9911796707
TMI Blog2016 (1) TMI 358X X X X Extracts X X X X X X X X Extracts X X X X ..... of this issue is that the assessee is a retailer and whole sale trader of computer and other accessories in Durgapur. During the assessment year under appeal, he borrowed Rs. 2,50,000/- from his father and Rs. 1,50,000/- from his mother for the purpose of his business. The Learned AO during the course of assessment proceedings confronted the assessee as to why the said loans received should not be treated as unexplained cash credit and treat the same as income of the assessee. In response to that, the assessee stated his father Shri. Malayendra Kumar Kar ( a retired government school teacher) had borrowed loan from United Bank of India Tobin Road Branch, Calcutta, to the tune of Rs. 2,70,000/- on 24.11.2006 against the Fixed Deposit of Rs. 3 lacs held by him in the said branch and out of the same, issued a demand draft for Rs. 2,50,000/- on 25.11.2006 in favour of Durgapur Municipal Corporation for and on behalf of the business purposes of the assessee herein. As far as the loan from mother to the tune of Rs. 1,50,000/- , the assessee stated his mother Smt.Gita Rani Kar had advanced him cash loan out of her retirement benefits. This loan was utilized for purchase an asset at Suhatt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of advancing the loans together with the purpose of the loan given to the assessee. He further argued that the assessee is the only son of his mother and the assessee is a post graduate student of MSC (Hons.) Chemistry having sufficient software knowledge and despite being a bright student, could not secure a job to take care of himself and hence had to forcibly get into the business. He further stated that in the place like Durgapur which is dominated by SAIL , it is very difficult for a beginner to set up his business unless he is flushed with the required funds to do so. In this background, the assessee chose to draw loan from his mother to the tune of Rs. 1,50,000/- to enable himself to establish his business in a competitive locality like Durgapur. In view of these facts, he argued that going by the capacity of the senior rank of the mother and in view of the smallness of the amount involved herein, going by the background of the assessee as stated supra, identity and genuinity of the transaction is proved beyond doubt by the confirmation filed by the assessee's mother, prayed that the three essential ingredients are duly satisfied by the assessee and hence no addition cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is duly reflected and when this was put across to the Learned DR, he fairly conceded to the stand of the assessee. Hence the addition deleted in that regard by Learned CITA does not require any interference. With regard to the loan received from mother to the tune of Rs. 1,50,000/- in cash, it is undisputed that the assessee is a senior teacher in a school run by SAIL at Durgapur in the senior rank as Shift In charge. It is also seen that the assessee had proved the identity of creditor (his mother) and genuineness of the transaction through filing the confirmation from her mother. We also find from the confirmation placed on record that the mother had not mentioned the loan amount advanced by her to the assessee. But however, she had clearly mentioned the fact of advancing the loan and the purpose of the loan in her confirmation together with the source for advancing the loan. The status of the assessee that she is a retired school teacher and had held a senior position as Shift Incharge in a school run by SAIL at Durgapur is not disputed by the revenue. Hence in these facts and circumstances, we hold that the assessee has also proved the creditworthiness of the transaction and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be invited with the additions. He further argued that ultimately only the income element is to be taxed for income tax purposes and the Learned AO had made both the additions of Rs. 4,48,000/- and Rs. 3,76,992/- under the head business income only . He argued that the business in which assessee is engaged (being a retailer and wholesale trader of computer and other accessories) in would not at any stretch of imagination yield the business profits suggested by the Learned AO. Moreover, he stated that no corresponding assets / outgoings were found by the Learned AO to justify these additions. He argued that this point has not been properly appreciated by the lower authorities. In response to this, the Learned DR vehemently supported the orders of the lower authorities. 4.3. We have heard the rival submissions and perused the materials available on record. We find that the assesee in his reply before the Learned AO had stated that admittedly there were some mistakes in the audited accounts submitted before the department and hence requested for rejection of the books of accounts to the Learned AO. We find from the assessment order that the assessee had stated that no capital was in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for his rebuttal and ascertained the true facts in this regard. We also find from the records that the assesee had chosen to write a letter dated 11.1.2010 i.e after receiving the assessment order dated 31.12.2009, to the previous auditor asking him to explain the reasons for signing the accounts with deficiencies pointed out in the assessment order warranting huge additions. This letter was sent by speed post by the assesee and is part of our records. Admittedly, no reply has been received for the same by the assessee and hence in this scenario, we find that the assessee has been genuinely prevented from reasonable cause to put forth his case before the first appellate authority. Hence we find that the action of the Learned AO in this regard is not proper in the facts and circumstances of the case and no additions are warranted in this regard. Accordingly, the ground nos. 2 & 3 raised by the assessee stands allowed. ISSUE III - Addition of Rs. 13,07,328/- on account of Debtors in revenue appeal 5. This addition was made on the premise that the assessee had not offered the sales in respect of sundry debtor Aryabhatta Institute of Engineering & Management Durgapur, Panagarh. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supported the order of the Learned AO. 5.2. We have heard the rival submissions and we find that the assessee had already disclosed the turnover in respect of these two parties in the earlier years and just because the sundry debtor balance is not shown in the balance sheet of the assessee , it cannot be added as income of the assessee. Moreover, we have already held in the previous grounds that the books of accounts of the assessee contain lot of deficiencies and this was also pointed out by the assessee before the Learned AO. We have already held that the right course of action available with the Learned AO could be to reject the books of accounts and determine the profits on estimated basis u/s 145(3) of the Act which has not been done by the Learned AO in the instant case. Hence, we hold that no addition could be made in respect of balance receivable from sundry debtors in the facts and circumstances of the instant case as the sales in respect of them have already been disclosed by the assessee in the earlier years which fact has not been refuted by the Learned AO in the remand proceedings. Accordingly, the ground no. 3 raised by the revenue is dismissed. ISSUE IV - Additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Learned AO and the same has been accepted. He argued that having done so, there is no case for making any addition towards trade creditors. Moreover, in the facts of the instant case, there is no discrepancy in the balance outstanding of sundry creditors as could be evident from the fact that no adverse comments were made by the Learned AO in remand proceedings. In response to this, the Learned DR vehemently supported the order of the Learned AO. 6.2. We have heard the rival submissions and perused the materials available on record. We find that the Learned CIT(A) had duly called for a remand report from the Learned AO wherein the entire discrepancies with regard to balances in sundry creditors have been duly reconciled and no adverse comments were recorded by the Learned AO. Accordingly, the Learned CIT(A) sought to give relief to the assessee. We also find that the purchases have not been disputed by the Learned AO. Admittedly, these sundry creditors have emanated only out of purchases of the assessee and hence when purchases (ie debit entry) have been accepted as genuine, there is no scope for treating the credit entry (i.e sundry creditors) as bogus. In view of these f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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