DCIT, Bareilly v. M/s. Dhruv Amusement Ltd., Bareilly

ITA 483/LKW/2010 | 2004-2005
Pronouncement Date: 21-01-2011 | Result: Dismissed

Appeal Details

RSA Number 48323714 RSA 2010
Assessee PAN AABCD6575H
Bench Lucknow
Appeal Number ITA 483/LKW/2010
Duration Of Justice 6 month(s) 12 day(s)
Appellant DCIT, Bareilly
Respondent M/s. Dhruv Amusement Ltd., Bareilly
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 21-01-2011
Date Of Final Hearing 18-01-2011
Next Hearing Date 18-01-2011
Assessment Year 2004-2005
Appeal Filed On 09-07-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B - BENCH LUCKNOW. BEFORE SHRI H.L.KARWA HON'BLE VICE PRESIDENT AND SHRI N.K.SAINI ACCOUNTANT MEMBER I.T.A.NO.483(LKW.)/2010 A.Y. : 2004-05 THE DY.CIT CIR. I VS. M/S. DHRUV AMUSEMENT LTD. BAREILLY. 158-A RAJENDRA NAGAR BAREILLY. PAN AABCD 6575H (APPELLANT) (RESPONDENT) C.O.NO.33(LKW.)/2010) ( IN I.T.A.NO.483(LKW.)/2010) A.Y. : 2004-05 M/S.DHURV AMUSEMENT VS. THE DY.C.I.T. CIR.- I BAREILLY. BAREILLY. (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY : SHRI P.K.BAJAJ D.R. ASSESSEE BY : SHRI YOGESH AGRAWAL ADVOCATE O R D E R PER N.K.SAINI ACCOUNTANT MEMBER THE APPEAL BY THE DEPARTMENT AND THE CROSS OBJECT ION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 29.3. 2010 OF THE LD.CIT(A) BAREILLY. SINCE THE MAIN ISSUE IS COMMON IN THE APP EAL OF THE DEPARTMENT AND THE CROSS OBJECTION OF THE ASSESSEE SO THESE A RE BEING DISPOSED OF BY THIS COMMON ORDER. 2 2. THE FIRST ISSUE AGITATED BY THE DEPARTMENT AND T HE ASSESSEE RELATES TO RELIEF/SUSTENANCE OF THE ADDITION OUT OF THE ADDITI ON MADE BY THE AO AMOUNTING TO RS.35 80 000 ON ACCOUNT OF CASH CREDIT S. 3. THE FACTS OF THE CASE IN BRIEF ARE THAT THE AS SESSEE FILED THE RETURN OF INCOME ON 27.10.2004 DECLARING AN INCOME OF RS.9 4 1 840. THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESS MENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAD RECEIVED RS.35 80 000 IN CASH FROM 216 PERSONS OF BAREILLY AND NEIGHBOURING DISTRICTS. ALL THOSE DEPOSITS WERE RANGING BETWEEN RS.15 000 TO RS.18 000. TO EXAMINE THE GENUINENESS OF THE DEPOSITS THE AO ISSUED NOTICES UNDER SECTION 133(6 ) OF THE I.T.ACT TO ALL THE DEPOSITORS. HOWEVER NONE OF THE DEPOSITORS FUR NISHED ANY REPLY NOR CONFIRMED THE AMOUNT OF DEPOSITS AND NOBODY ATTENDE D FOR ENQUIRY ABOUT THE ISSUANCE OF THE SAID NOTICE. LATER ON THE AO FOR T EST-CHECKING THE GENUINENESS OF THE DEPOSITS ISSUED SUMMONS UNDER S ECTION 131 OF THE I.T.ACT TO RANDOMLY SELECTED 21 PERSONS. OUT OF TH OSE SIXTEEN PERSONS APPEARED BEFORE THE AO AND REMAINING FIVE DID NOT COMPLY THE SUMMONS ISSUED UNDER SECTION 131 OF THE I.T.ACT. ALL THE S IXTEEN PERSONS WHO ATTENDED WERE EXAMINED ON OATH AND THEY ACCEPTED T O HAVE MADE THE DEPOSITS WITH THE ASSESSEE. WHEN