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TMI Blog2013 (1) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... ty - 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the addition made holding that the assessee has furnished bank statement showing that the expenditure claimed were incurred. Whereas the issue was not the same. 8. The Ld. Commissioner of Income tax (Appeal)-XIII, Ahmedabad, erred in law and on facts in deleting the addition of Rs.19,24,117/- made by the A.O. being unproved claim of bills discounting charges. 9. The Ld. Commissioner of Income tax (Appeal)-XIII, Ahmedabad, erred in law and on facts in holding that the said expenditure is revenue in nature and allowable u/s.37 of the I.T. Act. Whereas the issue involved was not the same. 10. The Ld. Commissioner of Income tax (Appeal)-XIII, Ahmedabad, erred in law and on facts in overlooking the issue that the assessee never proved that the entire transactions on which the bill discounting charges claimed have been accounted for in his regular books of accounts. In this regard, the CIT(A) held that the claim is allowable u/s.37 of the I.T. Act. 2. The assessee has maintained three set of books in the name of Manoj C. Brahmbhatt, M/s. Parth Mercantile Inc. and Atlas Jewellers. Parth Mercantile Inc. and Atlas Jewellers are the propriety concern of the assessee. 3. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Now the Revenue is in appeal before us. The ld. D.R. Shri S.K. Gupta, CIT D.R. filed the written reply dated 26.06.2012 along with copy of confidential inquiry report made by DDIT (Investigation) dated 24.10.2000 along with list of bank accounts where refunds have been credited. List of bank accounts with no return of income have been filed, the list of bank accounts to which return of income have been filed, list of bank accounts not belong to the Anand group, land debited in the books of State Bank Property Ltd., land debited in the books of Shri Ramesh M. Shah, legal position on Section 68. The ld. D.R. contended that the assessee was maintaining bank account in the name of propriety concern, namely, Parth Mercantile Inc. in Induslnd Bank in which cash amount of Rs.1,74,00,000/- was deposited. The source of this cash was explained as withdrawal made from the assessee s own account with Relief Mercantile Bank. The source of deposit in bank account with Relief Mercantile Bank was from Shri Hemendra L. Shah for Rs. 45 lacs and from Shri Praful L. Shah for Rs.1.59 crore. The source of Praful L. Shah in his bank account which was maintained with same bank i.e. Relief Mercantile Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the A.O. it was explained that the cash deposits in the Induslnd Bank was received from Relief Merchantile Bank and in Relief Mercantile Bank it was received from Shri Hemendra L. Shah as well as from Shri Praful L. Shah. It has been stated by the assessee that the source of Shri Hemendra L. Shah is from Parth Mercantile Inc. and also from Dilip Atmaram Modi (HUF). It is further seen that the source of Shri Praful L. Shah is also from Dilip Atmaram Modi (HUF). The A.O. has stated that this is as per written submission given by the assessee on 14.03.2002. The assessee has claimed to have explained the source of cash deposit upto 3 stages in view of the above submission. However, it is clear that the ultimate source shown by the assessee is from Parth Mercantile and Shri Dilipkumar Atmaram Modi (HUF). It is interesting to see that Parth Mercantile is propriety concern of the assessee and therefore assessee cannot explain the source form his own concern without explaining the source from where is propriety concern got the cash. The assessee was also asked to produce Dilipkumar Atmaram Modi (HUF) before the A.O. but it was state by the assessee Shri Dilipkumar had gone to Americ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09-03-1998 35,00.000 09-03-1998 50,00,000 09-03-1998 45,00,000 09-03-1998 44,00,000 Total... 