M/s. Gupteshwar Cotton Company (Firm), Sendhwa V. ITO Sendhwa, Sendhwa

ITA 867/Ind/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 9580 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Appeal Filed On: 11-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 147; 131; 68; 69C; 143(3); 143(2); 13; 22; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE (CONDUCTED THROUGH VIRTUAL COURT) BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI MANISH BORAD, ACCOUNTANT MEMBER I. T. A . N o. 867/ I nd/ 20 19 ( A s s e ss me nt Y e a r: 20 15 - 16 ) M / s . G u pt es h w a r C o tt on Co mp an y (F i r m) 04, J aw a ha r G an j S e nd hw a , D i s t ri c t Ba rw a n i ( M . P . ) V s.ITO S e nd hw a P A N N o. A AK F G 409 8G (Appellant) . . (Respondent) Appellant by : Shri Ram Gilda, Adv. Respondent by : Shri Amit Soni, Sr. DR Date of Hearing : 11.01.2022 Date of Pronouncement : 28 .01.2022 O R D E R PER MAHAVIR PRASAD - JM: 1. This is an appeal by assessee against the order of CIT(A)-II, Indore dated 30.07.2019 in Appeal No. IT-10610/17-18/139, arising out of the assessment-order dated 29.12.2017 for Assessment Year 2015-16. 2. The assessee has taken following Grounds: “1. That the proposal and sanction of scrutiny assessment u/s 143(3) is illegal, wrong and bad-in-law. 2. That assessment order passed u/s 143(3) is illegal, wrong and without jurisdiction and authority of law. 3. That the addition made of Rs. 15,12,353/- u/s 68 of the Act is also illegal, wrong and bad-in-law. 4. That the assessing officer is also illegal and wrong in making addition of Rs. 5,00,000/- of the Act. ITA No. 867/Ind/2019 A.Y. 2015-16 2 5. That the addition of Rs. 2,72,948/- u/s 69C of the Act is illegal, wrong and bad-in-law. 6. That the addition of Rs. 14,69,623/- u/s 69C of the Act is illegal, wrong and bad-in-law. 7. That the disallowance of interest of Rs. 2,68,225/- is illegal, wrong and bad-in-law. 8. That the disallowance of interest of Rs. 1,20,000/- is illegal, wrong and bad-in-law. 9. That the addition of Rs. 1,00,000/- of interest u/s 69C of the Act is illegal, wrong and bad-in-law. 10. That the appellant firm craves leave to add, alter, amend and / or withdraw any ground of appeal on or before the hearing of appeal.” 3. Precisely stated the facts are such that the assessee is a firm engaged in the business of ginning, pressing and trading of cotton and cotton seed, etc. The assessee submitted return on 22.09.2015 declaring a total income of Rs. Nil. The Ld. AO selected case for manual-scrutiny vide notice u/s 143(2) dated 31.08.2016 and completed assessment u/s 143(3) on 29.12.2017 at a total income of Rs. 42,43,150/- after making various additions. Against the order of Ld. AO, the assessee filed appeal to Ld. CIT(A) who allowed part-relief. Still being aggrieved by the order of Ld. CIT(A), the assessee has filed this appeal and now before us. With this background, we proceed to decide all grounds one by one. 4. Ground No. 1 and 2 – Challenge to the scrutiny assessment u/s 143(3): 4.1 In Ground No. 1 and 2, the assessee has submitted that the proposal and sanction of scrutiny assessment u/s 143(3) as well as the assessment-order passed u/s 143(3) are illegal, wrong and bad-in-law. 4.2 At the outset it is noteworthy that the assessee has participated in the scrutiny proceedings without raising any such challenge or objection before Ld. AO. In first appeal proceeding, the assessee raised exactly same Grounds as Ground No. 1 and 2.However, the Ld. CIT(A)dismissed those Grounds with the reasoning that they are general in nature and do not require any adjudication. Before us, the Ld. A.R. made lengthy submissions on these Grounds. The Ld. D.R. too, without demonstrating any objection, made substantial submissions. As the Grounds are legal, go to the root, ITA No. 867/Ind/2019 A.Y. 2015-16 3 not general in nature and also there is no objection from opposite side, we proceed to decide the same. 4.3 The facts qua these Grounds are such that the Ld. AO received letter No. 526 dated 27.06.2016 from the office of DCIT (Central)-1, Indore containing an information that a search had been conducted at the premises of Shri Hemant Kumar Jain and family members wherein it was found that Shri Hemant Kumar Jain and family members were engaged in cash-loans given and taken by various parties through them. Evidences in the form of letter dated 27.05.2014 and cheque No. 237053 belonging to the assessee, were also found during search, which demonstrated