ITO, Gwalior V. Sh. S.P. Jaiswal, Gwalior

ITA 408/AGR/2009

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7691 (ITAT-AGRA)
• Duration Of Justice: 2 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-04-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 24-09-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained cash credit
• Section: 44AD; 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 408/AGRA/2009 ASSTT. YEAR : 2005-06 INCOME-TAX OFFICER, VS. SHRI S.P. JAISWAL, WARD 1(2), GWALIOR. PROP. M/S. S.P. JAISWAL & CO ., JADHAV NAGAR, GWALIOR. (PAN : AEWPJ 6961 P) (APPELLANT) (RESPONDENT) APPELLANT BY : 16.04.2012 RESPONDENT BY : 20.04.2012 DATE OF HEARING : SHRI A.K. SHARMA, JR. DR DATE OF PRONOUNCEMENT OF ORDER : NONE ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), GWALIOR DATED 02.06.2009 FOR THE ASSESSMENT YEAR 20 05-06. 2. WE HAVE HEARD THE LD. DR AND PERUSED THE FINDING S OF THE AUTHORITIES BELOW. THE ASSESSEE IS SERVED THROUGH THE DEPARTMEN T FOR THE DATE OF HEARING. THE SERVICE REPORT IS AVAILABLE ON RECORD. DESPITE SERVE, NONE IS PRESENT ON BEHALF OF THE ASSESSEE. THE APPEAL IS, THEREFORE, P ROCEEDED EXPARTE. ITA NO. 408/AGRA/2009 2 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE IS AN INDIVIDUAL AND FILED RETURN OF INCOME DECLARING LOSS OF RS. (-) 4, 21,560/- AND AGRICULTURAL INCOME ALSO IN MINUS. THE ASSESSEE IS PROPRIETOR OF M/S. S.P. JAISWAL AND COMPANY AND M/S. NEW SAI KRIPA ENTERPRISES, IN WHIC H THE ASSESSEE HAS CLAIMED TO BE THE LABOUR CONTRACTOR AND P.P. CAP CO NSTRUCTION AND SALE. THE CASE WAS SELECTED FOR SCRUTINY AND SEVERAL DETAILS WERE CALLED FOR. THE AO NOTED THAT WITH RESPECT TO M/S. S.P. JAISWAL & CO., SEVERAL DE TAILS AND PRODUCTION OF BOOKS OF ACCOUNT AND BILL/VOUCHERS WERE ASKED FOR BUT DUR ING THE COURSE OF ENQUIRIES, EXCEPT PART REPLY FILED BY THE ASSESSEE, THE QUERIE S RAISED BY THE AO HAVE NOT BEEN EXPLAINED. NO BOOKS OF ACCOUNT, BILLS/VOUCHERS WERE PRODUCED. THE AO NOTED THAT THE ASSESSEE CLAIMED TOTAL RECEIPTS FROM LABOUR CONTRACTS IN A SUM OF RS.46,87,396/-, OUT OF WHICH TOTAL EXPENSES HAVE BE EN CLAIMED IN A SUM OF RS.42,35,380/-. NO COMPARATIVE STATEMENT AND DETAIL S HAVE BEEN PRODUCED. NO DETAILS WERE FURNISHED BEFORE THE AO TO GET THE EXP ENSES VERIFIED. THE AO ALSO NOTED THAT NO AUDIT REPORT U/S. 44AB HAS BEEN FURNI SHED. IN THE BACKGROUND OF THESE FACTS, THE INCOME OF THE ASSESSEE WAS ESTIMAT ED AND EXPENSES WERE ALSO DISALLOWED AND SOME OTHER ADDITIONS WERE ALSO MADE, WHICH REMAINED SUBJECT MATTER OF APPEAL BEFORE THE LD. CIT(A) AND THE LD. CIT(A) DELETED SUBSTANTIAL ADDITIONS MADE BY THE AO. THEREFORE, THE REVENUE PR EFERRED THE PRESENT APPEAL, IN WHICH 15 GROUNDS OF APPEAL HAVE BEEN RAISED CHAL LENGING THE ORDER OF THE LD. ITA NO. 408/AGRA/2009 3 CIT(A) IN DELETING VARIOUS ADDITIONS. NOW, WE TAKE UP EACH GROUND SEPARATELY AS UNDER : 4. ON GROUND NO. 1, THE REVENUE CHALLENGED THE DELE TION OF ADDITION OFRS.2,14,322/- ON ACCOUNT OF INCOME FROM LABOUR CO NTRACT BUSINESS OF M/S. S.P. JAISWAL & CO. THE AO NOTED THAT NO BOOKS OF AC COUNT OF THIS CONCERN AND BILLS/VOUCHERS HAVE BEEN PRODUCED. THE BOOKS OF ACC OUNT ARE NOT AUDITED. THEREFORE, 12% N.P. RATE WAS APPLIED AGAINST GROSS RECEIPTS OF RS.46,87,398/- AND INCOME WAS ESTIMATED AT RS.5,62,488/- AND