SHRI SHRI MAHESH KUMAR DUHLANI, KORBA(CG) V. THE DY. COMMISSIONER OF INCOME TAX,CIRCLE , KORBA, KORBA(CG)

ITA 92/BIL/2017

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 8872 (ITAT-RAIPUR)
• Duration Of Justice: 5 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 14-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Gift; Business income; Charitable institution; Bad and doubtful debts; Capital receipt; Revenue expenditure; Capital expenditure; TDS
• Section: 131; 68; 271(1)(c); 44AD; 80C; 143(1); 43; 72; 22

Judgement Text

आयकर अपीलȣय अͬधकरण Ûयायपीठ रायप ु र मɅ। IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI RATHOD KAMLESH JAYANTBHAI, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No. 92/BIL/2017 Ǔनधा[रण वष[ / Assessment Year : 2011-12 Shri Mahesh Kumar Duhlani Main Road, P. O. Katoghora, Distt. Korba (C.G) PAN : AEJPD4102K .......अपीलाथȸ / Appellant बनाम / V/s. Deputy Commissioner of Income Tax, Circle Mahanadi Complex, Niharika Road, Korba (CG) ......Ĥ×यथȸ / Respondent Assessee by : Shri G. S. Agrawal Revenue by : Shri G. N. Singh स ु नवाई कȧ तारȣख / Date of Hearing : 06.06.2022 घोषणा कȧ तारȣख / Date of Pronouncement : 09.06.2022 2 ITA No. 92/BIL/2017 A.Y.2011-12 आदेश / ORDER PER RATHOD KAMLESH JAYANTBHAI, AM: This appeal is filed by the assessee aggrieved from the order of the Commissioner of Income Tax (Appeal), Bilaspur (CG) [ Here in after referred as Ld. CIT(A)] for the assessment year 2011-12 which in turn arises from the order passed by the assessing officer under Sec.143(3) of the Income tax Act, 1961 (in short 'the Act') dated 28.03.2014. 2. Before us the assessee has assailed the impugned order on the following grounds of appeal: “1. That under the facts and the law, the learned Commissioner of Income Tax (Appeals) erred in confirming an addition of Rs.25,00,000/- made by the learned Assessing Officer u/s 68, rejecting the explanation & supporting filed and ignoring the fact that all the creditors appeared before the ld. AO & were examined by him: S. No. Name of Lender Amount Received (Rs.) 1. Smt. Ekta Agarwal 5,00,000/- 2. Shri M. P. Modi HUF 3,50,000/- 3. Smt. Priti Dubey 4,00,000/- 4. Shri Ramesh Kumar Modi 4,50,000/- 5. Ram Niwas Agrawal HUF 3,00,000/- 6. Smt. Sarda Agrawal 2,00,000/- 7. Smt. Urmila Modi 3,00,000/- Total 25,00,000/- 3 ITA No. 92/BIL/2017 A.Y.2011-12 Prayed that Appellant has discharged the burden of proving the identity, credit-worthiness and genuineness of transaction, the addition of Rs. 25,00,000/- be deleted. 2. That under the facts and the law, the learned Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs.25,00,000/- made by the learned Assessing Officer without having any adverse material on record and under presumption & surmises. Prayed to delete the addition of Rs. 25,00,000/-. 3. That the learned Commissioner of Income Tax (Appeals) further erred in confirming the disallowance of Rs. 17,26,809/- made by the learned Assessing Officer being amount written-off which is an allowable expense. Prayed to delete the disallowance of Rs. 17,26,809/-.” 3. Tersely stated the fact of the case is that the assessee is an individual. He has filed his Return of Income on the total income of Rs.16,17,300/- on 14.03.2012 electronically in ITR-V vide e-filing Acknowledgement Number 351617221140312. Vide return, the payment of tax of Rs.3,49,366/- on the returned income has been claimed against TDS of Rs.5,23,053/-. The return has been duly processed on AST by CPC Banglore u/s 143(1) of the Income Tax Act, 1961 (here-in-after referred to as the Act) on 04.04.2012 and accordingly refund of Rs.1,79,780/- including interest of Rs.6,076/- u/s 244 A of the Act was generated and duly issued to the assessee. The case was thereafter selected manually under scrutiny for the reasons (1) Verification of unsecured loans (2) Sundry Creditors (3) Major Expenses. The notice were issued under section 143(2)/142(1) along 4 ITA No. 92/BIL/2017 A.Y.2011-12 with the questionnaire. During the course of proceedings, certain more queries were raised which have also been replied. The AR also produced the books of accounts, bills, vouchers and bank statements in original. These have been checked on random basis with regard to the financial statements filed during proceedings by the assessing officer. 3.1 During the previous year relevant to assessment year in question, assessee has earned his income from civil contract works obtained from Simplex Infrastructures Ltd., Vandana Power Ltd. Chhuri, Korba, PMGSY and Satya Sai Builders. The ld. AO has made a comparsion of Gross profit and Net profit for current year with that of last two year and observed that there is substantial downfall in N. P. ratio. The rate has declined from 6.65 % to 4.30 %. Vide Query No.7 of the questionnaire dated 11th July, 2013, the assessee has been specifically asked to furnish the GP and NP rate and in case of decline, to explain the reasons. But in the reply dated 11.11.2013, the assessee has merely furnished the figures of Gross receipts, Net Profit and and percentage of Net profit. No reason for decline in NP rate has been put forth. However, ongoing through the Profit & Loss A/c of the assessee, 5 ITA No. 92/BIL/2017 A.Y.2011-12 it is noted that the assessee has debited a substantial sum of Rs.17.26,809/- under the narration "Sundry Balances Written off". Vide query No. 17, The assessee has been specifically asked to explain the nature of this expenditure with justification. In response to this query, the assessee has submitted as under:- " नफा न ु कसान खाते मɅ Ǿ. 17,26,809/- Written off ड ू बत राͧश के Ǿप मɅ ͧलखी गई है, इसका कारण शासकȧय ͪवभागो मɅ ͪववाद के चलते उनके ɮवारा राͧश राजसात (जÞत कर लȣ गई है। फलèवǾप Ǔनधा[ǐरती को वह श ु ɮध न ु कसान ह ु आ जबͩक उÈत राͧश के संबंध मɅ प ू व[ वषɟ मɅ Contract Work कȧ ĤािÜतयɉ टन[ ओवर मɅ Ĥदͧश[त कȧ जा च ु कȧ है। इसमɅ SD / EMD कȧ राͧश को राजसात कर ͧलया गया है।" 