TaxTMI 
TaxTMI 
2011 (10) TMI 689
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....4/Ahd/2009 Asst. Year 2005-06 (Assessee's appeal) 3. In this appeal the assessee has raised following grounds :- (1) That the CIT(A) erred in confirming the addition of Rs. 56,500/- Rs. 56,000/-, Rs. 55,000/-, Rs. 56,500 & Rs. 55,000/- & Rs. 57,000/- resp. from Priya Steel, Saniya Steel, Suleman Ent., Vijay Traders, Mansoor Metal & Jaybharat Steel Co. (2) That the CIT(A) erred in confirming the addition of Rs. 1,50,000/-, Rs,6,00,000/-, Rs. 14,25,000/- & Rs. 9,00,000/- resp. from Fashat Ali, G.V. Katwala, J.K. & Co. & Mayur M. Patel. (3) That the CIT(A) That the CIT(A) erred in not taking cognizance of the PAN & confirmation produced of Fashat Ali, G.V. Katwala, J.K. & Co., Mayur M. Patel. (4) That the CIT(A) erred in not applying the ratio of Rohini Builders 256 ITR 360. (5) That the addition of Rs. 56,500/-, 56,000/-, Rs. 55,000/-, Rs. 56,500/- & Rs. 55,000/- & Rs. 57,000/- should be deleted. (6) That the addition of Rs. 1,15,000/-, Rs. 6,00,000/-, Rs. 14,25,000/- & Rs. 9,00,000/- should be deleted. (7) That the CIT(A) erred in confirming disallowance of Kharajat expenses of Rs. 99,833/-. ITA No.2086/Ahd/2009 As....
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....281 (Cochin) Star Ferro Alloys (P) Ltd. (2004) 90 ITD 63 (Delhi (Third Member) Shri Shah Unmesh Indravadan vs. ITO in ITA No.3489/A/07 ITAT, Bench'D' Ahmedabad.. On merits the assessee submitted that he had filed copy of ledger accounts. The parties are small traders, hence PAN proof was not there but the loan is genuine and accepted. 7. After considering the submissions of the assessee the ld. CIT(A) held as under :- "4.1 I have considered the facts and submissions. I do not agree with the appellant's view. In the original assessment proceedings no inquiry was made regarding genuineness of the loans. As per the audit report loan was taken in cash. Penalty proceedings u/s 271(D) was initiated. During the penalty proceedings, it was found that identity, capacity and genuineness of the loans are not proved. Hence, section 68 of IT Act is attracted. Accordingly, the AO issued notice u/s 148 of IT Act on 29.08.2007. Regarding genuineness of the loan, no opinion was formed in original proceedings, hence there is no question of change of opinion. Hence it is not a case of change of opinion and the case laws relied on by the appellant is not applicable. ....
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....was there hence s.147 is not permissible. The AO further dealt with the objection on change of opinion at page 17 of paper book where he stated that erstwhile AO had not taken ample note of the creditors in her assessment order and therefore it can be said that there was certain non-application of mind of the part of the then AO. In this regard he relied on the decision of the Delhi High Court (FB) in the case of CIT vs. Kelvinator of India 256 ITR 1(Delhi)(FB) affirmed by Hon'ble Supreme Court in 320 ITR 561, wherein the Hon'ble Delhi High Court has held as under :- "23. We also cannot accept submission of Mr. Jolly to the effect that only because in the assessment order, detailed reasons have not been recorded on analysis of the materials on the record by itself may justify the AO to initiate a proceeding under section 147. The said submission is fallacious. An order of assessment can be passed either in terms of subsection (1) of section 143 or sub-section (3) of section 143. When a regular order of assessment is passed in terms of the said sub-section (3) of section 143, a presumption can be raised that such an order has been passed on application of mind. It is well-k....
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.... make investigation as per decision of the Tribunal reported in (2004) 90 ITD 63 (Delhi)TM. The duty of the assessee is to furnish primary details only. As held in 199 Taxman 342 & 106 ITR 1(SC) Parshuram Pottery. On merits, he submitted that as the one person was examined in 271-D proceeding, who confirmed deposit, merely because his sources were not proved, additions could not be made u/s 68 and all other credits be added in suspicion. 9. On the other hand, the ld. DR relied on the orders of authorities below and submitted that during the penalty proceedings initiated u/s 271D it was found by the AO that identity, capacity and genuineness of the loans were not proved and therefore the provisions of section 68 were attracted. No opinion was formed at the time of initial assessment. Accordingly, the AO issued notice u/s 148 of the IT and the case was reopened. The identity of the creditors, credit-worthiness of the creditors and genuineness of the transactions of the loans were not proved therefore, the ld. CIT(A) has rightly upheld the action of the AO. His order may kindly be upheld. 10. After hearing both the parties and perusing the record, we find that there is no dis....
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....ITR 456 (SC) wherein the Hon'ble Apex Court has held as under :- "Held, affirming the decision of the High Court, that subsequent to the completion of the original assessment proceedings, on making enquiry, the Income-tax Officer came to know that the Calcutta company from whom the appellant claimed to have borrowed the loan of Rs. 50,000/- in cash had not really lent any money but only its name to cover up a bogus transaction. This was not a case where the Income-tax Officer sought to draw any fresh inference, which could have been raised at the time of the original assessment on the basis of the materials placed before him by the appellant relating to the loan from the Calcutta company and which he failed to draw at that time. Acquiring fresh information, specific in nature and reliable in character, relating to a concluded assessment which went to expose the falsity of the statement made by the assessee at the time of the original assessment was different from drawing a fresh inference from the same facts and material available with the Income-tax Officer at the time of the original assessment proceedings. The two situations were distinct and different. Where the transa....
