TaxTMI 
TaxTMI 
2017 (5) TMI 1771
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....irming the disallowance ofRs.,6,08,632/- of the labour and wages expenses without considering the explanation offered by the assessee that the regular and proper books of accounts are maintained by the assessee and hence no disallowance is called for. 3. That, on the facts and in the circumstances of the case, the order of the learned CIT(A) confirming the initiation of penalty proceedings u/s 271(1)(c) is not justified. 4. That, on the facts and in the circumstances of the case, the order of the learned CIT(A) confirming the charging of interest of Rs. 28,292/- u/s 234B is not justified." 3. Apropos ground no. 1, brief facts are that the Assessing Officer noticed that the assessee had taken loan of Rs. 5 lacs from Smt. Parvati Bai Chouhan on 29.9.2011 vide cheque no. 153401 of Bank of India. In response to query, the assessee explained that the lender was a close relation of the assessee and she, being a teacher, was getting pension of Rs. 14,000/- approx. p.m. However, the Assessing Officer noticed that an amount of Rs. 5 lacs was deposited in cash in the same bank account just before giving of unsecured loan to the assessee. As the lender was an old lady pension who also di....
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....ngs to the assessee, addition cannot be made u/s 68 of the Act. The learned counsel for the assessee strenuously pointed out that the assessee having discharged his burden by bringing existence of the depositor/lender and the depositor/lender owing the deposits then the assessee is not required to prove the source of source. Placing reliance on the ratio of the decision of the Hon'ble High Court of Madhya Pradesh in the case of Metachem Industries (supra), the learned counsel for the assessee submitted that when cash credit is found in the assessee's books and the assessee has established that the amount has been given to him by a particular person then the responsibility of the assessee is over and there is no requirement on the part of the assessee to further show whether the amount received by him has been properly taxed in the creditors hands. The learned counsel for the assessee submitted that the lender, Smt. Parvati Bai Chouhan, was having only monthly income of Rs. 14,000/- from pension and she was 78 years old senior citizen lady and she might not have filed the return, as she was not required to file the same as her income was not liable to be taxed being lesser in qu....
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....n such an event if the creditors not found to be acceptable, the investments owned by such persons may be subjected to the proceedings for inclusion of such investments as their income from undisclosed sources but in order to fasten liability on the assessee by including such credits as income from unexplained sources, nexus has to be established that the source of deposits has flown from the assessee. Their Lordships have held that in the absence of any such link, additions of cash credits found in the books of accounts of the assessee could not be considered to be unexplained income of the assessee where existence of depositor of such credits was established and such deposits/advances/loan were owned by such existing person. We also take respectful cognizance of the decision of the Hon'ble High Court of Madhya Pradesh in the case of Metachem Industries (supra) wherein their Lordships rendering the proposition for jurisdictional High Court held that when cash credit is found in the assessee's books then the responsibility of the assessee is over and there is no requirement on the part of the assessee to further show whether the amount received by him as loan has been properly ....
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....d and confronted by the Assessing Officer with the discrepancies found in the books of accounts of the assessee, the AR voluntarily agreed that 5% of expenses on wages and labour may be disallowed. Pras 5 of the assessment order reads as under :- "5. On perusal of audited Profit & Loss Account, it was found that the assessee has debited a sum of Rs. 1,21,72,645/- towards labour wages expenses. Vide order sheet entry dated 09.01.2015 the assessee was asked to produce all bills and vouchers of said expenditure. On 12.01.2015, the AR of the assessee produced the asked bills/vouchers for verification. On perusal of bill and vouchers of labour wages expenses, it was observed that some of vouchers are missing and the bills and vouchers are not maintained properly. Some of them are selfmade. Therefore, the expenses debited under the above head are not fully verifiable. Vide order sheet entry dated 12.01.2015 the AR of the assessee was confronted with the discrepancy found and the AR of the assessee agreed that 5% of said expenses i.e. Rs. 6,08,632/- should be disallowed because of discrpeancies found. Therefore, an amount ofRs. 6,08,632/- should be disallowed because of discrepancies fo....