Income Tax Appellate Tribunal - Ahmedabad
Umesh Krishnani, Surat vs Department Of Income Tax on 17 August, 2004
IN THE INCOME TAX APPELLATE TRIBUNAL: AHMEDABAD BENCHES
"D" BENCH: AHMEDABAD
(BEFORE S/SHRI H. L. KARWA, JM AND A N PAHUJA, AM)
ITA No. 3360/Ahd/2004
A Y: 2001-02
Shri Umesh Krishnani, Vs Income Tax Officer Ward 2 (3),
Prop. M/s. Swami Enterprise, Room no. 205B,Aayakar
1007, Jash Textile Market, Bhavan,Majura Gate, Surat
Ring Road, Surat,
[PAN: ABQPK 8062 R]
Appellant Respondent
In ITA No.3288/Ahd/2004
AY: 2001-02
Income Tax Officer, Vs Shri Umesh Krishnani,
Ward 2 (3), Surat Prop. M/s. Swami Enterprise,
1007, Jash Textile Market,
Ring Road, Surat
Appellant Respondent
Assessee by Shri Tushar P. Hemani, AR
Revenue by Shri Samir Vakil, DR
ORDER
A N PAHUJA: These cross appeals by the assessee and the Revenue against an order dated 17-8-2004 of the learned CIT(A)-II, Surat, raise the following grounds:
ITA No. 3360/Ahd/2004[ Assessee]"1. That on the facts and circumstances of the case, the learned CIT(A) has erred in confirming the addition of Rs.1,95,000/- u/s. 68 as made by the ITO in respect of loans received from certain persons even though the appellant has discharged the onus cast on him under the Act to prove the same.
2. On the facts and circumstances of the case, the learned CIT(A) has grossly erred in confirming the following ad hoc disallowances as made by the ITO, being 20% of the respective expenses alleging possible personal use of the same.
ITA No.3360 & 3288/Ahd/2004 2
Shri Uumesh Krishnani
- Rs.3,846/- out of staff welfare
- Rs.2,213/-. Out of office expenses
- Rs.3,263/- out of mobile expenses
- Rs.9,885/- out of petrol expenses.
3. The appellant craves to add, amend, alter, substitute, modify any or all of the above grounds of appeal, if necessary, on the basis of submissions to be made at the time of personal hearing. "ITA No. 3288/Ahd/2004: By Revenue
"1. On the facts and in the circumstances of the case and in law, the learned CIT(A)-II, Surat erred in granting relief in respect of brokerage expenses, without any substantial basis.
2. On the facts and in the circumstances of the case and in law, the learned CIT(A)-II, Surat erred in granting relief in respect of unsecured loans and interest paid thereon because, the primary requirement of section 68 of the I. T. Act had not been fulfilled by the assessee.
3. It is, therefore, prayed that the order of the CIT(A)-II, Surat be set aside and that of the AO be restored to."
2. Facts, in brief, as per relevant orders are that return declaring income of Rs.3,37,280/- filed on 24-10-2001 by the assessee, engaged in the business of trading in polyester yarn, after being processed u/s 143(1) of the Income-tax Act,1961 (hereinafter referred to as the Act) was selected for scrutiny with the issuance of notice u/s 143(2)(ii) of the Act on 23-10-2002. During the course of assessment proceedings, the Assessing Officer[AO in short]noticed that though there was marginal increase in sales of the assessee vis-a-vis preceding year, the gross profit[GP] rate declined to 0.73% from 1.92% in the preceding year. The AO further noticed from the details of brokerage of Rs.12,04,570/- debited in the profit & loss account that out of total brokerage paid to 38 parties, mentioned on page 3-4 of the assessment order, an amount of Rs.11,02,113/- was outstanding at the end of the year. To a query by the AO, the assessee furnished Xerox copies of the bills/ debit notes stated to have been issued by these brokers. Since the assessee neither filed any evidence of services rendered by these brokers nor even could furnish the names and address of the parties to ITA No.3360 & 3288/Ahd/2004 3 Shri Uumesh Krishnani whom sales were made, the AO asked the assessee to produce the following 6 brokers:
1. Shri Babubhai M. Patel
2. Ambica Filaments
3. Manthan Tex
4. Pinky Textiles
5. Shashin Babubhai Patel
6. Rajkumar Barmecha In response, the assessee submitted that all the aforesaid six brokers were income-tax payers and payments to them have been made through account payee cheques. However, the assessee did not produce them and instead requested the AO to issue summons u/s 131 of the Act to the aforesaid six persons. However, the summons issued by the AO for service through the Inspector at the address given by the assessee, could not be served since whereabouts of the aforesaid six brokers were not known. Accordingly, the AO asked the assessee to produce the aforesaid six brokers for examination. In response, the learned AR on behalf of the assessee while referring to written submissions stated that almost all the brokers had changed their addresses.
