TaxTMI 
TaxTMI 
2007 (1) TMI 216
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....dram 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 of transaction and creditworthiness. S....
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.... 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 94,27,505 -....
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....ned 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, therefore, the same cannot be added in the income of the assessee in the impugned as....
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....; 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 --------- Security &n....
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....bsp; 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 50,000 - 6. 24-4-2000 Nevandram Ahuja 5,00,000 5,00,000....
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....-------- 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. 1-2 of the assessee's paper book that the following amount was deposited with Asstt. Commr., State Excise Department on 28th March, 2000 and 29th March, 2000: ....
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....; -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- - 45,000 28-3-2000 103151 -do- - ....
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.... 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 immediate source of credits in books of account was transfer through cheques from bank accounts. Under no circumstances, this part of the explanation could be rejected by the Revenue. The Revenue may not be entitled to question source of deposits of creditors in bank accounts as it tantamounts to ques....
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....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, 2000 against FDR and transferred the said amount in the State Bank account No. 5630 of Shri Chitrabhan Singh, copy of this bank account is also available on record. The appellant also furnished copies of acknowledgement of the return bearing No. 04479 dt. 31st Aug., 2000 for asst. yr. 2000-01 and return No. ....
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....wever, 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 certainly indicates his individual identity and investment of Rs. 5 lakhs, therefore, he was liable to be taxed in his individual capacity if source of his capital contribution remained unexplained but the firm could not have been taxed." We further find that the assessee has filed the copy of assessment order of Sri Arun....
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....p; --------- 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. 2000-01 reveals deposit with State Excise, Rewa of Rs. 10,00,000. This is out of the opening balance of Rs. 9,28,390 and net profit of the year of Rs. 1,18,800. Thus his identity and source of capital contribution stands proved." In the absence of any contrary material brought on record by the Revenue against the aforesaid finding of the learned CIT(A) ....
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....y 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 Revenue, we are inclined to uphold the finding of the learned CIT(A) on this account also. Accordingly, the ground taken by the assessee is allowed and that of Revenue stands rejected. 19. Ground No. 2 in assessee's appeal reads as under: "The learned CIT(A)-II was not justified in confirming the addition on account of false liability, while it was repeatedly requested that the difference in the liabi....
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....peal 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 from the salesmen. In the liquor business it is imperative for the assessee to obtain security deposit from the salesmen. During the year under consideration, the assessee has received security deposit of Rs. 18,000 to Rs. 19,000 each from 202 salesmen. The AO has examined more than 100 depositors and many of them submitted their affidavits. All of them have confirmed to have deposited the amount as security deposit....
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..... 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 observed by the AO in his remand report that both the sales and discount appeared in the books of account and per day stationwise sale discount has been posted in the books of accounts, therefore, keeping in view the above facts it appeared that so-called commission was direct discount to the customers. He further submits that the learned CIT(A) in view of the remand report of the AO deleted all the impugned disallowance made by th....
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....eported 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 learned CIT(A) and keeping in view that the AO in the remand report has accepted the commission as discount to the customers and vehicle expenses as genuine and also keeping in view that the breakage loss is a normal business loss considering the value of turnover, we are inclined to uphold the finding of the learned CIT(A) in deleting the same. The ground taken by the Revenue is, therefore, rejected. 31. Ground No. 4 of the Revenue's appeal reads as ....