Shri Mangi Lal Dhaka, JODHPUR v. ITO, MAKRANA

ITA 1/JODH/2008 | 2004-2005
Pronouncement Date: 28-07-2011 | Result: Dismissed

Appeal Details

RSA Number 123314 RSA 2008
Assessee PAN ABMPD9851H
Bench Jodhpur
Appeal Number ITA 1/JODH/2008
Duration Of Justice 3 year(s) 6 month(s) 26 day(s)
Appellant Shri Mangi Lal Dhaka, JODHPUR
Respondent ITO, MAKRANA
Appeal Type Income Tax Appeal
Pronouncement Date 28-07-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 28-07-2011
Date Of Final Hearing 25-07-2011
Next Hearing Date 25-07-2011
Assessment Year 2004-2005
Appeal Filed On 01-01-2008
Judgment Text
ITA NO.1/JU/2008 ITA NO.84/JU/2008 1 IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH : JODHPUR JODHPUR BENCH : JODHPUR JODHPUR BENCH : JODHPUR JODHPUR BENCH : JODHPUR BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER AND AND AND AND SHRI K.D. RANJAN ACCOUNTANT MEMBER SHRI K.D. RANJAN ACCOUNTANT MEMBER SHRI K.D. RANJAN ACCOUNTANT MEMBER SHRI K.D. RANJAN ACCOUNTANT MEMBER ITA NO.01/JU/2008 ASSESSMENT YEAR : 2004-05 SHRI MANGI LAL DHAKA NAWACITY. PAN : ABMPD9851H VS. INCOME TAX OFFICER WARD-2 MAKRANA. ITA NO.84/JU/2008) ASSESSMENT YEAR : 2004-05 INCOME TAX OFFICER WARD-2 MAKRANA VS. SHRI MANGI LAL DHAKA NAWACITY. PAN : ABMPD9851H ASSESSEE BY : SHRI U.C. JAIN ADVOCATE REVENUE BY : SHRIM.N. MAURYA DR O R D E R O R D E R O R D E R O R D E R PER PER PER PER K.D. RANJAN AM: K.D. RANJAN AM: K.D. RANJAN AM: K.D. RANJAN AM: THESE CROSS APPEALS BY THE ASSESSEE AND REVENUE FOR ASSESSMENT YEAR 2004-05 ARISE OUT OF THE ORDER OF CIT (APPEALS) JODHPUR. THESE APPEALS WERE HEARD TOGETHER AND FOR THE SAKE OF CONVE NIENCE ARE DISPOSED OF BY THIS COMMON ORDER. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE AS WELL AS BY THE REVENUE ARE REPRODUCED AS UNDER- ASSESSEES APPEAL 1) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) GROSSLY ERRED IN SUSTAINING ADDITIONS/DISALLOWANCES O UT ITA NO.1/JU/2008 ITA NO.84/JU/2008 2 LD. CIT (A) GROSSLY ERRED IN SUSTAINING ADDITIONS/DIS ALLOWANCES OUT OF EXPENSES IN THE BUSINESS CARRIED UNDER THE NAME OF M/S GANESH IODISED SALT INDUSTRIES UNDER THE FOLLOWING HEA DS:- (A) DISALLOWANCES OF LOSS IN BUSINESS 32 605/- (B) TRADING ADDITION 4 7 530/- (C) ADDITION U/S 68 90 000/- (D) DISALLOWANCES OF EXPENSES 2 881/- 1 73 016/- 2) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT (A) GROSSLY ERRED IN SUSTAINING ADDITION OF RS.6 666 222/- U/S 69 IN THE BUSINESS CARRIED UNDER THE NAME & STYLE OF M /S DHAKA CONSTRUCTION CO. 3) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) GROSSLY ERRED IN SUSTAINING ADDITION IN R ESPECT OF FDR INTEREST SEPARATELY PARTICULARLY WHEN THE ASSESSEE CLAIM ED PAYMENT OF INTEREST TO CREDITORS AFTER REDUCING THE AMOUNT OF FDR. IF THE INTEREST ON FDR IS TO BE TAXED SEPARATELY THE N INTEREST ALLOWABLE BE INCREASED BY THE SAME AMOUNT WHILE COMPU TING NET INCOME FROM CONTRACT BUSINESS. 4) THAT THE PETITIONER MAY KINDLY BE PERMITTED TO RAISE AN Y ADDITIONAL AND/OR ALTERNATIVE GROUND AT OR BEFORE THE HE ARING OF APPEAL. 5) THE PETITIONER PRAYS FOR JUSTICE & RELIEF REVENUES APPEAL ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT (A) ERRED IN I) RESTRICTING DISALLOWANCE MADE BY THE AO OUT OF EXPENSES UNDER VARIOUS HEADS FROM RS.10 000/- TO RS.2 881/- AS THE ENTIRE EXPENSES DEBITED IN PROFIT AND LOSS ACCOUNT WERE NOT FULLY VOUCHED AND NOT SUPPORTED BY PROPER EVIDENCE; II) DELETING ADDITION MADE BY THE AO AMOUNTING TO RS.20 47 502/- BY APPLYING NP RATE OF 8% S AGAINST NP RATE OF 0.76% DECLARED BY THE ASSESSEE WHICH TOO IS RIDICULOUSLY LOW IN COMPARISON TO IMMEDIATELY ITA NO.1/JU/2008 ITA NO.84/JU/2008 3 PRECEDING ASSESSMENT YEARS; III) DELETING ADDITION MADE BY THE AO ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 OF THE IT ACT 1961 AMOUNTING TO RS.12 LACS; IV) DELETING ADDITION ON ACCOUNT OF UNEXPLAINED SUNDRY CREDITORS AMOUNTING TO RS.5 LACS AS THE LD. CIT (A) HAS NOT APPRECIATED THE FACTS BROUGHT ON RECORD BY THE A.O. 3. FIRST WE WILL TAKE UP THE ASSESSEES APPEAL. THE FIR ST ISSUE IN THE ASSESSEES APPEAL RELATES TO DISALLOWANCE OF LOSS IN BUSINESS AMOUNTING TO ` 32 605/-. DURING THE COURSE OF HEARING OF THE APPEAL LD. AR OF THE ASSESSEE DID NOT PRESS THIS GROUND OF APPEAL. ACCORDINGLY THE SAME IS DISMISSED AS SUCH. 4. THE NEXT ISSUE FOR CONSIDERATION RELATES TO TRADING ADDITION OF ` 47 530/-. THE FACTS OF THE CASE STATED IN BRIEF ARE T HAT THE ASSESSEE IS A PROPRIETOR OF THREE CONCERNS NAMELY (I)M/S GANESH IODISED SALT INDUSTRIES; (II) M/S DHAKA SALT COMPANY; AND (III) M/S DHAKA CONSTRUCTION COMPANY. 