Jabir Ismail Patel, Godhra V. The Income tax Officer,Ward-1, Godhra

ITA 102/AHD/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6340 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 20-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 03-01-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAVINDRA KUMAR
• Assessee Lawyers: S N SOPARKAR
• Keywords: Unexplained cash credit; Rejection of books of accounts; Unexplained investment; Unexplained expenditure; Deemed to accrue or arise in india
• Section: 69C; 143(3); 69; 263

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE S/SHRI G. D. AGARWAL, VP AND BHAVNESH SAINI , JM) ITA NO.187/AHD/2008 A. Y.: 2005-06 THE INCOME TAX OFFICER, WARD-1, GODHRA, DIST. PANCHMAHAL VS SHRI JABBIR ISMAIL PATEL, PROP. PATEL TRANSPORT, VEJALPUR ROAD, GODHRA PA NO. AFNPP 2372 Q (APPELLANT) (RESPONDENT) ITA NO.102/AHD/2008 A.Y.: 2005-06 SHRI JABBIR ISMAIL PATEL, PROP. PATEL TRANSPORT, VEJALPUR ROAD, GODHRA VS THE INCOME TAX OFFICER, WARD-1, GODHRA, DIST. PANCHMAHAL PA NO. AFNPP 2372 Q (APPELLANT) (RESPONDENT) DEPARTMENT BY SHRI RAVINDRA KUMAR, DR ASSESSEE BY SHRI S. N. SOPARKAR, AR O R D E R PER BHAVNESH SAINI: BOTH THE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-VI, BARODA DATED 23-10-2007, FOR ASSESSMENT YEAR 2005-06. IN BOTH THE APPEALS C ERTAIN GROUNDS ARE COMMON. THEREFORE, THE SAME WERE HEARD TOGETHER AND ARE BEING DISPOSED OF THROUGH THIS COMMON CONSOLIDATED ORDER ISSUE WISE. THE ASSESSEE HAS FILED MODIFIED GROUNDS OF APPEAL. ITA NO.187 AND 201/AHD/2008 SHRI JABIR ISMAIL PATEL, PROP. PATEL TRANSPORT 2 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND C ONSIDERED THE MATERIALS AVAILABLE ON RECORD. ISSUE NO.1 3. THE ASSESSEE IN HIS APPEAL ON GROUND NO.1 CHALLE NGED THE REJECTION OF BOOK RESULTS U/S 145(3) OF THE IT ACT AND FURTHER ESTIMATING THE NET PROFIT RATE @ 5% OF GROSS PROFIT S. THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS .2,27,324/-. THE ASSESSEE IS PROPRIETOR OF M/S. PATEL TRANSPORT ENGA GED IN THE BUSINESS OF HIRING OF CARRIAGE VEHICLES FOR TRANSPO RTATION OF GOODS. THE ASSESSEE DOES NOT HAVE ANY TRUCK OF HIS OWN. DU RING THE RELEVANT FINANCIAL YEAR, THE ASSESSEE HAD SHOWN HIR E CHARGES OF RS.1,01,65,025/- AND NET PROFIT OF RS.2,27,324/- @ 2.24% OF THE RECEIPTS. THE BOOKS WERE AUDITED. THE ASSESSEE WAS DIRECTED TO FURNISH BOOKS OF ACCOUNTS AND RELATED VOUCHERS IN S UPPORT OF THE EXPENSES CLAIMED. THE ASSESSEE FILED COPY OF THE LE DGER ACCOUNT BEFORE THE AO OF THE EXPENSES WHICH REVEALED THAT A LL THE EXPENSES WERE MADE IN CASH. HOWEVER, COMPLETE BOOKS OF ACCOU NTS WERE NOT PRODUCED. SHOW CAUSE NOTICE WAS ISSUED AS TO WHY IN COME SHOULD NOT BE ESTIMATED BY APPLYING NET PROFIT RATE OF 10% . THE ASSESSEE IN RESPONSE THERETO, FILED MANUAL CASH BOOK AND LEDGER . IT WAS EXPRESSED BY THE AO THAT HIRE CHARGES AMOUNTING TO 96.75% OF THE TOTAL EXPENSES WERE PAID IN CASH AND THAT IN THE AB SENCE OF SUPPORTING BILLS/VOUCHERS/CHALLANS THESE EXPENSES C ANNOT BE VERIFIABLE. FURTHER, CREDITORS FOR HIRE CHARGES WER E ISSUED NOTICES U/S 133 (6) OF THE IT ACT, HOWEVER, THE LETTERS REMAINE D UN-COMPLIED WITH. ITA NO.187 AND 201/AHD/2008 SHRI JABIR ISMAIL PATEL, PROP. PATEL TRANSPORT 3 THE AO, THEREFORE, REJECTED THE BOOK RESULTS AND ES TIMATED THE NET PROFIT @ 10% OF THE HIRE CHARGES AMOUNTING TO RS.10 ,16,500/- AS AGAINST RS.2,27,324/- DECLARED IN THE PROFIT & LOSS ACCOUNTS. THE ADDITION WAS CHALLENGED BEFORE THE LEARNED CIT(A) A ND IT WAS SUBMITTED THAT BOOKS OF ACCOUNTS ARE CORRECT AND HI RE CHARGES WERE CLAIMED ON TRIP TO TRIP BASIS. IT WAS SUBMITTED THA T ALL THE TRUCK OWNERS IN MAJORITY ARE ILLITERATE AND ARE FILING RETURNS U NDER PRESUMPTIVE SCHEME OF TAXATION AND DO NOT MAINTAIN BOOKS OF ACC OUNTS. IT WAS SUBMITTED THAT MAJOR BUSINESS OF THE ASSESSEE IS WI TH COMPANIES LIKE VIDEOCON AND ALL THE RECEIPTS ARE THROUGH CHEQUES A ND SUBJECTED TO TDS. THEREFORE, REJECTION OF BOOK RESULTS IS UNJUST IFIED. IT WAS SUBMITTED THAT IN THE SAME BUSINESS PROFIT