Income Tax Appellate Tribunal - Jaipur
Shri Surendra Kumar Saini, Jaipur vs Ito, Ward 6-4, Jaipur on 31 July, 2017
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 529/JP/2015
fu/kZkj.k o"kZ@Assessment Year :2010-2011
Shri Surendra Kumar Saini, cuke The ITO-Ward 6(4), Jaipur.
C-20, Vijay Vihar Colony, Vs.
Naya Khera, Amba Bari,
Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AQOPS0504R
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No. 517/JP/2015
fu/kZkj.k o"kZ@Assessment Year :2010-2011
The ITO-Ward 6(4), Jaipur. cuke Shri Surendra Kumar Saini,
Vs. C-20, Vijay Vihar Colony, Naya
Khera, Amba Bari, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AQOPS0504R
vihykFkhZ@Appellant izR;FkhZ@Respondent
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s Assessee by : Shri Anil Kumar Sharma (C.A.)
jktLo dh vksj ls@ Revenue by : Shri R.A. Verma (Addl.CIT)
lquokbZ dh rkjh[k@ Date of Hearing : 10/07/2017
mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 31/07/2017
vkns'k@ ORDER
PER: VIKRAM SINGH YADAV, A.M. 2 ITA No. 529 & 517/JP/2015 Shri Surendra Kumar Saini Vs. ITO, Jaipur These are cross appeals filed by the assessee and Revenue against the order of Ld. CIT (A)-2, Jaipur dated 23.03.2015 for A.Y. 2010-11 wherein the respective grounds of the appeal are as under:-
529/JP/15 (Ground of Assessee's appeal):-
"Under the fact and circumstances of the case the ld. CIT(Appeal) is not justified in estimating the GP rate of 11% against that of 8.53% declared by the assessee and that of 12.33% applied by the AO and thus upholding trading addition of Rs. 5,23,026/- made to returned income.
2. Under the fact and circumstances of the case the ld. CIT(Appeal) is not justified in confirming the addition of Rs. 200000/- towards unsecured loan taken from Shri Bajraang Lal, holding the same as unexplained u/s 68 of IT Act, 1961.
3. Under the fact and circumstances of the case the ld. CIT(Appeal) is justified in confirming the addition of Rs. 250000/- towards unsecured loan taken from Shri Pramod Kumar, holding the same as unexplained u/s 68 of IT Act 1961.
4. Under the fact and circumstances of the case the ld. CIT(Appeal) is justified in confirming the addition of Rs. 1538160 towards trading liability payable to M/s S.D Enterprises, holding the same ceased to exist u/s 41(1) of IT Act 1961.
5. Under the fact and circumstances of the case the ld. CIT(Appeal) is justified in confirming the addition of Rs. 75060/- towards disallowance of Bonus payable, u/s 43B of IT Act 1961.
6. Under the fact and circumstances of the case the ld. CIT(Appeal) is justified in confirming the addition of Rs. 60000/- towards disallowance of Salary paid to Shri Bajrang Lal.
3 ITA No. 529 & 517/JP/2015Shri Surendra Kumar Saini Vs. ITO, Jaipur 517/JP/15 (Ground of Revenue's appeal):-
"1. Whether on the facts and in the circumstances of the case and in law the ld. CIT(Appeals) erred in deleting the trading addition of Rs. 2,82,743/-
2. Whether on the facts and in the circumstances of the case and in law the ld. CIT(Appeals) erred in deleting the trading addition of Rs. 19,68,420/- on account of unexplained cash credit in the form of unsecured loans from M/s Supriya Industries, M/s R.R. Steels and M/s Stamping.
3. Whether on the facts and in the circumstances of the case and in law the ld. CIT(Appeals) erred in deleting the trading addition of Rs. 20,46,272/- on account of unproved sundry creditor, M/s Supria Industries."
2. Regarding ground No. 1 of the assessee and ground No.1 Revenue, briefly the facts of the case are that the appellant is engaged in the business of manufacturing and supplying of Electric Transformers to various Electricity Boards/ Corporations, in the name and style of M/s Vidyut Rekha Transformers and Electrical. For the year under consideration, the appellant declared G.P. rate of 8.53% on total sales of Rs. 2,12,58,859/- against that of 10.3% on sales of Rs. 1,17,61,406/- in preceding year. The AO rejected the book results and estimated GP of the assessee by applying preceding year GP rate of 12.33% on declared turnover and thereby made addition of Rs. 8,05,769/- to returned income. The ld CIT(A) sustained the rejection of books of accounts and restricted the G.P rate to 11% against 12.33% estimated by the AO. Against the said order of ld CIT(A), both the assessee and the Revenue are in appeal before us.
4 ITA No. 529 & 517/JP/2015Shri Surendra Kumar Saini Vs. ITO, Jaipur
3. During the course of hearing, the ld AR submitted that during the course of assessment proceedings, the assessee vide letter dated 13.09.2012 explained that during the relevant previous year the tender prices of the transformers and meter Box have been significantly declined and as provided in clause G of the purchase order for the relevant previous year, the tender prices were subject to further reduction.
Thereafter, the assessee vide further letter dated 18.02.2013 submitted date and bill wise details of transformers supplied/sold during the relevant previous year and claimed average sales price of Rs. 35490/- per transformer (even below the tender price of Rs. 38509/-) against that of Rs. 40881/- in preceding year marking decline of Rs. 5391/- per transformer i.e. 13.18% over the preceding year.
The assessee did not deny the fall in the prices of raw material and fairly submitted before the AO that the same not been declined as compared to reduction in selling prices.
The AO without disputing/contradicting the claim of the assessee towards such decline in sale prices alleged the assessee for inflating the Job Work charges paid to Shri Parmendra Kumar Saini and discrepancies in valuation of closing stock. The AO on the basis of statements of Shri Parmendra Kumar Saini recorded u/s 131 of the Act, held that the assessee has claimed Job Work Charges of Rs. 8,43,000/- (wrongly mentioned to be Rs. 8,12,315/- in the assessment order) paid to Shri Parmendra Kumar Saini against that of Rs. 3,00,000/- estimated by the AO.
5 ITA No. 529 & 517/JP/2015Shri Surendra Kumar Saini Vs. ITO, Jaipur Thus the AO rejected the book results and estimated GP of the assessee by applying preceding year GP rate of 12.33% and thereby made addition of Rs. 8,05,769/- to returned income (i.e. estimated GP of Rs.26,21,217/- @ 12.33% on turnover of Rs. 2,12,58,859/- less declared GP of Rs. 18,15,448/-). The ld. CIT(A) vide impugned order dated 23.03.2015 sustained the rejection of books of accounts, however restricted the GP rate to the extent of 11% against that of 12.33% applied by the AO and thus confirmed addition of Rs. 5,23,026/- and deleted the same to the extent of Rs. 2,82,743/-.
The gross receipts from sales and repairing of Transformer pertain to Electricity Boards/Corporations and the same is fully verifiable from sales bills, and other relevant records produced before the AO. The purchase shown in the trading account is supported by purchase bills, confirmation, addresses PAN and TIN of the suppliers etc. and the AO has not found any defect therein. The assessee has maintained stock register and details of consumption for the purpose of manufacturing and repairing of Transformers. The substaintial decline in selling price of Rs. 5391/- per transformer being 13.18% over the preceding year has not been disputed by the AO and ld. CIT(A) has recorded a clear cut finding of this effect. The only serious allegation against the assessee is that the job work charges paid to Shri Parmendra Kumar Saini have been inflated and ld. CIT(A) specially influenced from the same has estimated the GP rate of 11%.
