DEPUTY COMMISSIONER OF INCOME TAX-3 (1), INDORE vs. SHRI MUKESH AGRAWAL, INDORE

Shri Mukesh Agrawal CIT], Indore dated 07.03.2018 which are arising out of the order u/s 143(3) of the Income Tax Act 1961(In short the ‘Act’) dated 24.12.2017 framed by ACIT-3(1), Indore.

Shri Mukesh Agrawal received during the year from existing loan creditors. Ld.

Assessing Officer also disallowed expense of Rs. 33,47,709/- claimed in the profit and loss account for want of verification.

Disallowance also made u/s 40(a)(ia) of the Act, towards Motor, Bhada Expenses of Rs.4,77,446/-. Addition also made towards purchase of scrap of at Rs.9,39,798/- for non-furnishing of necessary details. Ld. Assessing Officer also made addition u/s 68 of the Act for the sale consideration received at Rs.2,71,500/- which was part of the sale of capital asset and shown by the assessee in the computation of income. After making all the above additions income of the assessee assessed at Rs.2,50,00,324/-.

1.“Whether on the facts and in the circumstances of the case, Ld. CIT(A) is justified in deleting the addition made by the Assessing Officer under the head business income by considering the Gross profit of Rs. 35,44,709/- as income from business of the assessee when the assessee has not submitted the books of accounts, bills and vouchers in support of its claim? 2.Whether on the facts and in the circumstances of the case, Ld. CIT(A) is justified in deleting the addition in respect of unsecured loan of Rs. 81 Lakhs and Rs. 1,18,66,871/- without appreciating the fact that the assessee did not submit with cogent evidence to substantiate identity 3

Shri Mukesh Agrawal and the capacity of the creditors and genuineness of the transactions. 3.Whether on the facts and in the circumstances of the case, Ld. CIT (A) has erred in not considering the remand report submitted by the Assessing Officer wherein the Assessing Officer has given clear cut finding of each and every loan creditor and given his finding in detail in the remand report which proves that the creditworthiness, genuineness and identity are not proved to the satisfaction of the assessing officer as per the provisions of Section 68 of the Income Tax Act, 1961. 4.Whether on the facts and in the circumstances of the case, Ld. CIT(A) is justified in deleting the addition of Rs. 9,39,798/- made by the AO in respect of purchase of scrap without appreciating the factual position that the assessee has not submitted any purchase bill and not furnished any TCS certificate to support the purchase? 5.Whether on the facts and in the circumstances of the case, Ld. CIT(A) is justified in deleting the addition made by the AD in respect of disallowance made u/s. 40(a)(ia) of the Income Tax Act, 1961 amounting to Rs. 4,77,446/- ignoring the finding of assessment order. 6.Whether on the facts and in the circumstances of the case, Ld. CIT(A) is justified in deleting the addition made by the AD in respect of capital gains in which the assessee has not furnished the relevant documents to explain the capital gains? 7.The appellant craves leave to add to, deduct from or otherwise amend the above grounds of appeal.

Ground No 04 This ground of appeal is with regard to treating the gross profit of Rs 35,44,709 as net income from business in place of Rs.1,77,798 / - as net profit. I have carefully gone through the assessment order as well as submission of the appellant in this regard. The appellant has stated that the AO had not allowed any of the expenses on the ground that books of account, bills and vouchers for verification of expenses claimed were not produced and disallowed the same. The appellant has further submitted that the audit report, prima facie showed the correct position of affairs and was conducted by examining on a test basis the evidence supporting the amounts. In support of his case the appellant has submitted that in 17. ITR page 355 the Hon'ble Orissa High Court had held that a best judgment assessment cannot be made capriciously in utter disregard to the material on record. It is submitted that all the expenses as claimed are proper and accordingly to business needs and stood audited by the auditor. 6.2 Thus, in light of the above judicial decisions and facts of the case, it is clear that the appellant had claimed proper expenses and the audit report also supported the said expenses. Hence, in light of the above facts, the addition so made by the AO is hereby deleted and this ground of appeal is allowed.

Shri Mukesh Agrawal 8.1 From perusal of the above finding of Ld. CIT(A) and also going through the details in the paper book we find that the assessee is carrying on business consistently. Since the tax audit report has been filed, the facts remain undisputed that the books of account are regularly maintained. In the profit and loss account, various expenses incidental to running the business have been claimed.