THE AO VERIFIED TH E STATEMENTS OF OATH IT WAS FOUND THAT ALL THE PERSONS HAD MEAGRE INCOME AN D THEY HAVE HUGE FAMILY EXPENSES. THE ASSESSEE FURNISHED WRITTEN REPLY IN C ONNECTION WITH FIVE UNATTENDED DEPOSITORS. THE AO REQUIRED THE ASSESSEE TO PRODUCE THE COPIES OF THE RECEIPTS WHICH WERE ISSUED IN THE NAME OF D EPOSITORS SINCE NO PROOF OF DEPOSIT HAD BEEN PRODUCED BY THE DEPOSITORS IN THE COURSE OF STATEMENTS ON OATH OR EVEN LATER WHEREAS IT WAS COMMITTED BY EACH AND EVERY DEPOSITOR THAT PHOTO COPY OF THE RECEIPT WOULD BE PRODUCED L ATER ON. THE AO AFTER 3 RECORDING THE STATEMENTS ON OATH ISSUED A SHOW CA USE NOTICE TO THE ASSESSEE ALONGWITH CERTIFIED COPIES OF ABOVE-MENTIONED STAT EMENTS ON OATH AND REQUIRED TO JUSTIFY THE AMOUNTS DEPOSITED WITH THE ASSESSEE OF RS.35 80 000 FROM 216 DEPOSITORS. ACCORDING TO THE AO THE ASESS EE HAD PURPORTED A FALSE STORY TO CONVERT ITS UNACCOUNTED MONEY INTO THE ACC OUNTED MONEY. HE ALSO OBSERVED THAT THE IDENTITY OF SOME OF THE SO CALLED DEPOSITORS AND CAPACITY OF ALL SO CALLED DEPOSITORS AS WELL AS GENUINENESS WE RE NOT ESTABLISHED BY THE ASSESSEE AND THAT THE DEPARTMENT HAD PROCEEDED UNDE R THE PROVISIONS OF SECTION 142(1) 133(6) AND 131 OF THE I.T.ACT BY GI VING FULL AND COMPLETE OPPORTUNITIES TO ESTABLISH THE IDENTITY AND THE CAP ACITY OF THE DEPOSITORS AS WELL AS GENUINENESS OF THE DEPOSITS. IN THE ABOVE C IRCUMSTANCES THE AMOUNTS DISCLOSED AS CASH CREDITS OF RS.35 80 000 WAS TREAT ED AS UNDISCLOSED INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE I.T.ACT AND ADDED TO THE INCOME OF THE ASSESSEE. 4. THE ASESSEE CARRIED THE MATTER TO THE LD.CIT(A) AND SUBMITTED THAT THE ASSESSEE ACCEPTED DEPOSITS FROM 216 PERSONS OF RS. 35.80 LACS AND THE DEPOSITS WERE RECEIVED AFTER OBTAINING THEIR SIGNA TURES ON APPLICATION FORMS FROM EACH DEPOSITOR AND THE COPIES OF THE SAID FORM S WERE FURNISHED TO THE AO ALONGWITH LIST OF THE DEPOSITORS CONTAINING TH EIR NAMES ADDRESSES AND AMOUNT RECEIVED FROM EACH OF THEM. IT WAS FURTHER SUBMITTED THAT THE AO ISSUED NOTICES UNDER SECTION 133(6) TO ALL THE 216 PERSONS. IN COMPLIANCE TO THOSE NOTICES THE DEPOSITORS FILED THEIR CONFIRMA TORY LETTERS ALONGWITH PROOF OF THEIR IDENTITY SUCH AS PHOTO ID RATION CARD KH ASRA KHATAUNI ETC. AND EXPLAINED SOURCE OF INCOME. THEREAFTER THE AO ISS UED SUMMONS UNDER SECTION 131 OF THE I.T.ACT TO 21 PERSONS ON TEST-CH ECK BASIS AND OUT OF THOSE PERSONS 16 DEPOSITORS WERE EXAMINED ON OATH BY THE AO. ALL THE SIXTEEN 4 PERSONS CONFIRMED IN THEIR STATEMENTS THAT THEY MAD E DEPOSITS WITH THE ASSESSEE AND EACH OF THEM EXPLAINED SOURCE OF HIS I NCOME. AS REGARDS TO THE COMPLIANCE OF NOTICE UNDER SECTION 133(6) AND SUMMO NS UNDER SECTION 131(1)OF THE I.T.ACT IT WAS CONTENDED BY THE ASSES SEE THAT MOST OF THESE DEPOSITORS WERE