MARGIN V ARIES FROM 2.5% TO 3% AND THE AO ACCEPTED IN THE SIMILAR CASES. IN THE COMPARABLE CASES OF KAILASH TRANSPORT AND EVEREST TRANSPORT FO R ASSESSMENT YEAR UNDER APPEAL, THE NET PROFIT RATE HAS BEEN ACC EPTED AT 4.32% AND 3.52% RESPECTIVELY. THE LEARNED CIT(A) NOTED TH AT DESPITE GIVING SEVERAL OPPORTUNITIES TO THE ASSESSEE, COMPLETE BOO KS OF ACCOUNTS WERE NOT PRODUCED AND THAT MAJORITY OF THE EXPENSES HAVE BEEN INCURRED IN CASH. THE ASSESSEE ALSO EXPRESSED INABI LITY TO PRODUCE THE TRUCK OWNERS ON TEST CHECK BASIS. IN THE ABSENC E OF COMPLETE DETAILS, REJECTION OF BOOKS OF ACCOUNTS WAS HELD TO BE JUSTIFIED. HOWEVER, CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES AND COMPARABLE CASES THE APPLICATION OF NET PROFIT RATE AT 10% WAS REDUCED TO 5%. 4. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT DIS PUTE REJECTION OF THE BOOKS OF ACCOUNTS. HOWEVER, HE HAS SUBMITTED THAT EVEN 5% ITA NO.187 AND 201/AHD/2008 SHRI JABIR ISMAIL PATEL, PROP. PATEL TRANSPORT 4 NET PROFIT RATE IS EXCESSIVE CONSIDERING THE HISTOR Y OF THE ASSESSEE. PB-64 IS THE GROSS PROFIT CHART IN EARLIER YEARS IN WHICH 2.79% TO 3.04% HAS BEEN SHOWN. ON THE OTHER HAND, THE LEARN ED DR RELIED UPON THE ORDER OF THE LEARNED CIT(A) AND SUBMITTED THAT THE DEPARTMENT DID NOT FILE CROSS APPEAL ON THE SAME GR OUND. 5. ON CONSIDERATION OF THE RIVAL SUBMISSIONS OF THE PARTIES IN THE BACKGROUND OF THE FACTS NOTED AND FURTHER THAT THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT DISPUTE REJECTION OF THE B OOK RESULTS; WE ARE OF THE VIEW BOOK RESULTS HAVE BEEN RIGHTLY REJECTED BY THE AUTHORITIES BELOW. SAME DO NOT REQUIRE ANY INTERFERENCE. AS REG ARDS APPLICATION OF NET PROFIT RATE OF 5%, IT IS ADMITTED FACT THAT COMPLETE BOOKS OF ACCOUNTS WERE NOT PRODUCED AND SUBSTANTIAL EXPENSES WERE INCURRED IN CASH. THE ASSESSEE HAS ALSO SHOWN INABILITY TO P RODUCE THE PARTIES FOR EXAMINATION. THE ASSESSEE HIMSELF ADMITTED BEFO RE THE LEARNED CIT(A) THAT IN COMPARABLE CASES EVEN THE NET PROFIT RATE OF 4.32% HAS BEEN ACCEPTED. THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES, THE LEARNED CIT(A) WAS JUSTIFIED IN APPLYING RATE OF 5% FOR ESTIMATING THE PROFIT OF THE ASSESSEE. NO FURTH ER INTERFERENCE IS CALLED FOR. THE NET PROFIT RATE OF 5% IS QUITE REAS ONABLE AND PROPER. ACCORDINGLY, WE DO NOT FIND ANY MERIT ON GROUND NO. 1 OF THE APPEAL OF THE ASSESSEE. THE SAME IS ACCORDINGLY DISMISSED. ISSUE NO.2 6. THE ASSESSEE IN GROUND NO.2 OF THE APPEAL, CHAL LENGED THE CONFIRMING OF ADDITION OF RS.7,24,614/- U/S 41(1) O F THE IT ACT. THE ITA NO.187 AND 201/AHD/2008 SHRI JABIR ISMAIL PATEL, PROP. PATEL TRANSPORT 5 REVENUE RAISED GROUND NO.1 IN ITS APPEAL CHALLENGIN G THE DELETION OF ADDITION OF RS.8,47,085/- ON THE SAME GROUND. 7. IT WAS NOTED THAT CREDITORS OF RS.15,71,700/- WE RE APPEARING IN THE BALANCE SHEET ON 31-03-2005. 11 LETTERS WERE IS SUED ON TEST CHECK BASIS OUT OF WHICH TWO RETURNED BACK DUE TO I NCOMPLETE ADDRESS AND THE REMAINING 9 LETTERS THOUGH SERVED, HOWEVER, REMAINED UN-COMPLIED WITH. THE AO, THEREFORE, REQUE STED THE ASSESSEE TO ESTABLISH THAT THESE CREDITORS WERE GEN UINE. IN THE ABSENCE OF EXPLANATION, THE AO OPINED THAT SMALL TR UCK OPERATORS WHO WERE PERSONS HAVING ONE OR TWO TRUCKS AND ARE PERSO NS OF SMALL MEANS DEMAND PAYMENT IN ADVANCE, THEREFORE, BALANCE STANDING FOR 2/3 YEARS CANNOT BE TREATED AS GENUINE. ACCORDINGLY , CREDITORS BALANCE OF RS.15,71,700/- WAS TREATED AS BOGUS AND THE LIABILITY OF BEING TREATED AS NON-GENUINE ADDITION WAS MADE U/S 41(1) OF THE IT ACT AS CESSATION OF LIABILITY. AT THE APPELLATE STA GE, THE ASSESSEE FILED COMPUTERIZED COPY OF THE LEDGER ACCOUNTS FOR 01-04- 2005 TO 30-03-2006 SHOWING THAT MAJORITY OF THE CREDITORS O UTSTANDING WERE PAID IN CASH DURING APRIL TO AUGUST, 2006. IT WAS, THEREFORE, SUBMITTED THAT ADDITION U/S 41 (1) OF THE IT ACT IS NOT JUSTI FIED. THE COMMENTS OF THE AO WERE CALLED FOR IN WHICH IT WAS EXPLAINED TH AT DESPITE GIVING OPPORTUNITIES THE ASSESSEE DID NOT FILE ANY MATERIA L TO