TaxTMI 
TaxTMI 
2015 (4) TMI 474
X X X X Extracts X X X X
X X X X Extracts X X X X
....t been able to controvert the finding of the AO. 3. The order of the Ld. CIT(A) may be set aside and the order of the AO be restored." 2. The facts relating to the issues in dispute are that the assessee is an individual deriving income from running a Garment Export Unit in Sector-60, Noida. She filed her return for assessment year under consideration on 29.11.2003 declaring net profit of Rs. 11,09,439/- and the total income of Rs. 3,32,830/- while claiming deduction of Rs. 7,67,607/- u/s. 80HHC of I.T. Act. The case was selected for scrutiny and statutory notices u/s. 143(2) and 142(1) were issued and duly served upon the assessee. The AO has pointed out that the assessee was required to produce books of accounts and various other details and has also raised several queries. The AO has observed that in spite of various opportunities provided to the assessee. She failed to produce books of accounts and various other details. 2.1 The AO has also brought on record that a survey operation u/s. 133A was conducted at the business premises of the assessee on 18.10.2005 and during survey several documents of incriminating nature were found at her business premises, which required logic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of appeal. He further stated that the order passed by the Ld. First Appellate Authority is not elaborated on the issues in dispute whereby he has wrongly deleted the addition in dispute and has also given the part relief to the assessee on many issues which is contrary to the law and facts of the case. Secondly, he requested that the issues in dispute may be set aside to the Ld. First Appellate Authority to decide the same, afresh under the law and to pass a speaking order. 7. We have heard the Ld. DR and perused the relevant records available with us, especially the orders passed by the Revenue Authority. We are of the view that the AO has adjudicated the issues in dispute and made the additions to the assessee's income which was assessed as under:- 1. Income as declared by the assesse Rs. 3,32,830/- 2. Add : Deduction u/s. 80HHC disallowed Rs. 7,76,607/- Rs. 11,09,437/- 3. Add : Unexplained investment in business assets i) Income as declared by the assesse Rs. 19.00 lacs ii) Unexplained investment in machinery & Generator Rs. 6.11 lacs iii) Unexplained investment in form of cash deposit R....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt in factory building: The AO has made an addition of Rs. 19,00,000/- under the head unexplained investment in factory. building, which consisted of Rs. 12,00,000/- + Rs. 7, 00,0001-. The facts of the case briefly stated are that during the year the assessee has declared investment in factory building amounting to Rs. 37,00,000/-. It was explained before the AO that the assessee has received a sum of Rs. 25,00,000/- from her daughters through a/c payee cheques and the 'rest of investments of Rs. 12,00,000/- were out of cash based transactions which the assessee 'claimed to have made through the account books of M/s Indian Weaves. (a) Addition of Rs. 12,00,OOO/-: The AO has made the addition of Rs. 12,00,OOO/- by observing that Rs. 12 lacs have been invested through cash based transactions for which the assessee has no explanation at all. It has been further observed that the assessee neither furnished any cashbook nor cash flow statement. Accordingly, the same was treated as unexplained income and added to assessee's total income u/s. 69 of the I.T. Act. Before me the learned AR has furnished statement showing availability of source of Rs. 12,00,000/-. However, it is se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....laimed to have invested Rs. 5.3 lacs in machinery and Rs. 80,000/- in generator. The AO has made the addition by observing as under:- "It is noticeable that no loan whatsoever from any bank was obtained for the purchase of above machinery. The machinery & generator were claimed to have been purchased in cash through books of accounts, which were never produced . To explain the source of investment, various opportunities of being heard were given to the assessee but the assessee had no proper explanation regarding the source of investment. No cash book or cash flow statement was furnished by the assessee to support the availability of cash. The assessee could not even link up the above cash based investment with any bank. withdrawal. In such circumstances, there is no other option but to