EITHER ILLITERATE OR NOT HAVING ANY KNOWLEDGE OF THE I.T. ACT AND INCOME-TAX OFFICE. THEREFORE AFTER RECEIPT OF NOTICES FROM THE OFFICER THEY APPROACHED THE ASSESSEE. IN THOSE CIRCUMSTANCE S THE ASSESSEE PROVIDED THEM COPY OF TYPED CONFIRMATION LETTER BUT THE FA CTS OF EACH PERSON WERE DIFFERENT AND EACH OF THEM CONFIRMED THE DEPOSITS. IT WAS FURTHER STATED THAT THESE DEPOSITORS FURNISHED PROOF OF THEIR IDENTIT Y AND THE EMPLOYEES OF THE ASSESSEE ASSISTED THE DEPOSITORS IN COMPLYING THOS E FORMALITIES. SO THERE WAS NOTHING ILLEGAL OR WRONG IN ASSISTING THE DEP OSITORS TO ENSURE COMPLIANCE OF THE REQUIREMENT OF THE AO AND IT DID NOT MAKE ANY DIFFERENCE WHETHER THE PERSONS CALLED BY THE AO CAME DIRECTLY OR ALONGWITH THE ASSESSEES REPRESENTATIVES BECAUSE IN ANY CASE THE IR STATEMENTS COULD NOT HAVE BEEN RECORDED WITHOUT THE HELP OF THE ACCOUNTA NT OF THE ASSESSEE. AS REGARDS TO THE IDENTITY OF THE DEPOSITORS AND THE IR CAPACITY TO MAKE DEPOSITS THE ASSESSEE FURNISHED INFORMATION BEFORE THE AO IN THE FORM OF A CHART WHICH REVEALED EACH DEPOSITORS NAME HIS FATHERS NAME ADDRESS OCCUPATION AMOUNT OF DEPOSIT AND ANNUAL INCOME AS CONFIRMED U/S 131 IN THEIR STATEMENTS. IT WAS FURTHER SUBMITTED THAT THE OBSERVATION OF THE AO REGARDING THE CONTENTS OF STATEMENT OF EACH OF THE DEPOSITOR WAS MISLEADING AND CONTRARY TO THE FACTS STATED BY THE DEPOSITORS IN THEIR STATEMENTS. IT WAS ALSO SUBMITTED THAT THE OBSERVATION OF THE AO THAT THESE DEPOSITORS DID NOT PRODUCE RECEIPTS ISSUED BY THE ASSESSEE IN LIEU OF DEPOSITS WAS REBUTTED BY THE ASSESSEE WITH THE SUBMISSION THAT THE AO DID NO T CALL FOR THIS DOCUMENT IN THE SUMMONS AND IN THE NOTICE ISSUED U/S 133(6) NOR DID HE ASK THESE 5 DEPOSITORS TO PRODUCE THE RECEIPTS ON ANY SUBSEQUEN T DATE. HOWEVER AFTER RECEIPT OF SHOW CAUSE NOTICE THE ASSESSEE FILED CO PIES OF THE RECEIPTS BEFORE THE AO. IT WAS VEHEMENTLY CONTENDED THAT NO ADDITIO N COULD BE MADE UNDER SECTION 68 IN THE HANDS OF THE ASSESSEE-COMPANY WHE N THERE WAS NO DOUBT ABOUT THE EXISTENCE IDENTITY AND CAPACITY OF THE D EPOSITORS. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: 1. CIT VS. STELLOR INVESTMENT LIMITED (2001) 251 ITR 263(SC) 2. CIT VS. SOPHIA FINANCE LTD. (1994) 205 ITR 98 (DEL.)(FB). 4.1 AS REGARDS TO THE IDENTITY CAPACITY AND GENUI NENESS OF THE DEPOSITS THE ASSESSEE SUBMITTED THAT THERE WAS NO DISPUTE AB OUT THE EXISTENCE AND IDENTITY OF THE DEPOSITORS BECAUSE NOTICES WERE DIR ECTLY SENT TO THEM AND COMPLIANCE WAS MADE ALONGWITH DOCUMENTARY EVIDENCE WITH REGARD TO THEIR RESPECTIVE IDENTITY. THEREFORE ADDITION IN THE HAN DS OF THE ASSESSEE COULD NOT BE MADE. IT WAS FURTHER SUBMITTED THAT IT WAS HIGHL Y UNJUSTIFIED AND ILLEGAL THAT ON THE BASIS OF WRONG CONCLUSION DRAWN ON TEST -CHECK BASIS IN RESPECT OF 16 PERSONS