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M/s Moomal Motors Versus Income Tax Officer, Kishangarh.

2017 (2) TMI 499 - ITAT JAIPUR

Addition u/s 68 - correlation between the amount surrendered in A.Y. 2007-08 and bogus credits/deposits shown in A.Y. 2009-10 - Held that:- The amount surrendered by the assessee is represented in the form of cash deposits in the books of accounts and not any other tangible assets. So, it is the cash pool which is available with the assessee and what is required to be investigated by the Revenue in order to hold its ground is that the assessee has exhausted the cash pool and was not in possessio .....

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e addition stand deleted. The remaining addition of ₹ 18,36,664 is not disputed and the same is hereby sustained. - Decided partly in favour of assessee - ITA No. 328/JP/2014 - Dated:- 8-2-2017 - SHRI KUL BHARAT, JM and SHRI VIKRAM SINGH YADAV, AM For The Assessee : Shri Manish Agrawal (CA) For The Revenue : Shri R.A. Verma (Addl. CIT) ORDER PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of CIT(Appeals), Ajmer dated 31/03/2014 for the assessment yea .....

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ating the fact that the appellant made surrender of ₹ 47,10,000/- on account of advances from customers in case of assessment year 2007-08 and said amount were repaid in A.Y. 2008-09 in the books available with the appellant and out of which deposits were made during the year under appeal and balance of ₹ 17,86,646/- has already been surrendered by the appellant during the course of assessment proceeding to buy the peace of mind and to avoid prolonged litigation which is duly verifia .....

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0-11 therefore benefit of set off of surrendered income be allowed to the appellant and the addition sustained deserves to be deleted. 2. The facts of the case are that the appellant is a partnership firm having authorized dealership of M/s Eicher Tractor and other vehicles and also running a service centre for all types of automobile vehicles besides having sale of spare parts. The return of income was filed u/s 139(1) and assessment was completed by AO by passing order u/s 143(3) dated 27.12.2 .....

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lant surrendered the creditors to the extent of ₹ 65,46,664/- and claimed set-off in respect of surrender of ₹ 47,10,000/- made for A.Y. 2007-08. The assessee s contention is that assessee may be allowed set-off of amount of ₹ 47,10,000/- surrendered in A.Y. 2007-08 on account of bogus advances from the customers against the addition made by the AO on account of creditors/advances from the customers of ₹ 65,46,664/- in the year under consideration. The assessee claimed th .....

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mount surrendered in A.Y. 2007-08 of ₹ 47,10,000/- is represented by the various assets in the balance sheet for A.Y. 2007-08. It has not been shown that corresponding assets are bogus or have been liquidated. Further, as per the assessment order for A.Y. 2007-08, assessee has not given any address of the persons from whom the advances were shown and repayments were claimed to have been made in next year and assessee surrendered the above advance from customers of ₹ 47,10,000/- inste .....

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s dismissed. 4. During the course of hearing, the ld. AR submitted all these grounds of appeal are in relation to non-allowance of benefit of telescoping of ₹ 47,10,000/- claimed by the assessee being the amount of additional income offered for taxation in AY 2007-08. 4.1. It was submitted that during the year under consideration, assessee had shown closing balance of advances received from customers at ₹ 34,62,272/- under the head Current Liabilities in Balance sheet as on 31.03.200 .....

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ponse to show cause, since assessee was not able to furnish confirmations, however it furnished list of cash receipts and payments made in A.Y. 2009-10 (reproduced at page 8 para 5 of Assessment order), according to which total receipts were of ₹ 71,41,664/- and deducting the payments of ₹ 37,55,000/-, closing balance remained at ₹ 33,86,664/-. Since the assessee could not prove the advances in the manner ld. AO desired, maximum peak balance of ₹ 64,96,646/- was work out .....

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ers in subsequent period. However, during the course of assessment proceedings for A.Y. 2007-08 when the assessee was not able to produce the parties, in order to buy peace and avoid litigation, amount of ₹ 47,10,000/- was offered for taxation though these amounts come claimed to have been refunded meaning thereby that refund was available with assessee. The said cash was available with it which was introduced in the guise of cash deposits received from various customers in the year under .....

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7; 47,10,000/- was included. Your honours would appreciate that entry for booking income in respect of income surrendered would always be made on the date of conclusion of proceedings, in which income was offered. The Ld. CIT(A), rejected the claim of the assessee observing that amount surrendered in A.Y. 2007- 08 must have been represented by various assets and in the absence of liquidation of the same, no correlation could be proved in respect of money surrendered and cash deposits made during .....

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page 2 para 2 of assessment order for A.Y. 2007-08 (APB 8), the accounts of parties from whom advances were shown to be received, were settled by cash payments in F.Y. 2007-08 itself. Accordingly, when surrender was made of the advance receipts, the subsequent repayment of of the same in cash at ₹ 47,10,000 stood available with the assessee which was utilized by the assessee in the manner he desires. Therefore, assessee s contention that the cash circulated in assessment year under appeal .....