However, he furnished the acknowledgement of their income tax returns, profit & loss accounts, balance sheets etc. but did not produce the brokers. Since despite opportunity given, the assessee did not establish the genuineness of the aforesaid expenditure nor furnished any evidence of services rendered by the aforesaid brokers nor even the details of payments to aforesaid brokers in subsequent years, the AO disallowed the entire amount of Rs. 12,04,572/-.
3. On appeal, the learned CIT(A) deleted the addition after having a remand report from the AO, holding as under:
"8. I have given careful consideration to the facts mentioned by the Assessing Officer and also the appellant. All the major brokers were called by the Assessing Officer. They have confirmed the receipt of the brokerage through account payee cheque. The brokers are assessed to tax also wherein brokerage income is shown. The Assessing Officer has observed in the remand report that the brokers have withdrawn cash after deposit of the cheque but this statement is not found to be correct ITA No.3360 & 3288/Ahd/2004 4 Shri Uumesh Krishnani because of the explanation given by the appellant which has been reproduced on page 18 and 19 of the order.
It is found that most of the brokers have issued cheque/ DD to other parties and there is no immediate withdrawal of cash. There is also no proof that the cash has been given back to the appellant. It is a practice in the trade of the appellant wherein sales are normally made through brokers. The bill has been raised by the brokers at the end of the year and payment has been made in subsequent year does not appear to be relevant for disallowance of the expenditure. The brokers have given the details of the orders procured for the appellant along with the confirmation of the respective parties. As regards brokerage paid to wife and HUF, it is found that both are assessed to tax and they are also in the same line of business. Their accounts are also audited. They had placed order each with the appellant for supply of goods and they were paid brokerage at the market rate The appellant has explained in writing the services rendered by them vide letter dated August 2, 2004 and the Assessing Officer has not made any adverse comment.
Therefore, the entire brokerage payment is held to be genuine and the addition of Rs.12,04,570/- on this ground is deleted."
4. The Revenue is in appeal against the aforesaid findings of the learned CIT(A). The learned DR relied on the order of the AO while the learned AR on behalf of the assessee supported the findings of the learned CIT(A).
5. We have heard both the parties and gone through the facts of the case. As is evident from the impugned order, in the remand proceedings, the AO summoned all the major brokers, who confirmed receipt of brokerage through account payee cheques. All of them were found to be assessed to tax. The comments of the assessee on the report of the AO on page 18 and 19 of the impugned order evidence that there is no immediate withdrawal of cash by the aforesaid brokers as contended by the AO nor there is any evidence that cash has been returned to the assessee by these brokers. The brokers have furnished details of the orders procured by them while furnishing the confirmations of the respective parties. In the light of these undisputed findings of the learned CIT(A),especially when the Revenue have not placed before us any material contrary to the aforesaid findings of the ld. CIT(A), we have no hesitation ITA No.3360 & 3288/Ahd/2004 5 Shri Uumesh Krishnani in upholding his findings. Therefore, ground no.1 in the appeal of the Revenue is dismissed.
