TaxTMI 
TaxTMI 
2017 (5) TMI 680
X X X X Extracts X X X X
X X X X Extracts X X X X
....the facts and in the circumstances of the case and in law erred in confirming the addition made by the ITO 24(3)(1) of Rs. 721,607/- being disallowance of commission expenses u/s 40(a)(ia) of the Ac well as on the round that the same were not genuine. 3) The Learned Commissioner of Income tax (Appeals) - 42, Mumbai on the facts and in law erred in confirming the addition made by the ITO (3)(1) u/s. 40(a)(ia) of the I.T. Act of Rs. 82,725/- being disallowance of Audit fees. 4) Without prejudice to ground number 2 and 3 above, the Learned Commissioner of Income tax (Appeals) - 42 erred in not directing the ITO 24(3)(1) to allow deduction of expenses of Rs. 7,27,607 and Rs. 82,725/- in the year in which the payment of TDS was made. 5) The Learned Commissioner of Income tax (Appeals) - 42, Mumbai on the facts and in the circumstances of the case and in Law erred in confirming the addition made by the ITO 24(3)(1) u/s. 40A(2)(b) of the I.T. Act of Rs. 2,67,6871- being disallowance of 25% of the labour charges of Rs. 10,70,749/- paid to Mr. Dhirendra T Singh, brother of the assessee treating the said disallowance as very nominal. 6) The Learned Commissioner of Income tax (App....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lly the AO added the same u/s 68 of the Act to the total income of he assessee for the reasons that three main ingredients have not been proved by the assessee i.e. creditworthiness of the creditor, identity of the lender and genuineness of the transactions. 4. Aggrieved by the order of AO, the assessee preferred an appeal before the ld.CIT(A) who also dismissed the appeal of the assessee by observing and holding as under : "In view of the above settled legal position it is seen that in the case at hand the assessee has been able to establish only the identity of the cash creditors but their capacity to pay and the genuineness of the transactions are not established. It is clear that Smt. Meena Singh does not have adequate financial capacity to lend Rs. 3,95,0001- to the assessee. The loan creditor has no explanation for the cash deposited in her bank account immediately before issuance of the cheques to the assessee. It is also seen that in the entire financial year there are hardly any worthwhile transactions or bank deposits in the accounts of Smt. Meena Singh other than those connected with the loan transactions. The cash creditor Smt. Meena Singh has no explanation for t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd the genuineness thereof before the cash credit is accepted. The cash creditor Shri Dhirendra T Singh has no explanation for the cash deposits in his bank and the replies given are not substantiated by any evidence. Similarly the genuineness of the cheque of Rs. 2,00,0001- is not established by records. (the issue of non genuine labour charges paid to Shri Dhirendra T Singh is also one of the grounds of appeal in this year). It is therefore held that this cash credit is also not proved. In the case of Smt. Savitri Thakur the facts are very simple. The lady has no regular source of income and no evidence of her earning any sort of income is produced in these proceeding.Further the lady is not an income tax assessee and the deposits in her bank account have come from other relatives of the assessee and these people. in turn have no explanation for the cash deposited by them in their own bank account before transferring the money to Smt. Savitri Thakur. The entire regimen of generation of funds by the assessee through his relatives and family members makes it necessary to examine the actual source of cash credit and in this respect the assessee has not been able to discharge the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....his facts, we are not in agreement with the finding of the ld.CIT(A) that the three main ingredients i.e. identity of the creditor, creditworthiness of the creditor and genuineness of transaction were not proved. However, in respect of Savitri Thakur who has lent a sum of Rs. 17 lakhs to the assessee out of gifts from Rajendra Bahadur Singh brother of lender and Ms.Sarojini Thakur sister of Savitri Thakur . In the case of Rajendra Bahadur Singh huge cash was deposited i.e Rs. 5,00,000/- on 20.7.2009 which was stated to be kept in the house of the assessee out of tuition receipts whereas in the case of Sarojini Thakur Rs. 9,00,000/- on 18.7.2009 which was stated to be out of agricultural income kept in the house. We also find that in these cases the assessees were not government employees and not filing any return of income for the reasons that they are eiher deriving income which was below the taxable income or from agriculture which we find is not convincing and satisfactory. In case of remaining Rs. 3,00,000/-, we find that the assessee has proved genuineness of the transactions, creditworthiness and identity of the creditor. In our opinion, the order of the ld.CIT(A) in sustaini....
X X X X Extracts X X X X
X X X X Extracts X X X X
....In the present case, the TDS was deposited before 31.10.2010 and therefore in view of our decision with respect to ground no.2 and 3 above this ground becomes infructuous and accordingly dismissed. 11. Ground no.5 is against the confirmation of addition of 25% of the labour charges of Rs. 10,70,749/- paid to Dhirendra T Singh, brother of the assessee treating the said disallowance as very nominal as made by the AO u/s 40A(2)(b) of the Act. 12. During the course of assessment proceedings, the AO noticed that a sum of Rs. 10,70,749/- was paid to Dhirendra T Sing towards labour charges which as per the AO covered under section 40(2)(b) of the Act. Therefore, the AO issued notice to the assessee as to why the same should not be disallowed and added back to the total income of the assessee. In response the assessee filed a copies of bills of Dhiren T Singh giving explanation or justification for the such payments. But the AO not finding the same to be satisfactory for the reasons that the assessee has offered no explanation and disallowed 25% of Rs. 10,70,749/- i.e. Rs. 2,67,685/- on adhoc basis. In the appellate proceedings, the ld.CIT(A) also dismissed the appeal of the assessee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1,38,798/- u/s 41(1) of the Act on account of cessation of liability in respect of 10 parties outstanding as on 31.3.2010. During the course of appellate proceedings, the ld. CIT(A) observed that the turnover of the assessee is Rs. 1.80 crores and purchases were to the tune of Rs. 79,94,817/-. The ld. CIT(A) also observed that the assessee was carrying substantial amount of liabilities in as form of sundry creditors of Rs. 43,17,014/- and advance from debtors Rs. 15,97,053/-. Vide order sheet entry dated 15.2.2016, the assessee called upon to explain as to why these liabilities were not discharged. Accordingly, the assessee filed copies of ledger accounts and also payment made in some cases. Finally, the ld. CIT(A) vide order sheet entry dated 13.4.2016 issued a show cause notice to the assessee as to why the assessment should not be enhanced by the amount of sundry creditors and advanced from the debtors, which was replied by the assessee vide letter dated 12.5.2016 submitting therein that the assessee has already declared a sum of Rs. 7,04,240/- as other income in the assessment year 2011-12 on account of writing back of certain sundry creditors which are no more payable. The ld.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... no payment has been returned also. The assessee has claimed to have written back the amount in his books on 02.04.2010 but the assessee has given no explanation as to how the liabilities ceased on 02.04.2010 only. Further this has no impact on the finding of cessation of liability on 31.3.2010 as per the case law discussed below. Total 1138798 17. The ld.AR vehemently submitted that in the assessment year 2011-12, the assessee suomotu written back a sum of Rs. 7,04,240/- towards cessation of liability which was duly shown as income in the profit and loss account. The ld. AR further submitted that the action of the appellate authority was totally wrong and against the spirit of law as provided under section 41(1) of the Act. Whereas, in fact these were not ceased to exist but continued to exist and outstanding at the year end. The ld. AR finally requested that the addition so made by the ld.CIT(A) deserved to be deleted. On the contrary, the ld. DR strongly opposed the submissions of the ld.AR and heavily relied on the orders of the authorities below. 18. We have heard both the parties and perused the material available before us including ....