TaxTMI 
TaxTMI 
2018 (4) TMI 9
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.... case and in law the ld. CIT (A) has erred in not admitting the additional evidences produced during the course of appellate proceedings. The action of the ld. CIT (A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by considering the additional evidences while disposing off the appeal. (b) In the facts and circumstances of the case and in law the ld. CIT (A) has erred in confirming the action of ld. AO to the extent of making addition of Rs. 9,40,000/- u/s 68 of the Income Tax Act, 1961 out of the total addition of Rs. 25,75,500/- made by the ld. AO. The action of the ld. CIT (A) is illegal, unjustified arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 9,40,000/-. 3. In the facts and circumstances of the case and in law the ld. CIT (A) has erred in confirming the action of ld. AO in making disallowance out of the following expenses :- Particulars Expenses Disallowed Telephone expenses 72,758/- 21,400/- Transportation Expenses 80,724/- Vehicle repair Expenses 60,491/- Total : 2,13,973/- 21,400/- The action of the ld. CI....
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....ing past history of the assessee which is not reliable. She has relied upon the orders of the authorities below. 3. We have considered the rival submissions as well as material on record. As far as the computation of income of the assessee on the basis of the best judgment, there is no dispute that the assessee's own past history of declared GP which is accepted or the GP which has attained the finality can be considered as a proper guidance for the estimation of income after rejection of books of account under section 145(3). The Coordinate Bench of the Tribunal in case of CIT vs. Allied Gems Corporation, while considering an identical issue has held in para 5 as under :- "5. We have considered the rival submissions as well as relevant material on record. The Assessing Officer rejected the books of account by invoking the provisions of section 145(3). The issue of rejection of books of accounts is involved in the cross objection filed by the assessee, therefore, we deal with this issue while deciding the cross objection. Once, the books of accounts are rejected by the AO the only course of action left to the AO is to assess the income of the assessee on the basis of best judgme....
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....or the name has been mentioned on the challan forms, so the verification of the same by the Assessing Officer became totally impracticable on account of lack of this complete information supplied by the assessee. It means that the assessee failed in establishing the genuineness of the so called trade creditors appearing in its books of account. We are further of the opinion that since in the instant case of the assessee, the point under consideration before us is regarding the genuineness of the liability amounting to Rs. 1,75,26,586 shown by the assessee in its balance-sheet as trade creditors, so it was not relevant for us to consider as to whether the purchases made by the assessee were genuine or not or to whether the assessee has inflated those purchases or not. It is also not material to consider whether the GRs from sale-tax department were verified or not, so, the CIT(A) on considering these points was not justified in deleting the impugned addition without discussing as to whether the liability of trade creditors shown by the assessee in the absence of furnishing complete addresses of trade creditors/consignors and the payment vouchers was genuine or not." While evaluati....
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.... then the GP which has attained the finality or was accepted by the AO can be considered for the purpose of estimation of income of the assessee for the year under consideration. Accordingly, we direct the AO to compute the income of the assessee by taking the average GP of the past years of the assessee which is accepted and/or attained finality. Hence this issue is set aside for limited purpose of applying the average GP for computation of income of the assessee. Ground No. 2 is regarding the addition of Rs. 9,40,000/- made under section 68 of the IT Act confirmed by ld. CIT (A). 4. During the course of assessment proceedings, the AO noted that the assessee has introduced the deposit of Rs. 25,75,500/- on account of partner's capital and further Rs. 9,40,000/- as unsecured loan. When the assessee has failed to furnish any explanation and supporting evidence, the AO made the addition of these amounts as unexplained credit under section 68 of the IT Act. On appeal, the ld. CIT (A) has deleted the addition to the extent of Rs. 25,75,500/- on account of the capital introduced by the partner. However, the ld. CIT (A) has confirmed the addition under section 68 of the Act on account ....