AFTER DEDUCTING DECLARED PROFIT, ADDITION OF RS.2,14,322/- WAS MADE. IT WAS EXPLAINE D BEFORE THE LD. CIT(A) THAT THE INCOME WAS DECLARED BY APPLYING THE PROFIT RATE OF 8% AS PROVIDED U/S. 44AD OF THE IT ACT AND IN EARLIER YEAR ALSO 8% PROF IT RATE WAS APPLIED BECAUSE THE TURNOVER WAS LESS THAN RS.40 LACS. IT WAS EXPLA INED THAT COMPLETE DETAILS WERE AVAILABLE WITH THE ASSESSEE BUT THE SAME COULD NOT BE PRODUCED BECAUSE THE CA LEFT GWALIOR. IT WAS SUBMITTED THAT IN OTHER CASES ALSO PROFIT RATE OF 8% HAVE BEEN APPLIED AS PER COMPARABLE CASES. THE LD. CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE THAT THOUGH SECTION 44AD WOULD NOT APPLY BECAUSE THE RECEIPTS ARE MORE THAN RS.40 LACS, BUT NO REASO NS HAVE BEEN GIVEN BY THE AO FOR APPLYING THE PROFIT RATE OF 12% AND ACCORDINGLY , DELETED THE ADDITION. ITA NO. 408/AGRA/2009 4 5. ON CONSIDERATION OF THE SUBMISSIONS OF THE LD. D R, WE DO NOT APPROVE THE FINDING OF THE LD. CIT(A) IN DELETING THE ADDITION. THE LD. DR RIGHTLY POINTED OUT THAT BOOKS OF ACCOUNT, BILLS AND VOUCHERS OF M/S. S .P. JAISWAL & CO. WERE NOT PRODUCED BEFORE THE AO FOR EXAMINATION. THEREFORE, THE AO WAS JUSTIFIED IN REJECTING THE BOOK RESULTS OF THE ASSESSEE. EVEN AS PER SUBMISSIONS MADE BEFORE THE LD. CIT(A), THE ASSESSEE ADMITTED THAT COMPLETE DETAILS COULD NOT BE PRODUCED BEFORE THE AO BECAUSE THE C.A. LEFT GWALIO R. THEREFORE, THERE WAS NO REASON FOR THE LD. CIT(A) TO HAVE DELETED THE ENTIR E ADDITION. MAY BE IN EARLIER YEAR, PROFIT RATE WAS SHOWN BY APPLYING 8% AGAINST THE RECEIPTS AS PER SECTION 44AD, BUT IN THE YEAR UNDER APPEAL, THE RECEIPTS AR E MORE THAN RS.40 LACS, THEREFORE, SECTION 44AD WOULD NOT BE APPLICABLE IN THIS CASE, WHICH IS ALSO AFFIRMED BY THE LD. CIT(A). THEREFORE, REASONABLE P ROFIT SHOULD HAVE BEEN ESTIMATED IN THE MATTER INSTEAD OF DELETING THE ENT IRE ADDITION. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT IT WOULD BE REASONABLE TO APPLY NET PROFIT RATE OF 10% AGAINST TOTAL RECEIPTS SHOWN BY THE ASSESSEE FOR THE PURPOSE OF MAKING THE ADDITION. TH E ORDER OF THE LD. CIT(A) IS THEREFORE SET ASIDE AND THE ORDER OF THE AO IS REST ORED WITH THE DIRECTION TO APPLY N.P. RATE OF 10% INSTEAD OF 12% AND AO WILL M AKE NECESSARY ADDITION ACCORDINGLY. IN THE RESULT, GROUND NO. 1 OF THE DEP ARTMENTAL APPEAL IS ALLOWED PARTLY. ITA NO. 408/AGRA/2009 5 6. ON GROUND NO. 2, THE REVENUE CHALLENGED DELETION OF ADDITION OF RS.6,489/- ON ACCOUNT OF DIFFERENCE IN THE BANK ACC OUNT. IT WAS EXPLAINED BEFORE THE LD. CIT(A) THAT THE AO CONSIDERED THE BALANCE I N UTI BANK BILASPUR OF RS.11,489/- IN THE BOOKS OF ASSESSEE AND IN THE BAN K ACCOUNT THE BALANCE IS RS.5000/-. IT WAS EXPLAINED THAT THERE IS NO DIFFER ENCE BECAUSE THE BALANCE OF RS.5000/- IS IN THE ACCOUNT OF UTI BANK BHOPAL AND NOT AT BILASPUR. RECONCILIATION STATEMENT WAS FILED, WHICH EXPLAINED THAT THERE IS NO DIFFERENCE. THE LD. CIT(A) CONSIDERING THE RECONCILIATION STATE MENT AND PERUSAL OF THE BANK ACCOUNT, DELETED THE ADDITION. 7. ON CONSIDERATION OF THE ABOVE FACTS, WE DO NOT F IND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) IN DELET ING THE ADDITION. THIS GROUND OF APPEAL OF THE REVENUE IS, ACCORDINGLY, DISMISSED . 