Income Tax Appellate Tribunal - Chandigarh
M/S Rama Udyog, Ambala Cantt. vs Assessee on 18 December, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCH 'B' CHANDIGARH
BEFORE Ms.SUSHMA CHOWLA, JUDICIAL MEMBER
AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER
ITA No. 527/CHD/2011
Assessment year : 2005-06
ITO, Ward-2, V M/s Rama Udyog,
Ambala. 4219, Dal Mandi,
Ambala Cantt.
PAN: AABCB-5576G
&
C.O. 18/CHD/2012
In I TA 527/CHD/2011
Assessment year : 2005-06
(Appellant) (Respondent)
Appellant by : Shri D.K.Goyal
Respondent : Shri Akhilesh Gupta
Date of Hearing : 18.12.2012
Date of Pronouncement : 26.12.2012
ORDER
PER MEHAR SINGH, AM
The present appeal, filed by the revenue and the CO filed by the assessee, are against the order of the CIT(A) dated 07.03.2011 passed u/s 250(6) of the Income-tax Act,1961 (in short 'the Act').
2. The Revenue has raised the following grounds of appeal:
"1. Whether on the facts and in the circumstances of the case, the Ld. C.I.T (Appeals) is right in restricting the addition made at Rs.1,52,170/- on account of Bardana account to Rs.96,310/- by ignoring the fact 'that the assessee has purchased the bags of bardana from the Govt. @Rs. 12.63 per bag, which was applied for calculating the sale price of the bags 2 declared as sold.
2. Whether on the facts and in the circumstances of the case, the Ld. C.IT.(Appeal) is right in deleting the addition made at Rs.5,60,000/- on account of Milling Charges by ignoring the fact that no explanation could be furnished by the assessee regarding payment of Milling Charges to its sister concern, for diverting the income for ulterior motive.
3. Whether, on the facts and in the circumstances of the case, the Ld. C.I.T (Appeal) is right in restricting the disallowances made out of expenses claimed under the heads 'Repair & Maintenance and Machinery Repair1; Diesel Expenses and 'Freight Inward, Freight Outward, Wages, Labour charges and Conveyance1 at Rs. 50,000/-, Rs. 2,60,015/- and Rs. 3,63,000/- to 10% of the expenses claimed by ignoring the facts that the expenses claimed are not fully supported with the vouchers.
4. Whether, on the facts and in the circumstances of the case, the Ld. C.I.T.(Appeal) is right in deleting the disallowances made out of 'Misc. Expenses' by ignoring the facts that the expenses claimed by the assessee is on account of cost of Rice short which is a sort of Penalty and is not an allowable expenditure.
5. Whether, on the facts and in the circumstances of the case, the Ld. C.l.T. (Appeal) is right in deleting the disallowances made out of 'Moisture Cut' claimed by the assessee by ignoring the facts that no clarification could be furnished by the assessee,
6. It is prayed that the order of the Ld C.l.T.(Appeal) be set-aside and that of A.O. be restored.
7 The appellant craves leave to add or amend the grounds of appeal before the appeal is heard and disposed off."
3. In Cross Objection, the assessee has raised the following Grounds :
"1. Because the action for upholding the addition of Rs.96,310/- is being challenged on facts and Law relatable to Bardana Sale Price.
2. Because the action is being is challenged on facts and law for upholding the Estimated disallowance of 10% Expenditure for Repairs & 3 Maintenance & Machinery Repairs Rs. 5,000/-, Diesel Expenses Rs. 30,000/- Freight Outward Freight Inward, Wages & Labour 36,300/- (Rs. 71,300/-).
3. Because the action for upholding the addition of Rs. 1,89,000/- is being challenged on facts and law by invoking the Provisions of Section 68 without affording 'Opportunity' as prayed in accordance with the true interpretation of Section 250(5),(6), Section 251(l)(c) the Explanation referring to the Words "Satisfaction", 'State points for determination', 'Pass Such Orders' in the Interest of Substantial Justice'."
