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TMI Blog2021 (10) TMI 1014X X X X Extracts X X X X X X X X Extracts X X X X ..... irst time the assessee asked cross-examination before the Ld. CIT(A). Those persons have been claimed by the assessee as shareholders and thus onus was on the assessee to produce before the Assessing Officers. It is only when the assessee failed to produce those persons, the Assessing officers issued summons requesting them to appear before him. When summons were issued to them on the request of the Assessee, the onus was on the assessee to be present during recording of their statement but assessee ignored to present before the AO. The assessee did not ask cross examination even after confronting the statement to the Authorised representative. Thereafter asking cross examination before the Ld First Appellate Authority is not justified. As in preceding year, the assessee itself has admitted the addition made by the Assessing Officer on identical ground, then in view of rule of consistency, the assessee is not justified in raising the grounds without any valid reasons. - Decided against assessee. Disallowance of expenditure in terms of section 37 of the Act on proportionate basis for diversion of the fund - According to AO loans were issued in violation of the norms and h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for assessment year 2014-15, raising following grounds: 1. That the learned CIT(Appeals), Ghaziabad is in erred in law by confirming the order of Dy. Commissioner of Income Tax, Circle-1, Ghaziabad and on facts in confirming the addition of ₹ 3,02,27,000/- u/s 68 of Income Tax Act,1961 for addition in Share Capital only by confirming the reference of RBI Inspection report. 2. That the learned CIT(Appeals), Ghaziabad is in erred in law by confirming the order of Dy. Commissioner of Income Tax, Circle-1, Ghaziabad in addition of ₹ 44,7,618/- for disallowing the expenditure u/s 37 on proportionate basis on diversion of fund on the basis of RBI inspection report and misunderstanding of concept of NPA. 3. That the learned CIT(Appeals), Ghaziabad is in erred in law by confirming the order of Dy. Commissioner of Income Tax, Circle-1, Ghaziabad and on facts in confirming the addition of ₹ 87,74,000/- by disallowing the expenditure without rejecting the accounts, only on the basis of by making the reference of last year's assessment order and RBI Inspection Report, despite and ignoring the facts that the assessee has provided the books of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... repair of office buildings, ₹ 27.60 lakhs, which were based on the discrepancy in voucher and cash expenses pointed out by the RBI on Generator, travelling and conveyance and food and beverages; ₹ 3.07 lakhs due to discrepancies by the RBI in respect of professional charges. In this manner total income of the assessee was assessed at ₹ 4,61,47,948/-in assessment order dated 27/12/2016 passed under section 143(3) of the Act. 3. The assessee preferred appeal against the assessment order before the Ld. CIT(A), who dismissed the ground of the assessee in relation to share capital and diversion of the funds, but allowed part relief in respect of disallowance of expenses. 4. Aggrieved with the finding of the Ld. CIT(A), the assessee is before the Tribunal raising the grounds as reproduced above. 5. Before us, the parties appeared through videoconferencing facility. The written submission was filed on behalf of the assessee through email. The learned Consul of the assessee submitted that the liquidator has been appointed by the appropriate authority on 31/08/2017 and the assessee society is under liquidation process. The learned Counsel informed that she h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the oath that they were not aware of being shareholders of the assessee society and they were just asked to sign the form on the ground that they should get higher interest on the money deposited. The Assessing Officer brought these observations in the knowledge of the assessee by way of order sheet entry dated 22/12/2016. A copy of the said order set has been reproduced by the Assessing Officer in the impugned assessment order. In view of the failure on the part of the assessee to discharge the onus under section 68 of the Act of establishing, identity, creditworthiness and genuineness of the transaction, the Assessing Officer made addition of ₹ 3,02, 27,000/-observing as under: Hence, keeping in of the above facts, identity, genuiness of transaction and creditworthiness of individual contributor could not ascertained in respect of Mr. Kawal Singh (₹ 25,00,000/-), Mr. Ashok Kumar Yadav (₹ 90,00,000/-) Mr. Rakesh Kumar (₹ 25,00,000/- and Mr. Jagveer (₹ 160,00,000). The pleas that the amount was received from land compensation is also not supported as the cheques bear name of