6. Adverting now to ground No.2 in the appeal of the Revenue and ground no. 1 in the appeal of the assessee relating to addition u/s 68 of the Act, during the course of assessment proceedings, the AO noticed that the assessee had received unsecured loans from a number of persons out of which Rs.9.70 lacs was received from the following 12 parties:
Sr. Name of Depositor Amount of Mode of
No. Loan received receipt
1 Shri Assandas Merchandani ` 3,50,000 Cheque
2 Shri Anil Himmatramka 1,00,000 Cheque
3 Shri Akshay Biswal 75,000 Cheque
4 Smt. Anita Bhoolani 15,000 Cash
5 Smt. Neha Mahesh Khabrani 50,000 Cheque
6 Shri Naresh Kumar Goyal 50,000 Cheque
7 Shri Pukhraj Tailor 15,000 Cash
8 Smt. Rachna Lakhani 50,000 Cheque
9 Smt. Rajuben Darak 15,000 Cash
10 Smt. S. P. Shah 1,00,000 Cheque
11 Smt. Sunita Krishnani 50,000 Cheque
12 Shri Vinod Bholani 1,00,000 Cheque
Though the assessee furnished confirmations from the aforesaid depositors, the AO asked the assessee to produce these depositors for examination in order to ascertain their identity and creditworthiness as also the genuineness of the transactions. Of the aforesaid 12, the assessee produced only 8 persons mentioned at Sr. No. 1, 3, 5 ,6, 8 and 10 to 12. The remaining depositors except Shri Pukhraj Tailor, to whom summons u/s 131 of the Act were issued, could not be traced out at the address given by the assessee.
6.1 Since Shri Pukhraj Tailor[sl. No. 7] denied having given any deposit to the assessee in a statement recorded u/s 131 of the Act and the assessee did not offer any explanation, the AO added the entire amount of Rs. 15,000/-stated to have been received from the said person u/s 68 of the Act.
ITA No.3360 & 3288/Ahd/2004 6Shri Uumesh Krishnani 6.2 As regards Smt. Anita Bhoolani[sl. No. 4], Smt. Rajuben Darak[sl. No.9] and Shri Anil Himmatramka[sl. No.2], the assessee could not produce these depositors nor Shri Anil Himmatramka could be found at the address given by the assessee. In the absence of identity and creditworthiness of these persons nor even genuineness of transactions having been established, the AO added the amount shown in their names u/s 68 of the Act, resulting in addition of Rs. 1,30,000/-.
6.3 In respect of deposit in the name of Shri Assandas Merchandani[sl. No.1], the assessee produced the said depositor before the AO, but he could not substantiate his claim regarding the amount withdrawn from his NRE Account nor could furnish any evidence of his savings. Accordingly, the AO added an amount of Rs. 3,50,000/- shown in his name.
6.4 In respect of Shri Akshay Biswal[sl. No.3], though he was stated to be employee of the assessee, no salary income was shown by him. The amount of Rs.75,000/- given to the assessee was stated to be out of cash deposited in his bank account on the same day. No satisfactory explanation was given for source of the said cash. Therefore , an amount Rs. 75,000/- shown in his name was also added.
6.5 Smt. S. P. Shah[sl. No.10], wife of an ex-employee of the assessee, though stated to be running beauty parlour, did not maintain any books of accounts nor could satisfactorily explain the source of Rs.1,00,000/- deposited in her bank account. Accordingly, the amount of Rs. 1,00,000/- was added.
6.6 In case of Smt. Neha Mahesh Khabrani[sl. No.5], she is stated to be running tuition classes and could not explain the source and availability of cash amounting to Rs.1,05,000/- deposited in her bank account. Therefore, the AO added the amount of Rs. 50,000/- shown in her name.
ITA No.3360 & 3288/Ahd/2004 7Shri Uumesh Krishnani 6.7 As regards Shri Vinod Bholani[sl.no. 12] , brother-in-law of the accountant of the assessee and employee of the proprietary concern of the wife of the assessee, no apparent means to save huge amount of Rs.1,00,000/- deposited in his bank account on the date of advancing the loan to the assessee was shown. As a result, amount of Rs. 1,00,000 was added.
6.8 Shri Naresh Kumar Goyal[sl. No.6], though filed return declaring income of Rs. 51,401/- for the AY 2001-02, source of cash of Rs.85,000/- deposited in his bank account was not explained, resulting in addition of Rs.50,000/-.
6.9 Smt. Rachna Lakhani[sl. No.8] , wife of the Accountant of the assessee stated to be stitching ladies garments, could not explain source of Rs.50,000/- deposited in her bank account on the date of advancing loan to the assessee and therefore, the amount of Rs. 50,000/- was added..