These expenses are duly supported by the Audit Report. Looking to the consistent running of business of the assessee this action of the Ld. Assessing Officer of disallowing all the expenses claimed in the profit and loss account was not justified. Ld. CIT(A) has rightly deleted the addition which calls no interference. Thus ground no.1 raised by the revenue stands dismissed.

This ground of appeal is with regard to making additi9on of Rs.81,00,000/- Rs.1,18,66,871/- u/s 68 of the IT, Act 1961, addition of Rs.2,71,500/- as capital gains and addition of Rs.9,39,798/- on account of purchase of scrap. I have carefully gone through the assessment order as well as submission of the appellant is this regard. 5.1 The appellant has stated that as far as addition of Rs 8100000 was concerned, Rs 4050000 were squared up loans during the year for which copy of account and even confirmation letter was also submitted in appeal proceedings. Further, the appellant has 6

Shri Mukesh Agrawal AO had neither examined nor commented on this issue in his remand report. As regards the balance addition of Rs 4050000 was concerned, it has been claimed that the confirmations were duly submitted by the appellant. The appellant has submitted in his submission that the entire amount of Rs 4050000 was repaid by the appellant in subsequent year i.e. A. Y.- 2006-07 and the confirmation of the said amounts were also submited. The appellant has thus argued that with regard to addition made at Rs 8100000 the appellant had discharged its onus as stated above to prove the same but the AO did not comment on the same in his remand report. 5.2 As regards protective addition concerned, it was submitted that no subs-a n made in individual cases. In spite of ha Submitted the confirmation and requisite details to AO by speed post during the course of assessment proceedings and during the remand proceedings also. It has been stated that during the course of assessment proceedings, the entire papers signed by different persons were not accepted and returned back unnerved from the AO. Thus, it is clear from the above discussions that the appellant had submitted confirmation letters during the appellate proceedings as well as before the AO and also at remand stage and had discharged his onus to prove the genuineness of the said transactions. The AO had not I pointed out any reason in his remand report regarding the above additions whereas the appellant had provided confirmation letters before the AO.

9.1 From perusal of the above finding as well as gone through documents filed in the paper books which are placed before lower authorities, we find that the assessee took, unsecured loan of Rs.1,18,66,871/- from existing loan creditors in other words those parties which have already given unsecured loan to the assessee in preceding years further gave loan to the assessee during the year.

Nothing has been brought on record that whether identity, genuineness and creditworthiness of these cash creditors were ever disputed by revenue authorities in the preceding years as no such Shri Mukesh Agrawal Ld. DR.

9.2 As regards remaining amount of Rs. 81 lack is concerned we find that out of this sum amount of Rs.40,50,000/- was received and was repaid during the year itself and for the remaining amount of unsecured loan of Rs.40,50,000/- was repaid in subsequent A.Y. 2006-07.

9.3 We also find that the assessee had filed complete details of confirmation of account, copies of Income Tax Return of the cash creditors along with bank statements to explain the identity, genuineness and creditworthiness of all the alleged unsecured loans. Revenue authorities failed to find any discrepancy in these documents and even before us also Ld. DR could not file any evidence to challenge the evidences filed by the assessee. Under these given facts and circumstances of the case we find merit in the finding of Ld. CIT(A) and the same stands confirmed.

Accordingly, ground no.2 & 3 raised by the revenue stands dismissed.

Shri Mukesh Agrawal Ld. Assessing Officer made the disallowance for want of verification of purchase. The assessee placed these details before the ld. CIT(A) who after going through the same and also in view of the details appearing in the audited financial statement deleted the disallowance of purchase of Iron Scrap of Rs.9,39,798/-. Before us Ld. DR failed to controvert the finding of Ld. CIT(A) which therefore, in our view needs no interference. Accordingly ground no.4 raised by the revenue stands dismissed.

Before the Ld. CIT(A) it was stated that none of the payment exceeded the limit provided u/s 194C of the Act i.e. Rs.20,000/-

per transaction and Rs.50,000/- in aggregate for transaction with one party during the year. Further there is no adverse remark in the tax audit report and also Ld. CIT(A) has examined the documents to arrive at the finding that TDS was not deductible on the alleged expenses of Rs.4,77,466/-and this finding of Ld. CIT(A) remains uncontroverted by ld. CIT-DR, we therefore, find no

Shri Mukesh Agrawal Ld. CIT(A). Accordingly ground no.5 raised by the revenue stands dismissed.

1994-95 & 1991-92 as claimed in the computation of income.