3.2 The ld. AO stated that the contention of the assessee has been considered and discussed but the claim of the assessee is patently wrong and disallowable on account of following reasons as mentioned in the assessment order : (a) First of all, As the assessee has himself stated in his written submission that it is the part of SD and EMD of different years, it was obviously the receivables from the departments and has not been reflected in the Profit & Loss A/cs of the preceding years as it is not the part of Profit & Loss A/cs. It was actually the part of the assets of the assessee of his Balance Sheet which from nowhere qualifies to be allowed as expenditure in the Profit & Loss A/c. During discussion, the counsel of the assessee raised a question that, if it is not allowable, then what should be its accounting treatment? The reply is quite obvious. The SD/EMD will be reduced by this amount and correspondingly, the capital of the assessee will be reduced. But, it is not at all allowable as expenditure from the income of the current year. The above 6 ITA No. 92/BIL/2017 A.Y.2011-12 amount is virtually the SD/EMD is evident from the summary of SD/EMD filed by the assessee. (b) Secondly, how any sum which the assessee has been showing as his receivable in his Balance Sheet will qualify as deduction in the Profit & Loss A/c in the event of its forfeiture by the contractee Departments? (c) Lastly, the version of the assessee that the receipts relating this (alleged) expenditure have already been shown in the preceding years has also no legal force on the ground that gross receipt of the contractors comprises of various heads like Royalty, SD/EMD, TDS of different taxation departments and other incidental deductions which the contractee departments levy from time to time as per their terms and conditions. Some deductions merit for claim as expenditure in the Profit & Loss A/c e.g. Royalty, Demurrage Charges etc. which the assessee never receives back and some, being receivables, become the component of Balance Sheet as assets of the assessee. In the instant case, the forfeited sum was in earlier years the receivables of the assessee which had never been the amount debitable in the Profit & Loss A/c. In view of the facts and circumstances and reasons elaborately discussed above, the claim of the assessee for expenditure of Rs.17,26,809/- is not at all allowable and accordingly it is disallowed and added back to the total income of the assessee. For concealing this income, penalty proceedings u/s 271(1)(c) are being initiated separately. 3.3 From Annexure-A of the Auditors Report given in Form No. 3CD it is evident that the assessee has borrowed unsecured loans during the previous year from the following persons as detailed below:- Name Amount 1. Smt. Ekta Agarwal 5,00,000/- 2. Shri M. P. Modi HUF 3,50,000/- 3. Smt. Priti Dubey 4,00,000/- 4. Shri Ramesh Kumar Modi 4,50,000/- 5. Ram Niwas Agrawal HUF 3,00,000/- 6. Smt. Sharda Agrawal 2,00,000/- 7. Smt. Urmila Modi 3,00,000/- 7 ITA No. 92/BIL/2017 A.Y.2011-12 -------------- Total 25,00,000/- ======== 3.4 With a view to examining the Identity of the lenders, genuineness of the loans and its transaction and creditworthiness of the lenders, summons u/s 131 were issued to all the alleged lenders. In response to the summons, the lenders attended whose statements on oath have been recorded. All the lenders have averred that they have given the loans to Shri Mahesh Kumar Duhlani through cheques from their bank accounts. During recording the statements, they have also filed their Income tax Returns, PAN Cards and their bank accounts. From the documents produced, the identity of the lenders and genuineness of the transactions are found correct but the question remains about their creditworthiness meaning thereby their capacity of advancing loans. The lender-wise observation of the assessing officer is under :- “A. Smt. Ekta Agrawal: On examination of bank account of Smt. Ekta agrawal, it has been found that on 28/03/2011, cash of Rs.5,00,000/- has been deposited in her Savings Bank A/c No.30893512112 of State Bank Of India, Katghora and the same date Rs.5,00,0257 (Rs.25/- is the RTGS Charges) has been debited through cheque No.37927 and sent to account of the assessee, Shri Mahesh Kumar Duhlani through RTGS. On being asked about the source of this cash deposit of Rs.5,00,000/-, Smt. Ekta Agrwal, in her statement in reply to question No.7, has stated that the cash deposit in her bank account is her savings from income of past years which was lying with her in cash. In reply to Q.N. 8, she has stated That she has earned income of Rs.2,77,462/- during F.Y.2010-11 and has duly shown this 8 ITA No. 92/BIL/2017 A.Y.2011-12 income in her return of income for A.Y.2011-12. In reply to Q.N.9, she has stated that she does not have any evidence of this cash amount as she does not maintain any books of a/c. 5. On going through her return for A.Y.2011-12, it is seen that she has shown gross income of Rs.2.77,462/- out of which Rs.88,711/- has been claimed as deduction under chapter VI A of the Act. Thus the taxable income has been shown at Rs.1,88,750/-. The income has been claimed to have been earned from business and profession and other sources but no specific name of business or other sources has been mentioned. In support of her claim of depositing the cash, she has merely stated that she was having cash of Rs.5,00,000/- and could not adduce any evidence for holding the cash of Rs.5,00,000/- as on the date of deposit. The reply given by her is a general reply being normally given by the lenders in case of asking the source of cash deposit. It is beyond understanding as to how and from where, suddenly, the cash of Rs. 5,00,000/- came