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TMI Blog2017 (11) TMI 1547X X X X Extracts X X X X X X X X Extracts X X X X ..... y the A.O. U/s 68 of the I.T. Act, 1961 without appreciating the material facts of the case. (ii) On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the disallowance of Rs. 50,000/- made by the A.O. U/s 80C of the I.T. Act, 1961." Grounds in assessee's Cross Objection "(i) The ld. CIT(A) has erred on facts and in law in confirming the disallowance of Rs. 3,47,600/- being 25% of the commission paid to three persons. (ii) The ld. CIT(A) has erred on facts and in law in confirming the rejection of books of account and trading addition of Rs. 3,99,167/-." 4. In the ground No. 1 of revenue's appeal, the issue involved is deleting the addition of Rs. 60,49,000/- made by the Assessing Officer U/s 68 of the Act. The ld. CIT(A) has granted relief to the assessee by holding as under: "6.5 I have gone through the assessment order as well as submissions made by the appellant. The appellant has filed additional evidences and cited the reasons for not been able to file before the A.O. The reasons given are taken into consideration and the additional evidences submitted during the appellant proceedings have been taken on record under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10." Thus, the provision of the section confers upon the assessee to give nature and source of the credit. In this case the appellant had provided following documents to the A.O during assessment proceedings; 1. Name and address of the persons. 2. Copies of income Tax returns. 3. Copy of bank accounts. That the factual position of the amounts of loan raised during the year have been tabulated as under; Name of the person (S/Sh.) Amount of loan(in Rs.) Whether THROUGH A/C PAYEE CHEQUE Whether Income tax assessee Confirmations Filed Amit 5,00,000/- YES YES YES M/s Balaji Enterprises 12,99,000/- YES YES YES Smt. Hemlata 9,50,000/- YES YES YES Pankaj Bansal 3,00,000/- YES YES YES R P Singh 15,00,000/- YES YES ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Ltd.(supra), it was held that the initial burden is upon the assessee to explain the nature and source of the share application money and in order to discharge this onus, the assessee should prove (a) the identity of shareholder: (b) genuineness of the transaction; and (c) creditworthiness of shareholders. It was further observed that for discharging the above burden, the assessee must file some documents or produce the shareholder to prove his identity. In the case of subscriber being a company details in the form of registered address or PAN identity, etc. would suffice. The genuineness of the transaction may be demonstrated by showing that the assessee had, in fact, received money from the applicant shareholder and that it had come not from the coffers of the assessee but from that of the applicant shareholder. As to the creditworthiness or financial strength of the subscriber. The proof could include banks statements of the subscriber showing sufficient balance in its kitty to enable it to subscribe. Therefore, taking into account factual matrix of the case and the parameters to determine the status of onus on the assessee as are discussed in the above mentioned judgments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of above, the addition made by the AO is rightly deleted by the Ld. CIT(A) and therefore, the ground of the department be dismissed. 7. We have heard the rival contentions of both the parties and perused the material available on the record. We have also gone through the various case laws relied upon by the ld AR and also the factual matrix of the issue under consideration. We have noticed that Shri Amit had advanced Rs. 5.00 lacs to the assessee and the ld. CIT(A) has simply accepted the PAN as establishing the creditworthiness of this creditor. In our considered view, simply PAN card can not establish the capacity of the lender. The PAN card in itself is not a certificate to establish the creditworthiness of any of the creditor. Similarly in the case of M/s Balaji Enterprises, who has advanced Rs. 12,99,000/- to the assessee. PAN card was accepted by the ld. CIT(A) as evidence for establishing the creditworthiness. In our considered view, that is not a sufficient proof to establish creditworthiness. Similarly in the case of Hemlata, who has advanced Rs. 9,50,000/- to the assessee, a copy of the ITR was made a basis for establishing the creditworthiness. From this ITR (place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 80C of the Act. However, in absence of proof for payment of Rs. 15,000/- to qualify for deduction U/s 80D of the Act, the same is rejected. Accordingly, the appellant's ground of appeal on the issue is partly allowed." 9. The ld. DR has relied on the order of the Assessing Officer. 10. While pleading on behalf of the assessee, the ld AR has submitted as under: 1. The assessee claimed deduction of Rs. 50,000/- u/s 80C and Rs. 15,000/- u/s 80D of the IT Act. In assessment proceedings, assessee filed the proof of payment of insurance premium of Rs. 50,000/- but AO disallowed the entire claim of deduction for want of evidence. 2. The Ld. CIT(A) after considering the evidence filed by the assessee, allowed the deduction of Rs. 50,000/- u/s 80C. 3. It is submitted that assessee has paid life insurance premium of Rs. 50,000/- to Max New York Life Insurance Co. Ltd. on 18.09.2011. Copy of insurance premium receipt and policy owner data is at PB 23-24. These documents were also produced during assessment proceedings but AO incorrectly held that assessee has not filed any proof of payment and disallowed the deduction. In view of above, the order of Ld. CIT(A) be upheld by d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was made only 25% of the expenses debited under the head 'Commission Paid' by invoking the provisions of Section 40A((2)(b) of the Act and also that the entire expenses were not wholly and exclusively for the purpose of business of the assessee. It is noticed that all the three persons were regularly assessed to tax and necessary TDS was also deducted. It was paid to the persons, who were relatives of the assessee. It was not wholly and exclusively for the purpose of business. It was excessive payment in view of the provisions of Section 40A of the Act. Thus, there is no clear cut finding that on what basis this payment was held to be excessive or unreasonable. Therefore, we direct to delete the addition. 16. In the ground No. 2 of assessee's C.O., the issue involved is confirming the rejection of books of account and making and confirming trading addition of Rs. 3,99,167/- for the year under consideration. The ld. CIT(A) has confirmed the addition by holding as under: "8.3 I have gone through the assessment order as well as submissions made by the appellant. I have taken into consideration the reasons given by the A.O to estimate the GP after invoking section 145 of the Act. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horities for rejecting the books of accounts and confirming the trading addition is incorrect. 2. Otherwise also, it is submitted that there is a slight decline of 0.70% in g.p. rate as compared to previous year on increased turnover by Rs. 8,59,94,849/-. It is normal business practice that assessee is mainly interested in volume of the profit earned instead of the rate. This volume can be achieved only by increasing the sales by reducing the margin. In the various cases it has been held that simply because there is decline in the G.P. rate due to substantial increase in the turnover, the trading addition is not justified. He relied on the following case laws: 1. PCIT Vs. Purshottam B. Pitroda (2017) 248 Taxman 118 (Guj.) (HC). 2. Madan Lal V. Income tax Officer 99 TTJ 538 (Jd.) 3. ITO V. Arun Kumar Gupta 103 TTJ 134 (Jd.) In view of above, the trading addition confirmed by CIT(A) be directed to be deleted. 18. On the other hand, the ld DR has relied on the orders of the authorities below. 19. We have heard both the sides on this issue and also perused the material available on the record. From the records, we find that there was discrepancy in the reconciliatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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