1, 74,00,000 4.1 It has been stated by the A.O that the respondent had explained that he was operating 2 Bank .Accounts, one with Indu Sind Bank Ltd. and the second with Relief Mercantile Co-operative Bank Ltd. It was explained that the deposit in Indu Sind Bank Ltd. was on account of withdrawals of funds from Relief Mercantile Co-operative Bank. Furthermore, in Relief Mercantile Co-operative Bank Ltd. the amount was received from Hemendra L. Shah and Praful L. Shah. It has also been stated by the A.O that the source of funds in case of Hemendra L. Shah was Parth Mercantile INC and Dilip Atmaram Modi HUF, whereas the source of funds in the case of Praful L. Shah was Dilip Atmaram Modi HUF. Thus, upto earlier three stages the source of cash deposited in the bank account had been explained. The A.O has further stated that the respondent was asked to produce Shri Dilip Atmaram Modi before him and has also accepted that the respondent had clarified that on account of him having gone to USA the same was not possible. The A.O. has stated that since no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents is not required to prove the source of source or the origin of origin the addition has been rightly deleted. 7. We have gone through the orders of authorities below and considered the reply of both sides. 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 Income Tax Return for A.Y. 98-99 before CIT(A) at page nos. 47 to 50 of paper book. 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. Therefore, ld. CIT(A) rightly deleted the addition. 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. It means from the assessee. Therefore, cash credit to the tune of Rs.20 lakh has not explained. The CIT(A) was not justified in deleting the addition of Rs.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce other than computer sheet, copy of account from the party even 18 dates of hearing were given to the assessee. Therefore, he added Rs.1,11,60,42,954/- u/s 68 along with interest in the income of the assessee. It is further observed by the A.O. that whatever information furnished by the assessee during the course of assessment proceeding had been forwarded to the concern Assessing Officer. The reply of the Assessing Officer was as under:- (i) Shri K.J. Shah DCIT Cir. 9, Ahmedabad : The case of Shri Hemendra L Shah is with him. On inquiry it is learnt from him that the assessee Shri Hemendra L Shah has not filed the return for A.Y.1998-99 till date. (ii) Smt. Smiti Samant DCIT Cir. 8, Ahmedabad. : In show cause notice dated 11.3.2002 at para no.9 it is mentioned that Rs. 70,000/- has been received as deposit from Speedwell Properties Ltd. by Shri Manoj C Brahmbhatt prop. Of Atlas Jewellers. The case of Speedwell Properties Ltd is assessed by the DCIT, Cir.8, A bad. A letter was written to the AO regarding inquiry of entry of Rs.70,000/-. The DCIT Cir. 8 has conveyed that the amount of Rs.70000/- has not been reflected in the books of accounts of ITA No. 565/Ahd/03 C.O.No.7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received by Account payee cheque. Thus all the above deposits have been received through cheques. For the deposit from H. Nyalchand Finance Co. the appellant has not filed any details nor confirmation letter, thus the appellant has not proved the genuineness of the said credit. Therefore, the additions made towards unexplained credits in respect of above depositors except the deposit from H.Nyalchand Finance Co. and Rs. 70,656A from Speedwell Properties Ltd are not justified. The Hon'ble Gujarat High Court in the case of DCIT V/s. Rohini Builders reported in 256ITR 360 while deleting the addition of cash credits has held that, "The Tribunal found that the assesses had discharged the initial onus which lay on it in terms of Section 68 by proving the identity of the creditors by giving their complete addresses, GIR numbers/permanent account numbers and the copies of assessment orders wherever readily available, that it had also proved the capacity of the creditors by showing that the amounts were received by the assesses by account payee cheques drawn from bank accounts of the creditors and the assessee was not expected to prove the genuineness of the cash deposited in the bank ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Speedwell Properties Ltd., the Assessing Officer is directed to accept the same as genuine. 10. Now the Revenue is before us. The ld. CIT DR contended that it has to be examined particulars of individual cash creditor s evidence whether the appellant had discharged onus to prove the identity of the person, creditworthiness of the assessee and genuineness of the transaction. He submitted a detailed chart which is reproduced as under:- Sr. No. Name of the creditor Page No. in paper book Amt. of deposit as per asst. order Interest Total Whether amt. matches PAN / whet her verifiable Copy of return Confirmation Wheter enquiry Remarks 1. Alka Barot (Page 11 of assess ment order) 19, 20 5000 0 5000 Match es with copy of a/c No PAN Yes No Yes 1. In the return, the name is mentioned as Alkaben J. Brahmbhatt 2. No PAN 3. No confirmation 4. Signature not verifiable 5. Address not verifiable 6. No response to the enquiry conducted by A.O. 7. Source is not properly explained. 