to her. In absence of any concrete and corroborative evidence, it is quite difficult to believe that she was holding cash of Rs.5,00,000/-. It is also, unbelievable that any prudent person would keep such substantial cash uselessly when the banking facility is quite in the vicinity of her house and would sustain loss of interest. Further, the capital account filed by her does also not reflect any entry as loan to Shri Mahesh Kumar Duhlani though in the Balance Sheet, the name of Shri Duhlani appears in the asset side against whom the amount of Rs.5.54,000/- has been shown as given. The capital account filed by Mrs. Ekta Agrawal does not reflect the deposit of cash in the bank account nor loan given to Shri Duhlahi. The balance Sheet and the Capital A/c are not in conformity with each other. The insertion of the name of Shri Duhlani in the Balance Sheet is a weak device just to explain and justify the loan. Moreover, for want of earlier years' capital account and balance sheet, it is also difficult to believe that she was having opening balance of Rs.6,89,510/-. In view of the facts and circumstances elaborately discussed above, it is held that the alleged loan of Rs.5,00,000/ is nothing but the assessee's own undisclosed income which has been shown as unsecured loan from Smt. Ekta Agrawal. Accordingly, the alleged loan of Rs.5,00,000/- is the unexplained cash credit and added u/s 68 of the Act to the total income of the assessee. B. Shri Ram Niwas Agrawal (HUF): The examination of bank account of Shri ram Niwas Agrawal (HUF) it is found that on 28/03/2011, cash of Rs.3,00,000/- has been deposited in the Savings Bank A/c No.11015576678 of State Bank Of India, Katghora and on the same date Rs.3.00.025/- (Rs.25/- is the RTGS Charges) has been debited through cheque No.155494 and sent to account of the assessee, Shri Mahesh Kumar Duhlani through RTGS. On being asked about the source of this cash deposit of Rs.3,00,000/-, Shri Ram Niwas Agrwal has stated that the cash deposit in the HUF's bank account is the savings from income of past years 9 ITA No. 92/BIL/2017 A.Y.2011-12 which was lying with him in cash. In reply to Q.N. 8, he has stated that he has earned income of Rs.3,25,475/- during F.Y.2010-11 and has duly shown this income in HUF's return of income for A.Y.2011-12. In reply to Q.N.9, he has stated that he does not have any evidence of this cash amount as he does not maintain any books of a/c. 6. On careful observation of the capital a/c of the HUF, it is seen that the HUF has shown gross contract receipt of Rs.9,90,500/- for the previous year 2010-11, the maximum part of which has been received from M/s B. B. Verma because on the TDS of Rs.6,773/-, the pro-rata corresponding receipts comes to Rs.6,77,300/-. But in the bank account, no credit entry against gross receipt either in part or in full is found. Like-wise, no cash withdrawal is found. There is no evidence with the lender of keeping cash with him. Further. It is a notable point that when a person shows cash balance at the end of the year, he must be able to prove the holding of cash of Rs.3,00,000/- as on 28/03/2011 with him; just three days before the end of the financial year. Keeping cash in the house out of savings is a general reply being given by the lenders. The lenders are bound to prove the holding and availability of cash with him. Thus, in absence of any concrete, corroborative and cogent evidence, it can't be accepted that the lender was having cash of Rs.3,00,000/- with him. Thus, the alleged loan of Rs.3,00,000/- is the assessee's own undisclosed income which has been utilized by him in the garb of loan. Accordingly, the same is liable to be added u/s 68 of the Act being unexplained cash credit. Thus, Rs.3,00,000/- is added to the total income of the assessee. 3.5 Out of the total seven depositor the assessing officer has given his observation only for two depositors and stated that more or less, same situations have been noted in other lenders' cases. All have stated in their statements that they were having the cash with them which they first deposited in their bank account and then issued cheques of loan in favour of assessee. But none of them could satisfactorily prove by any cogent evidence that they were having cash with them on the date of deposit the same in their bank accounts. Mere 10 ITA No. 92/BIL/2017 A.Y.2011-12 saying that the source of cash deposit in their bank accounts are their savings of past year is not any proof rather it is a general version in the event of not producing the evidence. The ld. AO further observed that by and large, it is quite obvious that none of the lenders was having creditworthiness of depositing the cash equivalent to advancing the loan amount and therefore, the cash deposited by them in their bank accounts are the assessee's own unexplained cash which he utilized in his business in the garb of loan from different persons who accommodated the assessee by depositing his undisclosed cash in their bank accounts to give the shape of loan of his concealed cash income. Accordingly, the total alleged unsecured loan aggregating to Rs.25,00,000/- is the assessee's own concealed income which he could not explain and thus the total sum of Rs.25,00,000/- is the assessee's unexplained cash credit and liable to be added u/s 68 of the Act. 4. Aggrieved from the order of the assessing officer the assessee preferred an appeal before the CIT(A) and the ld. CIT(A) has confirmed the addition based on the following observations:- Observation of the ld. CIT(A) on addition of Rs. 17,26,809/- 11 ITA No. 92/BIL/2017 A.Y.2011-12 Decision- I have considered the rival submission and find that an issue has been decided by the Hon'ble Apex Court for the chargeability to tax so for as security deposit/ EMD is concerned. The Hon'ble Apex