Shri. H. Ibrahim, Shimoga V. ITO, Shimoga

ITA 965/BANG/2010

• Counselvise Citation: 96521114 RSA 2010
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-01-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 05-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MEERA SRIVATSAV JT
• Assessee Lawyers: V SRINIVASAN
• Keywords: Unexplained cash credit; Source of fund

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO.965/BANG/2010 ASSESSMENT YEAR : 2005-06 SHRI H. IBRAHIM, EXCISE CONTRACTOR, KOTE POST OFFICE ROAD, SHIMOGA. PAN : AAFPI 1390A VS. THE INCOME TAX OFFICER, WARD 1, SHIMOGA. APPELLANT RESPONDENT ITA NO.1039/BANG/2010 ASSESSMENT YEAR : 2005-06 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1, SHIMOGA. VS. SHRI H. IBRAHIM, EXCISE CONTRACTOR, KOTE POST OFFICE ROAD, SHIMOGA. PAN : AAFPI 1390A APPELLANT RESPONDENT ASSESSEE BY : SHRI V. SRINIVASAN, C.A. REVENUE BY : SMT. MEERA SRIVATSAV, JT. CIT(DR) DATE OF HEARING : 04.01.2012 DATE OF PRONOUNCEMENT : 13.01.2012 ITA NOS.965 & 1039/BANG/10 PAGE 2 OF 22 O R D E R PER N.K. SAINI, ACCOUNTANT MEMBER THESE CROSS APPEALS BY THE ASSESSEE AND THE DEP ARTMENT ARE DIRECTED AGAINST THE ORDER DATED 7.6.2010 OF CIT(AP PEALS), HUBLI. 2. THE BACKGROUND OF THIS CASE IS THAT THE ASSESSEE FILED HIS RETURN OF INCOME ON 15.12.2005 DECLARING AN INCOME OF RS.2,97 ,130 AND AGRICULTURAL INCOME OF RS.18,10,367, HOWEVER, THE ASSESSMENT WAS FRAMED AT AN INCOME OF RS.58,97,130 VIDE ASSESSMENT ORDER DATED 31.12.2007. AGAINST THE SAID ASSESSMENT ORDER, THE ASSESSEE PREFERRED A N APPEAL TO THE LD. CIT(APPEALS), WHO NOT ONLY CONFIRMED THE ADDITION M ADE BY THE AO, BUT ALSO ENHANCED THE ADDITIONS VIDE ORDER DATED 27.3.2 008. THE SAID ORDER WAS ALSO PASSED EX PARTE. 3. AGAINST THE AFORESAID ORDER DATED 27.3.2008 PASS ED BY THE LD. CIT(APPEALS), HUBLI, THE ASSESSEE PREFERRED AN APPE AL IN ITA NO.1109/BANG/2008 TO THE ITAT B BENCH, BANGALORE, WHEREIN VIDE ORDER DATED 26.6.2009, THE MATTER WAS REMANDED BACK TO TH E LD. CIT(A) TO DECIDE THE ISSUE AFRESH AFTER AFFORDING OPPORTUNITY OF BEI NG HEARD TO THE ASSESSEE. THEREAFTER, IN COMPLIANCE OF THE AFORESAID ORDER OF THE ITAT, THE LD. CIT(A) DECIDED THE CASE VIDE IMPUGNED ORDER DATED 7.6.2010 . THE LD. CIT(A) ALLOWED RELIEF OF RS.18.50 LAKHS TO THE ASSESSEE OU T OF THE ADDITION OF RS.29 LAKHS MADE BY THE AO ON ACCOUNT OF CASH DEPOSIT IN BANK. ANOTHER ADDITION MADE BY THE AO AMOUNTING TO RS.27 LAKHS WA S DELETED BY THE LD. CIT(A). NOW BOTH THE PARTIES ARE IN APPEAL. ITA NOS.965 & 1039/BANG/10 PAGE 3 OF 22 4. THE GROUNDS RAISED BY THE ASSESSEE IN ITA NO.965 /B/10 ARE AS UNDER: 1. THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR AS THEY ARE AGAINST THE APPELLANT ARE OPPOSED TO LAW, EQUITY, W EIGHT OF EVIDENCE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT[A] IS NOT JUSTIFIED IN SUSTAINI NG THE DISALLOWANCE OF RS. 10,50,000/- OUT OF THE TOTAL DISALLOWANCE OF RS. 29,00,000/- MADE IN RESPECT OF THE CASH DEPOSITED IN THE BANK ACCOUNT UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE. 3. THE LEARNED CIT[A] IS NOT JUSTIFIED IN UPHOLDIN G THE ACTION OF THE LEARNED A.O. IN REFUSING TO GIVE CREDIT FOR TAX COLLECTED AT SOURCE OF RS. 5,007/- UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE. GROUNDS NOT URGED BEFORE THE LEARNED CIT[A] 4. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER W ITH THE HON'BLE C.C.I.T./D.G. THE APPELLANT DENIES HIMSELF LIABLE TO BE CHARGED TO INTEREST U/S. 234-A AND 234-B OF THE ACT , WHICH UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT 'S CASE AND THE LEVY DESERVES TO BE CANCELLED. 5. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT HUMBL Y PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLANT MAY BE AWARDED COSTS IN PROSECUTING THE APPEAL AND ALSO ORDER FOR THE REFUND OF THE INSTITUTION FEES AS PAR T OF THE COSTS. 5. THE GROUNDS RAISED BY THE DEPARTMENT IN ITA NO.1 035/B/10 READ AS UNDER: 1) THE LEARNED CIT(APPEALS) FAILED TO APPRECIATE T HE FACTS AND CIRCUMSTANCES OF THE CASE, IN ITS PROPER PERSPE CTIVE. THE ORDER OF THE CIT(APPEALS) IS BAD IN LAW AND OPPOSED TO THE FACTS OF THE CASE. 2) THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S OF THE CASE IN RESTRICTING THE ADDITION ON ACCOUNT OF UNEX PLAINED CASH CREDITS TO RS.10.50 LAKHS AS AGAINST THE ADDITION O F RS.29 LAKHS ITA NOS.965 & 1039/BANG/10 PAGE 4 OF 22 MADE BY THE ASSESSING OFFICER. THE LEARNED CIT(A) O UGHT NOT TO HAVE ACCEPTED THE CONTENTION OF THE ASSESSEE THAT H E HAD CASH BALANCE OF RS.41LAKHS AS ON 01/04/2004 BEING ACCUMU LATED AGRICULTURAL INCOME OF EARLIER YEARS, WHICH REMAINS UNSUBSTANTIATED, FOR ALLOWING RELIEF OF RS.18.50 LA KHS. 3) IT IS MANIFEST AND APPARENT FROM THE ORDER OF T HE ASSESSING OFFICER(AO) ITSELF, THAT BEFORE THE ASSESSING AUTHO RITY, THE ASSESSEE FAILED TO ADDUCE ANY SORT OF EVIDENCE TO T HE EFFECT THAT THE SUM OF RS.40 LAKHS WAS BORROWED FROM S/SHRI.AFS ARDAS AMARLAL AND AVINASH AMARLAL AND WAS ADVANCED TO M/S .MITRA TRADERS. THE LEARNED CIT(APPEALS) ERRED IN GIVING R ELIEF TO THE ASSESSEE ON THE BASIS OF TRANSACTION SAID TO HAVE B EEN MADE BY THE ASSESSEE WITH M/S.MITRA TRADERS. 