that the assessee had taken a loan of Rs. 10,00,000/- through Shri Hemant Jain, from one Shri Prashant Pahadia. The Ld. DCIT(Central)-1 also formed a view that the assessee would have paid an interest on this loan @ 12-18% per annum and such interest expenditure would have not been accounted for by the assessee since it was a cash loan. Therefore Ld. DCIT(Central)-1 informed the Ld. AO to take action against the assessee and make addition of unaccounted interest expenditure for AY 2015-16. Based on this information, the Ld. AO sent his letter dated 09.08.2016 to Ld. PCIT-2, Indore (Referred here-in-after as “Ld. PCIT”) seeking approval for manual-selection of scrutiny. In response thereto, the PCIT conveyed his approval vide letter dated 31.08.2016. 4.4 Before us, the Ld. A.R. presented made submission to demonstrate that the action u/s 143(2) as well as order u/s 143(3) are illegal. Per contra, the Ld. D.R. made submissions to rebut the same. We have given a careful consideration to submissions made by both sides as under: (i) Firstly, the Ld. A.R. submitted that vide letter dated 09.08.2016, the Ld. AO sought approval from Ld. PCIT for manual selection of two assessees, viz. (a) the assessee-appellant and (b) one more person named M/s Agarwal Oil Products, on the exactly same nature of transactions (the only difference being in amounts), yet it appears from the letter of Ld. PCIT dated 31/08/2016 that the approval has been given only in case of assessee and not in case of M/s Agarwal Oil Products. According to Ld. A.R., if the approval was not given in M/s Agarwal Oil Products, the assessee also deserved the same treatment. We feel this claim of assessee is not correct. It is true that the letter of Ld. PCIT dated 31/08/2016 conveys approval only ITA No. 867/Ind/2019 A.Y. 2015-16 4 for assessee, but from this letter it cannot be conclusively decided that the Ld. PCIT has not given approval in case of M/s Agarwal Oil Products. It is quite possible that the Ld. PCIT has prepared two separate letters, one aforesaid letter dated 31/08/2016 giving approval in case of assessee and one other letter giving approval in case of M/s Agarwal Oil Products. Even the Ld. A.R. is also having only an apprehension by saying “it appears”, but not a definite information. He himself is not sure about conclusiveness of this claim. Be that as it may be, irrespective of whether or not the approval was given in case of M/s Agarwal Oil Products, it is on record that the approval was properly given in the case of assessee. (ii) Secondly, the Ld. A.R.has claimed that the Ld. PCIT has given approval in a mechanical manner without application of mind and without analysis and verification of facts. Per contra the Ld. D.R. argued that there was Case-records in Vol.1 available before the Ld. PCIT which is clearly evident from the enclosures mentioned in the aforesaid letter dated 31/08/2016. The Ld. PCIT has duly examined the Case-records and thereafter given approval. The Ld. A.R. has also submitted before us certain legal decisions but all those decisions are in respect of section 147 / 144B. The provisions of section 147 / 144B are at a different pedestal and those decisions do not help in the present matter. (iii) Thirdly, the Ld. A.R. has argued that no statement of Prashant Pahadia was recorded by Investigation Wing, Assessing Officer of searched person or even Assessing Officer of assessee. In this regard, we refer Page No. 9 and 10 of the Paper-Book submitted by Ld. A.R. where the evidences found during the course of search, viz. letter dated 27.05.2014 and cheque No. 237053 are placed. We observe that the letter dated 27/05/2014 is a letter on the printed letter-head of assessee wherein the assessee has made an acknowledgement of receipt of Rs. 10,00,000 to Shri Prashant Pahadia. This letter is signed and sealed on revenue stamp, by the partner of assessee-firm. Further, the cheque No. 237053 is drawn for a sum of Rs. 10,00,000/- on the bank account of assessee and duly sealed and signed by the partner of assessee-firm. Even the assessee has admitted that the letter and cheque were issued by the assessee and they belong to the assessee. (iv) Lastly, the Ld. A.R. has argued that the present case was selected for “manual scrutiny” on the basis of point No. (vii) of CBDT Instruction No. 4 / 2016 ITA No. 867/Ind/2019 A.Y. 2015-16 5 dated 13.07.2016. The Ld. A.R. has placed the said instruction on Page No. 11 to 12 of the Paper-Book and invited your