6.10 Likewise Smt. Sunita Krishnani[sl. No.11], housewife and sister-in-law of the assessee, was not assessed to tax nor could not explain the source of Rs.50,000/- deposited in her bank account on the date of advancing the loan to the assessee, resulting in addition of Rs.50,000/-.
6.11 In the light of the aforesaid facts, the AO added the entire amount of Rs.9,70,000/- shown in the name of the aforesaid creditors u/s 68 of the Act besides interest of Rs.61,774/- on the said deposits.
7. On appeal, the learned CIT(A) after considering the submissions of the assessee and having a remand report from the AO, concluded as under:
"9. As regards cash credits, I have perused the reasons for making the addition and also the submissions of the appellant in this regard. My finding in respect of the creditors is as below:ITA No.3360 & 3288/Ahd/2004 8
Shri Uumesh Krishnani
(a) Shri Pukhraj Tailor: The creditor appeared before the Assessing Officer and denied having deposited any money with the appellant. He is not assessed to tax also. In view of the denial of the creditor, the same is treated as bogus cash credit and the addition of the cash credit along with interest thereon is confirmed.
(b) Anita Bholani: The creditor was not produced before the AO for examination of the cash credit she is also not assessed to tax.
Therefore, in absence of establishment of identity of the creditor, the credit is held to be non-genuine and her alleged credit along with interest is held to be rightly held as bogus and liable for addition. Accordingly addition is confirmed.
(c) Rajuben Darak: The creditor did not appear before the A. O. in response to notice u/s. 131. Thus the identity and creditworthiness is not established. The addition on the account is therefore confirmed in respect of this creditor.
(d) Anil Himmat Ranka: The creditor did not appear before the A. O. in response to notice u/s. 131 of the Act and his whereabouts are not known. In view of this fact identity and creditworthiness could not be established. Therefore, the cash credit in the name of Anil HImmat Ranka along with interest is also held to be non- genuine and liable for addition u/s. 68 of the I. T. Act.
(e) Assandas Mirchandani: In fact, from the records it is found that this creditor had made the deposit of only Rs.1,75,000/- on 04.04.2000 out of which sum of Rs.1,00,000/- lakh was repaid to him on 25.04.2000 and Rs.75,000/- on 27.04.2000. Again sum of Rs.1,75,000/- was deposited by him on 17.06.2000 which was repaid to the creditor on 09.08.2000. All transactions are through banking channel. Thus, the deposit is only of Rs.1,75,000/- and not Rs.3,50,000/- as mentioned and added by the AO. The creditor was in Dubai for 5 years and had brought his earnings to India out of which deposit of Rs.1,75,000/- was made by him. He has filed a salary certificate from which it is found that he was getting salary of 1800 dirham per month and after paying 300 dirham for lodging and boarding, net salary was 1500 dirham/month. He was working with International Traders (ME) Ltd., owner of Cosmos.
As regards withdrawal of Rs.1,75,000/-, it has been explained that he had made fixed deposit of Rs.1,75,000/- in the Bank and after some time he has transferred to money to Ajmer Bank from Surat bank. On verification of NRO A/c No.6634 Canara ITA No.3360 & 3288/Ahd/2004 9 Shri Uumesh Krishnani Bank Ajmer it is found that, the creditor who is relation of the appellant had given loan of Rs.1,04,000/- on 31.10.98 and Rs.51,000/- on 04-01-1999. Again Rs.55,000/- was given on 24.08.99. Thus, he has been giving loan to the appellant since earlier years. In this year also immediate source of credit has come through Banking Channel. Therefore, in view of the fact that the creditor has proved his identity & credit worthiness, the loan is treated to be genuine & the addition made by the A. O. is deleted.
(f) Akshay Biswal: The Assessing Officer has made the addition of credit of Rs.75,000/- in his name on the ground that he had deposited cash of Rs.75,000/- before issue of the cheque of Rs.75,000/- in favour of the appellant and his income of about Rs.51,000/- was too meager for giving loan of Rs.75,000/-. In this regard, contention of the appellant is that he is assessed to tax and is having income since several years. He and his brother Ajay Biswal are staying together and combined income of the two is more than Rs.1,00,000/-. The capital of both the brothers is more than Rs. 3 lakhs each. Therefore, it was possible to make deposit of Rs. 75,000/- in the bank and give credit of Rs.75,000/.- to the appellant. From the balance sheet of both the brothers, it is found that their capital is more than Rs.3 lakhs each, both are assessed to tax.
