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

PER MANISH BORAD, A.M

The above captioned appeal filed at the instance of the Revenue for Assessment Year 2005-06 is directed against the orders of Ld. Commissioner of Income Tax(Appeals)-II(in short ‘Ld.

Shri Mukesh Agrawal ITA No.517/Ind/2018 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.

assessee is an individual engaged in the business of trading in Jute

Bags. Return for A.Y. 2005-06 was filed on 25.10.2005 declaring

income of Rs.1,86,900/-. Case selected for scrutiny followed by

serving of notices u/s 143(2) & 142(1) of the Act. When the case

was fixed non attended. Again an opportunity was given and

assessee filed written submissions. However, books of accounts

were not produced and thereafter there was no appearance on

behalf of the assessee. Ld. Assessing Officer proceeded to complete

the assessment on the basis of return of income and annexures

and documents attached thereto and written submission filed

including the tax audit report. Ld. Assessing Officer examined the

details of unsecured loans and in absence of necessary details to

explain the unsecured loans he made the addition for unsecured

loan of Rs. 81 lacs received during the year of which some amount

was repaid during the year and the remaining was paid in

subsequent years. Ld. Assessing Officer also made the addition for

unsecured loan of Rs.1,18,66,871/- u/s 68 of the Act for the loan 2

Shri Mukesh Agrawal ITA No.517/Ind/2018 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/-.

partly succeeded.

grounds of appeal:

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 ITA No.517/Ind/2018 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.

Assessing Officer.

finding of Ld. CIT(A) referred to various documents filed before the

lower authorities which are placed in the paper book dated 21st

May 2019 containing 148 pages and argued referring to the written

submission placed on record. 4

Shri Mukesh Agrawal ITA No.517/Ind/2018 7. We have heard rival contentions and perused the records placed

before us and carefully gone through the finding of Ld. CIT(A) and

the documents placed in the paper book.

addition of gross profit of Rs.33,44,709/-( wrongly mentioned by

the revenue at Rs.35,44,709/- in the grounds of appeal) made by

the Ld. Assessing Officer for adopting the gross profit figure of

Rs.33,44,709/- as income and not allowing the claim of expenses

made in the profit and loss account. This addition has deleted by

the Ld. CIT(A) observing as follows:-

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 ITA No.517/Ind/2018 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.

68 for unsecured loan of Rs.81 lacs and Rs.1,18,66,871/- made by

the Ld. Assessing Officer we find that Ld. CIT(A) deleted this

addition giving following finding of facts:-

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 ITA No.517/Ind/2018 also submitted that the 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 ITA No.517/Ind/2018 material was put forth by the 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.

for the disallowance of purchase iron scrap, we find that the

addition was deleted by ld. CIT(A) holding it to be an addition made

on ad hoc basis without correlating to the specific expenditure. We

Shri Mukesh Agrawal ITA No.517/Ind/2018 find that the 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.

Ld. Assessing Officer u/s 40a(ia) of the Act for non-deduction of tax

at source and the Motor Bhada Expenses, we find that Ld.

Assessing Officer was supplied with the relevant details of the

Motor Bhada Expenses claimed in the profit and loss account.

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 ITA No.517/Ind/2018 inconsistency in the finding of Ld. CIT(A). Accordingly ground no.5

raised by the revenue stands dismissed.

made by the Ld. Assessing Officer u/s 68 of the Act for the sale

consideration received from sale of capital asset. We note that in

the computation of income while computing the short Term Capital

Gain assessee has shown sale of security liable to STT for

Rs.67,822/- and claimed of cost of acquisition at Rs.66,000/-. The

assessee has also claimed Long Term Capital Gain from sale of

land for a consideration of Rs.2,05,500/- Ld. Assessing Officer

made the addition for the total sale consideration received from

sale of land at Rs.2,05,500/- and also made addition for cost of

acquisition of equity share of Rs.66,000/-. We further find that

when the matter was carried before the Ld. CIT(A) the assessee had

filed the details of cost of assets and calculation of capital gain and

the same were found to be correct. We find that the ld. Assessing

Officer failed to allow the deduction for cost of acquisition of equity

shares against the sale of securities and similarly failed to give

deduction for cost of acquisition of land purchased during the F.Y.

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

Since necessary enquiries were carried out by the ld. CIT(A) by

Shri Mukesh Agrawal ITA No.517/Ind/2018 calling remand report and examining documentary evidences

before deleting the impugned addition, we find that Ld. CIT(A) has

rightly examined the facts of this issue and the finding of Ld.

CIT(A) remains uncontroverted before us by the Revenue

authorities. We, thus confirm the finding of Ld. CIT(A) and dismiss

the revenue’s ground No.6.

Sd/- Sd/-

(MAHAVIR PRASAD) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER

�दनांक /Dated : 30.11.2021 Patel/PS

Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file. By Order, Asstt.Registrar, I.T.A.T., Indore