attention to the following para: “CBDT Instruction No. 4/2016 dt 13 th of July, 2016 1. In suppression of earlier instruction on the above subject, the Board hereby lays down the following procedure and criteria for manual selection of returns/ cases for compulsory scrutiny during the financial year 2016-17:- (i) to (vi) XXX (vii) Cases in respect of which specific and verifiable information pointing out tax-evasion is given by any Government Department / Authority. However, before selecting a case for scrutiny under this criterion, Assessing officer shall be required to take prior administrative approval from the concerned jurisdictional PCIT / PDIT / CIT.” It is the contention of the Ld. A.R. that since the Ld. AO got a specific information of unaccounted interest expenditure and mooted the proposal to Ld. PCIT for giving approval for selection of case under manual-scrutiny on that basis alone, the scope of scrutiny must be confined to that specific issue alone. But the Ld. AO had gone beyond this issue and made additions on other issues as well while completing the order of assessment u/s 143(3). Therefore, according to the Ld. A.R., the order passed u/s 143(3) is illegal. At that juncture, the Bench asked Ld. A.R. as to whether the Notice u/s 143(2) was for “limited scrutiny” to which the Ld. A.R. replied in negative. Thus, the Ld. A.R. has frankly accepted that the case was not marked for “limited scrutiny”. If it is so, we do not find strength in the claim of assessee. 4.5 In view of above, we find that the manual scrutiny was well initiated by issue of notice u/s 143(2) in terms of Clause No. (vii) of CBDT Instruction No. 4 / 2016 dated 13.07.2016, after seeking requisite approval from Ld. PCIT and the assesseealso participated in the assessment-proceedings without any objection. Therefore, the assessment was framed u/s 143(3) on the basis of scrutiny proceedings. Hence we do not find any strength in the Ground No. 1 and 2 of the assessee. Therefore, Ground No. 1 and 2 are dismissed. ITA No. 867/Ind/2019 A.Y. 2015-16 6 5. Ground No.3 – Addition of Rs. 10,10,975/- u/s 68: 5.1 In this Ground, the assessee has challenged the addition of Rs. 10,10,975/- sustained by Ld. CIT(A) u/s 68. 5.2 Facts qua this Ground are such that the assessee has taken unsecured loans from two parties, viz. (i) Rs. 7,51,378/- from Shri SuyashRamkishore Agarwal (loan taken is Rs. 7,51,378/- minus repayment is Rs. 50,000; hence net loan taken is Rs. 7,01,378/-), and (i) Rs. 8,10,975/- from Shri KailashChandjiMulchand. During assessment proceedings, the Ld. AO was not satisfied with the identity, source and genuiness of the receipts and therefore invoked section 68 and made addition. 5.3 During appellate proceeding, the Ld. CIT(A) allowed part-relief and sustained additions to the extent of Rs. 2,50,000/- in respect of Shri Suyash Agarwal and Rs. 8,10,975/- in respect of Shri KailashChandjiMulchand. Being aggrieved, the assessee has challenged these additions before us. We would take up these additions one by one in detail. 5.4 Addition of Rs. 2,50,000/- in respect of Shri SuyashRamkishore Agarwal: During assessment-proceeding, the Ld. AO asked the assessee to submit necessary evidences of identity, genuiness and credit worthiness of Shri SuyashRamkishore Agarwal (lender). In response, the assessee has submitted ITR and account confirmation of the lender. During appellate proceedings, the Ld. CIT(A) sought remand-report from Ld. AO. After appraisal of remand-report, the Ld. CIT(A) observed that the lender appeared personally before Ld. AO on 11.02.2019 and his statement was also recorded wherein he admitted having given loan to the assessee. Being satisfied the Ld. CIT(A) deleted addition, but still sustained to the extent of Rs. 2,50,000/-. The Ld. CIT(A) observed that the lender has admitted having given a loan of Rs. 2,50,000 to the assessee out of an equivalent receipt of Rs. 2,50,000/- from M/s Narsingh Agro. But he has failed to furnish the PAN, ITR and audit-report of M/s Narsingh Agro and therefore the addition of Rs. 2,50,000/- was warranted. We have seen Page No. 109 to 117 of the Paper-Book where a copy of the statement of lender, is placed on record and paid attention to Q.No. 14 to Q.No. 21 ITA No. 867/Ind/2019 A.Y. 2015-16 7 of the statement. We have observed that in reply to Q.No. 15, the lender has stated having given loan through his SBI Bank A/c No. 32424947769 on 03.07.2014, after receiving the same from M/s Narsingh Agro on 