8. ON GROUND NO.3, THE REVENUE CHALLENGED THE DELET ION OF ADDITION OF RS.10,000/- ON ACCOUNT OF UNEXPLAINED DEPOSITS IN B ANK ACCOUNT. THE AO ADDED BEING CASH DEPOSIT OF RS.10,000/- ON 28.06.2004 IN UTI BANK, BILASPUR BECAUSE NO CASH BOOK WAS PRODUCED BEFORE HIM. IT WAS EXPLAI NED BY THE ASSESSEE THAT HE IS ENGAGED IN THE SUPPLY OF LABOUR TO TWO MAJOR CON TRACTEES, NAMELY, AEGIS PVT. LTD. AND OASIS DISTILLERY. THEY HAVE THEIR OFFICES AT DIFFERENT PLACES AND THE ASSESSEE RECEIVED PAYMENT BOTH IN CASH AND CHEQUE A ND OUT OF THE CASH ITA NO. 408/AGRA/2009 6 RECEIVED, THE SAME WERE DEPOSITED IN THE BANK ACCOU NT. THE LD. CIT(A) AFTER CONSIDERING THE MATERIAL ON RECORD, FOUND THAT THE ASSESSEE HAS OBTAINED CASH FROM OASIS DISTILLERS ON 24.06.2004, WHICH IS AVAIL ABLE TO THE ASSESSEE FOR MAKING DEPOSIT IN THE BANK ACCOUNT. ADDITION WAS AC CORDINGLY DELETED. 9. ON CONSIDERATION OF THE SUBMISSIONS OF THE LD. D R, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD . CIT(A). THE LD. CIT(A) ON FACTUAL VERIFICATION OF THE FACTS OF RECEIPT OF MON EY FROM OASIS DISTILLERY PRIOR TO DEPOSIT IN THE BANK RIGHTLY DELETED THE ADDITION . THE LD. DR SUBMITTED THAT THE BOOKS OF ACCOUNT WERE NOT PRODUCED. THEREFORE, THE LD. CIT(A) SHOULD NOT HAVE DELETED THE ADDITION. HOWEVER, THE EVIDENCE CONSIDE RED BY THE LD. CIT(A) HAS NOT BEEN REBUTTED THROUGH ANY EVIDENCE ON RECORD. T HEREFORE, THIS GROUND OF APPEAL OF THE REVENUE HAS NO MERITS AND IS, ACCORDI NGLY, DISMISSED. 10. ON GROUND NO. 4 & 5, THE REVENUE CHALLENGED THE DELETION OF ADDITION OF RS.91,500/- ON ACCOUNT OF SALARIES PAID TO THE EMPL OYEES AND IN DELETING THE ADDITION OF RS.61,500/- ON ACCOUNT OF HRA PAID TO T HE EMPLOYEES. THE AO MADE ADDITION OF RS.91,500/- BY DISALLOWING SALARY AND RS.61,500/- WERE DISALLOWED ON ACCOUNT OF 100% OF HRA PAID. IT WAS E XPLAINED BEFORE THE LD. CIT(A) THAT SALARY AND HRA HAVE BEEN PAID TO THE EM PLOYEES AND THE AO DISALLOWED THE SAME BECAUSE THERE WAS DIFFERENCE IN THE SIGNATURE IN SALARY ITA NO. 408/AGRA/2009 7 REGISTER. FURTHER, THE AO WANTED THAT SHRI DILIP SI NGH AND SHRI K.K. MALVIYA BE PRODUCED FOR EXAMINATION, BUT THEY HAD LEFT THE SER VICE OF THE ASSESSEE LONG BACK. IT WAS FURTHER EXPLAINED THAT THE SALARY WAS COMPARED WITH THE EARLIER YEAR AND THE ADDITION WAS MADE WITHOUT ANY JUSTIFICATION . THE ASSESSEE FURNISHED COMPLETE LIST OF EMPLOYEES AS WELL AS NEW EMPLOYEES AND EXPLAINED THAT SALARY AND HRA HAVE BEEN PAID FOR THE PURPOSE OF BUSINESS. THE ASSESSEE FILED COMPARATIVE STATEMENT OF MANUFACTURING EXPENSES AND ADMINISTRATIVE EXPENSES TO SHOW THAT THE SALARY AND HRA HAVE BEEN PAID IN E ARLIER YEAR AS WELL. IT WAS, THEREFORE, CLAIMED THAT THE AO WAS NOT JUSTIFIED IN HOLDING THAT THE HRA WAS NOT CLAIMED IN EARLIER YEAR. THE LD. CIT(A) CONSIDE RING THE DETAILS OF THE EMPLOYEES AND SALARY & HRA PAID TO THE EMPLOYEES, F OUND THAT THESE EXPENSES HAVE BEEN PAID FOR THE BUSINESS PURPOSE AND, THEREF ORE, ALLOWABLE DEDUCTION. ADDITIONS WERE, ACCORDINGLY, DELETED. 11. ON CONSIDERATION OF THE ABOVE FACTS, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) IN DELET ING BOTH THE ADDITIONS. THE LD. DR SUBMITTED THAT EXCESSIVE CLAIM IS MADE AND NO DE TAILS WERE FURNISHED BEFORE THE AO. THEREFORE, THE LD. CIT(A) SHOULD NOT HAVE D ELETED THE ADDITION. HOWEVER, EXPLANATION OF THE ASSESSEE CLEARLY PROVED THAT THE SAME EXPENSES WERE ALSO INCURRED IN EARLIER YEARS AND THE DETAILS FURNISHED BY THE ASSESSEE SUPPORT THE FINDING OF THE LD. CIT(A). IN THE ABSEN CE OF ANY CONTRARY MATERIAL ON ITA NO. 408/AGRA/2009 8 RECORD, NO INTERFERENCE IS CALLED FOR IN THE MATTER . GROUNDS NOS. 4 & 5 OF THE APPEAL OF THE REVENUE ARE, ACCORDINGLY, DISMISSED. 