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TMI Blog2016 (4) TMI 509X X X X Extracts X X X X X X X X Extracts X X X X ..... ening balance as on 01.04.2008 in the accounts of the assessee and hence the same cannot be treated as unexplained credit in the relevant financial year to be added under section 68. Apart from that, the assessee had filed confirmation letter and confirmation of account from these parties along with the PAN, copy of Audited Balancesheet and Profit & Loss account and acknowledgement of return. Once these documents were submitted and remanded to the AO for his comment and examination, then it cannot be held that the nature of advance received from the customers can be treated as unexplained credits, especially when assessee had a regular business activity and dealing with these parties. In absence of any enquiry made by the AO and any adverse material brought on record, we do not find any reason to doubt the genuineness of the credit and accordingly, the finding given by CIT(A) for deleting the addition is upheld. The AO, when was required to look and examine these evidence, had simply chosen to ignore and raise technical objections. Moreover, the evidences furnished merely corroborates the explanation and evidences filed before the AO. - Decided in favour of assessee Addition in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was unable to prove the genuineness of these advances and by accepting additional evidence in respect of these advances in violation of Rule 47A. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition of ₹ 18,50,000/- made by the Assessing Officer in respect of capital introduced by the partners as the assessee was unable to prove the source of said capital and creditworthiness of partners and by accepting additional evidence in respect of these advances in violation of Rule 46A . 3. The assessee is partnership firm engaged in the business of manufacturing of Tin Containers used in healthcare products and deodorants, etc. 4. As regards the issue raised in ground no.1, the AO has noted that, during the year under consideration, the assessee had shown receiving of fresh loans for sums aggregating to ₹ 57,50,500/- from the three parties, namely:- Sr.No. Name of the Person Amount of loan taken during the year(Rs.) 1 Bhogilal Patel 10,50,000 2 Wall Street Deve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appreciation of evidences, deleted the said loan amount after observing and holding as under:- I have carefully considered the findings of the AO in the assessment order, as well as the submissions of the appellant. It is noted that at the time of assessment stage the appellant has submitted the confirmation of all the three parties along with their PAN, but the AO has not made any enquiry either from the AOs of such parties or directly from these parties. He has summarily treated these loans which were owned up by the concerned parties, as unexplained credits on the ground that the appellant could not file the bank statements and other details of source of these deposits. It is further noted that in the remand proceedings the AO had another opportunity to make enquiries in respect of such loans, but he has not made any adverse observation on the fresh evidence filed by the appellant in form of copies of I.T. Returns and balance sheet etc. of three parties. All these parties are regularly assessed to tax, from their accounts filed by the appellant they appears to be the persons of sound financial state, they have not only given confirmation of loan but has also provided their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed the copies of Audited Balance-sheet reflecting the loan amount, profit loss account and acknowledgment of income-tax returns. Thus, for proving the nature and source of credit, the following evidences were there in the record before the CIT(A) as well as before the AO (in the remand proceedings): (a) Loan confirmation of the parties including PAN and other details; (b) Bank statements of the parties showing loan amount given to the assessee through account payee cheques; (c) Acknowledgment of income-tax returns of the creditors for AY 2009-10; (d) Audited Balance sheet and profit loss account of the creditors. On consideration of these evidences, the Ld. CIT(A) has deleted the said addition by holding that, the said loan was genuine and assessee has prima facie discharged its onus. If the assessee has satisfactorily explained the nature and source of Credit by adducing prima facie all the necessary evidence then onus of the assessee gets discharged and onus shift upon the AO to show / prove that such an explanation is not correct. In absence of any enquiry conducted by the AO even when specific mandate was given by the CIT(A) in the remand pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the assessment-year 2009-10. Not only that, copies of their acknowledgement of income-tax-returns and accounts were also filed. In case of other three parties, it was submitted that, amount was appearing in the opening balance as on 31st March, 2008 and hence, these amounts does not pertained to this assessment year. In support of such contention, acknowledgement of ledger account and confirmation from these parties were also filed. It was also brought to the notice of the CIT(A) that, all these parties are regularly assessed to tax and have been fling their income-taxreturns, the details of which was already given before the AO, therefore, without any enquiry by the AO, the credit balance appearing in the books of the assessee of these parties cannot be treated as unexplained cash credit. 12. The Ld. CIT(A) after considering the entire material on record, deleted the addition after observing and holding as under:- I have carefully considered the findings of the AO in the assessment order, as well as the submissions of the appellant. It is at the time of assessment stage the appellant has submitted the confirmation of all the five parties along with their PAN, but t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. Once these documents were submitted and remanded to the AO for his comment and examination, then it cannot be held that the nature of advance received from the customers can be treated as unexplained credits, especially when assessee had a regular business activity and dealing with these parties. In absence of any enquiry made by the AO and any adverse material brought on record, we do not find any reason to doubt the genuineness of the credit and accordingly, the finding given by CIT(A) for deleting the addition is upheld. The AO, when was required to look and examine these evidence, had simply chosen to ignore and raise technical objections. Moreover, the evidences furnished merely corroborates the explanation and evidences filed before the AO. Thus, order of the CIT(A) is confirmed and ground no. 2 is dismissed. 14. In ground no.3, the revenue has challenged the deletion of addition of ₹ 18,50,000/- in respect of capital introduced by the partners. The partners of the assessee-firm, namely M/s Asian Aerosol P Ltd and M/s Shree Laxmi Trust introduced capital of ₹ 5,00,000/- and ₹ 13,50,000/- respectively. In response to the show cause notice by the AO for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in law the learned Commissioner of Income Tax (Appeals) erred in confirming the addition of ₹ 71,38,571/- made to the income of the appellant by the Assessing Officer in respect of additional cost of material consumed . 18. The brief facts are that, the assessee is a partnership firm engaged in the business of manufacturing of Tin Containers used in healthcare products and deodorants, etc. The activity carried out by the assessee falls under the purview of Central Excise and entire raw material consumed and product manufactured are subjected to Central Excise Law. The AO on the perusal of the profit and loss account observed that, the cost of material consumed in ratio to the total sale was 40% in the AY 2009-10, whereas the cost of material consumed for the immediately preceding year was shown at 30% of the sales. He further observed that, the assessee was entitled to claim of deduction under section 80IB and from this year the claim for deduction has been reduced to 25% of the profit therefore such a rise on material consumed is 40% will affect the profit as it will not be much. The AO noted that in response to the show cause notice, the assessee did not justify t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... increase in cost of material consumed with reference to the sales. In the appeal proceedings, the appellant had filed objections to the finding of the AO and also submitted the reasons for increase in the cost of raw material which was on account of almost 12% increase in the cost of foreign exchange utilized for purchase of imported raw material. It is however noted that the increase in the cost of raw material of any industry is also accompanied with the increase in rates of finished products, which is evident from the fact that sales are also increased as compared to last year. Had this been the only reason for increase in cost of raw material, the appellant could have submitted it to AO at the time of assessment. The explanation of the appellant appears to be an afterthought which is not supported by convincing documentary evidence. There is abrupt decrease of G.P. from 47.78% last year to 35.7% during the year for which the assessee does not have any cogent explanation. Under these circumstances, the addition made by the AO appears reasonable hence the same is confirmed . 20. Before us, the Ld. Counsel submitted that, the total quantity of raw material purchased in finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t side and sales have been accepted on credit side along with the gross profit, then no addition in the trading account can be made merely on the basis surmises and presumption.Analysis based on evidences and entities in the books of account has to be done, and only if books of account or corroborating evidences are not proper, the trading result can be disturbed. The purchase bills of raw material has not been doubted nor there is any discrepancy in excise register of raw material, hence, no addition can be made either on account of cost or on account of consumption. 23. Before us, the Ld. Counsel pointed out that, if the assessee rate of cost of material purchased as on 31st March, 2008 is applied, then perhaps, there would be negligible difference in the so called increase cost of consumption. Hence, on this premise also no addition is called for. This aspect has been demonstrated before us by way of a separate chart. However, without going into this aspect, we on the threshold hold that addition itself is unsustainable especially when no defect has been pointed out either in purchase bills or purchase rates of raw materials consumed or factor of foreign exchange rates and wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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