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2015 (4) TMI 666 - ITAT HYDERABAD

2015 (4) TMI 666 - ITAT HYDERABAD - TMI - Additions for unexplained cash credits - Dis-allowance of various expenses - Assessee fail to produce documents to establish the identity and capacity of the concerned creditors - Held that:- It is observed that advances aggregating to ₹ 17,89,500 were claimed to be received by the assessee from four parties during the year under consideration in cash against supply of material. No supply of material against the said advances, however, was made by .....

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yments, Permanent Account Number of the concerned creditors etc. Copies of the said confirmation letters are placed on record before us in the paper book filed by the assessee and a perusal of the same shows that the said letters worded identically, do not even contain the dates of issuance of the confirmation letters.

The assessee also failed to file any other documentary evidence such as income tax particulars of the creditors or their balance sheets to show that the advances claim .....

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assessee in cash represented cash credits and the assessee having failed to discharge the primary onus that lay upon him to establish inter alia the capacity of the concerned creditors, the provisions of S.68 were clearly attracted, as rightly held by the Assessing Officer relying on the decision of the Kerala High Court in the case of K.M.Mahim [1994 (11) TMI 88 - KERALA High Court]. In our opinion, the relief allowed by the learned CIT(A) on this issue was totally unwarranted and his impugned .....

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ed that the relevant expense claimed by the assessee such as block cutting charges, champering charges, machinery maintenance, polishing charges, cleaning chares, etc. were in the nature of the business expenditure regularly required to be incurred by the assessee going by the nature of his business. Moreover, the nature of these expenses claimed by the assessee is such that they are sometimes required to be paid by way of self-made vouchers. Although some deficiencies in such self made vouchers .....

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#8377; 70,000. - Decided partly in favour of revenue. - ITA No.226/Hyd/13 - Dated:- 18-3-2015 - Shri P.M.Jagtap And Smt.Asha Vijayaraghavan JJ. For the Appellant : Shri Rajat Mitra DR For the Respondent : Shri S.Rama Rao ORDER Per P.M.Jagtap, Accountant Member : This appeal is preferred by the Revenue against the order of the learned Commissioner of Income-tax (Appeals) Vijayawada, dated 14.12.2012, whereby he deleted the additions of ₹ 17,89,500 made by the Assessing Officer on account of .....

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f assessment proceedings, it was noticed by the Assessing Officer that the assessee has received advances from four parties aggregating to ₹ 17,89,500. Since the said advances were claimed to be received by the assessee for supply of materials, he was called upon by the Assessing Officer to furnish the details of supplies made to the concerned our parties against the advances. In reply, it was submitted by the assessee that no material was actually supplied against the said advances, and t .....

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also found that all the confirmation letters were identically worded and the same were not supported by any other documentary evidence such as Balance Sheet of the concerned parties reflecting the advances made to the assessee, their income-tax returns, etc. The Assessing Officer, therefore, held that the creditworthiness of the concerned four parties was not satisfactorily established by the assessee and relying on the decision of the Hon'ble Kerala High Court in the case of CIT V/s. K.M.M .....

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68. Accordingly, addition of ₹ 17,89,500 was made by the Assessing Officer to the total income of the assessee on account of unexplained cash credits under S.68. 3. During the course of assessment proceedings, it was also found by the Assessing Officer on verification of the supporting vouchers produced by the assessee for various expenses that the expenses claimed by the assessee were not fully verifiable. In this regard, he noted that some of the expenses claimed by the assessee were sup .....

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Act. 4. Against the order passed by the Assessing Officer under S.143(3), an appeal was preferred by the assessee before the learned CIT(A), challenging the action of the Assessing Officer in making the addition on account of unexplained cash credits under S.68 and disallowance of expenses. After considering the submissions made by the assessee as well as the material available on record, the learned CIT(A) deleted the addition made by the Assessing Officer under S.68 for the following reasons g .....