The creditor has admitted before the Assessing Officer, that he had given loan to the appellant and was assessed to tax. From the Balance Sheet, I find that the name of Swami Enterprises is appearing in the creditor's balance sheet and interest of Rs. 7,990/- has been shown to have been received from the appellant. From the capital of the appellant, it was possible to deposit cash of Rs.75,000/- and give the same to the appellant. In view of the fact that the creditor is assessed to tax, in view of Gujarat High Court decision in the case of Rohini builders and other case laws cited by the appellant's counsel, the addition of Rs.75,000 U/s 68 of the I. T. Act is deleted.
(g) Smt. S. P. Shah: She had filed return of income at Rs.62,,626/-. The income is from Beauty Parlour Training. She could tell only two names whom she had given training, therefore, the Assessing Officer observed that it was not possible to believe that a lady giving training for parlor will not remember names of 5 to 10 persons when she was doing it since several years. The Assessing Officer has also mentioned that she could not remember the names of the persons from whom she had received sum of Rs. 1 lakh out of which loan was given to the ITA No.3360 & 3288/Ahd/2004 10 Shri Uumesh Krishnani appellant. Therefore, the Assessing Officer made addition of Rs.1 lakh as unexplained cash credit U/s 68 of the I. T. Act. In this regard, it has been explained that she is assessed to tax. Her husband is also filing return showing income of Rs.70,664/-. Thus total income of wife and husband is Rs.1,33,306/- which has not been considered by the Assessing Officer. It is also mentioned before me that during the course of personal examination by the Assessing Officer she had explained that the immediate source of the loan given to the appellant was the receipt back of the loan given to 3 other persons whose cheques were deposited in the bank account. From the statement, it is found that in reply to Q. No.11 she has given name of 4 persons as Bharat Jauantilal, Ketal Sanghani, Kadambhai & Hitesh Rajkamal from whom she received back Rs.50,000/- through cheque. For another receipt of Rs.50,000/- she could remember only one name i.e. Barut Sanghati. On perusal of her bank account, her statement before the Assessing Officer, the income of her husband and also capital account, it is held that the credit has to be treated as genuine, since she is assessed to tax and having capital of more than the loan given. She has also explained the source of the credit as receipt back of money given to certain persons. She could not remember a few names from whom she had got back the money will not render the credit as non genuine.
(h) Neha M Khabrani: She has given loan of Rs.50,000/- out of her income of running stitching & Yoga classes. She files return of income showing income from these sources. The Assessing Officer found that she had given loan of Rs.55,000/- to her husband also which made the total loan of Rs.1,05,000/-. He held that it was not possible to give so much loan out of her income. Cash was deposited before issue of cheque in each case. During her examination she could not properly explain the availability of cash, therefore, the Assessing Officer treated the credit to be non-genuine. Before me, it has been stated that she is assessed to tax and has admitted that she advanced the loan to the appellant, therefore, the credit should be treated to be genuine. She also explained the source of income & the person from whom she learnt this art. On examination of the capital account, it is found that she had opening capital of Rs.1,30,309/- and closing capital of Rs.1,91,292/- and she is regularly assessed to tax. She has filed return of income at Rs.82,240/-. Since she is assessed to tax and has more capital than the loan given during the year, it is held that the credit is genuine. Simply because cash was deposited before issue of ITA No.3360 & 3288/Ahd/2004 11 Shri Uumesh Krishnani cheque cannot make the credit non-genuine on the facts of the case.
(i) Naresh Goyal: Before the Assessing Officer he admitted of having given loan of Rs.50,000/- to the appellant. He had shown total income of Rs.51,401/-it was stated that the cash deposited in the bank amounting to Rs.85,000/- was lying with him since so many years and out of this cash he gave loan to the appellant. The Assessing Officer disbelieved the statement and treated the credit to be non-genuine. Before me, it has been stated that he is assessed to tax and his PAN was given to the Assessing Officer and since he has admitted that he gave the loan to the appellant, the credit has to be treated to be genuine. It is also stated that the income of his wife is Rs.57,146/- and she is also assessed to tax. Acknowledgement for filing return by wife is also filed before me. The wife had opening capital of Rs.2,27,028/- during the year as per the accounts filed before me. It is also stated that Shri Goyal was depositing his cash in his Bank Account since several earlier years. He had brought forward deposit of Rs. 2,07,421 as on 10-8-1999. He has been depositing cash and making withdrawal as is apparent from his Bank account. It is contended that the money deposited with the appellant has been repaid to him also through account payee cheque and has been credited in the account at Rs.58,100/-.
