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Fazal Frozen Foods Pvt. Ltd Versus ITO, Ward-1 (2) , Meerut

2016 (5) TMI 238 - ITAT DELHI

Addition of unsecured loan received from 10 persons added u/s 68 - ingenuity - Held that:- Regarding the identity of the creditors, it has been proved by the assessee beyond doubt as all the lenders are having permanent account number bank account and have filed their return of income.

While filing the computation of total income along with return of income only income from embroidery and knitting is mentioned. There is no detail of gross income or expenditure incurred by these assess .....

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ese amounts with the assessee as well as its sister concern on the very next day proves more than what is saidby lower authorities. Therefore in the case of these 8 ladies wherein the identicalmodus operandi has been adopted for giving alleged loan to the assessee who are having their meager income and has meager cash in hand and have minimum bank balance with them. We are of the view that the assessee has miserably failed to prove the creditworthiness of these lenders.

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ut the activities of these persons. In the statement of affairs cash at hand of ₹ 170,000/- has been shown, further in his bank account only cash of ₹ 25,000/- is available. In the case of Rehmat Elahi, the facts are also identical. Therefore all these evidences in case of lenders lead that theidentity of these creditors have been proved and nothing else. In view of the above facts, we confirm the order of the learned Commissioner of Income tax (Appeals) confirming addition of ₹ .....

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le by the assessee before the lower authorities. Therefore in the interest of justice we set aside this ground to the file of the AO to enquire from whom the assessee has purchased animals and how payment have been made to the subsequent. If Asraf Sohail has received the payment then the statement of Asraf Sohail needs to be verified and reexamined and if the paymentsare made to the petty suppliers then definitely the assessee must be having detail about them. Regarding the claim of the modus op .....

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: Sh.Ravinder Aggarwal, FCA Sh. Rohit Aggarwal, ACA Revenue : Sh. Bharat Bhusan Garg, Sr. DR ORDER PER PRASHANT MAHARISHI, A. M. 1. The assessee against the order dated 26.11.2014 of the learned Commissioner of Income tax (Appeals) Meerut prefers this appeal for the Assessment Year 2010-11. The following grounds of appeal have been raised by the assessee:- 1. That the learned Commissioner of Income Tax (Appeals), Meerut (hereinafter referred to as Id. CIT (A) ) has erred in law as well as on the .....

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8 of the Income Tax Act, 1961, confirming that the loans received by the appellant during the relevant were not genuine and that the creditworthiness of the lenders is not proved, when the same was duly established by the documents placed on record and through affidavits and statements on oath. The facts of the case and the submissions of the assessee are not considered in the right perspective and various findings made by the Id. CIT(A) including that all the 10 unsecured lenders were apparentl .....

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of ₹ 11,09,3507- was payable by the appellant for purchase of animals. b) The Id. CIT(A), has also ignored the modus operand! of the appellant that Mr. Ashaf Sohail, was the commission agent for the purchase of animals and was solely responsible to the actual suppliers for the payment of their dues and was the only link between the actual suppliers and the appellant and the same modus operand! is very much prevalent in the trade of the appellant. c) The Id. CIT(A), has also failed to appre .....

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case are that the assessee is a private limited company engaged in the business of processing and trading of Frozen Foodsat Meerut. The return of income showing NIL income was filed on 14.10.2010. During the course of the assessment proceedings, it was found that the assessee has borrowed through unsecured loan of ₹ 61,25,000/- from 10 persons. The brief trail of the amount deposited with the assessee company was immediate cash deposit in the account of these persons. Cash was deposited on .....

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s submitted that all the depositors are old assesses. Therefore, the AO not being satisfied with the explanation of the assessee issued summons on 18.03.2013 to all the persons as well as to all the sundry creditors. In response to these summonses, it was submitted that out of these 10 persons eight are women are Pardanashin as per section 132 of the Code of Civil Procedure, 1908 and therefore they are exempt from personal attendance. Assessee submitted duly sworn affidavit of these eight women .....

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ission from the sale of animals to meat factories. Both of them have advanced Rs.Five lacs each to the assessee company. Both persons have stated that their savings of earlier years for AY 2009-10 and 2010-11 are put into bank account in cash and then cheque for loan was given. On these facts, the AO made an addition of ₹ 61,25,000/- u/s 68 of the Act. On appeal before the ld.CIT (A), the same arguments were reiterated. 4. The ld.CIT (A) was of the view that it is apparent that unconnected .....

