TaxTMI 
TaxTMI 
2022 (7) TMI 993
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.... the assessee did not respond to any of the notices and therefore an ex-parte assessment under section 144 of the Act. i.e., a best judgment assessment was made by the AO. The AO treated the credits in question as unexplained and added a sum of Rs.25 lacs to the total income of the Assessee u/s.68 of the Act, as the Assessee failed to prove the identity, credit worthiness of the creditors and genuineness of the transaction of receiving loan. 4. In the proceedings before the CIT(A) the assessee filed confirmation from Mr. Ram Mohan alias A. R. Arinaya, Mr. Ajit Hebbar and Ms. Mridula Hebbar and also affidavit from the above said three persons confirming that they had given a sum of Rs.10 lakhs, Rs.5 lakhs and Rs.10 lakhs respectively as loan to the assessee. Mr. Ram Mohan alias A. R. Arinaya explained his source by filing statement of bank account of his mother Smt. Lalitha. The CIT(A) noticed from the copy of bank statement of Smt. Lalitha that she had issued cheques for a sum of Rs.4,32,085/- directly to Silicon Motors for purchase of two wheelers by the assessee. The remaining sum of Rs.5,69,915/- was paid to the assessee by her through cheque. On noticing this fact, the CIT(A) ....
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....persons besides the details of PAN given in the confirmation filed by these two parties. It was submitted that the CIT(A) failed to look into these documents and committed an error in coming to the conclusion that the assessee failed to establish the creditworthiness of the creditors. It was submitted that prima facie the assessee's duty under section 68 of the Act is only to explain source of the creditors. The assessee cannot be called upon the sources of source of the creditors. In this regard, it was submitted that the first proviso to section 68 of the Act which was inserted by the Finance Act, 2012 casts an obligation on the assessee to prove the sources of source only in the case of investments in share capital or share application money or any such amount and cannot be extended to a case of a loan simpliciter. The Finance Act, 2022 w.e.f. 01.04.2023 also makes the first proviso applicable to loans but that amendment is only prospective. Reliance was placed by him on the decision of the Hon'ble Karnataka High Court in the case of Kumar Nirman and Nivesh Pvt. Ltd. v. ACIT (2020)425 ITR 486 (Karnataka) wherein it was held that when an assessee in support of identity, genuinene....
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....nk accounts indicating sufficient funds and there are no circumstances indicating that the funds in their bank accounts is assessee's money. The assessee has thus established the source of the creditors. As pointed out by the learned Counsel for the assessee, the PAN and the addresses of the creditors was very much available with the AO and he did not choose to issue any summons calling upon them to prove their source or any other explanation. In these circumstances, I am of the view that the assessee has duly discharged his onus all satisfactorily the credits in question under section 68 of the Act. Consequently, the aforesaid addition of Rs.5 lakhs and Rs.10 lakhs being credits from Mr. Ajit Hebbar and Ms. Mridula Hebbar are also deleted. I find support for my conclusion from the decision of the Hon'ble Supreme Court in the case of Orissa Development Corporation Pvt. Ltd., (supra). 10. The next issue that arises for consideration in this appeal is with regard to disallowance of depreciation made by the AO. In so far as this issue of disallowance of depreciation is concerned, the facts are that during the previous year, the assessee claimed depreciation of Rs.9,61,797/- as per th....
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....d 07.09.2015 with Datacraft Technologies Pvt. Ltd., for developing the app for use by the assessee in its business and the Assessee paid consideration to the said company which sum was capitalized and depreciation was claimed on the same at 60%. The learned Counsel for the assessee drew our attention to the agreement between the assessee and Datacraft Technologies Pvt. Ltd., as well as the invoices evidencing payment to the said company for development of software. Copies of these documents are at pages 28 to 40 of the assessee's Paper Book. So far as the disallowance of depreciation on vehicles is concerned, learned Counsel for the assessee submitted that the evidence of purchase of the vehicles was duly filed by the assessee and the AO has also accepted ownership of the vehicle. The only dispute was with regard to use of the vehicles. It was submitted that evidence of receipt of hire charges was filed before the AO proves use of the vehicles for the purpose of business of the assessee and therefore the disallowance of depreciation cannot be sustained. Learned DR relied on the order of the CIT(A). 14. I have given a careful consideration to the rival submissions and I am of the v....