TaxTMI 
TaxTMI 
2007 (1) TMI 216
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....50,000, Arun Singh Rs. 5,00,000, Nevandram Ahuja Rs. 10,00,000, Prakashchand Ahuja Rs. 5,00,000, Anil Kumar Pathak Rs. 5,00,000 and Jairamdas Malkani Rs. 5,00,000. Accordingly, the assessee was asked to produce all the aforesaid persons along with documentary evidence to prove their capacity to invest the aforesaid amount. The AO after considering the statement of the persons and the material placed on record was of the view that the capital investment of Rs. 10,00,000 by Sri Nevandram Ahuja stood proved satisfactorily but capital contribution of Rs. 10,00,000 by Sri Chitrabhan Singh, Rs. 24,60,000 by Sri Nandlal Pandey, Rs. 10,00,000 by Sri Parmanand Soni, Rs. 50,000 by Sri Prakashchand Ahuja, Rs. 5,00,000 by Sri Arun Singh, Rs. 5,00,000 by Sri Anil Kumar Pathak, Rs. 5,00,000 by Sri Prakashchand Madan and Rs. 5,00,000 by Sri Jairamdas Malkani remained unexplained, however, he added Rs. 60,10,000 as income from undisclosed source in the total income of the assessee. Besides this, it was also found by the AO that in the balance sheet there is a security deposit of Rs. 37.46 lakhs from 202 persons. The assessee was asked to produce the said persons along with evidence of genuineness ....
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....sp; CIT(A) per AO --------------------- Deleted Sustained ------------------------------------------------------------- Capital investment 60,10,000 35,00,000 25,10,000 Security deposit 37,46,000 37,46,000 - Sundry liabilities 2,00,000 - 2,00,000 Commission 94,27,505 &nbs....
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....se grounds are considered as common ground for the sake of convenience. 6. The learned counsel for the assessee while reiterating the same submissions as submitted before the AO and the learned CIT(A) further submits that Sri Nandlal Pandey deposited Rs. 20,60,000 through five bank drafts on 28th March, 2000 and Rs. 4 lakhs by nine bank drafts in favour of Asstt. Excise Commissioner for the liquor contractor-ship business for the financial year 200001. The work was awarded to Mr. Parmanand Soni, Sri Nandlal Pandey along with other seven persons joined hands with Sri Paramanand Soni to form a partnership. On 31st March, 2000 the deed was executed w.e.f. 1st April, 2000. He further submits that Sri Nandlal Pandey is assessed to income-tax vide P.A. No. AGPPP 4239 B by the ITO, Allahabad and he appeared personally before the AO on 28th Nov., 2002. He also filed copy of return and balance sheet wherein he has clearly reflected the amount of his deposit to Asstt. Excise Commissioner during financial year 1999-2000. He further submits that the transaction of Rs. 24.60 lakhs took place during financial year 1999-2000 and even before 31st March, 2000 when the aforesaid deed was executed....
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....; Amount Assets Amount ----------------------------------------------------------------- Capital Account Cash & (As per Annex. 70,02,525 Bank Balance 'A') Unsecured Loan Cash in 33,24,064 hand Khanna Finance 6,36,000 Cash at 297 33,24,361 Co., Rewa Bank &nbs....
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.... Withdrawal No. introduced ------------------------------------------------------------ 1. 28-3-2000 Nandlal Pandey 2,460,000 - 2. 5-7-2000 Arun Singh 5,00,000 - 3. 29-3-2000 Parmanand Soni 10,00,000 5,00,000 4. 29-3-2000 Chitra Bhan Singh 9,50,000 - 2-5-2000 -do- 50,000 - 5. 28-3-2000 Prakash Madan  ....
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....; 574 4,99,426 574 4,99,426 - - ----------------------- 7,475 70,02,525 ----------------------- 11. We further find that out of the above capital investment, the AO while discussing the capital investment of Rs. 65,10,000 in the accounts of Shri Nandlal Pandey Rs. 24,60,000, Sri Arun Singh Rs. 5,00,000, Sri Parmanand Soni Rs. 10,00,000, Sri Chitrabhan Singh Rs. 10,00,000, Prakashchand Madan Rs. 5,00,000, Sri Anil Kumar Pathak Rs. 5,00,000, Sri Jairam Das Malkani Rs. 5,00,000 and Sri Prakashchand Ahuja Rs. 50,000 aggregating to Rs. 65,10,000, however, added Rs. 60,10,000 as undisclosed income of the assessee. We further find that the learned CIT(A) while accepting the capital investment to the tune of Rs. 35 lakhs sustained the deposit of Rs. 24,60,000 in the account of Sri Nandlal Pandey and Rs. 50,000 in the account of Sri Prakashchand Madan aggregating to Rs. 25.10 lakhs. We further find that the assessee has explained vide chart appearing at pp. ....