4) THE LEARNED CIT(APPEALS) IGNORED THE FACT THE A O HAS MADE IT CLEAR IN THE ASSESSMENT ORDER ITSELF THAT I F THE ASSESSEE'S TRANSACTIONS WITH S/SHRI.AFSARDAS AMARLAL AND AVINA SH AMARLAL AND THE ALLEGED ADVANCE TO M/S.MITRA TRADERS, WERE TO BE CONSIDERED AS TRUE, THE BALANCE OF RS.27 LAKHS SAID TO HAVE BEEN OUTSTANDING OUGHT TO HAVE BEEN REFLECTED IN THE ASS ETS' SIDE OF THE BALANCE SHEET OF THE ASSESSEE AS AT 31/03/2005. 5) THE WRITTEN SUBMISSIONS ALONG WITH DOCUMENTARY EVIDENCES MADE ON 20/01/2010 AND ON 28/05/2010 BY T HE ASSESSEE BEFORE THE CIT(APPEALS) HAVE NOT BEEN MADE AVAILABLE TO THE AO. THUS THE AO WAS DENIED AN OPPORTUNITY TO EXAMINE THE ISSUES RAISED AND THE FRESH EVIDENCE PRODUCED B Y THE ASSESSEE BEFORE THE CIT(APPEALS). ADMISSION OF SUCH EVIDENCE IS SUBJECT TO PROVISIONS OF RULE 46A OF THE RULES AND NO OPPOR TUNITY WAS GIVEN TO THE AO TO EXAMINE THE EVIDENCE OR TO PRODU CE ANY EVIDENCE IN REBUTTAL TO THE EVIDENCE PRODUCED BY TH E ASSESSEE. THE ACTION OF THE CIT(APPEALS) WAS NOT IN CONFORMIT Y WITH THE PROVISIONS OF THE ACT AND ALSO THE RULES AND THE LE ARNED CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.27I AKHS. RELIANCE IS PLACED ON THE JUDGMENTS IN: 1. CIT VS RANJIT KUMAR CHOUDHURY (2007) 288 ITR 0179 (GAUHATI) 2. SARDARNI UTTAM KAUR EDUCATIONAL SOCIETY VS CIT (2009) 220 CTR 0601 (P&H) 6) IT IS PRAYED THAT THE HON'BLE ITAT BE PLEASED T O CONSIDER THAT THIS IS A FIT CASE TO BE REMANDED FOR PROPER A DJUDICATION BY FOLLOWING THE ESTABLISHED PROCEDURE LAID DOWN UNDER RULES 46A(1), (2) AND (3) OF THE I T RULES, 1962 . ITA NOS.965 & 1039/BANG/10 PAGE 5 OF 22 7) THE APPELLANT CRAVES TO LEAVE, ADD, ALTER, AMEN D OR DELETE ANY OTHER GROUNDS ON OR BEFORE HEARING OF APPEAL. 6. AT THE FIRST INSTANCE, WE WILL DEAL WITH THE APP EAL OF THE ASSESSEE IN ITA NO.965/B/10. 7. GROUND NOS. 1 & 5 ARE GENERAL IN NATURE, SO DO N OT REQUIRE ANY COMMENTS ON OUR PART, WHILE GROUND NOS. 3 & 4 WERE NOT PRESSED, AS SUCH THOSE ARE DISMISSED AS NOT PRESSED. NOW THE ONLY G ROUND FOR ADJUDICATION REMAINS GROUND NO.2, WHICH RELATES TO SUSTENANCE OF ADDITION OF RS.10,50,000 OUT OF DISALLOWANCE OF RS.29 LAKHS. ON THIS ISSUE, THE DEPARTMENT IS ALSO IN APPEAL VIDE GROUNDS NO. 2 & 3 FOR THE RELIEF GRANTED TO THE ASSESSEE, SO AT THE FIRST INSTANCE, WE WILL ADJ UDICATE THIS ISSUE RAISED BY THE ASSESSEE IN GROUND NO.2 AND BY THE DEPARTMENT I N GROUND NOS. 2 & 3. 8. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THA T THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HAD SEPARATE CASH CREDITS IN HIS BANK ACCOUNT MAINT AINED AT STATE BANK OF MYSORE AND THOSE CREDITS AGGREGATED TO RS.29 LAKHS. THE AO ASKED THE ASSESSEE TO EXPLAIN THE SOURCE OF THE SAME. IN RES PONSE, THE ASSESSEE STATED THAT A SUM OF RS.40 LAKHS HAD BEEN BORROWED FROM SHRI AFSARDAS AMARLAL AND SHRI AVINASH AMARLAL, THE SAID AMOUNT H AD BEEN TRANSFERRED TO M/S. MITRA TRADERS, AZAD ROAD, THIRTHAHALLI. IT WA S CLAIMED THAT M/S. MITRA TRADERS HAD RETURNED THIS AMOUNT WHICH APPEARED AS THE CASH CREDIT. THE ASSESSEE ALSO FURNISHED COPIES OF BANK ACCOUNT AND THE RECEIPTS & PAYMENTS ACCOUNT. FROM THE AFORESAID ACCOUNT, THE AO NOTICED THAT THE AMOUNT OF RS.39,94,950 APPARENTLY A NET OF THE FIR ST INSTALLMENT OF INTEREST ITA NOS.965 & 1039/BANG/10 PAGE 6 OF 22 AND BANK CHARGES HAD BEEN CREDITED TO THE ASSESSEE S ACCOUNT ON 5.10.04 AND ON THE SAME DAY THE ASSESSEE HAD TRANSFERRED TH ROUGH TWO CHEQUES AMOUNTING TO RS.20 LAKHS EACH TO M/S. MITRA TRADERS . ACCORDING TO HIM, THIS AMOUNT COULD NOT BE A SOURCE FOR THE EARLIER C REDITS WHICH APPEARED FROM 1.4.04 TO 4.10.04. HE FURTHER OBSERVED THAT M /S. MITRA TRADERS HAD RETURNED A SUM OF RS.4 LAKHS ON 5.11.04 APPARENTLY BY CHEQUE OR TRANSFER AND ON THE SAME DAY TWO DDS HAVE BEEN DRAWN FOR SUM OF RS.2,00,350 EACH AND SIMILARLY ON 10.12.04 A SUM OF RS.9 LAKHS HAD BEEN RECEIVED FROM M/S. MITRA TRADERS BY TRANSFER FROM THEIR CURRENT A CCOUNT AND ON THE SAME DAY, THERE WAS A DEBIT OF RS.9.01,575. THIS WAS A DD PAYMENT TO SHRI AMARLAL, APPARENTLY INCLUSIVE OF BANK CHARGES. THE AO WAS OF THE VIEW THAT THE CASH CREDITS BETWEEN 5.11.04 AND 18.11.04 COULD NOT BE EXPLAINED. THE AO FURTHER OBSERVED THAT THE CASH CREDIT IN THE ACCOUNT FROM 18.12.04 TO 31.3.05 WAS SOUGHT TO BE EXPLAINED OUT AS FUNDS RECEIVED FROM M/S. MITRA TRADERS. ACCORDING TO HIM, M/S. MITRA TRADER S WAS IN THE HABIT OF TRANSFERRING FUNDS INTO THE ASSESSEES ACCOUNT WHIC H WOULD HAVE BEEN EASIER OPTION AS WELL AS IN THE ABSENCE OF ANY CONF IRMATION FROM M/S. MITRA TRADERS REGARDING THE TRANSACTION, THE MERE ASSERTI ON OF THE ASSESSEE COULD NOT BE RELIED UPON. HE ACCORDINGLY MADE AN AD DITION OF RS.29 LAKHS. 9. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A ) AND FILED WRITTEN SUBMISSIONS DATED 20.1.10 AND 28.5.10 WHICH ARE REP RODUCED BY THE LD. CIT(A) AT PAGES 7 TO 11 OF THE IMPUGNED ORDER, THE SAME ARE AGAIN REPRODUCED VERBATIM AS UNDER:- ITA NOS.965 & 1039/BANG/10 PAGE 7 OF 22 SUBMISSION DATED:20.01.2010 'OUR APPEAL HAS BEEN REMANDED BACK TO CIT (APPEALS) FOR FRESH DISPOSAL. NOW, WE ARE MAKING THE FOLLOWING WRITTEN SUBMISSIONS. 1. THE LEARNED I.T.O. HAS ADDED BACK RS. 29,00,000 /- FOR THE REASON THAT THE CASH DEPOSITS IN STATE BANK OF MYSO RE IS NOT PROPERLY EXPLAINED. IN THIS CONNECTION, WE WANT TO SUBMIT OUR EXPLANATI ONS TO VARIOUS CASH DEPOSITS AS UNDER:- THE APPELLANT HAD AGRICULTURE INCOME OF EARLIER YEA RS AS UNDER: ASST. YEAR 2003-04 RS.26.46 LAKHS ASST. YEAR 2004-05 RS.29.981AKHS THE APPELLANT HAD CASH BALANCE OF RS. 41.00 LAKHS A S PER THE RECEIPTS AND PAYMENTS ACCOUNT AS ON 1-4-2004 AN D THIS FACT IS VERY CLEAR FROM THE RECEIPTS AND PAYMENTS ACCOUN T FILED. IN ADDITION, THE APPELLANT IS HAVING AGRICULTURE INCOM E OF ASST. YEAR 2005-06 RS. 18.10 LAKHS. THE CASH DEPOSIT OF RS.29. 00 LAKHS WAS MADE ON VARIOUS DATES, BUT OF THE OPENING CASH BALA NCE OF RS. 41.00 LAKHS AND CURRENT YEARS AGRICULTURE INCOME, T HE APPELLANT COULD EASILY DEPOSIT RS. 29.00 LAKHS TO THE BANK AC COUNTS. NOTWITHSTANDING THE ABOVE, THE DEPOSIT OF RS.29.0 0 LAKHS WAS NOT MADE ON A SINGLE DAY. THE DEPOSIT WAS MADE AT DIFFERENT DATES. THERE WERE CASH WITHDRAWALS ALSO BETWEEN THE TWO DATES OF DEPOSITS. SO, SUBSEQUENT DEPOSITS WOULD ALSO HAVE B EEN MADE OUT OF THE PREVIOUS WITHDRAWALS. HENCE, EACH DEPOSIT IS EXPLAINED IN THE ANNEXURE. 2. THE NEXT ADDITION MADE BY THE LEARNED ITO IS RE GARDING TRANSACTION WITH MITRA TRADERS. THE APPELLANT HAS M AINTAINED REGULAR BOOKS OF ACCOUNTS IN RESPECT OF HIS INDIAN MADE LIQUOR BUSINESS. THE BOOKS OF ACCOUNTS IN RESPECT OF AGRIC ULTURE INCOME AND OTHER TRANSACTIONS ARE NOT MAINTAINED. HOWEVER, A RECEIPTS AND PAYMENTS ACCOUNT IN RESPECT OF THE OTHER TRANSA CTIONS ARE PREPARED AND SUBMITTED TO THE ASSESSING OFFICER. THE APPELLANT HAS BORROWED RS.20.00 LAKHS EACH FR OM TWO LENDERS AFSARDAS AMARLAL AND AVINASH AMARLAL TOTALL ING ITA NOS.965 & 1039/BANG/10 PAGE 8 OF 22 RS.40.00 LAKHS. THE LEARNED ASSESSING OFFICER HAD A CCEPTED THE CASH CREDITS AS GENUINE. THE APPELLANT HAS LENT THIS RS.40.00 LAKHS TO MITRA TRADERS, THIRTHAHALLI, OUT OF THE AMOUNT BORROWED F ROM TWO LENDERS AS ABOVE. A LEDGER ACCOUNT IS DRAWN UP BASED ON RECEIPTS AN D PAYMENTS ACCOUNT, THERE WILL BE DEFINITELY A DEBIT BALANCE OF RS. 20.00 LAKHS IN THE ACCOUNT OF MITRA TRADERS AS UNDE R: LEDGER ACCOUNT OF MITRA TRADERS IN THE ACCOUNT OF H EBRAHIM IN RESPECT OF TRANSACTION OF LOAN FROM TWO PARTIES. DR. CR. 05.10.2004 TO CHEQUE 40,00,000.00 05.11.2004 BY PAYMENT TO ASADRAS AMARLAL AND AVINASH AMARLAL 4,00,000.00 25.11.2004 -DO- 4,00,000.00 06.12.2004 -DO- 4,00,000.00 27.01.2005 -DO- 4,00,000.00 28.02.2005 -DO- 4,00,000.00 31.03.2005 CLOSING BALANCE DR.4,00,000.00 ____________ ___________ 40,00,000.00 40,00,000.00 THE ENTIRE AMOUNT REPAID TO AFSARDAS AMARLAL AND AVINASH AMARLAL IS RECEIVED FROM MITRA TRADERS ONLY . HENCE, THE AMOUNT REPAID IS DULY EXPLAINED AND AS SUCH THERE IS NO REASON MAKE ADDITION OF RS. 27.00 LAKHS ON ACCOUNT OF TRANSACTION WITH MITRA TRADERS. IN SUPPORT OF THE A BOVE, WE ENCLOSE HEREWITH THE REVISED RECEIPTS AND PAYMENTS ACCOUNT AND LEDGER ACCOUNT OF MITRA TRADERS. THE LOAN GIVEN TO MITRA TRADERS AND LOAN RECEIVED BACK MITRA TRADERS HAS BEEN DULY REFLECTED IN THE RECEIP TS AND PAYMENTS ACCOUNT OR FUNDS FLOW STATEMENT ENCLOSED. UNDER THE ABOVE FACTS THE LEARNED ASSESSING OFFIC ER IS ERRED IN ADDING BACK RS.27.00 LAKHS AS THE BALANCE DUE FROM MITRA TRADERS DID NOT APPEAR IN THE BALANCE SHEET. SUBMISSION DATED:28.05.2010 ITA NOS.965 & 1039/BANG/10 PAGE 9 OF 22 '1. IN CONTINUATION OF OUR WRITTEN