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TMI Blog2013 (4) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... depositors thread-bare and has established that they cannot be genuine depositors who could extend loans to the assessee company. Thus the order of the AO confirmed - in favour of revenue. Disallowance of interest paid on account of unexplained cash credit - CIT(A) restricted the addition made by AO of Rs.1,82,648 to Rs.11,770 - Held that:- Since the disallowance of interest of Rs.1,82,648/- is consequential to the addition made under the head cash credit invoking section 68 and since the order of the AO was sustained on that count, the order of the AO with respect to this issue was also confirmed - in favour of revenue. - ITA No.253/Ahd/2010 - - - Dated:- 15-2-2013 - Shri G. C. Gupta, VP And Shri A. Mohan Alankamony, AM,JJ. Shri Rahul Kumar, Sr.DR Shri Ramesh Malpani, AR ORDER The revenue has preferred the appeal aggrieved by the order of the learned CIT (A)-I, Surat in Appeal No. CAS-I/196/08-09 dated 26-11-2009, for the assessment year 2006-07, passed u/s 250 read with section 143(3) of the Act. The assessee has filed the Cross Objection in support of the aforesaid order of the learned CIT(A). Since the issues involved are similar and identical they were h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by AO of Rs.43,70,000/- on account of unexplained cash credit u/s. 68 of the Act to Rs.2,00,000/-. The learned AO on verification of the return of income found that the assessee disclosed receipt of unsecured loans of Rs.43,70,000/- during the relevant previous year, from the following 17 creditors:- Sr. Name of the lenders Amount (Rs.) No 1 Shri Bhavanisingh Sekhawat 200000 2 Smt. Shunkidevi Singhodia 200000 3 Shri Gopal Saini 260000 4 Shri Govind Seshma 200000 5 Smt. Indra Pareek 200000 6 Shri Kamal Kishore R Pareek 200000 7 Shri Mukesh Kumar Malwal 200000 8 Shri Narpat Sharma 200000 9 Shri Om Prakash Sharma 200000 10 Shri R. L. Agrawal Sons HUF 1250000 11 Shri Ramesh Bhadu 160000 12 Shri Ram Chander Chaudhary 160000 13 Shri Satya Narayan Chaudhary 200000 14 Shri Seo Narayan Chaudhary 160000 15 Smt. Suman Om Prakash Sharma 260000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d reasons for arriving at such conclusion in the assessment order. (vi) With much efforts of the Inspector Shri Om Prakash Sharma appeared before the learned AO. After a detailed examination Mr. Om Prakash Sharma also did not seem to be a genuine creditor. The learned AO made a detailed reasoning in his assessment order for arriving at such conclusion. (vii) Similarly, after a strenuous effort by the learned AO and his staff the other creditors were also not found to be genuine. The learned AO had made a detailed reasoning in his order substantiating his findings. (viii) With respect to various other creditors the summons were returned un-served by the postal authorities with the remarks "not known/no such person/left" 5.2 For the above said reasons the learned AO made an addition of Rs.43,70,000/- u/s 68 of the Act under the head cash credits and Rs.1,82,648/- being disallowance of interest expense on such bogus creditors and concluded as follows:- "4.10 The assessee company failed to respond to the show cause notice. The assessee has thus failed to give even the correct addresses of the alleged lenders, leave aside the capacity of the alleged lenders to advance the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 2001-02 and the loan was given by account payee cheque. The loan was also returned along with interest by account payee cheque during the financial year 2007-08 and 2008-09. As per the balance sheet of the depositor's they had capital exceeding the loan extended to the appellant. 7. The learned DR supported the order of the learned AO and submitted that the creditworthiness of the creditors were not genuine and highlighted the fact that many of the letters sent to the creditors were received by the same person other than the creditors which established that the transactions were bogus. The learned DR further submitted that the assessee company had not furnished the correct addresses of the creditors and after strenuous efforts and by the compulsion of the Inspector and the other staff of the revenue the assessee had reluctantly produced the creditors and the learned AO had carefully examined them and came to the right decision. It was, therefore, prayed that the order of the learned AO may be restored. The learned AR on the other hand, relied on the order of the learned CIT(A). 8. We have heard the rival submissions, carefully perused the materials on record, the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng income of Rs.6,000/- to Rs.8,000/- per month and his monthly expenditure is about Rs.4,000/- to Rs.5,000/-. Therefore, his capacity to extend loan of Rs.1,60,000/- is doubtful. Further, his only bank transaction is the alleged loan transaction and, therefore, it does not appear to be genuine. Moreover, the opening balance in the bank before this transaction was only Rs.1,068/-. Cash was deposited in the bank one day before the cheque for the loan was issued. (v) Smt. Suman Om Prakash Sharma:- She is engaged in the work of stitching laces on sarees earning income of Rs.25/- to Rs.40/- per day. Her husband's income was not known to her. However, household expenditure was Rs.8,000/- to Rs.10,000/- per month. Therefore, her capacity to extend loan of Rs.1,60,000/- is doubtful Further, her only bank transaction is the alleged loan transaction and, therefore, it does not appear to be genuine. Moreover, the opening balance in the bank before this transaction was only Rs.1,068/-. Cash was deposited in the bank one day before the cheque for the loan was issued. (vi) Shri Mukesh Malwal:- He is a commission agent for machinery parts earning income of Rs.8,000/- to Rs.10,000/- per month ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto the capital of the company by adopting this dubious device. Due to these reasons, the case laws relied upon by the assessee; do not come to its rescue. In these circumstances, we do not have any hesitation to set aside the order of the learned CIT(A) and sustain the order of the learned AO. Accordingly, we hereby confirm the order of the learned AO and allow this ground of appeal in favour of the revenue. 10. Ground No.2:- Restricting the disallowance of interest made by the AO of Rs.1,82,648/- claimed to have been paid by the assessee on account of unexplained cash credit to Rs.11,770/-. On perusal of the records, the learned AO observed that the assessee had debited Rs.3,92,407/- in its profit loss account against interest payment under the head "administrative finance expense" which included a sum of Rs.1,82,648/- as interest on bogus loans. Since the loan amount were treated to be not genuine, the interest of Rs.1,82,648/ paid on the said loan was disallowed and added to the income of the assessee by the learned AO. The learned DR submitted that the learned CIT(A) had only sustained the addition of Rs.11,770/- since he had deleted the addition substantially made under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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