5. THE AO ISSUED SEVERAL NOTICES FIXING THE CASE FOR HEA RING. ON THOSE DATES THE ASSESSEE EITHER SOUGHT ADJOURNMENTS OR THE RE WAS NO RESPONSE FROM THE ASSESSEE. THE AO THEREFORE COMPLETED THE ASSESSMENT U/S 144 OF THE ACT. 6. THE ASSESSEE IN RESPECT OF BUSINESS CARRIED ON IN THE NA ME AND STYLE OF M/S DHAKA SALT COMPANY HAD SHOWN GROSS PROFIT O F ` 4 68 505/- ON THE TOTAL SALES OF ` 41 61 578/- GIVING GP RATE OF 11.26%. ON EXAMINATION OF BOOKS OF ACCOUNT AND RELATED BILLS AND VOUCHERS THE AO ITA NO.1/JU/2008 ITA NO.84/JU/2008 4 NOTICED THAT THE ASSESSEE WAS NOT MAINTAINING DAY-TO-DAY RECORD OF RAW MATERIALS AND FINISHED GOODS. SIMILARLY NO PROPER VO UCHERS IN RESPECT OF VARIOUS EXPENSES DEBITED IN TRADING AND PROFIT & LO SS ACCOUNTS WERE KEPT. MOST OF THE VOUCHERS KEPT WERE SELF MADE INTERN AL VOUCHERS ONLY WITHOUT SUPPORTING DETAILS. ON CLOSE SCRUTINY OF THE A UDIT REPORT AND CONCERNED DOCUMENTS I.E. BALANCE SHEET ETC. THE AO FOUND THAT THERE WAS DIFFERENCE IN QUANTITATIVE TALLY OF CLOSING STOCK OF FINISHED GOODS. IN THE BALANCE SHEET THE QUANTITY OF CLOSING GOODS WAS SHOW N AT 5385 QNTLS AS AGAINST IN 3CD REPORT AT 5385 QNTLS. IN VIEW OF THESE FACTS THE AO REJECTED THE BOOKS OF ACCOUNT U/S 145(3) OF THE AC T AND ESTIMATED GP RATE ON THE BASIS OF PAST HISTORY OF THE CASE AND OTH ER COMPARABLE CASES IN THIS LINE OF BUSINESS. THE GP RATE IN THE LINE OF BUSINESS WAS RANGING FROM 13 TO 16%. IN THE IMMEDIATE PRECEDING YEAR THE ASSESSEE HAD SHOWN GP RATE OF 12.4%. THE AO ASKED THE ASSESSEE TO SHOW AS TO WHY GP RATE OF 12.4% MAY NOT BE APPLIED IN THE YEAR UNDER CONSIDERATION. SINCE NO REPLY/EXPLANATION WAS FURNISH ED BY THE ASSESSEE THE AO APPLIED GP RATE OF 12.4% WHICH RESULTED IN ADDITION OF ` 47 530/-. 7. ON APPEAL LD. CIT (A) AFTER CONSIDERING THE SUBM ISSIONS OF THE ASSESSEE OBSERVED THAT THE AO WAS JUSTIFIED IN INVOKING T HE PROVISIONS OF SECTION 145(3) OF INCOME TAX ACT AS SEVERAL DEFECT S WERE POINTED OUT BY THE AO. DURING THE COURSE OF APPELLATE PROCEEDIN GS THE ASSESSEE COULD NOT INDICATE ANY REASON ON THE BASIS OF WHICH IT COULD BE SAID THAT THE FINDINGS OF THE AO WERE INCORRECT. LD. CIT (A) THEREFORE UPHELD THE REJECTION OF BOOKS OF ACCOUNT U/S 145(3) OF THE ACT. LD. CIT (A) THEREAFTER DEALT WITH THE TRADING ADDITION MADE BY THE AO AT ` 47 530/-. LD. CIT (A) FURTHER NOTED THAT THE GP RATE IN THE P RECEDING ASSESSMENT YEAR WAS 12.4% AND ON THE GIVEN FACTS THE AO WAS JUSTI FIED BOTH ON FACTS AND IN LAW IN APPLYING GP RATE OF 12.4% THEREB Y MAKING ADDITION ITA NO.1/JU/2008 ITA NO.84/JU/2008 5 OF ` 47 530/-. HE FURTHER NOTED THAT THE ASSESSEE WAS G IVEN SPECIFIC OPPORTUNITIES BUT NO EXPLANATION WAS OFFERED BY THE ASSESSEE. LD. CIT (A) ACCORDINGLY UPHELD THE ADDITION OF ` 47 530/-. 8. BEFORE US LD. AR OF THE ASSESSEE SUBMITTED THAT THE A SSESSEE HAD MAINTAINED QUANTITATIVE STOCK OF RAW MATERIAL AN D FINISHED GOODS. THE BOOKS OF ACCOUNT WERE VERIFIED BY THE CHARTERED ACCOUNTANT AND HAS NOT GIVEN ANY ADVERSE COMMENT. AS REGARDS DIFFEREN CE BETWEEN CLOSING STOCK IT HAS BEEN SUBMITTED THAT IT WAS DUE TO TYPOGRAPHICAL MISTAKE THEREFORE THE ADDITION MADE BY THE AO IS NO T JUSTIFIED. ON THE OTHER AND LD. SR. DR SUPPORTED THE ORDER OF CIT (A) . 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH T HE MATERIAL AVAILABLE ON RECORD. THE AO HAS POINTED OUT CERTAIN DISCREPANCIES IN THE BOOKS OF ACCOUNT. THE ASSESSEE HAD NOT MAINTAINED P ROPER VOUCHERS FOR VARIOUS EXPENSES DEBITED IN PROFIT & LOSS AC COUNT. MOST OF THE VOUCHERS WERE SELF MADE WITHOUT ANY SUPPORTING DET AILS. REJECTION OF BOOKS OF ACCOUNT HAS BEEN UPHELD BY THE CIT (A) IN VIEW OF THE FACT THAT SEVERAL DISCREPANCIES INCLUDING DIFFERENCE IN QUA NTITATIVE DETAILS OF THE CLOSING STOCK OF FINISHED GOODS. THE AO HAD APPLI ED GP RATE OF 12.4% AS AGAINST THAT ADMITTED BY THE ASSESSEE AT 11.26%. THERE IS NO DISPUTE ABOUT THE FACT THAT GP RATE IN THE SAME LINE OF BUSINESS DECLARED BY OTHER ASSESSEES RANGES BETWEEN 13 TO 16%. IN VIEW OF THESE FACTS IN OUR CONSIDERED OPINION THE ASSESSING OFFI CER WAS JUSTIFIED IN ESTIMATING THE TRADING ADDITION OF ` 47 530/- BY APPLYING THE GP RATE OF 12.4%. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE CIT (A) CONFIRMING THE ADDITION. 10. THE NEXT ISSUE FOR CONSIDERATION RELATES TO CONFIRM ING THE ADDITION OF ` 90 000/- U/S 68 OF THE ACT. THE FACTS OF THE CA SE STATED IN BRIEF ARE THAT THE ASSESSEE HAD SHOWN ADDITION OF ` 90 000/- IN CA PITAL ACCOUNT OF ITA NO.1/JU/2008 ITA NO.84/JU/2008 6 M/S DHAKA SALT COMPANY. ON A QUERY RAISED BY THE AO NO REPLY WAS SUBMITTED BY THE ASSESSEE. THE AO THEREFORE TREATED THE AMOUNT OF `90 000/- AS UNEXPLAINED. THE AO HOWEVER ALLOWED THE SET OFF OF ` 47 530/- MADE ON ACCOUNT OF TRADING ADDITION AGAINST ADDITION OF ` 90 000/-. HE MADE ADDITION OF ` 42 470/- AFTER TEL ESCOPING THE TRADING ADDITION OF ` 47 530/-. 