treat the same as unexplained investment and to add the same u/s 69 of LT. Act, 1961." During appellate proceedings, the learned ,AR has worked out the availability of fund on the relevant dates. Again it is found that though apparently there may not be direct nexus between the fund available and the investment made in machinery and generator but the circumstantial evidence pointed out by the lea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rom the facts on record, it is clear that the submission of the assessee's counsel is not correct except for the fact that entry of Rs. 4,86,600/- has been taken as Rs. 4,86,000/- by way of typing mistake which makes the difference of just Rs. 600/- only. Rest of the submissions of the assessee's counsel are not correct as is apparent from the copies of bank account submitted by the assessee only. The copies of relevant pages of the bank accounts and the assessee's submission are being enclosed for reference as Annexure-D. 'From the perusal of relevant pages of the bank account with bank of Punjab, it is clear that following entries claimed by the assessee as 'not considered' do not exist at all on. the relevant pages in the bank account with bank of Punjab: 7.6.2002 5.12.820 29.6.2002 6,12,720 10.10.2002 1612017 Total 27,37,557 Since the above claim of the assessee has been proved to be wrong, the claim regarding the realization of debtors is not acceptable. Since the claim of realization of debtors is not true, the justification given by the assessee's counsel remains limited to Rs. 46,61 lacs only which calls for the addition of Rs. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ade by the AO under the head 'purchases out of undisclosed sources.' During appellate proceedings, it has been stated by the learned AR that relief of this amount has already been given by the AO vide rectification order passed U/s 154 of LT. Act. In view of this fact, no specific adjudication is called for in respect of this ground taken in appeal. (7) Disallowance of Rs. 11.60 lacs u/s 40A(3 ): Vide Ground No. 9 the appellant has challenged the action of the AO in making disallowance of Rs. 11.60 u/s 40A(3). The AO has made the disallowance by observing as under: "If we have a look upon the trading & P&L Account enclosed along with the return of income filed by the assessee, we find that the assessee has declared the purchases of Rs. 1.64 crores. The assessee has also declared the trading expenses of Rs. 50.51 lacs in trading account and the revenue expenses of Rs. 18.32 lacs in P/L account which means that the assessee has claimed total business expenses of Rs. 2.33 crores. If we have a look on the balance sheet enclosed along with the return of income filed by the assessee, we find that there is an increase in trade creditors by Rs. 9.70 lacs (Rs.41.07 lacs - 31.37 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 87 lacs u/s. 69 of the l.T. Act, 1961. The second is to consider the same as having been made in violation of the provisions of section 40A(3) out of cash withdrawals made from the undisclosed back accounts. In the interest of justice, the second option is being exercised here. Giving the maximum leverage to the assessee, the expenses of Rs. 29 lacs (1/3rd of the total expenses) are presumed as not covered by the provisions of section 40A(3). (The benefit of cash balance of Rs. 92,666/- has already been given to the assessee for incurring the petty business expenses). If we apply the provisions of section 40A(3) on rest of the expenses of Rs. 58 lacs. there is a clear disallowance of Rs. 11.60 lacs on this account. It is worthwhile to mention here that, in the absence of books of account, there is no other option but to decide the issue on the basis of best judgment while considering the facts on record. In view of the facts on record, there is no option but to treat the business of Rs. 58 lacs as having been made in violation of the provisions of section 40A(3). Accordingly, an addition of Rs. 11.60 lacs is made on: this account." During appellate proceedings the learned AR h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....plained the source of Rs. 1,67,667/- as under: Margin money for car (date of finance 30.11.02) Rs. 77723/- Out of BOP withdrawal of Rs. 4.15 lacs on 26.11.2002. Margin money for scooter (date of finance 28.10.02) Rs. 10273/- Out of BOP withdrawal of Rs. 40000/- on 10.10.2002. Fax (bill dated 11.11.02) Rs. 16000/- Out of BOP withdrawal of Rs. 5.65 lacs on 02.11.2002. Furniture Rs. 64171/- Out of available cash as sufficient cash withdrawal are there as per charge showing availability of cash. The submission of the learned AR has been considered. Out of investment of Rs. 1 ,67,667/-, the source of investment to the extent of Rs. 77,223/- (margin money tor car), RS'.10,273/- (margin money for scooter and Rs. 16,000/- (for fax) appears satisfactorily explained to be out of BOP withdrawals, as stated above. Hence there is no justification for making addition to such extent. However, as regards the investment in furniture to the extent of Rs. 64, 171/-, the learned AR has explained the source there of to be out of available cash. This explanation is of general nature as the same is not supported by any proper evidence. Hence out of Rs. 1 ,67,667/-, addition to th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ained investment in machinery and generator is concerned, we find that the assessee claimed to have invested Rs. 5.3 lacs in machinery and Rs. 80,000/- in generator. The AO has made the addition by observing as under:- "It is noticeable that no loan whatsoever from any bank was obtained for the purchase of above machinery. The machinery & generator were claimed to have been purchased in cash through books of accounts, which were never produced . To explain the source of investment, various opportunities of being heard were given to the assessee but the assessee had no proper explanation regarding the source of investment. No cash book or cash flow statement was furnished by the assessee to support the availability of cash. The assessee could not even link up the above cash based investment with any bank. withdrawal. In such circumstances, there is no other option but to treat the same as unexplained investment and to add the same u/s 69 of I.T. Act, 1961." 10.1 We find that during appellate proceedings, the learned counsel of the assessee has worked out the availability of fund on the relevant dates. Again it was found that though apparently there may not be direct nexus between....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... extent of Rs. 3,20,850/-, the assessee could "not give the source thereof. IN view of the above, we find considerable cogency in the finding of the Ld. CIT(A) to delete the addition of Rs. 13,86,400/- and Rs. 3,20,850/- is confirmed. In the background of the aforesaid discussions, we are of the considered view that no interference is called for in the well reasoned order passed by the Ld. CIT(A), hence, we uphold the same by rejecting this ground of appeal raised by the Revenue in the aforesaid manner. 12. With regard to ground 1(iv) regarding deletion of addition of Rs. 1,03,496/- on account of unexplained investment in car, furniture etc. is concerned, we find that considerable force in the contention of the Assessee that the AO was wrong and illegal in making an addition of Rs. 6.92 lacs to the income of the assessee as unexplained investment in car, furniture, scooter and fax. We find that during the appellate proceedings; the learned counsel of the assessee has submitted that out of the addition made of Rs. 6,92,201/-, the AO has given a relief of Rs. 5,24,534/- vide his rectification order passed U/s 154 of the Act remaining an addition of Rs. 1,67,667/- on this account. No....
X X X X Extracts X X X X
X X X X Extracts X X X X
....k on the balance sheet enclosed along with the return of income filed by the assessee, we find that there is an increase in trade creditors by Rs. 9.70 lacs (Rs.41.07 lacs - 31.37 lacs) during the year. The assessee has also shown the expenses payable of Rs. 2.18 lacs at the end of year. The assessee also had the cash balance of Rs. 92,000/- at the beginning of year. If we deduct the increase in creditors (Rs.9.70 lacs) and expenses payable of (Rs.2.18 lacs) and opening cash balance (Rs.92,000/-), we find that the assessee has claimed to have made purchases and business expenses of about Rs. 2.20 crores which are supposed to be withdrawn from the bank accounts declared by her. [The assessee's counsel has contended that we should deduct the creditors of Rs. 4I.07 lacs but only the increase in creditors is to be deducted]. But the surprising factor here is that there are huge cash withdrawals from the bank (the destinations of withdrawals are unknown and no cash book or cash flow account has been furnished by the assessee during the long assessment proceedings) which do not leave any room for the payments actually made through account payee cheque/DD as provided in section 40A(....