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N, copies of IT returns, account copies of the creditors in the books of the appellant, audited balance sheet of the purchasers reflecting the advances in such balance sheets etc and etc and for such alleged lapses the impugned addition was made by the AO, which is under challenge now. In course of the appellate proceedings, it is explained that the impugned advances were received for certain quality of granite material, which is to be excavated from the natural deposits. But, the appellant coul .....

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n with reference to assessment records of the next assessment year to come to a proper conclusion, which was not done by him. In the circumstances, as the advances stand refunded in the next assessment year, on which there was no adverse finding by the Revenue, I am of the opinion that the AO was not justified in making the impugned addition and he is accordingly directed to delete the same. 5. The disallowance of ₹ 1,71,532 made by the Assessing Officer out of various expenses claimed was .....

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line of business and suggested that some disallowance may be considered. In view of the facts, circumstances, nature of business and other explanations offered by the AR. I am of the firm view that ends of justice are met if the disallowance is restricted to ₹ 70,000 and the AO is directed to restrict the addition to this extent only and thus the appellant gets a relief of ₹ 1,01,532. 6. Against the order of the learned CIT(A) giving relief to the assessee as above, Revenue has pref .....

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ubted the genuineness of transaction as both the receipt and payment were in cash and the assessee failed to discharge the burden that lay upon him to prove the genuineness of cash credits. d. Reliance is placed on the following judicial pronouncements wherein it was held that the onus of proving the source of a sum of money found to have been received by an assessee is on him. When the nature and source of a receipt, whether it be of money or other property, cannot be satisfactorily explained b .....

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. f. The Id. CIT(A) erred in deleting the addition of ₹ 17,89,500/- as the advances stand refunded in the next assessment year without proving the genuineness of the transaction as the assessee failed to furnish statutory documents such as identity of person, PAN, IT returns of the prospective purchasers, copies of the assessee's account in the purchasers' books of account, audited balance sheet of the purchasers reflecting the advances made to the assesee and the creditworthiness .....

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e books of the assessee for any previous year it may be charged to Income Tax as the income of the assessee for that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the AO, not satisfactory. i. Sumanti Dayal Vs CIT (SC) 214 ITR 801 ii. Vasantibai N.Shah Vs CIT (Bom) 213 ITR 805 iii. Sreelekha Banerjee & Ors. Vs CIT (SC) 49 ITR 112 i. The ld. CIT(A) ought to have sustained the disallowance of expenditure of ₹ 1,71,532/- .....

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ecord. Grounds (a) and (k) raised by the revenue in this appeal are general in nature, which do not require any specific adjudication. As regards the issue involved in grounds (b) to (h) relating to the deletion by the learned CIT(A) of the addition of ₹ 17,89,500 made by the Assessing Officer, it is observed that advances aggregating to ₹ 17,89,500 were claimed to be received by the assessee from four parties during the year under consideration in cash against supply of material. No .....

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filed by him did not contain the relevant details such as mode of payments, Permanent Account Number of the concerned creditors etc. Copies of the said confirmation letters are placed on record before us in the paper book filed by the assessee and a perusal of the same shows that the said letters worded identically, do not even contain the dates of issuance of the confirmation letters. The assessee also failed to file any other documentary evidence such as income tax particulars of the creditors .....

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ted that the advances in question received by the assessee in cash represented cash credits and the assessee having failed to discharge the primary onus that lay upon him to establish inter alia the capacity of the concerned creditors, the provisions of S.68 were clearly attracted, as rightly held by the Assessing Officer relying on the decision of the Kerala High Court in the case of K.M.Mahim (supra). The stand taken by the assessee that the advances were repaid in the subsequent period was en .....

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the creditworthiness of the concerned creditors from whom the amount in question was claimed to be received by the assessee as advances in cash. In our opinion, the relief allowed by the learned CIT(A) on this issue was totally unwarranted and his impugned order on this aspect is liable to be set aside. Accordingly, we set aside the impugned order of the learned CIT(A) on this issue and restore that of the Assessing Officer. Grounds (b) to (h) of the Revenue in this appeal are accordingly allowe .....

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