IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES : C : NEW DELHI
BEFORE SHRI R.S. SYAL, AM AND SHRI H.S. SIDHU, JM
ITA No.99/Del/2013
Assessment Year : 2008-09
ITO, Vs. Harish Chaudhary,
Ward 1(3), Village Pavi Sadakpur Loni,
Ghaziabad. Ghaziabad.
PAN : AFBPC4491D
(Appellant) (Respondent)
Assessee By : Shri Sameer Kapoor, CA
Department By : Shri Satpal Singh, Sr.DR
ORDER
PER R.S. SYAL, AM:
This appeal by the Revenue is directed against the order
passed by the CIT (A) on 19.10.2012 in relation to the assessment
year 2008-09.
2. The first ground is against the deletion of addition of
`15,02,456/-. Briefly stated, the facts apropos this ground are
that the AO, on perusal of income-tax return, observed that the
ITA No.99/Del/2013
assessee had shown `Source of funds' at ` 13,85,570/- against
which the `Application of funds' was shown at ` 28,88,026/-
leading to difference of ` 15,02,456/-, divulging unexplained
investment. Despite several notices/reminders issued by the AO,
there was improper participation from the assessee's end which
led to the passing of the assessment order u/s 144. The AO made
addition of ` 15.02 lac as unexplained investment. During the
course of first appellate proceedings, the assessee submitted
detailed reasons about the difference in the figures given in the
return showing `sources' and `application' of funds. It was
explained that the Counsel who filed the return of income was not
well fully conversant with the accounting practices and made
mistakes in mentioning the figures relating to the assessee's
balance sheet. The position was correctly explained before the ld.
CIT(A) with the help of some evidence. The ld. CIT(A) called for
the remand report from the AO on the assessee's explanation
about the difference in the balance sheet figures. Considering all
the facts, the addition so made by the AO came to be deleted.
The Revenue is aggrieved against such deletion of addition.
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3. We have heard the rival submissions and perused the
relevant material on record. It is seen from the copy of income-
tax return, available on pages 1 onwards of the paper book that
there are certain glaring mistakes in mentioning the figures in
Part A-BS of the return. To cite a few, capital of ` 547,570/- has
been shown as `Proprietor's capital' and the same amount has
been inadvertently included in the Fixed assets as `Capital work-
in-progress.' Similarly, as against the gross value of the block of
assets at ` 7,79,400/- and depreciation of ` 77,940/-, the net
balance has been shown at ` 6,78,960/- as against the correct
balance which ought to have been at ` 7.01 lac. Similarly, under
the head `Cash and bank balance', balance with bank has been
shown at ` 5,54,488/-. In fact, this amount represents the balance
payable to bank on account of car loan. Thus it can be seen that
the person who filed the return mentioned the figures incorrectly,
which ultimately distorted the figures of Assets and Liabilities.
The correct position was placed before the AO during remand
proceedings. From a copy of remand report available on pages
87 onwards of the paper book, it can be seen that the assessee
explained the difference in balance sheet amounting to ` 15.02
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lac, which was the basis for addition. The AO considered these
figures but did not adversely comment upon the same. Under
such circumstances, we are of the considered opinion that no
fault can be found with the ld. CIT(A) in deleting the addition
based on the explanation tendered by the assessee before him as
well as the AO in remand proceedings, completely explaining the
difference in the figures of `Source' and `Application' of funds,
which were originally wrongly taken. We, therefore, uphold the
impugned order on this score. This ground is not allowed.
4. Ground No.2 is against the reduction in addition of `
4,76,640/- to ` 57,197/-.
5. Briefly stated, the facts of this ground are that the
assessee's passbook showed deposit in bank account amounting
to ` 25,75,000/- during the year. The AO observed that the total
sales effected by the assessee were to the tune of ` 20,98,360/-.
Even if it was accepted that the entire cash sales were deposited
in the bank account, the AO observed that still there was a
difference of ` 476,640/-. The AO further noted that there was
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huge cash deposit of ` 12.50 lac in a very short interval from
04.12.2007 to 20.12.2007. In view of the fact that he made
addition of `15,02,456/- on account of difference in balance sheet
figures, he treated this amount of ` 4,76,640/- of excess cash
deposit in the bank as covered by the above addition. As such,
no separate addition was made on this score. The ld. CIT(A)
observed that there was a difference of ` 4,76,640/- in the figure
of total sales and cash deposits in the bank. He, therefore,
enhanced the sales figure by such cash deposits of ` 4,76,640/-.
Considering the fact that only net profit was to be added on such
excess sales and not the amount of sales itself, he brought down
the addition to ` 57,197/-, being net profit rate of 12% applied on
such sales of `4.76 lac considered to have been made outside the
books of account. The Revenue is aggrieved against the relief
allowed in the first appeal.
6. After considering the rival submissions and perusing the
relevant material on record, it is noticed that the AO did not
specifically make the addition of ` 4,76,640/- on the ground that
he had already made addition of ` 15.02 lac on account of
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difference in `Sources' and `Application' of funds given by the
assessee in the balance sheet. Since the above addition of `
15.02 lac has been deleted by us, the instant addition of ` 4.76
lac crops up for consideration. It is seen that the assessee
deposited a sum of ` 25.75 lac in his bank account. No details
about the source of such deposits were given to the AO, who
chose to make addition for the said amount by considering the
amount of total turnover declared at `20.98 lac. In our
considered opinion, the ld. CIT(A) needlessly swayed by the
assessee's contention of sales outside the books of account to
this magnitude. When we peruse the balance sheet of the
assessee, it can be seen that the closing stock at the end of the
year stood at ` 2.03 lac. If one has to draw a presumption that
the assessee had stock-in-trade, but sold the goods without
issuing bills, then, there should have been corresponding stock
available, which is not the case here. If, on the other hand, one
has to draw a presumption that not only the sales, but also
purchases were made outside the books of account, then, apart
from the profit element, the capital base required for making
unexplained purchases should also be added to the total income,
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which is again not the case here. It can be seen from the
assessment order that the AO did not make out a case about the
deposit of unexplained/unrecorded sales in the books of account.
There can be unexplained deposits in bank accounts even
otherwise than through unrecorded sales. Thus it is manifest that
the ld. CIT(A)'s order is clearly not sustainable. As the assessment
order was passed u/s 144, we are of the considered opinion that
the ends of justice would meet adequately if the impugned order
on this issue is set aside and the matter is restored to the file of
the AO for a fresh adjudication. We order accordingly. Needless
to say, the assessee will be allowed a reasonable opportunity of
being heard in the fresh proceedings.
7. The last ground is against the deletion of addition of
`12,59,000/-. The assessee showed to have received four
amounts, tabled on page 3 of the assessment order as loan from
Shri Dheer Singh. On being called upon to establish the
genuineness of these credit entries appearing in the name of Shri
Dheer Singh, the assessee did not furnish any explanation
regarding the source of the above entries. Even the identity,
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credit worthiness and also the genuineness of the transactions
with Shri Dheer Singh were not proved. This resulted into the
addition of ` 12.59 lac by the AO u/s 68 of the Act. The ld. CIT(A)
deleted the addition by considering that Shri Dhir Singh furnished
confirmation along with PAN and also bank account. The Revenue
is aggrieved against such deletion of addition.
8. Having heard the rival submissions and perused the relevant
material on record, it is observed that the AO made addition u/s
68 on account of four items of loan allegedly received by the
assessee from one Sh. Dheer Singh on different dates. No
evidence worth the name was filed before the AO to substantiate
the identity and capacity of the lender along with the genuineness
of the transactions. The ld. CIT(A) simply deleted the addition by
considering that Shri Dhir Singh had filed return of income. The
so-called return shows the name as `Dhir Singh' as against `Dheer
Singh' explained by the assessee to be the person from whom the
loan was received. Further, the mere fact that a particular
amount has been received through banking channel is not
sufficient in itself to prove the genuineness of the transaction and
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capacity of the person. In our considered opinion, the ld. CIT(A)
was not justified in deleting this addition. Since the assessment
was framed u/s 144, we are of the considered opinion that it
would be in the fitness of things if this issue is also sent back to
the AO for a fresh adjudication. We, therefore, set aside the
impugned order on this score and send the matter back to the AO
for a fresh determination, after allowing a reasonable opportunity
of being heard to the assessee.
9. In the result, the appeal is partly allowed for statistical
purposes.
The order pronounced in the open court on 13.08.2014.
Sd/- Sd/-
[H.S. SIDHU] [R.S. SYAL]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated, 13th August, 2014.
dk
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT (A)
5. DR, ITAT AR, ITAT, NEW DELHI.
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