2013 (1) TMI 134 - AT - Income Tax

Unexplained cash deposits - Genuineness and source of cash creditor Held that - The assessee has received Rs. 1.59 crore from Praful L. Shah for which written submission made by the assessee on 14.03.2002 and explain the source. The assessee filed a copy of ITR for A.Y. 98-99 before CIT(A). Shri Praful L. Shah was cash creditor in the book of account of the assessee who is assessed to tax with ITO Ward 1 (6), Palanpur. Shri Hemendra L. Shah has given cash to assessee Rs. 45 lakh but source of cash in the hand of cash creditor was Rs. 20 lakh from Parth Mercantile Inc. and Rs. 25 lakh from Shri Dilip Atmaram Modi HUF. The cash creditor is the book account of the assessee is Hemendra L. Shah who had explained cash deposited up to Rs.25 lakh remaining amount had been shown from Parth Mercantile Inc. Therefore, cash credit to the tune of Rs.20 lakh has not explained. We have considered view that genuineness and source of cash creditor has not proved by the assessee in case of Hemendra L. Shah. Accordingly, confirm the addition of Rs.20 lakh. Addition u/s 68 - Identity of the party - Genuineness of the transaction - Source of the deposit Held that - assessee had submitted the confirmation and payments are account payee cheques, therefore, the assessee has discharged his primary onus to prove the genuineness of transaction, identity of person in above cash creditors. Cash credit of Rs.70000/- in case of Speedwell Properties Ltd. including interest has not been disclosed by the cash creditor in its balance sheet. No confirmation of Rs. 21,397/-. Therefore, (70000 21397) addition of Rs. 91397/- is confirmed by the CIT (A), is justified. Addition on account of bank charges and commission Held that - As concluding from the facts of the case debit entries as mentioned in books of accounts pertained to interest not bank charges and commission. The CIT(A) has not given any opportunity to the A.O. before admitting the evidence. Remand back to AO. Addition on account of bills discounting charges Expense not explained Held that - Assessee has given details of discounting charges and claimed that total turnover was Rs. 12.07 crore and gross profit was at Rs. 25.25lacs. The bills discounting charges were pertained to Banks. The CIT(A) has not given any opportunity to the A.O. Therefore matter remand back to AO

Summary

Issues Involved:
1. Deletion of addition of unexplained cash deposits.
2. Reduction of addition made under Section 68 of the I.T. Act.
3. Deletion of addition of unproved bank charges and commission.
4. Deletion of addition of unproved claim of bills discounting charges.

Detailed Analysis:

1. Deletion of Addition of Unexplained Cash Deposits:
The Assessing Officer (A.O.) observed that the assessee deposited Rs.1,74,00,000/- in the bank account, which was traced back to multiple sources, including Parth Mercantile Inc., Dilipkumar Atmaram Modi, HUF, and others. The A.O. made the addition due to the failure of the assessee to produce Shri Dilipkumar Atmaram Modi, HUF, for cross-verification and lack of proof regarding the creditworthiness of these parties. The CIT(A) deleted the addition, accepting the assessee's explanation and supporting documents, including income tax returns of the creditors. However, the Tribunal partially upheld the A.O.'s addition, confirming Rs.20,00,000/- as unexplained cash credit due to insufficient evidence regarding the source.

2. Reduction of Addition Made Under Section 68:
The A.O. initially added Rs.116,28,25,838/- under Section 68, citing incomplete details and unverifiable documents for multiple creditors. The CIT(A) reduced this addition to Rs.1,22,545/-, accepting the genuineness of most transactions based on the evidence provided, such as PAN numbers, income tax returns, and account statements. The Tribunal confirmed the deletion of most additions, except for Rs.91,397/- (Rs.70,000/- from Speedwell Properties Ltd. and Rs.21,397/- from H. Nyalchand Finance Co.) due to lack of proper disclosure and confirmation. The Tribunal also directed the A.O. to verify the interest amounts claimed as expenses.

3. Deletion of Addition of Unproved Bank Charges and Commission:
The A.O. added Rs.1,72,17,951/- as unproved bank charges and commission, citing the assessee's failure to justify these expenses during the assessment. The CIT(A) allowed the expenses based on bank statements and transaction summaries provided by the assessee. However, the Tribunal found discrepancies in the documents submitted and noted that the CIT(A) did not provide the A.O. an opportunity to examine these documents. Consequently, the Tribunal set aside this issue for reconsideration by the A.O.

4. Deletion of Addition of Unproved Claim of Bills Discounting Charges:
The A.O. added Rs.19,24,117/- for bills discounting charges, stating that the assessee failed to provide sufficient evidence. The CIT(A) deleted the addition, recognizing these charges as business expenses related to the assessee's bullion and jewellery business. The Tribunal, however, noted that the CIT(A) did not give the A.O. a chance to verify the supporting documents. Therefore, the Tribunal remanded this issue back to the A.O. for further verification.

Conclusion:
The Tribunal partially upheld and partially set aside the CIT(A)'s order, confirming some additions and directing further verification for others. The Revenue's appeal was partly allowed, and the assessee's cross-objection was also partly allowed.