The assessee during the relevant previous year has claimed total job work charges/labour charges/ and wages of Rs. 14,05,699/- comprising Rs. 8,43,000/- paid to Shri Parmendra Kumar Saini and balance of Rs.
6 ITA No. 529 & 517/JP/2015Shri Surendra Kumar Saini Vs. ITO, Jaipur 5,62,699/- paid to others against gross receipts of Rs. 16,67,891/- from corresponding contract work of repairing leaving a margin of Rs. 2,62,192/- being approx 16% of receipts. The above said Parmendra Kumar Saini during the relevant previous year has executed job work in respect of total 843 transformers comprising 401 transformers manufactured and 442 transformers repaired @ 1000/- per transformer resulting in job work charges of Rs. 8,43,000/-. The assessee against the total job work charges 8,43,000/- payable of Shri Parmendra Kumar Saini, after deduction of TDS of Rs. 17,246/- paid Rs. 4,32,900/- on different dates during the relevant previous year and balance Rs. 4,10,100/- remained payable at the end of the year. The assessee submitted the return of income of Shri Parmendra Kumar Saini wherein Shri Parmendra Kumar Saini has disclosed the gross receipts of Rs. 8,43,000/-, sundry debtors of Rs. 4,10,100/- and TDS of Rs. 17,246/-, as claimed by the assessee. The statement of Shri Parmendra Kumar Saini as referred by the AO have been recorded behind the back of assessee and without giving opportunity of cross examination and providing copy of the same.
The turnover of assessee during the relevant previous year has been increased to Rs. 2,12,58,859/- against that of 12026143/- in preceding year i.e. almost double of the same and the assessee has achieved the said turnover by effecting the sale at substantially deceased selling price and lower profit margin. When the fall in gross profit is fully explained no trading addition is warranted towards fall in GP rate. Thus ld. CIT(A) is not justified in estimating GP rate of 11% being heavily influenced by alleged inflation of job work charges. Therefore, it is humbly requested 7 ITA No. 529 & 517/JP/2015 Shri Surendra Kumar Saini Vs. ITO, Jaipur to restore the GP rate declared by the assessee and delete the trading addition of Rs. 5,23,026/- sustained by ld. CIT(A) and dismiss relevant ground of the Department.
4. We now referred to the finding of the ld. CIT(A) as held as under:-
"4.4 I have perused the facts of the case, the assessment order, remand report and the submissions of the appellant. The appellant is engaged in the business of manufacture and supply of transformers (to various Electricity Boards and corporations) in the name and style of Vidyut Rekha Transformers & Electricals. During this year, its G.P. rate has declined to 8.53% as against 12.33% in the preceding year (on the basis of a re-casted trading account for a like to like comparison. The Assessing Officer has rejected the books of accounts on the following grounds; on which the explanation of the appellant is given along side-
(a) The valuation of opening stock has been done as per purchase bills of the preceding year whereas the valuation of closing stock has been done on the basis of average cost price.
The appellant has denied this.
(b) On the basis of inquiries got conducted by the Assessing Officer, it was seen that job-work charges paid to Shri Pramendra Kumar of Rs. 8,12,315/- were inflated and was genuine to the extent of only around of Rs. 3,00,000/- (for job-work charges of 300 transformers @ Rs. 1000/- per transformer). Also, the signature and the spelling of the name in the vouchers of the assessee were different from the signature in the statement recorded u/s 131 of the I.T. Act.
The appellant has explained that the job-work charges pertain to 843 transformers and not 300 transformers. Also, the appellant 8 ITA No. 529 & 517/JP/2015 Shri Surendra Kumar Saini Vs. ITO, Jaipur has submitted copy of return of Shri Pramendra Kumar filed on 29.03.2011 in which gross receipts of Rs. 8,43,000 are disclosed.
The assessing Officer has estimated that this person has repaired 300 transformers during the year on the basis of the statement recorded of Shri Pramendra Kumar wherein he stated that he repaired an average of 25 transformers per month. This coupled with the fact that the vouchers maintained by the appellant have been fabricated since they do not contain the actual signature of Shri Pramendra Kumar, shows that the expenditure on job-work charges to Shri Pramendra Kumar, are not fully genuine and are inflated.
(c) Labour charges and carriage inward charges have been incurred in cash and are not verifiable.
In view of the above defects, which the appellant has not been able to fully explain during appellate proceedings, the rejection of books of accounts u/s 145(3) of the I.T. Act, is upheld. Ground No. 2 is dismissed.
5.1 The Assessing Officer has estimated the trading results of the assessee by estimating the G.P. rate at 12.33% which was the G.P. rate disclosed by the assessee in A.Y. 2009-10. The Assessing Officer has held that the contention of the assessee that reduction in the selling rate of the transformers, in this year as compared to the preceding year does not lead to reduction in gross profit margin as the rate of input costs have also decreased during the year. It has also been stated that the BSR rates of electricity Boards/Vidyut Vitran Nigam allow for a profit margin of 10% to 15%. It was also held that the G.P. rate in the books of accounts has decreased due to the defects mentioned above.
5.2 The appellant has explained that the tender rate of the transformers has decreased from Rs. 40,881/- per transformer in A.Y. 2009-10 to Rs. 38,509/- in this previous year leading to a 9 ITA No. 529 & 517/JP/2015 Shri Surendra Kumar Saini Vs. ITO, Jaipur decline of 5.8%. It has been further stated that the average rate at which the appellant has sold the transformers (at Rs.35,505/-) is much below the tender rate. The appellant has admitted that the rate of input prices has declined during the year but has stated that it has not declined to the same extent as the decrease in its selling price. Both the appellant and the Assessing officer have not given a computation of the percentage decline in the input prices as compared to the preceding year. It has not been disputed by the Assessing Officer that the selling price of the transformers has declined to Rs. 35,505/- as compared to Rs. 40,881/- in the preceding year, which is a substantial decline. The Assessing officer has stated that BSR rates of Electricity Boards/Vidyut Nigams allow for a profit margin of 10% to 15%. Looking to the facts of the case, the decline in the selling rate of the transformers, the BSR rates and the defects in the books of accounts, more specifically the inflation in job-work charges, I estimate the G.P. rate at 11% of the turnover, as against 12.33% made by the Assessing Officer. Therefore, the trading addition made by the Assessing Officer, is restricted accordingly. Ground No. 3 is partly allowed."
5. The ld. DR relied on the order of the Assessing officer and further submitted that there is basis given by the ld CIT(A) for estimating the G.P rate of 11% as against 12.33% done by the AO.
6. We have heard the rival contentions and perused the material available on record. The principle contention raised by the ld AR is that the Revenue is wrong in holding that job work charges paid to Shri Parmendra Kumar have been inflated and thus the main basis for rejection of books of accounts cannot be sustained. In support, he has submitted that the job work charges paid to Shri Parmendra Kumar amounting to Rs 8,43,000 are in relation to transformer repair work 10 ITA No. 529 & 517/JP/2015 Shri Surendra Kumar Saini Vs. ITO, Jaipur which has been executed by the appellant and the revenue in respect of which, has been duly disclosed in the return of income. In other words, there is direct correlation between the cost incurred and the revenue earned which the AO has failed to appreciate. Further, it was submitted that Shri Parmendra Kumar has filed his return of income where he has disclosed income of Rs 8,43,000. Regarding statement of Shri Parmendra Kumar recorded under section 131 of the Act, the ld AR submitted that the appellant has not been provided an opportunity to cross examine and hence, the same cannot be used against him. Per contra, the ld DR drawn our reference to the findings of the AO regarding statement of Shri Parmendra Kumar and the fact that the vouchers maintained by the appellant are not reliable as signatures are not tallying and apparently fabricated. In our view, the issue for consideration is whether the services of Shri Parmendra Kumar has been availed by the assessee during the year and if yes, to what extent. Whether he has rendered services in respect of 843 transformers as claimed by the assessee or in respect of 300 transformers as noted by the Assessing officer based on statement recorded of Shri Parmendra Kumar. Further, what is the correlation of such services with the work order (repair jobs) executed by and revenue reported by the assessee. All these questions require further examination and not enough material is on record for us to take a view in the matter. We are accordingly setting aside the matter to the file of the AO to examine the same afresh as per law after providing reasonable opportunity to the assessee. The grounds taken by the assessee and the revenue are disposed off accordingly.
