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TMI Blog2016 (5) TMI 317X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of mutual fund of Rs. 12,67,903/- which were claimed as exempt. The Assessing Officer arrived at this conclusion that the loan a sum of Rs. 1,00,000/- taken by the assessee from Manchhagauri M. Andharia and Rs. 5,00,000/- from Gopaliji V. Variya and Rs. 4,95,000/- from D.S.Mehta was not creditworthy and genuine therefore the same was declined and added to the income u/s. 68 of the Income Tax Act, 1961( in short "the Act"). The Assessing Officer has also applied the provision u/s.14A read with Rule 8D of the Income Tax Rules, 1962 in connection with the income which has been claimed as exempt challenged by the assessee which were confirmed by the learned CIT(A). 3. The assessee has raised the following ground of appeals:- A. Addition on account of alleged unexplained cash credits - Rs. 10,95,000/- 1) The learned Commissioner of Income Tax (Appeals) - 17, Mumbai [CIT(A)] erred on facts and in law in upholding the order of the Deputy Commissioner of Income Tax 8(2), Mumbai (AO) making an addition of Rs. 10,95,000/- on account of alleged unexplained cash credits as under without appreciating that the loan creditors had confirmed the loans by way of loan confirmation letters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance out of Telephone expenses - Rs. 3,416/- 13) The learned CIT(A) erred on facts and in law in upholding the order of the AO making a disallowance of Rs. 3,416/- out of Telephone expenses. 14) The appellant prays that the disallowance of Rs. 3,416/- out of Telephone expenses as made by the AO and as confirmed by the CIT(A) may be deleted. H. Disallowance out of Travelling expenses - Rs. 4,638/- 15) The learned CIT(A) erred on facts and in law in upholding the order of the AO making a disallowance of Rs. 4,638/- out of Travelling expenses. 16) The appellant prays that the disallowance of Rs. 4,638/- out of Travelling expenses as made by the AO and as confirmed by the CIT(A) may be deleted. ISSUE NO.:-A:- 4. The learned representative of the assessee has argued that the assessee has furnished sufficient documents before the learned CIT(A) and also proved the identity of the lenders and correct address and proved the genuineness of the claim which has not considered by the learned CIT(A) wrongly and illegally therefore the order of learned CIT(A) is wrong against law and facts and is liable to be set aside. However the learned Departmental Representative has refut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transactions but raised the point of creditworthiness of the creditors. Now it is to be seen whether the claim of the assessee has rightly been declined by the authority below. Before going further to decide the matter of controversy it is observed that the learned CIT(A) accepted the additional evidence but arrived at this conclusion that the lender were not having capacity to give the loan therefore the loan given by above said three person falls under section 68 of the Act. The relevant para of the finding of the learned CIT(A) is hereby reproduced as under: "1.3.8 As regards the identity of the persons who had given loan to the appellant there is no dispute. The creditworthiness of Mr. Gopalji V. Varaiya HUF who had given loan of Rs. 5 lakhs to the appellant required to be examined in respect of their creditworthiness of advancing such a loan. From a perusal of the computation of total income it can be seen that the gross total income of the HUF is Rs. 1,64,727 for A.Y.2009-10 and in earlier year it is even less than this, after claiming deduction under section 80C the net taxable income of the Mr. Gopalji V. Varaiya HUF is below the taxable income. The creditworthiness o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apparently, the learned CIT(A) discredited the said credit on the basis of creditworthiness. He relied upon the Income Tax return of the creditors. Gopalji V. Varaiya HUF produced the confirmation of account at page 3 of the paper book wherein the closing balance has been shown to the tune of Rs. 10,61,049.00. Copy of pass book has also been produced at page 4 and 5 of the paper book which speaks about the withdrawal of the said money. No doubt these documents have not been discussed in the order however in the written submissions before us these document only on the file of the CIT(A) as well as Assessing Officer. Accordingly, the loan received from Late Manchhagauri M. Andharia is concerned, in this regard the confirmation of account for the period from 01.04.2008 to 31.03.2009 is on the file which speaks about the closing balance of the Manchhagauri M. Andharia is to the tune of Rs. 4,44,230.00. Bank statement of Hina Maganlal Andharia has also been produced which is at page 7 of the paper book and speaks about some transactions which is required to be verified in the interest of justice also. However, it is also recorded that the statement of Hina Maganlal Andharia has also b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k for letter of credit for import of chemicals. It was empathetically asserted that none of the loan, taken on which interest was paid, was utilized for investment purposes. In view of these facts, we find merit in the explanation of the assessee, consequently, this ground of assessee is allowed." 5.1 Turning to the case in hand it is specifically asserted by the assessee that the appellant is maintaining separate accounts of the business carried on by him and his investment activities. The investment activities and its expenses are reflected in the appellant's personal accounts. No expenses pertaining to the investment activity are debited to the business accounts. Further, though the investment has been made out of the proprietary concern's bank account, the same has not been made out of borrowed funds but out of own funds, as is evident from the copies of bank statements filed with AO also. The appellant's capital account shows a figure of Rs. 3,85,83,534/-. As against this, the appellant has invested in fixed assets of Rs. 2,00,977/- and current assets of Rs. 2,67,57,531/- i.e. Rs. 2,69,58,508/-. The investment shown in the proprietary firm's balance sheet is in Fixed Deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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