01.07.2014. Thereafter, in reply to Q.No. 16, he stated that he was partner of M/s Narsingh Agro but he does not remember PAN of that firm and the firm had already been closed. Thereafter, in reply to Q.No. 17, he provided details of address and partners of M/s Narsingh Agro. Thereafter, in reply to Q.No. 21, he demanded 7-8 days’ time for submission of ITR and Balance-Sheet of M/s Narsingh Agro. The Ld. A.R. has placed a copy of Statement of SBI A/c No. 32424947769 of the lender for the period 1 April 2014 to 30 Sep 2014 on Page No. 18 of the Paper-Book. We have perused the same and found that the Bank A/c has a credit entry of Rs. 2,50,000 received from M/s Narsingh Agro on 01.07.2014 and a debit entry of Rs. 2,50,000 paid to the assessee on 03.07.2014. The Ld. A.R. has also filed a copy of Statement of ICICI A/c No. 048505500069 of M/s Narsingh Agro for the period 01.04.2014 to 31.03.2015 on Page No. 20 of the Paper-Book. We have perused the same and observed that there is a debit entry of Rs. 2,50,000 paid by M/s Narsingh Agro to the lender on 01.04.2014. These credit and debit entries appearing in the Bank Accounts corroborate with the averments made by the lender in his statement recorded on 11.02.2019. Being so, we are satisfied that the lender had received a sum of Rs. 2,50,000/- and from there, made a loan of Rs. 2,50,000/- to the assessee. Thus, the identity, source and genuiness of receipt of Rs. 2,50,000stands properly proved. Therefore, the addition of Rs. 2,50,000/- confirmed by Ld. CIT(A) deserve deletion and is hereby deleted. 5.5 Addition of Rs. 8,10,975/- in respect of Shri Kailashchandji Mulchand: During assessment-proceeding, the Ld. AO asked the assessee to submit necessary evidences of identity, genuiness and credit worthiness of Shri Kailashchandji Mulchand (lender). In response, the the assessee did not submit any evidence. Hence the Ld. AO observed that the assessee has failed to discharge the onus and made addition of Rs. 8,10,975/- u/s 68. During appellate proceedings, the Ld. CIT(A) sought remand-report from Ld. AO. During remand-proceeding, the assessee submitted letter dated 11.02.2019, a copy of which is also placed on Page No. 102 of the Paper Book submitted by Ld. A.R.. In this letter, the assessee provided the complete address of the lender and also submitted that the lender was not co- ITA No. 867/Ind/2019 A.Y. 2015-16 8 operating. Although the Ld. CIT(A) has narrated this submission of assessee in his order, yet he confirmed the addition. We have perused the aforesaid letter dated 11.02.2019 and found that not only the assessee submitted that the lender was not co-operating but also made a categorical request to the Ld. AO to either summon the lender u/s 131 of Income-tax Act or call a report by sending inspector of department. The Ld. CIT(A) has not incorporated this specific request of assessee in his order. Be that as it may be, once the assessee has provided complete address of the lender, apprised the Ld. AO that the lender is not co-operating and also made a specific request to summon the lender u/s 131 or get a report through the inspector, we feel that the Ld. AO, being a statutory authority, had power as well as duty to accede to the request of assessee. Having not done so, its not appropriate to draw a conclusion against the assessee. The Ld. A.R. has submitted copies of ITR, Account Confirmation and Bank statement of thelender on Page No. 22 to 24 of the Paper- Book. We have perused the same and found that these documents were neither produced before the Ld. AO nor before Ld. CIT(A). However, taking into account the fact that the lender was non co-operative and the request of assesseeto summon the lender u/s 131 was also not acted upon by Ld. AO during remand-proceeding, We deem it fit to remit the matter back to the file of Ld. CIT(A) for examining the matter afresh. 6. Ground No. 4 – Addition of Rs. 5,00,000/- u/s 68: 6.1 In this Ground, the assessee has challenged the addition of Rs. 5,00,000/- madeby Ld. AO u/s 68. 6.2 Facts qua this Ground are such that during the financial year 2011-12, the assessee had given an advance of Rs. 5,00,000/- through cheque to one M/s Rajlaxmi Ginning and Pressing. During the previous year 2014-15 relevant to the assessment year under consideration, the assessee recovered this sum of Rs. 5,00,000/- in cash on various dates. 