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nly asset getting affected in respect of these transactions, which cannot be earmarked as to whether the same is money surrendered or some other unaccounted money. Further, observation of Ld. CIT(A) that assessee has not given address of the persons from whom advances were shown in A.Y. 2007-08 and payments were made in A.Y. 2008-09 is not relevant as for whatever reason surrender was made, the same becomes part of pool of funds available with the assessee as soon as it is admitted and the same .....

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on the following rulings: a. Shri Foods V/s ACIT (ITAT, Jpr) 22 TW 675: - Peak credit theory becomes applicable unless Assessing Officer proves destination of withdrawals elsewhere.- b. Rameshchand Modi Vs. ACIT (JP), 21 TW 510: -While making addition for unrecorded sales, adjustment for rotation/recycling/reinvestment/telescoping, credit purchases and peak credit should be given. c. Sandeep Loomba V/s ACIT (ITAT, Jpr) 26 TW 288: - Peak credit theory becomes applicable unless Assessing Officer p .....

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proposition in law: When an intangible addition is made to the book profits during an assessment proceeding, it is on the basis that the amount represented by that addition constitutes the undisclosed income of the assessee. That income, although commonly described as intangible , is as much a part of his real income as that disclosed by his account books. It has the same concrete existence. It could be available to the assessee as the book profits could be. The secret profits or undisclosed in .....

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deficits and the cash credits can be reasonably attributed to a pre-existing fund of concealed profits or they are reasonably explained by reference to concealed income earned in that very year. In each case, the true nature of the cash deficit and the cash credit must be ascertained from an overall consideration of the particular facts and circumstances of the case. Evidence may exist to show that reliance cannot be placed completely on the availability of a previously earned undisclosed incom .....

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iculars of his income or has deliberately furnished inaccurate particulars. The burden remains on the revenue of proving the existence of material leading to that conclusion. 7. In case of Tyaryamal Balchand (supra), the Hon ble Rajasthan High Court following the decision of Hon ble Supreme Court in case of Anantharam Veersinghaiah (supra) has held as under: It is clear from the law discussed above, that the ITO was within his right to tax the amount of ₹ 16,950 as income from undisclosed .....

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#8377; 16,950 could be taken as having come out of such intangible additions. In the case of Anantharam Veerasinghaiah & Co. (supra), their Lordships of the Supreme Court have held that the additions made to the book profits in earlier years are the real income and can be treated as available for use in subsequent years or even in the same year. .. 8. In case of R.S Rathore (supra), the Hon ble Rajasthan High Court has held as under: Section 68 refers to cash credits which are found in the b .....

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ceived, the assessing authority is entitled to draw an inference that the receipt is assessable as income of the assessee. While explaining the various credits and investments, it may be possible that the assessee may be successful in explaining some of them but that does not by itself mean that the entire investments has to be considered as explained. Even lapse of time or inability of the assessee would not make the unexplained investment an explained one. It is each and every individual entry .....

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acceptable on the basis of the evidence produced before the taxing authority, the Tribunal can come to the conclusion that such investment is fully explained. 9. In light of above, it is clear that the addition to the book profits in the earlier year could constitute a fund from which the assessee might draw subsequently for meeting expenditure or introducing amounts in the books of account and the benefit of telescoping is available in general. At the same time, before such a benefit is given, .....

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h advances from customers which remain unexplained. As per the AO s finding in assessment order for AY 2007-08 which are final and binding, these were assessee s own money to the tune of ₹ 47,10,000 which were shown in the books as advances against booking of vehicles in name of various unknown persons. So, there were cash funds to the tune of ₹ 47,10,000 which were surrendered and available with the assessee. Though the surrender was made during the course of assessment proceedings .....

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8. The AO also stated that the assessee has taken complete benefit of surrender income of ₹ 47,10,000 in AY 2010-11 given that the entry for such surrender income was made in the cash book on 21.12.2009. The AO also stated that the contention of the assessee cannot be accepted as assessee has deposited the cash in different names in the financial year relevant to AY 2007-08. In our view, none of the objections raised by the AO are relevant. What is relevant to determine is whether assessee .....

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lation in A.Y. 2009-10. However, we donot find any finding given by the AO in response to the said contention raised by the ld AR and the same remain uncontroverted. 12. Now coming to the findings of the ld CIT(A), he has stated that there is no correlation between the amount surrendered in A.Y. 2007-08 and bogus credits/deposits shown in A.Y. 2009-10. The amount surrendered in A.Y. 2007-08 of ₹ 47,10,000/- is represented by the various assets in the balance sheet for A.Y. 2007-08. It has .....

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