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....2000 103145 -do- - 45,000 28-3-2000 103146 -do- - 45,000 28-3-2000 103147 -do- - 45,000 28-3-2000 103148 -do- - 45,000 28-3-2000 103149 -do- - 45,000 28-3-2000 103150 -do- ....
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....essee's paper book. 12. From the above chart we find that the assessee has not only proved the source of credit in the books of account but has also proved the immediate source thereof showing that the aforesaid amount was in existence prior to 31st March, 2000 relevant to the asst. yr. 2000-01 and not in the assessment year under consideration 2001-02. In the absence of any contrary material brought on record by the Revenue against the aforesaid documentary evidence, we are of the view that the addition in the account of Sri Nandlal Pandey Rs. 24,60,000, Sri Parman and Soni Rs. 10,00,000, Sri Chitra Bhan Singh Rs. 9,50,000 and Sri Prakashchand Madan Rs. 50,000 aggregating to Rs. 44,60,000 is not sustainable in law and the same is directed to be deleted. This view also finds support from the decision of Tribunal, Delhi Bench "A" in ITO vs. Sri Radha Krishan Distributors (1997) 58 ITD 47 (Del) wherein it has been held vide para 8 appearing at p. 52 as under: "In the present case, the sums were introduced in books of account of the assessee after 1st April, 1987 through cheques but in the bank accounts of the creditors these sums were found credited on 31st March, 1987. Thus im....
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....ted to be deleted. 14. As regards the addition of balance amount of Rs. 50,000 in the account of Sri Chitrabhan Singh, we find that the learned CIT(A) while deleting the addition of Rs. 10,00,000 in this account has held vide finding recorded at p. 10 of his order as under: "Chitrabhan Singh: The AO in his order has specifically observed that Shri Chitrabhan Singh was produced for examination and his statement was recorded on oath and he admitted that he had invested Rs. 10 lakhs in the firm M/s Rewa Group, Rewa as partner. It has also been observed that he is assessed to tax at Bhopal. The AO in his remand report dt. 29th Nov., 2004 has confirmed that this person had filed IT returns for asst. yrs. 1999-2000 to 2000-01 and 2001-02. It has also been reported that the assessee furnished authenticated copy of acknowledgement of return and the statement of computation of total income and statement of accounts related to asst. yr. 2000-01 from the ITO, Wd-1(2). Bhopal. This person had also furnished copy of certificate from Union Bank of India, Branch, Samman, to the effect that Shri U.P. Singh (his father, retired Government servant) had taken loan of Rs. 2,50,000 on 28th March,....
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....on this account is upheld. 16. As regards the addition of investment of Rs. 5 lakhs in the account of Sri Arun Singh, we find that it was also added by the AO on the ground that the assessee failed to produce any documentary evidence in support of the source of investment. We further find that the learned CIT(A), however, deleted the impugned addition vide finding recorded in para 6 appearing at p. 11 of his order which is reproduced as under: "Arun Singh: The return by this partner for asst. yr. 2001-02 vide receipt No. 017897 dt. 9th Feb., 2002 and 2002-03 have been filed, though there are no evidence that he was earlier assessed to tax. These returns have been filed in the status of HUF. Statement of affairs shows deposit of Rs. 5 lakhs with Parmanand Soni. It is so because the liquor contract was obtained by Parmanand Soni for the AOP named Rewa Group. Thus, Shri Arun Singh is also an independent income-tax assessee and he only was liable to explain the source of capital deposited by him. The AO in his order has mentioned that the acknowledgement of Saral Form was filed, the addition was made for the reason that this Form did not establish the investment. However, this ce....