6.3 The Ld. AO observed that the assessee has not submitted any evidence or confirmation from the party i.e. M/s Rajlaxmi Ginning and Pressing. He further observed that the receipt of cash of Rs. 15,000/- each on 13 occasions on a single day i.e. 05.04.2014, is nothing but the introduction of unaccounted cash of the ITA No. 867/Ind/2019 A.Y. 2015-16 9 assessee itself. Therefore, the Ld. AO applied section 68 and made addition of Rs. 5,00,000/-. 6.4 The Ld. CIT(A) has repeated the observations of Ld. AO and confirmed addition. 6.5 Before us, the Ld. A.R. submitted that it is an admitted fact that the assessee had made an advance of Rs. 5,00,000/- to M/s Radhalaxmi Ginning and Pressing in the year 2011-12 for job work but the job work was not executed and the amount was standing as receivable in the books of account of assessee as on 01.04.2014. The Ld. A.R. submitted that during the previous year 2014-15 relevant to the assessment-year under consideration, the assessee recovered this Rs. 5,00,000/- in cash. The Ld. A.R. advanced a preliminary objection that the sum of Rs. 5,00,000/- is assessee’s own money which was received back and therefore it cannot be said to be an income. Regarding receipt of Rs. 5,00,000/- in cash in piecemeal, firstly the Ld. A.R. submitted that there is no ban over recovery of advance in cash and secondly he submitted that the relations with M/s Radhalaxmi Ginning and Pressing were strained and the assessee had to receive cash in piecemeal, that too after great efforts. Per contra, the Ld. D.R. argued that the manner of receipt itself raises a strong doubt and is against the preponderance of probability. In short, the Ld. D.R. tried to emphasize that the assessee has not received any money from the party, it has shown its own-money as receipts and therefore it’s a fit case of section 68. 6.6 We have perused the Ledger A/c of Radhalaxmi Ginning & Pressing, placed before us on Page No. 27 of the Paper Book. After a careful consideration, we find that the assessee has declared receipt of Rs. 15,000 on 18 occasions, Rs. 16,000 on 5 occasions, Rs, 18,000 on 8 occasions and Rs. 6,000 on one occasion. Out of Rs. 15,000 on 18 occasions, there are 13 receipts of Rs. 15,000 on one single day i.e. 05.04.2014 which in itself raises a very strong doubt. Further we observe that the assessee has made submission of strained relations with the party but not adduced any iota of evidence to demonstrate that the relations were in fact strained. Section 68 casts a heavy onus upon the assessee, which the assessee is not able to discharge. Hence the Ld. AO has rightly invoked the section 68 and made addition. The Ld. CIT(A) has rightly confirmed the action of Ld. AO.Therefore, this Ground is dismissed. ITA No. 867/Ind/2019 A.Y. 2015-16 10 7. Ground No. 5 and 6 – Addition of Rs. 2,72,948 and Rs. 14,69,623 u/s 69C: 7.1 In these Grounds, the assesseehas challenged the additions of Rs. 2,72,948/- and Rs. 14,69,623/- made by Ld. AO u/s 69C. 7.2 Facts qua these Grounds are such that during assessment-proceedings, the assessee submitted the books of account maintained by it in tally software. On examination of cash-book, the Ld. AO observed that the assesseewashaving a cashbalance of Rs. 26,32,052/- as on 02.09.2014 against which total payments of Rs. 29,05,000/- were made during 02.09.2014 to 08.09.2014 without any other cash- inflow, which resulted in an cash shortage of Rs. 2,72,948/-. Similarly, on 01.10.2014, the assessee had a cash balance of Rs. 1,30,052/- against which total payments of Rs. 15,99,675/- were made during 01.10.2014 to 04.10.2014 without any other cash-inflow, which resulted in a cash-shortage of Rs. 14,69,623/-. This way, there were cash shortage of Rs. 2,72,948/- and Rs. 14,69,623/- for which the assessee does not have funds. Hence the Ld. AO made invoked section 69C and made additions. 7.3 During appellate proceedings, the Ld. CIT(A) sought remand-report from Ld. AO wherein the assessee submitted that in mailing the tally data, some technical mistake or data corruption occurred and certain credit purchases were shown as cash purchases which resulted in cash-shortage in cash-book. The assesseealso submitted a revised cash-book and the evidences of the agriculturists to whom payments were made in the form ofA/c confirmations, purchase vouchers, aadhar cards and khasra-reports. However, the Ld. CIT(A) observed that the submission of assessee were faulty for two reasons, viz. (i) Firstly Ld. CIT(A) noted that how can there be a corruption in part-data in tally accounts? He also observed that even the payment-entries existing in Cash-Book contained the date, particulars, voucher type, voucher number, debit and credit entries etc., which show that the data was not corrupt, and (ii)Secondly, he observed that the vouchers submitted by the assessee,were undated. Keeping in view these aspects, the Ld. CIT(A) confirmed the additions. 