11. BEFORE CIT (A) IT WAS SUBMITTED THAT M/S DHAKA SA LT COMPANY ISSUED A DEMAND DRAFT IN FAVOUR OF SUPERINTEND ENGINE ER IN RESPECT OF TENDER OBTAINED IN THE NAME OF M/S DHAKA CONSTRUCTION COMPANY. DUE TO LOW RATE SUBMITTED IN THE TENDER BY THE ASSESSEE THE TENDER WAS REJECTED AND THE AMOUNT OF ` 90 000/- WAS RETURNED B ACK AND THE SAME WAS DEPOSITED IN THE BANK ACCOUNT OF M/S DHAKA SALT CO MPANY. THE ASSESSEE FILED ADDITIONAL EVIDENCE IN SUPPORT OF ITS CLAI M UNDER RULE 46A(1) WHICH WAS REJECTED. HOWEVER LD. CIT (A) ON MERITS DECIDED THE ISSUE AGAINST THE ASSESSEE. HE NOTED THAT THE ASSESSEE HAD NO T PRODUCED BEFORE HIM THE BANK ACCOUNT OF DHAKA CONSTR UCTION CO. TO PROVE THAT THE DRAFT IN FAVOUR OF SUPERINTENDENT EN GINEER AGRICULTURAL MARKETING BOARD AJMER WAS MADE OUT OF ACCOUNT OF D HAKA SALT COMPANY WHICH WAS SUBSEQUENTLY CREDITED IN THE BANK AC COUNT OF M/S DHAKA SALT COMPANY ON 12.11.2003. THE ASSESSEE HAD NOT FILED ANY CORRESPONDENCE ETC. ON THE BASIS OF WHICH THE FACTS CO ULD BE PROVED. LD. CIT (A) FURTHER NOTED THAT SUPERINTENDENT ENGIN EER MUST HAVE REFUNDED THE AMOUNT BY WAY OF CHEQUE OR DEMAND DRAF T DRAWN ON ANY BANK ACCOUNT SITUATED AT AJMER. HOWEVER THE FACTS R EVEALED THAT IN THE BANK ACCOUNT OF M/S DHAKA CONSTRUCTION COMPANY T HE AMOUNT HAD BEEN DEPOSITED BY WAY OF TRANSFER AND NOT BY CLEARING . A DEPOSIT OF AMOUNT BY WAY OF TRANSFER TAKES PLACE ONLY WHEN A PER SON WHO ISSUES CHEQUE OR DD HAS GOT ACCOUNT IN THE SAME BANK. HAD T HE AMOUNT BEEN REALLY RECEIVED FROM SUPERINTENDENT ENGINEER AGRIC ULTURAL MARKETING ITA NO.1/JU/2008 ITA NO.84/JU/2008 7 BOARD AJMER THE ENTRY SHOULD HAVE BEEN BY WAY OF C LEARING. SINCE NO EVIDENCE IN THE MATTER OF CONTRACT REJECTED ETC. W AS PLACED ON RECORD LD. CIT (A) UPHELD THE ADDITION OF ` 90 000/-. HE ALSO UPHELD THE ADDITION OF ` 42 470/- WHICH WAS MADE AFTER GIVING T ELESCOPING EFFECT OF TRADING ADDITION OF ` 47 530/-. 12. BEFORE US SIMILAR ARGUMENTS WERE REITERATED. IT HAS BEEN SUBMITTED THAT ADDITION HAS BEEN MADE U/S 69. HE FURT HER SUBMITTED THAT ENTRIES ARE RECORDED IN THE CASH BOOK WHICH GIVE COMPLETE DETAILS OF DD RECEIVED AND HAD THE AO OR CIT (A) ANY DOUBT THEY COULD HAVE INQUIRED FROM THE BANK OR FROM THE SUPERINTENDENT E NGINEER AGRICULTURAL MARKETING BOARD AJMER. IN ANY CASE T HE ADDITION U/S 69 IS NOT PERMISSIBLE AS THE ENTRY OF RECEIPT OF DRAFT IS REC ORDED IN THE BOOKS OF ACCOUNT. 13. ON THE OTHER HAND LD. SR. DR SUPPORTED THE ORDE R OF THE CIT (A). 14. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE ASSESSE E HAD ISSUED DEMAND DRAFT FOR ` 90 180/- AND THE AMOUNT IS DEBITE D TO THE CAPITAL ACCOUNT OF SHRI MANGI LAL DHAKA THE PROPRIETOR. T HE AMOUNT OF ` 90 000/- HAS BEEN DEPOSITED IN THE CAPITAL ACCOUNT OF THE PROPRIETOR ON 12.11.2003. CORRESPONDING ENTRIES HAVE BEEN RECORDED IN CASH BOOK AS ON 11.9.2003 AND ALSO ON 12.11.2003 WHEN THE AMOUNT WAS RECEIVED BACK FROM SUPERINTENDENT ENGINEER AGRICULTURAL MAR KETING BOARD AJMER. THE DRAFT NUMBER MENTIONED AS PER CASH BOOK E NTRY IS 116117/25107 FOR ` 90 000/- AND THE SAME DRAFT RECEI VED BACK HAS BEEN DEPOSITED ON 12.11.2003 IN THE CAPITAL ACCOUNT OF THE ASSESSEE. LD. CIT (A) HAS REJECTED THE CLAIM OF THE ASSESSEE SIMPLY ON THE GROUND THAT A DEPOSIT OF AMOUNT BY WAY OF TRANSFER TAKES PLAC E ONLY WHEN THE PERSON WHO ISSUES CHEQUE OR DD HAS GOT AN ACCOUNT IN THE SAME BANK. ITA NO.1/JU/2008 ITA NO.84/JU/2008 8 PRIMA FACIE THE ASSESSEE HAD DISCHARGED THE ONUS OF PROVI NG THE TRANSACTION. UNDER THESE CIRCUMSTANCES NO ADDITION CA N BE MADE. HOWEVER WE SET ASIDE THIS ISSUE TO THE FILE OF AO WITH THE DIRECTIONS THAT HE SHOULD MAKE INQUIRY FROM THE BANK WHETHER TH E DRAFT PURCHASED BY THE ASSESSEE FOR THE PURPOSE OF TENDER WAS RETURNED B ACK BY SUPERINTENDING ENGINEER AGRICULTURAL MARKETING BOA RD AJMER WHICH WAS DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSEE OR THE SUPERINTENDING ENGINEER AGRICULTURAL MARKETING BOA RD AJMER HAD ISSUED A FRESH DEMAND DRAFT OR CHEQUE WHICH WAS DEPOSITE D BY THE ASSESSEE IN THE BANK ACCOUNT OF M/S DHAKA CONSTRUCTION CO MPANY. THE ASSESSING OFFICER WILL VERIFY THE FACTS AND DECIDE THE I SSUE AFRESH AFTER AFFORDING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD. 15. THE NEXT ISSUE FOR CONSIDERATION WHICH IS COMMON IN REVENUES APPEAL AS WELL AS IN THE APPEAL OF THE ASSESSEE RELATES TO DISALLOWANCE OF TELEPHONE EXPENSE. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE CLAIMED TELEPHONE EXPENSE OF ` 14 408/-. THE A O ISSUED SHOW CAUSE NOTICE AS TO WHY THE AMOUNT OF ` 10 000/- SHOULD NOT BE DISALLOWED FOR PERSONAL USE. SINCE NO REPLY WAS RECEI VED AO DISALLOWED THE SUM OF ` 10 000/-. ON APPEAL LD. CIT (A) NOTED THAT THE DISALLOWANCE MADE BY THE AO WAS EXCESSIVE. HE THEREFO RE RESTRICTED THE DISALLOWANCE TO ` 2 881/- BEING 20% OF THE TOTAL AMOUNT. LD. CIT (A) ALLOWED A RELIEF OF ` 7 119/-. 16. AGGRIEVED BY THE ORDER OF THE CIT (A) THE ASSESSEE FILED APPEAL AGAINST SUSTENANCE OF ADDITION OF ` 2 881/- AND THE RE VENUE IS IN APPEAL AGAINST DELETION OF ADDITION OF ` 7 119/-. 17. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAD NOT MAINTAINED A NY CALL REGISTER SO AS TO PROVE THAT THE ENTIRE EXPENDITURE ON TELEPHO NE BILLS WAS ITA NO.1/JU/2008 ITA NO.84/JU/2008 9 INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BU SINESS. IN THE ABSENCE OF ANY CALL REGISTER THE POSSIBILITY OF USE OF T ELEPHONE FOR PERSONAL USE OF THE PROPRIETOR AND HIS FAMILY MEMBERS C ANNOT BE RULED OUT. THEREFORE IN OUR CONSIDERED OPINION LD. CIT (A) WAS JUSTIFIED IN RESTRICTING THE DISALLOWANCE TO ` 2 881/-. ACCORDING LY WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE CIT (A). 18. THE NEXT ISSUE FOR CONSIDERATION IN ASSESSEES APPEAL R ELATES TO SUSTAINING THE ADDITION OF ` 6 66 222/- U/S 69. THE F ACTS OF THE CASE STATED IN BRIEF ARE THAT ON EXAMINATION OF THE CAPIT AL ACCOUNT OF THE ASSESSEE THE AO NOTED THAT AN ADDITION OF ` 6 66 222/- WAS MADE IN THE CAPITAL ACCOUNT. THE AO VIDE LETTER DATED 21 ST NOVEMBER 2005 ASKED TH ASSESSEE TO EXPLAIN SOURCES OF CREDIT IN CAPITAL ACCOU NT. SINCE NO EXPLANATION WAS OFFERED BY THE ASSESSEE THE AO ADDED TH E AMOUNT OF ` 6 66 222/-. THE AO DID NOT MAKE SEPARATE ADDITION O F RS.6 66 222/- ON THE GROUND THAT ADDITION OF ` 20 47 502/- WAS MADE O N ACCOUNT OF DIFFERENCE IN NET PROFIT IN THE CASE OF DHAKA CONSTRU CTION CO. ANOTHER PROPRIETORSHIP CONCERN OF THE ASSESSEE. 19. ON APPEAL BEFORE CIT (A) IT WAS SUBMITTED THAT T HE ASSESSEE CREDITED THE CAPITAL ACCOUNT BY ` 6 66 222/- WHICH CAME OUT OF LIC LOAN OF ` 55 000/- ADVANCE AGAINST SALE OF LAND OF ` 5 00 000/- AMOUNT OF ` 90 180/- ON ACCOUNT OF DD ISSUED IN FAVOUR OF SUPERIN TENDENT ENGINEER WHILE FILING TENDER AND ` 21 042/- FROM DHAKA SALT COMPANY. THE AMOUNT RECEIVED FROM LIC AS LOAN OF ` 55 000/- WAS DE POSITED IN THE BANK ACCOUNT. THE ASSESSEE FILED CONFIRMATION FROM LIC OF INDIA. AS REGARDS ADVANCE FOR LAND OF ` 5 LAC IT WAS SUBMITTED THAT THE ASSESSEE MADE AGREEMENT FOR SALE OF LAND WITH SHRI SOHAN LAL AND RECEIVED AN ADVANCE OF ` 5 LAC. THE ASSESSEE FILED COPY OF AGREEME NT AND AFFIDAVIT. AS REGARDS THE AMOUNT RECEIVED FROM DHAKA SALT COMPAN Y AT ` 90 180/- ITA NO.1/JU/2008 ITA NO.84/JU/2008 10 AND ` 21 042/- IT WAS EXPLAINED THAT THE ENTRIES ARE DISCLOSED BY DHAKA SALT COMPANY. THEREFORE NO ADDITION COULD BE MADE . LD. CIT (A) HOWEVER NOTED THAT THE ASSESSEE HAD NOT FILED ANY EXPL ANATION BEFORE THE AO. NO REQUEST FOR ADMISSION OF FRESH EVIDENCE WAS FILED BEFORE HIM DURING THE COURSE OF APPELLATE PROCEEDINGS. IN T HE ABSENCE OF ANY REQUEST FOR ADMISSION OF FRESH EVIDENCE LD. CIT (A) U PHELD THE ADDITION OF ` 6 66 222/-. 20. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE ADDITION OF ` 6 66 222/- INCLUDES THE AMOUNT OF ` 90 180/ WHICH REPRESENTS THE DEMAND DRAFT ISSUED IN F AVOUR OF SUPERINTENDING ENGINEER AGRICULTURAL MARKETING BOA RD AJMER. SINCE THE AMOUNT OF ` 90 180/- HAS BEEN CONSIDERED IN EARLI ER GROUNDS NO SEPARATE ADDITION CAN BE MADE OTHERWISE IT WOULD AMO UNT TO DOUBLE ADDITION. ACCORDINGLY THE AMOUNT OF ` 90 180/- STA NDS DELETED. AS REGARDS THE ADDITION OF ` 55 000/- THE ASSESSEE HAD REC EIVED LOAN FROM LIC AGAINST POLICY NO.500543044. THE LETTER FROM LI C DATED 17 TH APRIL 2003 HAS BEEN PLACED AT PAGE 27 OF PAPER BOOK. SINC E THE AMOUNT OF ` 55 000/- HAS BEEN RECEIVED AS LOAN AGAINST LIC POLICY NO ADDITION CAN BE MADE IN RESPECT OF AMOUNT OF ` 55 000/-. ANOTHER AMOUNT OF ` 21 042/- HAS BEEN CREDITED IN THE CAPITAL ACCOUNT WH ICH HAS BEEN TRANSFERRED FROM THE BOOKS OF ACCOUNT OF M/S DHAKA SAL T COMPANY. IN LEDGER WE FIND THAT AN AMOUNT OF ` 21 042/- HAS BEE N DEBITED ON 23 RD FEBRUARY 2004 ON ACCOUNT OF DD. THEREFORE NO ADD ITION CAN BE MADE IN THE HANDS OF THE ASSESSEE. NOW COMING TO THE ADDITION OF ` 5 LAC IN THE CAPIT AL ACCOUNT LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE ENTERED IN TO AGREEMENT FOR SALE OF HIS AGRICULTURAL LAND MEASURING 9 BIGHA BEARING KHASRA NO.423 SITUATED AT VILLAGE GUDAWADI (SALASAR) F OR A SUM OF ` ITA NO.1/JU/2008 ITA NO.84/JU/2008 11 7 51 000/- AGAINST