12. ON GROUND NO.6, THE REVENUE CHALLENGED THE DELE TION OF ADDITION OF RS.30,044/- ON ACCOUNT OF EMPLOYEES WELFARE. THE A O DISALLOWED THESE EXPENSES OUT OF STAFF WELFARE, MEDICAL AND CONVEYAN CE BECAUSE OF NON- AVAILABILITY OF THE VOUCHERS AND COMPARATIVE DETAIL S OF THE EARLIER YEARS. IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT ALL THE EXPENS ES ARE ALLOWABLE, THEREFORE, THE DISALLOWANCE OF THE SAME SHOULD BE DELETED. THE LD. CIT(A) RESTRICTED THE ADDITION TO RS.5,000/- AND DELETED THE REMAINING AD DITION. THE LD. DR RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT THE EXP ENDITURES WERE NOT FULLY VERIFIABLE AND THE ASSESSEE PRODUCED VOUCHERS OF RS .1233/-. THEREFORE, THE ADDITION IS JUSTIFIED. HOWEVER, WE DO NOT AGREE WIT H THE SUBMISSIONS OF THE LD. DR BECAUSE THE BOOKS OF ACCOUNT OF THE ASSESSEE HAV E BEEN REJECTED AND PROFIT RATE HAS BEEN APPLIED. SINCE THE ADDITION HAS BEEN MADE ON ACCOUNT OF HIGHER PROFIT RATE, THEREFORE, THERE IS NO NEED TO MAKE SE PARATE ADDITION AFTER DISALLOWING THE EXPENDITURE. THIS GROUND OF APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. 13. ON GROUND NO. 7, THE REVENUE CHALLENGED THE DEL ETION OF ADDITION OF RS.29,710/- OUT OF MACHINERY MAINTENANCE. THE ASSES SEE FILED COMPLETE DETAILS ITA NO. 408/AGRA/2009 9 AND COPIES OF THE VOUCHERS BEFORE THE LD. CIT(A) WH ICH WERE FILED BEFORE THE AO AND THE LD. CIT(A) CONSIDERING THE EXPLANATION O F THE ASSESSEE AND THAT THE AO HAS NOT GIVEN ANY SPECIFIC REASON FOR MAKING THE DISALLOWANCE, DELETED THE ADDITION. 14. ON CONSIDERATION OF THE SUBMISSION OF THE LD. D R, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD . CIT(A). THE LD. DR SUBMITTED THAT ADDITION WAS MADE BECAUSE NO COMPARATIVE STATE MENT WAS AVAILABLE. THE LD. CIT(A) ON PROPER VERIFICATION OF THE FACTS AND VOUCHERS RIGHTLY DELETED THE ADDITION. THE ADDITION CANNOT BE MADE MERELY COMPAR ING THE EXPENSES WITH EARLIER YEARS WITHOUT POINTING OUT ANY INADMISSIBLE EXPENDITURE. THIS GROUND IS, ACCORDINGLY, DISMISSED. 15. ON GROUND NO. 8, THE REVENUE CHALLENGED THE DEL ETION OF ADDITION OF RS.50,848/- ON ACCOUNT OF REBATE AND DISCOUNT. THE ASSESSEE FURNISHED COMPLETE DETAILS OF REBATE AND DISCOUNT BEFORE THE LD. CIT(A ) TO SHOW THAT IT WAS A BUSINESS POLICY OF TRADE AND THE BUYERS THEMSELVES HAVE DEDUCTED THE PAYMENT OUT OF THE BILLS. THE LD. CIT(A) ON EXAMINATION OF THE COMPLETE DETAILS FROM THE PURCHASE BILLS, DELETED THE ADDITION. WE, THEREFORE , DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) IN DE LETING THE ADDITION. THIS GROUND IS, ACCORDINGLY, DISMISSED. ITA NO. 408/AGRA/2009 10 16. ON GROUND NO. 9, THE REVENUE CHALLENGED THE DEL ETION OF ADDITION OF RS.5,525/- ON ACCOUNT OF LEGAL EXPENSES. THE AO DIS ALLOWED LEGAL EXPENSES BECAUSE NO SUCH CLAIM WAS MADE IN EARLIER YEAR. THE AO ALSO NOTED THAT IT WAS NOT EXPLAINED AS TO FOR WHAT PURPOSE, THE PAYMENT W AS MADE. IT WAS EXPLAINED THAT THE LEGAL EXPENSES WERE PAID TO SALES TAX ADVO CATE AND FOR EXPENDITURE INCURRED AT THE DEPARTMENT OF WEIGHTS AND MEASURES. THESE EXPENSES WERE FOUND TO BE RELATING TO THE BUSINESS ACTIVITIES OF THE ASSESSEE AND THE LD. CIT(A), ACCORDINGLY, DELETED THE ADDITION. SINCE LEGAL EXPE NSES HAVE BEEN PAID FOR SMOOTH RUNNING OF THE BUSINESS, THEREFORE, SUCH EXP ENSES ARE ALLOWABLE DEDUCTION. ACCORDINGLY, THERE IS NO MERIT IN THIS G ROUND OF APPEAL OF THE REVENUE. THE SAME IS, ACCORDINGLY, DISMISSED. 