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TMI Blog2011 (10) TMI 689X X X X Extracts X X X X X X X X Extracts X X X X ..... . In this appeal the assessee has raised following grounds :- (1) That the CIT(A) erred in confirming the addition of ₹ 56,500/- ₹ 56,000/-, ₹ 55,000/-, ₹ 56,500 & ₹ 55,000/- & ₹ 57,000/- resp. from Priya Steel, Saniya Steel, Suleman Ent., Vijay Traders, Mansoor Metal & Jaybharat Steel Co. (2) That the CIT(A) erred in confirming the addition of ₹ 1,50,000/-, Rs,6,00,000/-, ₹ 14,25,000/- & ₹ 9,00,000/- resp. from Fashat Ali, G.V. Katwala, J.K. & Co. & Mayur M. Patel. (3) That the CIT(A) That the CIT(A) erred in not taking cognizance of the PAN & confirmation produced of Fashat Ali, G.V. Katwala, J.K. & Co., Mayur M. Patel. (4) That the CIT(A) erred in not applying the ratio of Rohini Builders 256 ITR 360. (5) That the addition of ₹ 56,500/-, 56,000/-, ₹ 55,000/-, ₹ 56,500/- & ₹ 55,000/- & ₹ 57,000/- should be deleted. (6) That the addition of ₹ 1,15,000/-, ₹ 6,00,000/-, ₹ 14,25,000/- & ₹ 9,00,000/- should be deleted. (7) That the CIT(A) erred in confirming disallowance of Kharajat expenses of ₹ 99,833/-. ITA No.2086/Ahd/2009 Asst. Year 2005-06 (Revenue's a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber) Shri Shah Unmesh Indravadan vs. ITO in ITA No.3489/A/07 ITAT, Bench'D' Ahmedabad.. On merits the assessee submitted that he had filed copy of ledger accounts. The parties are small traders, hence PAN proof was not there but the loan is genuine and accepted. 7. After considering the submissions of the assessee the ld. CIT(A) held as under :- "4.1 I have considered the facts and submissions. I do not agree with the appellant's view. In the original assessment proceedings no inquiry was made regarding genuineness of the loans. As per the audit report loan was taken in cash. Penalty proceedings u/s 271(D) was initiated. During the penalty proceedings, it was found that identity, capacity and genuineness of the loans are not proved. Hence, section 68 of IT Act is attracted. Accordingly, the AO issued notice u/s 148 of IT Act on 29.08.2007. Regarding genuineness of the loan, no opinion was formed in original proceedings, hence there is no question of change of opinion. Hence it is not a case of change of opinion and the case laws relied on by the appellant is not applicable. The notice u/s 148 of IT Act is issued within four years from the end of the assessment year and reop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per book where he stated that erstwhile AO had not taken ample note of the creditors in her assessment order and therefore it can be said that there was certain non-application of mind of the part of the then AO. In this regard he relied on the decision of the Delhi High Court (FB) in the case of CIT vs. Kelvinator of India 256 ITR 1(Delhi)(FB) affirmed by Hon'ble Supreme Court in 320 ITR 561, wherein the Hon'ble Delhi High Court has held as under :- "23. We also cannot accept submission of Mr. Jolly to the effect that only because in the assessment order, detailed reasons have not been recorded on analysis of the materials on the record by itself may justify the AO to initiate a proceeding under section 147. The said submission is fallacious. An order of assessment can be passed either in terms of subsection (1) of section 143 or sub-section (3) of section 143. When a regular order of assessment is passed in terms of the said sub-section (3) of section 143, a presumption can be raised that such an order has been passed on application of mind. It is well-known that a presumption can also be raised to the effect that in terms of clause (e) of section 114 of the Indian Evidence Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 199 Taxman 342 & 106 ITR 1(SC) Parshuram Pottery. On merits, he submitted that as the one person was examined in 271-D proceeding, who confirmed deposit, merely because his sources were not proved, additions could not be made u/s 68 and all other credits be added in suspicion. 9. On the other hand, the ld. DR relied on the orders of authorities below and submitted that during the penalty proceedings initiated u/s 271D it was found by the AO that identity, capacity and genuineness of the loans were not proved and therefore the provisions of section 68 were attracted. No opinion was formed at the time of initial assessment. Accordingly, the AO issued notice u/s 148 of the IT and the case was reopened. The identity of the creditors, credit-worthiness of the creditors and genuineness of the transactions of the loans were not proved therefore, the ld. CIT(A) has rightly upheld the action of the AO. His order may kindly be upheld. 10. After hearing both the parties and perusing the record, we find that there is no dispute about the fact that during the assessment proceedings u/s 143(3) of the Act the AO did raise the query about the cash credit in response to which the assessee file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment proceedings, on making enquiry, the Income-tax Officer came to know that the Calcutta company from whom the appellant claimed to have borrowed the loan of ₹ 50,000/- in cash had not really lent any money but only its name to cover up a bogus transaction. This was not a case where the Income-tax Officer sought to draw any fresh inference, which could have been raised at the time of the original assessment on the basis of the materials placed before him by the appellant relating to the loan from the Calcutta company and which he failed to draw at that time. Acquiring fresh information, specific in nature and reliable in character, relating to a concluded assessment which went to expose the falsity of the statement made by the assessee at the time of the original assessment was different from drawing a fresh inference from the same facts and material available with the Income-tax Officer at the time of the original assessment proceedings. The two situations were distinct and different. Where the transaction itself, on the basis of subsequent information was found to be a bogus transaction, the mere disclosure of what transaction at the time of the original proceedings cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken during the year including trade advances for supply of goods and scrap material along with the name and address, PAN details, copy of balance sheet, capital account and copy of ROI filed by the parties. The assessee vide his letter dated….filed the following submission :- "The assessee has taken advances for supply of goods from following parties :- 1. S. N. Traders Rs.2,07,500/- 2. Suleman Enterprises Rs.1,51,500/- 3. Vijaya Traders Rs.2,23,500/- 4. Saniya Steel Rs.1,70,000/- 5. Sharma Trading Co. Rs.2,33,000/- The confirmations of the parties are now enclosed herewith. The assessee when approached the above parties to confirm their transactions before the ACIT, they refused to attend before your Honour due to fear of income-tax. During the course of penalty proceedings u/s 271D dated 31.07.07 for Asst. Year 2004-05 the assessee did produce all the five parties for that year but it so happened that all the parties, left the Aykar Bhavan immediately after the statement of one party was recorded and they never turned back inspite of repeated request by the assessee. Now at this stage, again we are helpless and show our inability to produce agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statement of Mr. Mayur Rana in respect of this ground regarding cash credit of ₹ 9,85,500/- also. Since at no stage the assessee has been able to prove the identity of the creditors, genuineness of transaction and creditworthiness of the persons, we confirm the order of ld. CIT(A) on this issue. The appeal filed by the assessee is dismissed. ITA No.1364/Ahd/2009 Asst. Year 2005-06 (Assessee's appeal) ITA No.2086/Ahd/2009 Asst. Year 2004-05 (Revenue's appeal) 15. Ground Nos.1 to 6 of assessee's appeal in ITA No.1364/Ahd/2009 and the only effective ground in Revenue's appeal in ITA No.2086/Ahd/2009 relate to addition of ₹ 50,51,000/- made by AO on account of cash credit. The facts of the case are that during assessment proceedings the assessee claimed to have received following loans: Sl.No. Name of party Amount taken Amount repaid 1 Priya Steel Rs.56,500/- Rs.56,500/- 2 Saniya Steel Rs.56,000/- Rs.56,000/- 3 Suleman Enterprises Rs.55,000/- Rs.55,000/- 4 Viya Traders Rs.56,500/- Rs.56,500/- 5 Mansoor Metal Rs.55,000/- Rs.55,000/- 6 Jaybharat Steel Co. Rs.57,000/- Rs.57,000/- 7 A.V. Corporation Rs.2,00,000/- Rs.2,00,000/- 8 Fas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this should be treated as explained. AO is directed to delete this addition. (c) As regards item at Sl.No.9 Magh Mayur Mallhar Co-op. Soc. ₹ 14,75,000/-, the appellant had filed the copy of account and confirmation, which shows that appellant had sold goods to the party in the next year. Hence the amount was for supply of goods only which was done in the next year. The appellant has also filed complete address, PAN etc. As the amount was trade advance and it was verifiable, the ratio of the case Zaverbhai Biharilal & Co. 154 ITR 591 is applicable. The AO's action in treating it as unexplained cash credit is not justified. Hence this addition is deleted. (d) As regards item Nos.8 and 10 to 12, Fashat Ali ₹ 1,15,000/-, G.V. Katwala ₹ 6,00,000/-, JK & Co. ₹ 14,25,000/- and Mayur M. Patel ₹ 9,00,000/- it is seen that appellant has returned the money in the next year and not supplied any goods. Hence, these were not trade advances but was loan taken. Therefore, onus was on the appellant to prove the identity, genuineness and credit worthiness. The appellant has filed only copy of accounts and confirmation but not the copy of IT return for relevant perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the amount was for supply of goods only which was done in the next year. The appellant had also filed complete address, PAN etc. As the amount was trade advance and it was verifiable, the ratio of the case Zaveribhai Biharilal & Co. 154 ITR 591 is applicable. Accordingly, it was submitted that the cash credits in respect of these parties may be deleted. 18. On the other hand, the ld. DR submitted that since the advances were received in cash, creditors were not produced before the AO for verification, no identity of the creditors, credit worthiness of the creditors and genuineness of the transactions were proved, no PANs were produced the lower authorities were justified in treated these advances as non-genuine. The ld. CIT(A) has given relief to the assessee without properly appreciating the facts of the case and, therefore, the order passed by him may kindly be set aside and that of the AO be restored. 19. We have considered the rival submissions and perused the material on record. As regards cash credits from Sl.No.1 to 6 it is observed that all the amounts have been received in cash. The amount has been returned by the assessee later on which shows that it was not for supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing heard to the assessee. So this ground of assessee is partly allowed for statistical purposes. 20. The next ground raised by the assessee is confirmation of addition of ₹ 99,833/- by disallowing kharajat expenses. 21. The AO noted that assessee claimed ₹ 9,98,331/- as kharajat expenses. The assessee failed to produce verifiable documents in support of his claim but filed only ledger account. The AO found from the ledger that most of the expenses were paid in cash. Section 37 deals with various other deductions, mandates that any expenditure, in order to be allowed as revenue expenditure, needs to be - (i) properly verifiable for having been actually incurred for the purposes of business & (ii) purely nonpersonal in nature. The fact of actual incurrence of the expenditure is critical to the allowability of any claimed expenditure. Expenditures undertaken in cash pre-empt and preclude any further inquiry into the fact of the actual incurrence of the expenditure, genuineness of the claimed transactions and identity of the recipient. Unlike expenditures undertaken through cheque/draft, the cash expenditures do not maintain any trail of the transaction for subsequent in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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