4. In the course of present appellate proceedings, ld. 'DR' placed reliance on the order passed by the AO, in respect of Ground No.1. He, also referred to para 12.1 at page 7 of the assessment order, and also findings of the ld. CI T(Appeals), as contained in para 6.3 of the appellate order dated 07.03.2011. Ld. 'AR' placed reliance on the order passed by the CIT(Appeals), however, the action of upholding the part amount of addition by the CIT(Appeals), has been challenged by him in Ground No.1 of the grounds raised in the C.O., under reference.
5. We have carefully perused and considered the rival submissions, facts of the case and the relevant records. The AO, made an addition of Rs.1,52,170/-, on account of under- valuation of sale of bardana. The AO, noted that the assessee received 88539 bags from the Government and out of which, 59539 bags were consumed in rice delivered and the balance 29000 bags were sold by the government to the assessee @ 12.63 per bag, valuing Rs.3,52,060/-. The assessee purchased 27850 bags of bardana @ Rs.4.50, from the open market, for a consideration of Rs.1,19,509/-. Therefore, as per AO, the assessee had total bardana of 56850 bags shown at value of 4 Rs.4,70,569/-. Out of this, the assessee sold. Out of this, the assessee sold 34000 bags @ 8.5 per bag in the open market for Rs.2,77,250/-. Out of the balance 22850 bags, the assessee consumed 12767 bags of bardana in by-products viz. rice bran, naku, phak. The assessee has not declared the value of the bardana consumed in by-products but has valued the remaining 10083 bags as closing stock for Rs.1,22,407/- declaring the net loss of Rs.71,911/- The AO rejected the appellant's contention that the assessee had sold bardana in the market at a lesser rate than that of purchase rate as the appellant did not furnish supporting bills and vouchers. As per the AO no prudent persons will sells/its goods in the market at a loss. The AO also observed that the assessee himself has valued the closing stock of bardana @ Rs.12.63 per bag. Therefore, the AO valued the total sale of bardana of 34000 bags sold in the open market at Rs.4,22,950/- @ Rs.12.63 per bag as against the declared value of Rs.2,77,250/- Thus an addition of Rs.1,52,170/- was made. The findings of the CI T(Appeals), as recorded in para 6.3 of the appellate order, is reproduced hereunder :
"6.3 I have carefully considered the submission made by the appellant, and also the reasoning given by the AO. It is seen that the basis of addition made by the AO as well as the submission of the appellant is unsupported by any details with regard to the quality of the bags sold i.e. whether these are the old bags purchased @ Rs.4.30 or the new bags purchased @ Rs.12.63. It is however seen that only 29000 bags were purchased @ of Rs.12.63/-. Therefore, at the most only 29000 bags can be held to have been sold @ Rs.12.63/-, the value of which will come to Rs.352060/-. The sale value of balance 5000 bags @ Rs.4.30 will come to Rs.21,500/-. Therefore, the total sale 5 value by accepting the AO's contention comes to Rs.3,73,560/- as against Rs.4,22,950/- worked out by the AO and as against Rs.2,77,250/- shown by the appellant. Therefore, it will be fair and just if the addition on this account is restricted to Rs.96,310/-. This ground of appeal is partly allowed."
6. The assessee appellant is not a dealer in bardana. The assessee is engaged in the activities of milling. Consequently, sale of used bardana by the appellant and not the sale of newly purchased of bardana was the subject matter before AO, and CI T(Appeals). A bare perusal of the findings of both AO and CIT(Appeals), reveals that no tangible material has been brought on records to demonstrate that assessee had sold the newly purchased bardana. The ld. CIT(Appeals), has rightly deleted the addition made by the appellant, based on no- evidence. However, as the assessee appellant is not engaged in the business of purchase and sale of bardana, it cannot be construed that the assessee had sold the unused and newly purchased bardana. Therefore, addition made by the CIT(Appeals), cannot be sustained. In view of this, the findings of the ld. CIT(Appeals), to the extent of upholding of addition of Rs.96,310/-, cannot be sustained. Consequently, the ground of appeal NO.1, raised by the revenue, is dismissed. However, Ground No.1 in C.O. of the assessee appellant is allowed.
7. Ld. 'DR', in respect of Ground No.2 of the appeal, referred to, para 12.2, at page 8 of the assessment order and para 7.3, at page 9 of the CIT(Appeals)'s order and stated that the findings of the CI T(Appeals) be reversed. Ld. 'AR' placed reliance on the order passed by the CIT(Appeals). 6
8. We have carefully perused and considered the rival submissions, facts of the case and the relevant records and found that the AO, made addition of Rs.5,60,000/-, on account of milling charges, paid to M/s Rama Krishna Rice & General Mills. The AO, found that no details, with regard to the purpose of the payment made to M/s Rama Krishna Rice & General Mills, were filed by the appellant, except a copy of ledger account of the appellant, showing entry of Rs.5,60,000/- debited to its account. Consequently, the AO, held that expenditure has been debited, with a view to reducing the taxable income. The CI T(Appeals), on appreciation of the remand report and submission filed before her allowed this ground of appeal, vide findings contained in para 7.3 of the order, passed by the CI T(Appeals). The relevant findings of the CIT(Appeals), are reproduced hereunder:
"7.3 I have carefully considered the submission made by the appellant and the facts of the case. It has been contended that the amount has been paid to M/s Rama Krishana Rice & General Mills on account of milling got done from it. It is noted that the payment so made to Rama Krishna Rice & General Mills has been shown as income by the respective firm which has been duly accepted by the Department. It is also seen that the AO has not brought on record any evidence to state that the milling was actually done by the appellant and not by M/s Rama Krishana Rice & General Mills. There is no dispute that the milling charges for the paddy got milled from M/s Rama Krishna Rice & General Mills have been received by the appellant from the Govt. Therefore, in the absence of any evidence to suggest that the milling was actually done by the appellant and not the concern to whom the payment has been made, no addition on this account can be made. The addition so made is therefore deleted. This ground of appeal is allowed."7
9. A bare perusal of the factual matrix of the case and findings of the CIT(Appeals) reveals that the findings of the CIT(Appeals) are well reasoned and based on appreciation of the fact-situation of the case. In view of this, we do not find any infirmity therein. Hence, the same are upheld. Consequently, Ground No. 2 of the appeal raised by the revenue is dismissed.
10. In respect of Ground No.3, ld. 'DR' referred to page 10 of the assessment order. Similarly, ld. 'DR' referred to page 8 & 9 of the assessment order and also findings of the CIT(Appeals), at page 13 of the order passed by her. He pleaded that findings of the AO be restored. Ld. 'AR' supported the findings of the CIT(Appeals), subject to the contention raised in C.O.
11. In the course of assessment proceedings, AO made adhoc addition, in respect of repairs and maintenance, machinery repair, diesel expenses and freight out-ward, freight inward, wages and labour charges etc. The AO made an addition of Rs.50,000/- in respect of repair and maintenance and machinery repair, as certain expenses were found not verifiable. Similarly, AO made an addition of Rs.2,06,015/-, in respect of diesel expenses and Rs.3,63,000/- in respect of freight outward and freight inward, wages and labour charges etc. Ld. CIT(Appeals), on appreciation of the submission and evidences filed before her, restricted the disallowance to 10% of such expenses. Findings of the CIT(Appeals), are recorded 8 at page 13 of the order, which are reproduced hereunder :
" The appellant in the rejoinder has reiterated the submission already made. It is seen that the adhoc disallowance has been made by the AO observing that the supporting vouchers have not been produced. The appellant on the other hand has challenged the addition stating that all the vouchers are available now and can be put to scrutiny by the AO. The AO has however opposed the admission of additional evidence stating that the same was not produced despite adequate opportunity given during the assessment proceedings. In totality of the facts of the case, it is considered fair that the adhoc disallowance under all these heads js restricted to 10% of the total expenses. The AO is directed to re-compute the disallowance. The appellant gets partial relief. These grounds of appeal are partly allowed."
