TaxTMI 
TaxTMI 
2023 (6) TMI 515
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....0,90,012/- on account of shortfall in NP without appreciating that from details of party-wise purchases and sales, difference of Rs.36,55,119/- arises which is gross profit earned by the assessee.'' 2.1 The facts relating to ground of Appeal no. 1 & 2 taken by the revenue against the deletion of addition of Rs. 1,47,01,596/- made by the AO on account of unsecured loans treated as unexplained cash credit u/s 68 of the Act and relating to ground of Appeal no. 2 against the deletion of addition of Rs. 1,62,39,154/- made by the AO on account of unsecured loans treated as unexplained expenditure u/s 69C of the Act are that the AO noticed share trading loss of Rs 1,73,42,965/- incurred in the transactions done through India Nivesh Securities P Ltd (India Nivesh) and asked the assessee to submit details of payment and source thereof. The assessee vide letter 14-11-2017, explained that to make payment of security amount, he obtained loans from following parties: 1. M/s Mamta Spinners Pvt. Ltd. Rs. 2,14,75,750/- 2. M/s Mamta Surgical Cotton Industries Rs. 74,65,000/- 3. M/s Sanjay Kumar Sandesh Kumar Rs. 20,00,000/- 4. Smt. Preeti Rathi Rs. 8,00,000/- Total Rs. 3,17,....
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....secured loans, on perusal of these bank statements it is observed that just before extending the loan to the assessee (there was a transfer entry through which fund was credited in the lender account and later on the fund transfer to the assessee. These transfer entries are again received from the above three concerns .e. M/s Mamta Spinner Pvt. Ltd, M/s Mamta Surgical Cotton Industries and M/s Sanjay Kumar Sandesh Kumar. Further in the case of M/s Sanjay Rathi HUF the assessee submitted that unsecured loan of Rs.9,85,5961- was received through transfer entry. On perusal of books of accounts it is observed that on the last day of the financial year, initially commission on Wheat flour sales of Rs.1,00,42,400/- was credited and commission on wheat purchase of 91,90,400 was debited in the name of Sanjay Rathi HUF and profit of 9,85,596/- was created and the same was received as unsecured loan by the assessee through transfer entry. Copy of ledger account reproduced as under: Kedarmal Radheyshyam Sadar Bazar GULABPURA-311021 DIST. BHILWARA (RAJ.) Sanjay Rathi HUF Wheat Ledger Account 1-Apr-2014 to 31-Mar-2015 Date Particulars Vch Type Vch No.1 Debit Cre....
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....rough the assessment order, I am of the view that the AO started the investigation with respect to the source of payments made to India Nivesh Securities Pvt. Limited. The appellant explained the source of investment as unsecured loans received from M/s Mamta Spinners Pvt. Ltd. (Rs. 2,14,75,750), M/s Mamta Surgical Colton Industries (Rs. 74,65,000), M/s Sanjay Kumar Sandesh Kumar (Rs. 20 lac) and Smt. Pr loans 3,09,40,750 received from M/s Mamta Spinners Pvt. Ltd. (Rs. 2,14,75,750), M/s Mamta Surgical Cotton Industries (Rs. 74,65,000), M/ Sanjay Kumar Sandesh Kumar (Rs. 20 Inc) as unexplained credit u/s 68. However, while completing the assessment he treated only amount of Rs. 1,47,01,596/- as unexplained credit u/s 68. Though the AO has not mentioned in the assessment order as to which of the unsecured loans of Rs. 1,47,01,596/- were treated by him as unexplained credit u/s 68, but apparently this amount must be the unsecured loans received from following six persons which are also appearing in the tax audit report: 1. P. R. Rathi HUF Rs. 35,00,000/- 2. Smt. Shashi Kala Rathi Rs. 14,74,000/- 3. Sandesh Rathi HUF Rs. 24,45,000/- 4. Sanjay Rathi HUF Rs. 9,85,....