On considering the statement of the creditor, the fact that he had deposit of Rs.2,07,421/- as on 10-08-1999 and also the fact that he is assed to tax and the payment and receipt is through account payee cheque, the credit is treated to be genuine. From his account, it is found that he had opening capital of Rs.2,22,260 which was enough to give loan to the appellant. He has also disclosed interest income ion his return which proves the credit.
(j) Rachna Lakhani: She is assessed to tax, she admitted before the Assessing Officer that she had given loan of Rs.50,000/- to the assessee. Her opening capital is Rs.1,59,990/- and closing capital is Rs.2,25,505/-. The name of the appellant is appearing in her balance sheet and she has shown interest income from the appellant. Her income is about Rs.83,390/- and her husband's return has been filed at income of Rs. 91,531/-. All these facts prove her creditworthiness. Therefore, on the facts, the credit is treated to be genuine.
(k) Sunita Kishnani: She is sister in law of the assessee and is not assessed to tax. She deposited cash of Rs. 50,000/- in her A/c.
ITA No.3360 & 3288/Ahd/2004 12Shri Uumesh Krishnani and gave loan to the assessee on the same day. As regards source of Rs.50,000/- it was stated before the A. O. that she had received gift from her sister-in-law living abroad in 1996 and 1998 and out of the gift amount the credit was given.
The appellant has submitted before me the proof of the gift received on 06.04.98 of Rs.19,625/- and on 04.09.1998 of Rs.21,153 ( i. e. US dollar 1000) on examination of the Bank account, it is found hat she had withdrawn cash out of the gift leaving balance of Rs.22872/- since September, 1998. She deposited cash of Rs.50,000/- on 8-11-2000 and issued cheque of Rs.50,000/- on 13-11-2000. It is contended that there is a proof that at least she had Rs.22,872/- which could be given to th4e appellant, therefore, the credit should be treated as genuine. The contention of the appellant is not acceptable because the balance of Rs.22,872/- remained with the alleged creditor and she gave credit of Rs.50,000/- out of cash deposit made by her for which she could not explain the source. From the facts, it can be inferred that cash introduced in the bank account belonged to the appellant himself. The alleged creditor is also not assessed to tax. Therefore, on these facts, the credit of Rs.50,000/- is treated to be non genuine.
(l) Vinod Bholani: The creditor is assessed to tax, the creditor filed PAN and other relevant details before the Assessing Officer and accepted having given the loan still the Assessing Officer held that salary income along with his interest income was only Rs.68,736/- then how he could give credit of Rs. 1 lakh.
The Assessing Officer accordingly treated the loan to be non genuine. It has been submitted before me that the creditor is having income since so many years but the Assessing Officer has not treated the credit to be genuine looking to the income of only one year. It is also submitted that the creditor had given loan to four persons as below in the earlier year:
Name Amount(Rs.)
Trilok Lakhani 17,700
Jaiprakash Lakhani 17,700
Ashok Lakhani 17,400
Hariom Enterprise 20,000
Total 72,800
The above named persons returned the loan to the creditor and the same along with income of the year was given to the ITA No.3360 & 3288/Ahd/2004 13 Shri Uumesh Krishnani appellant. This fact is verifiable from the Balance Sheet of the earlier year and this year. Based on these facts the credit in the name of Shri Vinod Bholani is also treated as genuine.
In view of the above discussions, the credits in the names of Pukhraj Tailor, Anita Bholani, Rajuben Darak, Anil Himmat Ranka and Sunita Kishnani are treated to be non genuine and additions made by the Assessing Officer in respect of these persons are confirmed.
The other credits are treated to be genuine and the additions made in respect of the other creditors are deleted. The addition on account of interest in respect of these genuine credits is also deleted. For the purpose of allowing the cash credits, reliance has been place on the decision in the following cases.