EXPLAIN THE ISSUE. THE LEARNED CIT(A) CONSIDERING THE SUBMISSIO N OF THE PARTIES AND GOING THROUGH THE COMPUTERIZED LEDGER ACCOUNT S UBMITTED BEFORE HIM FOUND THAT MAJORITY OF THE CREDITORS WERE PAID IN APRIL, 2006. BUT IT IS NOT EXPLAINED WHY THESE DETAILS WERE NOT FILED B EFORE THE AO. FURTHER, PAYMENTS HAVE BEEN MADE IN CASH; THEREFORE , GENUINENESS ITA NO.187 AND 201/AHD/2008 SHRI JABIR ISMAIL PATEL, PROP. PATEL TRANSPORT 6 OF THE SAME CANNOT BE VERIFIED. THE ADDITIONAL DOCU MENTS WERE NOT ADMITTED AT THE APPELLATE STAGE. THE ASSESSEE FURTH ER FILED COMPUTERIZED LIST OF 108 OUTSTANDING CREDITORS AGGR EGATING TO RS.20,88,400/-. BUT IT WAS NOT EXPLAINED WHETHER TH ESE WERE PAID DURING THE FINANCIAL YEAR 2004-05. THE LEARNED CIT( A) CONSIDERING THE CREDITORS OF BEING SMALL MEANS NOTED THAT A FAIR ES TIMATE OF NON- GENUINE CREDITORS SHALL HAVE TO BE MADE. THE ARGUME NTS OF THE ASSESSEE WAS CONSIDERED THAT NO ADDITION CAN BE MAD E U/S 41 (1) OF THE IT ACT. THE LD. CIT(A) CONSIDERING THE FACTS AP PLIED PROVISIONS OF SECTION 69C OF THE IT ACT I.E. UNEXPLAINED EXPENDITURE BEI NG DEEMED INCOME AND ASSUMED THAT ONE MONTHS OUTSTANDING IS GENUINE I.E. RS.8,47,085/- AND BALANCE OF RS.7,24,614/- WAS CONS IDERED AS UNEXPLAINED EXPENDITURE. THE ASSESSEE AND THE REVEN UE BOTH ARE IN APPEAL AGAINST THE FINDINGS OF THE LEARNED CIT(A). 8. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UBMITTED THAT THERE IS NO DISPUTE THAT THE AMOUNTS WERE APPEARING IN THE BALANCE SHEET AND HAVE SHOWN THAT LIABILITY DID NOT EXTINGU ISHED. HE HAS SUBMITTED THAT THE DETAILS FURNISHED BEFORE THE AO SHOW THAT BALANCES WERE VERY OLD ONE, THEREFORE, PROVISIONS OF SECTION 41(1) OF THE IT ACT WOULD NOT APPLY AND FURTHER PROVISIONS OF SECTION 6 9 C OF THE IT ACT WOULD NOT APPLY BECAUSE THE LIABILITY WAS APPEARING THE BALANCE SHEET. HE HAS REFERRED TO PB-75 THE DETAILS OF THE CURRENT LIABILITY AND THE PROVISION IN THE ASSESSMENT YEAR UNDER APPEAL A S WELL AS IN THE PRECEDING ASSESSMENT YEAR. ITA NO.187 AND 201/AHD/2008 SHRI JABIR ISMAIL PATEL, PROP. PATEL TRANSPORT 7 9. ON THE OTHER HAND, THE LEARNED DR RELIED UPON TH E ORDER OF THE AO AND SUBMITTED THAT THESE WERE NON-EXISTING LIABI LITIES AND NO DETAILS WERE FURNISHED ABOUT THE GENUINENESS OF THE SAME. SINCE THE LIABILITIES ARE NOT EXPLAINED, THEREFORE, THE LEARN ED CIT(A) SHOULD HAVE MAINTAINED FULL ADDITION INSTEAD OF DELETING PART O F THE ADDITION. THE LEARNED DR SUBMITTED THAT ONUS ON THE ASSESSEE IS N OT DISCHARGED. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON TH E ORDER OF ITAT AHMEDABAD BENCH IN THE CASE OF RAJESH MUKUNDLAL SHA H IN ITA NO.424/AHD/2006 DATED 08-01-2010 IN WHICH ADDITION WAS DELETED OF THE OLD BALANCES COMING FROM EARLIER YEARS U/S 41 ( 1) OF THE IT ACT. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE A SSESSEE FILED ANNEXURE A TO THE BALANCE SHEET (PB-75) WHICH PROVI DES DETAILS OF CURRENT LIABILITIES AND PROVISIONS IN A SUM OF RS.1 5,71,700/. IN THE PRECEDING ASSESSMENT YEAR THE SAME WAS ONLY IN A SU M OF RS.20,88,400/-. IT IS THUS CLEAR THAT LIABILITY ON THIS ISSUE HAVE REDUCED IN THE ASSESSMENT YEAR UNDER APPEAL AS COMPARED TO THE EARLIER YEAR. THE AO NOTED IN THE ASSESSMENT ORDER THAT THE ASSES SEE FILED COPY OF THE LEDGER AND OBSERVED THERE FROM THAT BALANCES WERE VERY OLD BEING CARRIED FORWARD FROM EARLIER YEARS. THE AO DI D NOT ACCEPT THE CONTENTION OF THE ASSESSEE BECAUSE PETTY TRUCK DRIV ERS WOULD DEMAND ADVANCE IN CASH. LETTERS WERE SENT TO THE PA RTIES BUT RETURNED UN-SERVED. THE AO, THEREFORE, FOUND FROM T HE MATERIAL ON RECORD THAT THOSE OUTSTANDING PAYMENTS TO SMALL TRA NSPORTERS ARE SHOWN OUTSTANDING LIABILITIES SINCE LAST 2/3 YEARS. THE AO ALSO NOTED THAT THE ASSESSEE FAILED TO WRITE THEM BACK THESE L IABILITIES. THE LEARNED CIT(A) ALSO NOTED IN THE APPELLATE ORDER TH AT THESE ADVANCES ITA NO.187 AND 201/AHD/2008 SHRI JABIR ISMAIL PATEL, PROP. PATEL TRANSPORT 8 HAVE BEEN SHOWN IN THE BALANCE SHEET AND THE BALANC ES ARE STANDING FOR 2/3 YEARS. IT