Court has categorically held that the department can not be allowed to tax the amount when the security deposit is received by the contractor. Following the same analogy it can be held that if deportment can not tax the security deposit received by the assessee form the contractee, assessee can not be permitted to debit it in profit and loss account because the SD/ EMD is capital receipt by its own nature. Respectfully following the law of land led down by Hon'ble Apex Court so for as the nature of SD/EMD is concerned I do not find any infirmity in the decision of the learned AO. Further the assessee could not specify whether he has proceeded the contractee department in the arbitration or not and what was the outcome. Since the issue is not crystallized the assessee is not permitted to even debit the capital account also. The ground of appeal as discussed here and above is hereby dismissed. Observation of the ld. CIT(A) on addition of Rs. 25,00,000/- “Decision- (a) In the case of Smt. Ekta Agrawal, she has deposited cash of Rs 5,00,000/- on 28.03.2011 and by way of RTGS the amount was transferred to the assessee. In her statement she had stated that the cash of Rs. 5,00,000/- was deposited by her out of past saving form the income of past year which was lying with her in cash. To the question no. 9 she had stated that she does not have not any evidence of Rs. 5,00,000/- because she does not maintain any books of account. The AO has found that her taxable income is 1,88,750/- for A.Yr. 2011-12 from Business and Profession and other sources. On being asked about the name of the business she could not tells as to what business she is engaged in. The capital account filed by her before the learned AO does not show any amount of loan in the name of the assessee. During appellate proceedings the learned AR has submitted in the paper book that the learned AO has discussed the issue only in case of Smt. Ekta Agrawal and in case of Shri Ram Nivas Agrawal HUF but in rest of the cases the comments of the learned AO are stereo type the learned AO had relied on various-case-law including Lovely export Pvt. Ltd. and ITO-Raigarh vs. Kaushal Agrawal 22 ITR 233 ITAT and CIT vs. Abdul Aziz 72 DTR 216 C.G.. The learned ARY had further submitted that she has mentioned that he runs the shop of boutique and the learned AO has failed to mention the name of the business. 12 ITA No. 92/BIL/2017 A.Y.2011-12 After considering the rival submission I find that Smt. Ekta Jain had filed her return of income on 26.03.2012 and her statement was recorded by the AO on 07.03.2014. She has claimed to have shown the income of Rs. 2,77,462/- as total income for A.Yr. 2011-12 and deposited the cash in her account on 28.03.2011. She had also filed with her return of income the details of computation of income capital account as on 31.03.2011 and balance sheet. The opening balance brought forwarded in the capital account was Rs. 689510/- and after addition of income and interest she had withdrawn Rs. 30000/- for house hold expenses and Rs. 34631/- for LIP. There is no other withdrawal from the capital balance. Since the out going is only Rs. 64631/ the cash and bank amounting to Rs. 1,28,261/- in the balance sheet does not justified in any way that she had advanced Rs. 5,00,000/- to the assessee, even though she had mentioned Rs. 5,54,000/- on asset side of her balance sheet and advance of Rs. 170,000/-. Since the opening capital was Rs.689510/- as on 01.04.2010 and NSC investment was only Rs. 1,00,000/- the available opening balance is reduced to 589510/- and out of this she had deposited cash in the bank amounting to Rs. 5,00,000/- leaving behind only 89,510/-, apart from the current year incomes. After analyzing the factual position it is clear that there was no withdrawal shown by her in her capital account. Whereas she had claimed deduction under chapter VI A for NSC of Rs. 50,000/- which is not disclosed by her as withdrawal from her capital account even when she had shown the amount invested in LIP of Rs. 34631/ from the capital account. The lender is certainly not Smt. Ekta Agrawal but some else because in section 80C deduction can be claimed by any dependent if NSC is purchased by a person. The LIP had been disclosed but NSC has not been disclosed by the lender whereas no loan has been shown in the withdrawal from the capital account for the investment made by her but in balance sheet sho has shown loan of Rs,. 5,54000/- in the name of M.K. Dulhani. From the sequence of even of cash deposit in the bank and filing of income tax return and then recording of statement it is not established that she has advanced money from her capital account. The learned AR had submitted only the front page of the passbook but the transaction part of the bank statement has not been submitted either on page 9 or 10 of his paper book. Hence the identity and genuineness of the transaction alongwith credit worthiness are not proved by the assessee. To this extent the observation of the learned AO is corrected. 