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TMI Blog2013 (5) TMI 1033X X X X Extracts X X X X X X X X Extracts X X X X ..... ver produced in either in the assessment or appellate proceedings nor their sources have been verified. 5. The CIT (A) erred in deleting the addition u/s 68 though creditworthiness of creditors isnot established. 6. Any other ground that may be taken at the time of the hearing. 3. Ground Nos. 1 and 6 are general in nature and hence they do not require any adjudication. 4. In ground No.2, the department has challenged the order of the CIT(A) restricting the disallowance made on account of expenditure incurred on improvement of the plot to ₹ 1,20,000/-. 5. Briefly the facts are, the assessee is an individual. For the assessment year under dispute he filed his return of income on 31-10- 2007 declaring income of ₹ 7,49,406/-. Assessee s case was selected for scrutiny assessment. During the scrutiny assessment proceedings, the Assessing Officer noticed that the assessee had declared income from short term capital gains on sale of flat at ₹ 1,40,000/-. It was further noticed by the Assessing Officer that while computing the short term capital gains the assessee has claimed an amount of ₹ 2,40,000/- towards cost of improvement of the flat. In respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer after verifying the details of loan taken and the details of interest paid and received by the assessee noted that the assessee had no capital to invest in properties, shares and advances of loans. It was further noted that the assessee was taking unsecured loans every year which as on 31-3-2007 stood at ₹ 1,91,60,691/- and the assessee was also paying interest on the said loans. Similarly, the assessee is also advancing loans which as on 31-3-2007 amounted to ₹ 27,08,232/- on which the assessee had received interest of ₹ 1,28,800/-. The Assessing Officer further noted that no interest had been received from Sri T. Ramesh to whom an amount of ₹ 15 lakhs was advanced and from Sri T. Chalapathi Rao to whom an amount of ₹ 11.4 lakhs was advanced. The Assessing Officer came to a conclusion that the expenditure incurred on borrowings amounting to ₹ 1,19,749/- for investing in shares etc., which is not in relation to the income not includible in total income, is not deductible u/s 14A and therefore disallowed the same. The assessee challenged the disallowance in appeal before the CIT (A). Before the first appellate authority, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir bank statement. From the information submitted, the Assessing Officer noted that the creditors are agriculturists and both the creditors were in possession of bank accounts with Oriental Bank of Commerce, Chirag ali Lane, Hyderabad. It was further noted that the address given in the bank statement of the creditor is the same as that of residential address of the assessee. On examining the bank statement, the Assessing Officer noted that cash/cheques were deposited into the bank accounts just immediately before or on the date of advancing loans to the assessee. It was further observed by the Assessing Officer that the two creditors were not only related to the assessee but also subscribers in the chits of Jeevanmitra Chit Fund Pvt. Ltd., of which the assessee is the Managing Director. 13. With regard to the explanation submitted by the assessee that the creditors had made the advances out of the amounts received on lifting the chits which were credited to their bank accounts, on verification of details furnished, the Assessing Officer noted that the Smt. Padmaja received an amount of ₹ 3,47,500 on 31-10-2006 on bidding a chit and Sri Vasudeva Rao received an amount of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in case of Sumati Dayal V/s. CIT (214 ITR 801) and CIT V/s. Durga Prasad More (82 ITR 540) ultimately came to a conclusion that the assessee has adopted a colorable device to bring in his own money in the form of chits and loans in the names of other persons who are his close relatives. On the aforesaid analysis of facts, the Assessing Officer held the credit of ₹ 14,97,500/- as unexplained and added it to the returned income u/s 68 of the Act. The assessee challenged the addition before the CIT (A). 15. In course of appeal hearing before the CIT(A), it was contended by the assessee that he has sufficient source for his monthly chit contributions and do not have to resort to investment through benami. It was further submitted that the assessee is having a credit balance of ₹ 73,34,530/- in Jeevanmitra Finance Corporation which is available to him interest free and there is no need to resort to contributing the chits in benami since there is sufficient source available. It was further contended that no incriminating material was found such as bogus membership etc., during the survey operations conducted by the department. 16. The CIT(A) after conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year, an amount of ₹ 2 lakhs was out of the earlier repayment made by the assessee and fresh credit is of ₹ 3,47,500 which is out of chit auction. In this context, the learned AR referred to the confirmation letter dated 21-8-2009 of Smt. Padmaja and the copy of the chit account with Jeevan Mitra Chit Fund Pvt. Limited which are at pages 29 and 30 of the paper book. The learned AR further submitted that so far as loan of ₹ 9,50,000/- from Sri B. Vasudeva Rao is concerned ₹ 6,50,000 was out of earlier repayment made by the assessee and the net fresh credit is of ₹ 3 lakhs which is out of chit auction. In this context, the learned AR referred to the letter dated 3-8-2009 of Sri B. Vasudeva Rao addressed to the Assessing Officer and also the copy of the bank account of B. Vasudeva Rao. It was further submitted that son of Smt. Padmaja at the relevant time was pursuing his studies at Hyderabad and other creditor B. Vasundeva Rao was staying at Hyderabad for his wife s medical treatment. He further submitted that though all these facts were stated in the written submissions made before the first appellate authority and a copy of which was sent to the As ..... X X X X Extracts X X X X X X X X Extracts X X X X
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