SUBMISSIONS, WE WANT TO MAKE FOLLOWING WRITTEN SUBMISSIONS IN RESPECT OF OBSERVA TIONS OF LEARNED INCOME-TAX OFFICER IN HIS ASSESSMENT ORDER. THE LEARNED I. T. O. HAS OBSERVED AS UNDER IN PAGE NUMB ER 2 OF HIS ASSESSMENT ORDER AS UNDER: 'IN RESPONSE, HE STATED THAT A SUM OF RS. 40,00,0 00/- HAS BEEN BORROWED FROM SRI.AFSARDAS AMARLAL AND SRI AVI NASH AMARLAL. THIS SUM HAD BEEN TRANSFERRED TO M/S. MITR A TRADERS, AZAD ROAD, THIRTHAHALII. IT WAS CLAIMED THAT M/S. M ITRA TRADERS HAD RETURNED THIS AMOUNT WHICH APPEARS AS THE CASH CREDIT. IN THIS CONTEXT, THE BANK ACCOUNT AND THE RECEIPT AND PAYME NT ACCOUNT WERE EXAMINED. IT IS SEEN THAT THE AMOUNT OF RS. 39 ,94,950/- APPARENTLY A NET OF THE FIRST INSTALMENT OF INTERES T AND BANK CHARGES HAS BEEN CREDITED TO THE ASSESSEE'S ACCOUNT ON 05-10- 2004. ON THE SAME DAY, THE ASSESSEE HAS TRANSFERRE D THROUGH TWO CHEQUE AMOUNTS OF RS. 20,00,000/- EACH TO M/S. MITR A TRADERS. APPARENTLY, THIS AMOUNT CAN NOT BE A SOURCE FOR THE EARLIER CASH CREDITS WHICH APPEAR FROM 01-04-2004 TO 04-10-2004' . THE SOURCES OF INVESTMENTS FOR VARIOUS CASH CREDI TS IN RESPECT OF AMOUNTS CREDITED IN THE BANK ACCOUNTS DU RING THE PERIOD 01-04-2004 TO 04-10-2004 ARE EXPLAINED AS UN DER. SBM A/C BELLARY NO. 101170065018 . 07-05-2004 RS.11,00,000/- - DEPOSITED OUT OF OP. CASH BALANCE OF RS. 41.00 LAKHS ACCUMULATED OUT OF AGRICULTURE INCOME OF EARLIER YEARS. 08-05-2004 RS. 6,00,000/- -DO- 04-10-2004 RS. 5,00,000/- DEPOSITED OUT OF RS.22,00,000/- WITHDRAWALS MADE BETWEEN 01-06-2004 TO 06-09-2004. TOTAL WITHDRAWALS RS. 1255000/- SBM A/C THIRTHAHALLI NO. 01190006317 03-07-2004 RS. 5,000.00 DEPOSITED OUT OF CURREN T YEARS AGRICULTURE INCOME AND EARLIER YEARS AGRICULTURE INCOME 30-08-2004 RS. 50,000.00 - DO - ITA NOS.965 & 1039/BANG/10 PAGE 10 OF 22 02-09-2004 RS. 50,000.00 - DO - 23-09-2004 RS. 30,000.00 - DO - RS.135,000.00 SBM A/C THIRTHAHALLI NO. 01150060270 27-04-2004 RS. 2,000.00 AGRICULTURE INCOME OF EARLIER YEARS RS. 13,000.00 - DO - 27-05-2004 RS.1,50,000.00 - DO - 17-06-2004 RS. 25,000.00 - DO - 18-06-2004 RS. 5,000.00 - DO - 03-06-2004 RS. 7,500.00 - DO - 31-07-2004 RS. 7,500.00 - DO - 02-08-2004 RS.1,00,000.00 DEPOSITED OUT OF WITHDR AWALS AT SBM RS.12,55,000.00 30-08-2004 RS. 12,500.00 -DO- 15-10-2004 RS. 1,50,000.00 -DO- RS. 4,72,500.00 RS. 2807500.00 TOTAL CASH DEPOSITS FROM 1-4-2004 TO 4-10-2004 SO, THE LEARNED ITO FINDING THAT CASH CREDIT MADE BETWEEN 1-4-2004 TO 4-10-2004 IS NOT EXPLAINED IS F ACTUALLY NOT CORRECT. THE DEPOSITS MADE IN THE ABOVE BANK ACCOUN TS ARE EXPLAINED AS ABOVE. THE ASSESSMENT ORDERS FOR THE ASST. YEAR 2003-04 AND 2004-05 ARE ENCLOSED, WHERE THE AGRICULTURE INCOME DISCLOSED IS REFERRED IN THE ASSESSMENT ORDER. 2. THE LEARNED I. T.O. OBSERVES AS UNDER: SIMILARLY, M/S. MITRA TRADERS HAS RETURNED A SUM OF RS.4,00,000/- ON 5-11-2004 APPARENTLY BY CHEQUE OR TRANSFER. ON THE SAME DAY, TWO DEMAND DRAFTS HAVE BEEN DRAWN AND SUMS OF RS.2,00,350/- EACH. APPARENTLY THIS INCLUDED BANK C HARGES FOR DRAWING THE DEMAND DRAFT. SIMILARLY, ON 10-12-2004 A SUM OF RS. 9,00,000/- HAS BEEN RECEIVED FROM MITRA TRADERS BY TRANSFER FROM THEIR CURRENT ACCOUNT. ON THE SAME DAY, THERE IS A DEBIT OF RS. 9,01,575/-. THIS IS A DD PAYMENT TO SRI AMARLAL, AP PARENTLY INCLUSIVE OF THE BANK CHARGES. THEREFORE, THE CASH CREDIT BETWEEN 5-11-2004 AND 18-11-2004 CAN NOT BE EXPLAINED BY ST ATING THAT THE SOURCE FOR THE SAME IS M/S. MITRA TRADERS. ITA NOS.965 & 1039/BANG/10 PAGE 11 OF 22 THE CASH DEPOSITS MADE DURING 5-11-2004 TO 18-11- 2004 IN BANK ACCOUNTS ARE EXPLAINED AS UNDER: A/C NO.01170065018 CASH DEPOSITS -NIL- A/C NO. 011900006317: 5-11-2004 RS. 4,00,000/- RECEIVED FROM MITRA TRAD ERS, WHICH HAS BEEN ACCEPTED BY LD. ITO 5-11-2004 RS. 10,000/- DEPOSITED OUT OF AGRICUL TURE INCOME OF CURRENT YEAR. 8-11-2004 RS. 15,000/- -DO- RS. 4,25,000/- A/C NO.01150060270 CASH DEPOSITS -NIL- 3. THE LEARNED I. T.O. FURTHER OBSERVES THAT CASH CREDITS IN BETWEEN 18-12-2004 TO 31-3-2005 IS NOT EXPLAINED. N OW, THE SOURCES OF DEPOSITS FOR VARIOUS CASH CREDITS ARE EX PLAINED AS UNDER. A/C NO. 01190006317 18-12-2004 RS. 9,00,000.00 AMOUNT RECEIVED BACK F ROM MITRA TRADERS. THE LEARNED ITO HAS MIS-QUOTED THE DATE AS 10-12-2004. 18-12-2004 RS. 2,000.00 CASH DEPOSITED OUT O F AGRICULTURAL INCOME 22-12-2004 RS. 7,000.00 -DO- 23-12-2004 RS. 11,000.00 -DO- 31-12-2004 RS. 6,000.00 -DO- 13-1-2005 RS. 7,500.00 -DO- 1-2-2005 RS. 25,000.00 -DO- 8-2-2005 RS. 10,000.00 -DO- 9-3-2005 RS. 7,500.00 -DO- 29-3-2005 RS. 2,000.00 -DO- 31-3-2005 RS. . 