TaxTMI 
TaxTMI 
2015 (7) TMI 1225
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....(A) has grossly erred in deleting addition of Rs. 4,00,000/- made by the A.O. u/s 68 of the Income-tax Act on account of unexplained cash credit only on the basis of affidavit and confirmation of account submitted by assessee from the persons advancing loan on 29.12.2010 denying the A.O. the opportunity from testing these loans for it's genuineness and creditworthiness as the case was to be barred by limitation of time on 31.12.2010. (iii) In the fact and circumstances of the case the CIT(A) has grossly erred in deleting addition of Rs. 1,14,936/- made by the A.O. on account of non-verified transaction recorded in the documents inventorized during the course of survey.' 3. The facts in relation to the first ground are that the assessee, a firm in the business of retail of readymade garments, was subject to survey u/s. 133A of the Act on 03.03.2008, whereat the CPU of its computer system, bills and invoices, etc. were impounded. A physical inventory of stock-in-trade was taken and valued at Rs. 80,69,629/-. The print out of the Profit & Loss (P&L) Account for the period 01.04.2007 to 28.02.2008, i.e., as per the books of account maintained on the computer system, reflecte....
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.....O. had, in effect, disallowed was part of the assessee's disclosed purchases. There was, accordingly, no basis to treat a part of the purchases claimed for the year as unexplained. The disallowance being deleted thus, the Revenue is in appeal. 4. Like submissions were raised before us; each side relying on the order of the authority below as favorable to it. 5. We have heard the parties, and perused the material on record. Our first observation in the matter is that the ld. CIT(A) has not issued any finding as to whether the assessee has been able to explain the difference in the purchases (up to 28.02.2008) as per the assessee's books of account (final accounts) and that per the impounded books (on the computer system). The latter (data on the hard disk) does not represent old data, of which no cognizance ought to be taken, as contended by the assessee before the A.O., who rightly rejected the explanation. The same is certainly not a dumb document. The assessee is also not maintaining two sets of books, i.e., one on the system and the other off it, for it to urge for ignoring the former. Such a case would, rather, provide a cause of action in terms of ascertaining the....
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....ed to be entered in to the system, which represents only a mechanism for recording transactions and, accordingly, maintaining the accounts. The ld. CIT(A) ought to have, in this view of the matter, undertaken the requisite exercise, giving a finding one way or the other, but he issues no such finding in the matter. The assessee, on his part, ought to have so done, proving its case. The issue arising, as we discern, is not of the 'additional' purchases as being not genuine - the Revenue not undertaking any exercise of identifying those purchases and following up with the concerned parties, but if there are indeed 'excess' purchases, i.e., which were not found during survey, whether fed in the books maintained on the computer, which were apparently incomplete, or not. And, thus, not forming part of the assessee's regular books of account. In which case the same would without doubt represent un-genuine purchases. The issue, thus, essentially is one of discharge of onus on the assessee. The reconciliation of the purchases, as finally claimed, with the impounded bills, having not been undertaken, or shown to have been, what the assessee was in the alternative requi....
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....at disclosed subsequently. Though the Revenue has 'disallowed' purchases, what it in effect has is to consider the assessee's trading results as deflated to that extent. As shall be apparent, no definite finding, one way or the other, can be issued in the absence of the sales figure up to 03.03.2008. And, two, in the event of the two trading results being not in agreement, the absence of the assessee's explanation, if any, toward the same, so as to be considered for being satisfactory, cogent, etc. on merits, or not so. We, accordingly, restore the matter back to the file of the A.O. to allow the assessee an opportunity to explain the difference, with reference to its accounts, between the gross profit obtaining up to the date of survey, covering a period of little over 11 months of the year, with that disclosed for the entire year and, thus, having not deflated the latter to any extent. He should decide in accordance with law, after examining the assessee's explanation/s, if any, by issuing 'definite' finding/s of fact. We may not be construed of having issued any finding on the case. Before parting, we may, lest any doubt is raised with regard to our ....
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....T v. P. Mohanakala [2007] 291 ITR 278 (SC) and Vijay Kumar Talwar v. CIT [2011] 330 ITR 1 (SC). The question, therefore, boils down to whether the assessee has met or discharged the burden of proof on it by leading satisfactory explanation/evidence. In our clear view, the assessee has only established the identity of the creditors by furnishing their PAN card/s/driving license/s, as well as confirmations there-from, i.e., even ignoring or overlooking the fact that even these were at the fag end of the assessment proceedings (29.12.2010 - the date of the assessment order), so that no verification by the A.O. could be undertaken (refer Gd. # 2). No material toward the capacity of the creditors or the genuineness of the transactions, stated to be loans, has been furnished. Rather, by own admission, the creditors' income/s is below or only marginally above the maximum amount not chargeable to tax. They are stated to be engaged in agriculture, though no evidence toward the same has been furnished. On the contrary, we find it to be not so as quite a few creditors, viz. Ram Sakal Pd. Chaudhary (PB pg. 11), Vidya Nand Chaudhary (PB pg. 75), Sanjeev Kumar (PB pg. 105) and Mirtanjay Ku....
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.... itself doubtful, held in the form of bank FDRs, lent to the assessee in bargain for a high return/yield? Has the creditor/s lent in the past to any other business on long-term or short term basis? The assessee is stated to be a reputed local businessman, to whom people lend. This is in fact inconsistent inasmuch as the assessee, in that case, could approach any bank or even a private lender of some repute, both of which abound, and would be only too inclined to lend to a borrower with good credentials. The assessee, on the other hand, picks up few persons, new in their respective careers, and barely able to survive, i.e., given the high cost of leaving. The assessee in fact has a line of credit from its regular bank, being, as it appears, Canara bank, Hajipur, with whom the partners and their family members have FDRs. The capacity of the creditors and genuineness of the transactions are not proved by affidavits. Questions of fact, invocation of s. 68 being essentially a matter of factual finding, need to be proved on the basis of materials and not on the basis of affidavits and counter-affidavits (refer: Mahendra Kumar Agarawala v. ITO [1976] 103 ITR 688 (Pat.); ITO v. S.B. Singha....