11 ITA No. 529 & 517/JP/2015Shri Surendra Kumar Saini Vs. ITO, Jaipur
7. In respect of ground No. 2, 3, and 4 of the assessee's appeal and ground No. 2 and 3 of the Revenue's appeal, briefly the facts of the case are that the AO during the course of assessment proceeding observed that the assessee has claimed unsecured loans of Rs. 27,18,420/- and trading liability of Rs. 35,84,432/- as sundry creditors for supply of good/ raw material, comprising:
(i) M/s Supriya Industries unsecured loan of Rs. 10,20,920/- and trading liability of Rs. 20,46,272/-
(ii) M/s R.R. Stamping, unsecured loan of Rs. 3,07,500/-.
(iii) M/s R.R. Steel, unsecured loan Rs. 6,40,000/-.
(iv) Shri Bajarang Lal Dhoot, unsecured loan Rs. 5,00,000/-.
(v) Shri Pramod Kumar, unsecured loan of Rs. 2,50,000/- and trading liability of Rs. 15,38,108/- in the name of his prop. concern M/s S.D. Enterprises.
The AO held the unsecured loans of Rs. 27,18,420/- from the above said parties as unexplained cash credit u/s 68 IT Act 1961. The AO also held the trading liability of Rs. 35,84,432/- (M/s Supriya Industries Rs. 20,46,272/- and M/s S.D. Enterprises Rs. 15,38,108/-) towards sundry creditors as unproved and thus ceased to exist u/s 41(1) of the Act.
The ld. CIT(A) deleted additions in respect of (i) M/s Supriya Industries, unsecured loan of Rs. 10,20,920/- and trading liability of Rs. 20,46,272/-. (ii) M/s R.R. Stamping unsecured loan of Rs. 3,07,500/-
(iii) M/s R.R. Steel, unsecured loan Rs. 6,40,000/- and (iv) Shri Bajrang 12 ITA No. 529 & 517/JP/2015 Shri Surendra Kumar Saini Vs. ITO, Jaipur Lal Dhoot, unsecured loan to the extent of Rs. 3,00,000/-. The ld. CIT(A) however sustained additions in respect of (i) Shri Bajrang Lal to the extent of Rs. 200000/- and (ii) Shri Parmod Kumar, unsecured loan of Rs. 250000/- and trading liability of Rs. 15,38,108/- in the name of his prop. Concern M/s S.D. Enterprises.
8. The party/person wise details and respective submission of the ld AR is as follows:
M/s Supriya Industries unsecured loan of Rs. 10,20,920/- and trading liability of Rs. 20,46,272/-:
1. The assessee submitted the confirmation letter, account statement, return of Income, audited Balance Sheet of M/s Supriya Industries along with reciprocal account statement in the books of M/s supriya Industries.
2. The audited balance sheet of M/s Supriya Industries was also collected by the AO himself u/s 133(6) of the Act wherein the collective balance of both unsecured loan of Rs. 10,20,920/- and sundry balance of Rs. 20,46,272/- being Rs. 30,67,195/- was reflecting in the name of assessee at S. No. 27 of the schedule of sundry debtors.
3. The assessee also produced Sh. Girish chand Saini prop. of M/s Supriya Industries before the AO, for his personal examination.
4. The bank statement of M/s Supriya Industries for the relevant F.Y. 2009-10 and it's account statements in the books of assessee for the subsequent F.Y. 2010-11 was also submitted before ld. CIT(A) as additional evidence which was duly admitted on record.13 ITA No. 529 & 517/JP/2015
Shri Surendra Kumar Saini Vs. ITO, Jaipur
5. The ld. CIT(A) after due examination of details and evidences available on record held that relevant additions cannot be sustained and deleted both the additions of Rs. 10,20,920/- towards unsecured loan and trading liability of Rs. 20,46,272/- in the name of M/s Supriya Industries.
M/s R.R. Stamping, (Prop. Shri Ram Parkash Saini) unsecured loan of Rs. 3,07,500/-:
1. The assessee submitted the confirmation letter, account statement in his books of accounts and return of Income of M/s RR Stamping.
2. The audited balance sheet of M/s R.R. Stamping was collected by the AO himself u/s 133(6) of the Act, wherein name of the assessee was duly appearing under the heading other advances.
3. The ld. CIT(A) after due examination of details and evidences available on record observed that the relevant amount of unsecured loan of Rs. 307500/- from M/s R.R. Stampings, has been brought forward from preceding year as opening balance and no new loan has been taken during the relevant previous year, therefore deleted addition of the same.
M/s R.R. Steel (Prop. Shri Ramesh Saini) unsecured loan of Rs. 640,000/-:
1. The assessee submitted the confirmation letter and account statement in his Books of Accounts of M/s RR Steel.
2. The ld. CIT (A) after due examination of details and evidences available on record observed that the relevant amount of unsecured loan of Rs. 640000/- from M/s R.R. Stampings, has been brought 14 ITA No. 529 & 517/JP/2015 Shri Surendra Kumar Saini Vs. ITO, Jaipur forward from preceding year as opening balance and no new loan has been taken during the relevant previous year, therefore deleted addition of the same.
Shri Bajarang Lal Dhoot, unsecured Loan Rs.500000/-:
1. The assessee disclosed unsecured loan of Rs.500000/- in the name of Shri Bajarang Lal Dhoot.
2. The assessee during the course of assessment proceedings submitted the confirmation letter and account statement in his Books of accounts for the preceding F.Y. 2008-09.
3. The return of Income of Sh. Bajrang Lal Dhoot was collected by the AO himself from the respective AO.
4. The ld. CIT (A) observed that a sum of Rs. 300000/- has been brought forward from preceding year as opening balance, therefore deleted the relevant addition to the extent of same and confirmed balance addition of Rs. 200000/-.
5. The assessee has obtained the relevant loan of Rs.200000/- by Account Payee Cheque and submitted the confirmation letter of loan provider containing his PAN and details of the transactions.
6. The AO has collected the return of income of the loan provider vide PAN as provided by the assessee and it is admitted fact that the said loan provider is assessed to Income Tax with ITO Ward-1, Jhunjhunu.
7.The appellant by producing the above said confirmation letters, PAN and return of Income of Sh. Bajarang Lal has proved the identity of the loan provider, his capacity to lend and genuineness of the transaction 15 ITA No. 529 & 517/JP/2015 Shri Surendra Kumar Saini Vs. ITO, Jaipur and thus discharged the primary burden lying upon it u/s 68 of the IT Act 1961.