1,000.00 -DO- RS. 9,79,000.00 A/C NO. 01170065018 24-2-2005 RS.4,00,000.00 DEPOSITED OUT OF WITHDRA WALS FROM SBM A/C RS.12.55 LAKHS. 26-2-2005 RS.3,00,000.00 DEPOSITED OUT OF CURRENT YEARS AGRICULTURE INCOME. ITA NOS.965 & 1039/BANG/10 PAGE 12 OF 22 A/C NO. 01150060270 14-3-2005 CASH RS. 22,500.00 DEPOSITED OUT OF CUR RENT YEARS AGRICULTURE INCOME. SO, CONSIDERING THE ABOVE, WE SUBMIT THAT ALL CASH DEPOSITS ARE DULY EXPLAINED AND DEPOSITS ARE MADE OUT OF AGR ICULTURE SOURCES OF INCOME ONLY AND AMOUNT WITHDRAWN FROM BA NK ACCOUNTS. CONSIDERING THE ABOVE, WE REQUEST YOU TO KINDLY D ELETE THE ADDITION OF RS. 29.00 LACS AND OBLIGE. 4. THE LEARNED CIT (APPEALS), VIDE HIS ORDER DT:27 -3-2008 HAS ADDED BACK FOLLOWING ACCOUNTS. (A) LOAN BORROWED FROM AVINASH AMARLAL AND AFSARDAS AMARLAL RS. 40,00,000.00 IN THIS CONNECTION, WE SUBMIT THAT AVINASH AMARLAL AND AFSARDAS AMARLAL ARE REGULAR ASSESSEE AND THEIR INCOME-TAX P ARTICULARS ARE AS UNDER: SETH AFSARDAS AMARLAL AVINASH AMARLAL, 24/71, ARUNA BUILDING, 100/1, CITY CENTRE, J.C.ROAD, BANGALORE-2. OPP.TOWN HALL, J.C. ROAD, PAN NO. ADVPK6233F. BANGALORE-560 002. PAN NO. ABUPA 0267F AMOUNTS ARE RECEIVED THROUGH BANKING CHANNELS ONL Y AND THE AMOUNT IS CREDITED TO BANK ACCOUNT - SBM, THIRT HAHALLI ON 5- 10-2004 RS.40,OO,OOO/- LESS BANK CHARGES RS. 5050/- NET RS. 39,94,950/-. THE LEARNED I. T.O. AFTER VERIFYING TH IS ONLY HAS ACCEPTED THE LOANS BORROWED AS GENUINE. BUT, THE LE ARNED CIT (APPEALS), HAS NOT BROUGHT ON RECORD ANY ADVERSE MA TERIALS TO TREAT THE SAME AS UNEXPLAINED CREDITS. 5. THE LEARNED CIT (APPEALS), HAS TREATED AMOUNT R ECEIVED FROM MITRA TRADERS ON 5-11-2004 AS UNEXPLAINED CRED ITS. THIS AMOUNT IS RECEIVED FROM MITRA TRADERS AND THIS IS C LEARLY VISIBLE FROM PASS BOOK ENTRY ON SBM ACCOUNT NO. 01190006317 , WHERE MITRA TRADERS C/A NO.6040 IS WRITTEN. THIS IS ALSO CLEARLY DEBITED IN THE BOOKS OF MITRA TRADERS, WHERE RS.4,00,000/- IS DEBITED TO H.EBRAHIM ACCOUNT ON 5-11-2004. ITA NOS.965 & 1039/BANG/10 PAGE 13 OF 22 6. THE LEARNED CIT (APPEALS) HAS ADDED BACK RS. 9, 00,000/- AS UNEXPLAINED CASH CREDIT IN RESPECT OF DEBIT ENTR Y DT: 18-12- 2004. THIS AMOUNT IS ALSO RECEIVED FROM MITRA TRADE RS A/C NO. 6040 AND THIS FACT IS ALSO CLEARLY VISIBLE IN THE B ANK ACCOUNT, WHERE THE TRANSFERORS ACCOUNT IS NUMBER AS WRITTEN AS 6040 AND THIS IS ALSO DEBITED IN BOOKS OF ACCOUNTS OF MITRA TRADERS, WHERE RS. 9,00,000/- IS DEBITED TO THE ACCOUNT OF H.EBRAH IM. 7. WE HAVE ALREADY EXPLAINED THE POSITION REGARDIN G ADDITION OF RS.27.00 LAKHS CONFIRMED BY LEARNED CIT IN OUR E ARLIER WRITTEN SUBMISSIONS. 8. SIMILARLY, WE HAVE ALSO EXPLAINED THE DIFFERENC E BETWEEN TCS CERTIFICATES AND PURCHASES DEBITED IN THE BOOKS IN OUR EARLIER WRITTEN SUBMISSIONS.' 10. IN SUPPORT OF HIS CLAIM FOR SOURCE OF OPENING B ALANCE WITH RESPECT TO AGRICULTURAL INCOME ASSESSED IN A.Y. 2003-04 AND 20 04-05, THE ASSESSEE FILED COPY OF THE ORDER OF ITAT DATED 28.5.2009 IN ITA NO.1209 & 1108 FOR THE A.YS. 2003-04 & 2004-05 RESPECTIVELY WHEREIN TH E ITAT UPHELD THE QUANTUM OF AGRICULTURAL INCOME OF RS.22 LAKHS IN EA CH OF THE YEAR, AGGREGATING TO RS.44 LAKHS. THE ASSESSEE ALSO FUR NISHED COPY OF RECEIPTS AND PAYMENTS ACCOUNT AND CASH STATEMENT AS ON 31.3. 2003 AND 31.3.2004 WHICH WAS ALSO FILED BEFORE THE AO DURING THE ASSES SMENT PROCEEDINGS. THE ASSESSEE SUBMITTED TO THE LD. CIT(A) THAT THE A RGUMENT AS REGARDS TO THE CASH BALANCE VIS--VIS AGRICULTURAL INCOME FOR EARLIER YEARS WAS NOT SPECIFICALLY RAISED BEFORE THE AO FOR THE REASON TH AT THE OUTCOME OF THE ORDER OF ITAT WAS SUBSEQUENT TO PASSING OF THE ASSE SSMENT ORDER BY THE AO. HOWEVER, AFTER RECEIVING THE ORDER OF ITAT, A REVISED RECEIPTS AND PAYMENTS ACCOUNT WAS FILED, WHICH IS SELF-EXPLANATO RY. IT WAS CONTENDED ITA NOS.965 & 1039/BANG/10 PAGE 14 OF 22 THAT ALL THE FACTS AND FIGURES WERE AVAILABLE WITH THE AO IN THE FORM OF RECEIPT AND PAYMENT ACCOUNT. 11. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE OBSERVED THAT THERE WAS NO ADVERSE MATERIAL AVAILAB LE ON RECORD TO DISCARD THE CLAIM OF THE ASSESSEE AS REGARDS TO THE OPENING CASH BALANCE OF RS.41 LAKHS AS ON 1.4.2004. HE POINTED OUT THAT THE ITA T IN ITS ORDER HAS ALSO GIVEN A FINDING THAT THE ASSESSEE DID NOT MAINTAIN ANY BOOKS OF ACCOUNTS IN RESPECT OF AGRICULTURAL INCOME AND THE ASSESSEE IN HIS WRITTEN SUBMISSIONS DATED 28.5.10 HAS GIVEN THE DATA WISE DETAILS OF AM OUNTS DEPOSITED IN CASH OUT OF OPENING CASH BALANCE OF RS.41 LAKHS BEING AC CUMULATED AGRICULTURAL INCOME OF EARLIER YEARS MAINLY OF A.YS. 2003-04 & 2 004-05 AND THE DEPOSITS MADE OUT OF WITHDRAWALS. 