13 ITA No. 92/BIL/2017 A.Y.2011-12 (b) In case of M.P. Modi, HUF the AO has recorded the statement of Karta Shri Ramesh Kumar and in para 7 of his assessment order the AO reached to the conclusion that the money belongs to the assessee himself and it had been deposited in the bank accounts of different persons and the same came back in the form of loan. The statement shows that the HUF has advanced Rs. 2,00,000/-.The brought forward balance in the bank account before 26.03.2011 was Rs. 13162/- only and on 26.03.2011 cash of Rs. 2,00,000/ was deposited and on 28.03.2011 the cheque of Rs. 2,00,000/- had been issued to the assessee. He does not maintain any books of account. The learned AR had given only front page of passbook at page 19 in which HUF has been mentioned to be engaged in service and on page 17 there is statement pertaining to different banks account has been furnished during appellate proceedings. The learned AR did not give the details of 1,57,255/ which is appearing as brought forward on 08.03.2011 on page 17 of the paper book and show is the case page 18 submitted by him. The HUF has claim to be earning agricultural income and bonus on paddy has been credited in the account on page no. 17 of the paper book Rs. 2,00,000/- has been deposited in the account as appearing on page 18 of paper book. An important fact which is apparent on page 17 and 18 of the paper book that both the pages are not showing the details of opening balance and page no.. 19 of paper book Mr. Mahaveer Prasad, HUF has been shown as doing service. There are several entries in account placed on page no. 17 wherein bonus on paddy has been credited but there is cut and paste photo copy appears on page 18 which shows the deposit of cash Rs. 2,00,000/- on 26.03.2011 and issuance of the cheque on 28.03.2011. On page 17 of paper book details are available up to 06.07.2011 whereas on page 18 the deposit of Rs. 2,00,000/- is shown on 26.03.2011. It appears that these are two different accounts and the dates are not tallying at all and only entries are tried to be submitted during appealing proceedings. The effort of learned AR is defeated because in the ledger account there are two entries amounting to Rs. 1,50,000/- and Rs. 2,00,000/- of the so called lender M.P. Modi, HUF the Karta of which is Ramesh Kumar. He had issued cheque NO. 756531 and cheque No. 513867 on 28.03.2011 as per account appearing on page 16 of the paper book. In absence of detail in the bank statement and occupation of service with statement recorded by the AO showing only agriculture income and submission of two separate accounts during appellate proceedings with two separate accounts and cheque no, are also having wide gap with the cheque book. In these facts and circumstances of the case and material submitted during the appellate proceedings I hold that not only genuineness as mentioned by the AO in his 14 ITA No. 92/BIL/2017 A.Y.2011-12 assessment order even the identity and capacity of the lender could not be proved by the assessee. To this extent the observation of the AO is corrected. (c) In case of Preeti Dubey the learned AR has submitted during appellate proceedings the statement recorded by the learned AO on page 20 to 23 in the paper book. The amount is stated to be given of Rs. 4,00,000/-. She has deposited 4,00,000/- on 26.03.2011 and issued the cheque in favour of the assessee. She has shown the income u/s 44AD and miscellaneous gift including interest. In the capital account for A.Yr. 2009-10 and 2010-11 she had shown investment in business and cash and other assets Rs. 3,77,500/ and Rs. 501250/- respectively and for A.Yr. 2011-12 the investment in business has reduced to Rs. 98640/- cash and other assets had also been reduced to 136871/- and she has shown name of Mahesh Kumar Duhlani amounting to Rs. 4,00,000/-. In A.Yr. 2010-11 cash and other assets has been disclose by the lender without bifurcation to the extent of Rs. 375890/- and business income had been shown for A.Yr. 2011-12 at Rs. 181250/- and other income of Rs. 38000/- with investment in business of Rs. 88650/- only she had earned Rs. 162500/- business income and with investment of Rs. 125360/- she had earned 168750/- business income respectively in A.Yr. 2009-10 and 2010-11 and with investment of 98640/- she had earned 181250/- as business income. On 26.03.2011there is cash deposit of Rs. 4,00,000/- and on 28.03.2011 there is withdrawal of Rs. 30000/- and cash deposit of Rs. 30000/- and issuance of the cheque on the same date 4,00,000/ . After that up to 20.06.2013 there is no deposit made by the lender exceeding Rs. 5500/-. This case is squarely covered by the Kushal Manhar case decided by Hon'ble Chhattisgarh High Court because the opening of the account is dated 24.03.2011 and transaction of huge amount with the credit entries is less than Rs. 5500/- for more than two years show that such conduct of the lender is not favoring the case of the assessee so for as capacity and genuineness is concerned and the capital account available on page 24, 25 and 26 do not establish that lender can be held as having capacity. Thus I hereby confirmed the addition made by the AO and hold that the money belongs to the assessee which had been deposited by him in different account and the persons produce before the AO could not establish that they could have capacity to advance the money. (d) In case of Shri Ramesh Kumar Modi the learned AR enclosed the statement and which is placed on page 32 to 33 of the paper book. Shri Ramesh Kumar Modi has deposed before the AO as Karta of Shri M.P. Modi and in capacity of individual. In case of HUF I have analyze the facts of the 15 ITA No. 92/BIL/2017 A.Y.2011-12 case here and above and in capacity of the individual he has stated before the AO on page no. 31 of the paper the book that he earn the income as a counsel of commercial tax and interest income. On Page 32 he has stated to have deposited Rs. 3,00,000/- on 26.03.2011. The front page of pass book of Shri Ramesh Kumar Modi shows that he is doing service whereas in the statement recorded he is engaged as counsel. On 28.03.2011 the amount is credited in the books of account of the assessee. On 26.03.2011 cash transaction charges of Rs. 200/- had been debited with auto sweep of Rs. 2,95,000/- and on 28.03.2011 Rs 4,50,000/- has been debited followed by auto sweep credit from different MODS. The auto sweep on 26.03.2011 which is a debit entry shows that Shri Ramesh Kumar Modi had FFD of Rs. 4,53,000/- only and what did he do of Rs. 2,95,000/- is not clear because it is a debit entry. The page 38 of