THE ADDITION WAS MADE FOR ENTIRE DEPOS ITS AND THAT THE AO SHOULD HAVE EXAMINED EACH AND EVERY PERSON AND THER EAFTER IF REQUIRED ADDITION SHOULD HAVE BEEN MADE. THEREFORE SUCH AC TION WAS UNWARRANTED BECAUSE IT WAS UTILIZED TO CIRCUMVENT AND CAMOUFLAG E IN THE MANNER WHICH SUITED THE AO. 5. THE LD.CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE POINTED OUT THAT THE AO AT PAGE 7 OF THE ASSESSMENT ORDER HAD CONFIRMED THAT THE ASESSEE FURNISHED LETTERS OF CONFIRMATIONS FROM THE DEPOSITORS BUT THE SAID CONFIRMATIONS WERE HAVING COMMON PROFORMA AND PREPARED ON THE SAME COMPUTER AND LETTER FONT WAS IDENTICAL. FOR T HAT REASON THE AO ISSUED SUMMONS UNDER SECTION 131 OF THE I.T.ACT TO 21 PERS ONS AND RECORDED 6 STATEMENTS OF SIXTEEN DEPOSITORS. THE LD.CIT(A)FUR THER POINTED OUT THAT AFTER CLOSE EXAMINATION AND ANALYSIS OF THE CONTENTS OF THE STATEMENTS IT WAS NOTICED THAT ALL THE SIXTEEN DEPOSITORS CONFIRMED TO HAVE MADE DEPOSITS WITH THE ASSESSEE AND ALL OF THEM WERE HAVING SOURCE OF INCOME. HE ALSO POINTED OUT THAT MOST OF THOSE DEPOSITORS STATED THAT THEY DID NOT DIRECTLY KNOW THE ASSESSEE BUT MADE THE DEPOSITS ON REFERENCE BY THE IR RELATIVES OR FRIENDS. THE LD.CIT(A) OBSERVED THAT IN THE CASES OF SHRI NASEER KHAN SHRI MOHAMMAD WASEEM SHRI SANJAY SINHA SHRI SUNIL KUMA R SANI SHRI BRIJ KISHORE SHRI ASLAM ALI AND SHRI NIHALUDDIN MONTHLY INCOMES WERE AT RS.4 000 RS.5 000 RS.6 500 RS.5 000 RS.4 000 R S.4 000 AND RS.7 000 RESPECTIVELY. HE FURTHER OBSERVED THAT IN CASE OF O THER DEPOSITORS THE AO DID NOT ENQUIRE ABOUT THEIR MONTHLY INCOME HOWEVER T HE PERUSAL OF STATEMENTS INDICATED THAT SHRI GAJRAJ SINGH WAS WORKING AS AN OPERATOR OF TUBEWELL ON DAILY BASIS AND HOLDING 10 BIGHAS OF AGRICULTURE LA ND SHRI ASHRAF USMANI WAS WORKING WITH HIS FATHER IN HIS AGRICULTURAL LAN D SHRI WASEEM HUSAIN DISTRIBUTED NEWSPAPERS IN THE MORNING GIVING TUITI ONS TO CHILDREN AND ALSO HELPING IN THE SHOP OF HIS FATHER SHRI SERVESH KUM AR WAS EMPLOYEE OF THE ASSESSEE. ON THE BASIS OF THE AFORESAID FACTS THE LD. CIT(A) WAS OF THE VIEW THAT THE FACTS REGARDING THEIR IDENTITY SOURCE OF INCOME AND THE AMOUNT OF DEPOSITS MADE BY EACH OF THEM LEAD TO THE CONCLUSI ON THAT NONE OF THEM WAS HAND TO MOUTH AND THEY HAD CONFIRMED THE AMOUNT O F DEPOSIT MADE WITH THE ASSESSEE. THE LD. CIT(A) EMPHASIZED THAT THE SUMMON S WERE DIRECTLY ISSUED BY THE AO TO THESE DEPOSITORS AND IN COMPLIANCE TO THE SUMMONS 16 DEPOSITORS APPEARED AND THE AO RECORDED THEIR STATE MENTS HOWEVER DESPITE SUCH CLEAR FACTS THE AO GAVE HIS FINDING THAT THE IDENTITY OF THOSE DEPOSITORS WAS DOUBTFUL AND THEY WERE NOT HAVING CAPACITY TO G IVE DEPOSITS TO THE ASSESSEE. THE LD. CIT(A) CONSIDERED IT IMPERATIVE T O ASK THE AO TO VERIFY 7 SOME OF THE DEPOSITORS ON TEST-CHECK BASIS TO ASCER TAIN THEIR IDENTITY AND SOURCE OF INCOME FOR MAKING DEPOSITS. THE AO ON T HE DIRECTION OF THE LD.CIT(A) SUBMITTED THE REMAND REPORT DATED 23.3.20 10 STATING THEREIN AS UNDER : HE ISSUED SUMMON TO 13 PERSONS ON SAMPLE BASIS. AL L THE ABOVE PERSONS ATTENDED MY OFFICE AND THEIR STATEMENTS ON OATH WERE RECORDED BY ME. THEIR IDENTITY PROOF LIKE DRIVING L ICENSE RATION CARD VOTER ID CARD. THEY ALL HAVE SOURCE OF INCOME FOR SEVERAL LAST YEARS ALL OF THEM CONFIRMED THEIR DEPOSITS WITH M/S DHRUV AMUSEMENT LTD. A-158 RAJENDRA NAGAR BAREILLY. ALL THE DEPOSITS W ERE MADE BY THE DEPOSITORS IN CASH THEREFORE THE GENUINENESS OF T RANSFER OF MONEY IS NOT PROVED. ALL OF THEM HAVE SHOWN A FIXED DEPOSIT RECEIPT OF THEIR DEPOSITS WITH THE ABOVE COMPANY. THE PHOTOCOPY OF T HE RECEIPT HAS BEEN OBTAINED FROM EACH DEPOSITOR. THE CASE RECORDE D AND THE STATEMENT ON OATH OF ABOVE PERSONS ARE BEING SUBMIT TED FOR YOUR KIND PERUSAL AND NECESSARY ACTION AT YOUR END.' 5.1 THE LD.CIT(A) PROVIDED THE SAID REMAND REPORT T O THE ASSESSEE AND ASKED TO OFFER ITS COMMENTS ON THE FINDINGS OF THE AO. THE ASSESSEE SUBMITTED THAT THE AO ISSUED SUMMONS TO 13 DEPOSITO RS TO CHECK AND VERIFY GENUINENESS REGARDING THEIR IDENTITY AND CAPACITY AS WELL AS GENUINENESS OF THE DEPOSITS SUMMONS WERE SERVED TO THOSE PERSONS AND THEY ATTENDED BEFORE THE AO WHO RECORDED THEIR STATEMENTS ON OAT H WHEREIN THOSE DEPOSITORS CONFIRMED THE DEPOSITS WITH THE ASSESSEE AND ALSO EXPLAINED SOURCE OF THEIR INCOME PROOF OF IDENTITY AND COPY OF RECEIPTS ISSUED FOR DEPOSITS. 5.2 THE LD.CIT(A) AFTER CONSIDERING THE SUBMISSIO NS OF THE ASSESSEE AND THE REMAND REPORT OF THE AO OBSERVED THAT THE CRE DITORS CONFIRMED THE DEPOSITS AND PROOF OF IDENTITY SUCH AS IDENTITY CARD ISSUED BY ELECTION 8 COMMISSION DRIVING LICENCE RATION CARD WERE FURNI SHED. THE LD. CIT(A) STATED THAT REGARDING THE SOURCE OF INCOME DURING THE PERIOD RELEVANT TO THE ISSUE UNDER CONSIDERATION IT WAS NOTICED THAT THE DEPOSITORS WERE HAVING SOURCE OF INCOME FROM SELF-EMPLOYMENT AND INCOME FR OM AGRICULTURE AND THE SOURCE OF DEPOSITS WAS STATED TO BE OUT OF ACCU MULATED SAVINGS. THE LD.CIT(A) HELD THAT IT WAS REASONABLY PROVED THAT THE DEPOSITS WERE CONFIRMED BY THE CREDITORS AND ALSO MENTIONED THAT 29 DEPOSITORS (16 DEPOSITORS EXAMINED IN THE ASSESSMENT PROCEEDINGS AND 13 DEPOSITORS EXAMINED IN THE REMAND PROCEEDINGS) WERE EXAMINED O N OATH BY THE AO AND ALL OF THEM CONFIRMED TO HAVE GIVEN DEPOSITS TO THE ASSESSEE. THEREFORE THE IDENTITY OF THOSE CREDITORS WAS PROVED BEYOND DOUBT AND THE SOURCE OF SAVINGS FOR GIVING DEPOSITS WAS EXPLAINED AS SUCH THE ADDITION MADE BY THE AO UNDER SECTION 68 OF THE I.T.ACT WAS WITHOUT GIVI NG RECOGNITION TO THE FACTS AND EVIDENCE ON RECORD. AT THE SAME TIME THE LD. CIT(A) ALSO OBSERVED THAT OUT OF 21 PERSONS TO WHOM SUMMONS WERE ISSUED DURING THE ASSESSMENT PROCEEDINGS ONLY SIXTEEN DEPOSITORS APPEARED BEFO RE THE AO AND THE ONUS WAS ON THE ASESSEE TO PRODUCE REMAINING FIVE DEPOSI TORS BUT THE ASSESSEE DID NOT DO THE NEEDFUL FOR THIS PURPOSE. THE LD.CI T(A) CONSIDERED IT JUST AND REASONABLE TO RESTRICT THE ADDITION TO RS.1 50 000 TO TAKE CARE OF POSSIBILITY OF UNEXPLAINED DEPOSITS. SINCE THE AO ALSO DISALLOWED THE INTEREST ON THE DEPOSITS THE LD. CIT(A) DIRECTED THE AO TO WORK O UT PROPORTIONATE INTEREST ON THE DEPOSITS AND ALLOW THE SAME IN THE LIGHT OF HIS FINDING RELATING TO THE RESTRICTION OF THE ADDITION. 6. NOW THE DEPARTMENT IS IN APPEAL AGAINST THE RE LIEF ALLOWED BY THE LD. CIT(A) WHILE THE ASSESSEE HAS FILED THE CROSS OBJ ECTION AGAINST THE SUSTENANCE OF THE ADDITION. 9 7. THE LD.D.R. REITERATED THE OBSERVATIONS MADE BY THE AO AND SUPPORTED THE ASSESSMENT ORDER PASSED BY HIM WHILE THE LD. COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER OF THE LD.CIT (A) AND ALSO SUBMITTED THAT MOST OF THE DEPOSITORS TO WHOM SUMMONS WERE IS SUED APPEARED BEFORE THE AO WHO EXAMINED THEM ON OATH AND ALL THE DEPOS ITORS DISCLOSED THEIR IDENTITY AND SOURCE OF DEPOSITS THEREFORE THE LD.CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION TO THE EXTENT OF RS.1 50 000. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN TH E PRESENT CASE IT IS NOTICED THAT THE ASSESSEE RECEIVED DEPOSITS FROM 216 PERSON S TO WHOM THE AO ISSUED NOTICES UNDER SECTION 133(6) OF THE I.T.ACT BUT NOBODY TURNED UPON. THE ASSESSEE EXPLAINED THAT MOST OF THE DEPOSITORS WERE ILLITERATE AND WERE NOT WELL-VERSED WITH THE WORKING OF THE INCOME-TAX DEPARTMENT. LATER ON THE AO AT HIS OWN RANDOMLY SELECTED 21 DEPOSITOR S AND ISSUED THE SUMMONS U/S 131 OF THE I.T.ACT TO THEM. OUT OF 21 DEPOSITORS SIXTEEN APPEARED IN PERSON BEFORE THE AO WHO RECORDED THEI R STATEMENTS ON OATH. ALL THOSE PERSONS CONFIRMED THAT THEY HAVE MADE THE DEPOSITS WITH THE ASSESSEE AND THEY ALSO EXPLAINED THEIR SOURCE OF I NCOME AND ALSO FURNISHED THE PROOF OF THEIR IDENTITY IN THE SHAPE OF VOTER CARD ISSUED BY THE ELECTION COMMISSION RATION CARD ETC. DURING THE FIRST APPEL LATE PROCEEDINGS THE LD.CIT(A) ALSO ASKED THE AO TO MAKE FURTHER ENQUIRY AND THE AO ISSUED SUMMONS U/S 131 OF THE I.T. ACT TO 13 PERSONS ALL OF THEM APPEARED BEFORE HIM AND EXPLAINED THE SOURCE OF DEPOSITS ALONGWITH THEIR IDENTITY PROOF. SINCE ALL THE THIRTEEN PERSONS SUMMONED BY THE AO APPEARED BEFORE THE AO AND CONFIRMED THE DEPOSITS EXPLAINED THE SOURCE OF DEPOSITS AND 10 FURNISHED THE IDENTITY PROOF AS SUCH THE IDENTITY CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION WERE PROVED IN THE CASE OF 24 PERSONS OUT OF 29 PERSONS SUMMONED BY THE AO. HOWEVER FIVE PERS ONS DID NOT APPEAR IN SPITE OF