7.4 Before us, the Ld. A.R. as well as Ld. D.R. repeated those submissions. The Ld.D.R. further went on stressing that the submission of data-corruption in mailing is ITA No. 867/Ind/2019 A.Y. 2015-16 11 just an after-thought story made by the assessee, but the fact is that the Cash-Book originally supplied by the assesseewas correct one and the revised Cash-Book was manipulated to suit requirement. Accordingly the Ld. D.R.strongly supported the additions. 7.5 We have given a careful thought. We find substance in the observation of Ld. D.R. that there cannot be corruption in part-data in Books of Account maintained by tally software. Even if some corruption occurs in mailing the data, wholedata becomes corrupt and not a part of data. We also find that the purchase- vouchers submitted by the assessee are internal vouchers of assessee itself. Even those vouchers are undated, as noted by the lower authorities. The aadhar cards and khasra-reports of the agriculturists merely prove the identity of the agriculturists. Even otherwise the purchase-vouchers, aadhar cards and khastra-reports at best prove the transactions of purchases, which are not in dispute at all. These documents do not prove the dates of payments with which we are actually concerned. At this juncture, we also take note of the original Cash-Book, revised Cash-Book and the A/c Confirmations submitted by the assessee and tabulate the analysis arising therefrom: Sl Payee Amount Date of payment in original cash-book Date of payment in revised cash-book A/c Confirmations Date of payment (appearing on debit side of A/c Confirmation) Date of purchase (appearing on credit side of A/c Confirmation) 1 2 3 4 5 6 7 1 ParasramBhimraoSonune 1,80,960 01.10.2014 01.12.2014 01.12.2014 01.12.2014 2 HarisinghKachrusingh 1,14,840 01.10.2014 01.12.2014 01.12.2014 01.12.2014 3 Nana B. Sonune 62,640 01.10.2014 01.12.2014 01.12.2014 01.12.2014 4 SubhashBhimraoSonune 1,18,320 01.10.2014 01.12.2014 01.12.2014 01.12.2014 5 KundlikBhimraoSonune 2,01,840 01.10.2014 01.12.2014 01.12.2014 01.12.2014 6 Rama SakharamSonune 2,10,981 04.10.2014 01.12.2014 01.12.2014 01.12.2014 7 RamdasEknathSonune 2,10,760 02.09.2014 02.12.2014 01.12.2014 02.12.2014 8 Narayan E. Sonune 1,76,100 02.09.2014 02.12.2014 01.12.2014 02.12.2014 9 SudhakarShenfad 1,06,780 02.09.2014 02.12.2014 01.12.2014 02.12.2014 10 MadhurkarShenfad 1,67,698 02.09.2014 02.12.2014 01.12.2014 02.12.2014 ITA No. 867/Ind/2019 A.Y. 2015-16 12 A careful analysis ofabove data leads to the following observations: (a) The above payments were appearing in original Cash Book on 01.10.2014 / 04.10.2014 / 02.09.2014 (Refer Column 4) but they appear on 01.12.2014 / 02.12.2014 in revised Cash-Book (Refer Column 5). In this respect, the assessee has claimed that due to tally-data corruption the credit purchases, made on 01.10.2014 / 04.10.2014 / 02.09.2014, were shown as cash purchases. But the A/c Confirmations submitted by the assesee itself demonstrate that the purchases were made on 01.12.2014 and 02.12.2014 (Refer Column No. 7). When it is so, there was no credit purchase on 01.10.2014 / 04.10.2014 / 02.09.2014 which could be shown as cash purchases. (b) If we look at the last 4 transactions appearing at S.No. 7 to 10, the revised Cash-Book demonstrates that the payments were made on 02.12.2014 (Refer Column 5), whereas A/c Confirmations demonstrate that the payments were made on 01.12.2014 (Refer Column 6). Thus there are serious mis-matches even in the revised Cash-Book and A/c confirmations. These serious irregularities and inconsistencies lead us to conclude that the revised Cash-Book is nothing but an attempt to shift certain payments which were actually made on 01.10.2014 / 04.10.2014 / 02.09.2014 to new dates, viz. 01.12.2014 and 02.12.2014. Being so, we are not persuaded to accept the submissions of assessee. Hence we sustain the addition. Therefore, this Ground is dismissed. 8. Ground No. 7 – Disallowance of interest of Rs. 2,68,225/-: 8.1 In this Ground, the assessee has challenged the addition of Rs. 2,68,225/- made on account of disallowance of interest. ITA No. 867/Ind/2019 A.Y. 2015-16 13 8.2 Facts qua this Ground are such that the assessee has taken Cash-Credit of Rs. 1,25,00,000/- from State Bank of India on which interest of Rs. 2,68,225/- has been paid. 8.3 Ld. AO observed that the assesee has made cash-withdrawals of approx. 