the paper book does not establish that the state of affairs as on 26.03.2011could be interpret in favour of the assessee. The learned AR has also tried to reconcile. In these facts and circumstances of the case I do not have any hesitation that amount credited in the books of the assessee as on 28.03.2011 had been explained at all. Thus the capacity identity and genuineness are not established in the light of facts and circumstances of the case and facts emerging from material submitted before the undersigned. The made by the AO is hereby confirmed. (e) In case of Shri Ram Nivas Agrawal, HUF the AO has discussed the issue on page on 5 of his assessment order. the AO has found that on 28.03.2011 Rs. 3,00,000/- had been deposited in saving bank account in cash and on the same day by the way of RTGS charges of Rs. 25/- by issuing of cheque the HUF transferred the amount to the assessee. The learned AO has discussed that out of gross receipt of 9,90,500/- shown by the assessee majority had been has been received from M/s B.B. Verma. No credit entry of such receipt has been shown by the HUF in the form of clearance of cheque or draft. Thus even if the learned AR had submitted in paper book page 40 the statement as recorded by the learned AO. Shri Ram Nivas Sharma has disclosed the income u/s 44AD. On page 47 of the paper book there is no withdrawal in the form of loan to Mahesh Kumar Duhlani in the capital account but in the balance sheet he is showing Rs. 3,00,000/- amount in the name of M.K. Duhlani. During the year business income is 156500/- and interest income of Rs. 137500/- and interest on NSC Rs. 30025/- cash in hand is 168576/-. Rs. 5,12,465/- appears as asset with B. B.Verma. The learned AR has submitted during the appellate proceedings that in view of the facts discuss and material submitted n the form of paper books the capacity is established and requested to delete the addition. 16 ITA No. 92/BIL/2017 A.Y.2011-12 I have carefully considered the facts that the HUF is engaged in petty contract work majority of receipt is from M/s B.B. Verma. The amount which had been shown as asset by the HUF of Rs. 512465/- is part of the amount retained by the M/s B.B. Verma. Stock is shown as 160000/- and investment in NSC amounts to Rs. 3,50,000/- as there is no mentioned in the capital account as to have withdrawn the money for advancing the loan to the assessee in the capital account and showing income from all scours in the capital account with house hold expense with income tax amounting to Rs. 30773/- only the omission of the entry for withdrawing amount for the assessee is not an ordinary happening when on page no 42 of the paper book. the Ram Nivas has stated that old saving in the form of cash was available with him which he had deposited in the bank amounting to Rs. 3,00,000/-. The opening balance of capital as on 01.04.2010 stands to Rs. 1631742/-. In the light of facts emerging from the material I do not find any infirmity in the conclusion of the AO that it is the money of the assessee which has deposited in the different account because out of opening balance of 16,31,742/- the amount as cash in hand could not be substantiated by the lender despite his claim to have deposited and when the most of the capital had remained with M/s B.B. Verma, Jawahar Lal Agrawal and petty advance with stock of Rs. 1,60,000/-. The addition made by the AO is hereby confirmed. (f) In case of Smt. Sharda Devi Agrawal the statement of Shri Ram Nivas the karta of M/s Ram Nivas HUF is important on page 43 of the paper book. Shri Ram Nivas has stated that Smt. Sharda Devi Agrawal is his daughter in law and Smt Ekta Agrawal at S1 no. 1 as the lender is the wife of Shri Vikas agrawal who is father of Smt Sharda Devi Agrawal. The most of the amount received by the assessee by loan in coming from two families and all have deposited cash in their accounts before advancing loan to the assessee. The opening capital balance of Smt. Sharda Devi Agrawal is 25,41,600/- and house hold withdrawal including LIP is only Rs. 92,194/- and in the capital account there is not a single name for whom the money stated to have been withdrawan. She is having 3,47,064/- with Jawahar Lal Agrawal. Rs. 678840/- with Jawahar Lal Agrawal, HUF Rs 5,23,250/- with J.P. Mittal and Rs. 2,38,043/- cash in hand. There is a TDS made by the depositors but the learned AO when asked during appealate proceedings that she had given in the balance sheet that most of the amount had been with third parties and which party has repaid to Smt. Sharda Devi Agrawal in cash which had been deposited by her in the bank account on 25.03.2011 17 ITA No. 92/BIL/2017 A.Y.2011-12 amounting to Rs. 3,00,000/- in cash. The learned AO had given and evasive reply. After analyzing the facts and above and emerging from the material submitted before me I hereby confirm the addition made by the AO and hold that the money belongs to the assessee which has been receipt in the garb of loan. (g) In case of Smt Urmila Agrawal, she is related to Shri Ramesh Kumar Modi and M.P. Modi, HUF as her addresses 16/268, Pusp Kunj, Vidya Nagar, Bilaspur. She has stated to have been sailing domestic products and earning commission form LIC. She has deposited Rs. 3,00,000/- on 26.03.2011 and advance the loan to the assessee on 28.03.2011 amounting to Rs. 3,00,000/ on page 70 of the paper book the learned AR has enclosed her bank account on 17.06.2010 she had deposited Rs. 2,00,000/- and she had advanced money on 19.06.2010 to some Vandana. After that only income tax refund and interest has amount has been credited and on 14.03.2011 she has credited non MIC outward amount of Rs. 25600/- and on 26.03.2011 she has deposited cash Rs. 3,00,000/- and advanced. There had been several entries of credit and withdrawals as the facts revealed