WHICH THE ASSESSEE RECEIVED ADVANCE O F ` 1 LAC ON 3.5.2003 AND ` 4 LAC ON 20 TH APRIL 2003. THE SAID AMOUNT WAS CREDITED IN THE CAPITAL ACCOUNT OF M/S DHAKA CONSTRUCTION COMP ANY. LD. AR OF THE ASSESSEE HAS FILED A LETTER STATING THEREIN THAT THE PURCHASER HAD OBTAINED POWER OF ATTORNEY FROM THE ASSESSEE AND SALE DE ED HAD NOT BEEN REGISTERED SO FAR. THE AGRICULTURAL LAND HAS BEE N STATED TO BE SOLD FOR ` 7 51 000/- OUT OF WHICH THE ASSESSEE HAD RECEIVED ADVANCE OF ` 5 LAC. THE INFORMATION AS TO WHEN THE BALANCE AMOUNT OF ` 2 51 000/- WAS RECEIVED IS NOT AVAILABLE ON RECORD. IN THE ABSEN CE OF COMPLETE DETAILS AND CONFIRMATION OF THE FACT THAT THE PURCHA SER HAD OBTAINED A POWER OF ATTORNEY FROM THE ASSESSEE WE ARE UNABLE TO A RRIVE AT THE CONCLUSION AS TO WHETHER THE AMOUNT OF ` 5 LAC WAS ACT UALLY RECEIVED AGAINST THE SALE OF AGRICULTURAL LAND. WE THEREFORE SET ASIDE THE MATTER TO THE FILE OF AO WITH THE DIRECTIONS TO INVE STIGATE THE MATTER BY COLLECTING THE EVIDENCE FROM SHRI SOHAN LAL S/O LU NA RAM FOR ALLEGED SALE OF AGRICULTURAL LAND BY THE ASSESSEE TO HIM. HE WI LL ALSO EXAMINE THE CREDIT WORTHINESS OF SRI SOHAN LAL AND THE DATE O N WHICH THE POWER OF ATTORNEY REGISTERED WAS ENTERED INTO AND THE AMOUN T OF BALANCE MONEY OF ` 2 51 000/- RECEIVED. IF THE ASSESSEE HAD SOL D THE AGRICULTURAL LAND FOR ` 7 51 000/- THE ASSESSEE WOULD HAVE RECEIVED THE BALANCE AMOUNT OF ` 2 51 000/- AT THE TIME OF REGIST RATION OF POWER OF ATTORNEY OR AT THE TIME OF HANDING OVER OF THE POSSESSI ON OF THE AGRICULTURAL LAND. THE AO WILL CONDUCT NECESSARY INQ UIRY AFTER AFFORDING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. H E WILL DECIDE THE ISSUE AFRESH. THE AO IS DIRECTED ACCORDINGLY. 21. THE NEXT ISSUE FOR CONSIDERATION RELATES TO TREATIN G THE INTEREST ON FDRS UNDER THE HEAD OTHER SOURCES. THE ASSESSEE HAS TREA TED THE BANK INTEREST ON FDRS AMOUNTING TO ` 40 257/- AS BUSINE SS INCOME WHILE THE AO HAS TREATED THE SAME UNDER THE HEAD OT HER SOURCES. ON ITA NO.1/JU/2008 ITA NO.84/JU/2008 12 APPEAL LD. CIT (A) UPHELD THE STAND TAKEN BY THE AO ON THE GROUND THAT NO EVIDENCES HAVE BEEN PLACED ON RECORD TO PROVE AND LINK THE NEXUS BETWEEN THE INTEREST INCOME AND THE BUSINESS. BEFORE U S LD. AR OF THE ASSESSEE SUBMITTED THAT FDRS WERE MADE FOR THE PURPOSE OF BUSINESS AND THEREFORE INTEREST THEREON HAS TO BE ASSESSED UNDER THE HEAD BUSINESS AND NOT UNDER THE HEAD INCOME FROM OTHER SO URCES. 22. WE HAVE HERD BOTH THE PARTIES . IN THE CASE OF S HRIRAM HONDA POWER EQUIPS VS. CIT 289 ITR 475 (DEL) HONBLE DELHI HIGH COURT AFTER CONSIDERING SEVERAL DECISIONS HAS HELD THAT INCOME FROM FDRS IS TO BE ASSESSED UNDER THE HEAD OTHER SOURCES AND NOT UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. IN SUBSEQUEN T DECISIONS HONBLE DELHI HIGH COURT HAS ALSO TAKEN SIMILAR VIEW. DURING THE COURSE OF HEARING LD. AR OF THE ASSESSEE COULD NOT PLACE ON R ECORD ANY DECISION OF HONBLE RAJASTHAN HIGH COURT CONTRARY TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF SHRIRAM HOND A POWER EQUIP (SUPRA). RESPECTFULLY FOLLOWING THE DECISION OF HONB LE DELHI HIGH COURT IN THE CASE OF SHRIRAM HONDA POWER EQUIP (SUPRA) IT IS HELD THAT INTEREST EARNED ON FDRS HAS TO BE ASSESSED UNDER THE HEAD OTHER SOURCES. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (A) CONFIRMING THE STAND OF THE AO. 23. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PA RTLY ALLOWED. 24. NOW COMING TO THE APPEAL FILED BY THE REVENUE THE SECOND ISSUE FOR CONSIDERATION RELATES TO DELETING THE ADDITION OF ` 20 47 502/- MADE BY APPLYING NET PROFIT RATE OF 8% AGAINST NET PROFIT RATE OF 0.76% DECLARED BY THE ASSESSEE. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT IN THE BUSINESS OF DHAKA CONSTRUCTION COMPANY THE ASSESSEE ADMITTED NET PROFIT RATE OF 0.76% ON CONTRACT RECEIPTS OF ` 2 82 91 502/-. THE ASSESSEE ADMITTED GROSS PROFIT OF ` 25 23 280/-. THE ASSE SSEE AFTER ITA NO.1/JU/2008 ITA NO.84/JU/2008 13 CLAIMING VARIOUS ADMINISTRATIVE EXPENSES AND FINANCE CH ARGES NET PROFIT OF ` 3 74 150/- WAS SHOWN WHICH INCLUDED INTEREST INCO ME OF ` 40 257/- AND INCOME FROM HITACHI AT ` 1 18 000/-. IF THESE T WO ITEMS OF INCOME WERE REDUCED FROM NET PROFIT SHOWN BY THE ASSESSEE THE RESULTANT AMOUNT CAME TO ` 2 15 818/- GIVING NET PROFIT RATE OF 0.76% ON CONTRACT RECEIPTS. THE AO NOTED THAT THE ASSESSEE HAD NOT MAINTA INED DETAILED EXPENDITURE ACCOUNTS OF SITE-WISE WORK AND THEIR PROFI TABILITY. NO STOCK REGISTER OF MATERIAL WAS MAINTAINED. NO DETAILS REGAR DING ISSUE AND SUPPLY OF MATERIAL AT SITES WAS KEPT. THE VOUCHERS KEPT IN RESPECT OF MAJOR DIRECT EXPENSES SUCH AS