IS, THEREFORE, ADMITTED FACT THAT THE LIABILITIES IN A SUM OF RS.15,71,700/- WAS APPEARING AS LIABILITY IN THE BALANCE SHEET OF THE ASSESSEE IN THE ASSESSMENT YEAR UNDER APPEAL AN D THE LIABILITY WAS CARRIED FORWARD FROM EARLIER YEARS. THEREFORE, PROVISIONS OF SECTION 41(1) WOULD NOT APPLY IN THE MATTER. ITAT A HMEDABAD B BENCH IN THE CASE OF SHRI NITIN S. GARG VS ACIT IN ITA NOS. 169,170,171 AND 172/AHD/2009 (40 SOT 253) VIDE ORDE R DATED 04-06-2010 ALLOWED THE CLAIM OF THE ASSESSEE. THE F INDINGS OF THE TRIBUNAL IN PARA 8 TO 10 ARE REPRODUCED AS UNDER: 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MATERIAL AVAILABLE ON RECORD. SECTION 41 (1) (A) OF THE IT ACT READS AS UNDER: 41. (1) WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE (HEREINAFTER REFERRED TO AS THE FIRST-MENTIONED PERSON) AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR, (A) THE FIRST-MENTIONED PERSON HAS OBTAINED, WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED BY SUCH PERSON OR THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DEEMED TO BE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE TO INCOME-TAX AS THE INCOME OF THAT PREVIOUS YEAR, WHETHER THE BUSINESS OR PROFESSION IN RESPECT OF WHICH THE ALLOWANCE OR ITA NO.187 AND 201/AHD/2008 SHRI JABIR ISMAIL PATEL, PROP. PATEL TRANSPORT 9 DEDUCTION HAS BEEN MADE IS IN EXISTENCE IN THAT YEAR OR NOT; OR 8.1 HONBLE MADRAS HIGH COURT IN THE CASE OF TAMILNADU WAREHOUSING CORPORATION 292 ITR 310 HELD AS UNDER: THE ASSESSEE FILED ITS RETURN FOR THE ASSESSMENT YEAR 1989-90 AND ASSESSMENT ERAS COMPLETED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961. THE ASSESSEE HAD SURRENDERED THE GROUP GRATUITY SCHEME WITH LIC AND RECEIVED A SUM OF RS.8,22,925/- DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR 1989-90. AS THERE WAS NO PROPER ENQUIRY MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT COMPLETED ON JANUARY 21,1992, THE COMMISSIONER PASSED ORDER UNDER SECTION 263 OF THE ACT AND SET ASIDE THE ASSESSMENT WITH A DIRECTION TO THE ASSESSING OFFICER TO ASSESS THE SAID AMOUNT UNDER SECTION 41(1) OF THE ACT FOR THE ASSESSMENT YEAR 1989-90. THE TRIBUNAL SET AIDE THE ORDER OF THE COMMISSIONER. ON APPEAL TO THE HIGH COURT: HELD, THAT THE ASSESSEE HAD CONTINUED TO SHOW THE ADMITTED AMOUNT OF RS.8,22,925 AS LIABILITY IN THE BALANCE-SHEET. THE UNDISPUTED FACT WAS THAT IT WAS A LIABILITY REFLECTED IN THE BALANCE-SHEET. ONCE IT WAS SHOWN AS LIABILITY BY THE ASSESSEE, THE COMMISSIONER WAS WRONG IN HOLDING THAT IT WAS ASSESSABLE UNDER SECTION 41(1) OF THE ACT. UNLESS AND UNTIL THERE IS A CESSATION OF LIABILITY, SECTION 41 IS NOT APPLICABLE. ITA NO.187 AND 201/AHD/2008 SHRI JABIR ISMAIL PATEL, PROP. PATEL TRANSPORT 10 8.2 HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF SMT. SITA DEVI JUNEJA, 189 TAXMAN 96HELD AS UNDER: IT IS THE CONCEDED POSITION THAT IN THE ASSESSEES BALANCE SHEET THE AFORESAID LIABILITIES HAVE BEEN SHOWN, WHICH ARE PAYABLE TO THE SUNDRY CREDITORS. SUCH LIABILITIES, SHOWN IN THE BALANCE SHEET, INDICATE THE ACKNOWLEDGEMENT OF THE DEBTS PAYABLE BY THE ASSESSEE. MERELY BECAUSE, SUCH LIABILITY IS OUTSTANDING FOR THE LAST SIX YEARS, IT CANNOT BE PRESUMED THAT THE SAID LIABILITIES HAVE CEASED TO EXIST. IT IS ALSO CONCEDED POSITIN THAT THERE IS NO BILATERAL ACT OF THE ASSESSEE AND THE CREDITORS, WHICH INDICATES THAT THE SAID LIABILITIES HAVE CEASED TO EXIST. IN ABSENCE OF ANY BILATERAL ACT, THE SAID LIABILITIES COULD NOT HAVE BEEN TREATED TO HAVE CEASED. 8.3 ITAT AHMEDABAD BENCH IN THE CASE OF N. R. CHAUHAN, ORDER DATED 23-01-2009 HELD AS UNDER: THE LD. COUNSEL FOR THE ASSESSEE SPECIFICALLY DRAWN OUR ATTENTION TO THE ACCOUNT COPIES AND STATED THAT THESE ARE OUTSTANDING AS ON DATE AND THIS AMOUNT ARE NOT WRITTEN OFF IN THE BOOKS OF ACCOUNT. ACCORDINGLY, THE SAME CANNOT BE ADDED U/S. 41(1) OF THE ACT AS THE LIABILITY OF OUTSTANDING AND THE PARTIES ARE IN EXISTENCE. WE ARE IN FULL AGREEMENT WITH THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE, AS IS SEEN FROM THE DOCUMENTS AND PAPERS FILED BEFORE US THAT THE PARTIES DO EXIST AND THESE AMOUNTS ARE OUTSTANDING IN THE BOOKS OF THE ASSESSEE AS ITA NO.187 AND 201/AHD/2008 SHRI JABIR ISMAIL PATEL, PROP. PATEL TRANSPORT 11 PAYABLE. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE FEEL THAT THESE AMOUNTS CANNOT BE ADDED EITHER U/S. 68 OR 41(1) OF THE ACT. WE DELETE THE ADDITION AND THIS ISSUE OF THE ASSESSEES APPEAL IS ALLOWED. 8.4 ITAT LUCKNOW BENCH IN THE CASE OF DCIT VS ALLIED LEATHER FINISHERS (P) LTD., 32 SOT 549 HELD AS UNDER: 21.7 A LIABILITY COULD NOT BE TREATED AS A CESSATION IF IT WAS BEING MERELY CARRIED FORWARD FOR YEARS. A NON-GENUINE NON- TRADING LIABILITY STANDING IN THE BALANCE SHEET CAN BE TAXED BUT UNDER SECTION 68 IF IT CAME IN THE BOOKS IN THE CURRENT YEAR. IF SUCH NON-GENUINE NON-TRADING LIABILITY CAME IN THE BOOKS IN AN EARLIER YEAR THAN SAME CANNOT BE TAXED IN THE CURRENT YEAR EVEN UNDER SECTION 68. A NON-GENUINE TRADING LIABILITY CAN BE CONSIDERED IN THE CURRENT YEAR IF IT IS RELATED TO CURRENT YEARS TRADING/MANUFACTURING OR PROFIT & LOSS ACCOUNT BUT NOT UNDER SECTION 41(1) OR UNDER SECTION 68. IT CAN BE CONSIDERED ONLY UNDER SECTION 28, I.E. IT CAN BE CONSIDERED FOR DISALLOWANCE WHILE EXAMINING THE CLAIM OF EXPENSES OR OUTGOINGS AGAINST REVENUE RECEIPTS. CURRENT YEARS GENUINE TRADING LIABILITIES, WAVED/REMITTED OR CEASED TO EXIST IN THE CURRENT YEAR ITSELF WILL NOT FORM PART OF TRADING/MANUFACTURING OR P/L ACCOUNT EXCEPT A NOTE APPENDED TO THEM AS DISCLOSURE OF INFORMATION. 21.10 EVEN IN A CASE WHERE A LIABILITY CEASED TO EXIST DUE TO LIMITATION I.E. THE CLAIM OF THE CREDITOR IS BARRED BY ITA NO.187 AND 201/AHD/2008 SHRI JABIR ISMAIL PATEL, PROP. PATEL TRANSPORT 12 LIMITATION UNDER LIMITATION ACT OF 1963 BUT IF THE LIABILITY SUBSIST OR HAS NOT BEEN WRITTEN OFF BY THE ASSESSEE, OR THE ASSESSEE DOES NOT ABSOLVE HIMSELF FROM THE LIABILITY, THOUGH NOT LEGALLY ENFORCEABLE, IT CANNOT BE TAXED UNDER SECTION 41(1). 8.5 THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS PRAMESHWAR BOHRA, 301 ITR 404 HAS HELD AS UNDER: THE ASSESSEE ON THE FIRST DAY OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1993-94 I.E. ON APRIL 1, 1992, CREDITED AN AMOUNT OF INVESTMENT/CASH CREDIT OF RS.1,55,316 IN HIS BOOKS OF ACCOUNT. THE ASSESSING OFFICER ADDED THIS AMOUNT IN THE INCOME OF THE ASSESSEE AS UNEXPLAINED INVESTMENT IN THE ASSESSMENT YEAR 1993- 94. THE TRIBUNAL HELD THAT THIS WAS NOT A CASE OF CASH CREDIT ENTERED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE DURING THE YEAR BUT IT WAS A CASE IN WHICH THE ASSESSEE HAD INVESTED THE CAPITAL IN THE BUSINESS AND THIS AMOUNT WAS SHOWN AS A CLOSING CAPITAL AS ON MARCH 31, 1992 AND ON APRIL 1, 1992, IT WAS AN OPENING BALANCE. THEREFORE THE TRIBUNAL HELD THAT WHAT WAS ALREADY CREDITED IN THE BOOKS OF ACCOUNT ENDING ON MARCH 31, 1992, FOR FINANCIAL YEAR 1991-92 RELEVANT TO ASSESSMENT YEAR 1992-93 COULD NOT BE UNEXPLAINED CASH CREDIT OR INVESTMENT IN THE BOOKS OF ACCOUNT MAINTAINED FOR THE FINANCIAL YEAR 1992-93, THE ACCOUNTING PERIOD FOR WHICH ENDED ON MARCH 31, 1993. ON APPEAL: HELD, DISMISSING THE APPEAL, THAT THE CARRIED FORWARD AMOUNT OF THE PREVIOUS ITA NO.187 AND 201/AHD/2008 SHRI JABIR ISMAIL PATEL, PROP. PATEL TRANSPORT 13 YEAR DID NOT BECOME AN INVESTMENT OR CASH CREDIT GENERATED DURING THE RELEVANT YEAR 1993-94. THIS ALONE WAS SUFFICIENT TO SUSTAIN THE ORDER OF THE TRIBUNAL IN DELETING THE AMOUNT OF R.1,55,316 FROM THE ASSESSMENT FOR THE ASSESSMENT YEAR 1993- 94. 8.6 ITAT MUMBAI BENCH IN THE CASE OF ACIT VS VIP INDUSTRIES, 30 SOT 254 HELD AS UNDER: SECTION 41(1) IS ATTRACTED WHEN THERE IS CESSATION FOR REMISSION OF A TRADING LIABILITY. SIMPLY BECAUSE A PERIOD OF THREE YEARS HAS EXPIRED AND THE CREDITOR CANNOT LAWFULLY ENFORCE HIS CLAIM, IT DOES NOT MEAN THAT THERE IS A CESSATION OR REMISSION OF LIABILITY. THERE MAY BE SEVERAL SITUATIONS WHEN THE MONEY IS NOT CLAIMED OR PAID BY ONE PARTY TO ANOTHER WITHIN THREE YEARS AND THEREAFTER THE CLAIM IS MADE AND HONOURED BY THE OTHER. SO, SIMPLY BECAUSE A PARTICULAR AMOUNT IS OUTSTANDING FOR A PERIOD OF MORE THAN THREE YEARS, THAT DOES NOT CONSTITUTE INCOME UNDER SECTION 41(1). 9. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT O F THE ABOVE PROVISIONS AND THE DECISION REFERRED TO ABOVE, IT IS CLEAR THAT THE EXPENDITURE CLAIMED AS DEDUCTION IN THE EARLIER YEAR HAVE NOT BEEN DISALLOWED IN THE EARLIER YEAR IN WHICH THEY WERE CLAIMED. EVEN THE AO IN THE EARLIER YEAR HAS NOT DOUBTED THE EXISTENCE OF THE PARTIES. THE LEARNED COUNSEL FOR THE ASSESSEE FILED COPIES OF BALANCE SHEET OF THE ALL YEARS UNDER APPEAL, AS WELL AS PROCEEDINGS EARLIER ASSESSMENT YEARS WHICH PROVE THAT THE OUTSTANDING LIABILITIES FROM EARLIER YEARS WERE CARRIED FORWARDED TO THE ASSESSMENT YEARS ITA NO.187 AND 201/AHD/2008 SHRI JABIR ISMAIL PATEL, PROP. PATEL TRANSPORT 14 UNDER APPEAL STARTING FROM ASSESSMENT YEAR 2001- 02. THE LIABILITIES IN ASSESSMENT YEAR 2000-01 WERE IN A SUM OF RS.1,29,83,564/-. THE PARTICULARS OF THOSE PARTIES AGAINST WHOM THE LIABILITIES WERE SHOWN IS MENTIONED AT PB-3, 4 AND 5. THE SAME PARTIES CONTINUED IN THE ASSESSMENT YEAR 2001-02 UNDER APPEAL BUT THE BALANCES OF SOME OF THE PARTIE S HAVE REDUCED WHICH WOULD SHOW THAT PART PAYMENTS HAVE BEEN MADE TO THEM. THE ABOVE FACTS WOULD SHOW THAT THE LIABILITIES SHOWN IN THE BALANCE SHEE T IN THE ASSESSMENT YEAR UNDER APPEAL I.E. 2001-02 WHICH ARE OPENING BALANCES WHICH ARE CARRIED FORWARD FRO THE PRECEDING ASSESSMENT YEAR. THE LIABILITIES HAVE BEEN SHOWN IN THE BALANCE SHEET OF THE ASSESSEE WHICH WOULD SHOW THAT THE ASSESSEE ACKNOWLEDGED THE LIABILITIES OF THE OUTSTANDING AMOUNTS. THE BALANCES WERE THUS CARRIED FORWARD FROM EARLIER YEARS. IN ASSESSMENT YEAR 2002-03, THE AO MADE ADDITION OF RS.1,60,590/- IN RESPECT OF ROYAL ENGINEERING WORK WHOSE BALANCE WAS ALSO OUTSTANDING IN THE ASSESSMENT YEAR 2000-01 AND 2001-02. IT WOULD, THEREFORE, SHOW THAT SIMILAR ADDITION IS MADE IN THE ASSESSMENT YEAR 2002-03 WHICH WOULD AMOUNT TO DOUBLE ADDITION IN RESPECT OF THE SAME PARTY. IN ASSESSMENT YEAR 2003-04 THE AO MADE ADDITION OF RS.40,032/- IN RESPECT OF SANJAY SPAL , RS.32/-, ANKIT ENGINEERING RS.20,000/- A ND MOTILALJI RS.20,000/-. THESE AMOUNTS WERE NOT CARRIED FORWARD FROM EARLIER YEARS AS PER THE DETAI LS FILED IN THE PAPER BOOK. IT WOULD SHOW THAT THESE A RE THE CURRENT LIABILITIES OF THE ASSESSEE IN THE ASSESSMENT YEAR 2003-04. SIMILARLY, IN ASSESSMENT YEAR 2006-07 THE AO MADE ADDITION OF RS.1,32,118/- IN RESPECT OF AMOUNT OF RS.45,409/- AND RS.86,709/- IN RESPECT OF MAHALAXMI ROADWAYS AND NIHAL ROADWAYS. THESE WERE THE CREDIT BALANCES IN THE ASSESSMENT YEAR UNDER APPEAL WHICH WERE CARRIED FORWARD IN THE PRECEDING ASSESSMENT YEAR 2005-06 AND IN THAT YEAR THERE WERE DEBIT BALANCES AGAINST ITA NO.187 AND 201/AHD/2008 SHRI JABIR ISMAIL PATEL, PROP. PATEL TRANSPORT 15 THESE PARTIES AS PER THE DETAILS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE. THESE FACTS WOULD SHOW THAT THE AUTHORITIES BELOW HAVE NOT APPLIED THEIR MIND TO THE FACTS OF THE CASE THAT THESE ARE NOT THE FIT CASES FOR INVOKING THE PROVISIONS OF SECTIO N 41(1) OF THE IT ACT IN THE MATTER AS DONE BY THE AO . 9.1 CONSIDERING THE FACTS OF THE CASE AS NOTED ABOVE IT IS CLEAR THAT THE ASSESSEE HAD CONTINUED T O SHOW THE ADMITTED AMOUNTS AS LIABILITIES IN ITS BALANCE SHEET. THE LIABILITIES REFLECTED IN THE BAL ANCE SHEET CANNOT BE TREATED AS CESSATION OF LIABILITIES . MERELY BECAUSE THE LIABILITIES ARE OUTSTANDING FOR LAST MANY YEARS, IT CANNOT BE INFERRED THAT THE SAID LIABILITIES HAVE CEASED TO EXIST. IT IS ALSO A FACT THAT THE ASSESSEE HAS NOT WRITTEN OFF THE OUTSTANDING LIABILITIES IN THE BOOKS OF ACCOUNT AND THE OUTSTAN DING LIABILITIES ARE STILL IN EXISTENCE WOULD PROVE THAT THE ASSESSEE ACKNOWLEDGED HIS LIABILITIES AS PER THE BOOKS OF ACCOUNT. SECTION 41(1) OF THE IT ACT IS ATTRACTED WHEN THERE IS CESSATION OR REMISSION OF A TRADING LIABILITY. THE AO SHALL HAVE TO PROVE THAT THE ASSESSEE HAS OBTAINED THE BENEFITS IN RESPECT