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Income Tax Officer Versus Smt. Meena Narula

2015 (4) TMI 474 - ITAT DELHI

Unexplained investment in factory and building - AO has made the addition by observing that ₹ 12 lacs have been invested through cash based transactions for which the assessee has no explanation at all - CIT(A) deleted part addition - Held that:- The assessee produced a statement showing availability of source of ₹ 12,00,000/ before the Ld. CIT(A) during the appellate proceedings and which shows there is no direct evidence regarding the cash transaction but the date on which such has .....

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ount i.e. ₹ 9,50,000/- is deleted. - Decided against revenue.

Unexplained investment in machinery and generator - CIT(A) deleted addition - Held that:- assessee has worked out the availability of fund on the relevant dates. Again it was found that though apparently there may not be direct nexus between the fund available and the investment made in machinery and generator but the circumstantial evidence pointed out by the learned counsel of the assessee that the dates on which ca .....

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ained investment in form of cash deposits - CIT(A) deleted addition - Held that:- Considering the facts and circumstances of the case, the preponderance of probabilities appears to be in favour of the assessee. However, while scrutinizing the date wise withdrawals and the date of deposit, it is seen that at five places apparently there are negative balances, which works out to ₹ 3,20,850/-. In the above circumstances, out of ₹ 17,07,250/-, for the amount to the extent of ₹ 3,20 .....

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on - Held that:- CIT(A) has rightly observed that out of investment of ₹ 1 ,67,667/-, the source of investment to the extent of ₹ 77,223/- (margin money tor car), RS'.10,273/- (margin money for scooter and ₹ 16,000/- (for fax) appears satisfactorily explained to be out of BOP withdrawals. Hence there is no justification for making addition to such extent. However, as regards the investment in furniture to the extent of ₹ 64,171/-, the learned counsel of the assessee h .....

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20% of expenditure incurred in violation of section 40A(3) - CIT(A) deleted part addition - Held that:- CIT(A) has observed that on perusal of the assessment order it was seen that the AO has made the addition on the basis of presumption without bringing on record the specific transaction made in cash. In the absence of any categorical findings by the AO regarding specific transaction made in cash, no disallowance could be made as held by various Hon’ble Courts. IN view of the above, we find c .....

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. KANUNJNA, SR. DR. For the Respondent : N one Present ORDER Per H.S. Sidhu : JM Revenue has filed the present appeal against the impugned Order dated 25.09.2008 on the following grounds:- 1. That the Ld. CIT(A) has erred in law and on facts in allowing the relief without appreciating the facts stated in the assessment order u/s. 143(3) under the different heads, as stated below:- i) Unexplained investment in factory and building ₹ 9,50,000/- ii) Unexplained investment in machinery & G .....

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Ld. CIT(A) may be set aside and the order of the AO be restored. 2. The facts relating to the issues in dispute are that the assessee is an individual deriving income from running a Garment Export Unit in Sector-60, Noida. She filed her return for assessment year under consideration on 29.11.2003 declaring net profit of ₹ 11,09,439/- and the total income of ₹ 3,32,830/- while claiming deduction of ₹ 7,67,607/- u/s. 80HHC of I.T. Act. The case was selected for scrutiny and statu .....

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ssessee on 18.10.2005 and during survey several documents of incriminating nature were found at her business premises, which required logical explanation from the assessee but the asseessee failed to offer any proper explanation. 2.2 Besides the above, the AO has also discussed in the assessment order about possession of various business results with the assessee; i.e. the two audit reports bearing the signature of two different CAs and business in the name of benami entities. The AO has also di .....

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us additions including the additions in dispute vide his assessment order dated 30.3.2006 passed u/s. 144/143(3) of the I.T. Act, 1961. 3. Aggrieved by the assessment order dated 30.3.2006 passed by the AO, assessee filed an appeal before the Ld. CIT(A), who vide impugned order dated 25.9.2008 has partly allowed the Appeal filed by the Assessee. 4. Against the aforesaid order of the Ld. CIT(A) dated 30.3.2006, Revenue is in appeal before the Tribunal. 5. The present appeal has been filed by the .....