in page no.71 of the paper books except cash deposit on 17.06.2010 and on 28.02.2008 she had deposited cash on 26.03.2011. These are the factual position that in last three years she had deposited cash only three times and issued the cheques and after 28.03.2011there is no deposited of cash. All amounts had been either credited by clearance or by cheque or by way of transfer from different persons and two different persons. The cash in hand with the lender whose statement has been recorded by the learned AO could only have cash by way of repayment made by either form Vandana as she is debtor from 19.06.2010 or Nalohia who is debtor from 22.02.2008. But both the amounts club together are Rs. 3,50,000/- which shows that the money had not been advanced from the past savings but form the current income of the lender and in absence of books of account evidence for identity, capacity and genuineness can not be stated to be helpful. For deposit of cash in case of user of the cheque the evidence has to be such which such requires the urgency and availability of the cash with the lender. Thus, the facts emanating from the material available on record I do not find any infirmity in the observation of the AO that the money deposited in different accounts is of the assessee which is routed back in the garb of loan. Thus, as discussed here in above the ground of appeal of the assessee is dismissed. 18 ITA No. 92/BIL/2017 A.Y.2011-12 5. We have heard both the parties, perused materials available on record. During the last hearing the original case records were called for to confirm whether the ld. AO has received the details and confirmation from the all the seven creditors whose unsecured loan is added under section 68 in the assessment order. The DR has confirmed that the all the seven persons have confirmed the fact that they have given the loan to the assessee and have also filed the required details during the assessment proceeding which is not disputed by the either party. 6. The ld. AR appearing on behalf of the assessee submitted that assessing officer has accepted the identity and genuineness but doubted the capacity whereas the ld. CIT(A) has in case of many depositors doubted even the identity and genuineness also. The ld. AR of the assessee submitted that in the subsequent year the assessee has paid the interest and even the TDS has been deducted and this fact is not disputed by ld. DR. The ld. AR further submitted a) assessee has discharged burden of proving identity, credit worthiness and genuineness of transaction b) All seven persons examined by the assessing officer c) All seven persons are assessed to Income Tax 19 ITA No. 92/BIL/2017 A.Y.2011-12 d) All the depositor has paid the amount by an account payee cheque e) In all the case merely rejected the explanation f) AO has given his findings only in respect of Ekta Agarwal and Ram Niwas Modi and in respect of rest of depositor merely general findings were given. g) The AO has merely based on the fact that the depositor has deposited the money into cash before the money has been given to the assessee. h) Prudent businessmen will not keep the cash at home and the amount of cash deposit is not shown in the capital account cannot be a reason to make the additions. i) All the depositor has enough capital and relevant details were filed before the AO. They have also advanced money to other parties. j) In case amount is given out of FDR swap and the depositors spouse is also a earning family members. k) The ld. AR of the assessee has relied upon the following judicial pronouncements i) Section 68 – No satisfaction 20 ITA No. 92/BIL/2017 A.Y.2011-12 - Barring Ekta & Ramniwas no discussion in the order ii) On discharge of burden Pawankumar Agarwal – CG HC [ Concluded assessment has bearing ] Abdul Aziz CG HC [ AO has not made any independent enquiry to disprove the credit worthiness ] Shri Koushal Agarwal – ITAT Raipur bench [ if the revenue alleges that what is apparent is not read, then onus is upon revenue which the revenue has failed to discharge] P K Noorjahan [ Cash deposited into Bank ] Kalyan Memorial Charitable Trust- ITAT Agra Bench Bhagwandas Sharda [ Deposit of cash on same day may create suspicion but not proved] Umesh Electricals – ITAT Agra [ Deposit of cash on same day in Bank account does not mean that those transactions is not genuine] Based on the above set of arguments and heavily relying upon the decision of the Hon’ble jurisdictional High Court in the case of Shri Pawankumar Agarwal Vs. ITO ward 2 (2) Bilaspur in Tax No. 24 of 2011submitted that the addition made by the assessing officer being on the similar set of facts be deleted. 7. Per contra the ld. DR has heavily relied upon the findings of the ld. AO and the ld. CIT(A) and has admitted that in case of Ms. Ekta Agarwal the finding of the ld. CIT(A) is wrong on fact that the identity 21 ITA No. 92/BIL/2017 A.Y.2011-12 and genuineness of the transaction along with credit worthiness are not proved by the assessee. The ld. DR has not controverted any of the observations and plea submitted by the ld. AR of the assessee and has relied on the finding that the capacity of the depositors is not proved by the assessee. He has also not supported any judicial pronouncement in support of the contentions and has not countered any of the arguments placed by the ld. AR except the finding of the AO that in some case capacity of the depositor is not apparently proved. 