12. We have carefully perused and considered the findings of the CI T(Appeals), in the matter vis-à-vis findings of the AO and relevant material produced, before these authorities. Having regard to the fact-situation of the case and entirety of the facts and circumstances of the case, we do not find any infirmity in the findings of the CI T(Appeals), hence, the same are upheld. Consequently, the Ground No.3 of the appeal of the revenue is dismissed.
13. In Ground No.4, ld. 'DR' stated that a reference be made to para 12.6, at page 10 of the assessment order and also to para 9.3 of the order of the CI T(Appeals), as appearing at page 14 of her order. The ld. 'DR' supported the findings of the AO. Ld. 'AR' relied upon the order passed by the CIT(Appeals).
14. We have carefully perused and considered the rival submissions, facts of the case and the findings of both the lower authorities. It is pertinent to reproduce findings of the 9 CIT(Appeals), as contained in para 9.3 at page 14 of her order:
"9.3 I have carefully considered the submission made by the appellant, assessment order, remand report of the AO and the rejoinder filed by the appellant. It is seen that the AO's finding that the expenditure is penal in nature is unsupported by facts. The expenditure has been incurred during the course of business of the appellant and is therefore admissible business expenditure. The addition made by the AO is-therefore not justified and is deleted. This ground of appeal is allowed."
15. Ld. CI T(Appeals) has allowed the appeal of the assessee on appreciation of the findings in assessment order, remand report submitted by the AO and the rejoinder filed by the assessee. In view of this, we do not find any infirmity in the findings of the CIT(Appeals), which are based, on the foundation of the facts of the case. Accordingly, this ground of appeal of the revenue is dismissed.
16. In Ground No.5, the revenue contended that CIT(Appeals), erred in deleting the disallowance made out of 'moisture cut' claimed by the assessee, by ignoring the facts that no clarification could be filed by assessee. In this context, ld. 'DR' referred to the findings of the AO, as contained, in para 12.7, at page 10 of the assessment order and findings of the CI T(Appeals) in para 10.2 at page 15. Findings of the CIT(Appeals) are reproduced hereunder :
"10.2 I have carefully considered the submission made by the appellant, assessment order, remand report of the AO and the rejoinder filed by the appellant. It is seen that the 'moisture cut' is a normal component/expenses in course of business of rice Shelters engaged in milling for the Govt. The same cannot be held as penal in nature. It is not the case of the AO that the expenditure is not genuine or is not supported by documents. The disallowance 10 made by the AO in this regard is therefore deleted. The ground of appeal is allowed."
17. The CI T(Appeals) has considered the remand report and the findings of the AO, including the submissions made by the assessee. The CI T(Appeals), deleted the addition, made by the AO, holding that the impugned expenses cannot be construed, as penal in nature. Findings of the CIT(Appeals) are well reasoned and are based on appreciation of the facts of the case and findings of the AO, as contained in assessment order and remand report. Therefore, we do not find any infirmity therein and, hence, the same are upheld. Accordingly, Ground No.5 of the appeal of the revenue is dismissed.
18. Ground Nos. 6 & 7 of the revenue's appeal is general in nature and, hence, need no separate adjudication. Accordingly, the same are dismissed.
