SHRI SHREYANS JAIN,KOLKATA vs. ITO, WARD-45(2), KOLKATA, KOLKATA

The assessee has raised two effective grounds. The first ground is regarding confirmation of addition of Rs. 1,90,000/- as undisclosed income on account capital introduction in the proprietorship concern (M/s Jain Ispat).

The brief facts of the case is that the AO noted that the assessee has shown capital introduction of Rs. 3,11,568 in the balance sheet as on 31.03.2007 of M/s Jain Ispat. The AO asked the assessee to file the details of source of capital introduction. However, the AO notes that the assessee failed to furnish the same. However, the AO after perusal of the personal bank details of the assessee has found that Rs. 1,90,000 has been transferred from his personal bank account to the proprietorship concerned. The Sri Shreyans Jain A.Yr.2007-08 AO also notes that an amount of Rs. 1,90,000/- in the said bank account was deposited by the transfer into it. The AO notes that the assessee has claimed that the said amount was received from M/s Quality Engineering Works. However, the AO asked for verification letter from M/s Quality Engineering Works which according to the AO did not confirm of any such payment to the assessee on the given date. Since the assessee failed to explain in the source of capital introduction to the tune of Rs. 1,90,000/- it was added as his undisclosed source of income. Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who was pleased to dismiss the same. Aggrieved the assessee is before us.

We have heard both the parties and perused the records. We take note that the confirmation of M/s Quality Engineering Works has been placed on record by the assessee which is found at page-18 of the paper book from where we note that the M/s Quality Engineering Works proprietor has signed the confirmation of the fact that a cheque on 17.08.2006 was issued for an amount of Rs. 1,90,000/- to the assessee. The confirmation of account has been signed by both the assessee and for M/s Quality Engineering Works, the proprietor has duly signed whose PAN No. is also given in it. We note that this evidence was produced before the Ld. CIT(A), who sent it to the AO calling for the remand order wherein the AO has stated as under which is evident from perusal of the paper book : “In respect of Capital introduction in the proprietorship concern: In this regard the assessee submitted loan confirmation along with bank details. As per personal bank statement the assessee received Rs. 1,90,000/- vide cheque no. 342648 on 17.08.2006 and the same was transferred to his proprietorship firm [M/s. Jain Ispat] on 18.08.2006 vide cheque no. 506985 which was reflected in the bank of statement of M/s. Jain Ispat. Both the photocopies of the bank statement is enclosed for your ready reference.

As stated earlier we have perused the confirmation of the account from M/s Quality Engineering Works to the assessee from where it is clear that a cheque vide no. 342648 dt. 17.08.2006 for Rs.1,90,000/- was issued to the assessee and which was credited in the personal bank account of the assessee and thereafter the assessee has transferred the same to his proprietorship firm M/s Jain Ispat on 18.08.2006 vide cheque no. 506985. Thus the loan confirmation M/s Quality Engineering Works has been clearly supported by evidence. In the light of the same we find the Ld. CIT(A) erred in confirming the addition by misdirecting himself that M/s Quality Engineering Works have not confirmed to have made any loan to M/s Jain Ispat. The case of the assessee is that the loan amount has come to the assessee, which has been confirmed. Thereafter, if that money is introduced by the assessee to 3 Sri Shreyans Jain A.Yr.2007-08 his proprietory concern, how can CIT(A) say it as being from undisclosed source. Thus the finding of the authorities below is clearly erroneous and so we are inclined to direct deletion of the addition made on this issue.

The second ground is against the addition of Rs. 96,000/- on account of lower drawings.

We have heard both the parties and perused the records. The case of the assessee is that the other family members are also earning and drawing for their expenditure separately, so the authorities below did not appreciate the said fact, so separate addition is not needed for less drawings in the hands of the assesse. The Ld. AR took our attention to the impugned order wherein it has been clearly stated about the fact that there are three members of the family who are drawing Rs. 2500/-, Rs. 6000/- Rs. 2000/- per month for running the household expenses. So, therefore, the three members altogether spend Rs. 10,500/- thus the total amount after adding the amount assessee’s drawing of Rs. 2000/- which comes to a total of Rs. 12,500/- per month. Taking into consideration the facts of the case we note that the case of the AO is that Rs. 10,000/- is necessary for running the household expenses and so drawing of Rs. 1,20,000/- was estimated by him to make the 4