SUMMONS ISSUED BY THE AO AND ONUS WAS ON T HE ASSESSEE WHICH HAS NOT BEEN DISCHARGED THEREFORE THE LD.CIT(A) BY C ONSIDERING ALL THE AFORESAID FACTS WAS FAIR AND REASONABLE IN RESTRICT ING THE ADDITION TO RS.1 50 000 AND DELETING THE REMAINING ADDITION MAD E BY THE AO. WE DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDING S OF THE LD.CIT(A). ACCORDINGLY THE GROUNDS RAISED BY THE DEPARTMENT IN ITS APPEAL AND THE GROUNDS NO.1 AND 2 RAISED BY THE ASSESSEE IN THE CR OSS OBJECTION ARE DISMISSED. 9. NOW WE WILL DEAL WITH THE REMAINING GROUNDS RAI SED BY THE ASSESSEE IN THE CROSS OBJECTION. 10. VIDE GROUND NO.3 OF THE CROSS OBJECTION THE G RIEVANCE OF THE ASSESSEE RELATES TO THE SUSTENANCE OF ADDITION OF R S.15 000 OUT OF THE DISALLOWANCE OF RS.25 000 MADE BY THE AO UNDER THE HEAD CULTURAL EXPENSES. 11. THE FACTS RELATING TO THIS ISSUE IN BRIEF ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT TH E ASSESSEE HAD CLAIMED A SUM OF RS.1 31 292 ON ACCOUNT OF EXPENSES FOR AGAIN ST THE CULTURAL ACTIVITIES AND IN THE IMMEDIATELY PRECEDING YEAR SUCH EXPENSE S WERE AT RS.49 023. THE AO ASKED THE ASSESSEE TO EXPLAIN THE CLAIM OF E XCESS AMOUNT. IN COMPLIANCE TO THE SAID QUERY THE ASSESSEE STATED T HAT THERE WERE MORE CULTURAL ACTIVITIES DURING THE PERIOD UNDER CONSID ERATION IN COMPARISON TO 11 LAST YEAR TO ENTERTAIN VISITORS IN THE AMUSEMENT PA RK. THE AO MADE THE DISALLOWANCE OF RS.25 000 BY OBSERVING THAT THE ASS ESSEE HAD NOT KEPT AND MAINTAINED PROPER VOUCHERS OF THOSE ACTIVITIES SO IT WAS NOT POSSIBLE TO ALLOW THE EXPENSES CLAIMED IN TOTO. 12. THE ASSESSEE CARRIED THE MATTER TO THE LD.CIT(A ) AND SUBMITTED THAT THE CULTURAL ACTIVITIES WERE INTEGRAL PART OF THEIR BUSINESS THEREFORE THOSE EXPENSES WERE NECESSARY TO ATTRACT THE PUBLIC AND P ROMOTE THE BUSINESS. THE LD.CIT(A) RESTRICTED THE DISALLOWANCE TO RS.15 000 . 13. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IT A PPEARS THAT THE AO WHILE MAKING THE DISALLOWANCE HAD NOT GIVEN ANY BASIS. AT THE SAME TIME THE CLAIM OF THE ASSESSEE WAS ALSO NOT FULLY VERIFIABL E SINCE PROPER VOUCHERS WERE NOT KEPT AND MAINTAINED FOR THE CULTURAL ACTIV ITIES THEREFORE THE LD.CIT(A) WAS JUSTIFIED IN SUSTAINING THE DISALLOWA NCE TO THE EXTENT OF RS.15 000. WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) ON THIS ISSUE. 14. THE NEXT ISSUE VIDE GROUND NO.4 RELATES TO THE SUSTENANCE OF DISALLOWANCE OF RS.15 000 OUT OF THE DISALLOWANCE O F RS.20 450 MADE BY THE AO UNDER THE HEAD GIFT EXPENSES. 