TaxTMI 
TaxTMI 
2016 (5) TMI 317
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..... 4,71,987/- and Long Term Capital Gain on sale of mutual fund of Rs. 12,67,903/- which were claimed as exempt. The Assessing Officer arrived at this conclusion that the loan a sum of Rs. 1,00,000/- taken by the assessee from Manchhagauri M. Andharia and Rs. 5,00,000/- from Gopaliji V. Variya and Rs. 4,95,000/- from D.S.Mehta was not creditworthy and genuine therefore the same was declined and added to the income u/s. 68 of the Income Tax Act, 1961( in short "the Act"). The Assessing Officer has also applied the provision u/s.14A read with Rule 8D of the Income Tax Rules, 1962 in connection with the income which has been claimed as exempt challenged by the assessee which were confirmed by the learned CIT(A). 3. The assessee has raised the following ground of appeals:- A. Addition on account of alleged unexplained cash credits - Rs. 10,95,000/- 1) The learned Commissioner of Income Tax (Appeals) - 17, Mumbai [CIT(A)] erred on facts and in law in upholding the order of the Deputy Commissioner of Income Tax 8(2), Mumbai (AO) making an addition of Rs. 10,95,000/- on account of alleged unexplained cash credits as under without appreciating that the loan creditors ha....
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.... staff welfare expenses. 12) The appellant prays that the disallowance of Rs. 3,910/- out of staff welfare expenses as made by the AO and as confirmed by the CIT(A) may be deleted. G. Disallowance out of Telephone expenses - Rs. 3,416/- 13) The learned CIT(A) erred on facts and in law in upholding the order of the AO making a disallowance of Rs. 3,416/- out of Telephone expenses. 14) The appellant prays that the disallowance of Rs. 3,416/- out of Telephone expenses as made by the AO and as confirmed by the CIT(A) may be deleted. H. Disallowance out of Travelling expenses - Rs. 4,638/- 15) The learned CIT(A) erred on facts and in law in upholding the order of the AO making a disallowance of Rs. 4,638/- out of Travelling expenses. 16) The appellant prays that the disallowance of Rs. 4,638/- out of Travelling expenses as made by the AO and as confirmed by the CIT(A) may be deleted. ISSUE NO.:-A:- 4. The learned representative of the assessee has argued that the assessee has furnished sufficient documents before the learned CIT(A) and also proved the identity of the lenders and correct address and proved the genuinene....
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....remand report which has been attached at page 234 of the paper book speaks that the assessee was not entitled to adduce the evidence because the evidence was not produced before the Assessing Officer at initial stage, hence by not fulfilling the condition u/s. 47A of the Act nothing is required to be considered. However, the said report also confirmed the transactions but raised the point of creditworthiness of the creditors. Now it is to be seen whether the claim of the assessee has rightly been declined by the authority below. Before going further to decide the matter of controversy it is observed that the learned CIT(A) accepted the additional evidence but arrived at this conclusion that the lender were not having capacity to give the loan therefore the loan given by above said three person falls under section 68 of the Act. The relevant para of the finding of the learned CIT(A) is hereby reproduced as under: "1.3.8 As regards the identity of the persons who had given loan to the appellant there is no dispute. The creditworthiness of Mr. Gopalji V. Varaiya HUF who had given loan of Rs. 5 lakhs to the appellant required to be examined in respect of their creditworthiness....
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....ceding to the entry of giving loan, the creditworthiness of these persons therefore cannot be said to be proved. The additional made by the Ld.AO is based on the material on record and also on the circumstantial evidences indicating that the immediate sources of advancing loan stands unexplained in accordingly upheld. This ground of appeal is thus dismissed." Apparently, the learned CIT(A) discredited the said credit on the basis of creditworthiness. He relied upon the Income Tax return of the creditors. Gopalji V. Varaiya HUF produced the confirmation of account at page 3 of the paper book wherein the closing balance has been shown to the tune of Rs. 10,61,049.00. Copy of pass book has also been produced at page 4 and 5 of the paper book which speaks about the withdrawal of the said money. No doubt these documents have not been discussed in the order however in the written submissions before us these document only on the file of the CIT(A) as well as Assessing Officer. Accordingly, the loan received from Late Manchhagauri M. Andharia is concerned, in this regard the confirmation of account for the period from 01.04.2008 to 31.03.2009 is on the file which speaks about the closin....
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....sessee and thus, there is no nexus of the expenses debited to the profit & loss account and the income generated out of investment. The claim of the assessee is that unsecured loans were utilized for payment of imports of chemical for trade or for paying import duties or for establishing the fixed deposit with the bank which was required as collateral security by the bank for letter of credit for import of chemicals. It was empathetically asserted that none of the loan, taken on which interest was paid, was utilized for investment purposes. In view of these facts, we find merit in the explanation of the assessee, consequently, this ground of assessee is allowed." 5.1 Turning to the case in hand it is specifically asserted by the assessee that the appellant is maintaining separate accounts of the business carried on by him and his investment activities. The investment activities and its expenses are reflected in the appellant's personal accounts. No expenses pertaining to the investment activity are debited to the business accounts. Further, though the investment has been made out of the proprietary concern's bank account, the same has not been made out of borrowed funds but out ....