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....tes to confirmation of addition of Rs. 9,85,500/- made u/s 68. During the course of assessment proceedings the assessee was requested to furnish the details of loans and advances taken during the year including trade advances for supply of goods and scrap material along with the name and address, PAN details, copy of balance sheet, capital account and copy of ROI filed by the parties. The assessee vide his letter dated....filed the following submission :- "The assessee has taken advances for supply of goods from following parties :- 1. S. N. Traders Rs.2,07,500/- 2. Suleman Enterprises Rs.1,51,500/- 3. Vijaya Traders Rs.2,23,500/- 4. Saniya Steel Rs.1,70,000/- 5. Sharma Trading Co. Rs.2,33,000/- The confirmations of the parties are now enclosed herewith. The assessee when approached the above parties to confirm their transactions before the ACIT, they refused to attend before your Honour due to fear of income-tax. During the course of penalty proceedings u/s 271D dated 31.07.07 for Asst. Year 2004-05 the assessee did produce all the five parties for that year but it so happened that all the parties, left the Aykar Bhavan imme....
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....uld not substantiate that he had given loan to the assessee, therefore, the AO held this loan to be bogus and had initiated reassessment proceedings in this case which we have already upheld, therefore, assessee does not get any support from the statement of Mr. Mayur Rana in respect of this ground regarding cash credit of Rs. 9,85,500/- also. Since at no stage the assessee has been able to prove the identity of the creditors, genuineness of transaction and creditworthiness of the persons, we confirm the order of ld. CIT(A) on this issue. The appeal filed by the assessee is dismissed. ITA No.1364/Ahd/2009 Asst. Year 2005-06 (Assessee's appeal) ITA No.2086/Ahd/2009 Asst. Year 2004-05 (Revenue's appeal) 15. Ground Nos.1 to 6 of assessee's appeal in ITA No.1364/Ahd/2009 and the only effective ground in Revenue's appeal in ITA No.2086/Ahd/2009 relate to addition of Rs. 50,51,000/- made by AO on account of cash credit. The facts of the case are that during assessment proceedings the assessee claimed to have received following loans: Sl.No. Name of party Amount taken Amount repaid 1 Priya Steel Rs.56,500/- Rs.56,500/- 2 Saniya Steel Rs.56,000/- ....
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....te address and their credit worthiness is not proved. Hence, AO's action for treating these as not genuine is confirmed. (b) Regarding cash credit at Sl.No.7 A.V. Corporation Rs. 2,00,000/- the appellant has filed confirmation along with bank statement and copy of IT acknowledgement for the relevant Asst. Year. Hence credit worthiness is proved and this should be treated as explained. AO is directed to delete this addition. (c) As regards item at Sl.No.9 Magh Mayur Mallhar Co-op. Soc. Rs. 14,75,000/-, the appellant had filed the copy of account and confirmation, which shows that appellant had sold goods to the party in the next year. Hence the amount was for supply of goods only which was done in the next year. The appellant has also filed complete address, PAN etc. As the amount was trade advance and it was verifiable, the ratio of the case Zaverbhai Biharilal & Co. 154 ITR 591 is applicable. The AO's action in treating it as unexplained cash credit is not justified. Hence this addition is deleted. (d) As regards item Nos.8 and 10 to 12, Fashat Ali Rs. 1,15,000/-, G.V. Katwala Rs. 6,00,000/-, JK & Co. Rs. 14,25,000/- and Mayur M. Patel Rs. 9,00,000/- it ....
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....garding Sl.No.7 the ld. counsel submitted that assessee has filed confirmation along with bank statement and copy of I.T. acknowledgement for the relevant Asst. Year. Hence credit worthiness is proved and this should be treated as explained. As regards item at Sl.No.9 Megh Mayur Mallhar Co-op. Soc. Rs. 14,75,000/- the appellant had filed the copy of account and confirmation, which shows that appellant had sold goods to the party in the next year. Hence the amount was for supply of goods only which was done in the next year. The appellant had also filed complete address, PAN etc. As the amount was trade advance and it was verifiable, the ratio of the case Zaveribhai Biharilal & Co. 154 ITR 591 is applicable. Accordingly, it was submitted that the cash credits in respect of these parties may be deleted. 18. On the other hand, the ld. DR submitted that since the advances were received in cash, creditors were not produced before the AO for verification, no identity of the creditors, credit worthiness of the creditors and genuineness of the transactions were proved, no PANs were produced the lower authorities were justified in treated these advances as non-genuine. The ld. CIT(....
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....ty, genuineness and credit worthiness. The assessee had filed only copy of accounts and confirmation but not the copy of IT return for relevant period and no copy of bank accounts of the concerned parties. We feel that assessee be given one more opportunity to substantiate the creditworthiness of the creditors and for this purpose the matter is restored back to the file of AO for fresh adjudication after affording reasonable opportunity of being heard to the assessee. So this ground of assessee is partly allowed for statistical purposes. 20. The next ground raised by the assessee is confirmation of addition of Rs. 99,833/- by disallowing kharajat expenses. 21. The AO noted that assessee claimed Rs. 9,98,331/- as kharajat expenses. The assessee failed to produce verifiable documents in support of his claim but filed only ledger account. The AO found from the ledger that most of the expenses were paid in cash. Section 37 deals with various other deductions, mandates that any expenditure, in order to be allowed as revenue expenditure, needs to be - (i) properly verifiable for having been actually incurred for the purposes of business & (ii) purely nonpersonal in nature. The fact....