M/s Geeta Jewellers, Ganjam V. ITO, Phulbani

ITA 351/CTK/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52430 (ITAT-CUTTACK)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 16-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 13-07-2011
• Court: TRIBUNAL
• Department Lawyers: A BHATTACHARJEE
• Assessee Lawyers: D K SETHM SETH ARS
• Keywords: Unexplained investment; Deemed dividend
• Section: 10

Judgement Text

IN THE INC O ME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : SHRI K.K.GUPTA, AM , AND SHRI K.S.S.PRASAD RAO, JM ITA NO. 351/CTK/2011 (ASSESSMENT YEAR 2006 - 07) M/S.GEETA JEWELLERS, AT: MAIN ROAD, P.O.BHANJANAGAR, DIST. GANJAM. PAN: AAGFG 6157 L VERSUS INCOME - TAX OFFICER , PHULBANI (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI D.K.SETH/M.SETH, ARS FOR THE RESPONDENT SHRI A.BHATTACHARJEE, DR DATE OF HEARING : 16.11.2011 DATE OF PRONOUNCEMENT : 18.11.2011 ORDER SHRI K. S.S.PRASAD RAO, JUDICIAL MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE HAVING BEEN AGGRIEVED BY THE ORDER OF THE LEARNED CITA) DT. 28.3.2011 OF THE COMMISSIONER OF INCOME - TAX (APPEALS) CONFIRMING ADDITION OF 26,00,000 MADE BY THE ASSESSING OFFICER U/S.68 OF THE INCOME - TAX ACT,1961 FOR THE ASSESSMENT YEAR 2006 - 07 BY NOT ACCEPTING THE CLAIM OF LOAN S OBTAINED FROM THE FOLLOWING PERSONS . 1 ) B.PRAMOD KUMAR PATRO. .. 3,00,000 2 ) ASHOK KUMAR PRADHAN .. 2,00,000 3 ) BHAWAN SWAR .. 1,00,000 4 ) RAMCHANDRA PANDA . . 2,00,000 5 ) RAJKISHORE PATRO .. 15,00,000 6 ) SMT.SANDYARANI PATRO .. 3,00,000 TOTAL: 26,00,000 2. THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING HIS ARGUMENTS SUBMITTED THAT THE COMPUTATION OF ADDITION U/S.68 HAS BEEN WRONGL Y CONFIRMED BY THE LEARNED CIT(A) ON THE FACTS AND CIRCUMSTANCES OF THE ASSESSES CASE. HE SUBMITTED THAT THE ASSESSING OFFICER, THIS BEING THE FIRST YEAR OF ASSESSEE FIRM, TRIED TO ISOLATE THE VARIOUS DEBITS AND CREDITS IN THE LOAN CREDITORS ACCOUNT AS WE LL AS THE SQUARED OFF ACCOUNTS BY CONSIDERING THE DEMAND DRAFTS PURCHASED BY LOAN CREDITORS AGAINST CASH WHICH WAS HELD BY 2 HIM AS UNEXPLAINED BY THE LOAN CREDITORS WHEN HE HAS CHOSEN TO TAX THE VERY AMOUNT OF THE DEMAND DRAFTS RECEIVED BY WAY OF LOAN FROM THE LOAN CREDITORS IN THE HANDS OF THE ASSESSEE. HE FURTHER AGGRAVATED THE ADDITION U/S.68 BY BRINGING TO TAX A SUM OF 16 ,96,585 BEING THE CASH INTRODUCED BY THE LOAN CREDITORS AS BELONGING TO THE ASSESSEE FIRM. THIS APART, THE ASSESSING OFFICER CHOSE TO TAX A SUM OF 8 LAKHS AS CAPITAL INTRODUCED BY THE PARTNERS WHEN THE PARTNERS HAVE CATEGORICALLY STATED THE AMOUNT OF INTRODUCTION OF CAPITAL WAS ON THE BASIS OF PERSONAL LOAN OBTAINED FROM VARIOUS LOAN CREDITORS WHO CHOSE TO ADVANCE THE SUM TO THE PAR TNERS INSTEAD OF THE FIRM. THE ASSESSING OFFICER ULTIMATELY ASSESSED THE INCOME AT 83,53,974 AS AGAINST RETURNED INCOME OF 9,120. 