OF SU CH TRADING LIABILITIES BY WAY OF REMISSION OR CESSATIO N THEREOF. MERELY BECAUSE THE ASSESSEE OBTAINED BENEFIT OF DEDUCTION IN THE EARLIER YEARS AND BALAN CES ARE CARRIED FORWARD IN THE SUBSEQUENT YEAR, WOULD NOT PROVE THAT THE TRADING LIABILITIES OF THE ASSES SEE HAVE BECOME NON-EXISTENT. IT MAY ALSO BE NOTED HERE THAT THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION OF THE EXPENDITURE IN ALL THE ASSESSMENT YEARS UNDER APPEAL. THE DECISIONS CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE SQUARELY APPLY TO THE FACTS OF THE CASE. THEREFORE, WE ARE OF THE VIEW THAT PROVISIONS OF SECTION 41 (1) (A) OF THE IT ACT HAVE BEEN WRONGLY APPLIED IN THE MATTER. WE MAY ALSO NOTE HERE THAT T HE LEARNED COUNSEL FOR THE ASSESSEE HAS FILED DETAILS OF PARTICULARS OF PAYMENTS OF LIABILITIES IN SUBSEQUEN T YEARS WHICH ARE IN THE NATURE OF ADJUSTMENT THROUGH ITA NO.187 AND 201/AHD/2008 SHRI JABIR ISMAIL PATEL, PROP. PATEL TRANSPORT 16 JOURNAL ENTRY, CASH PAYMENT AND SOME PAYMENTS BY BANKING CHANNEL. THE LEARNED DR OBJECTED TO THE FILING OF SUCH DETAILS AT THIS STAGE AND FURTHER SUBMITTED THAT THE PAYMENT BY CASH AND JOURNAL ENTRY WOULD NOT PROVE GENUINENESS OF THE PAYMENTS. WE DO NOT AGREE WITH THE SUBMISSION OF THE LEARNED DR BECAUSE THOSE DETAILS WERE CALLED FOR BY THE BENCH DURING THE COURSE OF HEARING AND EVEN PAYMENT BY CHEQUES AND/OR JOURNAL ENTRY WOULD NOT ABSOLVE THE AO FOR MAKING OUT A CASE U/S 41 (1) (A) OF THE IT ACT. THE LAST CONTENTION OF THE LEARNED COU NSEL FOR THE ASSESSEE WAS THAT SINCE INCOME OF THE ASSESSEE IS COMPUTED U/S 44AE OF THE IT ACT, THEREFORE, PROVISIONS OF SECTION 41(1) OF THE IT AC T WOULD NOT APPLY. HOWEVER, CONSIDERING THE FINDING GIVEN ABOVE THAT PROVISIONS OF SECTION 41 (1) WOULD NOT APPLY TO THE FACTS AND CIRCUMSTANCES OF THE CAS E; THERE IS NO NEED TO GIVE FURTHER FINDINGS ON THIS I SSUE. 10. ON CONSIDERATION OF THE ABOVE DISCUSSION, WE FIND THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN MAKING THE ADDITIONS AGAINST THE ASSESSEE IN ALL TH E ASSESSMENT YEARS UNDER APPEAL OF THE ABOVE AMOUNTS WITH THE AID OF SECTION 41(1)(A) OF THE IT ACT. AS A RESULT, WE SET ASIDE THE ORDERS OF THE AUTHORI TIES BELOW AND DELETE THE ENTIRE ADDITIONS. 10.1 THE LEARNED CIT(A) CONSIDERING THE SAME FACTS APPLIED THE PROVISIONS OF SECTION 69C OF THE IT ACT FOR MAKING PART OF THE ADDITION WHICH PROVIDES ABOUT UNEXPLAINED EXPENDITURE. SINCE THE LIABILITY IS ARISING FROM PRECEDING ASSESSMENT YEAR AND WAS SHOW N IN THE BALANCE SHEET, THEREFORE, IT CANNOT BE TREATED AS U NEXPLAINED EXPENDITURE AS PER SECTION 69C OF THE IT ACT. CONSI DERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT APPROVE TH E ORDERS OF THE AUTHORITIES BELOW IN MAKING THE ADDITION OR CONFIRM ING PART OF THE ITA NO.187 AND 201/AHD/2008 SHRI JABIR ISMAIL PATEL, PROP. PATEL TRANSPORT 17 ADDITION. WE ACCORDINGLY, SET ASIDE THE ORDERS OF T HE AUTHORITIES BELOW AND DELETE THE ENTIRE ADDITION. IN THE RESULT, GROU ND NO.2 OF THE APPEAL OF THE ASSESSEE IS ALLOWED AND GROUND NO.2 OF THE A PPEAL OF THE REVENUE IS DISMISSED. ISSUE NO.3 11. ON GROUND NO.3 OF THE APPEAL, THE ASSESSEE CHAL LENGED CONFIRMING THE ADDITION OF RS.97,480/- AS UNEXPLAIN ED CASH CREDIT AND THE REVENUE ON GROUND NO.2 OF THE APPEAL, CHALL ENGED THE DELETION OF PART OF THE ADDITION ON ACCOUNT OF CAS H CREDIT. ON VERIFICATION OF THE CASH BOOK CERTAIN ACCOUNTS WERE FOUND CREDITED IN CASH AGAINST DIFFERENT PERSONS. IN THE ABSENCE OF A NY DETAILS FROM THE SIDE OF THE ASSESSEE, THE AO TREATED ALL 8 CASH CRE DITS AS UNEXPLAINED AND MADE THE ADDITION OF RS.1,28,480/-. DETAILS OF THE SAME ARE NOTED IN THE IMPUGNED ORDER. IT WAS SUBMIT TED BEFORE THE LEARNED CIT(A) THAT THE FIRST AND THE SECOND PARTY IN THE LIST OF THE AO NAMELY KASIM A. DHOLKA AND RANJIT R. BARIA ON DATED 12-04-2004 IN A SUM OF RS.17,000/- AND RS.14,000/- ARE TRADE CRED ITORS AND JOURNAL ENTRIES RECORDED THROUGH VEDEOCON NARMADA GLASS. FO R THE REST, NO EXPLANATION WAS FILED. THE LEARNED CIT(A), THEREFOR E, DELETED THE ADDITION IN RESPECT OF THESE TWO PERSONS IN A SUM O F RS.31,000/- AND SUSTAINED THE ADDITION OF RS.97,480/-. THE ALTERNAT IVE PLEA OF THE ASSESSEE FOR TELESCOPING OF THE ADDITION INTO GROSS PROFIT ADDITION WAS ALSO NOT ALLOWED BECAUSE THE ASSESSEE HAS NOT FURNI SHED ANY DETAILS. THE ASSESSEE AS WELL AS THE REVENUE, BOTH ARE IN AP PEAL. ITA NO.187 AND 201/AHD/2008 SHRI JABIR ISMAIL PATEL, PROP. PATEL TRANSPORT 18 12. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UBMITTED THAT GROSS PROFIT ADDITION IS AVAILABLE TO EXPLAIN THE A DDITION OF RS.97,480/-, THEREFORE, TELESCOPING BENEFIT MAY BE GIVEN. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT THE ASSESSEE DID NOT FURN ISH ANY EXPLANATION BEFORE THE AO AND THAT TELESCOPING BENE FIT CANNOT BE GIVEN TO THE ASSESSEE BECAUSE THE ASSESSEE FAILED T O PROVE NEXUS OF THE FUNDS GENERATED AND THE INVESTMENTS. 13. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE D O NOT FIND ANY JUSTIFICATION TO INTERFERE IN THE ORDER OF THE LEAR NED CIT(A) IN PARTLY DELETING THE ADDITION AND CONFIRMING THE ADDITION U /S 68 OF THE IT ACT IN PRINCIPLE. THE ASSESSEE EXPLAINED BEFORE THE LEA RNED CIT(A) THAT IN RESPECT OF TWO CREDITORS ON 12-04-2004 THESE WERE T RADE CREDITORS THROUGH VEDEOCON NARMADA GLASS ACCOUNT. THEREFORE,C ONTENTION OF THE ASSESSEE WAS RIGHTLY ACCEPTED AND THE SAME WERE RIGHTLY TREATED AS UNEXPLAINED. FURTHER, FOR REST OF THE CREDITORS THE ASSESSEE DID NOT FILE ANY EVIDENCE BEFORE THE AO AS WELL AS BEFORE T HE LEARNED CIT(A) TO ESTABLISH GENUINE CREDITS. IN THE ABSENCE OF ANY EVIDENCE, THE IDENTITY OF THE CREDITORS IS NOT PROVED. THEIR CRED ITWORTHINESS AND GENUINENESS OF THE TRANSACTION IS ALSO NOT PROVED. THEREFORE, THE LEARNED CIT(A) RIGHTLY TREATED THE SAME AS UNEXPLAI NED CASH CREDIT TO THE EXTENT OF RS.97,480/-. THE FINDINGS OF THE LEAR NED CIT(A) TO THAT EXTENT ARE MAINTAINED. 13.1 HOWEVER, AS REGARDS TELESCOPING BENEFIT CLAIME D BY THE ASSESSEE, WE FIND THAT THE ASSESSEE DID NOT FURNISH ANY EXPLANATION ITA NO.187 AND 201/AHD/2008 SHRI JABIR ISMAIL PATEL, PROP. PATEL TRANSPORT 19 BEFORE THE AO AND NO SUCH CLAIM WAS ALSO EARLIER MA DE BEFORE THE AO. THE LEARNED DR RIGHTLY CONTENDED THAT ON THE DA TE OF THE UNEXPLAINED DEPOSIT THE ASSESSEE SHALL HAVE TO PROV E THAT ON ACCOUNT OF EARNING OF UNDISCLOSED INCOME ON ACCOUNT OF NET PROFIT RATE, THE ASSESSEE SHOULD HAVE PROVE AVAILABILITY OF FUNDS. T HE LEARNED CIT(A) ALSO NOTED IN THE IMPUGNED ORDER THAT ONUS IS UPON THE ASSESSEE TO SHOW THAT SUCH ADDITIONS WERE AVAILABLE FOR INVESTM ENT AS CASH CREDIT. THE NEXUS OF FUNDS GENERATED AND ITS UTILIZ ATION HAS TO BE ESTABLISHED BY THE ASSESSEE. BEFORE THE LEARNED CIT (A) NO DETAILS WERE FURNISHED HOW THE NET PROFIT ADDITION WAS AVAI LABLE TO THE ASSESSEE. SINCE, WE HAVE CONFIRMED THE ADDITION NOW , ON ACCOUNT OF REJECTION OF BOOKS AND TO APPLYING HIGHER NET PROFIT RATE AND NO EXPLANATION WAS FILED BEFORE THE AO, THEREFORE, IT WOULD BE REASONABLE AND JUSTIFIED TO RESTORE THE ISSUE TO TH E FILE OF THE AO FOR RECONSIDERATION. CONSIDERING THE ABOVE DISCUSSIONS, THE ADDITION ON ACCOUNT OF UNEXPLAINED CREDIT IN PRINCIPLE IS MAINT AINED. THE APPEALS OF THE ASSESSEE AS WELL AS THE APPEAL OF THE REVENU E ON THIS ISSUE ARE DISMISSED. HOWEVER, ON TELESCOPING OF THE ADDITION THE MATTER IS RESTORED TO THE FILE OF THE AO WITH DIRECTION TO RE -DECIDE THE SAME BY GIVING REASONABLE SUFFICIENT OPPORTUNITY OF BEING H EARD TO THE ASSESSEE. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED PARTLY FOR STATISTICAL PURPOSES AND THE DEPARTMENTAL APPEA L IS DISMISSED. 14. NO OTHER POINT IS ARGUED OR PRESSED. ITA NO.187 AND 201/AHD/2008 SHRI JABIR ISMAIL PATEL, PROP. PATEL TRANSPORT 20 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED AND THE DEPARTMENTAL APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24-06-2011 SD/- SD/- (G. D. AGARWAL) VICE PRESIDENT (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 24-06-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD