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Income Tax Appellate Tribunal, DELHI BENCH - ‘DB’ NEW DELHI (F
Before: SHRI BHAVNESH SAINI & SHRI PRASHANT MAHARISHI
This appeal by the assessee has been directed against the order of Ld. CIT(A) III, New Delhi dated 18.11.2008 for assessment. year 2005-06.
We have heard Ld. Representatives of both the parties and perused the material on record.
On ground No. 1 assessee challenged the addition of Rs. 11,38,300/- u/s 68 of the I.T. Act. The brief facts of the case are that assessee is a fashion designer and was engaged in the business of garments. Assessee had shown the source of income from salary, income from business and profession, income from proprietary concern M/s. Rohit Overseas and M/s. The Iris Company, income from other sources and capital gains. The Assessing Officer noted that assessee had shown credit of Rs. 11,38,300/- as unsecured loans in the name of Smt.
Bina Aggarwal. Assessee was asked to file confirmation from the creditor and produced evidence to prove genuineness of the transaction.
Assessee submitted before the Assessing Officer that as regard the confirmation of amount of Rs. 11,38,300/- standing in statement of affairs of the assessee in the name of Ms. Bina Aggarwal that the same has been treated as income in the books of M/s. Rohit Bal Design Pvt. Ltd. in the later years. It was submitted that the material was supplied to Ms. Bina Aggarwal for the same amount by the company vide invoice dated 22nd October, 2007. However the Assessing Officer has not accepted the contention of assessee. It was observed by the Assessing Officer that it is not clear to whom the delivery of the goods were made when the party was stated to be out of country. Moreover the assessee has not furnished even the confirmation from the lady. The Assessing Officer observed that burden is upon the assessee to prove the amounts credited in his account did not represent his income and the payment received by cheque is not sufficient. The onus lies upon assessee to prove identity , creditworthiness of the creditors and genuineness of the transactions which has not been discharged by the assessee. In the absence of any confirmations, bank statements and evidence of any identity and creditworthiness of the creditor, the Assessing Officer made addition of Rs.11,38,300/- shown in the name of Ms. Bina Aggarwal u/s 68 of the I.T. Act.
The assessee reiterated the submissions before Ld. CIT(A) and it was submitted that the amount in question was received by assessee for designer wears from Ms. Bina Aggarwal. The order was placed on the company but cheque was given in the name of the assessee which was credited in his bank account. The company has supplied goods to Ms.
Bina Aggarwal in later year and the amount was shown as revenue receipt on account of sale in subsequent year in the hands of the company. Therefore it could not be treated as unsecured loan u/s 68 of the I.T. Act. It was contended that assessee is a brand name and cheque was issued in his name because the customer would not know the name of the company. The cheque was issued by the customer inadvertently in his personal name. The customer is NRI therefore confirmation could not be produced. Delivery of material was made to her agent.
Ld. CIT(A) considering the facts of the case and submission of the assessee noted that the amount in question was found credited in the statement of affairs of the assessee as individual. The company claimed to have supplied the goods to Ms. Bina Aggarwal on 22nd October, 2007 i.e. after the lapse of more than 2 years 8 months from the date of the credit of the amount in assessee’s account on 5.2.2005. Normally it would not take such a long time for supply of garments. The credit has been shown in the individual case of assessee and not in the case of the company. The assessee has not produced any sufficient evidence to prove identity, creditworthiness of creditors and genuineness of the transaction in the matter. Ld. CIT(A) relied upon decision of Supreme Court in the case of CIT vs. P. Mohanakala 291 ITR 278 (Supreme Court) and the decision of Delhi High Court in the case of Indus Valley Promoters Ltd. vs. CIT 305 ITR 202. Ld. CIT(A) in the absence of any evidence of record confirmed the addition and dismissed this ground of appeal .
After considering rival submission, we do not find any merit in this ground of appeal of assessee . It is not in dispute that assessee had received amount of Rs. 11,38,300/- through cheque which was in his individual name and credited to his bank account which was received from Ms. Bina Aggarwal. This amount is shown as loans (liability) in the statement of affairs of assessee (PB 11). Ld. Counsel for assessee, however, submitted that the amount was later on transferred to the Company’s account from where bills have been issued for sale of garments to Ms. Bina Aggarwal on 22nd October, 2007. Copies of certain bills and accounts are filed in the paper book (pages 12 to 17). Copy of the bank account of assessee is filed at page 22 of the paper book in which the amount in question is credited to the account of assessee. It is difficult to believe that the purchaser of garments would wait for two years and 8 months after giving the amount in question for purchase of garments. Further when order was placed to the company, the purchaser would not give the cheque in the name of the individual assessee. Further the assessee remained silent from the day of receipt of the cheque till the assessment proceedings started against him. In the statement of accounts assessee has shown the amount in question from Ms. Bina Aggarwal as loans (liability). The assessment proceedings started on issue of notice u/s 143(2) on 22nd May, 2006. The assessee has however allegedly transferred the money to the company in the year 2007 by issuing bills in the name of Ms. Bina Aggarwal on 22nd October, 2007. The story propounded by assessee is thus clearly after thought and against the statement of affairs filed by the assessee. It appears that when assessment proceedings have started against the assessee the assessee later on fabricated the bills in the name of company and the amount is transferred to the company to show that it is shown as sale in the hands of the company. The explanation of the assessee thus cannot be accepted in any manner. Once the assessee has shown the amount in question as loan, assessee cannot be permitted to change the stand in later year. Thus the assessee failed to prove the identity of the creditor and her creditworthiness and genuineness of the transaction.
Assessee manipulated the transactions in the name of sale to the creditor by the company. Therefore even if sale has been shown by the company the fact remained that the assessee received the credit in the year under consideration from Ms. Bina Aggarwal which was not explained by the assessee to the satisfaction of the Assessing Officer. In the absence of any confirmation or any evidence on record, it is difficult to believe the explanation of the assessee. Hon'ble. Calcutta High Court in the cases of Bharati Private Ltd. vs. CIT 111 ITR 951 and CIT vs. United Commercial and Industrial Co. Pvt. Ltd. 187 ITR 596 have held that mere filing of confirmation not enough to prove credit. However in the present case the assessee has not even filed the confirmation from the creditors. Therefore credit remained unexplained. Ld. Counsel for assessee relied upon certain case laws on the proposition that when amount is shown as revenue receipt and taxes have been paid no addition u/s 68 be made. However this proposition is not applicable in the case of assessee because assessee has shown credit in the year under appeal which assessee has failed to explain the same. Sale made by another company is clearly after thought. Therefore no interference is called for in the matter. This ground of appeal of assessee is dismissed.
7. On ground No. 2 assessee challenged the addition of Rs. 1,60,000/- as income from undisclosed sources. The AO noticed that assessee had introduced a sum of Rs. 1,60,000/- in cash in the accounts of proprietary concern M/s. The Iris Company. The assessee was asked to explain source of the deposits The assessee had explained that source of the cash was from opening cash balance and other cash balance withdrawn during the year. However the AO was not satisfied with the source of Rs. 1,60,000/- introduced as capital in M/s. Iris company as the assessee failed to explain with cogent evidence about the source of the cash available on the dates when the amount was credited. The AO therefore treated Rs. 1,60,000/- as income from undisclosed sources.
8. The assessee reiterated the same facts before Ld. CIT(A) and filed copy of cash flow statement to explain source of copy of Rs. 1,60,000/-.
Ld. CIT (A) after considering cash flow statement and withdrawals made by assessee noted that assessee has shown drawings at Rs. 3,69,202/- during the year under consideration. When the assessee was confronted with the fact as per cash flow statement assessee has shown withdrawals made by assessee at Rs. 1,70,000/- only whereas as per statement of affairs assessee has shown drawings at Rs. 3,69,202/-.
Therefore no cash would be available to assessee to make introduction of cash in M/s. The Iris Company. This ground was accordingly dismissed.
After considering rival submissions, we are of the view no interference is called for in the matter. The assessee has filed copy of details of withdrawals of Rs. 3,69,202/- at page 28 of the paper book.
However in the cash flow statement the withdrawal is shown at Rs. 1,70,000/- therefore assessee failed to establish availability of the cash with him for the purpose of introduction of cash in M/s.The Iris Company. Assessee thus failed to explain this issue to the satisfaction of the authorities below. In the absence of any cogent and relevant evidence on record no interference is called in the order. This ground is dismissed.
In the result appeal of assessee is dismissed.
Pronounced in the Open Court.