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Income Tax Appellate Tribunal, DELHI BENCH: ‘F’: NEW DELHI
Before: SHRI BHAVNESH SAINI & SHRI O.P.KANT
ORDER PER BHAVNESH SAINI, JUDICIAL MEMBER:
This appeal by Assessee has been directed against the order of Ld.
CIT (Appeals)-XXVIII, New Delhi {CIT(A)} dated 04.10.2013 for Assessment Year: 2009-10.
Earlier this appeal was dismissed for default. The Miscellaneous Application of assessee was allowed and appeal of assessee was restored.
We have heard the Ld. Representatives of both the parties and perused the material on record.
On ground No.1, assessee challenged the addition by applying profit rate of 8%. The assessee is an individual and engaged in business of underground cable laying and hiring of vehicles in the name & style of M/s R.L. Construction Co. and M/s Gaurav Enterprises respectively.
During the year under consideration, the assessee has shown net profit of Rs.27,88,717/- on gross receipts of Rs.4.70 Crore thereby showing net profit rate of 5.92%. The assessee did not produce the books of account before the AO because the explanation of assessee was that the same had been lost and copy of the FIR was produced. The AO, however, in absence of books of account and verification of the details rejected the books of account u/s 145(3) of the I.T. Act. The AO applied net profit rate of 8% on gross receipts and estimated the profit at Rs.37,64,707/-. The profit rate declared by assessee was reduced and addition was made of Rs.9,75,990/-.
The assessee challenged the addition before the Ld. CIT(A) and it was submitted that books of account of the assessee were audited and addition is made merely on the ground for non-maintenance of the stock register. The assessee submitted that stock register is not required as the assessee has business of laying underground cable and the cable is supplied by BSNL, therefore, addition is unjustified.
5.1 The Ld. CIT(A) noted that since the assessee failed to produce books of account and other documents, therefore, profit rate of 8% applied for making addition is justified, this ground was dismissed.
After considering rival submissions, we are of the view that the addition is on excessive side. It is a fact that assessee failed to produce the books of account and related documents before the AO, therefore, rejection of the books of account is justified. However, the explanation of assessee is acceptable that mere non-maintenance of stock register may not be a ground for making addition because the assessee was not required to maintain stock register because he was in the business of laying underground cables which are supplied by BSNL. The counsel for assessee has filed chart of Net Profit rate for preceding assessment years 2007-08 & 2008-09 in which N.P. rate of 4.75% and 6.45% have been declared by assessee. Therefore, considering the history of the assessee, we direct the authorities below to apply profit rate of 7% as against the 8% for computing the net profit of the assessee. The orders of the authorities below to that extent are modified. AO directed to apply Net Profit rate 7% against the 8% and made the addition. Ground No.1 of appeal of the assessee is allowed partly.
Ground No.2, assessee challenged the addition of Rs.23,65,000/- u/s 68 of the I.T. Act. The AO noted from the balance sheet as on 31st March, 2009 that assessee has shown unsecured loans to the tune of Rs.23,65,000/-. The Assessee in response to the notice submitted before the AO, their no fresh loan during the year except for Rs. 4,00,000/- from the family members have been taken. Confirmation of Miss Dolly Garg of loan was filed. The AO noted that assessee has furnished one confirmation from Miss Dolly Garg (daughter of the assessee) which did not contain any PAN and no other supporting documents have been filed. It is also noted that bank statement showing the payment but did not prove other contents i.e. genuineness and creditworthiness of the loan. In absence of satisfactory explanation AO made addition of Rs.23,65,000/- u/s 68 of the I.T. Act, 1961.
The assessee challenged the addition before the Ld. CIT(A) and it was submitted that in the assessment year under appeal assessee has taken loan of Rs.4,00,000/- from his daughter through cheque.
Confirmation and Bank statement were provided. She has assessed to tax and PAN was filed. It was further submitted that other loan of Rs.19,65,000/- were not taken in assessment year under appeal and the same were duly assessed in previous year, therefore, no addition could be made. The Ld. CIT(A) noted that assessee failed to submit the evidence with regard to the creditworthiness and genuineness of the transactions.
The balance sheet along with Annexure were filed for assessment year under appeal and preceding assessment year shows that the amount of Rs.19,65,000/- was outstanding. However, the name of the persons were not enclosed as per Annexure in both the years. Thus, it could not be ascertained whether the same person’s balances were outstanding in assessment year under appeal. Books of account were also not produced for verification. The assessee has been produced a list of unsecured loans for both the years which were allegedly stamped and signed by the auditor. There is a difference in the size and shape of the stamp of the auditor. In absence of relevant evidences on record, addition was confirmed.
Learned Counsel for assessee reiterated the same submissions made before the authorities below and referred to documents filed in the paper book. Counsel for assessee has also submitted that the assessee is willing to produce books of account for preceding assessment year 2008-09 to prove that loans of Rs.19,65,000/- were outstanding as on 31st March, 2008 which contained the names of the creditors.
On the other hand, Ld. DR relied upon the orders of the authorizes below and submitted that explanation of assessee cast doubt, therefore, addition may be maintained.
We have considered the rival submissions and perused the material on record. The assessee submitted before the authorities below that in assessment year under appeal loan of Rs.4,00,000/- was taken from Miss Dolly Garg, daughter of the assessee and rest of the amount was balance coming up from the earlier year and no fresh loan have been taken in assessment year under appeal. The Ld. CIT(A) has noted in his impugned order that balance sheet of preceding year 2008-09 and balance sheet of assessment year under appeal i.e. 2009-10 have been filed. Perusal of the balance sheet ending on 31st March, 2008 shows outstanding unsecured loans of Rs.19,65,000/- but the Annexure did not contain names of the creditors. There was a difference in the stamp of the Auditor. Learned Counsel for assessee referred to audited balance sheet for preceding year 2008-09 in the Paper Book and submitted that the unsecured loans have been shown of Rs.19,65,000/- ending on 31st March, 2008 (PB-13).
However, according to Ld. CIT(A) no details of the unsecured loans have been shown. This fact could be verified from the books of account maintained by the assessee for preceding assessment year 2008-09 as well as from the balance sheet filed on record along with return filed for assessment year 2008-09. Since, assessee has been taking this plea consistently, therefore, we are of the view that this fact requires reconsideration at the level of the AO. In this view of the mater, we set aside the orders of the authorities below qua the addition of Rs.19,65,000/- only and restore this issue to the file of the AO with direction to re-decide the issue by verifying the factual facts from the record. The assessee is directed to produce the books of account for assessment year 2008-09 before the AO along with complete and reliable details in support of the explanation that the amount of unsecured loans of Rs.19,65,000/- pertain to assessment year 2008-09. AO may also verify this fact from the balance sheet filed with the return of income for assessment year 2008-09. The AO before verifying this fact shall give reasonable sufficient opportunities of being heard to the assessee.
11.1 However, as regards addition of Rs.4,00,000/- on account of unexplained loan received by assessee from his daughter Miss Dolly Garg is concerned, the assessee filed confirmation of the creditor in which PAN of creditor is given. Copy of the bank statement is filed which shows that just prior to giving the loan to the assessee, there were deposit of Rs.2000/- in cash and prior to, the balance amount shown as Zero in the account of the creditor. Thereafter, Rs.4,00,000/- have been taken by the creditor and the same have been advanced to the assessee. No other documentary evidence have been produced on record to prove the creditworthiness of the creditor. The bank statement of the creditor clearly shows that creditor was having no means to give loan of Rs.4,00,000/- to the assessee. No other evidence have been produced on record to prove her source of income or her worth to advance loan of Rs.4,00,000/- to the assessee. Merely because loan is given through cheuqe is not sacrosanct to prove genuine loan in the matter. Considering the totality of the facts and circumstances, it is clear that assessee may be able to prove the identity of the creditor, but, her creditworthiness and genuineness of the transactions have not been proved by the assessee. We therefore, maintain addition of Rs.4,00,000/-. Part of this ground of appeal is dismissed.
Ground No.2 of appeal of the assessee is partly allowed for statistical purposes as noted above.
In the result, appeal of assessee is partly allowed.
Order pronounced in the Open Court on 28/02/2020.