Commissioner Of Income Tax vs. Shri Satendra Singh Parmar

1 THE HIGH COURT OF MADHYA PRADESH I.T.A. No. 36/2018 Commissioner of Income Tax Gwalior Vs. Shri Satendra Singh Parmar Gwalior, 24/04/2018 Shri D.P.S. Bhadoriya, learned counsel for the appellant. None for the respondent. Heard on admission. Challenge is to an order dated 31/07/2017 passed by Income Tax Appellate Tribunal, Bench at Agra; whereby the Tribunal while affirming the order dated 13/01/2017 by the Commissioner of Income Tax (Appeal) as to assessment year 2011-12 of deleting the addition of Rs. 71,98,000/- added by the Assessing Officer on account of alleged unexplained cash creditors and Rs. 55,93,270/- added by the Assessing Officer on account of alleged suppression of sale. The assessee is a liquor contractor. For the assessment year 2011-12, he filed the return on 07/02/2012 declaring an income of Rs. 8,36,315/-. The assessee maintained account audited by the Chartered Accountant under Section 44AB. However, 2 the sale bills of liquor were not available, only the quantity of liquor supplied at the outlets were noted in the account books. In the course of assessment, the Assessing Officer accepted the expenses debited in P&L account and also the purchases, sealing and bardana expenses, freight, licence fee and duty, but did not accept the sales. Adopting the sales by increasing the purchases including sealing, bardana, freight, licence fees & duty by 12% worked out the sale at Rs. 12,59,67,008/- against the declared sales of Rs. 12,03,73,771/-. Thus an addition of Rs. 55,93,270/- was made. The Assessing Officer further treated the loan of Rs. 71,98,000/- as unexplained cash credit under Section 68 of Income Tax Act. Accordingly, arrived at an income of Rs. 1,36,27,550/- against the returned income of Rs. 8,36,315/-. The Commissioner of Income Tax (Appeal) found that Assessing Officer could not have added the entire difference between the estimated and declared sales as income, only the profit element ought to have been brought to tax by adjudging it in the light of comparable cases. Accordingly, directed for application of net profit rate of 1.5% on the estimated 3 sales of Rs. 12,03,73,771/- which worked out to Rs. 18,05,606/- against the net profit of Rs. 8,36,315/- disclosed by the assessee. As regard to addition of Rs. 71,98,000/- on account of unexplained unsecured loan under Section 68 of Income Tax Act, Commissioner of Income Tax (Appeal) while admitting additional evidence under Rule 46A(3) of the Income Tax Rules after relying on the decision in CIT Vs. Shiya Dawoodi Bohara Jamat [(2008) 304 ITR 336 (MP)] and CIT Vs. Gani Bhai Wahab Bhao [(1998) 232 ITR 900 (MP)] found the assessee having discharged his burden. It observed:- “5.2.5. Now, in the remand report, as reproduced in the foregoing paragraph, the Assessing Officer has reported that in respect of following loan creditors the identity

credit

worthiness

and genuineness of the loan creditors stand proved. (i) Shri Radha Krishna Yadav 19,00,000/- (ii) Shri Gopal Goyal 1,00,000/- (iii) Shri Naresh Tomar 9,98,000/- (iv) Marg Dharshan Traders 7,00,000/- Thus, the above loan creditors which have been examined by the Assessing Officer with reference to bank account and other 4 direct and primary evidence & admitted are explained. As for the remaining three creditors, namely, (i) Shri Matadeen Shivhare

Rs15,00,000/-;

(ii)

Shri Satyendra Singh Parmar Rs. 10,00,000/-; and (iii) Shri Arvind Jhari Rs.10,00,000/-, the Assessing Officer has, however, reported that in respect of the following persons capacity to advance loan to the appellant is not proved in as much as credit worthiness of these persons can not be said to be proved as according to the Assessing Officer, the amounts were deposited by them in their bank accounts in cash. On verification, I find that all the above three persons, viz., (i) Matadeen Shivhare (ii) Stendra Singh Parmar (iii) Arvind Jhari attented before the Assessing Officer in response to summons issued u/s 131 of the Act. Their statements on oath/solemn affirmation have accepted that they had given loan to the assessee by a/c payee cheques, the details of which are placed on record. No further details or evidence were sought from the three creditors. All the facts were duly stated by the three creditors in their affidavits filed before me. The Assessing Officer has not controverted the above statement and the affidavits. In my view, 5 the appellant has discharged his onus of proof regarding the identity, creditor- worthiness and genuineness of the transaction. There is no evidence against the creditors to prove that they were providing

accommodation

entries. Therefore, mere deposit of money by the creditor on the same day does not establish that the loan is not genuine. In Leeladhar Khodiyar v. Asst. CIT (2013) 22 ITJ 601(Trib.-,Jabalpur), where Assessing Officer recorded the statement of creditors, and sufficient evidence were brought on record to prove that the creditors are genuine, but the Assessing Officer doubted that the transaction was an afterthought without bringing any material on record to controvert the said evidences, it has been held that no addition was called for.” In an appeal, the Tribunal upheld the order. It is held: “8. We have heard the parties and have examined the material on record. It is not disputed that the parties, in their statements on oath/solemn affirmation, have accepted that they had given loan to the assessee by account payee cheques, the details of which are placed on record. No further details or evidence were 6 sought for from the three creditors. All the facts were duly stated by the three creditors in their affidavits filed before the CIT(A). The AO has not controverted the above statements and the affidavits. In our view, the assessee has discharged his onus of proof regarding the identity, creditworthiness and genuineness of the transaction. There is no evidence against the creditors to prove that they were providing

accommodation

entries. Therefore, mere deposit of money by the creditor on the same day does not establish that the loan is not genuine. 14. We have heard the ld. DR with regard to this issue also and have examined the material on record thereto. It is an undisputed fact that while estimating the income, the AO has not based his estimate on any comparable case, or the past history of the case. Further, legally, he could not have added the entire difference between the estimated and declared sales as income; only the profit element ought to have been brought to tax. While the estimate of sales does not call for any interference, the reasonability of estimate of profit has to be judged in the light of comparable cases.” Though it is contended on behalf of the 7 appellant that the Commissioner of Income Tax (Appeal) and the Tribunal grossly erred in construing the facts in right perspective. However, no material is on record to doubt the findings by Commissioner of Income Tax (Appeal) and the Tribunal, as would give rise to any substantial question of law. Consequently, appeal fails and is dismissed. No costs.

(Sanjay Yadav) (Ashok Kumar Joshi) Judge Judge shubh* Digitally signed by SHUBHANKAR MISHRA Date: 2018.04.26 18:12:26 +05'30'