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2016 (1) TMI 358 - ITAT KOLKATA

2016 (1) TMI 358 - ITAT KOLKATA - TMI - Addition made u/s 68 - loan received from father and from mother by the assessee for his business purposes - CIT(A) deleted the addition - Held that:- With regard to the loan received from father we find that all the three ingredients of section 68 namely identity of the creditor, genuineness of the transaction and creditworthiness of the creditor are proved beyond doubt. We find that the bank statement of father was filed before us wherein the loan receiv .....

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e had proved the identity of creditor (his mother) and genuineness of the transaction through filing the confirmation from her mother. We also find from the confirmation placed on record that the mother had not mentioned the loan amount advanced by her to the assessee. But however, she had clearly mentioned the fact of advancing the loan and the purpose of the loan in her confirmation together with the source for advancing the loan. The status of the assessee that she is a retired school teacher .....

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he capital account - Held that:- The contention of the assessee that books contain deficiencies and he is not conversant with the maintenance of accounts and the income tax affairs finds lot of force and is proved beyond doubt. Moreover, it is also found from the remand report dated 16.8.2010 submitted by the Learned AO before the Learned CITA, that , this stand has been reiterated by the assessee before the Learned AO. We find that the Learned AO could have as well summoned the concerned CA who .....

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as been received for the same by the assessee and hence in this scenario, we find that the assessee has been genuinely prevented from reasonable cause to put forth his case before the first appellate authority. Hence we find that the action of the Learned AO in this regard is not proper in the facts and circumstances of the case and no additions are warranted in this regard. - Decided in favour of assessee

Addition on account of Debtors - Held that:- The assessee had already disclosed .....

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ject the books of accounts and determine the profits on estimated basis u/s 145(3) of the Act which has not been done by the Learned AO in the instant case. Hence, we hold that no addition could be made in respect of balance receivable from sundry debtors in the facts and circumstances of the instant case as the sales in respect of them have already been disclosed by the assessee in the earlier years which fact has not been refuted by the Learned AO in the remand proceedings - Decided in favour .....

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d AO. Admittedly, these sundry creditors have emanated only out of purchases of the assessee and hence when purchases (ie debit entry) have been accepted as genuine, there is no scope for treating the credit entry (i.e sundry creditors) as bogus. In view of these facts and circumstances, we do not find any reason to interfere with the order of the Learned CIT(A) in this regard. Decided in favour of assessee - I.T.A No. 2186/Kol/2010, I.T.A No. 2140/Kol/2010 - Dated:- 18-11-2015 - Shri M. Balagan .....

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961 (hereinafter referred to as the Act ). 2. The issues involved in assessee as well as the department s appeal are identical in nature and hence they are disposed off together by way of a common order for the sake of convenience. ISSUE I - Addition made u/s 68 of the Act in respect of loan received from father - ₹ 2,50,000/- and loan received from mother - ₹ 1,50,000/- by the assessee for his business purposes 3. The brief facts of this issue is that the assessee is a retailer and .....

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endra Kumar Kar ( a retired government school teacher) had borrowed loan from United Bank of India Tobin Road Branch, Calcutta, to the tune of ₹ 2,70,000/- on 24.11.2006 against the Fixed Deposit of ₹ 3 lacs held by him in the said branch and out of the same, issued a demand draft for ₹ 2,50,000/- on 25.11.2006 in favour of Durgapur Municipal Corporation for and on behalf of the business purposes of the assessee herein. As far as the loan from mother to the tune of ₹ 1,50 .....

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and upheld the addition made towards loan received from mother to the tune of ₹ 1,50,000/- as the confirmation filed by the mother does not contain the figure and hence cannot be construed as genuine. Aggrieved, both the assessee as well as the revenue are in appeal before us on the following grounds of appeal:- Assessee s appeal in ITA No. 2186 / Kol /2010 1 On the facts and in the circumstances of the case, the ld.CIT(A) Durgapur erred in confirming the addition u/s. 68 of a sum of S .....