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ce for hearing was issued by Regd. Post for 10.3.2015 which was not received back unserved. Therefore, keeping in view of the facts and circumstances, as explained above, we are of the view that assessee is not interested to prosecute her appeal in dispute, therefore, we are proceeding to adjudicate the issues in disputes exparte qua the assessee and after hearing the Ld. DR and perusing the records. 6. Ld. DR at the time of hearing relied upon the order passed by the AO and reiterated the conte .....

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pass a speaking order. 7. We have heard the Ld. DR and perused the relevant records available with us, especially the orders passed by the Revenue Authority. We are of the view that the AO has adjudicated the issues in dispute and made the additions to the assessee s income which was assessed as under:- 1. Income as declared by the assesse ₹ 3,32,830/- 2. Add : Deduction u/s. 80HHC disallowed ₹ 7,76,607/- ₹ 11,09,437/- 3. Add : Unexplained investment in business assets i) Incom .....

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on of section 40A(3) ₹ 11,60,000/- Total Income Rs.1,43,35,437/- 8. We find that the Ld. First Appellate Authority has adjudicated the issues vide his order dated 25.9.2008 from pages 19 to 27 as under:- (1) Addition of ₹ 17,07,250/- on a/c of unexplained cash deposits in bank A/cs. During appellate proceedings, the learned AR has worked out the availability of cash in appellant's bank alc. On perusal of the accounts, it is seen that the learned AR has given date-wise withdrawals .....

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e been made and the cash has been deposited does make a circumstantial evidence. Such a circumstantial evidence becomes more credible in view of the fact that no other business source/account has been found by the AO during the course of assessment proceedings or in subsequent assessment proceedings, as has been pointed out by the learned AR. Considering the over facts and circumstances of the case, the preponderance of probabilities appears to be in favour of the assessee. However, while scruti .....

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19,00,OOO/- on a/c of Unexplained investment in factory building: The AO has made an addition of ₹ 19,00,000/- under the head unexplained investment in factory. building, which consisted of ₹ 12,00,000/- + ₹ 7, 00,0001-. The facts of the case briefly stated are that during the year the assessee has declared investment in factory building amounting to ₹ 37,00,000/-. It was explained before the AO that the assessee has received a sum of ₹ 25,00,000/- from her daughte .....

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ed any cashbook nor cash flow statement. Accordingly, the same was treated as unexplained income and added to assessee s total income u/s. 69 of the I.T. Act. Before me the learned AR has furnished statement showing availability of source of ₹ 12,00,000/-. However, it is seen that there is no direct evidence regarding the cash transaction but the date on which such has taken place and the availability of cash on such date shows that there is plausible nexus, which explains the source. Howe .....

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ory building, source of ₹ 25,00,0001- was explained as the amount received by daughters through account' payee cheques. Out of ₹ 25 lacs, the AO, for the reasons discussed' in the' assessment order, has accepted the source to the extent of ₹ 18 lacs and the rest of ₹ 7 lac and added the same to assessee's total income on the ground that that the assessee could not justifiably explain the source of ₹ 7 lac as the lenders lack the credit worthiness. Du .....

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see with the amount deposited in cash and the onus lies on the department to prove that the person 'in whose name the deposits were made really belong to the assessee. The above case laws relied upon by the learned AR has no application in the instant case because the AO has brought on record that the lender has no independent source of income and, therefore, the preponderance of probabilities that the same represents unexplained income of the assessee is reasonably proved. Hence, the additi .....

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nerator were claimed to have been purchased in cash through books of accounts, which were never produced . To explain the source of investment, various opportunities of being heard were given to the assessee but the assessee had no proper explanation regarding the source of investment. No cash book or cash flow statement was furnished by the assessee to support the availability of cash. The assessee could not even link up the above cash based investment with any bank. withdrawal. In such circums .....

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en made from the various banks of the assessee and the dates on which expenditure has been incurred appears to be plausible explanation for which benefit cannot be denied to the assessee; Accordingly, addition amounting to ₹ 6,11 ,000/- is hereby deleted. (4) Addition of ₹ 13.97 lac on a/c of unexplained investment in stock: The AO has made the addition by observing as under: "From the business results enclosed by the assessee along with her income tax returns, we find that the .....