12. THE LD. CIT(A) ALSO POINTED OUT THAT THE ASSESS EE HAD EXPLAINED CASH DEPOSITS WITH RESPECT TO CURRENT YEAR AGRICULT URAL INCOME OF RS.18.10 LAKHS AND DATE WISE ANALYSIS OF CASH DEPOSITS AND W ITHDRAWALS WITH RESPECT TO THREE SEPARATE BANK ACCOUNTS HAD BEEN EXPLAINED BY THE ASSESSEE IN THE WRITTEN SUBMISSIONS. THE LD. CIT(A) CATEGORICA LLY STATED THAT IT REMAINED AN UNDISPUTED FACT THAT THE ASSESSEE HAD A N OPENING BALANCE OF RS.41 LAKHS AS ON 1.4.2004 WHICH WAS SOURCE OF DEPO SITS IN THE BANK ACCOUNT IN THE RELEVANT FINANCIAL YEAR. 13. THE LD. CIT(A) POINTED OUT THAT THE ASSESSEE HA D CLAIMED THAT A SUM OF RS.12,55,000 HAD BEEN WITHDRAWN BETWEEN THE PERI OD 1.6.2004 TO 6.9.2004, OUT OF WHICH A SUM OF RS.5 LAKHS WAS DEPO SITED ON 4.10.2004, RS.1 LAKH ON 2.8.2004, RS.12,500 ON 30.8.2004, RS.1 ,50,000 ON ITA NOS.965 & 1039/BANG/10 PAGE 15 OF 22 15.10.2004 AND RS.4 LAKHS ON 24.2.2005. THE LD. CI T(A) WAS OF THE VIEW THAT THE ASSESSEE OUT OF CASH WITHDRAWAL OF RS.12,5 5,000 DEPOSITED ON VARIOUS DATES AGGREGATING TO RS.11,62,500. HE FURT HER OBSERVED THAT ONLY TWO AMOUNTS OF RS. 1 LAKH AND RS.12,500 DEPOSITED O N 2.8.04 AND 30.8.04 FELL WITHIN THE PERIOD OF WITHDRAWALS I.E., FROM 1. 6.04 TO 6.9.04 AND BALANCE DEPOSIT AGGREGATING TO RS.10,50,000 FELL OUTSIDE TH E PERIOD OF WITHDRAWALS. HE THEREFORE CONSIDERED RS.10,50,000 (RS.11,62,500 RS.1,12,500) AS UNEXPLAINED AND SUSTAINED THE ADDITION TO THAT EXTE NT. IN THIS MANNER, RELIEF OF RS.18,50,000 WAS ALLOWED. 14. NOW THE ASSESSEE IS IN APPEAL AGAINST THE SUSTE NANCE OF ADDITION OF RS.10,50,000 WHILE THE DEPARTMENT IS IN APPEAL AGAI NST THE RELIEF OF RS.18,50,000. 15. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE OPENING CASH IN HAND AMOUNTING TO RS.41 LAKHS OUT OF AGRICULTURAL I NCOME OF RS.44 LAKHS EARNED BY THE ASSESSEE DURING THE YEARS RELEVANT TO A.YS. 2003-04 AND 2004-05 HAD BEEN ACCEPTED AND THE DEPOSITS MADE BY THE ASSESSEE IN THE BANK ACCOUNT WERE OUT OF THAT OPENING BALANCE AND W ITHDRAWALS MADE FROM THE BANK. IT WAS FURTHER SUBMITTED THAT THE LD. CI T(A) WAS SATISFIED WITH REGARD TO CASH WITHDRAWALS OF RS.12,55,000 BY THE A SSESSEE IN THE PERIOD 1.6.04 TO 6.9.04. HOWEVER, HE DID NOT ACCEPT THE D EPOSITS MADE AFTER 6.9.04 OUT OF THE SAID WITHDRAWAL FOR THE REASONS B EST KNOWN TO HIM. IT WAS FURTHER STATED THAT THE ASSESSEE DID NOT UTILIZE TH E AFORESAID WITHDRAWN ITA NOS.965 & 1039/BANG/10 PAGE 16 OF 22 AMOUNT ELSEWHERE, SO THERE WAS NO OCCASION TO SUSTA IN THE ADDITION OF RS.10,50,000. 16. IN HER RIVAL SUBMISSIONS, THE LD. DR STRONGLY S UPPORTED THE ORDER OF THE AO AND FURTHER SUBMITTED THAT THE ASSESSEE COUL D NOT EXPLAIN THE DEPOSITS OF RS.29 LAKHS WITH DOCUMENTARY EVIDENCE, THEREFORE THE AO WAS JUSTIFIED IN MAKING THE ADDITION. SHE FURTHER SUBM ITTED THAT THE ARGUMENTS WHICH WERE ADVANCED BY THE ASSESSEE BEFORE THE LD. CIT(A) WERE NOT BEFORE THE AO. THEREFORE, THE LD. CIT(A) WAS NOT J USTIFIED IN ALLOWING THE RELIEF TO THE ASSESSEE. 17. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH MATERIAL AVAILABLE ON RECORD . IN THE PRESENT CASE, IT IS NOT IN DISPUTE THAT THE AGRICULTURAL INCOME AMOU NTING TO RS.44 LAKHS HAS BEEN ACCEPTED AT THE ITAT LEVEL AND THAT WAS THE ON LY SOURCE FOR OPENING BALANCE AS ON 1.4.2004. THE AO CONSIDERED THE DEPO SITS IN THE BANK ACCOUNT OF THE ASSESSEE AS UNEXPLAINED AND THE EXPL ANATION OF THE ASSESSEE BEFORE THE AO AS WELL AS THE LD. CIT(A) WA S THAT THE SAID DEPOSITS WERE OUT OF HIS ACCUMULATED CASH BALANCES WHICH WAS FROM AGRICULTURAL INCOME. HOWEVER, THE AO MADE AN ADDITION OF RS.29 LAKHS, BUT THE LD. CIT(A) ALLOWED RELIEF OF RS.18,50,000 BY ACCEPTING THE GENUINENESS OF THE OPENING CASH BALANCE OF RS.41 LAKHS WHICH WAS AVAIL ABLE WITH THE ASSESSEE. THE REASONS FOR NOT ACCEPTING THE DEPOSI TS OF RS.10,50,000 GIVEN BY THE LD. CIT(A) WAS THAT THE WITHDRAWALS FR OM THE BANKS WERE MADE BY THE ASSESSEE DURING THE PERIOD 1.6.2004 TO 6.9.2 004 AND THE DEPOSITS FROM 2.8.04 TO 30.8.04 WERE OF RS.1,12,500 ONLY AND REST OF THE DEPOSITS ITA NOS.965 & 1039/BANG/10 PAGE 17 OF 22 WERE AFTER 6.9.04 I.E., THE DATE UPTO WHICH THE WIT HDRAWALS WERE MADE BY THE ASSESSEE FROM THE BANK ACCOUNT. IN THE PRESENT CASE, NOTHING IS BROUGHT ON RECORD TO SUBSTANTIATE THAT THE WITHDRAW ALS MADE BY THE ASSESSEE HAD BEEN UTILIZED ELSEWHERE AND NOT IN DEP OSITING BACK IN THE BANK ACCOUNT. SINCE THE CASH WITHDRAWALS AMOUNTING TO RS.12,55,000 WAS NOT IN DISPUTE DURING THE PERIOD 1.6.04 TO 6.9.04 W HICH WAS MORE THAN THE DEPOSIT OF RS.11,62,500 AND NOTHING IS AVAILABLE ON RECORD TO SHOW THAT THESE WITHDRAWALS WERE USED BY THE ASSESSEE FOR OTH ER PURPOSES THAN DEPOSITING IN THE BANK ACCOUNT. THEREFORE MERELY FOR THIS REASON THAT THE DEPOSITS IN THE BANK ACCOUNT WERE MADE AFTER THE DA TE OF WITHDRAWALS, CANNOT BE A GROUND TO SUSTAIN THE ADDITION PARTICUL ARLY WHEN DEPOSITS MADE IN THE BANK ACCOUNT WERE LESS THAN THE AMOUNT WHICH WAS EARLIER WITHDRAWN. CONSIDERING THE TOTALITY OF THE FACTS, WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDI TION OF RS.10,50,000. IN THAT VIEW OF THE MATTER, WE DELETE THE SAID ADDITIO N. IN THIS MANNER, GROUND NO.2 RAISED BY THE ASSESSEE IS ALLOWED AND GROUNDS NO.2 & 3 RAISED BY THE DEPARTMENT ARE DISMISSED. 