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2023 (6) TMI 515
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....explained by the assessee. 3. Deleting addition of Rs.10,90,012/- 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 ....
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.... 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. 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-3....
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....ome Tax Act, 1961 are initiated separately for furnishing inaccurate particulars of income. 2.2. In the first appeal, the Ld. CIT(A) deleted both the additions (pr. 4.6& 4.7 Pg. 6-8) by holding as under:- "4.6 After going through 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 fol....
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....85,596), M/s Mamta Spinners Pvt. Ltd., M/s Mamta Surgical Cotton Industries, M/s Sanjay Kumar Sandesh Kumar, Smt. Preeti Rathi (Rs. 25,10,000), R.S. Rathi HUF (Rs, 37,87,000). I am of the considered view that there is no justification for sustaining the addition of 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 ad....
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....resaid decisions, that once the initial burden has been discharged in respect of the identity of investors, about their existence, and the confirmation from such investors has been obtained, the burden shifts to the Revenue to prove otherwise not only that the invested amount did not belong to the creditors 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. 9,85,5....
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....o admitted at page 4 of the order that" the assessee has submitted confirmations, bank statements in respect of the unsecured loans to the assessee" Accordingly, the assessee fully discharged onus cast upon it. Suspicion howsoever strong cannot take the place of reality as held in the case of Dhakeshwari cotton Mills (1954) 26 ITR 775 (SC). 4. Supporting case laws: 4.1 Aravali Trading Co. v/s ITO 8 DTR 199 (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....
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...., the material placed on the records in the light of the judicial precedents cited by the parties at bar. It is an admitted fact on record that the assessee filed the confirmations, copies of the ITR, computation of total income showing the complete name, address and PAN , the bank statement of all the six creditors and copies of which were submitted before us also in the paper book filed by the assessee at pages 21-38. All creditors are regular 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 l....
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....t and strongly placed reliance on the order of the CIT(A) while deleting the said addition. He submitted that the AO proceeded on a serious misconception of the law of the S. 69C in as much as the entire transaction of receipt of Rs. 3.09 crores from the three parties was fully established in as much as copies of their respective ITR, computation, confirmations and bank statements were submitted. Those parties duly and fully disclosed the transactions 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....
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....yment of Rs. 1.62 crores was made through banking channel. The audited accounts were submitted and the AO completely failed to point out any discrepancy or error in the accounts which were not even rejected by him. The said provisions contemplate that any expenditure not accounted for or there is no source behind incurring such expenditure then only section 69C could be invoked. However, such is not the case of the AO as he failed to point out any expenditure incurred without source or which 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)....
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....Rs. 1,00,42,400 - Rs. 91,90,400) has to be taxed in the hands of the appellant only. Since all other entries appearing in the reconciliation statement are verifiable from the books of accounts of the appellant, therefore after going through the evidences furnished by the appellant, I am of the considered view that out of the total addition of Rs. 19,42,012/- (Rs. 36,55,119 - Rs. 17,13,107) made by the AO in respect of the difference between the gross profit as appearing in the books of accounts of 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....
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....nbsp; Less; Rs. 3,39,298 VAT Rs. 1,72,95,866 Total Sales as per Audit Report PURCHASES AMOUNT (Rs) DETAILS REMARK Rs. 2,39,93,711 Total Purchases as per the AO's order Less: Rs. 91,90,400 Commission Purchases on behalf of M/s Sanjay Rathi HUF (AO pg. 05) Commission Income of Rs. 50212.00 earned. Disclosed in the Total Income of the Assessee (AO pg. 05) Rs. 1,48,03,311 Add: Rs. 12,14,400 Purchases from M/s Ali Afzal Flour This Purchases, not mentioned by the Assessing Officer Rs. 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.....