2. Anand Jewelle rs (Page 11 of assess ment order) 21 to 25, 166 14000 000 27616 14027616 Match es with co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot properly explained. 8. Praful L. Shah (Page 13, para 20(iv v) of assess ment order) 47 to 50 50000 00 177534 5177534 Matches with copy of a/c GIR No. Yes Yes Yes 1. No response to the enquiry conducted by A.O. 2. Source is not properly explained. 3. There is no PAN on the income-tax Return and Address on the return is not verifiable from the return 9, 10 11 Hemen dra L. Shah (Page 15, para 23 of assess ment order) 54 to 57, 60 to 64, 66 to 92, 116 to 118, 167 to 169 200000 735430900 9918000 0 39950101 362548 200000 7753 8100 1 10280548 Yes Yes Yes Yes Para 23 page 15 of assessment order. Proprietary of Vidhi Corporation in a statement recorded on 11.03.2002 admitted that return of A.Y. 1998-99 not filed till the completion of this assessment order i.e. 20.03.2002 because he stated that books were still under preparation. Did not produce any evidence or books of accounts. 12 13 Pinky Corpor ation (Page 13, para 20(iv v) of assess ment order) 53, 54, 170 8400000 5000000 463956 175068 8863956 5175068 Match es with copy of a/c Yes Yes No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers for A.Y. 98-99. Page 23 is a copy of computation of income. Page 24 is a copy of list of documents attached and depreciation chart and page 25 again ledger account for the period of 01/04/97 to 31/03/98. Page166 is a copy of balance sheet as on 31.03.98 in which loan of Rs.1,40,27,616/- has been shown. (iii) Anand Property Finance Ltd. - The assessee has shown loan at Rs.12,00,000/- for which the appellant submitted the confirmation from page ITA No. 565/Ahd/03 C.O.No.74/Ahd/04 A.Y.98-99 Page 23 nos. 26 to 31 and 153 to 160 of the paper book which reveals that on page 26 there is unsigned ledger account for the period of 01/04/97 to 31/03/98 in which Rs. 12,00,000/- with interest has been shown. Page 27 is a copy of return of Anand Property Finance Ltd. for A.Y. 98-99 on which PAN has been shown applied for. Page 28 to 30 is a computation of income for A.Y. 98-99 and page 31 is another unsigned running account for the period of 01/04/97 to 31/03/98. Page 153 to 160 are copies of balance sheet of Anand Property Finance Ltd. for A.Y. 98-99 in which Rs. 12,02,367/- has been shown outstanding. (iv) Galaxy Impex - The assessee has shown a loan from Galaxy Impex at Rs. 1,14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the cash creditor for A.Y. 98-99 on which PAN applied for mentioned. Page nos. 42 43 are the computation of income for A.Y. 98-99. Page nos. 172 to 185 are copies of balance sheet along with annexures on page 176 in schedule-8. The current assets loan and advances receivable in schedule 8 at page 181 has been shown at Rs.1,40,86,648/- by Speedwell Properties Ltd. in which the assessee s name has not been reflected whereas page 40 shows the outstanding balance as on 31.03.98 in the name of Atlas Jewellers (propriety concern to the assessee) at Rs.70,000/-. Rs. 6.5 lakh was not loan taken by the assessee but loan advanced by him which has been accepted by the A.O. of M/s. Speedwell Properties Ltd. (viii) Praful L. Shah The assessee has shown a loan from Praful L. Shah at Rs. 50,00,000/- for which the assessee has filed confirmation at page no.47 to 50. Page 47 is a copy of return for A.Y. 98-99 on which GIR No. mentioned not PAN No. Page 48 to 49 are copies of computation of income and page no. 50 is a signed ledger account for the period of 01/04/97 to 31/03/98 in which loan of Rs. 50 lacs has been shown in the name of Atlas Jewellers and closing balance as on 31.03.98 at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich confirmation in page nos. 58 59 and 93 to 96 have been submitted by the assessee. Page 58 59 are copies of interest running ledger account for the period of 01/04/97 to 31/03/98. Page 93 to 96 are a running copies of account for the period of 01/04/97 to 31/03/98 of Parth Mercantile Inc. where total outstanding loan of Rs.21,59,23,912/- has been shown. The assessee has not verified on what date of loan of Rs. 50 lakhs had been accepted. Therefore, the A.O. is directed to verify the loan with reference to addition made in assessment order. (xvi) Interest paid to depositors:- On page 14 para 21 of the assessment order, the A.O. has disallowed the interest on ten cash creditors which were found non genuine in A.Y. 97-98. The assessee filed appeal for A.Y. 97-98 before the CIT(A) who has deleted the addition vide his order dated 18.04.2002 and confirmed the addition in case of Jigar B. Desai and Vinod Prajapati. Therefore, the CIT(A) has confirmed the interest disallowance to the tune of Rs.3304/- for the above two cash creditors. The remaining interest amount has been already been allowed by the CIT(A) in the above cited order. (xvii) R.A. Corporation (proprietory conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of accounts. Therefore, the A.O. is directed to verify the above interest, which are claimed by the assessee as expenses. The loan shown from Vidhi Corporation is also required to verify as per findings on page 27. 13. Ground nos. 5, 6 7 are against deletion of Rs.1,72,17,951/- on account of bank charges and commission. The A.O. observed at page 16 of the assessment order that the assessee has debited commission of bank charges of Rs.1,72,17,951/-. The justification of this expense was asked for by the A.O. but no reply was filed during the course of assessment proceeding. He, therefore, made the addition of Rs.1,72,17,951/-. 14. Being aggrieved by the order of A.O., the assessee was before CIT(A). The CIT(A) observed on page 23 in paragraph 7.2 which is reproduced as under:- 7.2 I have considered the submissions of the Authorised Representative carefully and have gone through the observations of the Assessing Officer in the assessment order. I find that the appellant has furnished the bank statement and the bank advice from Induslnd Bank to whom such bank charges have been paid. The appellant has filed details of bank charges and commission as per Pages 78-79 of paper bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e so made has been deleted. Ld. CIT(A) had allowed the bank charges and commission as per pages 78 to 82 and bank charges payments were to Induslnd Bank but on verification of paper book submitted before us the page nos. 78 79 are the copy of running ledger account of Shri Hemendra L. Shah with Induslnd Bank for the period of 29.11.97 to 04.12.97 in which no commission / bank charges debited and not pertained to the assessee. But, as per reply of assessee page nos. 97 and 98 are the copy of bank charges in the name of Parth Mercantile Inc. On verification of this account Rs.3368637.65 is debited by Induslnd Bank on account of interest vide letter dated 14.03.2012 at page no.101 of paper book. Rs.16070658.85/- is debited interest in current account no. 0009-353315-050 in the name of Parth Mercantile Inc. in Induslnd Bank which has been debited in the bank charges and commission account. Both the debit entries as mentioned above pertained to interest not bank charges and commission. There are credit entries in this account of Rs.223561.64/- and Rs.2011257.11/-. Thus, hardly Rs.13474/- has shown on account of bank charges and commission. The CIT(A) has not given any opportunity t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). He also filed written reply on this issue, which is reproduced as under:- 23 Ground No.8 relates to the addition of Rs.19,24,117/- towards alleged claim of bill discounting charges. The relevant discussion has been made in para 27 and page 16 of the assessment order. The A.O. stated that on enquiry with the respondent and verification of his return, it is not proved as to why the discounting charges were paid to the bank and what was the income earned by the appellant. It has also been stated inspite of repeated requests only the copy of account and no other evidences has been furnished. 23.1 The Ld. CIT(A) in para 8 and page 23 of the order has referred to submission made by the respondent. The various evidences which have been furnished in support if the claim made are placed on page 102 to 113 of the paper book. The documents in support of the claim of expenditure made are in the nature of Xerox copy of the invoices, Xerox copy of the letter issued by the bank, Xerox copy of the letter of credit issued by the bank and Xerox copy of the bank statements where LC s have discounted. 23.2 The Ld CIT in para 8.2 of his order has given categorical finding with discounting cha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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