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TMI Blog2015 (4) TMI 474X X X X Extracts X X X X X X X X Extracts X X X X ..... nst revenue. Unexplained investment in machinery and generator - CIT(A) deleted addition - Held that:- assessee has worked out the availability of fund on the relevant dates. Again it was found that though apparently there may not be direct nexus between the fund available and the investment made in machinery and generator but the circumstantial evidence pointed out by the learned counsel of the assessee that the dates on which cash withdrawals have been made from the various banks of the assessee and the dates on which expenditure has been incurred appears to be plausible explanation for which benefit cannot be denied to the assessee; Accordingly, Ld. CIT(A) has rightly deleted the addition of 6,11 ,000/-. In the background of the aforesaid discussions, we are of the considered view that no interference is called for in the well reasoned order passed by the Ld. CIT(A) - Decided against revenue. Unexplained investment in form of cash deposits - CIT(A) deleted addition - Held that:- Considering the facts and circumstances of the case, the preponderance of probabilities appears to be in favour of the assessee. However, while scrutinizing the date wise withdrawals and the date of depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l reasoned order passed by the Ld. CIT(A)- Decided against revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal before the Tribunal. 5. The present appeal has been filed by the Revenue on 9.1.2009 which came up for hearing before the Bench many times since 25.6.2009. As per the order sheet, we have seen that most of time assessee remained absent, in spite of valid notice issued to the assessee and the Bench adjourned the case many times. We have perused the records available with us and seen that this office issued many times notices by Regd. Post to the assessee on the address, as per the assessment and appellate records, but assessee remained absent. Lastly, the notice for hearing was issued by Regd. Post for 10.3.2015 which was not received back unserved. Therefore, keeping in view of the facts and circumstances, as explained above, we are of the view that assessee is not interested to prosecute her appeal in dispute, therefore, we are proceeding to adjudicate the issues in disputes exparte qua the assessee and after hearing the Ld. DR and perusing the records. 6. Ld. DR at the time of hearing relied upon the order passed by the AO and reiterated the contentions raised by the Revenue in the grounds of appeal. He further stated that the order passed by the Ld. First Appellate Autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wals have been made and the cash has been deposited does make a circumstantial evidence. Such a circumstantial evidence becomes more credible in view of the fact that no other business source/account has been found by the AO during the course of assessment proceedings or in subsequent assessment proceedings, as has been pointed out by the learned AR. Considering the over facts and circumstances of the case, the preponderance of probabilities appears to be in favour of the assessee. However, while scrutinizing the date wise withdrawals and the date of deposit, it is seen that at five places apparently there are negative balances, which works out to ₹ 3,20,850/-. In the above circumstances, out of ₹ 17 ,07 ,250/-, for the amount to the extent of ₹ 3,20,850/-, the assessee could "not give the source thereof. Therefore, out of the addition of ₹ 17,07,250/-, addition to the extent of ₹ 3,20,850/- is confirmed and the balance amount deleted. (2) Addition of ₹ 19,00,OOO/- on a/c of Unexplained investment in factory building: The AO has made an addition of ₹ 19,00,000/- under the head unexplained investment in factory. building, which consis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs of the AO on factual basis. The learned AR has not specifically countered the finding of the AO regarding lack of creditworthiness of the lender. The learned AR has relied upon the ratio delivered in the case of CIT Vs. Real Time Marketing (P) Ltd (2008) 10 DTR 191 (Del) and also in case of Ram Kishan Dass Munnu Lal Vs CIT (1961) 41 ITR 452 (All.) to suggest that that there being no material link to the assessee with the amount deposited in cash and the onus lies on the department to prove that the person 'in whose name the deposits were made really belong to the assessee. The above case laws relied upon by the learned AR has no application in the instant case because the AO has brought on record that the lender has no independent source of income and, therefore, the preponderance of probabilities that the same represents unexplained income of the assessee is reasonably proved. Hence, the addition of ₹ 7,00,000/- made by the AO treating the said sum as unexplained credit stands confirmed. (3) Addition of ₹ 6, 11,000/- on