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....; Balances --------- --------- --------- Total 1,017,190 Total 10,17,190 --------------------------------------------------------------- It was added by the AO on the ground that no documentary evidence has been filed by the assessee to prove the source of investment. We further find that the learned CIT(A), however, deleted the impugned addition vide finding recorded at p. 11 of his order as under: "Anil Kumar Pathak: Again this person's IT return for asst. yr. 1999-2000 vide receipt No. 008431 dt. 31st March, 2000 and asst. yr. 2000-01 vide receipt No. 000281 are available on record. The fund flow chart for asst. yr....
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....nbsp; --------- Total 10,15,054 Total 10,15,054 --------------------------------------------------------------- It was added by the AO on the ground that no documentary evidence has been filed by the assessee to prove the source of investment. We further find that the learned CIT(A), however, deleted the impugned addition vide finding recorded at p. 11 of his order as under: "Shri Jairamdas Malkani: Similar is the case in respect of Shri Jairamdas Malkani, whose copy of IT return for asst. yr. 1999-2000 vide receipt No. 08398 dt. 31st March, 2000 and receipt No. 000282 dt. 17th April, 2001 are available on record. The cash flow chart for the year 1999-2000 reflects deposit with said M/s Rewa Group at Rs. 10 lakhs. Thus his identity also stands proved." In the absence of any contrary material brought on record by the Revenue against the aforesaid finding of the learned CIT(A) and keeping in view that the assessee has discharged his burden which was not controverted by the Revenu....
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.... of the AO who shall decide the same afresh in the light of our observation hereinabove and according to law after providing a reasonable opportunity of being heard to the assessee and if he finds that the assessee has properly reconciled the amount of Rs. 30,13,260, then no addition be made. Accordingly, the ground taken by the assessee is allowed for statistical purposes. 23. Ground No. 2 in Revenue's appeal reads as under: "On the facts and in the circumstances of the case, the learned CIT(A) erred in deleting the addition of Rs. 37.46 lakhs made by the AO on account of unproved security deposits from 202 salesmen." 24. The learned Departmental Representative submits that since the assessee failed to reconcile the discrepancies as pointed out by the AO in the assessment order and in the absence of any documentary evidence to prove the said investment of Rs. 37,46,000, the learned CIT(A) has erred in deleting the same. He, therefore, submitted that the addition made by the AO be upheld. 25. On the other hand, the learned counsel for the assessee while relying on the order of the learned CIT(A) submits that the impugped amount of Rs. 37,46,000 is the security deposit f....
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....men and employees of the assessee. It was further found by the AO that the assessee has debited salary and staff welfare expenses aggregating to Rs. 54,41,617 separately. On being asked by the AO to justify the claim of commission expenses, the assessee could not produce any evidence for payment of such expenses, therefore, the AO disallowed the commission expenses Rs. 94,27,505 and added the same in the income of the assessee. He further submits that for the reasons as mentioned in the assessment order the AO has also disallowed vehicle expenses Rs. 8,79,693 and breakage loss Rs. 1,38,448. He further submits that the learned CIT(A) has erred in deleting the said disallowances. He, therefore, submits that the disallowance made by the AO be restored. 29. On the other hand, the learned counsel for the assessee while reiterating the same submissions as submitted before the learned CIT(A) further submits that in the remand report it has been observed by the AO that in the sale sheets the said commission was printed as "Chhoot based commission" and this discount was allowed at an average rate of 15 per cent which varied from station to station and period to period. It was further obs....
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....e learned CIT(A) vide p. 17 of his order has also deleted the disallowance of vehicle expenses Rs. 8,79,693 and breakage Rs. 1,38,448 as under: "Now the contention of the appellant is found to be correct. The AO in his remand report dt. 27th May, 2004 observed that the expense vouchers produced were not in order, but found to be genuine and made towards the running of vehicles mainly hired for business. In respect of hiring of vehicle it was reported that the vehicle hired can be taken as genuine and can be accepted. This report was made by the AO after examining the relevant evidence which he was not in a position to examine during the assessment proceedings. Now that the AO himself is satisfied about the genuineness of the expenses, the addition does not appear to be called for. So far as breakage loss of Rs. 1,38,448 is concerned, its possibility in such a trade cannot be ignored, since it was very negligible as compared to the total turnover of the business, it was an allowable expenditure. Accordingly the additions of Rs. 8,79,693 and Rs. 1,38,448 are hereby deleted." In the absence of any contrary material brought on record by the Revenue against the finding of the lear....