19. In the result, appeal of the revenue is dismissed.
20. In CO/18/Chd/2012, ld. 'AR' submitted that the delay in filing the appeal may please be condoned, in view of the written submissions and affidavit filed by him. Affidavit filed by Megha Gupta D/o Late Shri Arun Gupta is reproduced hereunder :
"I, Megha Gupta d/o Late Sh. Arun Gupta partner of M/s Rama Udyog, 4219, Dal Mandi, Ambala Cantt (Haryana) do hereby solemnly affirm and; declare as under :-
1. In the aforesaid case the main working partner Sh. Arun Gupta expired on dt. 15.01.2005 and the assessment proceedings were completed through the order u/s 143(3) dt. 12.12.2007 which was challenged through 11 grounds of appeal dt. 28.12.2007 and the order of the CIT(A) allowing the appeal partially is dt. 07.03.2011.
2. The appeal before this Hon'ble Court has been filed by the Income Tax Department in ITA No. 527/Chd/2011 in pursuance to which the first notice of communication of the appeal filing has been brought to the knowledge of the assessee by having served through the Income Tax Department on dt. 30.03.2012 evident from the notice at Pg.
2-3 and the last date for filing the Cross Objections is 29.04.2012 (Saturday) whereby the Counsel Sh. Pankaj Jain, O.K. GoyaL Advocates at Chandigarh were engaged on dt. 28.04.2012 and after preparation of the papers for presenting before this Hon'ble Court the same have been received by the assessee on 01.05.2012 (Tuesday) and thereafter the same has been returned for filing on dt. 05.05.2012 (Saturday) hence, the fling thereafter on 07.05.2012 (Monday).
3. Therefore in accordance with the aforesaid facts and circumstances of the case there is a delay of 8 days in the filing of the present Cross Objections before this Hon'ble Court and in accordance with the provisions of section' 253(4), (5) there is a sufficient cause for pursuing the remedy available after the expiry of the father for engaging the counsel within the time limit as referred under the Income Tax Act. 1961."
21. Ld. 'AR' vehemently contended that delay needs to be condoned and substantial justice be rendered. Ld. 'DR' did not seriously contested the issue of condonation of delay. 21(i) On appreciation of the factual matrix of the case of the case, and to advance the cause of substantive justice, the delay is condoned, in view of the submission filed by ld. 'AR'.
22. As far as Ground No.1, raised in C.O. is concerned, the same has been adjudicated while adjudicating Ground No.1 of the appeal. Hence, this ground of C.O. is allowed. 12
23. In Ground No.2 of the C.O., it is contended that estimated disallowance of 10%, upheld by the CIT(Appeals), needs to be deleted. This ground, raised in the C.O. has been duly adjudicated while considering and deciding ground No.3 of the revenue's appeal, where, the findings of the CIT(Appeals) have been upheld and such findings are applicable to ground NO.2, raised by the appellant in CO. In view of such findings, ground No.2 of the C.O. is dismissed.
24. In Ground No.3 of the CO, it is contended that addition of Rs.1,89,000/- has been made by invoking the provisions of section 68 of the Act, and without affording proper opportunity to the assessee.
24(i) We have heard and considered the rival submissions, in the matter and also perused and considered the findings of lower authorities. The AO, made an addition of Rs.1,89,000/- , on account of unsubstantiated, unsecured loans, shown under the head 'Relatives and friends'. The AO, found that the assessee claimed to have received a loan of Rs.19,000/- from each of the following eleven persons, as incorporated in the assessment order as well as in para 13 of the order of the CIT(Appeals)'s order.
25. The assessee placed reliance on the decision of the jurisdictional High Court in the case of CI T V Vikas Chemi Gum India (2005) 276 ITR 32 (P&H. The Hon'ble jurisdictional High Court has held in that case that it is the duty of the Tribunal to give reasons for its decision. Ld. 'AR' applied this ratio to the findings given by the CIT(Appeals). 13 25(i) The assessee, further, placed reliance on the decision of the Hon'ble Supreme Court, in the case of Woolcombers of India V Their Workers Union AIR 1973 (S.C) 2758. The decision, relied upon by the assessee, is also not applicable to the facts of the present case, as the ld. CI T(Appeals) has passed a well reasoned and detailed order.