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Even if we accept the assessee's arguments regarding Bank PC limit of ₹ 36.91 lacs and increase in Creditors level of ₹ 9.70 lacs, the realization of debtors is also not on the cards (as discussed on page 20 to 22). While discussing about the realization of debtors, {t is important to mention the argument of assessee's counsel in this regard submitted by him vide his letter dated 27.3.2006. The relevant excerpts from the above written submission are being reproduced hereunder .....

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considered .... .. Your finding that realization of debtors is, not as per disclosed bank accounts as discussed above. Your good self will appreciate that realization of debtors is fully explainable as per the bank accounts of the assessee in view of point no. 5 above and as such there is no justification in making the said addition. From the facts on record, it is clear that the submission of the assessee's counsel is not correct except for the fact that entry of ₹ 4,86,600/- has been .....

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tries claimed by the assessee as 'not considered' do not exist at all on. the relevant pages in the bank account with bank of Punjab: 7.6.2002 5.12.820 29.6.2002 6,12,720 10.10.2002 1612017 Total 27,37,557 Since the above claim of the assessee has been proved to be wrong, the claim regarding the realization of debtors is not acceptable. Since the claim of realization of debtors is not true, the justification given by the assessee's counsel remains limited to ₹ 46,61 lacs only w .....

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he plea of the learned AR that there is an overall availability of cash, which explain the investment in stock is a general plea which lack credibility. There is absolutely no nexus / direct plausible explanation regarding the said investment and accordingly, the addition on account of U Investment in stock amounting to ₹ 13.97 lacs made by the AO is hereby confirmed. (5) Addition of ₹ 2.99 lacs on a/c of unexplained investment in FDRs: The AO has made the addition by observing as un .....

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sessee. The assessee could not even link up the above investment with any bank withdrawal. It is also important to mention here again that no cash book or cash flow statement has been furnished by the assessee. During appellate proceedings, the learned AR has again taken the plea that there is an overall availability of cash, which cover this investment and therefore no addition is called for' on this account. The plea of the learned AR is again not acceptable. The assessee has not been able .....

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es out of undisclosed sources.' During appellate proceedings, it has been stated by the learned AR that relief of this amount has already been given by the AO vide rectification order passed U/s 154 of LT. Act. In view of this fact, no specific adjudication is called for in respect of this ground taken in appeal. (7) Disallowance of ₹ 11.60 lacs u/s 40A(3 ): Vide Ground No. 9 the appellant has challenged the action of the AO in making disallowance of ₹ 11.60 u/s 40A(3). The AO ha .....

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e have a look on the balance sheet enclosed along with the return of income filed by the assessee, we find that there is an increase in trade creditors by ₹ 9.70 lacs (Rs.41.07 lacs - 31.37 lacs) during the year. The assessee has also shown the expenses payable of ₹ 2.18 lacs at the end of year. The assessee also had the cash balance of ₹ 92,000/- at the beginning of year. If we deduct the increase in creditors (Rs.9.70 lacs) and expenses payable of (Rs.2.18 lacs) and opening c .....

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nd no cash book or cash flow account has been furnished by the assessee during the long assessment proceedings) which do not leave any room for the payments actually made through account payee cheque/DD as provided in section 40A(3) and, the violation of these provisions is clearly, on the cards on the basis of facts on record. It is highly surprising that the withdrawal entries of about ₹ 1.28 crores only can be termed as other than cash withdrawals. Even among this ₹ 1.28 crores, l .....

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, ICD, Duty Drawback A/c NIL Canara Bank - PC Limit A/c NIL Total 132.75 Thus, out of the total expenses claimed to be actually incurred (payment made) for, the purchases/business expo (Rs.2.20 crores), the assessee has paid Rs.l.33 crores through modes other than cash out of declared Bank Accounts. Rest of ₹ 87 lacs have been paid either through undisclosed bank accounts or through modes other than crossed cheque/crossed DD. Now there are only two options. First is to consider the investm .....

