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TMI Blog2014 (2) TMI 515X X X X Extracts X X X X X X X X Extracts X X X X ..... C when the expenses were actually recorded - even in principle the expenses found, which related only to six weeks and that too in a period of two months, cannot be averaged over the whole year as production is not at the same levels throughout the year and depends on several factors - If the unexplained expenditure made under section 69C is removed from the income, meager taxable income remains in the hands of Assessee - CIT(A) has noted that on the comparison of details of expenses recorded in the books and those mentioned in the loose papers - the expenses were recorded in the books except from some minor discrepancies for week ending 22.12.2007 - mismatch of data for one week cannot be extrapolated for the year – Revenue could not controvert the findings of CIT(A) nor has brought any material on record in its support – Decided against Revenue. - I.T. A. No. 3232/AHD/2011 - - - Dated:- 7-2-2014 - Shri G. C. Gupta And Shri Anil Chaturvedi, A.M.,JJ. For the Appellant : Shri J. P. Jhangid Sr. D. R. For the Respondent : Shri Divyakant Parikh ORDER Per Shri Anil Chaturvedi,A.M. 1. This appeal is filed by the Revenue against the order of CIT(A)-IV, Surat dated 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has led to a debit balance of the partner in his capital account in the books of Shree Surya Packaging. He further noted that the cash book of Surya Packaging was not furnished for examination. He therefore concluded that the source of capital in the hands of the firm remained unexplained as the creditworthiness of the partner has not been proved satisfactorily. A.O. also noticed from the note book found from the site premises during the survey proceedings that Shivjibhai Patel had made capital contribution aggregating to Rs. 50,000/- in January 2008 which were not reflected in the books of accounts produced before him. He further noticed that a claim was made regarding circulation of withdrawal of Rs. 2,25,000/- on 23.01.2008 for subsequent capital introduction. From the Annexure BF-12 on totaling the cash and capital movements of the relevant week, he noted that there was no such withdrawal of Rs. 2,25,000/-. He further noted that the circumstantial evidence proves that such huge cash cannot be handled on withdrawal during the period from 23.01.2008 to 28.03.2008. He accordingly considered the explanation regarding the source of capital of Rs. 6,86,000/- as not been satisfactoril ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingly made an addition of Rs. 23,99,365/- as income earned from unexplained source. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A). CIT(A) after considering the submissions made by the Assessee deleted the addition on account of capital contribution of various partners by holding as under:- 11. In the case of Shivjibhai Patel, CIT(A) deleted the addition by holding as under:- (iii) I have gone through the facts of the case. As far as source of Rs. 4,00,000/- is concerned, the appellant has been able to explain this by way of evidence of withdrawal from the firm M/s. Shree Surya Packaging and the fact of negative capital balance in not way takes away from the source of fund being explained. The non production of cash book of M/s. Shree Surya Packaging is not relevant as the transactions were shown to be recorded in the capital account of partners with the said firm and in the balance sheet of the partner. In any case, the assessee was not required to show the source of source. The explanation as regards withdrawal from and reintroduction as capital in the assessee firm is required to be accepted as the conclusion of the A.O. is based only on doubt and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the A.O. is based only on doubts. He has not brought anything on record to show that the explanation was not correct. The assessee has produced all relevant details to prove his claim. He cannot be held responsible for production of books of third party. The addition made is without any basis and therefore deleted. 13. In the case of Rajeshbhai Patel, CIT(A) deleted the addition by holding as under:- iii) I have gone through the facts of the case. The appellant firm has shown the source of funds introduced by the partner. The conclusion of the A.O. that the partner did not have the capacity to invest was based on income earned by him. This is not correct as the source of fund can be out of income for the year as well as investments made in the past or loans obtained from legitimate sources. If the A.O. had any reservation about the source of funds with the partner, he should have investigated rather than consider it as unexplained without bringing anything on record. The extent of capital introduced and recorded in the books is held as explained. Even if it is held that capital not recorded in the books but only in annexure-BF12 was unexplained, the assessee has to be al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he addition made is therefore deleted. 16. In the case of Hitesh Mistry, the addition was deleted by CIT(A) by holding as under:- 6.(ii) I have gone through the facts of the case. The partner had sufficient cash balance and the source of this cash has been explained to be out of remittances received from abroad. The A.O. has based his conclusion regarding creditworthiness of the partner on his taxable income. He has not considered the fact that the partner had other sources of fund available to him. In case the A.O. was not satisfied with the availability of funds with the partner, the addition if any on account of unexplained cash credits was to be made in the hands of the partner and not the appellant firm as it is not required to establish the source of source. Even otherwise, it is seen that an amount of Rs.55,000/- was withdrawn on 21.01.2008 from ICICI bank and Rs. 3,00,000/- was deposited on the same day in the other bank account of the appellant i.e. State Bank of India from which DD of Rs. 3,00,000/- was purchased on same date and therefore the source of the DD as being withdrawals from ICICI bank has to be accepted. The appellant has shown withdrawals of sufficient am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and source of capital introduced by the partner and had also proved even the source of source. It was further submitted that all the partners are assessed to tax and the Assessee placed on record, the copy of the I.T. returns, personal balance sheets. From the computation of the income of the various partners placed on record, the ld. A.R. pointed out that the interest on capital received from the firm has been shown by the Assessee as income and the same has also been allowed and the income on capital has also been allowed as expenditure by the Revenue. He also placed reliance on the decision of Gujarat High Court in the case of CIT vs. Ranchhod Givabhai Nakhaba (2012) 208 Taxman. 35 (Guj.). He thus supported the order of CIT(A). 20. We have heard the rival submissions and perused the material on record. We find that CIT(A) after considering the submissions and the facts in the case of each partners by a reasoned order has deleted the additions made by A.O. Before us, the Revenue could not controvert the findings of CIT(A) nor has brought any material on record in its support. We therefore find no reason to interfere with the order of CIT(A). Thus this ground of Revenue is dism ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenses found, which related only to six weeks and that too in a period of two months, cannot be averaged over the whole year as production is not at the same levels throughout the year and depends on several factors. In the alternate, it was also argued that the disclosure made during survey was sufficient to cover such income. 4.2 I have gone through the facts of the case. From a comparison of the details of expenses recorded in the books and those mentioned in the loose papers, it is seen that the expenses are recorded in the books. Only in respect of week ending 22.12.2007, some of the expenses were shown as recorded on neighbouring dates, i.e. not falling within the week. This can be on account of some entries getting recorded on wrong dates when transferred in the regular books. It could also be that the recording in the regular books was correct and in the annexure was wrongly recorded- Date of receipt of bill etc. instead of actual incurring of the expense. In any case, mismatch in data for one week cannot be extrapolated for the year when recording on other date match. Even otherwise, the additional income of Rs. 31,00,000/- disclosed would be sufficient to cover th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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