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TMI Blog2013 (12) TMI 1722X X X X Extracts X X X X X X X X Extracts X X X X ..... in appeal before us and has raised the following grounds:- 1. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in deleting the disallowance made by the A.O. of ₹ 14,484 out of various expenses. 2. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in deleting the disallowance made by the A.O. of ₹ 14,400/- on account of commission expenses. 3. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in deleting the disallowance made by the A.O. of ₹ 2,59,940/- to ₹ 1,03,977 out of Kharajat expenses. 4. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in deleting the disallowance made by the A.O of ₹ 60,000/- on account of unexplained cash credit. 5. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in deleting the disallowance made by the A.O of ₹ 10 lakh u/s. 68 of the Act. 6. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in deleting the disallowance made by the A.O of ₹ 16,50,000/- u/s. 69A of the Act. 7. On the facts and circumstances of the case and in law, the ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o whom such payments are made do not usually have any bank account which means most of such expenses have to be incurred in cash. Nor do they provide any bill or voucher or even a cash receipt which means that the businessperson has to prepare his own vouchers after consolidation of such expenses on weekly or monthly basis. Therefore, no disallowance can be made or should be made out of such expenses simply on the ground of non-verifiability. In any case, there cannot be any personal element in such expenses. The AO on his part has not been able to show or prove any item of expenditure included under the said head which was either not genuine or not incurred wholly and exclusively for the purpose of business. Therefore, the disallowance made out of miscellaneous expenses, amounting to ₹ 14,484 will stand deleted. 6.2 Coming to the commission expenses of ₹ 72,000, I find that the AO made the disallowance in a very summary manner and simply on the ground that such payments were made in cash. He failed to verify the expenses and simply assumed that it had been claimed to reduce the profit. The fact as intimated by the AR was that, the commission was paid @ ₹ 6,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oted that the addition of ₹ 74,732/- on account of vehicle and telephone expenses, disallowance of ₹ 14,400/- on account of commission expenses was agreed by the Assessee before A.O. and the Assessee had not raised any objection. With respect to the disallowance of Kharajat expenses, he submitted that most of the expenses have been incurred in cash and the Assessee had not produced any verifiable document in support of the expenditure. He also pointed out to page 30 to 38 of the paper book of the Assessee and from the aforesaid ledger account, he pointed that more than 90% of the expenses incurred by the Assessee are in cash. He further submitted that before A.O. Assessee had submitted self generated vouchers and not any other third party evidence. He therefore submitted that in view of the aforesaid facts the A.O. was justified in making the additions and therefore the addition made by the A.O. be upheld. The ld. A.R. on the other hand relied on the order of CIT(A). 10. We have heard the rival submissions and perused the material on record. From the assessment order it is seen that with respect to disallowance of ₹ 74,732/- on account of telephone and vehicle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad accounted for the same in the books in the A.Y. 2006-07. The Assessee had however shown the entry in the A.Y. 2007-08 on the ground that the same was received in the subsequent year. The complete address and a confirmation letter of M/s Lakhani Enterprises showing its PAN was furnished before the A.O who had failed to appreciate the transactions and the reconciliations provided. According to the AR, the Assessee had not accepted the addition and it was a falsity that no objection was raised in course of the assessment proceeding against the proposed addition. 10, I have carefully considered the position, I have also gone through the copy of the ledger account of the Assessee in the books of M/s Lakhani Enterprises which clearly supports the explanation furnished by the A.R. M/s Lakhani Enterprises had made the entry in their book on 10.03.2006 which took the closing balance to ₹ 3,10,000/-. Since, the draft was received by the Assessee in the subsequent year, it had resulted in M/s Lakhani Enterprises showing the loan in excess of what had been accounted for by the Assessee. The transactions were very clear. Consequently, the addition of ₹ 60,000 will stand delete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered together since they are interconnected. 15. A.O. noticed that Assessee had shown in his Balance Sheet, receipt of ₹ 10 lacs as unsecured loan from Markandeshwar Scrap Traders . Assessee furnished the copy of the ledger account showing the transactions but according to the A.O, the copy was without address, IT particulars of the lender. To ascertain the genuineness of the loan, AO issued notice u/s 133(6) of the Act but there was no response from the lender to the notice. Thereafter the Assessee was requested to prove the genuineness, credit worthiness and capacity of the lender to which the Assessee submitted that AO should issue notice u/s 131 of the Act for verification of the transaction. AO did not accept the contention of the Assessee as he was of the view that onus rests on the Assessee to prove the identity of the lender and also the genuineness of the transaction. He was further of the view that mere furnishing of address and PAN number does not prove the genuineness of the transaction. He thus concluded that assessee has failed to satisfy the conditions required u/s 68 and therefore treated the amount of loan of ₹ 10 lacs as unexplained cash credit u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ressed by M/s Markandeshwar Scrap Traders to the A.O. which was received in the Assessing Officer s office on 22.12.2008. The letter is on the letter-head of M/s Markandeshwar Scrap Traders where the office address at Ankleshwar, as also the address of the godown is clearly shown, as also their phone and fax numbers. It also mentions the GST and CST Nos allotted to the said party. It has been stated in the letter that they had sent a DD to GSFC on behalf of M/s Laxmi Steel the Assessee's proprietary concern. The said amount had been returned to them and credited back to the account of the Assessee. It has been clearly stated that the Assessee had noting to do with the said amount. The ledger account of M/s Laxmi Steel in the books of M/s Markandeshwar Scrap Traders which has been signed and confirmed by them, shows a debit of ₹ 16,50,000 on 10-06-2005 and a further debit for ₹ 5,00,000 on 25-07-2005. There is a credit to Assessee of ₹ 16,50,000 on 22-08-2005, a further debit of ₹ 7,00,000 on the same day, and two credit entries of ₹ 1,00,000 each received by the Assessee by cheques on 07-03-2006. The closing balance at the end of the year is shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000 nor was it the case that the Assessee had failed to furnish any explanation in this regard. The A.O., even after reproducing the provisions of section 69A in the body of the assessment order (page-8) wrongly applied the said section while making the addition. He is therefore directed to delete the addition of ₹ 16,50,000/-. 