8. The legal submission made subsequently in the case of Pramod Kumar and M/s S.D. Enterprises that separate addition u/s 68 cannot be made where books of accounts have been rejected and Gross/Net Profit has been estimated by application of NP rate, may kindly be considered in respect of this addition also.
9. Therefore the ld. CIT(A) is not justified in sustaining the above said loan taken from Sh. Bajarang Lal as unexplained credit within the meaning of section 68 of IT Act 1961.
Shri Parmod Kumar, unsecured loan of Rs.250000/- and Trading liability of Rs.1538108/- in the name of his prop. concern M/s S.D. Enterprises:
1. The assessee disclosed unsecured loan of Rs.250000/- in the personal name of Shri Pramod Kumar.
2. The assessee also disclosed trading liability of Rs.1538160/-as sundry creditor in the name of M/s S.D. Enterprises prop. concern of Sh.
Pramod Kumar towards purchase of goods/raw material in ordinary course of business and during the relevant previous year itself.
3. The above said unsecured loan to the extent of Rs.180000/- and trading liability to the extent of Rs.1500000/- were paid/ repaid to Sh. Pramod Kuamr and M/s S.D. Enterprises through account payee cheque on different dates in subsequent year, well before selection of the case for scrutiny vide notice dated 13.09.2011, u/s 143(2) of the Act.
16 ITA No. 529 & 517/JP/2015Shri Surendra Kumar Saini Vs. ITO, Jaipur
4. The assessee during the course of assessment proceedings submitted the confirmation letter of Sh. Pramod Kumar towards unsecured loan in his name and account statement of M/s S.D. Enterprises in his books of accounts.
5. The AO behind the back of the assessee recorded statements of Sh. Pramod Kumar u/s 131 of IT Act 1961, wherein as mentioned in the assessment order Sh. Pramod Kumar denied about the loan and trading liability claimed by the assessee.
6. The AO issued show cause notice dated 19.03.2013 to the assessee giving reference of the statements of Sh. Pramod Kumar.
7. The assessee vide letter dated 26.03.2013 submitted copy of his account statement in the books of M/s S.D. Enterprises confirmed by Sh. Pramod Kumar, (as received via E-mail) and protested before the AO that copy of statements of Sh. Pramod Kumar has not been provided to the assessee.
8. The AO in respect of confirmation M/s S.D. Enterprises submitted by the assessee alleged that the signature of Sh. Pramod Kumar on the same has been scanned from some other document and held that the denial of Sh. Pramod Kumar is more authentic.
9. Thus the AO without providing copy of the statements of Sh. Pramod Kumar and without giving opportunity of cross examination to the assessee passed the relevant assessment order dated 28.03.2013 and held:
17 ITA No. 529 & 517/JP/2015Shri Surendra Kumar Saini Vs. ITO, Jaipur
(i) Unsecured loan of Rs.250000/- in the name of Shri Pramod Kumar, as bogus u/s 68 of IT Act 1961.and---
(ii) Trading liability of Rs.1538160/- in the name of his Prop. Concern M/s S.D. Enterprises as unproved and thus ceased to exist u/s 41(1) of IT Act 1961.
10. The assessee submitted certain evidences before ld. CIT (A) as additional evidences which after obtaining remand report from the AO were duly admitted on record.
11. Thus the following documentary evidences showing genuineness of the unsecured loan of Rs.250000/- from Sh. Pramod Kumar and Trading liability of Rs.1538108/- as sundry creditors payable to his prop. concern M/s S.D. Enterprises were lying before ld. CIT (A):
S.No. Details of Evidencess PB No. 1. Confirmation of Pramod Kumar Loan A/c- as per books of 167
accounts the assessee containing PAN, date , and cheque No. of relevant amount of loan.
2. Copy of HDFC Bank statement of the assessee showing receipt 168 of cheques as contained in confirmation letter.
3. Ledger account of Parmod Kumar in the book of assessee for 169/177-85 the subsequent F.Y. 2010-11 showing repayment of loan by way of account payee cheques on different dates/ read with Bank statement of the assessee.
4. Challan No. 14 and Bill No.14 dated 12.10.2009 of M/s S.D. 170-171 Enterprises for Rs.1538160/-towards purchase of goods/raw material.
5. Ledger account of S.D. Enterprises in the Books of assessee for 172 the relevant F.Y.2009-10, showing trading liability of 18 ITA No. 529 & 517/JP/2015 Shri Surendra Kumar Saini Vs. ITO, Jaipur Rs.1538160/- at the end of the year as sundry creditor for purchase of goods during the year vide Bill No.14 dated 12.10.2009 .
6. Confirmed copy of Ledger account of assessee in the book of 173 S.D. Enterprises.(Alleged by the AO to be signed by scanning the signatures of Pramod Kumar )
7. Confirmed coy of Ledger account of assessee in the books of 174-175 S.D. Enterprises.(duly/Originally signed by Pramod Kumar received after completion of the assessment and produced as additional evidence) along with courier envelop whereby the above said confirmation received from Raipur, Chhatishgarh. The courier envelop also signed by Sh. Pramod Kumar.
8. Ledger account of SD Enterprises in the books of assessee for 176/177-186 subsequent F.Y. 2010-11. /read with Bank statement of the assessee.
9. Bank Statement of the assessee of SBBJ: 01.04.2010 TO 177-185 31.03.2011
10. Bank Statement of the assessee of HDFC Bank 14.03.2010 to 186 13.04.2010
11. The assessee also raised his objection before the ld. CIT(A) towards not providing copy of alleged statements of Sh. Pramod Kumar and opportunity of cross examination.
12.The ld. CIT(A) without properly appreciating the submission of the assessee and documentary evidences available on record has confirmed both the additions simply relying on alleged statements of Sh. Pramod Kumar.
19 ITA No. 529 & 517/JP/2015Shri Surendra Kumar Saini Vs. ITO, Jaipur
13. It is evident from the documents available on record that the assessee during the relevant previous year has obtained the unsecured loan of Rs.250000/- by way of Account Payee Cheque from Sh. Pramod Kumar and also incurred trading liability of Rs.1538160/- in favour of his prop. concern M/s S.D. Enterprises for purchase of Goods, outstanding at the end of relevant previous year.
14. Sh. Pramod Kumar in answer to Question No.7 has admitted that he has issued two cheques to the assessee for Rs.1.50 lacks and 1.00 lac on 18.02.2010, however consequently in the same answer he retracted that it was not loan and claimed that the assessee issued cheque in the name of S.D.Enterprises and the said amount was withdrawn by him to deposit in his personal Bank Account and issued cheques to the assessee.
15. Sh. Pramod Kuamr further in response to Question No.10 stated that the assessee provided loan to him in the name of M/s S.D. Enterprises and he withdrawn the same for depositing in his personal account and issued cheques in the name of the assessee. Thus the own funds of the assessee were returned to him.
16. It is evident from the ledger account of M/s S.D. Enterprises and bank statement of the assessee that the assessee has not issued any cheque in favour of M/s S.D. Enterprises after 04.06.2009 till 18.02.2010.Therefore above said claim of Sh. Parmod Kuamr is not true.
17. It is also evident that both the relevant unsecured loan and trading liability has been paid by way of account payee cheque in subsequent 20 ITA No. 529 & 517/JP/2015 Shri Surendra Kumar Saini Vs. ITO, Jaipur F.Y.2010-11, that is too before the initiation of relevant assessment proceedings vide notice dated 13.09.2011 u/s 143(2) of the Act.
18. Thus both the unsecured loan of Rs.250000/- in the name of Sh. Pramod Kumar and trading liability of Rs.1538160/-in the name of his prop. concern M/s S.D. Enterprises outstanding at the end of relevant previous year have been duly proved to be genuine.
