2016 (11) TMI 536 - AT - Income Tax

Disallowance towards credit purchases - Held that - AO did not make any enquiry whether M/s. Shagun Jewellers, Delhi has any branch or unit in Chennai or they have endorsed these DDs to some other party. The confirmation from SBH only indicates that these DDs were payable at Service Branch, Chennai. This even though does not prove that the DDs are encashed by assessee but certainly does not support that the payments are bogus. In the absence of contrary evidence, it is to be accepted that assessee has issued cheques on his bank account, from which DDs were purchased and those DDs were encashed. Therefore, simply because DDs were encashed in Chennai and not in Delhi, AO cannot presume that M/s. Shagun Jewellers, Delhi is a bogus firm. The reasons attributed for disbelieving the credit purchase are not valid. Therefore, we are of the opinion that assessee has discharged his duty in explaining the credit purchases and also payments thereon. In view of that, we are of the opinion that the disallowance towards credit purchases is not sustainable. - Decided in favour of assessee Credits given by Shri Omprakash Sirvi, Shri Kanaram Sirvi and loan from Mahesh Bank - Held that - ince all the family members are in the same place and have been working in the jewellery and the Girvi business (all of them shown the similar sort of incomes in their returns), it can be presumed the loan funds obtained from Mahesh Bank could have been utilized by assessee. It is also seen that AO has quantified the excess stock or undisclosed income in the course of survey. Therefore, the explanation given by assessee to explain the stock on the date of survey could have been verified by the AO on the date of survey. Therefore, doubting the explanation of assessee of contributions from the family members is not correct. Considering the confirmations filed on record and the fact that the loan was obtained from Mahesh Bank, even though in the name of Shri Kanaram Sirvi, the credit can be given to assessee s purchase of stock. Accordingly, we are of the opinion that addition made by AO is not warranted.- Decided in favour of assessee Unexpalined investment in the house - assessee explained that he has obtained ₹ 3,50,000/- from his father-in-law, Mr. Ratanlal Panwar and Mr. Sohan from Rajastan. Assessee also claimed credit from the loan funds and business funds to an extent of ₹ 8,50,000/- Held that - Before us, except filing two confirmation letters in the Paper Book at pg. 3 & 4, nothing further was advanced in support of the contentions. As seen from the confirmation letter, there is only thumb impression on the confirmation letter filed on behalf of Shri Ratanlal Panwar. There is no identity with reference to thumb impression as well. No enclosures in the form of Identity Card, Voter Card or documents in support of agricultural lands was filed. Similarly in the case of Sohan also, some confirmation letter was filed but here also no enclosures were filed at least to identify the person who has issued the confirmation letter. The revenue contention that no proof was furnished either for receipt of the amounts or for establishing the creditworthiness has to be accepted. Since, no further evidence was furnished before us, we are also not in a position to appreciate the assessee s contention. In view of that, addition made as unexplained investment in the house stands confirmed. - Decided against assessee

Summary

Issues:
1. Disallowance of credit purchases and unexplained investments in gold and silver stock.
2. Addition of loans received and unexplained investments in girvi items.
3. Disallowance of loans received from family members and unexplained investment in construction of house property.
4. Failure to appreciate evidence and documents filed before the assessing officer.

Analysis:
1. The assessee, engaged in trading of jewellery and money lending, appealed against additions made by the Assessing Officer (AO) which were confirmed by the Commissioner of Income Tax (Appeals)-III. The AO disbelieved credit purchases from M/s. Shagun Jewellers, Delhi, amounting to ?8,06,161, as the DDs were paid in Chennai. However, the ITAT Hyderabad found that the AO's doubts were not valid as the payments were genuine, and the disallowance was unsustainable. The ITAT allowed the grounds of the assessee on this issue.
2. The AO also questioned loans received from family members and Mahesh Bank, adding ?12,23,000 as unexplained investments in girvi items. The ITAT noted that the family members had confirmed advancing the money, had creditworthiness, and filed returns, indicating genuine transactions. The ITAT found the AO's doubts unfounded, as the loans were utilized for business purposes, and the stock explanation by the assessee was plausible. Therefore, the addition of ?12,23,000 was deemed unwarranted, and the ground was allowed.
3. Regarding the investment in the house, the AO disbelieved loans from the father-in-law and another individual, adding ?3,50,000 as unexplained investment. The ITAT upheld this addition as the confirmation letters lacked proper identification and supporting documents. The ITAT found no additional evidence to support the contentions, leading to the rejection of the ground and confirmation of the addition of ?3,50,000 as unexplained investment in the house.
4. The ITAT concluded that the appeal of the assessee was partly allowed, emphasizing the importance of furnishing proper evidence to support contentions in tax assessments. The judgment was pronounced on 21st October 2016 by the ITAT Hyderabad.