17. Aggrieved by the order of CIT(A), Revenue is now in appeal before us. 18. Before us, Ld D.R. with respect to addition of ₹ 10 lacs submitted that the primary onus of identifying the lender, proving the genuineness of the transaction and the creditworthiness of the person was on the Assessee. Only on satisfying the primary onus by Assessee, onus is shifted on the Revenue. In the present case, the Assessee had not discharged the primary onus and therefore the onus of issuing summons u/s 131 of the Act could not be shifted on the Revenue. He therefore submitted that in the given facts of the case, the AO was fully justified in making the addition u/s 68 and therefore the order of the AO be upheld. 19. With respect to addition of ₹ 16.50 lacs made by the AO, Ld D.R. submitted that the transaction of ₹ 16.50 lacs did not app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pported the order of CIT(A). 21. We have heard the rival submissions and perused the material on record. It is an undisputed fact that the ledger account of the Assessee (Laxmi Steel) as appearing in the books of Markandeshwar Scrap traders showed entry of ₹ 16.50 lacs. The Assessee before the AO had denied of any transaction been entered by it with Markandeshwar Scrap Traders. Markandeshwar Scrap Trader on the other hand by a letter delivered at the office of AO on 22.12.2008 and placed at PB 71 has stated of sending a DD to GSFC of ₹ 16.50 lacs for purchase of goods in the name of Laxmi Steel and returning of the amount by GSFC. The aforesaid statement of Markandeshwar Scrap traders is not supported by any tangible evidence or any confirmation from GSFC to that account. Thus it can be seen that there are contradictory statements by the Assessee and Markandeshwar Scrap Traders. Further there is nothing on record to demonstrate as to how on non materializing of the transaction, the DD from GSFC which was alleged to have been entered on behalf of the Assessee was received by Markandeshwar Scrap Traders and credited in its bank account. From the entry of 22.8.2005 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. The A.O. was thus of the view that since the Assessee has failed to prove the genuineness of transaction, the amount of ₹ 82,94,857/- received as trade advance was to be taxed under section 68 of the Act, and he accordingly made the addition. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A). CIT(A) after considering the submissions of the Assessee deleted the addition by holding as under:- 22. I agree with the contention of the AR that once it had been accepted that the sums shown under the head of sundry creditors represented trade advances, or amounts received against purchases made, they could not be brought under the purview of section 68 of the IT Act. From the copies of account of all the parties listed above in the books of the Assessee, I find that these were essentially in the nature of current account transactions. There were substantial brought-forward balances from the preceding year, which were accepted in assessment proceedings for the AY 2005-06. On his part, the AO failed to conduct the requisite inquiries with the said parties. He was not justified in rejecting the Assessee's request for issuing summons u/s 131 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and the aggregate of such was ₹ 67,64,374/-. He further pointed out to the copy of the letter, address to CIT(A) wherein it was submitted that the Assessee has filed the copy of the confirmations with complete address and PAN numbers of the creditors. He pointed to page 8 of the paper book in support of the same. He also placed on record, the copy of the ledger accounts of various creditors placed on page 72 to 83 of the paper book. He therefore submitted that the Assessee has discharged the onus by submitting the complete address, name, confirmations and PAN numbers of most of the creditors. He further submitted that the sales and purchase made by the Assessee has not been disputed by the A.O. He further placed reliance on the decision in the case of Vasudev Elelctric Corporation in ITA No. 2306/Ahd/2010 and has also placed on record copy of the same. He thus supported the order of CIT(A). 25. We have heard the rival submissions and perused the material on record. We find that CIT(A) while deleting the addition has noted that the transactions entered by the Assessee were in the nature of current account transactions, there was substantial brought forward balances from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28. Before us, the ld. D.R. supported the order of A.O. and relied on the decision in the case of S.A. Builders. 288 ITR 01. The ld. A.R. on the other hand reiterated the submissions made before CIT(A) and supported the order of CIT(A). He further placed reliance in the case of CIT vs. Raghuvir Synthetics Ltd. He also placed on record, the copy of the aforesaid decision of Hon. Gujarat High Court in Tax Appeal No. 829/AHD/2007. 29. We have heard the rival submissions and perused the material on record. We find that CIT(A) while deleting the addition has noted that the disallowance was made by the A.O. in a summary manner and he has not established the nexus between interest bearing loans with the advancing interest free advances. He has further noted that the Assessee explanation was rejected without any material on record. Before us, the D.R. could not controvert the findings of CIT(A), nor has he brought on record any contrary material in its support. In view of the aforesaid facts, we find no reason to interfere with the order of CIT(A) on this ground. Thus this ground of revenue is dismissed. 30. In the result, the appeal of the Revenue is partly allowed for statistical ..... X X X X Extracts X X X X X X X X Extracts X X X X
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