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o the assessee creates serious doubts about the genuineness and creditworthiness of these loan transactions. He further stated that same loan creditors have also advanced loan of varying amount ranging ₹ 3.5 lacs to 6.35 lacs to M/s. Al Hind exports, a related concern of the appellant company during the same assessment year. He was also of the opinion that transaction through cheque does not prove the sanctity of the transaction. The ld.CIT (A) further held that loan transactions of the ap .....

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income, statement of affairs of the lenders and bank statement of the 10 unsecured lenders to the AO. It was further submitted that all the lenders are assessed to tax and they have advanced interest free unsecured loan to the assessee. Such loans are outstanding in the statement of affairs of these lenders, which is submitted before lower authorities, therefore the identity, creditworthiness, and the assessee proves genuineness of the transaction. He further submitted that when the summons were .....

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Mark Hospitals Pvt. Ltd. 373 ITR 115. He submitted that merely about the deposit of cash in the bank account of the lenders on previous day, issue of cheques on next day is a legal transaction, and it cannot be doubted. He further relied on the decision of Rajasthan High Court in the case of CIT Vs. Jai Kumar 267 CTR 396. 6. The ld. DR relied on the orders of the lower authorities and he submitted that addition u/s 68 has rightly been made as the assessee has failed to prove the creditworthiness .....

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rther copy of the statement of two unsecured lenders which are recorded by the AO during the assessment proceedings. The assessee also placed before us the written submission made before the learned Commissioner of Income tax (Appeals). We have carefully gone through the submission and evidences placed before us. On perusal of all the evidence, we are of the view that for the purpose of section 68 of the Act following three conditions are required to be proved. 1. Identity of the lenders 2. Cred .....

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n filed on same day i.e. 31.03.2011. In all the computation of income, income shown by the lenders is a single lineentry wherein income from embroidery and knitting has been shown. There is no profit and loss account or income and expenditure statement. For all the returns, the income computed is approximately 2.15 to ₹ 3 lacs only and meagre tax of ₹ 15 thousands to ₹ 2500 is paid in all these accounts. In an identical manner statement of affairs of all these eightwomen and tw .....

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of Mrs. Farhanha Praveen ₹ 10.94 lacs in the name of Mrs. Mehmooda Begum, Rs, 12.94 lacs in the name of Mrs. Naseem Bano and ₹ 10.66 lacs in the name of Sabana Praveen are shown. In past no loan is given to the assessee and other sister concern of the assessee. In same the statement of the affairs of some of the lenders sundry creditors are shown which are also cannot be identified. From the statement of affairs surprisingly there is no profit and loss account was available no incom .....

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e. Dena Bank, Subash Bazar, Meerut City. It is also surprising that the address of all the parties is 13 Ismail Nagar, Meerut City. All these lenders have come together and deposited cash in their bank accounts with the same bank and then deposit these amounts with the assessee as well as its sister concern on the very next day proves more than what is saidby lower authorities. Therefore in the case of these 8 ladies wherein the identicalmodus operandi has been adopted for giving alleged loan to .....

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oan was advancedto the assesseecompany andits sister concern. All the assessee have filed their return of income showing meager income and paying small amount of tax and further preparing and submitting their computation of total income, a statement of affairs, capital account in similar manner and showing opening capital of those assess to show the advance, it is a façade created to prove the genuineness of the transaction. All the decisions relied upon by the ld. AR cannot be come to th .....

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on the facts narrated above in the case of the assessee. Similarly, in the case of other two other assesses who have deposed before the AO regardingdeposit ₹ 5 lacs each are also dealt in a similar manner. In case of Mr. Ashique Elahi the income of ₹ 210,000/- has been shown however, there is no narration in the computation of total income about the activities of these persons. In the statement of affairs cash at hand of ₹ 170,000/- has been shown, further in his bank account .....

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No.2 of the appeal is against confirmation of addition of ₹ 11,09,350/- u/s 41(1) of the Act. The brief facts of this addition is that this creditor in response to the summons appearedbefore AO for recording the statement and admitted that he is not engaged in the business of selling of the animals and he is only earning commission. The modus operandi of the assessee was to record his name as creditor in places of the traders who sale the animals. Therefore, AO held that Mr. Asraf Sohail .....

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