TaxTMI 
TaxTMI 
2019 (11) TMI 927
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessee company were reported as "nil" as required to be reported in para -24 (a) and 24 (b) of annexure to the tax audit report in form No. 3 CD. Subsequently, on being asked by the AO to file the various details, the assessee filed the same according to which it had received loans from 6 persons only. However, from the bank statement, it was revealed that, besides above six parties, the Assessee had also accepted loans and repaid the same during the year. In spite of sufficient opportunities given to file confirmations/bank accounts, copy of Income Tax returns and to produce them with their books of accounts, the assessee could not submit any of the details asked for nor could produce them. The AO, therefore, held that the assessee had neither intended to bring the said loans on records nor the assessee is in possession of any other document to prove the identity, credit worthiness and genuineness of the loans. All the said loans have been taken on 2 days i.e. 19.06.2008 and 20.06.2006 and have been shown as repaid to all simultaneously on 19.09.2006. He, therefore, added the unsecured loans from the following parties to the income of the Assessee u/s 68 of the I.T. Act being une....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... amount of Rs. 46,17,000/- remained unexplained by the assessee and, therefore, he added the same to the income of the Assessee u/s 68. 5. The AO further noted that the assessee has made a payment of Rs. 6,17,091/- on account of Commission. He asked the assessee to give details and the basis of commission paid and also to provide confirmation of the same from the recipient. However, despite several opportunities, assessee could not file any details or confirmation. He, therefore, disallowed the commission paid amounting to Rs. 6,17,091/- and added to the income of the assessee. 6. The AO observed that the assessee has received a sum of Rs. 15,00,000/- from M/s. Rishi Promoters (P) Ltd as advance against property. The assessee was asked to give details/ nature and documentary evidence of this advance and as to when this advance was materialized. However, despite several opportunities, assessee filed only a copy of account in assessee's books which shows only the receipt of this amount of Rs. 15,00,000/-. In absence of any other details or confirmation, the said amount of Rs. 15,00,000/- remains unexplained and therefore, the AO added the same to the income of the Assessee. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....& Co. Rs. 1,90,000/- , Mr. Rajesh Kumar Khemka Rs. 1,00,000/-, M/s Bagla Store Rs. 7,00,000/-, Mr. Harish Surana Rs. 2,40,000/- and Ms. Monika Surana Rs. 4,90,000/- ignoring the evidences placed on record to discharge the onus on the appellant. Hence the said addition must be deleted. 2. The learned CIT(A) erred in law and on facts that in directing the assessing officer to disallow interest on above mentioned loans without issuing die statutory show cause of enhancement of income to the appellant. Thus the said directions given must be reversed. 3. The learned CIT(A) erred in law and on facts in confirming the disallowance of Rs. 6,17,091/- on account of payment of commission paid ignoring the evidences placed on record. Hence, the said addition must be deleted. 4. The learned CIT(A) erred in law and on facts in confirming the addition of Rs. 1,50,000/- u/s. 68 for the amount received from M/s. Rishi Promoters (P) Ltd. as advance against property ignoring the evidences placed on record. Hence the said addition must be deleted. 5. The learned CIT(A) erred in law and on facts in confirming the disallowance u/s.14A of the Act of Rs. 20,645/- on acc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e opportunity during the course of assessment proceedings. 8. The appellant craves leave to add, to alter, or amend any grounds of the appeal raised above at the time of hearing. 10. Ground of appeal No.1 and 8 by revenue and ground of appeal No. 6 by the assessee being general in nature are dismissed. 11. Ground appeal No. 2 and 2.1 by the revenue and ground appeal No. 1 and 2 by the assessee relate to the part relief granted by the CIT(A) out of the total addition of Rs. 37,55,000/- made by the AO on account of unsecured loan from 13 parties, the details of which are given at para No. 2.1 of this order. 12. We have heard the rival arguments made by both the sides and perused the orders of the authorities below. We find the AO made the addition of Rs. 37,55,000/- on the ground that the assessee did not file the requisite details in respect of all the creditors. The assessee filed list of only six creditors whereas according to the AO as per the bank statement, there were more loans obtained by the assessee during the year from different persons which were repaid. We find before CIT(A) the assessee filed certain additional evidences based on which the Ld. CIT(A) c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng the cheques to the assessee there are credits in the bank accounts of the creditors and no source thereof has been explained. Further he has given a finding that the parties are having meager income and in some cases the taxable income ranges from Rs. 1,811/-to Rs. 45,464/-. We further find from the remand report of the AO wherein he has observed as under :- "Assessee was also asked to file copy of their complete returns with computation of income, audit report and balance sheet, however, none of these required details could be filed by the assessee. From the perusal of acknowledgement of return filed by the assessee of the first 9 parties, it is seen that all these 9 persons are related persons showing their addresses at Churu, Rajasthan and have also filed their income tax returns with ITO Ward, Churu, even though all of them have their bank accounts in Bank of Baroda, Sadar Branch, Delhi, from where they have issued cheques to the assessee. As per acknowledgment of returns these 9 persons have returned income of Rs. 49,383/-, Rs. 1,52,215/- , Rs. 1,07,138/-, Rs. 98,464/-, Rs. 1811/-, Rs. 45,464/-, Rs. 1,14,506/-, Rs. 5,88,216/- (income of father of minor Harsh Sur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....efore, ground raised by the assessee on this issue is dismissed. 