SHRI GURIQBAL SINGH,GURDASPUR vs. INCOME TAX OFFICER WARD -1, BATALA

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR Before Sh. N. S. Saini, Accountant Member And Sh. N. K. Choudhry, Judicial Member ITA No. 782/Asr./2017 : Asstt. Year : 2013-14 Sh. Guriqbal Singh, Vs Income Tax Officer, Prop. M/s K. P. Rice Mills, Ward-1, Razdan Road, Qadian, Batala Gurdaspur-143516, Punjab (APPELLANT) (RESPONDENT) PAN No. AITPS1996E Assessee by : Sh. P. N. Arora, Adv. Revenue by : Ms. Shivani Bansal, DR Date of Hearing :22.02.2019 Date of Pronouncement : 22.03.2019 ORDER Per N. S. Saini, Accountant Member: This is an appeal filed by the assessee against the order of CIT(A)-I, Amritsar dated 31.10.2017.

ITA No. 782/Asr./2017 2 Guriqbal Singh and there was no reason and justification for the A.O. to made the addition. The addition which has been confirmed by the CIT(A) may be deleted. Alternatively the addition made is very high & excessive. The addition has been confirmed without appreciating the facts and written explanation submitted before the CIT(A).” 4. The Assessing Officer held as under: “Unsecured Loan in the name of Sh. Tejinder Pal Singh-Rs.20.00 lac. Study of copy of your bank account no. 13692020000190 with HDFC, Qadian discloses that you have returned back Rs.20 lac. to Tejinder Singh Dhillon as under: Ch. No. Date Amount 009522 01.10.12 1000000 009523 01.11.12 1000000 In view of above and counter-confirmed by Sh. Tejinder Singh on 10.11.2015, you were required to produce your own books of account. In this connection, you have stated that there was dispute in repayment of unsecured loans to Tejinder Pal Singh of Rs.20.00 lac. Mr. Tejinder Pal Singh was your friend and supplying trucks for your business. You stated that you have paid him Rs.20.00 lacs. on account of payment of freight of trucks supplied by him, but he adjusted his amount of unsecured loans instead of paying to the truck operators without your consent. You have submitted his copy of account in your books of account. You have further stated that you had paid the amount to the truck operators during FY 2015-16 since the same were not paid by your friend aforesaid. Your submission is not acceptable in the absence of any documentary proof to support your above explanation. You have also not produced books of account to show as to how the accounts of the transporters freight were adjusted in your books of

ITA No. 782/Asr./2017 3 Guriqbal Singh account in the financial year relevant to year under consideration. Payment to truck operators during the FY 2015-16 is just an afterthought to redress your commissions and omissions in the year under considerations and is just an attempt to furnish a made up explanation. This calls for rejection of your book version not supported by called for evidence. For unexplained unsecured loan of Rs.20,00,000 in the name of Sh. Tejinder Pal Singh.” 5. On appeal, before the Commissioner of Income Tax (Appeals), the assessee submitted as under: “The assessee submitted the copy of account of Sh. Tejinder Pal Smgh in the books of accounts of the assessee for FY 2013-14. Due to non-payment of freight to the truck operators by Tejinder Pal Singh the assessee had made reverse entry in his books of accounts by debiting Tejinder Pal Singh and crediting the track operators during April-May 2015 and the assessee paid freight of Rs. 20 lakh out of agriculture income, trucks operations and wine contractor business. The copy account of related tracks were also produced as the proof of payment of trucks freight. That the assessee only maintains records of freight payable on the basis of trucks numbers only. The AO considering the reply of the assessee stated that the unsecured loans of Rs. 20 lakh from Sh. Tejinder Pal Singh was not confound by him during cross verification by the AO and thereafter confronted to the assessee. That the assessee had not submitted any evidence to show that the unsecured loan was adjusted against the trucks supplied by his friend Sh. Tejinder Pal Singh and the assessee have also not shown is there was any contract between the two to supply the trucks by Sh. Tejinder Pal Singh, the mode of payments and other terms and condition. Even if there was any such contracts, then there was no deduction of TDS. The assessee had only furnished the copy of account of Sh. Tejinder Pal Singh in his books of accounts stating that due to non-payment of freight to truck