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₹ 250000, particularly under the circumstances when the assessee failed to establish corroborating reflection of the impugned transaction in the bank statement maintained by his father as mentioned in the Remand Report. B. That as far as facts and circumstances of the case, ld. CIT(A) was not justified in sustaining the addition of ₹ 150000 in lieu of invoking of penal provision pursuant to Sec. 271D considering the circumstances of the case when accepting of cash loan amounting to .....

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ther argued that the confirmation filed by the mother clearly stated the sources of advancing the loans together with the purpose of the loan given to the assessee. He further argued that the assessee is the only son of his mother and the assessee is a post graduate student of MSC (Hons.) Chemistry having sufficient software knowledge and despite being a bright student, could not secure a job to take care of himself and hence had to forcibly get into the business. He further stated that in the p .....

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n, going by the background of the assessee as stated supra, identity and genuinity of the transaction is proved beyond doubt by the confirmation filed by the assessee s mother, prayed that the three essential ingredients are duly satisfied by the assessee and hence no addition could be made u/s 68 of the Act for the same. With regard to loan from father, he argued that the assessee s father had received a loan from United Bank of India as stated above on 24.11.2006 to the tune of ₹ 2,70,00 .....

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8377; 2,50,000/- was received from father and ₹ 1,50,000/- was received from his mother as loan. In respect of loan received from father, he argued that the bank statement evidencing the receipt of loan was not submitted before the Learned AO even during the remand proceedings but however the Learned CITA sought to give relief based on the evidences available on record. In respect of loan received from mother by the assessee, the same is received only in cash and creditworthiness of the mo .....

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e heard the rival submissions and perused the materials available on record. Admittedly, the loans received by the assessee from his father and mother were utilized only for purchasing a shop at Suhatta Mall, City Centre admittedly for the purpose of business. On this fact there is no dispute. With regard to the loan received from father to the tune of ₹ 2,50,000/- , we find that all the three ingredients of section 68 namely identity of the creditor, genuineness of the transaction and cre .....

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it is undisputed that the assessee is a senior teacher in a school run by SAIL at Durgapur in the senior rank as Shift In charge. It is also seen that the assessee had proved the identity of creditor (his mother) and genuineness of the transaction through filing the confirmation from her mother. We also find from the confirmation placed on record that the mother had not mentioned the loan amount advanced by her to the assessee. But however, she had clearly mentioned the fact of advancing the loa .....

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he Ground No. 1 raised by the assessee stands allowed and that of the revenue stands dismissed. With regard to the ground no. 2 raised by the revenue for section 271D violation in respect of cash loan received from mother, we find that the issue of levy of penalty u/s 271D of the Act is not before us and hence the same is not adjudicated herein. ISSUE II - Addition of ₹ 4,48,000/- towards introduction to capital account by the assessee and addition made towards difference in opening capita .....

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n confirming an addition of ₹ 3,76,992/- allegedly for being difference between the closing balance of capital a/c in last year and opening balance of capital a/c in this year which also arose due to mistakes of the Auditor of the Appellant. 4.1. The addition of ₹ 4,48,000/- was made towards introduction of fresh capital during the assessment year under appeal which was completely denied by the assessee before the Learned AO . Similarly an addition of ₹ 3,76,922/- was added by .....

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acceded to by the Learned AO and additions were made. On first appeal, both the additions were confirmed by the Learned CIT(A). 4.2. The Learned AR apart from reiterating the facts stated before the Learned AO argued that because of the mistake committed by the erstwhile CA of the assessee, the assessee should not be invited with the additions. He further argued that ultimately only the income element is to be taxed for income tax purposes and the Learned AO had made both the additions of ₹ .....