17. So far as the ground appeal No.3 by the assessee is concerned the Ld. Counsel for the assessee did not press this ground for which the Ld. DR has no objection. Accordingly the said ground is dismissed as not pressed. 18. So far as the ground appeal No. 4 by the assessee is concerned it relates to the disallowance of Rs. 15 lacs made by the AO u/s. 68 of the IT Act being the amount received from M/s. Rishi Promoters Private Limited which has been upheld by the CIT(A). 19. We have heard the rival arguments made by both the sides and perused the record. We find the AO made addition of Rs. 15 lacs being the amount received by the assessee from M/s. Rishi Promoters Private Limited as advance against Property on the ground that despite several opportunities the assessee did not file the requisite details. We find the Ld. CIT(A) sustained the addition made by the AO by observing as under :- "9.5 I have carefully examined the claim of the appellant company with reference to the documents placed before me. As stated earlier, the amount of Rs. 151acs is claimed to have been received by the appellant compan....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 15 lacs is being sustained." 20. We do not find any infirmity in the order of the CIT(A) on this issue. The Ld. Counsel for the assessee has not satisfied the conditions prescribed u/s. 68 of the IT Act i.e. identity and capacity of the creditor and the genuineness of the transactions. In the instant the assessee has merely filed the PAN number of M/s. Rishi Promoters alongwith their confirmation and the ledger account of M/s. Rishi Promoters Private Limited in the books of the assessee. Although the assessee has filed the audited accounts of M/s. Rishi Promoters showing advance against property at Rs. 6,14,25,000/-, however, it is very difficult to find out from the same as any advances given to the assessee company especially when such advances were shown at Rs. 8,43,31,716/- in the preceding year and the assessee has failed to file any documentary evidences as to what were the unavoidable circumstances for which the proposed sale had to be cancelled. The Ld. Counsel for the assessee could not bring any other material before us other than the material placed before the CIT(A) so as to take a contrary view other than the view taken by the CIT(A) on this issue. We, therefor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ve three parties during assessment proceedings. Now, assessee has filed their confirmations, copy of bank statements and copy of returns which reflects their credit worthiness and deposits with the assessee." 24. We find based on the remand report of the AO the Ld. CIT(A) deleted the addition holding that the assessee company has duly discharged the onus cast on it. The Ld. DR could not controvert the factual findings given by the CIT(A) while deleting the addition. We, therefore, do not find any infirmity in the order of the CIT(A) deleting the addition of Rs. 2,28,75,000/- made by the AO u/s. 68 of the IT Act. Accordingly, the grounds raised by the revenue on this issue are dismissed. 25. Grounds appeal No. 4 and 4.1 by the revenue relates to order of the CIT(A) in deleting the addition of Rs. 46,17,000/- made by the AO. 26. After hearing both the sides we find the AO made the addition of Rs. 46,17,000/- being the advance received from SNS Trading, DMCC, Dubai on the ground that the said parties are related concerns of the assessee and although the amount was received as advance, however, no such sale was made till the year end and the assessee failed to file re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s and before say that the money in question represented unexplained funds of the appellant company is without any justifiable basis and at best can amount to suspicion or doubt entertained by the ld.AO. However, in the absence of any further material/investigation to suggest laundering of unaccounted money, no adverse inference can logically/legally be drawn against the appellant company. Therefore, the addition in question is being deleted." 27. We do not find any infirmity in the order of the Ld. CIT(A) on this issue. We find the assessee during the appeal proceedings has produced the copy of FIRC issued by the foreign exchange division of Canara Bank wherein the purpose for which money has been received by the assessee has been clearly stated as advance against supply of goods. The Ld. CIT(A) has also given the finding that money in question has been received by the assessee through banking channels and due disclosures in this regard had been made by the company before the concerned authorities namely the foreign department division of Canara Bank which deals with the remittances of foreign currency from overseas. Merely because said parties are related concern the same in ou....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., unless this nexus is established , there is no basis either to hold that the loans were not raised for the business purposes or to disallow the interest paid to the directors and their relatives. Admittedly, the AO has not brought any material on record to establish the fact that the payment interest of Rs. 726519/- was pertaining to the borrowings which were utilized by the appellant company for making interest free advances to the sister concerns. In view of the aforesaid fact situation, the disallowance of Rs. 726519 is being deleted. 30. However, a perusal of the order of the CIT(A) shows that he has no where examined the availability of the own funds with the assessee for extending such huge interest free advances whereas assessee is paying interest to the directors and their relatives on advances received from them. Although the assessee has filed voluminous paper book, however, the audited accounts of the assessee company have not been filed. We, therefore, deem it proper to restore the issue to the files of the AO with a direction to find out the own capital and free reserves of the assessee company. In case the own funds and free reserves of the assessee company are m....