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.... the rival submissions as well as relevant material on record. The assessee has shown the cash credit of Rs. 9,40,000/- being loan taken from M/s. Royal Jaipur Durbar Hotels Pvt. Ltd. There is no dispute that the primary onus is on the assessee to establish the genuineness, creditworthiness and identity of the creditor. The assessee has produced bank statement from which the said company has issued the cheques for payment of the amount. However, apart from the bank statement, the assessee has not produced any other documents. The ld. CIT (A) has specifically pointed out that even the confirmation with PAN was not filed by the assessee and, therefore, the assessee has failed to discharge its primary onus. We further note that when the partner of the assessee is one of the Directors of the loan creditor company, then the burden lies on the assessee to prove the genuineness of the transaction beyond any iota of doubt. The assessee has not explained any reason for not furnishing the confirmation and PAN of the loan creditor despite the fact that the partner of the assessee is also a Director of the said company. The relevant transactions of the payments received from the said company a....
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.... "5. I have carefully considered both the positions. I have also examined the relevant documentary evidences furnished by the AR including account confirmations, copies of Income-tax returns of the depositors, their balance-sheets, P & L accounts, and capital accounts as also their bank statements. The first depositor was Shri Hasmukh R. Mehta, against whom the loan of Rs. 3 lakhs was shown. His bank statement with HDFC Bank shows, amongst other transactions, a deposit of Rs. 3 lakhs on 29.6.2006 by cheque. The loan was given to the Assessee by cheque on 4.7.2006. It cannot therefore be said that unexplained cash was deposited in the account of Shri Hasmukh R. Mehta before giving the said loan to the Assessee. The next depositor was Shri Jimit M. Mehta, his bank account showed a deposit of Rs. 1,50,000/- in cash on 24.3.2005. On the very next day, he issued a cheque of Rs. 1,50,000/- to the assessee. Prior to the said deposit, his balance was only Rs. 2,056.20 with no major credits. The extract of his cash book shows no cash balance prior to depositing such cash into his bank account. Next was Smt. Kokilaben M. Mehta; a loan of Rs. 1,50,000/- was showed in her name. On 6.11....
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....nd confirmed the loans, even then the loans did not stand satisfactory explained, especially in relation to the creditworthiness of the alleged depositors. The identities of four depositors were established only by their personal appearance. However, the returns of income cannot be treated as a conclusive evidence of genuine identity or even the bank accounts, especially when it is considered that a large number of bogus returns and bank accounts are opened for providing such entries, the practice of which in Surat is almost an industry, apart from the textile and diamond industries. On the face of it the transactions were made look absolutely genuine as the loans were taken by account-payee cheques, the depositors had filed their returns of income, had prepared their accounts, had their own bank accounts and four of them had even appeared before the Assessing Officer. Unfortunately, a deep scrutiny into the pile of documents furnished by the AR and the assessee, both in asst. proceedings and in appellate proceedings clearly reveal that the manipulations, the manner in which cash was deposited in the bank accounts of seven of the alleged depositors immediately prior to issuing the ....
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....ng the question of addition under section 68 of the Act, assessee cannot be expected to establish source of the source. In this context, he placed heavy reliance on the following decisions : (1) CIT v. Jay Dee Securities & Finance Ltd.[2013] 32 taxmann.com 91 (All.) (2) Nemi Chand Kothari v. CIT[2003] 264 ITR 254/[2004] 136 Taxman 213 (Gau.). (3) S. Hastimal v. CIT[1963] 49 ITR 273 (Mad.) 6.1 Counsel further submitted that assessee had not only established the identity of the depositors, had received the amount through cheque. Genuineness of the transaction therefore, could not have been doubted. The creditworthiness of the depositors also was sufficiently established. Assessee thereafter, could not have been asked to establish the source of the income of such creditors. 7. With respect to the legal contention that the Revenue cannot insist on assessee supplying the source of source is impeccable. However, the facts of the present case are vastly different. It is of-course true that some of the observations made by the Tribunal may suggest that the Tribunal did concern itself with the source of the source. However, such observations cannot be picked in isolation as to tre....