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.... Rs. 1,47,01,596- made by the AO u/s 68 or the addition of Rs. 1,62,39,154/- made u/s 69C. The additions appears to have been made by the AO without going through the copies of accounts of these parties as appearing in the books of account of the appellant and the evidences furnished by the appellant. Therefore, the addition of Rs. 1,47,01,596/- made u/s 68 and addition of Rs 1,62,39,154/- u/s 69C are hereby deleted.'' 2.3 Hence, the revenue is an appeal against the deletions of both these additions vide grounds of appeal number 1 & 2. 2.4 Ld DR mainly contended that in the facts and circumstances of the case the AO has rightly made the addition. Placing strong reliance on the findings of the AO, the ld. DR urged that the additions made may be restored and the order of the ld. CIT(A) on this aspect be reversed. 2.5 Per Contra, the Ld AR placed strong reliance upon the order of the ld. CIT(A) while deleting the addition of Rs. 1,47,01,596/- made u/s 68 of on account of the unsecured loans received from the six persons. He further contended that not only the initial burden lay upon the assessee w.r.t the credits received from the six persons, was duly discharged but even the sour....
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....editors but further it has to prove the said amount belonged to the assessee." 2.2 Kindly refer at a glance chart showing the relevant details of the creditors here under: S. No. Name of the Cash Creditor Amount (In Rs.) Copy of Confirmation Copy of Ledger Account ITR 1. M/s Mamta Spinners Pvt. Ltd. Rs.2,14,75,750/- PB 13-14 PB 13 -14 PB 15 2. M/s Mamta Surgical Cotton Industries Rs. 74,65,000/- PB 16 PB 16 PB 17 3. M/s Sanjay Kumar Sandesh Kumar Rs. 20,00,000/- PB 18 PB 18 PB 19 Total (A) Rs.3,09,40,750/- 4. P.R Rathi HUF Rs. 35,00,000/- PB 21 PB 22 PB 23 5. Smt. Shashi Kala Rathi Rs. 14,74,000/- PB 24 PB 25 PB 26 6. Sandesh Rathi HUF Rs. 24,45,000/- PB 27 PB 28 PB 29 7. Sanjay Rathi HUF Rs. 9,85,596/- PB 30 PB 31 PB 32* 8. Smt. Preeti Rathi Rs. 25,10,000/- PB 33 PB 34 PB 35 9. R. S. Rathi HUF Rs. 37,87,000/- PB 36 PB 37 PB 38 Total (B) Rs. 1,47,01,596/- * ( Individual return of Mr. Sanjay Rathi submitted in paper book instead of HUF return) 2.3.1 Identity Established: Their ide....
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....99 (Raj.) held that once the existence of the creditors is proved and such persons own the credits which are found in the books of the assessee, the assessee's onus stand discharged and the latter is not further required to prove the sources from which the creditors could have acquired the money deposited with him and, therefore the addition u/s 68 cannot be sustained in the absence of anything to establish that the sources of the creditors deposits flew from the assessee itself. 4.2 Labhchand Bohra V/s ITO (2008) 8 DTR 44 (Raj.)-Held: cash creditburden of proof- identity of the creditors established and the confirmed the credit. This discharged the burden of assessee to prove genuineness. However capacity of the lender to advancement money to assessee was not a matter which the assessee could be required to establish and that would amount to calling upon him to establish the source of source. Hence addition cannot be sustained. 4.3 Also refer Kanhaialal jangid vs. ACIT (2008) 8 DTR 38/ ( 217 CTR 354) (RAJ.) held Income - cash credit - Burden of proof - Assessee having filed confirmation from the creditor and having produced the creditor before AO where the creditor affir....
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....IT assesses. The credits totaling to Rs. 1.47 crs. in all the cases were received through the banking channels only as evidenced from the copies of the bank statements of all these parties and there apart, the source in the hands of those six parties is also verifiable being the receipts on account of the credits in their respective bank accounts through the transfer entries received from M/s Mamta Spinners Pvt. Ltd., M/s Mamta surgical cotton industries and M/s Sanjay Kumar Sandesh Kumar. In the balance sheet the assessee has shown outstanding unsecured loans to the tune of Rs. 1,73,57,329/- and out of which Rs.1,47,01,596/-was raised during the year. The assessee has submitted confirmations, bank statements in respect of these unsecured loans, on perusal of these bank statements it is observed that just before extending the loan to the assessee (there was a transfer entry through which fund was credited in the lender account and later on the fund transfer to the assessee. These transfer entries are again received from the above three concerns .e. M/s Mamta Spinner Pvt. Ltd, M/s Mamta Surgical Cotton Industries and M/s Sanjay Kumar Sandesh Kumar. Reliance is placed in the case of ....