GRIT BOULDERS STONE BLAST ROAD PAINT ETC. WERE SELF MADE WITHOUT ANY SUPPORTING DETAILS. THUS THE EXPENDITURE WAS NOT CAPABLE OF FURTHER VERIFICATION. THE PAYMENTS WERE SHOWN TO TRUCK DRIVERS CONTAINING NO NAMES AND AD DRESSES OF TRUCK OWNERS. NO PROPER RECORD OF WORK-IN-PROGRESS WA S MAINTAINED. THE ASSESSEE HAD NOT MAINTAINED MUSTER ROLLS AND REGISTER IN RESPECT OF WORKERS. THE AO REJECTED THE BOOKS OF ACCOUNT U/S 145 (3). HE REFERRED TO VARIOUS DECISIONS IN SUPPORT OF HIS CONTENTION THAT B OOKS OF ACCOUNT COULD BE REJECTED. THE AO FURTHER RELIED ON THE DE CISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. M/S JAIN CO NSTRUCTION COMPANY 257 ITR 753 WHEREIN NET PROFIT @ 12.5% SUBJE CT TO INTEREST AND REMUNERATION TO THE PARTNERS AND DEPRECIATION WA S HELD TO BE FAIR AND JUSTIFIED. SINCE NO REPLY/EXPLANATION WAS RECEIV ED FROM THE ASSESSEE THE AO FOLLOWING THE DECISION IN THE CASE OF J AIN CONSTRUCTION COMPANY APPLIED NET PROFIT RATE OF 8% WITHOUT FURT HER GIVING ANY DEDUCTIONS. THIS RESULTED IN ADDITION OF ` 20 47 502/ -. 25. BEFORE CIT (A) THE ASSESSEE EXPLAINED THE MATTER A T LENGTH. LD. CIT (A) UPHELD THE REJECTION OF BOOKS OF ACCOUNT U/S 145(3) OF THE ACT. LD. CIT (A) REFERRED TO VARIOUS DECISION OF ITAT INCL UDING THE DECISION OF ITAT JODHPUR BENCH IN THE CASE MANA RAM BISHNOI VS AC IT IN ITA ITA NO.1/JU/2008 ITA NO.84/JU/2008 14 NO.565/JDPR/2006 DATED 30 TH OCTOBER 2007 WHEREIN IT HAS BEEN HELD THAT PROVISIONS OF SECTION 44AD DO NOT APPLY TO A CA SE WHERE CONTRACT RECEIPTS EXCEED ` 40 LAC AND FURTHER NO ASSISTANCE OR SU PPORT COULD BE DERIVED FROM THE PROVISIONS OF SECTION 44AD. HOWEVER LD. CIT (A) NOTED THAT APPLICATION OF NET PROFIT RATE OF 8% WAS UNJUSTI FIED. LD. CIT (A) THEREAFTER COMPARED THE RESULT OF ASSESSEES BUSINESS FOR ASSE SSMENT YEAR 2004-05 WITH PRECEDING ASSESSMENT YEAR 2003-04. L D. CIT (A) NOTED THAT WHILE WORKING OUT NET PROFIT FROM THE BU SINESS INTEREST INCOME COULD NOT BE CONSIDERED AS PART OF CONTRACT RE CEIPTS. HE ALSO NOTED THAT THE AO HAD ALSO NOT CONSIDERED THE HITACHI HIRE INCOME AS PART OF CONTRACT RECEIPT. HE REFERRED TO DECISION O F ITAT JODHPUR BENCH IN THE CASE OF MANA RAM VISHNOI (SUPRA) WHEREIN IT HAS BEEN HELD THAT MACHINERY HIRE CHARGES COULD NOT BE SEGREGATED FROM T HE CONTRACT RECEIPTS. LD. CIT (A) THEREFORE TREATED THE HITAC HI HIRE CHARGES AS PART OF CONTRACT RECEIPTS. LD. CIT (A) FURTHER NOTED THA T NET PROFIT RATE IN ASSESSMENT YEAR 2004-05 WAS BETTER AS COMPARED TO PRECEDI NG ASSESSMENT YEAR THEREFORE NO FURTHER ADDITION COULD B E MDE ON THE BASIS OF APPLICATION OF HIGHER NET PROFIT RATE. HE F URTHER NOTED THAT EVEN IF FOR THE TIME BEING HITACHI HIRE INCOME WAS EXCLUD ED FROM CONTRACT INCOME YET THE NET PROFIT RATE IN ASSESSMENT YEAR 200 4-05 UNDER REFERENCE WAS AT 5.06% AS AGAINST 5.02% IN THE PRECEDI NG ASSESSMENT YEAR 2003-04. THE LD. CIT (A) THEREFORE CAME TO THE CONCLUSION THAT NO ADDITION COULD BE MADE IN THE HANDS OF THE ASSESSEE. 26. BEFORE US LD. SR. DR SUBMITTED THAT BOOKS OF ACCO UNT HAS BEEN REJECTED AND THEREFORE ESTIMATION OF NET PROFIT RA TE IS JUSTIFIED. ON THE OTHER HAND LD. AR OF THE ASSESSEE SUPPORTED THE ORDER O F THE CIT (A). 27. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN IMMEDIATE PRECEDING YEAR O N CONTRACT RECEIPT OF ITA NO.1/JU/2008 ITA NO.84/JU/2008 15 ` 2 11 71 739/- THE ASSESSEE HAS ADMITTED GROSS PROFIT @ 5.02% IN A.Y. 2003-04 AS AGAINST THE RATE OF PROFIT OF 5.06% IN THE YEAR UNDER CONSIDERATION. THE RATE OF PROFIT AT 5.02% WAS ACCEP TED BY THE AO IN THE IMMEDIATE PRECEDING YEAR. LD. AR OF THE ASSESSEE H AD ALSO POINTED OUT THAT THERE WAS ABNORMAL INCREASE IN THE PRICE OF PETROLEUM PRODUCTS IN THE YEAR FROM TIME TO TIME. THE PRICE OF MAJOR ITEMS REQUIRED FOR CONSTRUCTION WERE INCREASED BEYOND EXPECTATION DUE TO WHICH THERE WAS FALL IN PROFIT RATE THOUGH OVERALL PROFIT EARNED BY THE ASSESSEE WAS MUCH MORE THAN THAT DECLARED IN THE PRECEDING YEAR WITH THE SAME CAPITAL AND RESOURCES. IN THE CASE OF THE ASSESSEE THE A O HAD ACCEPTED THE NET PROFIT RATE BEFORE DEPRECIATION AN D INTEREST PAID TO THIRD PARTIES AND FINANCE CHARGES AT 5.02%. THE NET PROFIT IN THE YEAR UNDER CONSIDERATION WORKS OUT TO 5.06% WHICH IS HIGHER THAN THAT IN THE IMMEDIATE PRECEDING YEAR. ON IDENTICAL FACTS ITAT J ODHPUR BENCH IN THE CASE OF ASSESSEE IN A.Y. 2005-06 IN ITA NO.647/JU/2008 D ATED 22.06.09 HAS DELETED SIMILAR ADDITION MADE BY ESTIMATING NET PR OFIT RATE @ 8%. HENCE WE DO NOT FIND ANY REASON TO DIFFER WITH THE DECISION OF ITAT IN ASSESSEES OWN CASE. IN VIEW OF THESE FACTS IN OUR CONSIDER ED OPINION LD. CIT (A) WAS JUSTIFIED IN DELETING THE ADDITION O F ` 20 47 502/-. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE OR DER PASSED BY THE CIT (A). 28. THE NEXT ISSUE FOR CONSIDERATION RELATES TO DELETIN G THE ADDITION OF ` 12 LAC MADE U/S 68 OF THE ACT. THE AO ON EXAMINA TION OF BALANCE SHEET FOUND THAT THE ASSESSEE HAD RECEIVED ` 12 LAC FROM THREE PARTIES I.E. ` 4 LAC FROM GANESH DHAKA & SONS HUF; ` 4 LAC F ROM SURJA RAM DHAKA & SONS HUF; AND ` 4 LAC FROM MANGI LAL DHAKA & SONS HUF. THE AO REQUIRED THE ASSESSEE TO FURNISH CONFIRMATION ALONG W ITH SUPPORTING EVIDENCE TO PROVE IDENTITY CREDIT WORTHINESS AND GEN UINENESS OF CREDITS. THE ASSESSEE FURNISHED ONLY CONFIRMATION IN RESP ECT OF ABOVE ITA NO.1/JU/2008 ITA NO.84/JU/2008 16 CASH CREDITORS. HOWEVER NO SUPPORTING EVIDENCE TO PR OVE CREDIT WORTHINESS AND GENUINENESS OF CREDITS HAS BEEN FURNISHED. THE AO REQUIRED THE ASSESSEE TO EXPLAIN THE CREDIT WORTHINESS AN D GENUINENESS OF TRANSACTION. SINCE NO REPLY/EXPLANATION WAS FURNI SHED BY THE ASSESSEE THE AO INVOKED THE PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT AND ADDED THE AMOUNT OF ` 12 LAC. HOWEVER SINCE THE AO MADE TRADING ADDITION OF ` 20 47 502/- HE ALLOWED AMOUNT OF ` 12 LAC TO BE TELESCOPED SUBJECT TO A CONDITION THAT IN CASE THE ASSESSEE WAS ALLOWED RELIEF IN RESPECT OF ` 20 47 502 THE SET OFF GIVEN AGAINST NET PROFIT ADDITION WILL BE ALTERED ACCORDINGLY. 29. BEFORE CIT (A) THE ASSESSEE FILED FRESH EVIDENCES WH ICH INCLUDED THE COPIES OF RETURN OF INCOME FINANCIAL STATEMENTS O F ALL THE THREE CREDITORS. THE FRESH EVIDENCES WERE FORWARDED TO THE AO FOR HIS COMMENTS. LD. CIT (A) RECEIVED THE COMMENTS OF AO WH EREIN IT WAS STATED THAT THE FRESH EVIDENCES SHOULD NOT BE ADMITTED. IT WAS ALSO REPORTED THAT FILING OF CONFIRMATION WOULD NOT LEAD TO A CONCLUSION THAT THE CREDITS WERE GENUINE. LD. CIT(A) HOWEVER ADMI TTED THE FRESH EVIDENCE. HE NOTED THAT ALL THE THREE CREDITORS WER E ASSESSED TO TAX REGULARLY AND THE BALANCES WERE DISCLOSED IN THEIR RESP ECTIVE BALANCE SHEETS. FOR DEPOSIT OF CASH IN THE BANK ACCOUNT OF THE CREDITOR THE SAID CREDITOR WAS REQUIRED TO EXPLAIN THE SAME AND THE ASSESSE E COULD NOT BE HELD LIABLE FOR CASH DEPOSITS IN THE BANK ACCOUNT O F THE CREDITOR. ACTION IF ANY COULD BE TAKEN AGAINST THE CREDITOR IN WHOSE ACCOUNT CASH HAS BEEN FOUND TO BE DEPOSITED. THE LD. CIT (A) FURTHER OBSERVED THAT THE AO HAD NOT ESTABLISHED NOR BROUGHT ANYTHING ON RECORD TO PROVE THAT THE SAID CREDITOR DID NOT HAVE CAPACITY TO ADVANCE THE LOAN. HAD THE AO PLACED ON RECORD SOME EVIDENCES INDICATING FINANCIAL WEAKNESS OF CREDITOR THEN UNDER SUCH CIRCUMSTANCES C ASH DEPOSITS IN THE BANK ACCOUNT OF THE CREDITOR WOULD HAVE ASSUMED SI GNIFICANCE WHILE ITA NO.1/JU/2008 ITA NO.84/JU/2008 17 MAKING ADDITION U/S 68 OF THE ACT. HE FURTHER NOTED THAT IN REMAND REPORT NO EVIDENCE HAS BEEN PLACED ON RECORD TO PROV E THE NON-CREDIT WORTHINESS OF CREDITORS THOUGH THE AO WAS SPECIFICALLY R EQUESTED TO MAKE NECESSARY INVESTIGATIONS IN RESPECT OF FRESH EVIDENC ES. LD. CIT (A) IN VIEW OF THESE FACTS HELD THAT ADDITION COULD N OT BE MADE IN THE HANDS OF THE ASSESSEE. HE ACCORDINGLY DELETED THE ADDIT ION. 30. BEFORE US LD. SR. DR SUBMITTED THAT NO REPLY WIT H REFERENCE TO GENUINENESS OF TRANSACTION AND CREDIT WORTHINESS OF THE CREDITOR WAS FILED BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS. THEREFORE ON THE BASIS OF FILING OF CONFIRMATION IT CANNOT BE PRO VED THAT ALL THE THREE CONDITIONS I.E. THE IDENTITY OF THE CREDITOR GENUI NENESS OF TRANSACTION AND CREDIT WORTHINESS OF THE CREDITOR CAN BE PROVED. SINCE THE ASSESSEE HAS NOT DISCHARGED INITIAL ONUS THE PROVISIONS OF SECTI ON 68 WERE RIGHTLY APPLIED BY THE AO. ON THE OTHER HAND LD. AR OF TH E ASSESSEE SUPPORTED THE ORDER OF THE CIT (A). 31. WE HAVE HEAD BOTH THE PARTIES AND GONE THROUGH T HE MATERIAL PLACED ON RECORD. THE ASSESSEE HAD RECEIVED LOAN OF ` 4 LAC EACH FROM GANESH DHAKA & SONS HUF SURJA RAM DHAKA & SONS HUF A ND MANGI LAL DHAKA & SONS HUF. IN CASE OF GANESH DHAKA & SONS FOR ASSESSMENT YEAR 2004-05 THE INCOME FROM HOUSE PROPERTY H AS BEEN ADMITTED AT ` 24 000/- AND DAIRY INCOME OF ` 32 625 /- AND AGRICULTURAL INCOME OF ` 16 750/-. THE OPENING CAPITAL BALANCE IS AT ` 4 07 360/-. WE HAVE ALSO GONE THROUGH THE BANK STATEMENT OF GANE SH DHAKA & SONS HUF FOR THE PERIOD 1.4.2005 TO 31.3.2005. THIS BANK ACCOUNT FILED BY THE ASSESSEE IS NOT RELEVANT FOR THE YEAR UNDER CONSID ERATION AND THE OPENING CASH BALANCE IS ` 1000/-. IN CASE OF SURJA RA M & SONS HUF THE OPENING BROUGHT FORWARD BALANCE IS AT ` 6 47 120 /-. THE ASSESSEE HAS SHOWN RENTAL INCOME OF ` 54 000/- AND AGRICULTURA