8. We have heard the rival contention and also persuaded the written submission along with the evidences placed on record by the ld. AR of the assessee. It is not disputed by both the parties that all the seven depositors have confirmed before the assessing officer of having been given the deposit to the assessee. They have also submitted the details called for from all these persons wherein the confirmation of loan, bank statement and details of their ITR is placed on record and the same is not disputed. Merely in some of the depositor the cash has been deposited for which the depositor has substantiated their source but the assessing officer has merely the cash been deposited doubted 22 ITA No. 92/BIL/2017 A.Y.2011-12 their credit worthiness of the depositors. We have also gone through the finding of the ld. CIT(A) as extracted here in above. 9. Since, the Hon’ble jurisdictional high court has already held that when the primary onus is discharged by filling the required details on records then the department has to prove that the money is not belonging that person but of the assessee. All the depositor has appeared by the AO and based on the chart presented by the ld. AR as extracted here in below : 23 ITA No. 92/BIL/2017 A.Y.2011-12 Based on the above findings of facts placed on record by the assessee and not controvert by the ld. DR, we are of the considered view that the assessee has primarily discharged his onus and respectfully following the decision of the Hon’ble jurisdictional High Court in the case of Shri Pawankumar Agarwal Vs. ITO ward 2 (2) Bilaspur in Tax No. 24 of 2011 the addition made by the assessing officer to the extent of Rs. 25,00,000 is hereby deleted. Thus, the Ground no. 1 & 2 raised by the assessee is allowed in terms of the above observations. 10. As regards the ground no. 3 raised by the assessee in connection with the write off an amount of Rs. 17,26,809/- as bad debts amount being the sum reflected in the account as security deposit(SD)/ earnest money deposit(EMD) which the assessee has written in the books which the assessing officer disallowed. Aggrieved from the said addition the matter was carried before the ld. CIT(A) where the assessee did not get favour. The ld. CIT(A) has observed that the department cannot be allowed to tax the amount when the security deposit is received by the contractor and following the same analogy it has been held that if the department cannot tax security deposit received by the assessee from the contractee, assessee cannot be 24 ITA No. 92/BIL/2017 A.Y.2011-12 permitted to debit it in profit and loss account because the SD/EMD is capital receipt by its own nature and thus based on these contentions the addition was confirmed by the ld. CIT(A). 11. Before us, the ld. AR of the assessee submitted the assessee is contractor and has worked for various agencies. In the books he has shown that up to last year a sum of Rs. 17,26,809/- were carried under the head SD/EMD/WITHHELD as receivable SD/EMD totaling to Rs. 98,79,802/- along with various other parties. An amount of Rs. 17,26,809/- was write off in the books under the head written off as bad debts which has been disallowed and disputed by the assessee as ground no. 3. The ld. AR of the assessee also submitted that the amount in dispute was write as not receivable on account of the fact that SD/EMD with CG Housing Board was forfeited for various possible reasons as delay in work or quality of work and the amount which is part of work executed shown in the books as receivable and subsequently when it is turned as not receivable the same is written off in the books and it is revenue expenditure. In addition, the ld. AR of the also relied upon the decision in the case of M/s. Pyoginam Delhi Vs. Addl CIT in ITA no. 4273 order dated 11.02.2010 it is held that 25 ITA No. 92/BIL/2017 A.Y.2011-12 “Forfeiture of earnest money deposit for non-fulfillment of the export quota is neither penalty nor capital expenditure but is in the nature of business loss allowable as a deduction. Whereas in the case of DCIT Vs. Ebony Retail Holdings in ITA 2825/Delhi/2014 dated 20.08.2020 it has been held that AO did not rebut the submissions of the assesse to prove that security deposit was forfeited which is a business loss as the same was arising out of the business activities of the assessee. 12. Au contraire the ld. DR relied on the findings of the ld. AO and CIT(A) and supported his orders. The ld. DR further did not controvert any decision in this regard so as why the said claim is not allowable. He has also submitted that assessee has not submitted why the same is not receivable and write off in the books. 13. We have considered the rival submission and material placed on records and based on the findings of the various orders of the co- ordinate bench of the ITAT we find that the amount of SD/EMD write of by the assessee to the extent of Rs. 17,26,809/- is revenue expenditure and the reasons is also substantiated that it is nothing but an amount kept out of the work done amount as security deposit and 26 ITA No. 92/BIL/2017 A.Y.2011-12 the same amount on write off just as bad debt written off is allowable as expenses. Considering the set of facts and amount being shown in the books in earlier year as receivable and write off in the year as amount not receivable is revenue expenditure and allowable as such. Thus, Ground no. 3 raised by the assessee is allowed. 14. In the result, the appeal of the assessee is allowed. Order pronounced in open court on 9 th June, 2022. Sd/- Sd/- RAVISH SOOD RATHOD KAMLESH JAYANTBHAI JUDICIAL MEMBER ACCOUNTANT MEMBER रायप ु र/ RAIPUR ; Ǒदनांक / Dated : 9 th June, 2022 Ganesh Kumar आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G) 4. The Pr. CIT-1, Raipur (C.G) 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण,रायप ु र बɅच, रायप ु र / DR, ITAT, Raipur Bench, Raipur. 6. गाड[ फ़ाइल / Guard File. आदेशान ु सार / BY ORDER, Ǔनजी सͬचव / Private Secretary 27 ITA No. 92/BIL/2017 A.Y.2011-12 आयकर अपीलȣय अͬधकरण, रायप ु र / ITAT, Raipur. Date 1 Draft dictated on Sr.PS/PS 2 Draft placed before author Sr.PS/PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order