ITA No. 782/Asr./2017 4 Guriqbal Singh operator by Sh. Tejinder Pal Singh, the assessee had made reverse entry in his books of accounts by debiting Tejinder Pal Singh and crediting trucks operators during April-May 2015. This is just a made up affair of assessee. The assessee had not even provided the identity of the truck operators and only given truck numbers. The assessee expressed his inability to produce the books of accounts and other supporting documents with regard to complete names/addresses of the truck owners/ other documents of freight. Therefore the AO treated the unexplained unsecured loans of Rs. 20 lakh in the name of Sh. Tejinder Pal Singh as Irom undisclosed sources and added back to the total income. In the written submissions filed by the appellant in the appeal proceedings it was reiterated that Sh. Tejinder Pal Singh had paid a sum of Rs. 20 lakh as loan on 11.8.2012 to the assessee by means of cheaque which was not m doubt. This amount was never returned back during the year under consideration. That during the year under consideration the assessee paid the sum of Rs. 10 lakh each on 1.10.2012 and 1.11.2012 by cheques to Sh. Tejinder Pal Singh for making payment to various truck operators as he was assisting the assessee by way of supplying of trucks as he was having very wide relations with truck operators. That the assessee paid the sum of Rs. 20 lakh to Sh. Tejinder Pal Singh on account of payment of freight of trucks supplied by him but he adjusted this amount against the loan given by him instead of paying this amount to the truck owners without the consent of the assessee. That was the reason these entries were debited to the transporters. When the assessee came to know in the subsequent year he passed reverse entries. That the identity and the capacity of the creditor and the mode of payment have been explained.” 6. The Commissioner of Income Tax (Appeals) considering the submissions held as under:

ITA No. 782/Asr./2017 5 Guriqbal Singh “I have considered the assessment order and the written submission of the appellant and find considerable weight on the arguments of the AO for making the addition of Rs. 20 lakh by treating the so-called unsecured loan received from Sh. Tejinder Pal Singh as unexplained credit. In the assessment proceedings assessee had shown to have received unsecured loans from Sh. Tejinder Pal Singh of Rs. 20 lakh by cheaque on 11.8.2012 and the assessee had repaid the sum of Rs. 10 lakh each on 1.10.2012 and 1.11.2012 respectively. Assessee stated that Sh. Tejinder Singh was his friend and supplying trucks for his business. This claim of the appellant is not supported by any evidence that Sh. Tejinder Pal singh was supplying trucks to the assessee for his business. As rightly pointed out by the AO, that the assessee had not shown if there was any contract between the assessee and Sh. Tejinder Pal Singh for supplying of trucks to the assessee for his business, the mode of payments and other terms and conditions. Even if there was any such contracts, then there was no deduction of TDS. Assessee stated that he paid the sum of Rs. 10 lakh each on 1.10.2012 and 1.11.2012 respectively by cheques to Sh. Tejinder Pal Singh on account of payment of freight of trucks supplied by him but he adjusted this amount against unsecured loans given by him to assessee instead of paying to the trucks operators without his consent. The AO rightly rejected this contention of the assessee as the assessee had not produced his books of accounts to show as to how the account of the transporters freight were adjusted in his books of accounts. The assessee claimed to have made reverse entry in his books of accounts by debiting Sh. Tejinder Pal singh and crediting the truck owners during april-may 2015 and paid the freight of Rs. 20 lakh out of his agriculture income, truck operations and wine contractor of business is only an afterthought as in his replies before the AO assessee had stated that he was in acute financial stringency during the year