17. ON GROUND NO. 10, THE REVENUE CHALLENGED THE DE LETION OF ADDITION OF RS.50,100/- PAID ON ACCOUNT OF RENT. IT WAS CLAIMED THAT RENT WAS PAID FOR THE FACTORY PREMISES WHICH WERE TAKEN ON RENT. IN LAST YEAR ALSO RENT WAS PAID. THE LD. CIT(A) ON VERIFICATION OF THE FACTS, DELETED TH E ADDITION. ON CONSIDERATION OF THE ABOVE FACTS, WE DO NOT FIND ANY MERIT IN THIS G ROUND OF APPEAL OF THE REVENUE BECAUSE THE FACTORY RENT PAID IS BUSINESS E XPENDITURE AND HAS BEEN RIGHTLY ALLOWED AS DEDUCTION. THE LD. CIT(A) NOTED THAT SINCE LAST YEAR ALSO THE RENT PAYMENT OF RS.63,000/- WAS MADE AND EVEN IF NO THING IS PRODUCED BEFORE THE AO, THE DEDUCTION SHOULD HAVE BEEN ALLOWED ON T HE BASIS OF THE LAST YEARS ITA NO. 408/AGRA/2009 11 PAYMENT. ADDITION WAS, THEREFORE, RESTRICTED TO RS. 4,300/-, I.E., DIFFERENCE BETWEEN THIS YEARS CLAIM AND LAST YEARS PAYMENT. WE, THEREFORE, DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. THE SAME IS, ACCORDINGLY, DISMISSED. 18. ON GROUND NO. 11, THE REVENUE CHALLENGED THE DE LETION OF ADDITION OF RS.14,330/- ON ACCOUNT OF TRAVELING EXPENSES. THE A O DISALLOWED TRAVELING EXPENSES BECAUSE NO SUCH CLAIM WAS MADE IN EARLIER YEAR. THE LD. CIT(A) ON EXAMINATION OF THE COMPLETE DETAILS OF THE TRAVELIN G EXPENSES, DELETED PART OF THE ADDITION. WE, THEREFORE, DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. THE SAME IS ACCORDINGLY DISMISSED. 19. ON GROUND NO. 12 & 13, THE REVENUE CHALLENGED T HE DELETION OF ADDITION OF RS.47,080/- ON ACCOUNT OF VALUATION OF CLOSING S TOCK OF P.P. CAPS (25 MM.) AND DELETION OF ADDITION OF RS.21,417/- ON ACCOUNT OF VALUATION OF CLOSING STOCK OF P.P. CAPS (28 MM.). THE REASONS FOR INCREASING T HE VALUE OF CLOSING STOCK FOR ABOVE ITEM, AS ARGUED BEFORE THE LD. CIT(A), WAS TH AT THE AO HAS ADOPTED SELLING PRICE FOR VALUATION WHEREAS THE ASSESSEE HA S ADOPTED PRICE AT COST. COMPLETE DETAILS WERE FURNISHED BEFORE THE AUTHORIT IES BELOW. THE ASSESSEE EXPLAINED THAT METHOD OF VALUATION OF CLOSING STOCK WAS A LOWER OF COST OR MARKET VALUE, WHICHEVER IS LESS. THEREFORE, SELLING PRICE ADOPTED BY THE AO WAS ITA NO. 408/AGRA/2009 12 NOT JUSTIFIED. THE LD. CIT(A) CONSIDERING THE EXPLA NATION OF THE ASSESSEE, DELETED THE ADDITION. 20. ON CONSIDERATION OF THE ABOVE FACTS, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). THE LAW IS SETTLED THAT THE CLOSING STOCK HAS TO BE VALUED AT COST OR MARKET VALUE WHIC HEVER IS LESS. THE LD. CIT(A) ON PROPER APPRECIATION OF FACTS AND LAW RIGHTLY DEL ETED THE ADDITION. THESE GROUNDS HAVE NO MERIT AND ARE, ACCORDINGLY, DISMISS ED. 21. ON GROUND NO. 14, THE REVENUE CHALLENGED THE DE LETION OF ADDITION OF RS.86,668/- ON ACCOUNT OF UNEXPLAINED CAPITAL. THE AO NOTED THAT THERE WAS A INCREASE IN THE CAPITAL OF RS.2,13,496/-. THE EXPLA NATION OF THE ASSESSEE WAS CALLED FOR AND THE ASSESSEE EXPLAINED THE DETAILS B EFORE THE AO BUT THE AO WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND ADDITION WAS, ACCORDINGLY, MADE. IT WAS EXPLAINED BEFORE THE LD. CIT(A) THAT THE AO HAS NOT CONSIDERED THE WITHDRAWALS MADE BY THE ASSESSEE FROM M/S. S.P. JAISWAL & CO. AND MADE ADDITION MAINLY DENYING WITHDRAWALS FROM M/S. S.P. JAISWAL &CO. AND DEPOSIT MADE IN NEW SAI KRIPA ENTERPRISES. IT WAS EXPLAINED THAT THE WITHDRAWALS WERE MADE FROM ONE PROPRIETARY CONCERN, NAMELY, S.P. JAI SWAL & CO. AND WERE DEPOSITED IN ANOTHER PROPRIETARY CONCERN, M/S. NEW SAI KRIPA ENTERPRISES. THE DETAILS ARE ALSO MENTIONED IN THE APPELLATE ORDER A ND THE LD. CIT(A) ON GOING ITA NO. 408/AGRA/2009 13 THROUGH THE DETAILS AND FURTHER WITHDRAWALS MADE BY THE ASSESSEE FROM AEGIS BEVERAGES PVT. LTD., FOUND THAT THE INTRODUCTION OF CAPITAL IS EXPLAINED AND ACCORDINGLY, THE ADDITION IS DELETED. 22. ON CONSIDERATION OF THE SUBMISSIONS OF THE LD. DR, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. THE ASSESSEE EXPLAINED THAT THE WITHDRAWALS HAVE BEEN MADE FROM ONE CONCERN AND DEP OSITED IN ANOTHER CONCERN AND FURTHER WITHDRAWALS HAVE BEEN MADE FROM TWO OF THE BUYERS, M/S. OASIS DISTILLERY AND AEGIS BEVERAGES PVT. LTD. THES E DETAILS HAVE BEEN INCORPORATED IN THE APPELLATE ORDER WHICH HAVE NOT BEEN REBUTTED THROUGH ANY EVIDENCE OR MATERIAL ON RECORD. IN THE ABSENCE OF A NY CONTRARY MATERIAL, WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). WE CONFIRM HIS FINDING AND DISMISS THIS GROUND OF APPEAL OF THE RE VENUE. 23. ON GROUND NO. 15, THE REVENUE CHALLENGED THE DE LETION OF ADDITION OF RS.18,000/- ON ACCOUNT OF UNEXPLAINED CASH CREDITS. A SUM OF RS.18,000/- WAS FOUND CREDITED IN CASH IN THE NAME OF SHRI VINOD JA ISWAL ON 05.04.2004. THE REASON MENTIONED BY THE AO FOR MAKING ADDITION WAS THAT THE ASSESSEE DID NOT PRODUCE THE CREDITOR BEFORE HIM FOR EXAMINATION. ON THE CONTRARY, THE ASSESSEE FILED PAPERS OF FILING RETURN OF INCOME, AFFIDAVIT FOR CONFIRMING THE LOAN. IT WAS STATED THAT IT WAS A CASH ENTRY, THEREFORE, PRODUCT ION OF THE BANK ACCOUNT WAS NOT ITA NO. 408/AGRA/2009 14 RELEVANT. THE ASSESSEE RELIED UPON THE DECISION IN THE CASE OF MEHTA PARIKH & COMPANY AND EXPLAINED THAT THE ASSESSEE PROVED IDEN TITY OF THE CREDITOR, HIS CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION . THE LD. CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE BECAUSE THE DEPOSITO R WAS ASSESSED TO TAX AND FILED RETURN OF INCOME AND THEREFORE, DELETED THE A DDITION. 24. THE LD. DR RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT THE BURDEN IS UPON THE ASSESSEE TO PROVE THE IDENTITY OF THE C REDITOR, HIS CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION IN THE MATTER. T HE ASSESSEE MERELY PRODUCED CONFIRMATION LETTER BUT NO BANK ACCOUNT WAS PRODUCE D AND EVEN THE CREDITOR WAS NOT PRODUCED FOR EXAMINATION BEFORE THE AO. SINCE I T WAS A CASH LOAN, THEREFORE, PRODUCTION OF THE CREDITOR WAS NECESSARY FOR EXAMINATION BEFORE THE AO. THE ASSESSEE HAS PRODUCED COPY OF INCOME-TAX RE TURN OF THE CREDITOR FOR SUBSEQUENT ASSESSMENT YEAR 2006-07 AND NO CAPITAL A CCOUNT OR STATEMENT OF AFFAIRS OF THE CREDITOR WAS FILED. NO SOURCE OF INC OME OR CREDIT WAS EXPLAINED EVEN IN THE AFFIDAVIT OF THE CREDITOR. THEREFORE, T HE ASSESSEE FAILED TO DISCHARGE THE ONUS UPON HIM TO PROVE THE GENUINE CREDIT IN TH E MATTER. THE