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ed as not covered by the provisions of section 40A(3). (The benefit of cash balance of ₹ 92,666/- has already been given to the assessee for incurring the petty business expenses). If we apply the provisions of section 40A(3) on rest of the expenses of ₹ 58 lacs. there is a clear disallowance of ₹ 11.60 lacs on this account. It is worthwhile to mention here that, in the absence of books of account, there is no other option but to decide the issue on the basis of best judgment w .....

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ed AR has argued that in the absence of any evidence brought out by the AO, no disallowance can be made on the basis of mere presumption. The submissions of the learned AR have been considered. Perusal of 'assessment order shows that the AO has made the addition on the basis of presumption without bringing on record the specific transaction made in cash. In the absence of any categorical findings by the AO regarding specific transaction made in cash, no disallowance could be made as held by .....

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ceedings, the learned AR has taken a plea that in case any of the additions are confirmed in. appeal, the assessee is entitled for higher claim of deduction U/s 80HHC of LT. Act. The plea of the learned AR has been considered and finds that the same has no merit. The deduction U/s 80HHC is to be allowed in terms of the provisions of the Act. During appellate proceedings, the learned AR has not been able to prove the nexus between the additions made by the AO, which have been confirmed in appeal, .....

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addition made of ₹ 6,92,201/-, the AO has given a relief of ₹ 5,24,534/- vide his rectification order passed U/s 154 of the Act remaining an addition of ₹ 1,67,667/- on this account. Now, during appellate proceedings, the learned AR has explained the source of ₹ 1,67,667/- as under: Margin money for car (date of finance 30.11.02) ₹ 77723/- Out of BOP withdrawal of ₹ 4.15 lacs on 26.11.2002. Margin money for scooter (date of finance 28.10.02) ₹ 10273/- Ou .....

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scooter and ₹ 16,000/- (for fax) appears satisfactorily explained to be out of BOP withdrawals, as stated above. Hence there is no justification for making addition to such extent. However, as regards the investment in furniture to the extent of ₹ 64, 171/-, the learned AR has explained the source there of to be out of available cash. This explanation is of general nature as the same is not supported by any proper evidence. Hence out of ₹ 1 ,67,667/-, addition to the extent of .....

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lained before the AO that the assessee has received a sum of ₹ 25,00,000/- from her daughters through a/c payee cheques and the 'rest of investments of ₹ 12,00,000/- were out of cash based transactions which the assessee 'claimed to have made through the account books of M/s Indian Weaves. 9.1 Relating to Addition of ₹ 12,00,OOO/- is concerned, The AO has made the addition of ₹ 12,00,OOO/- by observing that ₹ 12 lacs have been invested through cash based tra .....

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t the date on which such has taken place and the availability of cash on such date shows that there is plausible nexus, which explains the source. However, the details furnished by the assessee in this regard indicate that an amount of ₹ 2,50,000/- has been shown to be representing direct credit in capital account. However, in absence of relevant detail, the same cannot be accepted. Thus in our considered opinion, Ld. CIT(A) has rightly confirmed the addition to the extent of ₹ 2,50, .....

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rned, we find that the assessee claimed to have invested ₹ 5.3 lacs in machinery and ₹ 80,000/- in generator. The AO has made the addition by observing as under:- It is noticeable that no loan whatsoever from any bank was obtained for the purchase of above machinery. The machinery & generator were claimed to have been purchased in cash through books of accounts, which were never produced . To explain the source of investment, various opportunities of being heard were given to the .....

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el of the assessee has worked out the availability of fund on the relevant dates. Again it was found that though apparently there may not be direct nexus between the fund available and the investment made in machinery and generator but the circumstantial evidence pointed out by the learned counsel of the assessee that the dates on which cash withdrawals have been made from the various banks of the assessee and the dates on which expenditure has been incurred appears to be plausible explanation f .....

