TaxTMI 
TaxTMI 
2013 (4) TMI 90
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....tricting the addition made by AO of Rs.43,70,000 on account of unexplained cash credit u/s. 68 of the Act to Rs.2,00,000/-. 2. On the facts and in the circumstances of the case and in law, the learned CIT(A)-I, Surat has erred in restricting the disallowance of interest made by the AO of Rs.1,82,648 claimed to have been paid by the assessee on account of unexplained cash credit to Rs.11,770." 3. The assessee has in its Cross Objections raised four grounds wherein ground No.4 is general in nature, hence does not survive for adjudication. Ground No.3 is relating to charging of interest u/s 234B of the Act which is consequential and the same is dismissed as such. The surviving grounds No.1 and 2 are in support of the order of the learned CIT(A) and aggrieved by the order of the learned AO; they are reproduced herein under for reference:- "1) That on the facts and in the circumstances of the case, the ld. A. O. has erred in making an addition of Rs.43,70,000/- by treating the Unsecured Loans received by the appellant company as Unexplained Cash credits u/s 68 of the Act. The addition made by the ld. A. O. is not only wrong and unjustified but is also contrary to well establish....
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....loan transaction with the assessee company. Thus, it was established that the said bank accounts were opened only for facilitating the transfer of funds from the creditors to the assessee Company. On enquiry about the financial capacity of the creditors the learned AR of the assessee as well as the Managing Director of the assessee Company demanded enquiry of the creditors u/s 133(6) of the Act by the revenue. Accordingly the learned AO issued notice to the creditors u/s 133(6) of the Act on 01-08-2008 and served the same on the same day by registered A/D post. Subsequently, the learned AO observed the following discrepancies:- (i) On verifying the acknowledgement for service of notice at different addresses it revealed that in case of some assessees letters were received by the same person who was not the creditor. (ii) In the case of other assessees also it was apparent that the signatures were fabricated and the acknowledgments for receipt of the letters were signed by an individual who was not the creditor. (iii) On going through the reply filed in response to the letters issued by the AO u/s 133(6) of the Act, it was obvious that all the replies were prepared at one p....
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....any has any means to prove the loans as genuine. In the circumstances, the amounts totaling to Rs.43,70,000/-, credited to the books of accounts of the assessee company in the guise of unsecured loans are held to be cash credits within the meaning of section 68 of the I. T. Act. As such, the said amount of Rs.43,70,000/- is added to the total income of the assessee company u/s 68 of the Act and taxed. 5. The assessee company has debited an amount of Rs.3,92,407/- in its P & L account towards 'interest paid', under the major head "Administrative & Finance Expenses". The said expense includes an amount of Rs.1,82,648/- as interest on above bogus loans. Since the loans in question are not genuine, the interest amount of Rs.1,82,648/- cannot be allowed. In the circumstances, the said amount of Rs.1,82,648/- is disallowed out of interest expenses and added to the total income of the assessee company." 6. The assessee carried the matter before the learned CIT(A). The learned CIT(A) restricted the disallowance to the extent of Rs.2 lacs with respect to the depositor Shri Om Prakash Sharma and thereby deleted an amount of Rs.41,70,000/-. In arriving at such conclusion the learned CIT....
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....acking materials earning net income of Rs.6,000/- to Rs.7,000/- per month and his expense per month is Rs.4,000/- to Rs.5,000/-. Therefore, his capacity to extend loan of Rs.2,00,000/- is doubtful. Further, his only bank transaction is the alleged loan transaction and, therefore, it does not appear to be genuine. Moreover, the opening balance in the bank before this transaction was only Rs.1,066/-. Cash was deposited in the bank one day before the cheque for the loan was issued. (ii) Shri Surendrakumar Chaudhary:- He is a commission agent for computer stationery and his daily income is Rs.200/- to Rs.400/- and monthly expenditure is about Rs.3,000/- to Rs.3,500/-. He has filed the income tax return without maintaining any books of account. Therefore, his capacity to extend loan of Rs.1,60,000/- is doubtful. Further, his only bank transaction is the alleged loan transaction and, therefore, it does not appear to be genuine. Moreover, the opening balance in the bank before this transaction was not known. Cash was deposited in the bank one day before the cheque for the loan was issued. (iii) Shri Gopal Saini:- He is a commission agent of dress materials earning commission income ....
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....source of extending loan to the appellant for Rs.12,50,000/- is doubtful. The opening balance in the bank account before the transaction was only Rs.3,006/- and cash was deposited on the same day the cheque for the loan was issued. 9. Considering the above finding of the learned AO and the facts of the case it is apparent that the loan extended by the depositors to the assessee company does not appear to be genuine. All the loan depositors are persons of meager resources and do not have any genuine reason to extend their lifetime savings as loan to the assessee company. In all these cases cash was deposited in the bank shortly before the cheques were issued to the assessee company. All the depositors do not appear to have genuine banking transactions because the only transaction pertains to the cheque issued to the assessee company for advancing loan. Further, the opening balances maintained in the bank by the depositors are meager which establishes that the depositors have maintained the bank account only to document the loan to give a color of genuineness to these transactions. Only by establishing the existence of the individuals purported to be the depositors and creating do....