1.18 crore from bank during the period 01.04.2014 to 30.08.2014, out of which the cash utilized for purchase of kapas was Rs. 45.04 lakhs only and the remaining cash has remained unutilized. The Ld. AO computed interest of Rs. 2,68,225/- on the unutilized amount and made disallowance. 8.4 The Ld. CIT(A) has repeated the observations of Ld. AO and confirmed disallowance. 8.5 Before us, the Ld. A.R. has submitted that the assessee has taken C/C limit for business purpose. He further submitted that the lower authorities have not found any mis-use of funds for non-business purpose, they have simply assumed that the funds have not been utilised. The Ld. A.R. further submitted that the nature of business carried on by the assessee is such that the assessee makes cash purchases from agriculturists and therefore needsfunds in hand to make sudden payments. Hence the cash had to be kept. The Ld. D.R. however supported the order of Ld. AO and Ld.CIT(A). 8.6 We find strength in the submissions of Ld. A.R.. We observe that it is not the case of revenue that the funds have been mis-used for non-business purpose. Further the assessee has also given sufficient explanation of keeping cash-balance. Therefore, we delete the addition of Rs. 2,68,225/-. Therefore, this ground is allowed. 9. Ground No. 8 – Disallowance of interest expenditure of Rs. 1,20,000/-: 9.1 In this Ground, the assesee has challenged the disallowance of Rs. 1,20,000/- made by Ld. AO out of interest expenditure. 9.2 Facts qua this Ground are such that the assessee has given a loan of Rs. 10,00,000/- Shri Prahalad Kumar Agarwal from which no interest is charged. ITA No. 867/Ind/2019 A.Y. 2015-16 14 9.3 The Ld. AO has observed that Shri Prahlad Kumar Agarwal is a brother of partner of assessee-firm. He further observed that the loan has been given without business activity and no interest has been received. He also observed that the assessee has used interest-bearing loans to give this non-interest-bearing loan. Based on these observations, the Ld. AO made an addition of Rs. 1,20,000 on account of estimated disallowance of interest @ 12% of Rs. 10,00,000/-. 9.4 Before Ld. CIT(A), the assessee submitted that the assessee is a partnership firm, the partners have invested enough capital in the firm and the assessee has not paid any interest on partners’ capital. Therefore the assessee submitted for deletion of disallowance. However, the Ld. CIT(A) concluded that the assessee has not filed any evidence to show that interest was not paid and therefore he confirmed the addition. 9.5 Before us, the Ld. A.R.reiterated the same submissions. The Ld. A.R.also drew our attention to the Balance-Sheet and the Schedule of Partners’ Capital, placed on Page No. 84 and 85 of the Paper Book to demonstrate that there is a capital investment of Rs. 93,40,903/- made by the partners in the firm on which no interest has been paid. The Ld. A.R. also submitted that the assessee has also taken an interest-free loan of Rs. 7,01,000/- from Shri Suyash Agarwal. Thus, according to the Ld. A.R., the assessee has approximate Rs. 1 Crore of funds invested by the partners and their relative, out of which a loan of just Rs. 10,00,000/- has been given to the brother of partner. According to Ld. A.R., no disallowance is called for in this scenario. Per contra, the Ld. D.R. relied upon the orders of lower authorities. 9.6 We have considered the rival submissions and contentions. We observe that the assessee has ample funds of non-interest-bearing nature invested by the partners and their relative, a non-interest-bearing loan of Rs.10,00,000 given to the brother of the very same partners, should not be viewed otherwise. We find substance in the submission of Ld. A.R. and therefore inclined to delete the addition of Rs. 1,20,000/-. Therefore this Ground allowed. 