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unt of unexplained investment in form of cash deposits is concerned, we find that during the appellate proceedings, the learned counsel of the assessee has worked out the availability of cash in assesse's bank alc. On perusal of the accounts, it is seen that the learned counsel for the assessee has given date-wise withdrawals from her bank account along with the dates on which the cash was deposited, in the bank account. Apparently, the dates of withdrawal and the dates of deposits are close .....

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usiness source/account has been found by the AO during the course of assessment proceedings or in subsequent assessment proceedings, as has been pointed out by the learned AR. Considering the over facts and circumstances of the case, the preponderance of probabilities appears to be in favour of the assessee. However, while scrutinizing the date wise withdrawals and the date of deposit, it is seen that at five places apparently there are negative balances, which works out to ₹ 3,20,850/-. I .....

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we uphold the same by rejecting this ground of appeal raised by the Revenue in the aforesaid manner. 12. With regard to ground 1(iv) regarding deletion of addition of ₹ 1,03,496/- on account of unexplained investment in car, furniture etc. is concerned, we find that considerable force in the contention of the Assessee that the AO was wrong and illegal in making an addition of ₹ 6.92 lacs to the income of the assessee as unexplained investment in car, furniture, scooter and fax. We f .....

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- Out of BOP withdrawal of ₹ 4.15 lacs on 26.11.2002. Margin money for scooter(date of finance 28.10.02) ₹ 10273/- Out of BOP withdrawal of ₹ 40000/- on 10.10.2002. Fax (bill dated 11.11.02) ₹ 16000/- Out of BOP withdrawal of ₹ 5.65 lacs on 02.11.2002. Furniture ₹ 64171/- Out of available cash as sufficient cash withdrawal are there as per charge showing availability of cash. 12.1 Ld. CIT(A) has rightly observed that out of investment of ₹ 1 ,67,667/-, t .....

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d rightly held that this explanation is of general nature as the same is not supported by any proper evidence. Therefore, the Ld. CIT(A) has rightly held that out of ₹ 1,67,667/-, addition to the extent of ₹ 64, 171/- is confirmed and the balance addition of ₹ 1,03,496/- is deleted. In the background of the aforesaid discussions, we are of the considered view that no interference is called for in the well reasoned order passed by the Ld. CIT(A), hence, we uphold the same by rej .....

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ses of ₹ 1.64 crores. The assessee has also declared the trading expenses of ₹ 50.51 lacs in trading account and the revenue expenses of ₹ 18.32 lacs in P/L account which means that the assessee has claimed total business expenses of ₹ 2.33 crores. If we have a look on the balance sheet enclosed along with the return of income filed by the assessee, we find that there is an increase in trade creditors by ₹ 9.70 lacs (Rs.41.07 lacs - 31.37 lacs) during the year. The .....

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ssee's counsel has contended that we should deduct the creditors of ₹ 4I.07 lacs but only the increase in creditors is to be deducted]. But the surprising factor here is that there are huge cash withdrawals from the bank (the destinations of withdrawals are unknown and no cash book or cash flow account has been furnished by the assessee during the long assessment proceedings) which do not leave any room for the payments actually made through account payee cheque/DD as provided in secti .....

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wise withdrawals made by the assessee during the year. Name of Bank Withdrawals (other than cash withdrawals) Amt. (Rs.) (in lacs) Bank of Punjab - Current Alc 82.95 Global Trust Bank - Current Alc 5.99 Canara Bank - current a/c 43.91 PNB, Patparganj Duty Drawback A/c 0.60 PNB, ICD, Duty Drawback A/c NIL Canara Bank - PC Limit A/c NIL Total 132.75 Thus, out of the total expenses claimed to be actually incurred (payment made) for, the purchases/business expo (Rs.2.20 crores), the assessee has pa .....

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isions of section 40A(3) out of cash withdrawals made from the undisclosed back accounts. In the interest of justice, the second option is being exercised here. Giving the maximum leverage to the assessee, the expenses of ₹ 29 lacs (1/3rd of the total expenses) are presumed as not covered by the provisions of section 40A(3). (The benefit of cash balance of ₹ 92,666/- has already been given to the assessee for incurring the petty business expenses). If we apply the provisions of secti .....

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