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Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC-I’ NEW DELHI
Before: SMT DIVA SINGH
Date of Hearing 11.02.2016 Date of Pronouncement 28.03.2016 ORDER The present appeal has been filed by the assessee assailing the correctness of the order dated 07.10.2015 of CIT(A), Karnal pertaining to 2011- 12 AY on the following grounds:-
“That the order passed by the A.O is wrong on facts in law.
2. That the additions of Rs.21,684/- by enhancing the value of the closing stock of Gur Shakkar A/c @ 174 per Quantal is purely estimate basis without appreciation of facts and law in next year there is profit in this A/c hence this addition is doubly taxed. 3. That the Ld. CIT(A) has erred in sustaining the additions, Rs.1,00,000/- creditor Mr. Yashu Aggarwal, creditor existing assessee, showing cash income declaring taxable income, is without appreciation of facts & law. The addition is illegal wrong. 4. That an addition of Rs.25,000/- of creditor Parul Aggarwal duly supported by confirmation and source is illegal wrong on fact & law. 5. That the addition of Rs.20677/- as disallowance of 20% from car expenses, petrol, telephone expenses, deprecation of car & scooter, interest paid on car loan, total expenses 103387/- is excessive, the assessee is widow, illiterate not attending any business work, her son looking after the work thus excessive wrong.”
I.T.A .No.-6812/Del/2015
The relevant facts of the case are that the assessee returned an income of Rs.1,67,360/-. The said return was selected for scrutiny through CASS. In the course of the assessment proceedings u/s 143(3), various additions were made.
The additions were confirmed in appeal by the CIT(A) leading to the filing of the present appeal. Addressing the grounds raised, the Ld.AR submitted that Ground No.-1 is general and requires no adjudication; Ground No.2 it was submitted the assessee did not wish to press as the issue was restored by the CIT(A) to the AO.
Addressing Ground No.3 & 4, the impugned order was assailed. The record shows that the AO found that there were consistent cash deposits of equal amounts in the bank accounts of both the creditors i.e Mr. Yashu Aggarwal & Smt. Parul Aggarwal who as per the assessee’s claim had advanced loans of Rs.1,00,000/- and Rs.25,000/- respectively. Accordingly the assessee was required to justify the claim of receipt of loans by the AO. The assessee was confronted by the fact that the bank accounts of the creditors did not show sufficient balance even to meet their day-to-day expenses; and coupled by the fact that the advancing of loan by cheque was always preceded by a deposit in cash of equivalent amounts the AO required the assessee to produce the creditors for examination. The assessee was accordingly held to have failed to prove the creditworthiness and genuineness of the transaction and the amounts were added as its income. The expenses booked in the P&L A/c pertaining to car, petrol, telephone, depreciation of car & scooter etc. totaling Rs.1,00,000/- were disallowed to the extent of 20% for want of documentary evidence in support of the same. These additions made by way of disallowance were upheld in appeal by the CIT(A).
I.T.A .No.-6812/Del/2015
Aggrieved the assessee is in appeal. The Ld.AR addressing Ground No.3 submitted that Mr. Yashu Aggarwal had advanced two loans of Rs.30,000/- and Rs.70,000/- totaling to Rs.1,00,000/- on 03.04.2010 and 18.11.2010 respectively. Relying on CIT vs Vir Bhan & Sons [2005] 273 ITR 206 (P&H) it was his submission that the addition can not be sustained as necessary verification should have been done by the AO which it was submitted the AO failed to do so. Sh. Yashu Aggarwal it was submitted was an income tax assessee.
Addressing the addition of Rs.25,00,000/- as loan advanced by Smt.
Parul Aggarwal it was his submission that though she was a house-wife and was not an income tax assessee but she had filed an affidavit before the AO & the CIT(A) stating that she had savings from moneys received on various ceremonies and she also did some petty job work which should have been accepted by the tax authorities as sufficient for advancing the loan.
Addressing the remaining ground of disallowance of 20% from car expenses; petrol expenses; telephone expenses, depreciation of car and scooter etc. it was his submission that the lady was a widow and does not drive a car etc. thus the expenses are purely for business purposes. In the alternate, the disallowance it was submitted is excessive. On query he submitted that he would be satisfied if 10% of the disallowance is sustained and part relief is granted.
The Ld. Sr.DR on the other hand heavily relying upon the findings arrived at by the AO and the CIT(A) submitted that necessary verification has been done by the AO to the extent that he has made out that before issuance of every cheque both by Mr. Yashu Aggarwal & Smt. Parul Aggarwal that they have deposited equal amounts of money in cash in their respective bank accounts. Page 3 of 6
I.T.A .No.-6812/Del/2015 The general arguments that the cash was deposited in the previous year it was submitted is of no relevance in the face of the consistent pattern where every time so called creditors deposit cash of the exact amount of advancing loans.
The assessee it was submitted as per the statute and jurisprudence is required to address the identity, creditworthiness and genuineness of the claimed transactions. In the facts of the present case neither genuineness nor creditworthiness has been established. These conclusions have been upheld by the CIT(A) and further despite an opportunity the creditors could not be produced before the AO to demonstrate genuineness and no such effort has been made by the assessee to produce them before the CIT(A or make any such prayer.
The Ld. Sr.DR submitted that the arguments of the assessee have no credence that the amounts are small and some savings can be made by Smt.
Parul Aggarwal are of no relevance as even in the earlier years qua Smt. Parul Aggarwal the assessee has claimed that the said lady had advanced a loan of similar amount again by making prior deposit in cash. The arguments that it is the opening balance for the year under consideration in the face of the systematic deposits in cash every time before advancing the loan it was submitted demonstrates that the assessee is consistently relying upon baseless facts and case laws which have no applicability on facts on record. Accordingly it was his submission that the additions made were correct and justified.
The Ld.AR in reply submitted that Mr. Yashu Aggarwal in his returned income has shown a loan of Rs.1,00,000/- and although it is not coming out from the record in the present proceedings, an opportunity to place it on record was requested and for Smt. Parul Aggarwal it was requested atleast part relief may be given and the entire explanation may not be rejected. Page 4 of 6
I.T.A .No.-6812/Del/2015
Having heard the submissions of the parties before the Bench and the material available on record, I am of the view that in the face of the consistent finding on record qua the receipt of advances from Mr. Yashu Aggarwal the assessee has failed miserably. The fact on record that there were cash deposits in the bank accounts just before the loan is made has not been rebutted. This practice is found to be a consistent pattern in the loans received in both the instances of Mr. Yashu Aggarwal & also in the case of Smt. Parul Aggarwal and stated to be a practice by the Ld.Sr.DR in the earlier also. However, the Ld.AR has raised the arguments that Mr. Yashu Aggarwal in his returned income has shown the advance of loan of Rs.1,00,000/- and has requested for an opportunity for verification of this fact. The Ld.Sr.DR has initially opposed.
Considering the pleadings of the parties the issue is restored back to the file of the AO in regard to the loan of Rs. One lakh stated to be advance by Sh.Yashu Aggarwal. The AO is directed to examine the claim. Accordingly for this limited purpose the issue is restored back to the file of the AO. Accordingly Ground No.3 is restored back.
Addressing Ground No.4 considering the admission of the parties the prayer of partial relief of the Ld.AR is accepted. Accordingly the assessee is given the benefit of having received loan of Rs.10,000/- from Smt. Parul Aggarwal as having been advanced from her savings. For the remaining amount of Rs.15,000/- the addition for lack of evidence is sustained. The finding in regard to the part relief has been arrived at on the basis of concession of the parties before the Bench and shall not be a precedent to be followed in any other year in the case of Smt. Parul Aggarwal as the evidence of job work; the nature of job work etc. has not been considered or examined.
I.T.A .No.-6812/Del/2015
Qua the issue raised in Ground No.5 the Ld. AR has prayed that the disallowance is excessive and the widowed lady does not drive and has used the vehicle, phone etc. for business purposes only. After hearing both the sides and considering the material available on record the disallowance is sustained for want of necessary evidences to the extent of 10%. The estimate was arrived at in the open Court after hearing both the sides.
In the result the appeal of the assessee is partly allowed for statistical purposes.
The order is pronounced in the open court on 28th of March, 2016.