Shri Hukum Singh S/o Hayat Shri Ulki S/o Anuchand, which are not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was found to be factually unsupported by the documents such as cheques which were issued in the name of a different person rather than the above said applicants. Considering above facts it is held that the genuineness of transaction of share money by the appellant bank could not be proved by the appellant. The appellant failed to discharge the primary burden of proof and shifted onus, after AO having issued' summons u/s 131 to the alleged applicants, u/s 68. This is clubbed by the fact that RBI has also reported violation of RBI guidelines in this regard. Considering these facts and provisions of section 68 this ground of appeal is not maintainable and accordingly dismissed. 12. We noticed that addition has been made by the Assessing Officer not merely on the basis of the statement of the alleged shareholders but in view of failure on the part of the assessee in substantiating the ingredient of section 68 of the Act. The assessee has failed to provide complete address and produce the two alleged shareholders namely Rakesh Kumar and Jagveer. The claim of source of fund in the hands of alleged share holders is also not been found correct as the assessee has not supported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances of the case and the discussion above, we uphold the finding of the Ld. CIT(A) on the issue in dispute and dismiss the ground No.1 of the appeal. 14. The ground No.2 of the appeal relates to disallowance of expenditure of ₹ 44,70,618/-in terms of section 37 of the Act on proportionate basis for diversion of the fund. 15. According to the Assessing Officer, loans were issued in violation of the norms and hence proportionate cost cannot be allowed because of the illegality involved. The Assessing Officer relied on the finding of his predecessor in assessment year 2013-14 and accordingly disallowed proportionate expenses amounting to ₹ 44,71,618/-. The Ld. CIT(A) upheld the disallowance observing as under: 5.2 Ground no. 2: The appellant has challenged the disallowance of expenditure u/s 37 of ₹ 44,71,618/- . During the course of appellate proceedings it has been submitted that AO has wrongly interpreted the word 'diversions'. As per RBI Inspector's report the instance of Non Performing Assets diversions were noted i.e. that NPA has been classified deviating from the standards and norms prescribed by RBI. According to the appellant di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus assessee has admitted the addition/disallowance of expenses corresponding to loan disbursed in violation of RBI rules. 18. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. We observed that in assessment year 2013 -14, identical grounds were raised before the Tribunal, which is reproduced as under: 2. That the learned CIT(Appeals), Ghaziabad is in erred in law by confirming the order of Dy. Commissioner of Income Tax, Circle-1, Ghaziabad and on fact in confirming the addition of ₹ 1,22,65,050/- for disallowing the expenditure u/s 37 by making the reference of RBI Inspection Report, despite and ignoring the facts that the assessee maintained its books of accounts properly and got them audited, even the Ld Assessing Officer did not rejected the books of accounts. It is also worthwhile to mention here that the Ld Assessing Officer misunderstood thye remarks of RBI Inspector for non declaring of loans of ₹ 1366.51 lacs as NPA and wrongly took the interest of ₹ 69.17 lacs as NPA as income. The Ld Assessing Officer erred in law as if we did not take the income of ₹ 69.17 lacs in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Computer repair and maintenance, vehjnle repair and maintenance, AMC and other maintenance and other repair and,-maintenance also. Considering these facts, it is prudent and reasonable to disallow/ 30% of the repair expense cut of ₹ 193.58 Lakh which gives a figure of ₹ 58.07 Lakh Initiate penalty precedings separately U/s 271(l)(c) for furnishing inaccurate particulars of income and concealment of income. (Addition of ₹ 58.07Lakh) 2. Based on the observation of the RBI and reply of the assessee along with discrepancies in voucher and cash expenses pointed out by the RBI, 30% of expenses on generator (₹ 39.09 Lakh), traveling and conveyance (₹ 41.83' lakh) and food and beverages ₹ 11.08 Lakh) are being disallowed. This gives a total disallowance of ₹ 27.60 lakh. Initiate penalty precedings separately U/s 27i(l)(c) for furnishing inaccurate particulars of income and concealment of income. (Addition of ₹ 27.60 Lakh) 3. Regarding water and electricity charges, the reply of the assessee is acceptable as these are billed by public utilities. And regarding professional charges, 10% of the same is being disa ..... 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