ITA No. 782/Asr./2017 6 Guriqbal Singh and could not pay the freight amounting to Rs. 80,49,145/- and has shown as freight payable account. At the same time he had claimed to have paid the freight in respect of transporters stated to be arranged through Sh. Tejinder Pal Singh amounting to Rs. 20 lakh in a month time between October and November 2012 whose identity has not been proved by the assessee except giving truck numbers only. The AO had asked the assessee to produce his books of accounts and other supporting documents with regard to complete names/addresses of the truck owners/other documents of freight, the assessee had expressed his inability to produce the same though sufficient time was granted to the assessee. Importantly the assessee had not produced before the AO in the assessment proceedings or in the appeal proceedings any confirmation from Sh. Tejinder Pal Singh that he had given unsecured loan of Rs. 20 lakh to the assessee by cheque on 11.8.2012 to the purpose of payment to the assessee. Also the story of the assessee that he paid the sum of Rs. 10 lakh each on 1.10.2012 and 1.11.2012 respectively by cheques to Sh. Tejinder Pal Singh on account of payment of freight of trucks supplied by him but he adjusted this amount against unsecured loans given by him to assessee instead of paying to the trucks operators without his consent is not supported by any confirmation from Sh. Tejinder Pal Singh or verified through verification of the entries in his books of accounts. Therefore, in view of the above reasoning it remained unverified that the assessee received unsecured loan of Rs. 20 lakh from Sh. Tejinder Pal singh on 11.8.2012 by cheque on account of unsecured loan and therefore the AO was justified in treating the said credit entry of Rs. 20 lakh as unexplained credit entry and making the addition of Rs. 20 lakh to the total income of the assessee. The addition of Rs. 20 lakh is confirmed.”

ITA No. 782/Asr./2017 7 Guriqbal Singh 7. The assessee reiterated the submissions made before the authorities below and the Departmental Representative relied on the orders of the lower authorities. 8. We have heard the rival submissions and perused the orders of the lower authorities and materials available on record. The undisputed fact of the case are that the assessee received Rs.20,00,000/- as loan from Sh. Tejinder Pal Singh. The Assessing Officer observed from the bank statement of the assessee maintained with HDFC Bank that two cheques of Rs.10,00,000/- each were paid to said Sh. Tejinder Pal Singh on 01.10.2012 and 01.11.2012. Thus, the loan of the assessee with Sh. Tejinder Pal Singh was secured up which was also confirmed by said Sh. Tejinder Pal Singh. 9. However, the assessee continued to show Rs.20,00,000/- as payable to Sh. Tejinder Pal Singh on account of unsecured loan in his balance sheet. When confronted the assessee explained that said Rs.20,00,000/- was paid to Sh. Tejinder Pal Singh for making payment to the truck owners/operators whose services were availed by the assessee for his business. However, Sh. Tejinder Pal Singh has adjusted that Rs.20,00,000/- against his loan to the assessee and not made payment to truck owners/operators. Therefore, when assessee came to know of this fact in the financial year 2015-16 he credited the truck operators/owners account and debited account of Sh. Tejinder Pal Singh. In other words, the assessee admitted that he did not owed Rs.20,00,000/- to Sh. Tejinder Pal Singh but the liability was towards truck owners/operators.

ITA No. 782/Asr./2017 8 Guriqbal Singh 10. However, the Assessing Officer considered this explanation of the assessee as afterthought and rejected the same and added Rs.20,00,000/- to the income of the assessee.