19. When Sh. Pramod Kuamr has obtained payment of both unsecured loan and trading liability in the subsequent F.Y.2010-11 and after receiving such paymnets, his statements before the AO that he did not provided the relevant loan to the asseesse and did not own the relevant trading liability are vague, false and far from reality.
20. As admitted before the AO, Sh. pramod Kumar has not filed his return of income for the relevant previous year, therefore in his own interest made false statement before the AO and disowned the relevant unsecured loan and trading liability receivable as well as received from the assessee.
21.The AO without trying to find truth in respect of the statement of Sh. Pramod Kumar by corroborating the same from his Bank statement, Books of Accounts or otherwise, has blindly relied on his oral statements that is too without providing copy of the same to the assessee and without providing opportunity of cross examination.
22. The statement recorded behind the back of assessee without providing copy of the same and opportunity of cross examination has no evidentiary value and cannot be used against him.
21 ITA No. 529 & 517/JP/2015Shri Surendra Kumar Saini Vs. ITO, Jaipur
23. As held by Hon. Supreme Court in the case of Kishinchand Chellaram vs CIT 125 ITR 713, "It will therefore be seen that, even if we assume that this letter was in fact addressed by the manager of the Punjab National Bank Limited to the Income Tax Officer, no reliance could be placed upon it, since it was not shown to the assessee until at the stage of preparation of the supplemental statement of the case and no opportunity to cross-examine the manager of the Bank could in the circumstances be sought or availed of by the assessee. It is true that the proceedings under the Income Tax law are not governed by the strict rules of evidence and therefore it might be said that even without calling the Manager of the Bank in evidence to prove this letter, it could be taken into account as evidence. But before the Income Tax Authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the Manager of the Bank with reference to the statements made by him."
24. This Hon. Bench in the case of Ghanshyam Das Agrwal v. ITO, ITA No.1161/JP/2010,relying on various judicial pronouncemnets has categorically held that "The Assessing Officer has recorded the statement behind the back of the assessee and collected information without allowing cross examination of said Shri Sohan Lal Mali. The said Shri Sohan Lal Mali was a witness of the Income Tax Department. It was, therefore, the duty of the Assessing Officer to have allowed opportunity to the assessee by way of cross examination even though the assessee had not asked for. Without cross examination, statement as such was of no evidentiary value nor such evidence could have been 22 ITA No. 529 & 517/JP/2015 Shri Surendra Kumar Saini Vs. ITO, Jaipur used against the assessee. This view finds support from the judgment rendered by the Hon'ble Apex Court in the case of Union of India Vrs.T.R. Verma 1957 SC 882 and also in the case of Kishan Chand Chellaram Vs. CIT AIR 1980 SC 840: 125 ITR 713 (SC). It is also a trite law that witness may lie but documents do not. In the face of documentary evidence on record, oral evidence is not entitled to any weight. This finds support from the judgment rendered by the Hon'ble Apex Court in the case of Behari Lal Murarka and Ors. AIR 1978 SC 300:
1978 (1) SCC 109."
25. This Hon. Bench vide recent decision dated25.11.2016 in the case of Sharad.U.Mishra ITA No.467/JP/11, following the decision in the case of Ghanshyam Das Agrwal v. ITO (supra) has deleted the addition made on the basis of oral statements holding that:
"Now the issue which requires our consideration is whether the addition can be sustained solely on the basis of the statement of Shri Hanuman Yadav, when there is no material placed on record that Shri Hanuman Yadav has made any claim against the assessee in any court of law seeking cancellation of sale deed or filing a recovery suit. The Coordinate Bench of the Tribunal after following the ratio laid down by Hon'ble Supreme Court under the similar circumstances has held in the case of Shri Ghanshyam Das Agarwal (supra) that in the absence of any conclusive evidence the document could not have been disbelieved. The ld. D/R could not point out any binding precedent wherein it has been held that the oral statement would over ride the documentary evidence.Therefore, respectfully following the decision of the Coordinate Bench in the case of Shri Ghanshyam Das Agarwal (supra), we are of 23 ITA No. 529 & 517/JP/2015 Shri Surendra Kumar Saini Vs. ITO, Jaipur the view that the AO was not justified to make addition solely on the basis of the statement of Shri Hanuman Yadav when there was a registered sale deed and more particularly when the maker of statement has not challenged the sale deed before any court of law. It is also not placed on record whether the sale deed was executed under coercion. Therefore, considering the totality of facts of the present case, we hereby direct the AO to delete the addition. This ground of the assessee's appeal is allowed."
26. This Hon. Bench again in the case of DCIT v. Prateek Kothari vide order dated 16.12.2016, in ITA No.159/JP/2016, following the decision of Hon. Supreme Court in Kishinchand Chellaram vs CIT (supra) and others has held that "It remains undisputed that the assessee was never provided copies of such incriminating documents and statements of Shri Bhanwarlal Jain and various persons and an opportunity to cross examine such persons though he specifically asked for such documents and cross examination. On the other hand, the burden was sought to be shifted on the assessee by the A.O. It is clear case where the principle of natural justice stand violated and the additions made under section 68 therefore are unsustainable in the eye of law and we hereby delete the same."
27. Hon. Bombay High Court in the case of CIT v. Ashish International INCOME TAX APPEAL NO.4299 OF 2009, has justified the order of Hon. Tribunal in deleting the addition when the addition was made on the basis of statements without affording opportunity of cross examination to the assessee, holding that: "The Tribunal has recorded a finding of fact that the assessee had disputed the correctness of the above 24 ITA No. 529 & 517/JP/2015 Shri Surendra Kumar Saini Vs. ITO, Jaipur statement and admittedly the assessee was not given any opportunity to cross examine the concerned Director of M/s. Thakkar Agro Industrial Chem Supplies P. Ltd. who had made the above statement. The appellate authority had sought remand report and even at that stage the genuineness of the statement has not been established by allowing cross examination of the person whose statement was relied upon by the revenue. In these circumstances, the decision of the Tribunal being based on the fact, no substantial question of law can be said to arise from the order of the Tribunal. The appeal is dismissed"
28. Within the plain language of section u/s 41(1) of the Act, a trading liability allowed in an earlier year shall be deemed to be income of the previous year in which the same has been ceased to exist by way of remission or otherwise.
29. The relevant trading liability of Rs.1538160/-in the name of M/s S.D. Enterprises has been incurred during the relevant previous year itself towards goods/raw material purchased in ordinary course of business vide Bill No.14 dated 12.10.2009. Therefore provisions of section 41(1) has no application in respect of the same.
30. Even if it is assumed that it is the case of non genuine trading liability representing purchase of current year which has been charged to Trading Account, the same being not a cash credit representing cash or any other assets, do not fall within the scope of section 68 of the Act and can only be considered for disallowance of corresponding purchase charged to Trading Account.
25 ITA No. 529 & 517/JP/2015Shri Surendra Kumar Saini Vs. ITO, Jaipur
31. The books of accounts of the assessee have been rejected u/s 145(3) of the Act and Gross profit has been estimated by application of GP rate. The relevant trading liability of Rs.1538160/- lying in the name of M/s S.D.Enterprises is relating to purchases made during the year which have charged to Trading Account.
32. When the Books of accounts have been rejected and Gross profit has been estimated by application of GP rate, addition cannot be made again on account of any liability forming part the purchase or other Expenditure of the same year charged to Trading Account.
33. Hon. Kokatta Bench of ITAT in the case of ITO v. Farida Begum, ITA No.1307/KOL/2013 has upheld and justified the order of ld. CIT(A) in deleting the addition made towards outstanding liability for labour charges payable forming part the labour charges charged to Trading Account, holding that "We, therefore, find no infirmity in the impugned order of the ld. CIT(Appeals) deleting the disallowance made by the Assessing Officer on account of outstanding liability towards labour charges and upholding the same on this issue, we dismiss the appeal of the Revenue."
34. In the case of the assessee, when the books of accounts have been rejected invoking the provisions of section 145 (3) of the Act, no separate addition could be made u/s 68 of the Act relying on the same books of accounts.
35. This Hon. Bench in the case of Narendar Kuamr Gupta v. ITO, ITA No.829/JP/2012, where Gross profit was estimated after rejecting the books of accounts held that "There is no dispute to the fact that the AO 26 ITA No. 529 & 517/JP/2015 Shri Surendra Kumar Saini Vs. ITO, Jaipur rejected the book results u/s 145(3) of the Act. Now the question arises as to whether any addition inter alia u 40A(3) can be made by making disallowance over and above adhoc addition made and/or when gross profit rate is applied after rejecting books results. The Hon'ble Jurisdictional High Court in the case of CIT vs. G.K. Contractor (supra) has held that when estimated profit is considered after rejecting assessee's books accounts by invoking the provision of Section 145(3) of the Act, no separate addition can be made even u/s 68 of the Act, even though the assessee has failed to discharge the onus of proof in explaining the amount shown in the books of accounts as 'market outstanding'. The Hon'ble Gujarat High Court in the case of CIT vs. Pravin And Co. 274 ITR 534 has held that once the addition has been made by increasing the gross profit rate then there is no further scope of making separate addition under different heads. The ITAT Jaipur Bench in the case of Choudhary Bros in ITA No. 1177/JP/2010 vide order dated 31-05-2010 has also taken a view that composite addition by way of application of gross profit rate and net profit rate would be sufficient to take care of such discrepancies. Similar view has also been taken by Hon'ble Allahabad High Court in the case of CIT vs. Banwari Lal Banshidhar, 229 ITR 229 wherein it was held that when income of the assessee was computed by applying the gross profit rate, there was no need to look into the provision of Section 40A(3) of the Act.4.6 Considering the above decisions, we hold that the ld. CIT(A) has rightly deleted separate addition made by the AO of Rs. 21,59,700/- u/s 40A(3) of the Act. Hence, the ground of appeal taken by the Department is rejected."
27 ITA No. 529 & 517/JP/2015Shri Surendra Kumar Saini Vs. ITO, Jaipur
36. This Hon. Bench vide recent decision dated 10.11.2016 in the case of Collector Ram Sharma v. DCIT, ITA No.771/JP/2012 following the decision in the case of Narendra Kumar Gupta v. ITO (supra) has deleted additions made u/s 68, holding that: " The ld. Counsel also placed reliance on the decision of the Coordinate Bench rendered in the case of CIT vs. Nardev Kumar Gupta (2013) 32 taxmann.com 38 (JaipurTrib.) in ITA No.829/JP/2012 dated 23rd January, 2013. We find that while dealing with the issue, the Coordinate Bench of the Tribunal has taken into consideration the judgment of Hon'ble Jurisdictional High Court rendered in the case of CIT vs. G.K. Contractor (supra), judgment of Hon'ble Gujarat High Court rendered in the case of CIT vs. Pravin & Co. (2005) 274 ITR 534, judgment of Hon'ble Allahabad High Court in the case of CIT vs. Banwari Lal Banshidhar (1998) 229 ITR 229 (All.) and decision of Coordinate Bench in the case of Choudhary Bros in ITA 1177/JP/2010 dated 31.05.2010 and decided the issue in favour of the assessee by observing in para 4.5 of its order as under : "...There is no dispute to the fact that the AO rejected the book results u/s 145(3) of the Act. Now the question arises as to whether any addition inter alia u 40A(3) can be made by making disallowance over and above adhoc addition made and/or when gross profit rate is applied after rejecting books results. The Hon'ble Jurisdictional High Court in the case of G.K. Contractor (supra) has held that when estimated profit is considered after rejecting assessee's books accounts by invoking the provision of Section 145(3) of the Act, no separate addition can be made even u/s 68 of the Act, even though the assessee has failed to discharge the onus of proof in explaining the amount shown in the books of accounts as 'market outstanding'. The Hon'ble Gujarat High Court in the case of 28 ITA No. 529 & 517/JP/2015 Shri Surendra Kumar Saini Vs. ITO, Jaipur CIT v. Pravin &Co.[2005] 274 ITR 534/144 Taxman 210 has held that once the addition has been made by increasing the gross profit rate then there is no further scope of making separate addition under different heads. The ITAT Jaipur Bench in the case of Choudhary Bros in ITA No.1177/JP/2010 vide order dated 31052010 has also taken a view that composite addition by way of application of gross profit rate and net profit rate would be sufficient to take care of such discrepancies. Similar view has also been taken by Hon'ble Allahabad High Court in the case of CIT v. Banwari Lal Banshidhar[1998]229 ITR 229 wherein it was held that when income of the assessee was computed by applying the gross profit rate, there was no need to look into the provision of Section 40A(3) of the Act..." We find force in the contention of the ld. Counsel for the assessee. Therefore, respectfully following the decisions of the Coordinate Bench, supra, and also the judgment of the Hon'ble Jurisdictional High Court, we set aside the order of the ld. CIT (A) thereby allowing the ground of the assessee."
37. Thus the ld. CIT (A) is not justified in sustaining the addition towards unsecured loan from Sh. Bajarang Lal of Rs.200000/-, and Sh. Parmod Kumar of Rs.250000/- u/s 68 and addition of Rs.1538160/- towards trading liability in the name of M/s S.D. Enterprises u/s 41(1) of IT Act relevant to Ground No.2,3, and 4 of the assessee's appeal.
38. Therefore Your Honour is requested to delete the relevant additions sustained by ld. CIT (A) by allowing Ground No.2,3 and 4 of assessee's appeal and dismiss Ground No.2 and 3 of the Department.
29 ITA No. 529 & 517/JP/2015Shri Surendra Kumar Saini Vs. ITO, Jaipur
9. We now refer to the relevant finding of the ld. CIT(A) as under:-
"6.4 I have perused the facts of the case, the assessment order, remand report and the submissions of the appellant. A person- wise discussion on unexplained unsecured loans and sundry creditors, is given below-
(a) Unsecured loan from M/s R.R. stamping of Rs. 3,07,500/-:-
It has been stated by the Assessing Officer that in the return of income of R.R. Stamping (prop. Shri Ram Prakash Saini), the name of the assessee does not appear under the head-sundry debtors. Therefore, the above sum has been treated by the Assessing Officer as unexplained.
The appellant has furnished a copy of the return of income of the above persons in which the name of the assessee-vidyut Rekha Transformer appears in the Balance Sheet under the head-other advances, to the tune of Rs. 1,89,500/-. It has further been stated that the unsecured loan of Rs. 3,07,500/- is the opening balance for the year and no new loan has been taken during the year.
While there is a difference in the amount of advance given by the above persons to the appellant, as discussed above; it has to be taken into consideration that the unsecured loan added by the Assessing officer, is the opening balance of the year and no new loan has been taken during the year. Therefore, the addition made by the Assessing officer on account of this unsecured loan cannot be sustained in thus year since the amount is the opening balance and no new loan has been taken during the year. The Assessing officer is directed to delete the above addition.