L INCOME OF ` ITA NO.1/JU/2008 ITA NO.84/JU/2008 18 80 500/-. THE LOAN OF ` 6 LAC HAS BEEN SHOWN AS ON 31 ST MARCH 2005. FOR ASSESSMENT YEAR 2004-05 THE ASSESSEE HAS SHOWN RENTAL INC OME OF ` 24 000/-AND INCOME FROM INTEREST AND COMMISSION AT ` 24 650/-. THE BANK ACCOUNT FOR THE PERIOD 1.4.2003 TO 31.3.2004 H AS BEEN PLACED. IN THIS ACCOUNT WE FIND DEPOSIT OF ` 2 LAC ON 25 TH MARCH 2004 ` 1 LAC ON 25 TH MARCH 2004 AND ` 1 LAC ON 29 TH MARCH 2004. THIS CASH OF ` 4 LAC WAS DEPOSITED IN THE BANK ACCOUNT OF M/S SURJA RAM DHA KA & SONS BEFORE TWO CHEQUES OF `3 LAC AND ` 1 LAC WERE ISSUED O N 29 TH MARCH 2004. SIMILARLY IN THE CASE OF SHRI MANGI LAL DHAK A & SONS HUF FOR ASSESSMENT YEAR 2004-05 RENTAL INCOME OF ` 18 000/- I NTEREST AND COMMISSION INCOME OF ` 23 630/- HAS BEEN ADMITTED. TH E BANK ACCOUNT FOR THE PERIOD 1.4.2004 TO 31.3.2005 HAS BEEN PLACED ON RECORD WHICH IS NOT RELEVANT. THE BALANCE BROUGHT FORWARD AS ON 1.4 .2004 WAS ` 1000/- ONLY. LD. CIT (A) WHILE ALLOWING THE RELIEF HAS NOT EXAMINED THE CREDIT WORTHINESS AND GENUINENESS OF TRANSACTION. HE HAS SIMPLY RELIED ON THE INFORMATION FURNISHED AS ADDITIONAL EVIDENCE IN SUPPOR T OF THEIR CONTENTION THAT CREDIT WORTHINESS AND GENUINENESS OF TR ANSACTION WAS PROVED. THE ASSESSEE HAD NOT FURNISHED THESE EVIDENCES BE FORE THE AO. ON THE BASIS OF INFORMATION PLACE ON RECORD WE ARE UNABLE TO COME TO A CONCLUSION THAT CREDIT WORTHINESS OF THESE PARTIES WERE PROVED. WE THEREFORE FEEL IT PROPER TO SET ASIDE THE ISSUE TO THE FILE OF AO WITH THE DIRECTION TO EXAMINE THE CASE OF THE ASSESSEE WITH R EFERENCE TO THE GENUINENESS OF TRANSACTION AND CREDIT WORTHINESS OF THE CREDITORS. HE WILL MAKE INQUIRY ABOUT THE RENTAL INCOME WITH RESPE CT TO DETAILS OF PROPERTY OWNED BY THE SAID HUFS THE SOURCE OF INTEREST INCOME AND ALSO THE COMMISSION AND AGRICULTURAL INCOME. THE AO A FTER MAKING NECESSARY INQUIRY WILL DECIDE THE ISSUE AFTER AFFORDING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. ITA NO.1/JU/2008 ITA NO.84/JU/2008 19 32. THE LAST ISSUE FOR CONSIDERATION RELATES TO DELETING THE ADDITION OF ` 5 LAC. THE FACTS OF THE CASE STATED IN BRIEF ARE TH AT THE ASSESSEE PURCHASED TATA HITACHI MACHINES FROM M/S MEMON MARBLES PVT. LTD. FOR ` 13 LAC AND PAID ` 8 LAC. THE REMAINING AMOUNT OF ` 5 LAC WAS SHOWN OUTSTANDING. IN ASSESSMENT YEAR 2001-02 M/S MEMON MARBL ES PVT. LTD. SURRENDERED MINES TO SOME OTHER PARTY. THE AO OBTAIN ED REPORT FROM ITO RAJSAMAND WHO REPORTED THAT M/S MEMON MARBLES PVT . LTD. HAD WOUND UP ITS OPERATIONS AND AS A CONSEQUENCE SOLD THE MA CHINERY TO THE ASSESSEE. SINCE THE AMOUNT OF ` 5 LAC WAS SHOWN OUTST ANDING THE AO TREATED THE AMOUNT OF ` 5 LAC AS BOGUS. THE AO CA ME TO THE CONCLUSION THAT THE ASSESSEE PURCHASED THE MACHINERY FOR ` 8 LAC. HE THEREFORE MADE THE ADDITION OF ` 5 LAC. 33. BEFORE CIT (A) IT WAS SUBMITTED THAT THE AO HAD ADDED THE AMOUNT OF ` 5 LAC MERELY ON CONJECTURES AND SURMISES. THE ASSESSEE HAD PURCHASED MACHINERY FOR ` 13 LAC FROM MEMON MARB LES PVT. LTD. THEREFORE NO DISALLOWANCE CAN BE MADE IN THE YEAR U NDER CONSIDERATION. LD. CIT (A) IN VIEW OF THESE FACTS DEL ETED THE ADDITION. 34. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE PURCHASED TATA HITACH I MACHINE FOR A SUM OF ` 13 LAC FROM M/S MEMON MARBLES PVT. LTD. IN ASSESSMENT YEAR 2001-02. IN THE YEAR UNDER CONSIDERATION THE AO O N THE BASIS OF REPORT FROM ITO RAJSAMAND THAT M/S MEMON MARBLES PVT. LTD. HAD WOUND UP THEIR BUSINESS AND SOLD THE MINES TO SOME OTHER PARTY CAME TO THE CONCLUSION THAT THE ASSESSEE MIGHT HAVE PURCHASED THE MACHINERY FOR ` 8 LAC. THERE IS NO MATERIAL ON RECO RD TO PROVE THAT MACHINERY WAS PURCHASED FOR ` 8 LAC. THE AO HAS ACCE PTED THE PURCHASE PRICE IN ASSESSMENT YEAR 2001-02 AT ` 13 LAC. NO ADDITION CAN BE MADE IN THE YEAR UNDER CONSIDERATION ON THE GROUN D THAT THE ITA NO.1/JU/2008 ITA NO.84/JU/2008 20 BALANCE AMOUNT OF ` 5 LAC WAS SHOWN OUTSTANDING BY T HE ASSESSEE. IF THE AO HAVE DOUBT ABOUT THE PURCHASE PRICE OF THE MA CHINERY HE SHOULD HAVE INVESTIGATED THE CASE FOR ASSESSMENT YEAR 2001 -02. HAVING ACCEPTED THE VALUE OF MACHINERY IN ASSESSMENT YE AR 2001-02 AT ` 13 LAC NO ADDITION CAN BE MADE IN THE YEAR UNDER CONSIDERATION. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE OR DER PASSED BY THE CIT (A) DELETING THE ADDITION. 35. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29.07.2011. SD/- SD/- [RAJPAL YADAV] [K.D. RANJ AN] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED 29 TH JULY 2011 DK COPY FORWARDED TO:- 1. APPELLANT. 2. RESPONDENT 3. INCOME-TAX OFFICER 4. CIT 5. DR 6. GUARD FILE ASSTT. REGISTRAR ITAT JODHPUR