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Income Tax Appellate Tribunal, RAIPUR BENCH: RAIPUR
Before: SHRI R. K. PANDA & MS SUCHITRA KAMBLE
PER SUCHITRA KAMBLE, JM
This appeal is filed by the assessee against the order of the CIT(A), Bilaspur dated 24.03.2014 for the A.Y 2010-11.
The grounds of appeal are as under:
“1. That the Ld. CIT(A) erred in maintaining the addition of Rs. 2,00,000/- made by the Ld. A.O being amount borrowed by the appellant from Smt. Jyoti Devi Aarwal.
Prayed that the appellant discharged the burden of providing the identity & credit-worthiness of the creditor and genuineness of the transaction, and therefore, the addition be deleted.
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That the Ld. CIT(A) further erred in maintain the addition of Rs. 60,000/- on account of so called un-recorded sale of husk made by the Ld. A.O on estimate basis.
Prayed to delete the addition of Rs. 60,000/-.
That the Ld. CIT(A) further erred in maintaining the disallowance of Rs. 45,000/- out of Rs. 90,000/-, made by the Ld. A.O out of various expenses incurred in processing of rice, without having any material on record.
Prayed to delete the disallowance of Rs. 45,000/-
The assessee is an individual and derives income from running a rice mill through his proprietorship concern “M/s. Bhagwati Rice Mill, Kharsia”. Return of income for the A.Y 2009-10 was filed showing total income at Rs. 4,08,720/- and agricultural income of Rs. 2,79,775/-. The A.O assessed the income at Rs. 8,12,880/- and agricultural income at Rs. 2,79,775/- after making additions to the returned income.
Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A)partly allowed the appeal of the assessee.
The Ld. AR submitted that due to the smallness of the amount, he is not pressing Ground No. 3. Hence, Ground No. 3 is dismissed.
As regards the Ground No. 1, the Ld. AR submitted that the assessee took loan of Rs. 2,00,000/- from Smt. Jyoti Devi Agarwal and paid interest @ Rs. 12% per annum. Smt. Jyoti Devi Agarwal has shown her source of income from cloths stitching and pickle making. The Ld. AR further submitted that copy of return of income for the year under reference was filed wherein the lender has shown the income from business and profession at Rs. 1,13,840/-. Interest received from the assessee at Rs. 52,235/-, petty loan interest of Rs. 19,300, bank interest of Rs.20/- was also shown in the said details. The total income of the said lender was shown at Rs. 1,85,395/- i.e. below taxable limit
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and return was filed basically for claiming refund of TDS of Rs.5,224/- deducted by the assessee against the payment of interest to the creditor. The Ld. AR submitted that the lender is assessed to income tax and copy of her acknowledgment of return for A.Y. 2010-11 was supplied during the course of the assessment proceedings. The Assessing Officer recorded the statement of the lender and thus, the identity of the lender is duly proved. The confirmation from the lender accepting the transaction with the assessee was furnished before the Assessing Officer. The loan was executed from the bank account of the lender and the lender has shown the interest earned on the said loan on her return of income. Further, the lender has confirmed the aforesaid transaction with the assessee in her statement recorded by the Assessing Officer. Thus, the genuineness of the transaction with the assessee is proved. The assessee is assessed to income tax since last so many years. The copy of the capital account and balance sheet relevant to A.Y. 2008-09 to A.Y.2010-11 duly reflected accumulation of fund with her to make loan transaction of Rs.2,00,000/- with the assessee during the year under consideration. Thus, the lender has explained the source of the income for accumulation of fund for lending money to the assessee. Thus, the creditworthiness of the lender is duly established. The Ld. AR relied upon various case laws and submitted that when the identity and credit worthiness of the creditor and the genuineness of transaction is established, the addition u/s 68 of the Act in the hands of the assessee is not at all justified.
As regards to Ground No. 2 relating to addition of Rs. 60,000/- on account of un-recorded sale of husk made by the Assessing Officer on estimate basis, the Ld. AR submitted that sale of husk was NIL in immediately two preceding/previous years and the returns were accepted by the department. In the year under consideration, the assessee offered Rs.1,35,000/- towards sale of husk. The Assessing Officer did not accept the income offered on sale of husk only on estimation and surmises that the assessee has nothing to substantiate the income and that sale of complete husk generated during the
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year was not shown. Thus, the Ld. AR submitted that the Assessing Officer ignored the fact that husk has very less physical value and the assessee had no control on its quantity available for sale, quality and sale price as it is stored in open place due to its very nominal value. Therefore, in such a situation, question of showing closing stock of husk or to recognize revenue on estimated basis on its position as on a particular date did not arise. The assessee did not have any adverse intention towards the Department and thus, as and when transaction of sale of husk is made it is duly incorporated in the books of account. The Ld. AR further submitted that the Assessing Officer has not pointed out any instance of irregularity in husk account. Purchases, sale and expenses were duly recorded and supported by bills and vouchers. There is no instance of any billing which was not recorded in the manufacturing and trading account. Therefore, the Ld. AR submitted that there is no reason or justification given by the Assessing Officer for making estimation of suppressed sales of husk without any evidence suggesting unrecorded sales of husk.
The Ld. DR relied upon the Assessment Order and the order of the CIT(A).
We have heard both the parties and perused all the relevant material available on record. As regards, to Ground No. 1, we find that the ratio laid down by the Hon’ble Chhattisgarh High Court in the case of Abdul Aziz (cited supra) has been relevant in the present case. The Hon’ble High Court held as under:
“19. In the case on hand, the CIT(A) has examined all the statements and depositions made by the creditors including their source of income and it was found that the A.O. without having any material on record, contrary to the statements and affidavits filed by the creditors taken a stand that the creditors have failed to prove their creditworthiness and, as such, the transaction was not genuine. The A.O. has not made any other independent enquiry to disprove the creditworthiness of the creditors, as established by
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affidavits, statements of the creditors disclosing source of income. Thus, the finding of the CIT(A) that the observation of the A.O. with regard to dissatisfaction was on the basis of surmises and conjectures, is just and proper. The I.T.A.T. has affirmed the finding recorded by the CIT(A) and, as such, there is no occasion for this Court to interfere with the finding of facts, which is based on proper appraisal of evidence and on the basis of sufficient records.
In view of foregoing, we are of the considered opinion that the findings recorded by the CIT(A) and affirmed by the I.T.A.T. are based on proper appreciation of facts and are not perverse, being correlated with each and every transaction. Thus, the issue is purely question of facts. No question of law, more so substantial question of law, as aforestated, arise in the facts of the case.”
In the present case, the assessee has explained the source of unsecured loan and credit. It can be seen that the loan was given by the loan creditors. Thus, the burden of proof was shifted from assessee to the Assessing Officer to prove that the source of loans were not genuine. The Assessing officer in present case has not made any other independent inquiry to disprove the creditworthiness, genuineness of the creditors. The Assessing Officer also failed to establish its finding that the amount received as loan was assessee’s own amount routed back in this manner as there is nothing on record to show the same. In fact, the records revealed that interest was paid on these loans made to the creditors which was duly reflected in the Income Tax Returns of the assessee and as well as that of the creditors. The CIT(A) relied upon the decision in the case of Khushal Prasad Manhar vs. ITO passed by the Tribunal, Bilaspur Bench and the same was confirmed by the Hon’ble Chhattisgarh High Court (2010) 236 CTR 192 does not apply in the present case as the facts in the said case was totally different. As in the said case of Khushal Prasad Manhar two separate deposits were made by individual assessee and in capacity of HUF by the assessee therein. In fact, the creditors therein filed their returns for the first
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time in 2005-06 and deposits into bank was not in lumpsum but on several occasions, more particularly in a gap of one day itself. Besides there was doubtful nature of transaction in the manner in which sum was found credited in the books of accounts. But in the present assessee’s case, the creditor is regular income tax payer with Assessing Officer located in the same station. The assessee filed copies of IT returns, Balance sheet, capital account and bank statements of the lender and the bank statements show the regular transactions which substantiate that the lender is having known sources of income. Therefore, the addition made by the Assessing Officer and confirming the same by the CIT(A) is not correct. Thus, we set aside the order of the CIT(A). Ground No. 1 is allowed.
As regards to Ground No. 2, sale of husk was NIL in immediately two preceding/previous years and the returns were accepted by the department. In the year under consideration, the assessee offered Rs.1,35,000/- towards sale of husk. The Assessing Officer did not accept the income offered on sale of husk only on estimation and surmises that the assessee has nothing to substantiate the income and that sale of complete husk generated during the year was not shown. Thus, the Assessing Officer ignored the fact that husk has very less physical value and the assessee had no control on its quantity available for sale, quality and sale price as it is stored in open place due to its very nominal value. Therefore, in such a situation, question of showing closing stock of husk or to recognize revenue on estimated basis on its position as on a particular date did not arise. The assessee did not have any adverse intention towards the Department and thus, as and when transaction of sale of husk is made it is duly incorporated in the books of account. The Assessing Officer has not pointed out any instance of irregularity in husk account. Purchases, sale and expenses were duly recorded and supported by bills and vouchers. There is no instance of any billing which was not recorded in the manufacturing and trading account. There is no reason or justification given by the Assessing Officer for making estimation of suppressed sales of husk without any evidence
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suggesting unrecorded sales of husk. We accept these contentions of the assessee as the addition was only on estimate basis without any supportive evidence as well as reasons given by the Assessing Officer. The reliance of the Ld. AR in case of M/s Anant Rice Industries vs. ITO passed by the Tribunal at Nagpur Bench (ITA NO. 280(Nag) of 2008 A.Y. 2004-05 order dated 26.08.2008 is relevant. The Tribunal held as under:
“4. We have heard the parties and perused the material placed before us. In our opinion, the A.O. has gone more on presumption than on reality. He has not pointed out a single instance of sale of husk by the assessee or even there is no evidence of such sales brought on record. It has been pointed out by the learned counsel that even in earlier assessment years also, there was no sale of husk and the department did not make any addition on that account. The assessee has also furnished examples of various other assesses doing similar nature of rice milling business who have not sold any husk. The exercise of the A.O. in adopting the net saleable price of husk was based on his surmises and conjectures. In that view of the matter, the addition of Rs.1,88,000/- made on account of unrecorded sale of husk was not justified and the C.I.T.(A) went wrong in upholding the same. The addition, therefore, is directed to be deleted.”
Thus, in view of the decision of the Tribunal in case of M/s Anant Rice Industries (supra) we find in the instant case also that there was no evidence pointed out from the records by the Assessing Officer that there was sale of husk in the past. Therefore, the issue contested in the present case is identical and covered in favour of the assessee. Hence, Ground No. 2 is allowed.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the Open Court on 23rd October, 2018. Sd/- Sd/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 23/10/2018 KRK
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