a/c of unexplained investment in machinery & Generator. During the year the assessee claimed to have invested ₹ 5.3 lacs in machinery an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is also not on the cards (as discussed on page 20 to 22). While discussing about the realization of debtors, {t is important to mention the argument of assessee's counsel in this regard submitted by him vide his letter dated 27.3.2006. The relevant excerpts from the above written submission are being reproduced hereunder: - ".....it is submitted that your goodself has not considered the entries of foreign remittances in the amount of bank of Punjab - current account correctly resulting into difference of ₹ 27.43 lacs which in fact is not there. The remittances not considered/wrongly considered are detailed below:- Date Amount Remarks 7.6.2002 512820 Not considered 21.6.2002 486600 Taken as ₹ 486000 29.6.2002 612720 Not considered 5.9.2002 1419720 Taken as ₹ 1419270 10.10.2002 1612017 Not considered .... .. Your finding that realization of debtors is, not as per disclosed bank accounts as discussed above. Your good self will appreciate that realization of debtors is fully explainable as per the bank accounts of the assessee in view of point no. 5 above and as such there is no justification in making the said addition. From the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of investment in the above FDRs, the assessee was able to submit the explanation regarding the FDRs of ₹ 86,400/- only. Regarding the timing, the amount and the source of investment regarding rest of the FDRs - no proper explanation has been filed by the assessee. The assessee could not even link up the above investment with any bank withdrawal. It is also important to mention here again that no cash book or cash flow statement has been furnished by the assessee." During appellate proceedings, the learned AR has again taken the plea that there is an overall availability of cash, which cover this investment and therefore no addition is called for' on this account. The plea of the learned AR is again not acceptable. The assessee has not been able to furnish any evidence, which could be directly or indirectly linked to the said investment. Hence the plea of the learned AR regarding source of investment in FDRs. remains unexplained even at the appellate state. Hence the action of the AO in making addition of ₹ 2.99 lacs treating it as unexplained investment in FDRs stands confirmed. (6) The next issue challenged by the assessee vide ground No.8 is against the addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is highly surprising that the withdrawal entries of about ₹ 1.28 crores only can be termed as other than cash withdrawals. Even among this ₹ 1.28 crores, lot of withdrawals appear to be bearer cheque withdrawals on the face of it but the same have been treated as 'cheque withdrawals' while giving the benefit of doubt to the assessee . Following is the break-up of bank wise withdrawals made by the assessee during the year. Name of Bank Withdrawals (other than cash withdrawals) Amt. (Rs.) (in lacs) Bank of Punjab -Current Alc 82.95 Global Trust Bank - Current Alc 5.99 Canara Bank - current a/c 43.91 PNB, Patparganj Duty Drawback A/c 0.60 PNB, ICD, Duty Drawback A/c NIL Canara Bank - PC Limit A/c NIL Total 132.75 Thus, out of the total expenses claimed to be actually incurred (payment made) for, the purchases/business expo (Rs.2.20 crores), the assessee has paid Rs.l.33 crores through modes other than cash out of declared Bank Accounts. Rest of ₹ 87 lacs have been paid either through undisclosed bank accounts or through modes other than crossed cheque/crossed DD. Now there are only two options. First is to consider the investment of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,607/- by the AO vide his order passed U/s 154 of LT. Act. However, during appellate proceedings, the learned AR has taken a plea that in case any of the additions are confirmed in. appeal, the assessee is entitled for higher claim of deduction U/s 80HHC of LT. Act. The plea of the learned AR has been considered and finds that the same has no merit. The deduction U/s 80HHC is to be allowed in terms of the provisions of the Act. During appellate proceedings, the learned AR has not been able to prove the nexus between the additions made by the AO, which have been confirmed in appeal, and the export business of the appellant. In view of this the claim of the learned AR for higher deduction u/s. 80HHC has no basis. Hence, the plea taken by the learned AR on this score is hereby rejected. (9) Vide ground No.5 the appellant has contended that the AO was wrong and illegal in making an addition of ₹ 6.92 lacs to the income of the assessee as unexplained investment in car, furniture, scooter and fax. During appellate proceedings; the learned AR has submitted that out of the addition made of ₹ 6,92,201/-, the AO has given a relief of ₹ 5,24,534/- vide his rectification ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d transactions for which the assessee has no explanation at all. The AO observed that the assessee neither furnished any cashbook nor cash flow statement. Accordingly, the same was treated as unexplained income and added to assessee's total income u/s. 69 of the I.T. Act. We find that the assessee produced a statement showing availability of source of ₹ 12,00,000/ before the Ld. CIT(A) during the appellate proceedings and which shows there is no direct evidence regarding the cash transaction but the date on which such has taken place and the availability of cash on such date shows that there is plausible nexus, which explains the source. However, the details furnished by the assessee in this regard indicate that an amount of ₹ 2,50,000/- has been shown to be representing direct credit in capital account. However, in absence of relevant detail, the same cannot be accepted. Thus in our considered opinion, Ld. CIT(A) has rightly confirmed the addition to the extent of ₹ 2,50,000/- and the rest of the amount i.e. ₹ 9,50,000/- is deleted. In the background of the aforesaid discussions, we are of the considered view that no interference is called for in the well r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellate proceedings, the learned counsel of the assessee has worked out the availability of cash in assesse's bank alc. On perusal of the accounts, it is seen that the learned counsel for the assessee has given date-wise withdrawals from her bank account along with the dates on which the cash was deposited, in the bank account. Apparently, the dates of withdrawal and the dates of deposits are close which indicate that in absence of' any other undisclosed business accounts, the preponderance of probability is that 'the cash withdrawals have been deposited in her bank account appears to be logical. Though the nexus between the withdrawal and the deposit cannot be directly proved but the dates on which withdrawals have been made and the cash has been deposited does make a circumstantial evidence. Such a circumstantial evidence becomes more credible in view of the fact that no other business source/account has been found by the AO during the course of assessment proceedings or in subsequent assessment proceedings, as has been pointed out by the learned AR. Considering the over facts and circumstances of the case, the preponderance of probabilities appears to be in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explained to be out of BOP withdrawals, as stated above. Hence there is no justification for making addition to such extent. However, as regards the investment in furniture to the extent of ₹ 64,171/-, the learned counsel of the assessee has explained the source there of to be out of available cash. Ld. CIT(A) held rightly held that this explanation is of general nature as the same is not supported by any proper evidence. Therefore, the Ld. CIT(A) has rightly held that out of ₹ 1,67,667/-, addition to the extent of ₹ 64, 171/- is confirmed and the balance addition of ₹ 1,03,496/- is deleted. In the background of the aforesaid discussions, we are of the considered view that no interference is called for in the well reasoned order passed by the Ld. CIT(A), hence, we uphold the same by rejecting this ground of appeal raised by the Revenue in the aforesaid manner. 13. With regard to ground 1(v) regarding deletion of addition of ₹ 11,60,000/- on account of 20% of expenditure incurred in violation of section 40A(3) of the I.T. Act is concerned, we find AO has made the disallowance by observing as under: "If we have a look upon the trading & P&L Accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .60 PNB, ICD, Duty Drawback A/c NIL Canara Bank - PC Limit A/c NIL Total 132.75 Thus, out of the total expenses claimed to be actually incurred (payment made) for, the purchases/business expo (Rs.2.20 crores), the assessee has paid Rs.l.33 crores through modes other than cash out of declared Bank Accounts. Rest of ₹ 87 lacs have been paid either through undisclosed bank accounts or through modes other than crossed cheque/crossed DD. Now there are only two options. First is to consider the investment of ₹ 87 lacs as having made through undisclosed Bank Accounts and to make addition of ₹ 87 lacs u/s. 69 of the l.T. Act, 1961. The second is to consider the same as having been made in violation of the provisions of section 40A(3) out of cash withdrawals made from the undisclosed back accounts. In the interest of justice, the second option is being exercised here. Giving the maximum leverage to the assessee, the expenses of ₹ 29 lacs (1/3rd of the total expenses) are presumed as not covered by the provisions of section 40A(3). (The benefit of cash balance of ₹ 92,666/- has already been given to the assessee for incurring the petty business expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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