LD. DR SUBMITTED THAT THE LD. CIT(A) WAS, THEREFORE, NOT J USTIFIED IN DELETING THE ADDITION. ITA NO. 408/AGRA/2009 15 25. ON CONSIDERATION OF THE SUBMISSIONS OF THE LD. DR AND PERUSAL OF THE FINDINGS OF THE AUTHORITIES, WE DO NOT FIND ANY JUS TIFICATION FOR THE LD. CIT(A) TO DELETE THE ADDITION IT IS WELL SETTLED LAW THAT IN ORDER TO PROVE THE GENUINE CASH CREDIT U/S. 68 OF THE IT ACT, THE BURDEN IS UPON TH E ASSESSEE TO PROVE IDENTITY OF THE CREDITOR, HIS CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION IN THE MATTER. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF BHARATI PVT. LTD. VS CIT, 111 ITR 951 HELD AS UNDER: IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE INCOM E-TAX OFFICER FOUND THAT THE ASSESSEE HAD SHOWN RS.20,000 AS LOAN IN ITS BOOKS TAKEN FROM TWO PARTIES. THE ASSESSEE PRODUCED THE ALLEGED CONFIRMATORY LETTERS FROM THOSE PARTIES BEFORE THE INCOME-TAX OFFICER IN SUPPORT OF THE TWO LOANS. THE INCOME-TAX OFFICER SERVED NOTICES UNDER SECTION 131 OF THE INCOME TAX ACT, 1 961, ON THE ALLEGED CREDITORS AND SINCE THOSE NOTICES CAME BACK UNSERVED, THE INCOME-TAX OFFICER TREATED THE LOAN AS ASSESSEES I NCOME FROM UNDISCLOSED SOURCES. THE APPELLATE ASSISTANT COMMIS SIONER DISMISSED THE ASSESSEES APPEAL ON THE GROUND THAT THE ASSESSEE COULD NOT EVEN ESTABLISH THE IDENTITY OF THE PARTIE S. ON FURTHER APPEAL BY THE ASSESSEE, THE APPELLATE TRIBUNAL HELD THAT MERE FILING OF CONFIRMATORY LETTERS DID NOT DISCHARGE THE ONUS THAT LAY ON THE ASSESSEE AND THERE WAS NO MATERIAL ON THE RECORD TO ESTABLISH THE IDENTITY OF THE CREDITORS: HELD, THAT THE TRIBUNAL HAD TAKEN ALL THE RELEVANT FACTS INTO CONSIDERATION AND THE CONCLUSION ARRIVED AT BY THE TRIBUNAL THAT THE LOANS REPRESENTED THE ASSESSEES INCOME FROM UN DISCLOSED SOURCES WAS NOT PERVERSE OR UNREASONABLE. 25.1 THE HONBLE CALCUTTA HIGH COURT IN THE CASE O F CIT VS UNITED COMMERCIAL AND INDUSTRIAL CO. (P) LTD., 187 ITR 596 HELD AS UNDER: THE PRIMARY ONUS LIES ON THE ASSESSEE TO PROVE THE NATURE AND SOURCE OF CREDITS IN ITS ACCOUNT. IT IS NECESSA RY FOR THE ASSESSEE ITA NO. 408/AGRA/2009 16 TO PROVE PRIMA FACIE THE IDENTITY OF HIS CREDITORS, THE CAPACITY OF SUCH CREDITORS TO ADVANCE THE MONEY AND LASTLY THE GENUINENESS OF THE TRANSACTIONS. ONLY WHEN THESE THINGS ARE PROVED BY THE ASSESSEE PRIMA FACIE AND ONLY AFTER THE ASSESSEE HA S ADDUCED EVIDENCE TO ESTABLISH THE AFORESAID FACTS DOES THE ONUS SHIFT ON TO THE DEPARTMENT. IT IS NOT ENOUGH TO ESTABLISH THE I DENTITY OF THE CREDITORS. MERE PRODUCTION OF THE CONFIRMATION LETT ERS BEFORE THE INCOME-TAX OFFICER WOULD NOT BY ITSELF PROVE THAT T HE LOANS HAVE BEEN OBTAINED FROM THOSE LOAN CREDITORS OR THAT THE Y HAVE CREDIT- WORTHINESS. HELD, THAT, IN THE INSTANT CASE, THE TRIBUNAL MISDI RECTED ITSELF IN HOLDING THAT THE TRANSACTIONS WERE GENUINE SIMPL Y BECAUSE SOME OF THE TRANSACTIONS WERE MADE BY CHEQUES. THE ASSES SEE HAD FAILED TO PROVE THE CREDIT-WORTHINESS OF THE ALLEGED LENDE RS. A NUMBER OF OTHER ASSESSEES HAD ALSO ADMITTED THAT LOANS OBTAIN ED FROM THESE BANKERS AGAINST HUNDIS WERE NOT GENUINE AND SUCH HU NDI LOANS REALLY REPRESENTED THEIR OWN CONCEALED INCOME. THE ASSESSEE HAD NOT DISCHARGED ITS BURDEN OF PROVING THAT THE LOANS IN QUESTION WERE GENUINE. 