TaxTMI 
TaxTMI 
2020 (2) TMI 885
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....red in confirming the action of assessing officer in making consequential disallowance of Rs. 3,22,637/- on account of interest paid on above Loans. 3. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income-tax (Appeals) has erred in confirming the action of assessing officer in making disallowance of Rs. 12,97,716 being 20% of General Labour wages. Worker Salaries & Freight Expenses on lump sum basis on frivolous grounds. 4. It is therefore prayed that the above addition/disallowance made by the assessing officer may please be deleted. 5. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal." 3. The brief facts of the case are that the assessee is a partnership firm and filed its Return of Income for the year under consideration on 19.07.2012 along with tax audit report. The return was selected for scrutiny and after serving statutory notices and seeking reply of the assessee the order of assessment u/s.143(3) was passed thereby making additions. 4. Being aggrieved with the order of the ld.Assessing Officer(AO), the assessee filed a....
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....sbook and Confirmations only. No further evidence is necessary ii) Whether amount deposited prior to issue of loan cheque is loan taken by him or out of his earlier deposit to some other person What difference both the eventualities make to the creditworthiness of the depositors is difficult to understand & appreciate. The depositor being a man of means is proved by ROI etc. Illogical Reason :- The learned AO's allegation that the depositors did not have taxable income or had negligible taxable income is not correct because all of them had taxable incomes. Another reason that, in some cases, transfer/clearing is credited & loan has been advanced on the same day is difficult to digest & understand, as to what is wrong in such transaction. Neither credit by transfer/clearing is a crime or giving loan on the same day is a crime. Next reason of not having made available balance sheets of depositors is also not tenable as they, being covered u / s 44AD/ 44AF of the IT Act, are exempted by the law itself from maintenance of books of accounts. Other observations of the learned AO, being the depositors having no means &being pauper are without any evidence with him & ....
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....ome-tax Act, 1961 - Cash credits - Assessment year 2006-07 - Whether once assessee has established that he has taken money by way of account payee cheques from lenders who are all income tax assessees whose PAN have been disclosed, initial burden under section 68 is discharged and then, it is Assessing Officer's duty to ascertain from Assessing Officer of those lenders, whether in their respective returns they "have shown existence of such amount of money and have further shown that those amount of money had been lent to assessee - Held, yes - Whether if Assessing Officers of those creditors are satisfied with explanation given by creditors as regards those transactions, Assessing Officer in question has no justification to disbelive transactions reflected in account of creditors - Held, yes - Whether if before verifying such fact from Assessing Officer of lenders of assessee, Assessing Officer decides to examine lenders and asks assessee to further prove genuineness and creditworthiness of transactions, it would be against principles laid down under section 68 - Held, yes [In favour of assessee]. 9. On the other hand, the ld.Departmental Representative (DR) relied upon the ....
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.... loans were received and repaid by assessee by account payee cheques along with interest-Tribunal deleted the addition-No substantial question of law arises-Appeal dismissed. And also in the decision of Hon'ble Gujarat High Court in CIT Vs. Ranchhod Jivabhai Nakhava [2012] taxmann.com 159 (Guj) wherein it was held as "Section 68 of the Income-tax Act, 1961 - Cash credits - Assessment year 2006-07 - Whether once assessee has established that he has taken money by way of account payee cheques from lenders who are all income tax assessees whose PAN have been disclosed, initial burden under section 68 is discharged and then, it is Assessing Officer's duty to ascertain from Assessing Officer of those lenders, whether in their respective returns they "have shown existence of such amount of money and have further shown that those amount of money had been lent to assessee - Held, yes - Whether if Assessing Officers of those creditors are satisfied with explanation given by creditors as regards those transactions, Assessing Officer in question has no justification to disbelive transactions reflected in account of creditors - Held, yes - Whether if before verifying such fact from Ass....
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....an. Consequently, these Ground No.1 & 2 raised by the are allowed. 13. Ground No.3: This ground relates to challenging the order of ld.CIT(A) in confirming action of the ld.AO in making disallowance of Rs. 12,97,716/- being 20% general labour wages, workers salaries and freight expenses of lumsum basis. 14. We have heard both the Counsels and perused the material placed on records, judgments cited by the parties as well as orders passed by the Revenue Authorities. From the records we noticed that the ld.AO had disallowed a sum of Rs. 12,97,716/- out of aforesaid expenses @20% without issuing any showcause notice and thus the said disallowance was made in breach of the principles audi alteram partem as no opportunity was afforded to the assessee to explain the so called discrepancies. The only reason for making disallowances was that assessee was not maintaining any register and had only submitted self-made vouchers. In this connection, ld.AR had made specific submissions that assessee runs factory of manufacturing of Art Silk Grey Cloth of power looms and the said power looms are being run by labourers by illiterate labourers under migrated from different states all over Indi....