(b) Unsecured loan from M/s R.R. Steels of Rs. 6.40,000/-
It has been stated by the Assessing officer that the proprietor of the above concern-Shri Ramesh Saini, has not filed any return of 30 ITA No. 529 & 517/JP/2015 Shri Surendra Kumar Saini Vs. ITO, Jaipur income of this year. From the return of income for A.Y. 2011-12, the Assessing officer has concluded that Shri Ramesh Saini does not have the capacity to give this unsecured loan. Also, the address given in the return of income of R.R. Steels is incomplete and the assessee also was not able to produce its proprietor. Therefore, the above sum has been treated by the Assessing Officer, as unexplained.
The appellant has stated that the unsecured loan of Rs. 6,40,000/- is the opening balance for the year and no new loan has been taken during the year.
While the Assessing Officer has pointed out deficiencies in the explanation of the appellant, as discussed above; it has to be taken into consideration that the unsecured loan added by the Assessing Officer, is the opening balance of the year and no new loan has been taken during the year. Therefore, the addition made by the Assessing Officer on account of this unsecured loan cannot be sustained in this year since the amount is the opening balance and no new loan has been taken during the year. The Assessing Officer is directed to delete the above addition.
(c) Unsecured loan from Shri Bajranglal Dhoot of Rs. 5,00,000/-
It has been stated by the Assessing Officer that the above person is working as an employee of the assessee and is a person of meager means, showing a returned income of Rs. 1,54,000/-. Also he was not traceable at the address given by the assessee. Therefore, the above sum has been treated by the Assessing Officer as unexplained.
The appellant has stated that out of the unsecured loan of Rs. 5,00,000/-, an amount of Rs. 4,00,000/- is the opening balance for the year and new loan of Rs. 2,00,000/- has been taken during the year, and Rs. 1,00,000/- has been repaid during the 31 ITA No. 529 & 517/JP/2015 Shri Surendra Kumar Saini Vs. ITO, Jaipur year. This has been accepted by the Assessing Officer, during remand proceedings.
The Assessing officer has rightly held that explanation of the assessee with respect to the creditworthiness of the creditor is not satisfactory. Also, the correct address of this person has not been furnished by the assessee or by this creditor in his return of income. It has to be taken into consideration that the unsecured loan added by the Assessing officer, is partly the opening balance of the year and new loan of Rs. 2,00,000/- has been taken during the year. Therefore, the addition made by the Assessing Officer on account of this unsecured loan is sustained to the extent of Rs. 2,00,000/- and the balance amount of Rs. 3,00,000/- which appears in the opening balance is directed to be deleted.
(d) Unsecured loan from Supriya Industries of Rs. 10,20,920/- and sundry credit balance of Rs. 20,46,272/-
In the books of accounts of the appellant, the name of the above person appears as under the head-unsecured loan amounting to Rs. 10,20,920/- and also under the head-sundry creditors amounting to Rs. 20,46,272/-. The Assessing officer has held that both the above amounts are unexplained since the name of the assessee does not appear in the Balance Sheet of the above person (Shir girish Chand Saini prop. of M/s Supriya Industries), filed along with its return of income. On the basis of the examination of the proprietor, Shri Girish Chand Saini and his books of accounts, it has been held that his unsecured loans and sundry creditors are not genuine since he asked for time to explain the above but did not later appear before the Assessing Officer.
The appellant has stated that the unsecured loan and sundry credit balance of M/s Supriya Industries is fully reflected in the return of income and Balance Sheet of M/s Supriya Industries, in the name of vidyut Rekha Transformers amount to Rs.
32 ITA No. 529 & 517/JP/2015Shri Surendra Kumar Saini Vs. ITO, Jaipur 30,67,195/-. This, the appellant said this is the summation of unsecured loan of Rs. 10,20,920/- and sundry credit balance of Rs. 20,46,272/-. In para 3(iii) of the order under section 143(3), the Assessing Officer has given a list of sundry debtors reflected in the return of income of Shri Girish Chand Saini. In this list, the name of Vidyut Rekha Transformers appears at serial No. 27 of an amount of Rs. 30,67,195/-. The Assessing Officer has not accepted this contention because the name of the assessee appear at Vidyut Rekha Transformers and not the complete name as Vidyut Rekha Transformers & electrical. This, minor difference in name does not make the unsecured loan and sundry credit balance of Rs. 30,67,195/-, as unexplained especially when the creditor has given a confirmed copy of the account of the appellant from his books of accounts, which tallies with the appellant's books of accounts. Furthermore, the creditor files its return of income showing a gross total income of Rs. 4,59,738/- which after deduction has resulted in a total income of Rs. 3,56,740/-. Furthermore, the proprietor of this concern (creditor) appeared before the Assessing Officer with his books of accounts and records. The appellant has submitted the final accounts of this person along with the Schedules. The inference of the Assessing Officer that the unsecured loans and sundry creditors of Girish Chand Saini are unexplained since he did not appear again before the Assessing Officer cannot lead to an adverse inference in the hands of the appellant, especially when the transactions with the appellant are fully reflected in the return of income of the creditor (who has a turnover of Rs. 1.43 crore). In view of the above discussion, the addition made by the Assessing Officer on account of unexplained unsecured loan and sundry credit balance from M/s Supriya Industries, cannot be sustained. These additions are directed to be deleted.
(e) Unsecured loan from Pramod of Rs. 2,50,000/- and sundry credit balance of M/s SD Enterprise of Rs. 15,38,108/-
33 ITA No. 529 & 517/JP/2015Shri Surendra Kumar Saini Vs. ITO, Jaipur In the books of accounts, the appellant has shown as unsecured loan from Pramod of Rs. 2,50,000/- and there is a credit balance of Rs. 15,38,108 in the name of M/s SD enterprise, whose proprietor is Shri Pramod. During the course of assessment proceedings, the Assessing Officer recorded the statement of Pramod, who stated that the signature on the confirmation of unsecured loan of Rs. 2,50,000/-, is not his. He also denied having given an unsecured loan to the assessee. He stated that he merely returned the money given to him by the assessee. Also, Shri Pramod has not filed his return of income for this year. In view of this statement of Shri Pramod, the addition made by the Assessing Officer on account of unexplained loan of Rs. 2,50,000/- is upheld, u/s 68, As regards, the sundry credit balance in the name of M/s SD Enterprise, it has been stated by Shri Pramod that he wound up his business in February 2010 and there was no outstanding balance payable of the assessee as on 31.03.2010. The appellant has stated that this statement of Shri Pramod is false since he has made payments to M/s SD Enterprise by cheque in the next year. However, in view of the categorical statement given by Shri Pramod, the liability of Rs. 15,38,160/-, shown as payable on 31.03.2010 in the books of the appellant, had ceased to exist and therefore, the addition of this liability of Rs. 15,38,160/- is upheld, u/s 41(1) of the I.T. Act. To sum up, addition made by the Assessing Officer on account of unsecured loan of Rs. 2,50,000/- and sundry credit balance of Rs. 15,38,160/- is upheld. Ground No. 4 & 5 are partly allowed."