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rities. In response to this, the Learned DR vehemently supported the orders of the lower authorities. 4.3. We have heard the rival submissions and perused the materials available on record. We find that the assesee in his reply before the Learned AO had stated that admittedly there were some mistakes in the audited accounts submitted before the department and hence requested for rejection of the books of accounts to the Learned AO. We find from the assessment order that the assessee had stated t .....

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to aforesaid deficiencies brought on record and requested to determine his taxable income on presumptive taxation as a percentage of turnover. The Learned AO had not rejected the books of accounts but instead proceeded to make independent addition towards increase in capital account to the tune of ₹ 4,48,000/- and difference in opening balance of capital account to the tune of ₹ 3,76,922/-. Further it is found that the Learned AO had made both the additions only under the head income .....

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on has been made only based on the defective capital account produced before the Learned AO without giving any categorical finding with regard to the income element contained thereon. We also find that the mistake in the audited books of accounts as stated by the assessee is quite apparent from records from the fact that the closing capital balance of earlier year does not tally with the opening capital balance of assessment year under appeal. Hence the contention of the assessee that books cont .....

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gard. We also find from the records that the assesee had chosen to write a letter dated 11.1.2010 i.e after receiving the assessment order dated 31.12.2009, to the previous auditor asking him to explain the reasons for signing the accounts with deficiencies pointed out in the assessment order warranting huge additions. This letter was sent by speed post by the assesee and is part of our records. Admittedly, no reply has been received for the same by the assessee and hence in this scenario, we fi .....

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e that the assessee had not offered the sales in respect of sundry debtor Aryabhatta Institute of Engineering & Management Durgapur, Panagarh. The Learned AO added a sum of ₹ 13,06,650/- as amount receivable from this party based on the confirmation received from the said party that they owe this sum to the assessee whereas the same is not reflected in the books of the assessee as on 31.3.2007. Similarly in respect of another party D.S.P. Employees Co-operative Society Ltd, there was a .....

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nd hence he cannot be found fault with for the same. The assessee submitted that the turnover in respect of this party had been duly offered to tax in the earlier years by the assessee and it is only outstanding dues recoverable from the party for which a suit has been filed against the debtor and hence there is no case for making any addition in this regard as undisclosed income. The Learned CIT(A) observed that in remand proceedings, the Learned AO had not doubted the information given by the .....

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set during the year which was never officered for taxation or tantamount cessation of liability during the year under consideration which had due impact for determination of income against the year in question. 5.1. The Learned AR reiterated the submissions already made before the Learned AO and Learned CITA in this regard and stated that there is no income that had been concealed by the assessee with regard to transactions with these two debtors and pleaded for non-interference in the Learned C .....

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in lot of deficiencies and this was also pointed out by the assessee before the Learned AO. We have already held that the right course of action available with the Learned AO could be to reject the books of accounts and determine the profits on estimated basis u/s 145(3) of the Act which has not been done by the Learned AO in the instant case. Hence, we hold that no addition could be made in respect of balance receivable from sundry debtors in the facts and circumstances of the instant case as t .....

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obtained information u/s 133(6) of the Act and he found that the balances were not matching in respect of the following three parties:- Sl.No. Name Nature of transaction Amount shown by the assessee Amount as per confirmation Difference Remarks 1 Supani Music Purchase 2,87,823.00 75,062.00 2,12,761.0 Bogus Purchase 2 Berlia Compu System Purchase Return 0.00 9,636.00 [5850.00 + 3786.00 9,636.00 Not shown In the book of the assessee 3 MBT Infosys Purchase 1,07,724.00 1,32,128.00 24,404.00 Undiscl .....

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lier though VAT has been charged. The Learned CITA observed that nothing prevented the Learned AO to make further enquiries in this regard and just because the supplier had not mentioned his VAT registration number, the assessee cannot be faulted with. The Learned CITA finally observed that no adverse comments have been made in the remand report by the Learned AO on the reconciliations submitted by the assessee before him and accordingly deleted the addition. Aggrieved, the revenue is in appeal .....

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