18. THE ANOTHER GRIEVANCE OF THE DEPARTMENT VIDE GR OUNDS NO.4 TO 6 RELATES TO DELETION OF ADDITION OF RS.27 LAKHS. 19. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE TH AT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE A SSESSEE OBTAINED A LOAN FROM S/SHRI AFARDAS AMARLAL AND AVINASH AMARLA L AND ADVANCED THE SAME TO M/S. MITRA TRADERS, THEREFORE HIS BALANCE S HEET OUGHT TO HAVE REFLECTED ANY AMOUNT THAT WAS OUTSTANDING. THE AO POINTED OUT THAT THE ITA NOS.965 & 1039/BANG/10 PAGE 18 OF 22 EXPLANATION OF THE ASSESSEE WAS THAT OUT OF A SUM O F RS.40 LAKHS ADVANCED, RS.13 LAKHS HAD BEEN RECEIVED AND RETURNE D TO THE LENDER. ACCORDING TO THE AO, THE BALANCE AMOUNT WOULD STILL BE RECEIVABLE AND SHOULD HAVE APPEARED IN THE BALANCE SHEET ON ASSET S SIDE, HOWEVER THERE WAS NO SUCH ENTRY IN THE BALANCE SHEET. HE THEREFO RE ADDED A SUM OF RS.27 LAKHS TO THE INCOME OF THE ASSESSEE. 20. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT( A) AND THE SUBMISSIONS MADE BEFORE HIM BY THE ASSESSEE VIDE LE TTER DATED 20.1.2010 AND 28.5.10 HAVE ALREADY BEEN REPRODUCED IN THE FOR MER PART OF THIS ORDER AT PARA 9 SINCE THOSE WERE THE JOINT SUBMISSIONS FO R ANOTHER ADDITION OF RS.29 LAKHS, AT THE COST OF REPETITION, THESE ARE N OT REPRODUCED HEREIN. 21. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE OBSERVED THAT THE ASSESSEE HAD MAINTAINED REGULAR B OOKS OF ACCOUNT IN RESPECT OF INDIAN MADE LIQUOR BUSINESS, WHEREAS NO BOOKS OF ACCOUNTS IN RESPECT OF AGRICULTURAL INCOME AND OTHER TRANSACTIO NS WERE MAINTAINED AND ONLY RECEIPT & PAYMENT ACCOUNT IN RESPECT OF OTHER TRANSACTIONS WAS PREPARED WHICH WAS SUBMITTED BEFORE THE AO. THE L D. CIT(A) POINTED OUT THAT THE ASSESSEE HAD BORROWED RS.20 LAKHS EACH FRO M S/SHRI AFARDAS AMARLAL AND AVINASH AMARLAL AGGREGATING TO RS.40 L AKHS THROUGH BANKING CHANNEL AND THE AO HAD ACCEPTED THE CASH CREDITS AS GENUINE. THIS SUM OF RS.40 LAKHS WAS LENT TO M/S. MITRA TRADERS OUT O F WHICH THE ASSESSEE RECEIVED BACK RS.33 LAKHS FROM M/S. MITRA TRADERS A ND RETURNED TO S/SHRI AFARDAS AMARLAL AND AVINASH AMARLAL TOWARDS REPAYME NT OF LOAN OF RS.40 LAKHS. THUS, THERE REMAINED ONLY A SUM OF RS.7 LAK HS AS RECEIVABLE AS ON ITA NOS.965 & 1039/BANG/10 PAGE 19 OF 22 31.3.2005 FROM THE SAID M/S. MITRA TRADERS. HE FUR THER OBSERVED THAT THE ASSESSEE HAD RECEIVED A SUM OF RS.4 LAKHS ON 05.11. 04 FROM M/S. MITRA TRADERS THROUGH BANK ACCOUNT TRANSFER AND SIMILARLY RS.9 LAKHS HAD BEEN RECEIVED ON 10.12.2004 BY TRANSFER FROM CURRENT ACC OUNT OF M/S. MITRA TRADERS. BOTH THESE AMOUNTS AGGREGATING TO RS.13 LAKHS HAD BEEN REPAID TO THE SAID LENDERS S/SHRI AFSARDAS AMARLAL AND AVI NASH AMARLAL. BESIDES THIS, THE ASSESSEE HAD ALSO RECEIVED BACK A SUM OF RS.20 LAKHS FROM M/S. MITRA TRADERS. THE LD. CIT(A) POINTED OUT THAT AS PER THE LEDGER ACCOUNT OF M/S. MITRA TRADERS IN THE BOOKS OF THE ASSESSEE, A SUM OF RS.40 LAKHS IS SHOWN AS PAID BY CHEQUE ON 5.10.04 TO THE SAID M/S. MITRA TRADERS AND SUBSEQUENTLY ON FIVE DIFFERENT DATES THE ASSESSEE H AD RECEIVED A SUM OF RS.4 LAKHS EACH BY 5 CHEQUES AGGREGATING TO RS.20 L AKHS FROM THE SAID M/S. MITRA TRADERS, WHICH WAS CLAIMED TO HAVE BEEN PAID BACK TO THE LENDERS I.E., S/SHRI AFSARDAS AMARLAL AND AVINASH A MARLAL DIRECTLY DEBITING THE ACCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S. MI TRA TRADERS, LEAVING THEREBY THE DEBIT BALANCE OF RS.20 LAKHS. THUS THE ASSESSEE IN TOTAL HAD RECEIVED BACK RS.33 LAKHS FROM THE SAID M/S. MITRA TRADERS DURING THE RELEVANT FINANCIAL YEAR. 22. THE LD. CIT(A) OBSERVED THAT THE CONTENTION OF THE ASSESSEE WAS THAT THE AMOUNT OF RS.40 LAKHS WAS RECEIVED BY CHEQ UES FROM S/SHRI AFARDAS AMARLAL AND AVINASH AMARLAL WHICH WAS TRANS FERRED TO M/S. MITRA TRADERS THROUGH DEMAND DRAFTS AND THE AMOUNT OF RS. 33 LAKHS WAS ALSO RECEIVED BACK FROM THE SAID M/S. MITRA TRADERS THRO UGH BANKING CHANNEL. THEREFORE THE ENTIRE TRANSACTION WAS EXPLAINED AND THERE WAS NO JUSTIFICATION OF MAKING THE ADDITION OF RS.27 LAKHS ON ACCOUNT OF TRANSACTION ITA NOS.965 & 1039/BANG/10 PAGE 20 OF 22 WITH M/S. MITRA TRADERS. THE LD. CIT(A) CATEGORIC ALLY STATED THAT ON CAREFUL EXAMINATION OF FACTS, IT WAS SEEN THAT THE CONTENTI ONS RAISED BY THE ASSESSEE IN HIS WRITTEN SUBMISSIONS WITH RESPECT TO RECEIPT AND PAYMENT ACCOUNT AND THE ACCOUNT OF M/S. MITRA TRADERS IN TH E BOOKS OF THE ASSESSEE WERE FACTUALLY FOUND TO BE IN ORDER. THE LD. CIT(A ) POINTED OUT THAT THE ASSESSEE HAD BORROWED THE AMOUNT OF RS.40 LAKHS BY TWO SEPARATE CHEQUES FROM THE SAID S/SHRI AFARDAS AMARLAL AND AV INASH AMARLAL, HOWEVER THE THEN THE LD. CIT(A) IN PARA 4.1 OF HIS ORDER HAD MENTIONED THE SAME AS CASH LOANS WHICH WAS FACTUALLY INCORRECT AS THE AMOUNT WAS RECEIVED THROUGH CHEQUES. HE FURTHER POINTED OUT THAT THE TWO AMOUNTS OF RS.4 LAKHS ON 5.11.04 AND RS.9 LAKHS ON 10.12.04 WE RE ALSO REPAID BY M/S. MITRA TRADERS TO THE ASSESSEE THROUGH BANK ACCOUNT TRANSFER AND THERE WAS NO CASH TRANSACTION. THEREFORE, CONSIDERING THOSE AMOUNTS AS CASH LOANS AND REPAYMENTS IN CASH WAS FACTUALLY NOT CORRECT. ACCORDINGLY, THE LD. CIT(A) DID NOT FIND ANY REASON FOR HOLDING THE TRAN SACTION WITH M/S. MITRA TRADERS AND S/SHRI AFSARDAS AMARLAL AND AVINASH AMA RLAL AS UNEXPLAINED. THE LD. CIT(A) OBSERVED THAT WHEN THE IDENTITY OF T HE PARTY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION WAS NOT DISPUTED, THE TRANSACTION COULD NOT BE HELD AS UNEXPLAINED. 23. AS REGARDS TO THE OBSERVATION OF THE AO THAT TH E AMOUNT OF RS.27 LAKHS WAS NOT FOUND REFLECTED IN THE BALANCE SHEET, THE LD. CIT(A) POINTED OUT THAT THE ASSESSEE HAD MAINTAINED SEPARATE RECEI PT AND PAYMENT ACCOUNT FOR PERSONAL TRANSACTIONS OTHER THAN LIQUOR BUSINESS AND THIS RECEIPT AND PAYMENT ACCOUNT WAS MADE AVAILABLE TO T HE AO WHICH WAS VERIFIABLE WITH RESPECT TO BANK ACCOUNTS OF THE ASS ESSEE. HOWEVER, THE AO ITA NOS.965 & 1039/BANG/10 PAGE 21 OF 22 DECLINED TO ACCEPT THE SAME WITHOUT BRINGING ANY AD VERSE MATERIAL ON RECORD. THE LD. CIT(A) ACCORDINGLY DELETED THE ADD ITION. NOW THE DEPARTMENT IS IN APPEAL. 24. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE INSTANT CASE, IT APPEARS THAT THE ASSESSEE RECEIVED A SUM OF RS.4 0 LAKHS BY TWO SEPARATE CHEQUES OF RS.20 LAKHS EACH FROM S/SHRI AF ARDAS AMARLAL AND AVINASH AMARLAL, THE SAID AMOUNT WAS LENT TO M/S. M ITRA TRADERS. THE ASSESSEE RECEIVED BACK A SUM OF RS.20 LAKHS FROM M/ S. MITRA TRADERS. THEREAFTER THE ASSESSEE RECEIVED RS.4 LAKHS ON 5.11 .04 AND RS. 9 LAKHS ON 10.12.04 AS BANK ACCOUNT TRANSFER FROM M/S. MITRA T RADERS. THE SAID AMOUNT WAS REPAID TO S/SHRI AFARDAS AMARLAL AND AVI NASH AMARLAL. THUS THE ASSESSEE RECEIVED BACK A SUM OF RS.33 LAKHS (20 LAKHS + 4 LAKHS + 9 LAKHS) FROM M/S. MITRA TRADERS, THE ENTIRE AFORESAI D TRANSACTION WAS THROUGH BANKING CHANNEL. THE AO DID NOT DISPUTE THE RECEIP T OF RS.40 LAKHS FROM S/SHRI AFARDAS AMARLAL AND AVINASH AMARLAL, HE ALSO DID NOT DOUBT THE PAYMENT OF THAT AMOUNT TO M/S. MITRA TRADERS AND HA D ALSO ACCEPTED THE RECEIPT OF RS.13 LAKHS FROM M/S. MITRA TRADERS. HE MADE AN ADDITION OF RS.27 LAKHS BY PRESUMING THAT THE SAID AMOUNT WAS T O BE REFLECTED IN THE BALANCE SHEET OF M/S. MITRA TRADERS. HOWEVER, HE I GNORED THIS VITAL FACT THAT THE ASSESSEE WAS NOT MAINTAINING BOOKS OF ACCO UNTS FOR PERSONAL TRANSACTIONS, RATHER RECEIPT AND PAYMENT ACCOUNT WA S MAINTAINED WHICH WAS FURNISHED TO THE AO FOR HIS VERIFICATION ALONG WITH BANK ACCOUNT, THE SAME WERE ALSO PRODUCED BEFORE THE LD. CIT(A), WHO ACCEPTED THESE AND CATEGORICALLY STATED THAT THE TRANSACTIONS OF THE A SSESSEE WITH M/S. MITRA ITA NOS.965 & 1039/BANG/10 PAGE 22 OF 22 TRADERS AND S/SHRI AFARDAS AMARLAL AND AVINASH AMAR LAL WERE GENUINE AND THAT THE IDENTITY OF THE PARTY AND CREDITWORTHI NESS WAS NOT IN DISPUTE. IN THE PRESENT CASE, NOTHING IS BROUGHT ON RECORD AGAI NST THE AFORESAID OBSERVATION OF THE LD. CIT(A). WE, THEREFORE, CONS IDERING THE TOTALITY OF THE FACTS, ARE OF THE VIEW THAT NO INTERFERENCE IS CALL ED FOR IN THE DECISION OF THE LD. CIT(A) ON THIS ISSUE. IN THAT VIEW OF THE MATT ER, WE DO NOT SEE ANY MERIT ON THIS ISSUE RAISED BY THE DEPARTMENT. 25. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED AND THAT OF THE DEPARTMENT IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 13 TH DAY OF JANUARY, 2012. SD/- SD/- ( P. MADHAVI DEVI ) ( N.K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 13 TH JANUARY, 2012. DS/REDDYGP/DS/- COPY TO: 1. ASSESSEE 2. REVENUE 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.