ABDUL HAI,BURDWAN vs. ITO, WARD-2(1), ASANSOL, ASANSOL

The issue raised in Ground No. 1 relates to the addition of Rs. 18,232/- made by the A.O. and confirmed by the Ld. CIT(A) on account of difference in the balance of sundry creditors by treating the same as bogus.

The assessee in the present case is an individual who is engaged in the business of wholesale distribution of corns. The return of income for the year under consideration was filed by him on 01.10.2009 declaring a total income of Rs. 1,88,747/-. In order to verify the balance of sundry creditors shown by the assessee in his balance sheet, notices under section 133(6) were issued by the A.O. As per the information received by the A.O. in response to one of such

I have heard the arguments of both the sides and also perused the relevant material available on record. The learned counsel for the assessee has relied on the reconciliation statement prepared and furnished before the authorities below (copy at page no 36 of the Paper Book) for the difference of Rs. 18,232/- pointed out by the A.O. in the account of the concerned creditor, M/s. Karnataka Soaps & Detergents Ltd. However, the documentary evidence in support of the said reconciliation has not been filed by him. In the absence of said documentary evidence, the explanation of the assessee as offered in the form of reconciliation statement regarding the difference, in my opinion, cannot be accepted. I, therefore, find no infirmity in the addition made by the A.O. and confirmed by the Ld. CIT(A) on this issue and upholding the impugned order of the Ld. CIT(A), I dismiss Ground No. 1 of the assessee’s appeal.

The issues raised in Ground No. 2 relate to the additions of Rs. 41,240/- and Rs. 22,848/- made by the A.O. under section 40(a)(ia) and 40A(3) respectively.

During the course of assessment proceedings a sum of Rs. 41,240/- was found to be paid by the assessee in cash to advertisement agency namely Sign Art. Since no deduction of tax at source was made by the assessee from the said payment as required by section 194C, the A.O. invoked section 40(a)(ia) and made a disallowance of Rs. 41,240/-. He also found that an expenditure of Rs. 22,848/- under head advertisement was incurred by the assessee in cash in violation of section 40A(3). Since the assessee could not explain any exceptional circumstances under which the said expenditure was incurred in cash, the A.O. made a disallowance of Rs. 22,848/- under section 40A(3).

The disallowances made by the A.O. under section 40(a)(ia) and 40A(3) both were challenged by the assessee in the appeal filed before the Ld. CIT(A). During the course of appellate proceedings before the Ld. CIT(A), it was submitted by the assessee that the expenditure of Rs. 41,240/- on account of advertisement was incurred on behalf of M/s. Subhalakshmi Sales Corporation and since the same was not claimed as deduction by debiting it to the profit and loss account, there was no question of making any disallowance under section 40(a)(ia) for non-deduction of tax at source. Similar stand was taken by the assessee even in respect of a payment of Rs. 22,848/- made in cash towards the advertisement expenditure. Keeping in view this submission made on behalf of the assessee, the Ld. CIT(A) directed the A.O. to verify the same and allow appropriate relief to the assessee.

The issue raised in Ground No. 3 relates to the addition of Rs. 1,56,000/- made by the A.O. and confirmed by the Ld. CIT(A) under section 68 of the Act by treating the unsecured loans claimed to be received by the assessee as unexplained cash credits.

During the year under consideration, the assessee had shown unsecured loans of Rs. 19,500/- each received from 8 different persons in cash aggregating to Rs. 1,56,000/-. In this regard, the assessee failed to file proper confirmation letters from the concerned creditors. There was also no proper compliance by the said parties to the notices issued by the A.O. under section 133(6) of the Act. The assessee also failed to produce the said parties for examination before the A.O. As found by the A.O., the said parties did not have permanent account numbers. Keeping in view all these facts of the case, the A.O.

I have heard the arguments of both the sides on this issue and also perused the relevant material on record. The learned counsel for the assessee has relied on the confirmations of the concerned loans creditors (copies placed in his Paper Book) and submitted that by filing the said confirmations, the onus that lay on the assessee to explain the relevant cash credits in terms of section 68 was duly discharged. A perusal of the said confirmations however shows that the same do not contain the relevant information such as the dates on which loans were given to the assessee, the occupation or source of income of the concerned creditors, their permanent account numbers etc. As stated in the said confirmations, which are not even dated, all the creditors having income below the taxable limits were not chargeable to tax. In my opinion, the said confirmations filed by the assessee thus are not sufficient to establish the financial capacity of the concerned creditors as well as the genuineness of the relevant loan transactions. The assessee thus has failed to discharge the primary onus that lies on him to explain the relevant loan transactions representing cash credit in terms of section 68 and this being so, I find no infirmity in the impugned order of the Ld. CIT(A)

The issue involved in ground no 4 relates to the addition of Rs. 2,38,800/- made by the A.O. and confirmed by the Ld. CIT(A) on account of alleged unsecured loans by treating the same as suppression of sales.

In his bank account maintained with HDFC, Asansol Branch, total deposits of Rs. 1,16,90,000/- were made by the assessee during the year under consideration. Since the total sales of the assessee during the year under consideration were to the extent of Rs. 1,10,46,448/-, the A.O. required the assessee to explain the excess deposits found to be made in his bank account. In this regard, it was explained by the assessee that temporary loans of Rs. 2,38,800/- were taken by him during the year under consideration and the same were deposited in his bank account with HDFC, Asansol Branch. A list of loan creditor was also filed by the assessee. The assessee however failed to produce any documentary evidence to support and substantiate his claim of temporary loans taken. The A.O., therefore, treated the excess deposits found to be made in the bank account of the assessee as suppression of sales and made addition of Rs. 2,38,800/- to the total income of the assessee. On appeal, the Ld. CIT(A) confirmed the said addition for the same reason as given by the A.O.

In the result, the appeal of the assessee is partly allowed. Order Pronounced in the Open Court on 13th April, 2018. Sd/- (P.M. Jagtap) ACCOUNTANT MEMBER Dated: 13/04/2018 Biswajit, Sr. PS