25(ii) We have carefully perused and considered the findings of the CI T(Appeals) and found the same as well reasoned and based on the foundation of factual matrix of the case, as also, the appreciation of the submission filed by the assessee. Findings of the CIT(Appeals), as contained in para 13 are reproduced hereunder :
"13. The AO made an addition of Rs.1,89,000/- on account of unsubstantiated unsecured loans under the head 'relatives and friends'. The AO noted that the appellant has claimed having received a loan of Rs.19,000/- each from the following persons.
S. No. Name of Station Amount
creditor/
1 Amar parkash Sadhaura 19,000
2 Vibhur Gupta Muzzafarnagar 19,000
3 Pulkit Gupta Sadhaura 19,000
4 Sanny Gupta Sadhaura 19,000
5 Parveen Gupta Sadhaura 19,000
6 Nidhi Gupta Ambala 19,000
7 Parveen Gupta Muzzafarnagar 19,000
8 Sunita Gupta Sadhaura 19,000
9 Menu Gupta Sadhaura 19,000
10 Shalini GujDta Sadhaura 19,000
11 Ankit Gupta Ambala 19,000
14
On a query by the AO, the appellant furnished the confirmation from above creditor's alongwith their address. The AO made independent inquiries with regard to these creditors, the finding of which are summed up as under.-
"To ascertain the genuineness of the creditors, summons were issued to all the above creditors on the addresses given by the assessee except Ms Nidhi Gupta, Sh. Ankit Gupta. In respect of Pulkit Gupta who was minor his credit was confirmed by her mother Ms Sunita Gupta. Except Sh. Amar Parkash , the remaining creditors were not available at the given addresses. The inspector of this office was deputed to serve the summons to sh. Vibhur Gupta and Sh. Parveen Gupta were sent through registered post at Muzzafarnagar on the given addresses by the assessee. The same have been received back. On the envelopes the visit of the postman showed % times at the given addresses and the summons have been received back with the comments that on enquiry the addresses could not be traced out.
However, Ms Sunita Gupta w/o Sh. Ashwani Gupta attended on 29.11.07 suo moto. On respect of credits in her name and in the name of her minor son Pulkit Gupta, statement was recorded u/s 131 of the Income Tax Act, 1961. In her statement she stated that advance of Rs.19, OOO/- by her and his son Pulkit Gupta was given to Mrs. Neeraj Gupta. The source of loan to Mrs. Neeraj Gupta was told that the money which was received from the relatives after the death of her husband. Her husband had expired in the year!996. in her confirmations filed earlier by the assessee by Ms Sunita Gupta in her own case and on behalf of her son confirmed the credits made to M/s Rama Udyog Sadhaura but in her statement dt. 29.11.07 she stated that the loans were advanced to Ms. Neeraj Gupta who had no identifity in the firm. Credibility of ht credit amount advanced by Ms.Sunita ato M/s Rama Udyogs also considered to be beyond doubt as she alleged to have advanced the money to Ms Neeraj Gupta out of the funds which were received after the death of her husband.
Sh. Ankit Gupta has been shown as creditor on the other hand he has been shown partner of the assessee firm. Similarly on one occasion Ms Nidhi Gupta has been shown partner and on the other side creditor of Rs.19,000/-. The assessee did not explain as to what was the purpose of keeping two accounts. No source of these credits were explained."15
In view of the above findings of independent verifications and in the back ground of the facts that each of the creditors is for Rs.19,000/- only, the AO concluded that the assessee deployed his own funds in the names of the nears and dears to the extent of Rs.19000/- in each name only to defeat the provisions of section 40A(3). The AO therefore held the creditors to be non genuine and made an addition of Rs.1,89,000/- after reducing Rs.19,000/- on account of credit confirmed by Sh. Amar Prakash. 13.1 During the course of appellate proceedings, the appellant filed written submission which is reproduced as under:-
S.No. Name Station Amount
1 Amar Sadhaura 19,000
2 Vibhur Muzzafarnagar 19,000
3 Pulkit Sadhaura 19,000
4 Sanny Muzzafarnagar 19,000
5 Parveen Sadhaura 19,000
6 Nidhi gupta Ambala 19,000
7 Parveen Muzzafarnagar 19,000
8 Sunita Sadhaura 19,000
9% Monu Gupta Sadhaura 19,000
10 Shalini Sadhaura 19,000
11 Ankit Gupta Ambala 19,000
The appellant filed confirmation from all the above credits with the Ld. ITO. The Ld. ITO has made addition on the ground that the summon sent on the above addresses have been received back. The Ld. ITO has not objected the identity of the person nor has held that the affidavits filed by the creditors were fake but has made addition only on the point that the letters sent by the Ld. IRO has been received back. Moreover in the case of Sumita Gupta d Pulkit Gupta, the Ld. ITO has made addition on the ground that while making the statement, although they confirmed the loan but the money was handed over to the wife of the partner Sh. Arun Gupta as Arun Gupta was ill and was on bed. So when the appellant has given the confirmation of all the creditors had addition made on the ground that the letters were not received by the creditors and addition made on the ground that the letters were not received by the creditors and without giving opportunity to the appellant the additions made deserve to be quashed. Yo9ur kind attention is invited to the case of Dhirendera S. Parikh vs. ITO (1994) 491 ITO (Bom) 257 in which case, it is held that statement or fact recorded behind assessee back without giving him opportunity to cross examine is illegal. Similar in the case 16 of Shiv Charan Gupta vs. IAC (1991) 41 TTJ (Del) 273, it has been held that making additions without affording opportunity of being head is illegal & void ab initio."
13.2 In the remand report the AO has relied upon the findings given in the assessment order and has stated that no books of account were produced by the appellant during the assessment proceedings. Therefore, the cash credits which have not been confirmed as per the independent verification have been rightly added back. In the rejoinder the appellant has reiterated its submission and has stated that the confirmations were filed by the appellant before the AO and that the AO is not justified to make the addition simply because the summons issued to these persons on the address given have been received back un-served/ or they are not found at the address given.
13.3 I have carefully considered the submission made by the appellant and find no merit in the same. It is noted that no books of account were produced during the course of assessment proceeding on the ground that the main partner of the firm has died during the year and the remaining partners do not have much knowledge in this regard. The confirmations filed by the appellant has no evidentiary value in the absence of the supporting books of account and in view of the fact that in none of the cases the amounts were confirmed in the independent verifications conducted by the AO. The addition made by the AO in this regard is held to be rightly made and is upheld. The ground of appeal is dismissed."
26. The provisions of section 68 of the Act, contain a golden rule of evidence and cast burden on the assessee, to prove the nature and source of sums, found credited in his books of account. It is a well-settled legal proposition that the assessee appellant is required to prove the identity, credit worthiness of the parties and genuineness of the transactions, while proving the nature and source of such loans or sums found credited in his books of account. Mere filing of confirmations are not sacrosanct. Similarly, routing of transaction through banking channel is an indication of movement of funds alone 17 and does not prove the genuineness of the transactions, as also credit worthiness of the parties. In the present case, the assessee has failed to prove nature and source of such funds, within the meaning of section 68 of the Act. Therefore, findings of the CIT(Appeals) are upheld. Accordingly, this ground raised by the appellant in the C.O. is dismissed.
29. In the result, appeal of the revenue is dismissed and the C.O. of the assessee is partly allowed.
Order pronounced in the Open Court on 26 t h
Dec.,2012.
Sd/- Sd/-
(SUSHMA CHOWLA) (MEHAR SINGH)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 26 t h Dec.,2012.
'Poonam'
Copy to:
The Appellant, The Respondent, The CI T(A), The CIT,DR Assistant Registrar, I TAT Chandigarh