MANISH AGARWAL,HOOGHLY vs. ITO, WARD-1(2), HOOGHLY, HOOGHLY

This appeal filed by the assessee is directed against the order of Ld. CIT(A) – 6, Kolkata dated 28.07.2016.

Ground nos. 1, 3b, 3c and 4b raised by the assessee in this appeal are not pressed by the learned counsel for the assessee at the time of hearing before us. The same are accordingly dismissed as not pressed.

The issue involved in ground no 2 relates to the addition of Rs. 12,00,000/- made by the A.O. and confirmed by the Ld. CIT(A) on account of difference in the balance of M/s. Three Steel Men by treating the same as unexplained purchases.

The addition of Rs. 12,00,000/- made by the A.O. on account of alleged undisclosed sales was challenged by the assessee in the appeal filed before the Ld. CIT(A). Before the Ld. CIT(A), it was contended on behalf of the assessee that certain purchases were made from M/s. Three Steel Men on approval basis and although the assessee accounted for the said purchases, the transactions ultimately got cancelled as a result of which M/s. Three Steel Men did not pass any entry in its books of account. On the basis of this submission of the assessee, the Ld. CIT(A) held that excess claim for deduction of Rs.

We have heard the arguments of both the sides and also perused the relevant material available on record. The learned counsel for the assessee has submitted that the difference of Rs. 12,00,000/- in the balance of M/s. Three Steel Men as pointed out by the A.O. was actually on account of cheque issued but not entered in the party’s ledger. In this regard, he has invited our attention to the copy of ledger account of M/s. Three Steel Men given on page 1 and 2 of the Paper Book to point out that the cheque for Rs. 12,00,000/- credited in the account of M/s. Three Steel Men as on 31.03.2011 was kept in suspense. The learned DR, on the other hand, has contended that this explanation in respect of difference of Rs. 12,00,0000/- in the balance of M/s. Three Steel Men as pointed out by the A.O. is specifically offered on behalf of the assessee for the first time before the Tribunal. He has urged that an opportunity should therefore be given to the A.O. to verify the same. We find merit in the contention of the learned DR. The impugned order of the Ld. CIT(A) on this issue is accordingly set aside and the matter is restored to the file of the A.O. for deciding the same afresh after verifying the explanation of the assessee as regards the difference of Rs. 12,00,000/- in the balance of M/s. Three Still Men. Ground No. 2 is accordingly treated as allowed for statistical purpose.

As per the information received by the A.O. from M/s. Uranus Merchants Pvt. Ltd. in response to notice under section 133(6), the said party had made total sales of Rs. 2,39,78,118/- to the assessee during the year under consideration whereas the total purchases claimed to be made by the assessee from the said party amounted to Rs. 2,69,67,688/-. The A.O. also found that a journal entry was passed by the assessee for Rs. 30,00,000/- as on 31.03.2011 showing cash payment. Since no satisfactory explanation could be offered by the assessee in this regard, a sum of Rs. 30,00,000/- was treated by the A.O. as unexplained expenditure under section 69C and addition to that extent was made by him to the total income of the assessee.

The addition of Rs. 30,00,000/- made by the A.O. on this issue was challenged by the assessee in the appeal filed before the Ld. CIT(A). Before the Ld. CIT(A), it was submitted on behalf of the assessee that goods worth Rs. 29,89,750/- supplied by M/s. Uranus Merchant Pvt. Ltd. were found to be defective by him, but the rejection of the same was not accepted by the said party. This explanation of the assessee was not found acceptable by the Ld. CIT(A). According to him, excess purchases of Rs. 29,89,570/- were claimed by the assessee in his books of account and the same were liable to be disallowed. He accordingly sustained the addition made by the A.O. to the extent of Rs. 29,89,570/- on account of excess purchases.

We have heard the arguments of both this sides on this issue and also perused the relevant material available on record. The learned counsel for the assessee has submitted that some of the goods rejected by the assessee were duly recorded in his books of account but the other party did not accept the same and make any entry in the books which resulted in the difference. He has invited our attention to the copies of relevant ledger account placed in his Paper Book in order to support and substantiate his contention. The learned DR, on the other hand, has contended that this submission made by the learned counsel for the assessee to explain the difference in question was not specifically made before the authorities below. He has contended that an opportunity should therefore be given to the A.O. to verify the same. We find merit in this contention of the learned DR. The impugned order of the Ld. CIT(A) on this issue is accordingly set aside and the matter is restored to the file of the A.O. for deciding the same afresh after verifying the explanation of the assessee as regards the difference of Rs. 29,89,570/- in question. Ground No. 3a is accordingly treated as allowed for statistical purpose.

The issue involved in ground no 4a relates to the addition of Rs. 5,00,000/- made by the A.O. and confirmed by the Ld. CIT(A) on account of gift claimed to be received by the assessee by treating the same as unexplained cash credit under section 68.

During the year under consideration, capital of Rs. 5,00,000/- was introduced by the assessee. While explaining the source of the said capital, it was submitted by the assessee that a gift of Rs.

The addition made by the A.O. under section 68 was challenged by the assessee in the appeal filed before the Ld. CIT(A) and after considering the submission made by the assessee as well as the material available on record, the Ld. CIT(A) confirmed the addition of Rs. 5,00,000/- made by the A.O. under section 68 by holding that the creditworthiness of the donor and the genuineness of the transaction was not established.

We have heard the arguments of both the sides and also perused the relevant material available on record. In support of the assessee’s case on this issue, the learned counsel for the assessee has relied on the affidavit filed by the donor Smt. Gayatri Devi, a copy of which is placed at page no 13 of the Paper Book. A perusal of the said affidavit however shows that there is nothing to establish the creditworthiness of the said donor for giving the amount of Rs. 5,00,000/- as gift to the assessee. There is no mention about source of income available to the said donor nor the source of cash claimed to be utilised for giving gift to the assessee is explained. We, therefore, find ourselves in agreement with the authorities below that the Assessment Year: 2011-12 Manish Agarwal assessee has failed to discharge the primary onus of establishing the creditworthiness of the donor as well as the genuineness of the gift transactions. In our opinion, there is thus no infirmity in the impugned order of the Ld. CIT(A) confirming the addition made by the A.O. under section 68 by treating the gift as unexplained cash credit and upholding the same, we dismiss ground no 4a of the assessee’s appeal.