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....s in their hands. The AO himself admitted that copies of confirmation and bank statement of these concerns were submitted but doubted the source of repayment made to them. Further reducing the loans taken from the six parties at Rs. 1.7 crore from the total amount of Rs. 3.09 crore taken from the three parties, the balance of Rs.1.62 crore was considered as almost equal to the loss booked by the assessee in the share trading, in absence of any details, as unexplained expenditure u/s 69C. In addition, the Ld. AR also submitted detailed written submissions reading as under: 'D-GOA- 2: Deletion of Addition of Rs. 1,62,39,154/- made u/s 69 (C) on account of the alleged unexplained expenditure: [AO pg 2-6 pr. 3 CIT (A) Pg 4 pr. 4.3] Facts and Submission are the same as D-GOA-1 above. In addition and without prejudice to those submission it is further submitted that the AO's allegation that source of repayment of 3.09Cr. was not given tough he admitted that the unsecured loan were partly explained the repayment ( i.e upto 1.47 Cr. ) but that was also not accepted for the reasons stated in assessment order. In the earlier submission, we have already established that assessee fu....
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....hich is unrecorded. Hence provisions of S.69C were wrongly invoked. We find no infirmity in order of the ld. CIT(A) while deleting the said addition. Therefore, the ground of appeal number 2 taken by revenue is hereby dismissed. 3.1 In grounds of appeal No. 3, the revenue is aggrieved by the deletion of the trading addition made upto Rs. 10,90,012/- as against the total addition of Rs.19,42,012/- (Rs. 36,55,119 - Rs. 17,13,107) made by the AO after comparing the gross profit shown by the appellant in the books of accounts (Rs. 17,13,107) and the gross profit worked out by the AO on the basis of sales and purchases shown in the VAT return (Rs. 36,55,119). 3.2 In the first appeal, the ld. CIT(A) partly confirmed the addition upto Rs. 8,52,000/-(out of the addition of Rs. 19,42,012/- made by the AO) and the remaining addition of Rs. 10,90,012/- was deleted by holding at para 5.3 of his order as under: "5.3 I have gone through the assessment order, statement of facts, grounds of appeal and written submission carefully. It is seen that the appellant during the course of assessment proceedings also had furnished a detailed statement reconciling the gross profit, sales and purchases a....
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....the appellant and as worked by the AO as per VAT returns, only addition of Rs. 8,52,000/- has to be confirmed. Accordingly, out of the addition of Rs. 19,42,012/- made by the AO, addition of Rs. 8,52,000/- is confirmed and remaining addition of Rs. 10,90,012/- is hereby deleted." 3.3 Hence, the Department is in appeal. However, the assessee did not challenge the addition partly sustained. 3.4 The Ld. DR mainly contended that in the facts and circumstances of the case the AO has rightly made the addition. Placing strong reliance on the findings of the AO, she urged the addition made may be restored and the order of the ld. CIT(A) on this aspect be reversed. 3.5 Before us, detailed reconciliation statements, copy of ledger account of all the transactions were submitted before the lower authorities by the Ld AR. He submitted that the AO did not appreciate that (as per the VAT provisions) the sales and purchase made on behalf of the M/s Sanjay Rathi HUF on commission basis, was also required to be shown. Moreover, some of the sales and purchase transactions carried out by the assessee were not considered by the AO and were pointed out by the assessee in the reconciliation statement....
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..... 1,60,17,711 Add: Rs. 89,750 Freight Not included by AO Rs. 1,61,07,461 Less: Rs. 7,24,355 Old Balance in account of M/s Shri Krishna Industry 'Old Balance' treated as purchases by the AO Rs. 1,53,83,106 Less: Rs. 2,00,148 VAT Paid Rs. 1,51,82,958 Total Purchases and direct attributable cost as per the Audit Report Thus Total Sales & Purchases as per the Audit Report is as under: Total Sales: Rs. 1,72,95,866 Less: Total Purchases Rs. 1,51,82,958 Gross Profit Rs. 17,13,107 2. A perusal of the above reconciliation charts (which was submitted before AO also), shall reveal the major reasons behind the difference in amount of the GP declared by the assessee ( Rs. 17,13,107/-) and on the one computed by the AO (Rs.36,55,119) is as under: 2.1. Firstly, the AO has considered the amount of the consignment sale and purchase effected by the assessee not on his behalf but on behalf of the consignor - principal M/s Sanjay Rathi HUF. 2.2 Whereas, the AO has included the amount of VAT in sale and purchase value, however, the assessee has excluded the VAT element to correctly compute sal....