2. IT WAS EXPLAINED TO THE LEARNED CIT(A) THAT THAT OUT OF ADDITION OF 8 LAKHS SRI B.MADHUSUDAN PATRO INTRODUCED ADDITIO NAL CAPITAL OF 2 LAKHS OUT OF HIS HUF SOURCE AND THE SOURCES OF INVESTMENT IS DULY REFLECTED IN HIS HUF RETURN OF INCOME BEARING RECEIPT NO.1972 DT.7.9.2007 FOR THE ASSESSMENT YEAR 2006 - 07 AND COPY OF THE I.T.RETURN FILED AT THE TIME OF ASSESSMENT HEARIN G. S RI B. MAHEAWAR PATRO INTRODUCED ADDITIONAL CAPITAL OF 5,00,000 O UT OF HIS HUF SOURCE AND THE SOURCE OF INVESTMENT IS DULY REFLECTED I N HIS HUF RETURN OF INCOME BEARING ACK NOWLEDGEMENT RECEIPT NO. 1973 DT : 07 - 09 - 2007 FOR THE A Y 2006 - 2007 AND COPY O F THE I.T.RETURN FILED AT THE TIME OF ASSESSMENT HEARING . B.SANDHYARANI PATRO I NTRODUCED CAPITAL OF 50,000 OUT OF HER INDIVIDUAL SOURCE O F I NCOME AND THE SOURCE OF INVESTMENT IS DULY REFLECTED IN HER RETURN OF INCOME BEARING ACKNOWLEDGEMENT RECEIPT NO . 1974 DT: 07 - 09 - 2007 FOR THE A Y. 2006 - 200 7 AND COPY OF THE RETURN F ILED AT THE TIME OF ASSESSMENT HEARING. B.SASMITA PATRO INTRODUCED CAPITAL OF 50,000 OUT OF HER INDIVIDUAL SOURCE OF INCOME AND THE SOURCE OF INVESTMENT IS DULY REFLECTED IN HER RETURN OF INCOME BEARING ACKNOWLEDGEMENT RECEIPT NO. 1971 DT.07 - 09 - 3 2007 FOR THE A.7 2006 - 2007 AND COPY OF THE RETURN FILED AT THE TIME OF ASSESSMENT HEARING. T HE ASSESSEE FIRM DULY REFLECTED THE PURCHASE OF JEWE LLERY ITEMS FOR 18,150 AND 26,200 IN SUPPORT OF PU RCHASE MEMOS BUT THE LEARNED ASSESSING OFFICER WITHOUT APPRECIATING TH E FACTS OF THE CASE SIMPLY DOUBTED AND ADDED BACK TO TOTAL INCOME WHICH I S BASELESS AND UNWARRANTED. THE ASSESSEE FIRM DEPOSITED INTO BANK ACCOUNT FOR 16.90,586 F OR THE PERIOD 11.3. 2006 TO 31.3.2006 OUT OF THE SALE PROCEEDS OF AIRTEL PRODUCTS BUT THE ASSESSING OFFICER IN ABSENCE OF CASH BOOK THE SALE PROCEED AMOUNT DEPOSITED INTO BANK HAS NOT ACCEPTED AND ADDED BACK TO THE TOTAL INCOME ON THE GROUND OF UNEXPLAINED INVESTMENT IS NOT P ROPER AND ILLEGAL. THE ASSESSEE PURCHASED AIRTEL PRODUCTS WORTH 22,99,076 AGAINST DEMAND D RAFT OUT OF SALE PROCEEDS DEPOSITED IN BANK ACCOUNT. BUT THE ASSESSING OFFICER SIMPLY DISBELIEVED AND ADDED BACK TO THE TOTAL INCOME ON THE PLEA OF NON MAINTENANCE OF CASH BOOK WHICH IS ILLEGAL AND UNWARRANTED. FURTHER, THE ASS ESSEE FIRM WAS APPOINTED AS A STOCKIST OF AIRTEL PRODUCTS ON DT:06 - 02 - 2006 AND REQUIRED TO DEPOSIT AMOUNT OF 35,00,000/ - AGAINST PURCHASE OF A IRTEL PRODUCTS AND BY THAT TIME THE FIRM HAD NO BANK ACCOUNT TO EFFECT THE TRANSACTIONS THROUGH OWN BANK ACCOUNT . THE ASSESSEE FIRM COULD ARRANGE LOANS THROUGH PARTNERS ON BEHALF OF THE FIRM IN THE PARTNERS NAME AND IMMEDIATELY DD PURCHASED THROUGH PARTNERS ACCOUNT. LOAN AMOUNT OF 2,00,000 FROM SMT. A. KANYA KUMAN SENAPATY ON DT:09 - 02 - 2006 BY A/C PAYEE CHEQUE I N FAVOUR OF B, PRAMOD KURNAR PAT R O, PARTNER ON BEHALF OF M/S GEETA JEWELLERS. SMT. A. KANYA KUMAN SENAPATY HAS GIVEN A CONFIRMATION LETTER AND MENTIONED NO INTEREST IS CHARGED AS THE PARTNER HAPPEN TO BE MY RELATIVE ALONG WITH COPY OF BANK STATEMENT WHICH INDICATES THAT SHE HAS RECEIVED A SUM OF 8,82,400 ON DEATH CLAIM OF HER HUSBAND FROM LIC OF INDIA ON DT: 16 - 01 - 2006. THIS IS A GENUINE LOAN AND THERE IS NO POINT TO DISBELIEVE 4 AND ADD BACK TO TOTAL INCOME. INTRODUCTION OF CAPITAL OF 2,00,000 BY PARTNER SRI B. MADHUSUDAN PATIO ON DT:09 - 02 - 2006 DEPOSITED INTO B. PRAMOD KUMAR PATIOS BANK ACCOUNT FOR A LUMP SUM DD INFAVOUR OF BHARATI TELEVEN TURES LTD., ON BEHALF O F M/S GEETA JEWELLERS. THE ASSESSEE SRI B. MADHUSUDAN PATR O SHOWN THE INTRODUCTION OF CAPITAL IN HIS HUF RETURN O F I NCO ME AND THE COPY OF THE I. T RETURN SUBMITTED AT THE TIME OF ASSESSMENT HEARING. HENCE, THE ADDITION OF 2,00,000 AS UNEXPLAINED SOURCE IS NOT AT ALL CORRECT. THE ASSESSEE FIRM DEPOSITED 3, 00,000 OUT OF OWN FUND ON DT: 09 - 02 - 2008 INTO B PRAMOD KUMAR PATR OS ACCOUNT FOR A LUMP SUM DD IN FAVO UR OF BHARATI TELEVENTURES LTD, ON BEHALF OF M/S GEETA JEWELLERS. HENCE, THE ADDITION OF 3.00,000 IS NOT JUST AND PROPER. LOAN AMOUNT OF 2,00,000 RECEIVED FROM SRI ASHOK KUMAR PRADHAN ON DT: 11.02. 2006 BY A/C PAYEE CHEQUE IN FAVOUR OF B.PRAMOD KUMAR PATIO, PARTNER ON BEHALF OF M/S GEETA JEWELLERS. SRI ASHOK KUMAR PRADHAN HAS GIVEN A CONFIRMATION LETTER AND MENTIONED NO INTEREST IS CHARGED AS THE PAR TNER HAPPENS TO BE MY CLOSE FAMILY FRIEND ALONG WITH BANK STATEMENT. THE ASSESSING OFFICER SIMPLY REJECTED SUCH A GENUINE LOAN WITHOUT ENQUIRY OR CONFRONTATION. HENCE, IT IS UNJUSTIFIED AND ILLEGAL. LOAN AMOUNT OF 1,00,000 RECEIVED FROM SRI BHAGABAN SWAR ON DT:11.02. 2006 BY A/C PAYEE CHEQUE IN FAVOUR OF B.PRAMOD KUMAR PATRO, PARTNER ON BEHALF OF M/S GEETA JEWELLERS. SRI BHAGABAN SWAR HAS GIVEN A CONFIRMATION LETTER AND MENTIONED NO INTEREST IS CHARGED AS THE PARTN ER HAPPEN TO BE HIS FAMILY FRIEND ALONG WITH BANK STATEMENT AND ALSO HE HAS APPEARED AND CONFIRMED THE LOAN BEFORE THE AO . THE ASSESSING OFFICER IS NOT AT ALL JUSTIFIED TO REJECT THE GENUINE LOAN. LOAN AMOUNT OF 2,00,000 RECEIVED FROM SRI RAMA CHANDRA PA NDA ON DT:11.02. 2006 BY A/C PAYEE CHEQUE IN FAVOUR OF B.PRAMOD KUMAR PATR O, PARTNER ON BEHALF OF M/S GEETA JEWELLERS. S RI RAMA CHANDRA PANDA HAS GIVEN A CONFIRMATION LETTER AND MENTIONED NO INTEREST IS CHARGED AS THE PARTNER 5 HAPPEN TO BE HIS FAMILY FRIEND ALONG WITH BANK STATEMENT AND ALSO HE HAS APPEARED AND CONFIRMED THE LOAN BEFORE THE ID. ITO. THE ID. ITO IS NOT AT ALL JUSTIFIED TO REJECT THE GENUINE LOAN. LOAN AMOUNT OF RS.4,00,000/ - RECEIVED FROM SN CH.LOKANATH PATRO ON DT:11 - 02 - 2006 AND DIRECTLY ISS UED A DEMAND DRAFT INFAVOUR OF M/S BHARATI TELEVENTURES LTD. FROM HIS CASH CREDIT ACCOUNT. THE SAID LOAN IS DULY REFLECTED IN CH. LOKANATH PATROS L.T RETURN OF INCOME VIDE ACKNOWLEDGEMENT RECEIPT NO. 3064 DT: 27 - 11 - 2007 FOR THE A.Y: 2006 - 2007. SRI CH. LOK ANATH PATIO HAS GIVEN A CONFIRMATION LETTER AND MENTIONED NO INTEREST IS CHARGED AS THE PARTNER HAPPENS TO BE MY CLOSE RELATIVE. AND ALSO THE COPY OF L.T RETURN SUBMITTED AT THE TIME OF ASSESSMENT OF HEARING. THERE IS NO POINT TO DISBELIEVE AND REJECT SUCH A GENUINE LOAN. LOAN AMOUNT OF 1,00,000 RECEIVED FROM SHRI CH.SADHANA PATRO ON DT.11.02. 2006 AND DIRECTLY ISSUED A DEMAND DRAFT IN FAVOUR OF M/S BHARATI TELEVENTURES LTD. , F ROM HER ACCOUNT. THE SAID LOAN IS DULY REFLECTED IN HER L.T RETURN OF INCOME VID E ACKNOWLEDGEMENT RECEIPT NO . 3063 DT: 27 - 11 - 2007 FOR THE A.Y: 2006 - 2007 . SMT. CH. SADHANA PATR O HAS GIVEN A CONFIRMATION LETTER AND MENTIONED NO INTEREST IS CHARGED AS THE PARTNER HAPPENS TO BE MY CLOSED RELATIVE. AND ALSO THE COPY O F I .T RETURN SUBMITTE D AT THE TIME OF ASSESSMENT OF HEARING. THERE IS NO POINT TO DISBELIEVE AND REJECT SUCH A GENUINE LOAN. LOAN AMOUNT OF 15,00,000 RECEIVED FROM SRI RAJ KISHORE PATRO ON DT. 13 - 02 - 2006 IN FAVOUR OF B.SANDHYA RAN PATRO, PARTNER ON BEHALF OF M/S GEETA JEWELLERS. SRI RAJ KISHORE PATRO HAS GIVEN A CONF IRMATION LETTER AND DULY REFLECTED IN HIS I T RE TURN O F INCOME AND MENTIONED THAT HE IS AN INCOM E TAX ASSESSEE BEARING PAN ABDPP 0707 D AND ASSESSED WITH ASST.COMMISSIONER OF INCOME - TAX , RANGE II, BHUBANESWEAR. THE ASSESSING OFFICER SIMPLY DISBELIEVED THE FACTS WITHOUT ANY ENQUIRY AND REJECTED SUCH A GENUINE LOAN. THE ASSESSEE FI RM DEPOSITED 3,00,000 OUT OF OWN FUND ON DT.13.02.2008 INTO SMT. B SANDHYA 6 RANI PATROS ACCOUNT FOR A LUMP SUM DD IN FAVOUR OF BHARATI TELEVENTURES LTD., ON BEHALF OF M/S.GEETA JEWELLERS. HENCE, THE ADDITION OF 3,00,000 IS NOT JUST AND PROPER. PR 3,00 ,000/ - IS NOT JUST AND PROPER THE ASSESSING OFFICER HAD ENTIRELY DISALLOWED THE TOTAL PURCHASE OF AIRTEL PRODUCTS THOUGH PURCHASED THROUGH DEEMED DIVIDEND OF 57,99,076 , SALE PROCEEDS OF AIRTEL PRODUCTS WORTH 16,96,586, INTRODUCTION OF CAPITAL BY THE PA RTNERS OF 8,00,000 DISALLOWANCE U/S.40A(3) OF 4,800 AND INFLATION ON PURCHASES OF 44,300 ON VAGUE GROUNDS AND ON MERIT OF THIS CASE ALL THE ADDITIONS ON DIFFERENT HEADS SHOULD BE DELETED IN THE INTEREST OF JUSTICE AND EQUITY. 3. THE LEARNED CIT(A) TH EREAFTER DEALT WITH THE INDIVIDUAL ITEMS SEPARATELY WHEN HE CHOSE TO CONSIDER THAT THE INADEQUACY OF EXPLAINING THE SOURCE OF SOURCE OF THE LOAN CREDITORS RESULTED IN REDUCTION OF THE ADDITION TO 26 LAKHS, A SUM OF 4 LAKHS BEING LOAN CREDITORS OF 2 LAKHS EACH, A SUM OF 1 LAKH BEING THE LOAN CREDITOR SHRI R.K.PATRO AND 15 LAKHS WAS THE AMOUNT OF INTRODUCTION OF THE SAID PARTNER WAS ALSO BROUGHT TO TAX, 6 LAKHS HE CONFIRMED ON THE MISINTERPRETATION OF A CASH FLOW WHICH MAY BE PERUSED IN HIS ORDER , WHEN TOTAL SUM OF RECEIPTS BY THE FIRM AMOUNTING TO 1.02 CRORES HAS BEEN HELD AVAILABLE TO THE ASSESSEE AGAINST A SUM OF 96,36,450 ONLY. THIS 6 LAKHS THEREFORE, HE HAS CONSIDERED AS ADDITION WITHOUT INDICATING AS TO HOW LOAN CAN BE TAXED WHEN THE O UTSTANDING BALANCE SHOWN BY THE ASSESSEE AS ON 31.3.2006 WAS 9 LAKHS ONLY. IN OTHER WORDS, THE BALANCES IN THEBANK AND OTHER BALANCE HAS NOT BEEN TAKEN INTO ACCOUNT WHICH WOULD RATHER RESULT IN A SURPLUS TO THE ASSESSEE GIVING A DOUBLE EFFECT OF 12 LA KHS. HE THEREFORE, SUBMITTED THAT THERE WAS NO CASE OF THE AUTHORITIES BELOW TO CONSIDER THE ADDITION U/S.68. HE PRAYED THAT THE ENTIRE AMOUNT OF ADDITION BE DIRECTED TO BE DELETED. 7 4. THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. IT WAS NO T THE CASE OF THE ASSESSING OFFICER TO BRING TO TAX ADDITION U/S.68 INSOFAR AS HE METICULOUSLY CONSIDERED THE INDIVIDUAL TRANSACTIONS OF A NEWLY STARTED FIRM OBTAINING LOA NS TO FURNISH SECURITY OF AIRTE L FOR STOCKING THE SIM CARDS ETC. THE LEARNED CIT(A) T HEREAFTER ON THE BASIS OF INFORMATION AVAILABLE IN THE ASSESSMENT ORDER COMPUTED THE CASH FLOW WHICH RESULTED IN UNEXPLAINED LOAN OF 6 LAKHS OVER AND ABOVE THE REMAINING 20 LAKHS WHICH INCOME WAS NOT EXPLAINED BY THE LOAN CREDITORS IN THEIR BOOKS OF AC COUNT. HE, THEREFORE, SUBMITTED THAT THE ORDERS OF THE AUTHORITIES BELOW BE CONFIRMED TO THE EXTENT THAT THE INDIVIDUAL LOAN CREDITORS ALONG WITH THE AVAILABILITY OF FUNDS AT A PARTICULAR TIME WAS TO BE EXPLAINED IN ITS ENTIRETY BY THE ASSESSEE WHICH WAS M ISSING AND THE RESIDUAL AMOUNT HAS BEEN BROUGHT TO TAX. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES, WE ARE INCLINED TO HOLD THAT THE ADDITION CONFIRMED PARTL Y BY THE LEARNED CIT(A) HAS BEEN WRONGLY COMPUTED. IT WAS NOT THE CASE OF THE ASSESSEE TO OBTAIN LOANS BY WAY OF BEING NAME LENDERS TO THE LOAN CREDITORS WHICH THE LEARNED CIT(A) AND THE ASSESSING OFFICER HAVE TRIED TO SCRUTINIZE. THE AMOUNTS OBTAINED AS L OAN OF 27 LAKHS OUT OF WHICH A SUM OFRS.18LAKHS WAS REFUNDED DURING THE YEAR ITSELF AND ONLY A SUM OF 9 LAKHS WAS OUTSTANDING TO THE LOAN CREDITORS WHEN THE ASSESSEE CHOSE TO BORROW LOAN FROM BANK AMOUNTING TO 10 LAKHS. THE SECURITY FURNISHED ENTITLE D THE ASSESSEE TO OBTAIN STOCK WORTH 34,24,980 WHEN THE DAY TO DAY SALES AND ACCUMULATION OF FUNDS AVAILABLE RESULTED IN REFUND OF LOAN TO THE EXTENT THAT THE ASSESSING OFFICER UNDERTOOK THE EXERCISE OF INDIVIDUAL VERIFYING THE LOAN CREDITORS. HOWEVER, ON THE SPECIFIC REQUISITION BY THE ASSESSING AUTHORITIES THE ASSESSEE WAS ABLE TO FURNISH THE DETAILS VIZ., IDENTITY, GENUINENESS AND 8 CREDITWORTHINESS OF THE LOAN CREDITORS BY SUBMITTING THE BANK ACCOUNT COPY OF THE LOAN CREDITORS AND SQUARED OFF ACCOUNTS ALONG WITH THE LOAN CREDITORS EXISTING ON THE LAST DAY OF THE FINANCIAL YEAR. THE FUNDS THEREFORE WERE AVAILABLE TO THE ASSESSEE TO REFUND A SUM OF 18LAKHS WHICH PARTLY WAS ROUTED THROUGH THE PARTNERS ACCOUNT WHEN THE LOAN WAS OBTAINED AS INTRODUCTION O F CAPITAL BY THE SAID PARTNER. THEREFORE, THE LEARNED CIT(A) ON THE BASIS OF ACTUAL FUND FLOW WAS ABLE TO COME TO THE CONCLUSION THAT THE ADDITION WAS RI PE FOR TAXATION U/S.69 AND NOT U/S.68 WHEN HE CHOSE TO TAX A SUM OF 6 LAKHS AS ASSESSEES INCOME BEIN G A CREDIT REMAINING UNEXPLAINED. WHEN THE ASSESSEE HAS EXPLAINED ALL THE CREDITS BY GIVING THE NAMES AND ALSO HAVE GENERATED SUFFICIENT FUNDS, THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THAT THE ADDITION OF 35 LAKHS BY THE ASSESSING OFFICER HAD NO LEGS TO STAND ON. THE FINANCIAL STATEMENT SUBMITTED BY THE ASSESSEE WAS DULY AUDITED U/S.44AB WHEN THE SQUARED OFF ACCOUNT ALONG WITH THE LOAN OUTSTANDING ARE EXPLAINED. THE TOTAL PURCHASES FROM AIRTAIL THEREFORE OUGHT NOT TO HAVE BEEN MADE AS CONSIDERED BY HI M WHEN THE LEARNED CIT(A) CHOSE TO INCLUDE THE SUM OF 29,18,463 SOLD BY THE ASSESSEE WHEN HE HAS NOT INDICATED THE STOCK OF 34,24,980 IN THE BOOKS OF ACCOUNT. THE FAULTY COMPUTATION OF CASH FLOW OUGHT NOT TO HAVE RESULTED IN CONFIRMING THE ADDITION U/S .68 WHICH WE ARE UNABLE TO SATISFY OURSELVES TOO. THE ASSESSEE HAS REPEATEDLY CLAIMED THAT THE CAPITAL OF ITS PARTNERS ALONG WITH THE INTRODUCTION OF CAPITAL N THE COURSE OF THE ASSESSMENT YEAR DID NOT EXCEED THE AMOUNT WHICH HAS BEEN HELD FOR THE BUSINES S OF THE ASSESSEE WHEN THE BANK HAS GRANTED LOAN AMOUNTED TO 10 LAKHS WERE SUFFICIENT TO TRADE AND GENERATE FUNDS TO REPAY THE LOAN CREDITORS. WHEN THE ACTUAL ENTRIES OF PURCHASE OF DRAFTS AND THE CASH INTRODUCED BY THE LOAN CREDITORS HAVE BEEN ACCEPTED BY THE LOAN CREDITORS WHO ARE ALL I.T. ASSESSEES, THE ONUS STOOD FULLY DISCHARGED BY THE ASSESSEE FOR NOT TO BE 9 TAXED FOR REQUIRING THE EXPLANATION FOR SOURCE OF SOURCE UNDER THE PROVISIONS OF SECTION 68. HONBLE SUPREME COURT IN THE CASE OF CIT V. LOVEL Y EXPORTS P LTD [216 CTR (SC) 195], HELD THAT IF THE CAPITAL INTRODUCTION IS HELD AS BOGUS BY THE ASSESSING OFFICER, THE S AME CANNOT BE ADDED IN THE HANDS OF THE ASSESSEE TILL SUCH TIME THE ASSESSING OFFICER HAS EXHAUSTED HIS REMEDIES TO TAX THE SAME IN TH E HANDS OF THE LOAN CREDITORS ALONE. THE LEARNED COUNSEL FOR THE ASSESSEE HA FILED ALL THE REQUISITE DETAILS OF INCOME - TAX, WEALTH TAX ASSESSMENTS, PAN, BANK ACCOUNTS, AVAILABILITY OF FUNDS WITH THE INDIVIDUALS FOR DEPOSIT IN BANK ETC., THEREFORE, DID NOT REQUIRE FURTHER FORMULATION OF A FUND FLOW STATEMENT TO ARRIVE AT A DEFICIT THAT TOO IN FAVOUR OF THE ASSESSEE. THE REPAYMENTS SHOULD TALLY WITH THE STOCK AVAILABLE TO THE ASSESSEE. FINDING NO INFIRMITY IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSE SSEE, WE ARE INCLINED TO SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND DELETE THE IMPUGNED ADDITION MADE U/S.68 OF THE INCOME - TAX ACT,1961, BY ALLOWING THE APPEAL OF THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. SD/ - SD/ - (K.K.GUPTA) ACCOUNTANT MEMB ER ( K.S.S.PRASAD RAO) JUDICIAL MEMBER DATE: 18 TH NOVEMBER, 2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: M/S.GEETA JEWELLERS, AT: MAIN ROAD, P.O.BHANJANAGAR, DIST. GANJAM 2. THE RESPONDENT: INCOME - TAX OFFICER , PHULBANI 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.