TaxTMI 
TaxTMI 
TaxTMI 
2012 (4) TMI 592
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....n of ₹ 42,93,350/- in respect of application money received from four persons as per following details. (i) Smt. Sharmila Kashid ₹ 5,00,000/- (ii) Shri Shankar Kashid ₹ 17,75,700/- (iii) M/s. Pushkraj Packaging (India) Pvt. Ltd. ₹ 15,17,650/- (iv) Shri Jeevan Visram Sawant ₹ 5,00,000/- Total ₹ 42,93,350/- Of the above, Shri Shankar Kashid is the Managing Director of the Assessee company and Smt. Sharmila Kashid is his wife. On being asked to prove the genuineness of the claim, the assessee produced before the AO the Income tax particulars and copy of the relevant bank account of the above persons besides producing the above individuals for examination of the AO. The AO, however, was not satisfied and added an aggregate sum of ₹ 42,93,350/- as unexplained cash credit u/s. 68 of the Act. 2.1. According to the AO the financial capacity of Smt. Sharmila Kashid and the genuineness of the transaction could not be established by the assessee. In this regard the AO has made a reference to the fact that this share applicant had explained source of investment out of funds lying in her bank account with Satara Jilla Madhyavarti Sahakari Bank Lt....
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....y was nothing but unproved cash credits in the A/cs. of the assessee company. The AO also made a reference to the fact that the said assessment has been upheld in 1st appeal. In the circumstances and as the genuineness of the transactions according to the AO was not established, the amount of ₹ 15,17,650/- was added as unproved cash credits u/s.68 of the I.T.Act. 2.4 A sum of ₹ 17,75,000/- was received as share application money from Shri Shankar Kashid. The AO on perusal of the copy of his A/c. No. 010428 with the Deccan Merchant Co-op. Bank Ltd., Dahisar, noticed credits in the said account from particular accounts belonging to the assessee group. The details of which were as under Date Credits Debits (Share application money) 13.04.2008 4,21,000 4,57,000 13.04.2008 5,86,000 10,07,000 5,50,000 10,07,000 08.07.2005 6,94,700 3,22,400 08.07.2005 _________ 6,94,700 3,71.378 6,93,718 21.7.2005 50.000 50,000 22.7.2008 50,000 50,000 8.9.2005 Cash 10,000 9.9.2005 Cash 15,000 25,000 25,000 25,000 17,75,718 The AO found that in the above said account of Shri Shankar Kashid, the opening balance as on 1.4.2005 was only ₹ 891/- and th....
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....e ground is allowed." 4. Before us the ld. D.R submitted that the CIT(A) fell into an error in not examining the capacity of the share applicants and also genuineness of the transactions. According to him merely establishing the identity of share applicant is not sufficient and the assessee was bound to explain the capacity of the share applicant(creditworthiness) and also the genuineness of the transactions. The ld. Counsel for the assessee brought to our notice the various documents submitted before AO in the course of assessment proceedings and submitted that the assessee had duly discharged its burden under section68 of the Act and the CIT(A) was justified in deleting the addition made by the AO. 5. We have considered the rival submissions. As far as Smt. Sharmila Kashid is concerned the share application signed by her disclosing the PAN had been filed. Her Income Tax return for A.Y 2006-07 alongwith computation of income copies had been filed. The bank account from which the payment had been made had also been filed. In our view the reasons assigned by the AO for making the impugned addition cannot be sustained. The law is well settled that the assessee is not obliged to pro....
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....he assessee has furnished satisfactory explanation with regard to this share applicant. We are of the view that in the light of the evidence filed by the assessee prima facie the receipt of share application money has been satisfactorily explained. 5.3 Shri Shankar Kashid: As far as this share applicant is concerned the share application signed by her disclosing the PAN had been filed. Her Income Tax return for A.Y 2006-07 alongwith computation of income copies had been filed. The bank account from which the payment had been made had also been filed. In our view the reasons assigned by the AO for making the impugned addition cannot be sustained. The law is well settled that the assessee is not obliged to prove the source of source. The evidence filed by the assessee prima facie establishes the receipt of share application money by the assessee and therefore, the order of the CIT(A) has to be sustained for the above reasons. The reasons given by the AO for making the impugned addition in our view are merely based on assumptions and surmises. In this regard we also find that this share applicant had appeared before the AO on 14/11/2008 but was not examined by the AO. In our view if ....
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....ontends that the added machineries were put to use in the first half of the year and it began commercial production of flexible packaging materials in August, 2005. The AC disbelieved this and allowed only 50% of the depreciation. It is seen from the details of fixed assets filed before the AO that the appellant had incurred trial run expenses which appear in the work in progress capitalized prior to 30/9/2005. There are invoices in those details which show sale of packaging materials in the month of September'05. I notice that the appellant has credited total sales of ₹ 27,26,97,968/- to the P&L A/c. this year. It seen that it had sales ranging between ₹ 1.11 crores and ₹ 1.34 crores during April'05 to August,05. The sales rose to ₹ 2.02 crores in September'05 and remained around that touching ₹ 2.28 crores in December'05. The sales shot to ₹ 3.68 crores in January'06 and peaked to ₹ 4.32 crores the next month. The spurt in sales from ₹ 1.11 crores to ₹ 2.02 crores evidence that the machineries added were used on before 30/9/2005. The AO does not dispute that all the items added were purchased prior to 30/09/2005. He also does ....
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....s rejected the claim of the assessee for no valid reasons. In our view the CIT(A) was fully justified in deleting the addition made by the AO. The order of the CIT(A) is, therefore, confirmed and Ground No.2 raised by the revenue is dismissed. 11. Ground No.3 raised by the revenue reads as follows: 3. On the facts and in the circumstances of the case and in law, the ld.CIT(A) erred in deleting the addition of ₹ 30,35,408/- being cash deposits added as unexplained income and the Ld. CIT(A) failed to appreciate how cash of ₹ 50 lakhs was generated in school's counter in rural area. 12. The AO noticed the following cash deposits in the three bank accounts maintained by the assessee. S.No. Name of the Bank Place Total amount deposited in cash 1. State Bank of India (IFB),( Current A/c.) Worli, Mumbai Mumbai ₹ 53,91,000 2. The Cosmos Co.Op. Bank Ltd. ,Kandivali(West), Mumbai Mumbai ₹ 8,45,222 3. The Satara Dist. Central Co-op. Bank Ltd. (Current A/c.) At Kaledhon, Dist. Satara Kaledhon (Satara) ₹ 6,85,250 Total ₹ 69,21,472 When asked to explain the source of such cash deposit the assessee explained that the stationary items whi....
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...., an amount of ₹ 1,65,406/- is stated to be the sales made in Mumbai / suburbs. It may also be mentioned here that in scrutiny assessment proceedings for the immediately preceding year wherein an addition at 50% of cash deposits in Mumbai's bank a/c was made on account of unexplained deposits in bank accounts of Mumbai. Under these circumstances and after careful consideration of the case, I hold that 50% of the cash deposits in Mumbai's Bank a/cs excluding Mumbai's sales of ₹ 1,65,406/-, is out of undisclosed sources of the assessee. The addition comes to ₹ 30,35,408/.. i.e. 1/2 ( 6236222- 165406)." 13. On appeal by the assessee the CIT(A) deleted the addition made by the AO for the following reasons. "5.3 I have considered the issue. It is not the case of the AO that the bank accounts were not disclosed. There were authorizations/permissions from various schools to carry out sales at their school counters. The appellant furnished challans in support of dispatch of goods sold there. There was date wise correlation of the cash sales with the cash deposits. The fact that the AO doubted only 50% of the cash sales shows that the AO himself does not dispute that ....
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....circumstances of the case and in law, the ld.CIT(A) erred in deleting two expenses of ₹ 9,66,592/- without appreciating that expenses were religious and expenses would not amount to advertisement." 16. The assessee had claimed advertisement expenses totalling ₹ 31,66,584/-. Out of the same a sum of ₹ 3,51,350/- was incurred on distribution of free note books to poor students and ₹ 6,15,342/- on arranging mahaprasad on festive occasion like Ganesh Chaturthi Pooja. The AO was of the view that free distribution of note book is a philanthropic work and in such case the name of the assessee is displayed on such note book and expenditure will not be advertisement expenditure. Similarly in respect of Mahaprasad expenses the AO was of the view that the same was purely religious and cannot be allowed as deduction. 17. On appeal by the assessee CIT(A) deleted the addition made by the AO for the following reasons. "6.3 .2 As regard the other two expenses totaling ₹ 9,66,592/-, it is no denying that the appellant displayed its brands and names either on the textbook distributed or by way of banners on the occasion of Mahaprasad distribution. It is a common sig....
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....set and should be allowed as revenue expenses u/s 37(1) of the Act. Alternatively and without prejudice, the Assessee submitted that depreciation may be allowed on the disallowance. 22. The CIT(A) held that the expenditure was revenue expenditure for the following reasons: "7.3 I have considered the issue. The only reason given by the AO for treating the impugned expenses as capital in nature is that concrete flooring and shutters endure for more than one year. Firstly, this is his mere assumption. If the logic of the AO is accepted then the expenditure on white washing of a building which also generally lasts for more than a year can be termed capital expenditure. In my opinion no time frame can be applied in order to treat any expenditure on capital account. The requirement for the purpose is enduring advantage and/or creation of a capital asset. In my opinion, if an expenditure say on building is incurred on capital account, it should result in an advantage which endures at least the life of the building, or result in an asset akin to the building. No such event has occurred in the case of the appellant by incurring of the impugned expense. The addition made of ₹ 7,19,4....