Income Tax Appellate Tribunal - Jodhpur
Maheshwari Industries vs Assistant Commissioner Of Income Tax on 19 May, 2004
Equivalent citations: (2005)95TTJ(JODH)111
ORDER
S.R. Chauhan, J.M.
1. This appeal by the assessee for the asst. yr. 1990-91 is directed against the order of CIT(A), Jodhpur, dt. 17th June, 1996.
2. I have heard the arguments of both the sides and have also perused the record. Ground No. 1 disputes sustenance of addition of Rs. 50,000 made on account of unexplained cash credit of M/s Cresswell Chemicals (P) Ltd. The learned Authorised Representative of the assessee has contended that in first round, the learned CIT(A) had set aside the matter of this addition which the AO has made as the assessee had not furnished the confirmation at the time of original assessment; and that this appeal is in second round and the assessee has furnished the confirmation of Rs. 25,000 before the AO with GIR number in second round and also furnished copy of accounts (pp. 1 and 3 of the paper book) duly confirmed by the creditor, M/s Cresswell. He has confirmed that the AO's finding regarding alleged contradiction is factually incorrect. He has contended that the director of the company appeared before the AO and confirmed the credit. He has contended that the credit was received through cheque and that the company is an existing IT assessee; the company had sufficient funds to advance loan. He has confirmed that Rs. 50,000 was deposited in firm's account by account payee cheque and the AO could have asked for bank pass book but the AO did not ask for the same and made the addition. He has relied on Subash Dall Mills v. Asstt. CIT (2002) 257 ITR 115 (Agra)(AT).
3. As against the above, the learned Departmental Representative has contended that the burden is on the assessee to prove all the ingredients of cash credit like identity of creditor, genuineness of transaction and paying capacity of the creditor. He has relied on Shankar Industries v. CIT (1978) 114 ITR 689 (Cal) and Dulichand Omprakash v. CIT (1978) 113 ITR 476 (Cal). He has contended that mere production of confirmation letter is not enough and in this regard he has cited CIT v. United Commercial & Industrial Co. (P) Ltd. (1991) 187 ITR 596 (Cal) and Addl. CIT v. Bahri Brothers (P) Ltd. (1985) 154 ITR 244 (Pat) in support of his contention. He has contended that receiving the loan by account payee cheque is not relevant. He has referred to pp. 4 and 5 of the AO's order and contended that the AO noted contradiction between the confirmation letter and the books of account of the assessee regarding the outstanding balance of Rs. 25,000 and so the AO rightfully treated the whole amount of loan Rs. 50,000 to be not genuine and unexplained and in turn rightly . made the addition as the assessee's income from undisclosed source.
4. I have considered the rival contentions, the relevant material on record, as also the cited decisions. The crucial point relying on which the AO made the addition was contradiction between confirmation letter filed by the assessee showing outstanding balance of Rs. 25,000 and the books of account of the assessee, showing the balance amount of Rs. 25,000 having been adjusted on 30th March, 1990, against the purchase of a pulveriser by the creditor-company of assessee, However, from the perusal of record it is revealed that the creditor is an IT assessee and its GIR number was also furnished by the assessee to the AO, along with the confirmation letter. The amount of loan was received by the assessee from the creditor by the account payee cheque of Canara Bank, the details of which are given in top para on p. 4 of the assessment order, and the same was deposited in assessee-firm's account. It is also revealed from record that out of the above loan, amount of Rs. 25,000 was repaid by cheque dt. 18th Jan., 1990, of SBI and the cheque number has also been given and the same is mentioned in the assessment order as well. As per the assessee, there was an outstanding balance of Rs. 25,000. The confirmation as placed on p. 2 of the paper book clearly shows the account position from 1st April, 1989 to 31st March, 1990, mentioning an outstanding balance of Rs. 2,500. (sic-25000). The contradiction or the discrepancy regarding the factum of balance of Rs. 25,000 remaining outstanding as on 31st March, 1990, or not, with reference to books of account of creditor wherein the adjustment of the said balance of Rs. 25,000 has been entered on account of purchase of a pulvariser by the creditor from assessee. though disputed by the assessee as being factually incorrect but even assuming the same to be there, the same may have been due to some confusion or communication gap or for some other reason but that does not render the loan to be not genuine in view of the overwhelming proof of advancing loan of Rs. 50,000 by M/s Cresswell, an IT assessee to the assessee. As such, considering all the facts and circumstances of the case, I find no justification for this addition which I delete accordingly.
5. Ground No. 2 disputes the following disallowances/additions on account of expenses :
Rs.
(a) Postage 2,000 (b) Petrol expenses 2,500 (c) Depreciation 10,955
6. The learned Authorised Representative of the assessee has contended that the AO has made excessive disallowance and addition @ 25 per cent and so the Tribunal may grant appropriate relief to the assessee.
7. The learned Departmental Representative has contended that the disallowance/addition made by the AO is not excessive.. He has contended that the assessee oven did not maintain log book in respect of use of car. He has contended that no further relief should be given to assessee.
8. I have considered the rival contentions as also the relevant material on record. Considering all the facts and circumstances of the case, I find that the above disallowances/additions to be quite reasonable and not excessive. I, therefore, make no interference therein.
9. Ground No. 3 disputes the addition of Rs. 60,771 made by AO under Section 40A(3) of the IT Act in respect of the following payments in cash:
Rs.