10. The ld. DR relied on the order of the lower authorities.
11. We have heard the rival contentions and perused the material available on record. In respect of transactions with M/s Supriya Industries amounting to Rs 30,67,195, transaction with M/s R. R Stamping amounting to Rs 307,500, transaction with M/s R. R Steel 34 ITA No. 529 & 517/JP/2015 Shri Surendra Kumar Saini Vs. ITO, Jaipur amounting to Rs 640,000, we donot see any infirmity in the order of ld CIT(A) and the same is hereby confirmed and the additions made in this regard is deleted. In respect of unsecured loan of Rs 5,00,000 from Bajarang lal Dhoot who happens to the employee of the assessee and whose creditworthiness has not been proved, the findings of the ld CIT(A) that "the addition made by the Assessing Officer on account of this unsecured loan is sustained to the extent of Rs. 2,00,000/- and the balance amount of Rs. 3,00,000/- which appears in the opening balance is directed to be deleted" is again confirmed. In respect of transactions with Shri Pramod Kumar and his proprietorship concern M/s S.D Enterprises, it is noted that certain additional evidences have been filed by the assessee before the ld CIT(A) and which have been duly admitted by the ld CIT(A), however, we donot find any finding recorded by the ld CIT(A) in respect of these evidences before arriving at his final conclusion. The statement recorded of Shri Pramod Kumar is no doubt relevant but at the same time, where there are evidences which are available on record, the statement cannot be the sole basis for making the addition in the hands of the assessee. The statement need to be corroborated by the evidences which are already available on record and some of the evidences, as we note, belong to Shri Pramod Kumar and M/s S.D Enterprises. It is also relevant to note that assessee has submitted bill and challan dated 12.10.2009 of M/s S.D Enterprises which falls during the relevant previous year. The question is whether the provisions of section 41(1) can be invoked in respect of trading liability where so incurred during the same previous year which has not been answered in the instant case. In our view, the matter require further examination and we accordingly set-aside this matter to the file 35 ITA No. 529 & 517/JP/2015 Shri Surendra Kumar Saini Vs. ITO, Jaipur of the AO to examine the same afresh in light of additional evidences submitted by the assessee and determine as per law. In the result, the grounds of assessee and revenue are disposed off with above directions.
12. In respect of ground No. 5 of the assessee's appeal, the ld AR at the outset submitted that the relevant amount in this Ground has been erroneously mentioned as Rs.75060/- in place of Rs.32650/-. Therefore the same may kindly be considered rectified accordingly. Briefly, the facts of the case are that the AO observed that the assessee has not paid the bonus of Rs.32650/- before the due date for filling of return of income as prescribed u/s 139(1) of IT Act 1961. Therefore the AO invoking the provisions of section 43B of IT Act 1961, made an addition of the same to returned income.
13. The ld AR submitted that the assessee has produced before the AO the copy of payment vouchers of Bonus of Rs. 32650/- paid on 21.08.2010 i.e. before the due date for filling of return of income as prescribed u/s 139(1) of IT Act 1961. The AO without any real finding and merely on the basis of doubts has disbelieved the above ssaid payment vouchers and added the same to returned income of the assessee. The ld. CIT (A) has sustained the same without properly appreciating the contention of the assessee and documents available on record. Therefore relevant addition of Rs.32650/- may kindly be deleted by allowing the relevant ground of appeal.
36 ITA No. 529 & 517/JP/2015Shri Surendra Kumar Saini Vs. ITO, Jaipur
14. The finding of the ld. CIT(A) is as under:-
"7.1 The Assessing Officer has disallowed u/s 43B, Service Tax payable of Rs. 42,410/- and bonus payable of 42,410/-. The appellant has stated that Service Tax of Rs. 25,343/- has been paid before the due date of filing the return of income. This has been accepted by the Assessing Officer in the remand report. The appellant has not furnished evidence for the balance amount. Therefore, disallowance u/s 43B amounting to Rs. 25,343/- is deleted and the balance amount is upheld. Ground No. 6 is partly allowed."
15. The ld. DR relied on the order of the lower authorities.
16. We have heard the rival contentions and perused the material available on record. The AO has disallowed the bonus payment of Rs 32,650 on the ground that payment vouchers are not subject to independent verification and all the vouchers have been signed by the person who has prepared those vouchers. In the appellate proceedings, the ld CIT(A) confirmed the disallowance holding that the appellant has not furnished evidence. Given that the assessee has furnished the payment vouchers in support of bonus payment, let there be a finding by the AO who can verify the same with the assessee's books of accounts and if so required, the AO can seek independent verification as well. The matter is accordingly set-aside to the file of the AO. The ground is allowed for statistical purposes.
17. In respect of ground No. 6 of the assessee, briefly the facts of the case are that the AO observed that the assessee has claimed salary of Rs.156000/- paid to Sh. Bajarang Lal, whereas the said Bajarang Lal 37 ITA No. 529 & 517/JP/2015 Shri Surendra Kumar Saini Vs. ITO, Jaipur has declared salary of Rs.96000/- only in his return of income. Therefore the AO allowed the salary of Sh. Bajarang Lal to the extent of Rs.96000/- as declared by him in his return of income and disallowed rest of Rs.60000/-.
18. The ld AR submitted that the assessee has claimed the salary of Sh. Bajarang Lal on the basis of actual payment recorded in the books of accounts duly supported by payment vouchers. It is not in the knowledge of the assessee that why Sh. Bajarang Lal has disclosed his salary only to the extent of Rs.96000/- and the assessee cannot be blamed for the same. The ld. CIT (A) has sustained the same without properly appreciating the contention of the assessee and documents available on record. Therefore relevant addition of Rs.60000/- may kindly be deleted by allowing the relevant ground of appeal.
19. The finding of the ld. CIT(A) is as under:-
"8.1 The Assessing Officer has disallowed an amount of Rs. 60,000/- on account of salary paid to Shri Bajrang Lal. The appellant has debited salary to the above person of Rs. 1,56,000/- whereas Shri Bajrang Lal has shown salary of only Rs. 96,000/- in his return of income. Therefore, the Assessing officer has rightly disallowed salary expenses of Rs. 60,000/-. Ground No. 7 is dismissed."
20. The ld DR relied on the order of the lower authorities.
21. We have heard the rival contentions and perused the material available on record. It is not clear whether the assessee has paid salary in cash or through cheque or TDS has been done or not. In either case, necessary paper trail is available in the books of accounts 38 ITA No. 529 & 517/JP/2015 Shri Surendra Kumar Saini Vs. ITO, Jaipur to substantiate the payment of salary. Similarly, the AO can call for the confirmation from the payee and where the payee is the employee of the assessee, the assessee is clearly in a position that he can ask his employee to provide the necessary confirmation. In the instant case, the employee's return of income has been examined by the AO wherein salary of Rs 96,000 has only been disclosed as against payment of Rs 156,000 claimed by the assessee. In our view, return of income is definitely a strong pointer to support the salary receipt and payment thereof in absence of any other corroborative evidence. In view of the same, we don't see any infirmity in the order of the ld CIT(A) and the same is hereby confirmed. The ground of appeal is thus dismissed.
In the result, the appeal of the assessee and the revenue are disposed off with above directions.
Order pronounced in the open court on 31/07/17
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(Kul Bharat) (Vikram Singh Yadav)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Tk;iqj@Jaipur
fnukad@Dated:- 31/07/2017.
*Santosh.
vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- Shri Surendra Kumar Saini, C-20, Vijay Vihar Colony, Naya Khera, Amba Bari, Jaipur.
2. izR;FkhZ@ The Respondent- ITO-Ward 6(4), Jaipur.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr@ CIT(A) 39 ITA No. 529 & 517/JP/2015 Shri Surendra Kumar Saini Vs. ITO, Jaipur
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur.
6. xkMZ QkbZy@ Guard File {ITA No. 529&517/JP/2015} vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar