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2014 (10) TMI 497 - AT - Income TaxUnaccounted sales - Refusal of estimate profit - Held that - CIT(A) rightly was of the view that there was no mention of sales made to Shreeji in the statement recorded during the survey - CIT(A) after examining the photo copy of the stock register has given a finding that the sales stated to have been made to Shreeji Sales has been entered after all the sales have been recorded up to 31.03.2007 and the totals were drawn and further the sales as per bills was stated to be 16735 Kg whereas the entry in the register was of 16732 kg. - the sales shown to M/s. Shreeji Sales are not genuine and the entry has been inserted as an afterthought only to explain the shortage of stock - Further there is no material on record to support the contention of the Assessee that the material sent to Shreeji Traders was not taken into account for want of confirmation from the purchaser - the addition made by the AO was justified - the entire amount of sales cannot be considered as income but only the profit element of the sale can be added as income - in the absence of details about the gross profit rate or the net profit ratio of the Assessee, the addition is restricted to lump sum amount of ₹ 1.50 lac Decided partly in favour of assessee. Unsecured loans taken from various parties - Addition u/s 68 Held that - With respect to the addition with respect to deposit from Shri Pancholi it is stated that he has given loan of ₹ 17 lacs through two cheques to the Assessee - Shri Jadavbhai Kalsaria, Director of the Assessee, in the statement recorded through survey had admitted that assessee had shown bogus loans which were offered for taxation - AO was fully justified in making the addition of ₹ 17 lacs with respect to amount received from Shri Pancholi - In the case of Jayesh Kumar Thakkar, Assessee had filed copy of confirmation and PAN card but did not file the copy of bank statement. There is nothing on record to demonstrate that on receipt of the copy of confirmation and PAN card, A.O had made any further inquiries and then found the amount to be bogus. By merely non filing the bank statement and in the absence of any other material on record it cannot be said that initial burden was not discharged by Assessee - no addition can be made and thus direct the deletion with respect to amount received from Shri Jayesh Thakkar. In the case of Doshi Kantilal Jayantilal, (HUF) N.B. Mehta, Doshi Balwantrai Jayantilal, the Assessees are assessed to tax and have filed the copy of its return of income and thus the Assessee had discharged the initial onus cast upon - There is nothing on record to demonstrate that on the basis of details filed, A.O had made further inquiries and found the amount to be bogus - merely that the depositors did not comply with the summons issued by A.O, we are of the view that no addition can be made from these parties and therefore direct its deletion. In the case of Doshi Dhirajlal, Kalajben Doshi, Ramesh kumar Girjashanker, Shri Ram Foods and Lilavati Shah, Assessee had filed their PAN nos, the deposits were returned subsequently and interest was also paid - These parties are also assessed to tax - There is nothing on record to demonstrate that on the basis of PAN number, enquiries were made by A.O and thereafter the deposits were found to be bogus - no addition can be made with respect to the amounts received from these parties and thus direct its deletion Decided partly in favour of assessee.
Issues Involved:
1. Addition on account of alleged unaccounted sales. 2. Addition under section 68 of the Income Tax Act for unsecured loans. Detailed Analysis: 1. Addition on Account of Alleged Unaccounted Sales: The Assessee, engaged in the business of manufacturing and processing cotton, filed its return of income for A.Y. 2007-08, declaring a total income of Rs. 12,02,640/-. During a survey action under section 133A, discrepancies were found in the stock records, leading to an addition of Rs. 8,40,783/- for unaccounted sales. The Assessee contended that the sales were made to Shreeji Traders and were not recorded due to a lack of confirmation. However, the CIT(A) noted discrepancies in the stock register and concluded that the sales to Shreeji Traders were not genuine, affirming the addition. Upon appeal, the Tribunal found no material evidence to counter the CIT(A)'s findings but held that only the profit element of the unaccounted sales should be added. Thus, the addition was restricted to Rs. 1.50 lakh. 2. Addition Under Section 68 for Unsecured Loans: The Assessee received unsecured loans amounting to Rs. 29,75,681/- from various parties. The AO scrutinized these loans and found several discrepancies, leading to additions under section 68 for unexplained cash credits. The CIT(A) upheld the AO's findings, noting that the Assessee failed to prove the creditworthiness of the lenders. - Loan from A.R. Pancholi (Rs. 17,00,000/-): The AO found inconsistencies in the source of funds and the timing of deposits, concluding the loan was not genuine. The CIT(A) affirmed this, noting the Assessee could not substantiate the source of funds. - Loans from Doshi Kantilal Jayantilal HUF (Rs. 50,000/-) and N.B. Mehta (Rs. 65,000/-): Despite filing PAN and return copies, the Assessee failed to provide bank statements, leading to the addition being upheld. - Loans from Doshi Balwantrai Jentilal (Rs. 1,00,000/-), Doshi Dhirajlal Virchandra (Rs. 90,000/-), and Ramesh Kumar Girjashanker (Rs. 50,000/-): Similar to the above, the lack of bank statements led to the addition being upheld. - Loan from Jayeshkumar I. Thakkar (Rs. 1,00,000/-): The Tribunal found that the Assessee had discharged the initial burden by providing confirmation and PAN card, and in the absence of further inquiries by the AO, directed the deletion of this addition. - Loans from Kajalben Chetanbhai Doshi (Rs. 1,85,000/-), Shri Ram Foods (Rs. 3,00,000/-), and Shah Lilavatiben Shantilal (Rs. 70,000/-): The Tribunal noted that these parties were assessed to tax, and in the absence of further inquiries by the AO, directed the deletion of these additions. Conclusion: The Tribunal partly allowed the Assessee's appeal, restricting the addition for unaccounted sales to Rs. 1.50 lakh and deleting several additions under section 68 for unsecured loans, where the Assessee had sufficiently discharged the initial burden of proof. The order was pronounced in open court on 16-05-2014.
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