1. Sh. Kanhaylal Jain 10,511
2. Shyam Sunder Sunil Kumar 16,500
3. Prem Chand Pramod Jain 12,400
4. Shri Ram Enterprises 10,050 60,771
10. The learned Authorised Representative of the assessee has contended that neither purchaser nor seller had any bank account at Osian. He has also contended that the transaction took place at Phalodi where the assessee had no bank account. He has also contended that as regards M/s Kanhaiya Lal Jain had the payment been made by cheque/draft it would have taken at least a week's time further and so the transaction was affected on cash payment basis and the rates were also taken on that basis. He has contended that confirmation of seller is placed on p. 11 of the paper book and the payment in cash was made on the insistence of seller. He has contended that the transaction, thus, falls within the exceptional circumstances under Rule 6DD.
11. As regards the transaction with M/s Shyam Sunder Sunil Kumar, he has contended that neither the purchaser-assessee nor the seller had any bank account at Osian and the same is giving discount on cash payment so the payment was made in cash. He has contended that the seller's confirmation is placed at p. 13 of the paper book wherein also the factum of discount (Muddat) of Rs. 110 is specifically mentioned as having been given to the assessee.
12. As regards Prem Chand Paras Mal Jain, he has contended that the transaction took place on 25th. Dec, 1989, the day on which it was a bank holiday; so the assessee made the payment in cash due to urgency of seller. He has contended that the seller's confirmation is placed at p. 15 of the paper book. He has also contended that this seller was new to the assessee and so he was pressing for payment in cash.
13. As regards Asha Ram Soni & Co.,. he has contended that neither the assessee nor the seller had bank account at Osian; and the seller was new to the assessee so the seller was pressing for cash payment. He has contended that the seller's confirmation is placed at p. 17 of the paper book.
14. As regards 5th party, being Shri Ram Enterprises, the learned Authorised Representative of the assessee raised the same contentions as raised by him in respect of payees mentioned at Sl. Nos. 3 and 4 above. He has contended that all the above 5 payments were genuine and due to urgency and so the same fell within exceptional circumstances within the purview of Rule 6DD.
15. As against the above, the learned Departmental Representative has contended that the parties are of local area and known to the assessee, so there was no difficulty in payment by cheque. He has contended that even if a particular day was a bank holiday, the payment through cheque/draft could have been made on the next day. He has contended that the matter of payment in cash to each of the parties has been elaborately dealt with by the AO and the learned CIT(A).
16. In the rejoinder, the learned Authorised Representative of the assessee has contended that there is no material or evidence on record to support the contention of the learned Departmental Representative that all the parties were known to the assessee. He has contended that confirmations of all the sellers are placed in the paper book and that all the sellers are registered with Sales-tax Department and are IT assessees. He has contended that even discount is available on cash payment.
17. I have considered the rival submissions as also the relevant material on record. Considering the fact-situation of each of the above 5 parties, to whom the assessee made the payment in cash, as detailed above in the ground as discussed above, I am of the view that the assessee made the aforesaid payment in cash due to exceptional circumstances being of insistence for payment in cash by the seller party, the discount being available on cash payment and the day of payment being holiday as also the fact that neither of these two parties, i.e., purchaser and seller having bank account at Osian; supporting seller's confirmation too are placed on record. In that view of the matter, I find no justification for these additions and so I delete the same.
18. Ground No. 4 disputes the sustenance of addition of Rs. 72,240 on account of excess stock. The learned Authorised Representative of the assessee has contended that the search took place on 23rd Aug., 1989, and during the search there was no evidence/document to show that there was any sale outside the books. He has contended that the assessee's business is of sale of Guar Gum and other agricultural produce. He has contended that the AO's basis for making addition is that the AO treats the wastage at 3 per cent being 281.40 qtls. (p. 29 of paper book) whereas the assessee claimed the wastage at .78 per cent. He has contended that it is because of assessee's calculation of wastage/shortage. He also contended that the AO made the calculation taking the weight inclusive of Bardana, i.e. jute bags, whereas the assessee had declared in his books the actual stock without the weight of jute bags. He has contended that the AO had raised the query regarding excess stock from time to time and the assessee replied the same mentioning the shortage at .78 per cent being 111.152 qtls. (p. 27 of the paper book).
19. As against the above, the learned Departmental Representative has contended that this addition was made/sustained due to the excess stock having been found at the premises of the assessee. He has referred to p. 7 of the assessment order and contended that the AO had made the detailed discussion while making the addition and so he relied thereon.
20. I have considered the rival contentions as also the relevant material on record. From the perusal of record, I find that the AO has made this addition finding the stock in excess due to taking the wastage/shortage resulting from conversion of Guar into Churi Korma, etc. at 3 per cent, i.e., much higher than that shown by the assessee which was .78 per cent. From the perusal of the record, I do not find any material on record supportive of AO's action in taking the shortage/wastage at the rate as he has done in the assessment order. In that view of the matter, considering the facts and circumstances of the case, I find the AO's action finding the stock in excess and in making the addition accordingly to be not justified and uncalled for I, therefore, delete the addition.
21. Ground No. 5 disputes the charging of interest under Sections 234B, 234C and 220(2) of the IT Act. The learned Authorised Representative of the assessee has contended that the charging of these interest is consequential. The contention of the learned Departmental Representative has also been the same.
22. In these situation, I need not give any specific decision on this issue; and I direct the AO to accord consequential relief to the assessee in this regard, if any.
23. In the result, this appeal of the assessee is allowed in part as indicated above.