10. Ground No. 9 – Addition of Rs. 1,00,000/- of unexplained interest u/s 69C: 10.1 In this Ground, the assesee has challenged the addition of Rs. 1,00,000/- made by Ld. AO u/s 69C on account of unexplained interest payment. ITA No. 867/Ind/2019 A.Y. 2015-16 15 10.2 Facts qua this Ground are such that the that the Ld. AO received letter No. 526 dated 27.06.2016 from the office of DCIT (Central)-1, Indore containing an information that a search was conducted at the premises of Shri Hemant Kumar Jain and family members wherein it was noticed that the assessee has taken a hundi loan of Rs. 10,00,000/- and repaid the same in cash. Evidences in the form of a letter dated 27.05.2014 on the letter-head and cheque No. 237053 duly signed and accepted by the assessee were also gathered during search. Though the assessee accepted that the letter and cheque belonged to it and the same were given to procure the loan, yet it further submitted that the transaction was not actually done because the broker could not execute. Hence there was no interest outflow. The Ld. AO however did not accept this submission of assessee with the reasons that (i) the cheque No. 237053 was given by the assessee to secure the loan, and (ii)the letter dated 27.05.2014 given by the assessee is called “chitthi” & “shrimanji” in the local language which refers to cash transaction having made. The Ld. AO further went on observing that since the assessee has taken cash-loan, it might have paid interest @ 15% for 10 months amounting to Rs. 1,00,000/- out of unaccounted funds. On this premise, the Ld. AO made addition. The CIT(A) accepted the Ld. AO’s observations and confirmed addition. 10.3 Before us, the Ld. A.R. repeated the same submissions and argued that the addition has been made merely on the basis of assumption / presumption. The Ld. A.R. further argued that there is no statement of Prashant Pahadia on the record by which it can be conclusively proved that a cash-loan was in fact taken by the assessee and interest was actually paid thereon. He further claimed that no statement of searched person were recorded u/s 131 with specific reference to the assessee. He further argued that no notice or enquiry letter was issued by Investigation wing to the AssessingOfficer of searched person / Assessing Officer of the assessee for enquiry in the matter. He further carried our attention to Page No. 87 to 99 of the Paper-Book to demonstrate that the assessee has always taken loans through account payee cheques and paid brokerage for taking loan. He further submitted that the assesee is not in the habit of taking cash-loans and there is no brokerage payment for the alleged cash-loan. With these submissions, the Ld. A.R. requested for deletion of addition. Per contra, the Ld. D.R. stressed that the cheque No. 237053 and letter dated 27.05.2014 called “chitthi” & “shrimanji” found by the ITA No. 867/Ind/2019 A.Y. 2015-16 16 department, belonged to the assesseeand this fact is very categorical. Ld. D.R. further argued that these evidences were quite sufficient evidences for arriving at conclusion that the assessee has taken a cash-loan. Therefore, according to Ld. D.R., the addition of estimated interest-outflow u/s 69C is quite valid and must be upheld. 10.4 We have given a careful consideration to the rival submission and contentions put forward by both sides. We observe that the letter dated 27.05.2014 called “chitthi” & “shrimanji” is given on the printed letter-head of assessee. The language of letter clearly demonstrates that it acknowledges the receipt of loan of Rs. 10,00,000/- and also contains a commitment to repay through cheque No. 237053. This letter is duly sealed by the assessee and signed by its partner, Shri Ram Kishore Singhal, on a revenue stamp. Thecheque No. 237053, referred to in this letter, is also found during search. These evidence have also been brought to the notice of assessee and the assessee has accepted as belonging to it. It is also on record of department that the person at whose premise search was conducted, is engaged in the business of arranging cash-loans for different parties. Therefore, the Ld. AO has taken a correct conclusion that the assessee has also taken a cash-loan of Rs. 10,00,000/- by way of and interest must have been paid out of books. Hence the addition of Rs. 1,00,000/- made by Ld. AO on account of unexplained interest payment u/s 69C is valid and hereby upheld. Therefore, this Ground is dismissed. 11. Ground No. 10: This Ground is general in nature and does not require adjudication. 12. In the result, this appeal of assessee is partly allowed. This Order pronounced in Open Court on 28 /01/2022 SSS- Sd/- Sd/- (MANISH BORAD) (MAHAVIR PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 28 /01/2022 TANMAY, Sr. PS TRUE COPY ITA No. 867/Ind/2019 A.Y. 2015-16 17 आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Indore 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, (Dy./Asstt.Registrar) ITAT, Indore