25.2 THE HONBLE CALCUTTA HIGH COURT IN THE CASE O F M/S. PRECISION FINANCE PVT. LTD., 208 ITR 465 HELD THAT EVEN THE LOAN THROUGH BANK CANNOT BE ACCEPTED AS GENUINE UNLESS THE IDENTITY AND CREDITW ORTHINESS OF THE CREDITORS ARE PROVED. MERE PAYMENT OF ACCOUNT PAYEE CHEQUE IS NOT SACROSANCT NOR CAN IT MAKE A NON-GENUINE TRANSACTION GENUINE. 26. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF ABOVE DECISIONS, WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN D ELETING THE ADDITION. IT IS ADMITTED FACT THAT THE ASSESSEE OBTAINED CASH LOAN FROM SHRI VINOD JAISWAL. THE ASSESSEE ONLY PRODUCED CONFIRMATION LETTER BEFORE T HE AO. SINCE IT WAS A CASH LOAN AND COPY OF THE BANK ACCOUNT OF THE CREDITOR A ND INCOME-TAX RETURN FOR THE ITA NO. 408/AGRA/2009 17 ASSESSMENT YEAR UNDER APPEAL WAS NOT FILED BEFORE T HE AO, THEREFORE, THE AO WAS JUSTIFIED IN INSISTING FOR PRODUCTION OF THE CR EDITOR FOR EXAMINATION IN ORDER TO FIND OUT THE TRUTH IN THE MATTER. THE ASSESSEE H AS NOT GIVEN ANY REASON AS TO WHY THE CREDITOR WAS NOT PRODUCED BEFORE THE AO FOR EXAMINATION. COPY OF IT RETURN OF THE CREDITOR FOR SUBSEQUENT YEAR WAS FILE D, BUT IT WAS ALSO NOT SUPPORTED BY ANY CAPITAL ACCOUNT AND HIS STATEMENT OF AFFAIRS. COPY OF HIS BANK ACCOUNT WAS NOT FILED TO PROVE HIS CREDITWORTHINESS . EVEN IN THE AFFIDAVIT OF THE CREDITOR, SOURCE OF INCOME AND SOURCE OF LOAN WAS N OT EXPLAINED. THE LD. CIT(A), HOWEVER, NOTED THAT SINCE IT WAS A CASH LOA N, THEREFORE, FILING OF BANK STATEMENT WAS NOT RELEVANT. THE FINDING OF THE LD. CIT(A) IS NOT JUSTIFIED BECAUSE EVEN IF THE LOAN WAS THROUGH CASH ENTRY, BUT THE BA NK ACCOUNT WOULD HAVE THROWN LIGHT ON THE CREDITWORTHINESS OF THE CREDITO R AND GENUINENESS OF THE TRANSACTION IN THE MATTER. THE LD. CIT(A) ALSO HELD THAT DENIAL OF AFFIDAVIT OF THE DEPOSITOR WITHOUT RECORDING HIS STATEMENT IS NOT AS PER DECISION OF HONBLE SUPREME COURT IN THE CASE OF MEHTA PARIKH & CO. TH E LD. CIT(A) FAILED TO NOTE THAT THE AO WANTED TO EXAMINE THE DEPOSITOR ON OATH IN ORDER TO FIND OUT TRUTH IN THE MATTER AND THE STATEMENT CONTAINED IN THE AFFID AVIT, BUT THE ASSESSEE FAILED TO PRODUCE THE CREDITOR FOR HIS EXAMINATION. NO REASON S HAVE BEEN GIVEN FOR FAILURE OF PRODUCTION OF THE CREDITOR BEFORE THE AO. THEREF ORE, SUCH A FINDING OF THE LD. CIT(A) IS NOT BASED ON PRINCIPLE OF LAW AND CANNOT BE APPROVED BECAUSE THE ASSESSEE FAILED TO PRODUCE THE CREDITOR BEFORE THE AO FOR EXAMINATION. SINCE ITA NO. 408/AGRA/2009 18 ONLY CONFIRMATION LETTER IS PRODUCED AND QUERIES OF THE AO HAVE NOT BEEN SATISFIED, THEREFORE, THE AO WAS JUSTIFIED IN HOLDI NG THAT THE CASH CREDIT REMAINED UNEXPLAINED TO HIS SATISFACTION. THE ASSES SEE HAS, THUS, FAILED TO PROVE THE CREDITWORTHINESS OF THE CREDITOR AND GENUINENES S OF THE TRANSACTION. MERELY BECAUSE THE LOAN WAS PAID SUBSEQUENTLY IN THE SAME YEAR, WOULD NOT MAKE THE NON-GENUINE TRANSACTION AS GENUINE TRANSACTION. CON SIDERING THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT THE LD. CIT(A) ON WRONG ASSUMPTION OF FACTS AND IMPROPER APPRECIATION OF FACTS WRONGLY DELETED THE ADDITION. WE ACCORDINGLY SET ASIDE THE ORDER OF THE LD. CIT(A) A ND RESTORE THE ORDER OF THE AO. IN THE RESULT, GROUND NO. 15 OF THE APPEAL OF T HE REVENUE IS ALLOWED. NO OTHER POINT IS ARGUED OR PRESSED. 27. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY