SUNITA RANI,SONEPAT vs. ITO, SONEPAT

Per Dr. B. R. R. Kumar, Accountant Member:

2. Following the grounds have been raised by the assessee:

“1. The Commissioner of Income Tax (Appeal), hereinafter C.I.T. (A) erred on facts and in law in confirming the addition of Rs. 42,05,216/- on account of capital out of Rs. 49,55,216. That the CIT (A) erred on facts and in law in confirming the addition by AO of Rs. 72,00,000/- on account of unsecured loan out of Rs. 107,00,000/-.

2. That the CIT (A) erred on facts and in law in confirming the addition by AO of Rs 54,51,492/- on account of Sundry Creditors out of Rs. 67,07,216/-.

3. That the CIT (A) erred on facts and in law in confirming the addition by AO of Rs.55,69,337 on account of commission/min guarantee.

2 Sunita Rani 4. That the CIT (A) erred on facts and in law in confirming the addition by AO of Rs 2,39,210/- on account of advertisement expense and Rs.3,06,885/- on account of other expenses.

5. That the CIT(A) erred on facts and in law in confirming the action of the assessing officer in this regard without considering the contemporaneous/circumstantial evidence furnished by the appellant and without appreciating that the transactions were supported by proper details/ documents /vouchers.”

On account of capital: 5. The ld. CIT (A) confirmed an amount of Rs.42,05,216/- out of the amount of the addition made by the Assessing Officer of Rs.49,55,216/-.

6. We have gone through the entire order of the ld. CIT (A) and find that the ld. CIT (A) has accepted and found it correct regarding the amounts received as gifts from husband of Rs.2,50,000/- and Rs.9,50,000/- from her father-in-law. The ld. CIT (A) confirmed the remaining amount owing to non-substantiation of the amounts received.

7. We have gone through the order of the ld. CIT (A) in the rationale given while confirming the addition. We find that the ld. CIT (A) has obtained three remand reports dated 30.06.2015, 17.12.2015 and 3 Sunita Rani 27.05.2016 from the Assessing Officer, the inputs of which is duly considered while adjudicating the issue. We have gone through the entire order in detail and find that the ld. CIT (A) has rightly given remission of Rs.7,50,000/-. For the sake of ready reference, the order of the ld. CIT (A) is reproduced as under: (page no. 6 para 5 to page no. 10 para 5.5) “5.0 Addition of Rs.49,55,216/- on account of introduction of new capital: the Assessing Officer has made the above-mentioned addition during the course of assessment proceedings when no explanation was filed. 5.1 In the appeal proceedings, the appellant has given Additional evidence explaining the source of capital being gift from Mr. Sushil Kumar, assessee’s husband amounting Rs. 2,50,000/-, Sh. Telu Ram, Assessee's Father-In-Law amounting Rs. 12,50,000/- and Sh. Rajbir Singh, assessee's Father amounting Rs.4,50,000/. This makes a total ofRs. 19,50,000/-. No explanation has been tendered in respect of the remaining amount of Rs. 30,05,216/-, 5.2 The Assessing Officer has examined the amount received from Mr. Sushil Kumar, assessee's husband, Sh. Telu Ram, Assessee's Father-In-Law amounting and Sh. Rajbir Singh in the course of remand proceedings and submitted the following reports: a) In report-1, dated 30.06.2015 it was reported that “in support of gift of Sh. Sushil Kumar only confirmation is submitted and no any source of his income or bank account is produced. In respect of gift of Rs. 12,50,000/- (claimed to be received from father in law) also no any bank account or source of Rs. 12,50,000/- has been explained only copy of fird of land is submitted. From which it cannot be arrived at that the gift was given to the assessee or not. No any occasion of gift is explained by the assessee. Assessee was asked to produce the above three persons. In response only Sh. Ranbir Singh father of the assessee attended and his statement was recorded Placed on record) and he produced copy of his salary bank account and stated that he has given cash gift out of his GPF withdrawal and payment received from his office. When asked about the occasion of gift he stated that gift was given for the birthday of his grandsons i.e. children of the assessee. But when asked about the date of birthday. He stated that birthday of the children are in the month of May and July. But the date of withdrawal of amount from his account is in the month of January. Hence no any proof of gift/source of addition of capital of Rs. 45,00,000/- is submitted by the assessee and the same stands unexplained.”

4 Sunita Rani b) In report-2, dated 17.12.2015 on this issue the Assessing Officer furnished no further comments but reiterated the comments earlier submitted vide report datedm17.12.2015. c) In report-3, dated 27.05.2016 it was reported that the authorized representative of the assessee vide order sheet entries dated 17.04.2016, 11.04.2016, 20.05.2016 & 23,05,2016 asked to produce persons/creditors for proving genuineness and credit worthiness of the person/creditors, On 24.05.16 the authorized representative produced Sh. Telu Ram S/o Sh. Kulwant Singh who has shown given gift of Rs. 12,50,000/- to the assessee. His statement was recorded. He was specially asked to intimate the date occasion and source of gift. In statement he has firstly stated that he is earning Rs. 8,00,000/- per annum from patta (Legal agreement) of 14 acre of land whereas, In another question he has stated that he has received 40 to 45 thousand per acre as lease rent which comes to Rs.5,00,000/- per annum. Regarding house hold expenses firstly he has stated that these are 5 lacs approx. & after that he stated 2.5 lacs per annum. The reply of the assessee on this issue is contradictory. It is surprising how’ he has made saving of so huge amount. When he was asked to state the mode of gift he stated that Rs. 3 lacs are from bank balance and balance of Rs. 9.5 lacs from cash available. The assessee has maintained two bank accounts, then why he has kept too huge cash in house. The source of gift he stated that this is from agricultural income. But he has received Rs. 5.6 lacs from lease and spent Rs. 5 lac on household expenses. Then saving of too much cash seems doubtful. Keeping in view of the facts the genuineness and creditworthiness of donor not proved. Further, the assessee was asked to produce the persons from whom he has received lease rent. He has shown his inability to produce the same. Further, the assessee was asked whether he has gifted such amount to other two daughter-in-laws. He too straightly refused to give any gift to other two daughters-in-law. Onus is lying on the assessee to prove the genuine & creditworthiness of entries and assessee has failed to prove it. Therefore, it is requested that submission of the assessee may kindly not be considered. Thus above facts submitted by the assessee are not genuine and un- reliable and thus unacceptable."

5.3 Response of the appellant: All the above reports were given to the appellant and finally a written submission was filed on her behalf on wherein the following was submitted: 6. The AO is not justified while making addition on account of introduction of new capital amounting Rs. 49,55,216/-.

During Remand Proceedings, documents relating to addition in capital through gifts from relatives have been filed with Ld. AO and it has been submitted before AO that part, of addition was on account of gift from Mr.

5 Sunita Rani Sushi! Kumar, asses see's husband amounting Rs. 2,50,000/-, Sh Telu Ram, Assessee's Father—In-Law amounting Rs. 12,50,000/- and Sh. Rajbir Singh, assessee's Father amounting Rs.4,50,000/- for which confirmation were submitted with Ld. AO Sh. Rajbir Singh Father of assessee visited the office of Ld. AO and recorded his statement and the same has been taken on record by Ld. AO in remand report dated 15.07.2015.

Sh. Telu Ram visited the office of Ld. AO three times on 16.05.2016, 19.05.2016 and 23.05.2016. Despite being not carrying good health (As he is more than 80 years of age) his statement was not been recorded in first two visits.

In his statement he has confirmed that he had gifted Rs. 12,50,000/- for supporting the business vide Rs, 3,00,000/- from bank and Rs. 9,50,000/- in cash.

Sh. Telu Ram repeatedly told to Id. AO that the total family expenses as on date are aprox. Rs. 5,00,000/- per annum and expenses in the captioned year were aprox. Rs. 2,50,000/- but despite being told to concerned Inspector, who drafted the statement, he mentioned the expenses to the tune of Rs. 5,00.000/- per annum in the statement instead of Rs. 2,50,000/- per annum and despite reminder he refused to change the statement and told to explain the same to CIT(Appeal).

Sh. Telu Ram, on being asked to produce the persons from whom he was getting lease rent, never expressed his inability to produce the tenants. Rather he requested to Ld. AO to accord the time to produce the person as it was not possible to produce the tenants then and there. But AO refused to accord the time.

5.4 I have given careful consideration to the facts of case and find that out of total addition to capital account no explanation has been given the extent of Rs. 49,55,216/-, in respect of Rs. 30,05,216/- which is confirmed straight away. In respect of the balance for which explanation is given, the same is as under: a) Gift from Husband 2,50,000/- b) Gift from Father 4,50,000/- c) Gift from Father- in –Law 12,50,000/- i. Gift from Husband: The appellant in the course of assessment proceedings/remand proceedings has failed to produce cogent and convincing evidence which would support that the husband of the appellant would give a gift of the amount as is claimed. No bank account has been produced and no source of income has been disclosed in the course of remand proceedings as has been reported by the assessing officer in his report dated 30.06.2015. Even in the 6 Sunita Rani reply submitted in response to remand reports, the appellant has not controverted the findings given by the Assessing Officer. Hence, the gift from the husband remains unsubstantiated. ii. Gift from Father: The father of the appellant has allegedly gifted an amount of Rs. 4,50,000/- and in the remand report the Assessing Officer has objected to the contention only on the ground that the donor has not been able to provide details of date of birth day of his grandsons. The occasion of gift has not be explained and therefore the Assessing Officer was of the view that the gift is not genuine. It is reported by the Assessing Officer that the donor has given cash gift out of GPF withdrawal. However, no factual findings have been recorded by the AO in respect of the source of fund of the donor. I have considered the factual metrics and find that it is not important for the donor to remember the dates particularly when the source of fund has been fully explained. The gift from such close relative has to be accepted. iii. Gift from Father - in - law: It has been reported by the Assessing Officer that the statement of this person was recorded where he admitted that total earning per annum from the agricultural income is about Rs. 8.00 lakhs only. Even in this income, there is a component of lease rent received which could not be proved in the course of remand proceedings. The total income as claimed above has not be substantiated in the statement. Further, it has been stated that gift to the appellant has been given from two sources, one is out of Bank Account from where Rs. 3 lacs were withdrawn and the remaining amount of Rs. 9.5 lacs has been given from the agricultural income. Even though the Assessing Officer has proposed that nothing could be substantiated but I find that the Assessing Officer did not conduct further enquiries in respect of gift made out of bank balance to the extent of Rs. 3.00 lacs. It has been specifically stated that such an amount has been withdrawn from the bank but the Assessing Officer did not accept the contention without giving any reason. The gift from Father-in-Law to this extent of Rs. 3 lacs stands explained whereas there is no evidence to substantiate the remaining gift of Rs. 9.5 lakhs.

5.5. In summation, out of the total addition of Rs. 49,55,216/-, the following component of addition to the extent of Rs. 42,05,216 is confirmed and balance Rs.7,50,000/- is deleted :

S.No. Particulars Amount (i) No Explanation 30,05,216/- (ii) Gift from Husband 2,50,000/- (iii) Gift from father-in- law 9,50,000/- 42,05,216/-

7 Sunita Rani 8. Since, the order of the ld. CIT (A) is correct on facts, we decline to interfere with the order and the amount of Rs.42,05,216/- is hereby confirmed.

Loans of Rs.72,00,000/-: 9. The ld. CIT (A) confirmed an amount of Rs.72,00,000/- out of the amount of the addition made by the Assessing Officer of Rs.2,09,94,924/-.

8 Sunita Rani (a) PNB CCA/c Rs. 74,34,788/- (b) Andhra Bank Rs. 28,60,136/- (c) Security Deposit from Dealers Rs. 1,07,00,000/- Total Rs. 2,09,94,924/- 6.2. Remand Reports: The Assessing Officer has examined the additional evidence and contentions of the appellant. After due consideration submitted the following reports: a) In report-1, dated 30.06.2015 the following was reported that:

As per Balance Sheet assessee has shown liability of Rs. 1, 07,00,000/- on account of security deposit. During remand proceedings also assessee only submitted copy of agreement with many parties from which it is not clear that the actually the transaction have taken place or not. Though asked specifically assessee has not given any detail/proof/bank account statement etc. in this regard. Hence additional evidence towards addition of Rs.1,07,00,000/- on account of liabilities stands unexplained.

5. As per Balance Sheet assessee has raised loam through banks of Rs.1,07,00,000/- and but though asked during asstt. Proceedings assessee did not even explained account No. and the name of the banks and persons from whom loan were taken. During remand proceedings bank statement from Punjab National Bank and Andhra Bank was called for which revealed that during the year assessee was having CC account No. 1710008700001131 with PNB with liability of Rs.74,34,788/- and having O.D. account No.117731100000229 with Andhra Bank having liability of Rs.28,60,136/- which may be decided on merits. b) In report-2, dated 17.12.2015 on this issue the Assessing Officer furnished no further comments but reiterated the comments earlier submitted vide report dated 17.12.2015. c) In report-3, dated 27.05.2016 after the enquiry the following was reported:

To meet the end of justice the assessee was again given an opportunity of being heard on 25.04.2016. On 25.04.2016 AR of the assessee attended the proceedings & furnish list of Creditors/persons from whom securities were received with complete name & address & submitted that due to closure of business & not having good relation with the parties it is not possible to produce the parties for confirmation as well as confirmed copies. The AR of the assessee requested to issue notice u/s 133(6) to these parties for confirmation. On request of the assessee and to meet the end of justice, notice to the following parties were issued, as per list with 9 Sunita Rani name & address of persons provided by the AR during proceedings, whose details are as under:

S. No. Name of the party Letter/Dispatch Balance in Balance in postal No. & date of the books of the books of Remarks issue a/c of the a/c of the assessee party 1. M/S Aeri Apparel 316 dt. 20,00,000 20,00,000 Inc 25.04.2016 2. M/S Om Selection 315 dt. 2,00,000 25.04.2016 3. M/S Shree Ram 314 dt. Received - Textiles 25.04.2016 unserved as incomplete address 4. M/S Mehta 313 dt. 3,00,000 -do- Garments 25.04.2016 5. M/S Shree Balaji 311 dt. 2,03,000 Received & Co. 25.Q4.2016 unserved as no such Firm.

7. M/s Indus 309 dt. 3,10,000 - Collection 25.04.2016 8. M/S Paul Brothers 308 dt. 4,00,000 - Received 25.04.2016 unserved as no such Firm.

10 Sunita Rani 17. M/S Rama Store 299 dt. 5,00,000 - 25.04.2016 18. M/S New Style 298 dt. 5,00,000 5,00,000 Apparels Prop. 25.04.2016 Ram Kumar Duhan 19. M/S Malik & Sons 297 dt. 5,00,000 5,00,000 25.04.2016 20. M/S Vidhi Fashion 296 dt. 5,00,000 5,00,000 25.04.2016 21. Sh. Dayanand 295 dt. 1,50,000 Received Khatri 25.04.2016 unserved as Expired 22. M/S Sheela 294 dt. 3,00,000 2,00,000 Garments 25.04.2016 23. M/S Sharan 293 dt. 1,50,000 5,00,000 Enterprises 25.04.2016 24. M/s Arora Bartan 292 dt. 3,00,000 Store 25.04.2016 25. M/s Vikaran 291 dt. 1,00,000 - Received Fashion 25.04.2016 unserved as not known.

11 Sunita Rani relation. Even then the assessee has failed to produce the persons from whom the verification has been received.

Further this office has received by name two letters from Sh. Rajesh Tushir amounting to Rs. 5,00,000/- and Sh. Ghansham Dass and to Rs.3,00,000/- in which they have stated that they have given advances/ securities to M/s Bru International of Rs.5,00,000/- & Rs.3,00,000/- respectively. Sh. Ghansham Dass has attached a copy of PAN only and Sh. Rajesh Tushir has filed copy of ITR for A.Y. 2014-15 and also stated no return was filed for A.Y. 2011-12. It is very strange that when this office has not issued any letter u/s 133(6) to both of them or no verification has been sought from them, then how they are sending letter regarding securities. Moreover, the assessee has not intimated their names in the list of persons from whom they have received securities.

Keeping in view the above facts, the matter may kindly be decided on merits.

6.3 Response of the appellant: All the above reports were given to the appellant and finally a written submission was filed on her behalf on wherein the following was submitted:

3. The AO has erred on facts and in law while making addition on account of Secured and Unsecured Loans. That Details of Secured and Unsecured Loans are as below:

(a) PNB CCA/c Rs.74,34,788/- (b) Andhra Bank Rs.28,60,136/- (c) Security Deposit from Dealers Rs.1,07,00,000/- Total Rs. 2,09,94,924/- Secured Loans During Remand Proceedings, Bank Statements from Punjab National Bank and Andhra Bank was called for by Hon'ble Assessing Officer (here-in-after called AO) which revealed that your appellant was liable to pay to Punjab National Bank Rs. 74,34,788/- and to Andhra Bank Rs. 28,60,136/-.

The above fact has been confirmed by Ld. AO in 1st Remand Report dated 15.07.2015.

Security Deposits The security deposits from dealers are basically the deposits received by M/s Bru International (Prop. Sunita Rani) from the dealers while entering into agreement for opening the franchisee of Bru Fashion, a Brand of M/s Bru International.

12 Sunita Rani During Remand Proceedings, appellant submitted detail list of the persons from whom security deposit has been received (copy had already been submitted with your honour vide our letter dated 19.10.2015 for your kind perusal).

Ld. AO had called for the confirmations from various parlies who had given security deposits to the appellant. In response to notice form Ld. AO, various parties have confirmed the balance to the tune of Rs. 51,00,000/- (Rs. Fifty One Lac only). The said fad has been confirmed by Ld. AO in his remand report dated 27.05.2016 at page no. 2 & 3 vide entries at sr. no. 1, 13, 18, 19, 20, 22, 23 & 27.

Your honour, We submitted before Ld. AO (hat there was massive fire in the premise of Appellant and whole records including accounts, computers, vouchers, documents etc got destroyed in fire and whatever records we have produced before Ld. AO has been collected from Bank & few customers/suppliers etc.

Your honour, as the appellant suffered heavy losses due to fire and could not pay off its creditors and depositors hence they are not co- operating with appellant and are not confirming their balances until their dues are paid off completely.

Your honour shall appreciate the facts relating to funds trail mentioned below:

Total deposits in all Bank Accounts (A) Rs.4,51,07,348/- Sales during the year: Rs.3,85,37,036/- Sundry Debtors on 31.03.2011 Rs.25,85,760/- Less: Sundry Debtors as on 31.03.2010 Rs.44,290/- Increase in Sundry Debtors Rs.25,41,470/- Rs.25,41,470/- Realization from sale proceeds Rs.3,59,95,566/- Less: Funds utilized for Addition in Fixed Assets Rs.13,87,650/- (B) Rs.3,46,07,916/- Balance being received towards Security Deposits (A-B) Rs.1,04,99,432/- Total deposits in all Bank Accounts Rs.4,51,07,348/- 6.4. I have given careful consideration to the entire gamut of facts and enquiries conducted by the assessing officer in remand. Out of the total amount of Rs.2,09,94,924/-, the AO has accepted the components pertaining to PNB CC A/c Rs.74,34,788/- and Andhra Bank Rs.28,60,136/- as explained which leaves behind the component of addition pertaining to “Security Deposit from Dealers” to the extent of Rs.1,07,00,000/-, 6.4.1. In the remand proceedings, the Assessing Officer conducted complete enquiries about Security Deposit from Dealers of Rs.1,07,00,000/- and after such enquiry came to a conclusion that the following deposits have been confirmed:

13 Sunita Rani S. No. S. No. of Name Amount Remand report M/s Aeri Apparel Inc. 20,00,000/- 1 1 18 M/s New Style Apparels 5,00,000/- 2 Prop. Ram Kumar Duhan 3 19 M/s Malik & Sons 5,00,000/- 4 M/s Vidbi Fashion 5,00,000/- 20 It is also reported that in respect of some other persons there is a discrepancy in the figures reported by the respective parties and further some of the parties confirmed certain balances despite the fact that no notice under section 133(6) of Income Tax Act was issued to such persons. 1 am in agreement with the Assessing Officer that these confirmations do not inspire confidence, particularly in view of the fact that the appellant has not discharged initial onus of producing these creditors before the Assessing Officer. There is no documentary evidence which would prove that the amounts so stated to have been received as ‘Security deposits’ were either through the banking channel or from the credible source. The Assessing Officer had doubts in his mind about the genuineness of these creditors and therefore provided an opportunity to the appellant to substantiate her claim by producing the respective creditors. The process of confirmation by post was initiated only to facilitate the appellant but even this exercise has resulted in confirmation of credits in respect of the aforesaid four persons. Each credit appearing in the Books of Account has to be substantiated by the appellant with the help of cogent and convincing evidence. In the present case, despite number of opportunities given to the appellant there has been no compliance. The letters issued by the Assessing Officer has remained un-served or has not been responded by the respective creditors. In some cases, as mentioned above, even though the letters have been responded but the credit balance are different which would mean that the confirmations are not reliable.

The appellant gets relief of Rs.35,00,000/- in respect of the aforementioned four creditors out of the total credit amount of Rs.1,07,00,000/- and the balance amount of Rs.72,00,000/- is confirmed.”

12. Since, the order of the ld. CIT (A) is correct on facts, we decline to interfere with the order and the amount of Rs.72,00,000/- is hereby confirmed.

14 Sunita Rani Sundry Creditors: 13. The ld. CIT (A) confirmed an amount of Rs.54,51,492/- out of the amount of the addition made by the Assessing Officer of Rs.67,07,216/-.

15 Sunita Rani the amount of Rs.35,00,000/- based on three remand reports dated 30.06.2015, 17.12.2015 and 27.05.2016 from the Assessing Officer, the inputs of which is duly considered while adjudicating the issue. We have gone through the entire order in detail and find that the ld. CIT (A) has rightly given remission of Rs.35,00,000/- and confirmed the amount of Rs.72,00,000/-. For the sake of ready reference, the order of the ld. CIT (A) is reproduced as under: (page no. 18 para 8 to page no. 22 para 8.6) “8. Addition of Rs.67,07,216/- on account of sundry creditors: the Assessing Officer has made the above-mentioned addition during the course of assessment proceedings when appellant failed to file confirmation of balances from sundry creditors as appearing in the balance sheet.

8.1 In the appeal proceedings, the appellant has given additional evidence explaining the following sundry creditors:

S. No. Name of the party Amount 1. M/S Ruchi Enterprises, Mumbai 20,46,050 2. M/S S.R. Enterprises, Ludhiana 10,43,574 3. M/s Gujarat Cotfab, Delhi 3,80,826 4. M/s Goyal Traders, Delhi 8,15,818 5. M/s Nirmal Textiles, Delhi 3,24,204 6. M/s Ahmadabad Cotton Mfg. Co. 1,56,470 7. M/s Santosh Fine Fab Ltd., Delhi 7,18,428 Confirmation from another party namely Shree Ram Textile (4,43,161/-) was furnished not before the Assessing Officer but in the appellate proceedings.

8.2 Remand Reports: The Assessing Officer has examined the additional evidence and contentions of the appellant. After due consideration submitted the following reports: a) In report-1, dated 30.06.2015 the following was reported that: During Assessment Proceedings assessee was asked to furnish names and complete address and confirmation of the sundry creditors for Rs.67,07,216/- but assessee did not furnish any reply. Now assessee submitted confirmation of few parties though assessee was requested to submit complete address of all the parties. Hence copy of account/confirmation was called for from the parties out of 16 Sunita Rani which only confirmation from Smt. Neelam of Gujarat Cotton Fab of Rs.3,80,826/- and Santosh Fine Fab of Rs.7,18,428/- & from Ahmadabad Cotton Mfg. Co. of Rs.1,56,470/- is received and query letter in respect of balance creditors were received back or no any confirmation is received till date. Hence additional evidence towards addition made on account of sundry creditors stands unexplained. b) In report-2, dated 17.12.2015 on this issue the Assessing Officer furnished the following report:

On 04.12.2015 the AR of the assessee attended this office and filed confirmation of following parties:

1. 1. M/s AERI Apparels Inc.

2. M/s Ruchi Enterprises 3. M/s S.R Enterprises and sought for adjournment and case was adjourned to 10.12.2015 with the directions that the further adjournment will be disallowed. On 10.12.2015 neither anybody attended the proceedings nor was any written submission received.

Letters were issued for calling information u/s 133(6) of the I.T. Act, and confirmation of the balances to the following parties:

S. No. Name of the party Letter/Dispatch Date No.

17 Sunita Rani 8.3 Response of the appellant: All the above reports were given to the appellant and. finally a written submission was filed on her behalf on wherein the following was submitted:

Sundry Creditors The AO has erred on facts and in law while making addition amounting Rs.67,07,216/- on account of creditors. During Remand Proceedings at the time of 1v Remand Report, confirmation letters were sent to five creditors out of seven and three confirmations had been received by Ld. AO from M/s. Gujrat Cotton Fab Rs3,80,826/-, M/s Santosh Fine Fab Ltd. Rs.7,18,428/- and M/s. Ahmadabad Cotton Mfg Co. Rs1,56,470/-. The fact has been stated by Ld. AO in the remand report dated 15.07.2015.

As far as M/s. Nirmal Textiles amounting Rs. 3,24,204/- is concerned (hey have confirmed us that they have not received any letter from Sonipat Income tax Office and with regard to M/s. Goel Traders amounting Rs. 8,15,818/- is concerned, they have refused to co- operate until their debts are paid off in full.

M/s. S.R. Enterprises another creditor for Rs. 10,43,574/- had already filed the confirmation to Ld. AO which is there on records in the file of AO, However despite being reminded by AR of appellant, the Ld. AO chose to ignore the fact and not taken the same in his current remand report.

8.4. ENQUIRY IN APPEAL PROCEEDINGS:- On this issue the appellant submitted that three parties namely M/s Ruchi Enterprises, S.R. Enterprises and Nirmal Textiles are ready to confirm the Accounts. In order to verify the correctness of the claim, notices were issued from this office vide letter dated 22.12.2016 in these three parties for confirming the balance. However, the notices came back.

8.4.1. On return of the notices the appellant was given opportunity on 29.12.2016 with the following letter:

"The aforesaid appeal is pending and in the appeal proceeding this office issued notice to the following concerns in order to verify the correctness of submissions made by you at the addresses provided by you. However, all the letters have been received back with the following postal remarks:

Sr. No. Particulars Remarks 1 M/s Nirmal Textiles, Ld-62, Pitam Is nam ka koi praptkarta Pura, Delhi - 110024 nahi hai.

18 Sunita Rani 2 M/s S.R. Enterprises, 3085, Support Address, No. Sunder Nagar, Near Bikaner Street No. Sweet, Ludhiana -141001. M/s Ruchi Enterprises, 88, 2nd 3 Not Known Caved Cross Lane, Room No. 14, Td Floor, Dadeseth Agiary Lane, Kalba Devi, Mumbai-2.

Sl. No. Name Amount (i) Gujarat Cott. Fab 3,80,826/- (ii) Santosh Fine Fab Ltd. 7,18,428/- (iii) Ahmadabad Cotton Mfg Co. 1,56,470/- 12,55,724/- 8.6. I have given careful consideration to the entire facts of the case and find that the appellant failed to discharge initial onus' of proving genuineness of its sundry creditors. Even during enquiry by the AO and this office only three creditors confirmed balance. In consideration of the facts above, out of total addition of rupees Rs.67,07,216/- on account of sundry creditors, the appellant gets a relief of Rs. 12,55,724 and the balance amount of Rs. 54,51,492/- is confirmed. The ground of appeal is Partly Allowed.

19 Sunita Rani Commission Amount: 18. The Assessing Officer made addition of commission paid owing to the absence of details of the persons to whom the commission has been paid. The assessee could not even provide details whether any TDS has been deducted on this amount or not. The total disallowance made by the Assessing Officer was Rs.55,69,337/- on account of commission. This amount consists of commission paid amounting to Rs.16,01,337/- and minimum guarantee paid to /shop-owners/showroom owners/dealers (being reimbursement of expenses incurred on shop/showroom by dealer as per the terms of agreement) amounting Rs.39,68,000/-. Even, the minimum guarantee and reimbursement has not been supported by the assessee so as to make her eligible for deduction u/s 37 of the Income Tax Act, 1961. The details of the payments have not been submitted. Even, though the assessee claims that the evidences have been lost in fire, the same could have been as well proved by the bank accounts by way of transfer of funds or flow of funds to the commission agents or even the confirmation from the agents who received the amounts could have gone a long way in proving the expenditure. However, we find from the record the assessee has failed to support his claim in any of the acceptable forms. Hence, the deduction claimed by the assessee is hereby confirmed.

20 Sunita Rani dealers after deposit of certain amount as security deposit as per the agreement for the due performance of the terms and condition of the agreement. In return of services, a particular sum of amount was to be paid by the appellant to registered dealers on monthly basis as reimbursement of expenses. The dealers were entitled to commission as per the terms of agreement. In support of contention copies of some of the Agreements were filed. During Remand Proceedings, a partial list of persons to whom commission had been paid was given to the Assessing Officer.

9.2 Remand Reports: The Assessing Officer has examined the additional evidence and contentions of the appellant. After due consideration submitted the following reports: a) In report-1, dated 30.06.2015 the following was reported that: As per Balance Sheet assessee has shown liability of Rs. 1,07,00,000/- on account of security deposit. During remand proceedings also assessee only submitted copy of agreement with many parties from which it is not clear that the actually the transaction have taken place or not . Though asked specifically assessee has not given any detail/proof/bank account statement etc. in this regard. Hence additional evidence towards addition of Rs. 1,07,00,000/- on account of liabilities stands unexplained.

9.3. In rebuttal to the above the appellant vide submissions dated 19.10.2015 on the point of commission submitted as under:

"The AO has erred on facts and in law while making addition amounting Rs. 55,69,337/- on account of commission. This amount consists of commission paid amounting Rs. 16,01,337/- and minimum guarantee paid to /shop- owners/showroom- owners/dealers (being reimbursement of expenses incurred on shop/showroom by dealer as per the terms of agreement) amounting Rs. 39,68,000/-.

21 Sunita Rani The model of the franchisee business of M/s Bru International is as follows:

M/s Bru International appointed various dealers as their exclusive brand franchisee, and they were allowed to deal in all Bru Fashion merchandises through their showroom. M/s Bru International was supposed to dispatch and deliver the goods to dealers on consignment basis at the showroom premises. Those dealers were supposed to deposit certain amount as security deposit with M/s. Bru International as per the agreement for the due performance of the terms and condition of the agreement. That a particular sum of amount was to be paid by M/s Bru International to registered dealers on monthly basis as reimbursement of expenses. The dealers were entitled to commission as per the terms of agreement.

Agreements substantiating the above claims had already been filed with your honour in our submission dated 20.02.2015 page no. 39 to 150 of the page book.

During Remand Proceedings, complete list of persons to whom commission had been paid, have been filed with Ld. AO along with copy of agreements containing complete address of payees. The Ld. .40 has not given any comment in his remand report regarding payment of commission to dealers which shows that the Ld. AO has nothing to comment in this regard.

Your honor will appreciate that during the captioned year approx. Rs. 5,25,00,000/- had been paid from various banks for various expenses debited in the Profit and Loss Account.”

9.4 I have given careful consideration to the above and find that the appellant has not given any direct evidence of payment of commission but merely stated that a part of it constitute minimum guarantee paid (Rs.39,68,337) and reimbursement of expenses (Rs.39,68,000) as per the agreement entered with the dealers/shop owners/showroom owners. However, as per provisions of Section 37(1) of the I.T, Act the appellant has to prove two elements, in respect of any expense one is that such expense has been incurred and secondly it has been expanded for the purposes of business. In the present case by merely producing dealers agreement /contemplated sum minimum guarantee/reimbursement by its is not enough evidence to establish that the claimed amount has actually been spent. No direct evidence of mode of payment, date of payment etc. has been given by the appellant. In absence of such details the veracity of expense cannot be verified by the AO. The appellant merely claimed that evidence has been lost in tire but at the same time she could have led secondary evidence by producing such parties and obtaining details from such parties about the payment of the said sum. The initial onus has not been discharged because by 22 Sunita Rani merely providing list no fruitful enquiry can be conducted until and unless further details are given. These agents were allegedly in fiduciary relationship with the appellant and it was much easier for her to obtain confirmation of accounts from the said agents. She has not taken any such steps and therefore prima facie genuineness of expenditure is in doubt. Further, the business purpose of the expense has also to be demonstrated besides the payment which is missing in this case because none of the agent has been examined by the appellant. Under these circumstances the AO has correctly disallowed the expense claimed, therefore, ground of appeal is dismissed.”

Advertisement: 20. For the sake of ready reference, the order of the ld. CIT (A) is reproduced as under: (page no.25 para 10 ) “10. Addition of Rs.2,39,210/- on account of advertisement expenses: the disallowance of this expense has been made by the Assessing Officer because no evidence of any nature was produced during the assessment proceedings. The Assessing Officer intended to verify the correctness of claim of expense and its allow-ability as per the provisions of Income Tax Act but the appellant has paid to adduce any evidence in support of its claim. Moreover during the appellant proceedings also no prayer for additional evidence has been filed in support of this contention. Under the circumstances, the ground of appeal is dismissed.”

21. We find from the record that the assessee has not produced any evidence to support the claim of expenditure. In the absence of any evidences or proof submitted by the assessee, these expenses cannot be allowed as utilized for the purpose of business. The order of the ld. CIT (A) is confirmed on this ground.