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Income Tax Appellate Tribunal, DELHI BENCH “SMC-I”, NEW DELHI
Before: SHRI S.V. MEHROTRA
This is an appeal filed by the assessee against the order dated 22.02.2016 passed by the Commissioner of Income Tax (Appeals), Faridabad, u/s 143(3) of the Income Tax Act, 1961 (in short “the Act”) relating to assessment year 2011-12. The assessee has taken following grounds of appeal :-
“1. That the order of Ld. CIT(A) is against law and facts.
2. That the Ld. CIT(A) erred in not condoning the delay in filing of appeal, although the appellant has the reasonable cause for the delay in filing of appeal.
3. That the Ld. CIT (A) erred in confirming the addition of Rs. 230000/- made by the Ld. AO u/s 68 of the Act by treating the fresh cash credits as unexplained.
4. That the Ld. CIT (A) erred in confirming the addition of Rs. 25300/- made by the Ld. AO by disallowing the interest paid of Rs. 25300/- to the unsecured loans not considered as genuine.
5. That the Ld. CIT (A) erred in confirming the addition of Rs. 7070/- made by the Ld. AO by disallowing 1/6th of expenses out of shop expenses on ad-hoc basis.
6. That the Ld. CIT (A) erred in confirming the addition of Rs. 5800/- made by the Ld. AO by disallowing 1/6th of expenses out of car and telephone expenses on account of personal user.
7. That the Ld. CIT (A) erred in confirming the addition of Rs. 36000/- made by the Ld. AO on account of low house hold expenses.”
Apropos ground no.2, ld. counsel for the assessee pointed out that there was delay in filing the appeal before ld. CIT(A), which was merely attributable to the counsel, who forgotten to file the appeal. He submitted that ld. CIT(A) has decided the appeal on merits and, therefore, impliedly he has condoned the delay though after hearing both the parties, he held that assessee had not been able to provide any sufficient reason for the delay in filing the appeal. I find that ld. CIT(A) though held that there was no sufficient cause for condoning the delay but decided the appeal on merits.
Therefore, as rightly submitted by ld. counsel for the assessee, the delay in filing the appeal stands condoned. However, I further find that the delay was attributable to the assessee’s counsel and, therefore, the assessee could not be made to suffer. In the result, the delay in filing the appeal before the ld. CIT(A) is condoned and the ground no.2 is allowed.
Brief facts apropos ground no.3 are that assessee is a proprietor of M/s Manoj Kumar Rajesh Kumar. In the relevant year under consideration, the assessee derived income from trading of food grains. He had filed return of income declaring net income of Rs.4,26,500/-. In the course of assessment proceedings, the Assessing Officer required the assessee to provide information in respect of unsecured loans including squared up accounts and also to explain the source of deposits in the accounts of creditors. From the details of copy of account furnished by the assessee in respect of unsecured loan raised during the year, he noticed that the assessee had raised loans worth Rs.1,20,000/- from Smt. Santosh Devi, W/o Binod Kumar and Rs.1,10,000/- from Smt. Santosh Devi, W/o Munshi Ram, Village Kanina. He required the assessee to establish the identity, creditworthiness and genuineness of the transactions in respect of these two unsecured loans. The assessee furnished copy of bank account along with proof of income-tax returns filed in respect of both the ladies. From the bank account of Smt. Santosh Devi, W/o Binod Kumar, he noticed that she deposited Rs.1,20,000/- cash in her account on 14.05.2010 and advanced loan of Rs.1,20,000/- on the same date to assessee. Similarly, Smt. Santosh Devi, W/o Munshi Ram deposited cash amounting to Rs.1,10,000/- on 14.05.2010 in her bank account and on the same date she advanced Rs.1,10,000/- to assessee. He, therefore, required the assessee to furnish the source of deposit of Rs.1,20,000/- by Smt. Santosh Devi, W/o Binod Kumar and Rs.1,10,000/- by Smt. Santosh Devi, W/o Munshi Ram and also required them to produce the said ladies for examination on 13.11.2013. He has pointed out that on the date of hearing, assessee attended the assessment proceedings but neither any explanation regarding his queries was furnished by the assessee nor ladies were produced for examination.
He, therefore, concluded that the assessee failed to discharge his onus of burden in respect of these two creditors. He, accordingly, made addition u/s 68 of Rs.2,30,000/-. The Assessing Officer, further, made disallowance of Rs.25,300/- allegedly on account of interest paid to abovementioned creditors. He, further, made disallowances of Rs.7070/- out of shop expenses amounting to Rs.42,397/-, inter-alia, observing that complete vouchers were not produced. Similarly, he also made another disallowance out of telephone and vehicle expenses amounting to Rs.5800/-. He also made addition of Rs.36,000/- on account of low house hold withdrawals.
Ld. CIT(A) dismissed the assessee’s appeal. Being aggrieved, the assessee is in appeal before the Tribunal.
Ld. counsel referred to page 8 wherein the return of income of Smt.
Santosh Devi, W/o Binod Kumar for assessment year 2011-12 is contained wherein the returned income has been disclosed at Rs.1,87,730/-. He referred to page 9 of the Paper Book wherein the statement of total income, capital account for the year ending 31st March, 2011 and Balance Sheet as on 31st March, 2011 is contained. As per the statement of total income, the rental income has been received from M/s Manoj Kumar Rajesh Kumar amounting to Rs.30,000/-. Further, income under the head ‘business and profession’ has also been shown at Rs.1,14,000/- and income from ‘other sources’ at Rs.52,734/- in the capital account. The interest paid to M/s Manoj Kumar Rajesh Kumar has been shown at Rs.17,600/-. Further, on the liability side, the balance outstanding to M/s Manoj Kumar Rajesh Kumar has been shown at Rs.4,00,709/-. Ld. counsel, further, referred to page 10 of the Paper Book wherein the copy of ledger account of Smt. Santosh Devi, in the books of assessee, is contained which has duly been confirmed by Smt. Santosh Devi. Ld. counsel pointed out that a sum of Rs.1,20,000/- was taken on 14.05.2010 and a sum of Rs.10,50,000/- was given to Smt. Santosh Devi on 24.05.2010. Ld. counsel, further, referred to page 11 – 12 of the Paper Book wherein the bank account of Smt. Santosh Devi is contained in which all transactions are duly reflected. 4.1 As regards Smt. Santosh Devi, W/o Munshi Ram, ld. counsel referred to page 13 wherein the copy of return of income of Smt. Santosh Devi is contained wherein the returned income has been shown at Rs.1,75,270/- which comprised of income under the head ‘house property’ of Rs.21,000/- from M/s Manoj Kumar Rajesh Kumar, income from business of Rs.1,08,000/- and income under the head ‘other sources’ of Rs.46,267/- in the capital account. The interest paid to M/s Manoj Kumar Rajesh Kumar has been shown at Rs.15,200/- in the Balance Sheet. The liability towards M/s Manoj Kumar Rajesh Kumar has been shown at Rs.3,58,480/-. The copy of ledger account of the creditor in the assessee’s books of account is contained at page 15 of the Paper Book which is duly confirmed by Smt.
Santosh Devi. Ld. counsel pointed out that the loan of Rs.1,10,000/- was taken on 14.05.2010 and a cheque of Rs.10,50,000/- was issued to Smt.
Santosh Devi on 24.05.2010. Further, he referred to the bank account of Smt. Santosh Devi contained at page 16 – 17 of the Paper Book evidencing these transactions.
4.2 With reference to aforementioned documents, ld. counsel pointed out that the assessee had duly discharged his primary onus of establishing the identity, creditworthiness and genuineness of the transactions. He submitted that there is no law which prohibits any person from depositing cash in his account and issuing cheque on the same date. He submitted that once the assessee had discharged his primary onus the action could be taken against the creditor and not the assessee. He, further, pointed out that the small amounts were deposited in bank and, therefore, no adverse inference could be drawn. Ld. DR relied on the order of ld. CIT(A).
I have considered the submissions of both the parties and have perused the record of the case. The Assessing Officer had made the addition u/s 68 primarily for two reasons. Firstly, the amount was deposited by creditors in their accounts on the same date viz. 14.05.2010 on which date they issued the cheque in favour of the assessee and, secondly, on the ground that assessee failed to produce the creditors before Assessing Officer. As far as the first reasoning is concerned, no doubt whenever there is proximity of deposit of cash and issuance of cheque then the Assessing Officer rightly gets prompted to examine the genuineness of transactions. However, this fact per se does not lead to any adverse inference and Assessing Officer is required to examine all the attendant circumstances and take a holistic view of the entire transaction with reference to the evidences furnished by assessee before coming to any conclusion. If the assessee furnishes sufficient evidences which prima-facie establish the creditworthiness of the creditor vis-à-vis the amount advanced by creditors, then, merely on account of deposit of cash in the bank on the same date on which the cheque was issued, no adverse inference can be drawn because the primary onus of the assessee stands duly discharged. In the present case from detailed submissions of ld. counsel, it is evident that returned income of both the creditors fully justified the small sums advanced by them. Both the creditors had current account with the assessee inasmuch as they had received rent from assessee. Under such circumstances, all the three ingredients for establishing the genuineness of transactions u/s 68 were fully met.
The second reason assigned by Assessing Officer was that the creditors were not produced. In this regard, I may observe that merely on this count, the addition cannot be made u/s 68. In view of above discussions, I direct for deleting the addition made by Assessing Officer u/s 68 of the Act. In the result, ground no.3 is allowed.
As far as ground no.4 is concerned, as noted earlier, both the creditors had paid interest to assessee which has duly been credited in the account statement filed by the assessee and, therefore, I fail to understand as to how the disallowance could be made on account of interest payment of Rs.25,300/-. The entire basis on which the findings of Assessing Officer are based misconceived. Thus, this addition is also directed to be deleted. In the result, ground and 4 is allowed.
As far as ground no. 5 and 6 are concerned, the main grievance of assessee is that disallowance of 1/6th of expenses out of shop expenses on ad-hoc basis and disallowance of expenses out of car and telephone expenses on account of personal user was not justified. As far as disallowance out of shop expenses are concerned the same has been made because complete vouchers could not be produced. I, therefore, do not find any basis for interfering with the order of the lower authorities on this count.
Similarly, as regards disallowances out of car and telephone expenses are concerned, it cannot be denied that there was personal user of both these facilities and, therefore, disallowance on account of personal user was called for. The disallowance was quite reasonable and no interference is called for on this count. In the result, ground nos.5 and 6 are dismissed.
Apropos ground no.7, the Assessing Officer has observed that assessee is having family of two members. He estimated the overall expenditure on various house hold items at Rs.8,000/- per month and, since, the assessee had shown Rs.60,000/- towards house hold expenses, therefore, addition of Rs.36,000/- was made which was confirmed by ld. CIT(A). Ld. counsel pointed out that Assessing Officer did not consider the withdrawals made by assessee’s wife of Rs.30,000/-. In this regard, he referred to page 18 wherein the copy of return of income of Smt. Santosh Devi wife of assessee is contained along with statement of total income, capital account and Balance Sheet. These papers were also filed before ld. CIT(A) but he has also not considered on this count. Thus, there was total withdrawal of Rs.90,000/- and not Rs.60,000/- of husband and wife together. Having heard both the parties, I find considerable force in the submissions of ld. counsel for the assessee because the total withdrawals towards house hold expenses were Rs.90,000/- and, therefore, no addition was called for. Thus, this ground is allowed.
In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on this 10th day of January, 2017.