Rohini Builders Vs. DCIT 76 TTJ (Ahd) 521 Sarogi Credit Corpn. Vs. CIT[ Patna], 103 ITR 344."
8. The assessee is now in appeal against the aforesaid findings of the learned CIT(A), confirming the addition of Rs.1,95,000/- and interest of Rs.23,714/- thereon while the Revenue is in appeal against the addition deleted by the learned CIT(A) to the extent of Rs.7,75,000/- and interest of Rs. 38,060/- thereon. The learned AR on behalf of the assessee reiterated their contentions before the learned CIT(A) while the learned DR supporting the findings of the AO.
9. We have heard the rival contentions and gone through the facts of the case. It is well settled that amount credited in the books of the assessee can be charged to income-tax u/s 68 of the Act only where the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not satisfactory. Satisfactoriness of the explanation has to be appreciated on objective considerations, material available on record, peculiar facts of the case and surrounding circumstances. There is no dispute to the well settled legal proposition that not only identity is required to be established, but also genuineness of the loan transaction and creditworthiness of the loan creditors, is equally important to be satisfied. In the instant case, we find that the neither before the AO nor before the ld. CIT(A), the assessee could establish either ITA No.3360 & 3288/Ahd/2004 14 Shri Uumesh Krishnani creditworthiness of aforesaid creditors Shri Pukhraj Tailor, Anita Bholani, Rajuben Darak, Anil Himmatranka and Sunita Kishnani nor genuineness of the transactions with them. Even before us, the ld. AR could not improve upon the case of the assessee nor placed before us any material, contrary to the findings of the learned CIT(A) . In these circumstances, we have no alternative but to uphold the findings of the ld. CIT(A) in sustaining the addition of Rs.1,95,000 and interest of Rs.23,714/- thereon in respect of aforesaid five creditors.
10. As regards remaining creditors, we find that the ld. CIT(A) has objectively analysed the material on record and accepted the cash credits in their names.The Revenue have not placed before us any material in order to take a different view in the matter of creditworthiness of Shri Asandas Merchandani, Akshay Biswal, Smt. S. P. Shah, Smt. Neha Mahesh Khabrani, Naresh Kumar Goyal, Rachhna Lakhani, and Vinod Bholani or genuineness of transactions with them. In these circumstances, we have no hesitation in upholding the findings of the learned CIT(A).
11. In view of the foregoing, ground no.2 raised by the Revenue in their appeal and ground no.1 raised by the assessee in his appeal are dismissed.
12. Next ground No. 2 in the appeal of the assessee relates to disallowance of Rs.3846/- out of staff welfare expenses , Rs.2213/- out of office expenses, Rs.3,263/- out of mobile expenses and Rs.9,885/- out of petrol expenses .The AO disallowed 20% of the total expenses debited under the aforesaid heads on account of personal use of mobile and in the absence of genuineness of the expenses, for want of bills debited under the head staff welfare expenses, office expenses and petrol expenses.. On appeal the learned CIT(A) concluded that disallowance being reasonable,is sustained.
13. Before us, the learned AR on behalf of the assessee did not place any material for taking a different view in the matter. We find that the disallowance sustained by the learned CIT(A) is reasonable in the facts and circumstances of ITA No.3360 & 3288/Ahd/2004 15 Shri Uumesh Krishnani the case. Therefore, ground no.2 raised in the appeal of the assessee is dismissed.
14. Ground no.3 in the appeal of the Revenue being general in nature while no additional ground having been raised in terms of the residuary ground no. 3 in the appeal of the assessee, both these grounds are dismissed.
15. In the result, both the appeals are dismissed.
Order pronounced in the open Court on 7th August,2009 Sd/- Sd/-
(H. L. KARWA) (A.N. PAHUJA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Date: 7th August,2009
LAKSHMIKANT/
Copy of the order forwarded to:
1. The assessee
2. Income Tax Officer Ward 2 (3), Room no. 205B,Aayakar Bhavan,Majura Gate, Surat
3. CIT(A)-II,Surat
4. The CIT concerned
5. The D.R. ITAT, Ahmedabad,
6. Guard File BY ORDER DR / AR, ITAT, Ahmedabad