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TMI Blog2015 (2) TMI 1036X X X X Extracts X X X X X X X X Extracts X X X X ..... where there is actual transaction of supply of goods, in all other cases we do not find any error or illegality in the orders of authority below. Hence the addition under section 68 in respect of 21 parties is confirmed. - Decided against assessee. Adhoc disallowance of motor car expenses, depreciation and telephone expenses - AO has disallowed 20% of the expenditure debited on account of motor car, depreciation and telephone on the ground of personal use of car and telephone - Held that:- Disallowance was made by AO because the assessee has not produced the log book for running the car to verify the exclusive use of car for business purposes. Similarly the personal use of telephone was not ruled out because the assessee has not furnished the details. Thus as the assessee being a partnership firm the personal use of car and telephone cannot be ruled out. However, the disallowance of 20% in our view is excessive and we find that 10% of the disallowance on account of personal use will be just and proper. Accordingly we restrict the disallowance of expenses on account of car depreciation and telephone to 10%. - Decided partly in favour of assessee. - I.T.A. No.7146/Mum/2010 - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of transaction entered with each of these parties where the cheques issued exceed ₹ 50,000/-. The assessee was also asked to furnish copy of ledger account of all the parties to whom cheques exceeding ₹ 50,000/- was issues by it but not encashed before 31/3/2003. The AO further observed that it was not clear if the payments were made on account of transaction of purchases of goods or any services rendered by those parties or in the nature of financial transaction. In response the assessee submitted that many of the parties are Bhiwandi based and they keep changing their addresses. The numbers of parties are many and scattered and tracing them is difficult and time consuming. Thus the assessee submitted it required the time of up till last week of March to collect their latest address and required details. Finally the assessee filed a letter dated 10/3/2006, and filed the details giving name and address, cheque no., date, amount, date of realization and nature of payment. The assessee submitted before AO that advances were received from certain parties. The AO noted that the assessee has not furnished the address and PAN of those parties from whom the advance amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO was of the view that the assessee failed to prove the genuineness of the advance received from the parties and made the addition of ₹ 36,77,093/- as unexplained cash credit under section 68 of the Act. The assessee challenged the action of the AO before the CIT(A) and contended that in order to ascertain the genuineness of the advance or loan, credit worthiness of these parties, the department should summon all these twenty two parties from whom such advance have been received. Considering the request of the assessee the CIT(A) issued a remand order under section 250(4) of the Income tax Act dated 13/09/2007. The AO submitted its remand report dated 17/04/2008. Thereafter, the assessee made a representation of 26 pages vide letter dated 19/07/2008 as well as vide letter dated 30/07/2008 and pointed out the requirement of issuing of summon and the process to be followed. Accepting the request of the assessee the CIT(A) issued another remand order dated 22/01/2009 and directed the AO to obtain all evidence from the assessee for completion of remand proceeding. Since there was a change of jurisdiction of the case of the assessee, therefore, CIT(A) issued a fresh order dated 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,800/-. The AO has conducted the enquiry regarding the genuineness of the repayment whereas the addition has been made under section 68 of the Income tax Act which is not sustainable in the facts of the case. He has referred to Annexure-C to the assessment order and submitted that the receipts shown in Annexure-C are in respect of the advance received by the assessee for supply of goods. The ld. AR has reiterated the explanation as advanced before the authorities below and submitted that due to the objection of the Reliance Industries, the assessee had to abandon its plan to expand the business by dealing in products of other manufacturers of textile yarn and, consequently, the assessee decided to refund the advance received from the potential buyers of yarn. Since the parties refused to receive the refund due to the increase in the price of yarn, the assessee transferred money to the sister concern and through intervention of the Yarn Merchants Association the money was ultimately returned to these parties. 4.1 He has referred to the reply received from the parties during the remand proceedings and submitted that out of 22 parties 18 parties have submitted their confirmation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO. Thus, the ld. AR has submitted that the assessee has discharged its onus of proving the genuineness of transaction as these parties have confirmed the transaction of giving the advance payment against supply of yarn and also receiving back the money through cheques. The AO has proceeded under wrong impression and contrary to the facts while making the addition u/s. 68 of the Act in respect of these amounts received by the assessee as advance payment for supply of yarn, instead of wrong presumption of AO, that the amount claimed by the assessee, is a loan taken from these parties. Thus, the ld. AR has submitted that the very basis of addition by the AO is contrary to the facts, accordingly not sustainable. 4.2 On the other hand the ld. DR has submitted that the assessee has failed to prove the genuineness and credit worthiness of the creditors, even the repayment to the creditors was not proved by the assessee by producing evidence. The assessee has not brought on record the details of the final payment to the creditors. The AO clearly gave a finding that the amount claimed to have been transferred to the sister concern was transferred to the saving bank account of the fam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the extent of the amount in question transferred to the sister concern was finally credited to the personal saving bank account of family members of the partners. The details of which has been given by the AO at page-6 in para-4 as under :- 4. On perusal of bank accounts of the above named account holders viz., Tejbrabha Silk Mills, Shree Silk Mills, Jayco Silk Mills, the amount credited in their accounts as above, were transferred to personal savings bank accounts of the family members of your partners as per details given below: Name of the sister concern Amount Transferred to S.B. Account Tejprabha Silk Mills Rs.7,23,507.19 Rs.6,75,162.66 Rs.5,96,261.00 No.27175, No.27174, No.27173, No.27168 and 27167 Shree Shakti Mills Rs.7,42,046.00 Rs.6,20,012.00 Rs.6,97,576.00 No.27176, No.27175, No.27173, No.27168 and No.27167 M/s. Jayco Silk Mills Rs.7,82,849.00 Rs.6,64,692.00 Rs.7,39,956.00 No.27176, No.27175, No.27168 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... summons issued to M/s. Textile Product Marketing Agency. One Shri Sitaram Rawat, partner of the said concern appeared before the AO on 11/3/2010 whose statement was recorded. We note that he has stated that the amount was against the purchase of yarn from the assessee. He has also given the bills, cheque number, date as well as the amount and bank. Even from the record we find that the amount matches with the bills under which the goods were sold to the said party and only some balance amount which was received over and above the sale consideration is appearing against the said party. We find that after deducting the commission from the said amount, the balance amount tallies/matches with the amount appearing against that creditor. Therefore, to the extent of the advance received from the said Bombay party, namely Textile Product Marketing Agency, the assessee proved and explained the nature and genuineness of the credit transaction. Accordingly the addition to the extent of the credit appearing in the name of Textile Product Marketing Agency at Sl.No.56 of Annex.-B and Sl.No.19 of Annex.-C is deleted. 5.2 Though, the AO has mentioned the amount in question as loan/advance rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r concern to that of the assessee s family members? The assessee has not produced any records to substantiate its story that the amount was finally repaid by the intervention of the Yarn Merchant Association . The assessee has put forth an interesting story, however, it lacks substance and veracity. The AO has clearly brought out that the amount claimed to have been transferred to the sister concern was finally transferred to the family members of the partners in their personal account. Further, the time gap between the alleged transfer of money by issue of cheques in the month of March and finally their encashment in the month of September 2003 also remains unexplained. Though, the assessee produced the confirmation from 18 parties out of the 21. However, we find that none of these confirmations explained how the amount was received by these creditors on so called refund. We have already stated the transfer of funds from the accounts of the assessee s family members to that of the creditors as totally unsubstantiated. There is no detail of cheque number through which this alleged amount was refunded to these creditors. Once the summons issued by the AO were received back then the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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