ITA No. 782/Asr./2017 9 Guriqbal Singh expenses claimed were incidental and related to business and all the expenses are vouched. As such these expenses claimed should have been allowed in toto and the AO was not justified in disallowing 2% of the claim of freight expenditure without pointing out any specific disallowance. Again the Ld CIT(A) has erred in confirming the same without appreciating the facts of this case and the worthy CIT(A) should have deleted the whole addition. Alternatively the addition confirmed is very high & excessive.” 15. The Commissioner of Income Tax (Appeals) has held as under: “The ground appeal no. 5 is against addition of Rs. 672,300/- on account of freight. Assessee had shown freight payable at Rs. 80,69,145/-. The assessee had failed to prove the genuineness of the claim vis a via freight paid/payable which the assessee had failed to prove when he categorically stated in his explanations given a, serial no. 6(a) to (e) that he has no account of freight received and freight paid account in his books of accounts and that month wise figures of these accounts cannot be given by him. Further the assessee had failed to discharge his onus to correlate the freight paid amount to the actual truck owners as the assessee had failed to produce bills and vouchers in respect of freight paid/payable. The books of accounts were also not produced before the AO despite sufficient opportunities. Therefore the AO held the expenditure on account of freight amounting to Rs.356,15,018/- remains unexplained in absence of books of accounts, bills/vouchers and rejected the books of accounts u/s 145(1) and made disallowance of the claim of freight hike of approximately 2% during the year at 2% during the year at 2% of Rs. Rs.336,15,018/- or Rs.672,300/-. In the written submissions filed by the appellant submitted that the AO was unjustified in concluding that the expenses on account of freight amounting to Rs.356,15,018/- remained unexplained expenditure

ITA No. 782/Asr./2017 10 Guriqbal Singh and accordingly rejected the books of accounts and disallowed the same @ of 2% and made the addition of Rs.672,300/-. The assessee submitted a chart to prove that expenses on account of petrol/diesel have gone up considerably during the year under consideration which was also produced before the AO. That all the expenses were fully vouched. Decision- The assessee had failed to prove the genuineness of the claim viz ai viz freight paid/payable when he categorically stated in his explanations given at serial no. 6(a) to (e) of his reply filed before the AO that he has no account of freight received and freight paid account in his books of accounts and that month wise figures of these accounts cannot be given by him. Further the assessee had failed to discharge his onus before the AO to correlate the freight paid amount to the actual truck owners as the assessee had failed to produce bills and vouchers in respect of freight paid/payable. The books of accounts were also not produced before the AO despite sufficient opportunities in the assessment proceedings. Therefore the AO rightly held that the expenditure on account of freight amounting to Rs.356,15,018/- remains unexplained expenditure in absence of books of accounts, bills/vouchers. If there was hike in petrol/diesel prices in the year under consideration, there would have been corresponding rise in the freight charges earned by assesses from FCI in year under consideration therefore the contention of price rise of petrol/diesel is rejected. Accordingly in view of the above, the disallowance of the claim of freight hike of approximately 2% during the year at 2% of Rs.336,15,018/- or Rs.672,300/- is confirmed.” 16. Before us, the Authorized Representative of the assessee has submitted as under:

ITA No. 782/Asr./2017 11 Guriqbal Singh “Similarly, the Ld CIT(A) has grossly erred in confirming the addition of Rs.6,72,300/- on a/c of Freight expenses out of the total addition of Rs. 3,56,15,018/-. The AO disallowed 2% of the total claim and accordingly the Ld CIT(A) has grossly erred in confirming the addition of Rs.6,72,300/-. A chart was produced before the authorities below therein showing that the prices of petrol & diesel have considerably gone up during the year under consideration. The necessary details are again available at Page No.65 & 66 of the paper-book. In view of these circumstances, there was no justification in confirming the addition which was made on adhoc basis which is not permissible under the law. As such the addition confirmed may be deleted. Alternatively, looking to the facts and circumstances, your honour will find that the addition made is very high & excessive. Even a reasonable addition could have met the ends of justice.” 17. The ld. Departmental Representative relied on the orders of the lower authorities.

ITA No. 782/Asr./2017 12 Guriqbal Singh paid by the AO was not sustainable in law. The Assessing Officer has not pointed out which of the freight payment made by the assessee are not verifiable. In absence of the same, the disallowance made should be deleted.

Sd/- Sd/- (N. K. Choudhry) (N. S. Saini) Judicial Member Accountant Member Dated: 22/03/2019 *Subodh* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT

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