15. THE FACTS RELATING TO THIS ISSUE IN BRIEF ARE THAT THE AO NOTICED FROM THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE THAT A SUM OF RS.20 450 HAD BEEN CLAIMED AS GIFT EXPENSES. THE AO DISALLOWED TH E SAME BY OBSERVING THAT THESE WERE NOT RELATED TO BUSINESS PERFORMANC E. 12 16. THE ASSESSEE CARRIED THE MATTER TO THE LD.CIT(A ) AND SUBMITTED THAT SUCH EXPENSES WERE INTEGRAL PART OF THEIR BUSINESS THEREFORE THOSE EXPENSES WERE NECESSARY TO GIVE GIFTS TO THE WINNERS IN CULT URAL ACTIVITIES. HOWEVER THE LD.CIT(A) AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE RESTRICTED THE DISALLOWANCE TO RS.15 000. NOW THE ASSESSEE HA S FILED THE CROSS OBJECTION. 17. DURING THE COURSE OF HEARING THE LD. COUNSEL F OR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT( A) WHILE THE LD.D.R. SUPPORTED THE ORDER OF THE AO. 18. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE P ARTIES IT APPEARS THAT THE ASSESSEE IN SUPPORT OF ITS CLAIM ONLY STATED TH AT THESE EXPENSES WERE INTEGRAL PART OF THEIR BUSINESS. NOTHING MORE WAS S TATED. IT APPEARS THAT GIFTS (CHARITY) ALSO INCLUDED IN THESE EXPENSES AND IT IS NOT CLEAR AS TO WHETHER ALL THE EXPENSES WERE INCURRED FOR BUSINESS EXPEDIENCY. THEREFORE THE LD. CIT(A) WAS JUSTIFIED IN RESTRICTING THE DISALLOWANC E TO RS.15 000. WE DO NOT SEE ANY MERIT IN THIS GROUND OF THE ASSESSEES CROS S OBJECTION. 19. THE LAST ISSUE AGITATED BY THE ASSESSEE VIDE GR OUND NO.5 OF THE CROSS OBJECTION RELATES TO THE CONFIRMATION OF ADDITION O F RS.2 622 MADE BY THE AO ON ACCOUNT OF DIFFERENCE IN ACCOUNT OF IBP LTD. 20. THE FACTS RELATING TO THIS ISSUE IN BRIEF ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT CLOS ING BALANCE OF THE IBP CO.LTD. WAS SHOWN BY THE ASSESSEE AT RS.2 78 929 AS AGAINST RS.348 SHOWN 13 IN THE COPY OF ACCOUNTS FURNISHED BY IBP CO.LTD. TH EREFORE THERE WAS A DIFFERENCE OF RS.2 78 581. THE AO ASKED THE ASSESS EE TO RECONCILE THE DIFFERENCE IN COMPLIANCE TO THAT THE ASSESSEE SUB MITTED THAT A CHEQUE OF RS.2 75 959 DATED 31.3.2004 ISSUED TO THE IBP CO.L TD. WAS DEPOSITED IN THE ACCOUNT OF THE COMPANY MAINTAINED IN ITS BOOKS OF A CCOUNTS. THE SAID CHEQUE WAS TAKEN INTO ACCOUNT BY IBP CO. LTD. ON 1. 4.2004.IN SUPPORT OF THE ABOVE THE ASSESSEE ALSO FURNISHED A COPY OF INVOIC E DATED 1.4.2004.THE AO POINTED OUT THAT AFTER REDUCING THE AMOUNT OF RS.2 75 959 THE BALANCE CAME AT RS.2 970 AND BY GIVING CREDIT OF RS.348 THE DI FFERENCE WORKED OUT TO RS.2 622 WHICH THE ASSESSEE WAS UNABLE TO RECONCIL E. HE THEREFORE MADE THE DISALLOWANCE OF RS.2 622. ON APPEAL THE LD. CI T(A) CONFIRMED THE DISALLOWANCE. 21. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE P ARTIES ON THIS ISSUE WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE LD.CIT (A). SINCE THE ASSESSEE COULD NOT RECONCILE THE DIFFERENCE POINTED OUT BY T HE AO THEREFORE THIS GROUND OF THE ASSESSEES CROSS OBJECTION ALSO FAILS . 22. IN THE RESULT THE APPEAL OF THE DEPARTMENT AND THE CROSS OBJECTION OF THE ASESSEE ARE DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 21.1.11. SD. SD. (H.L.KARWA) (N.K.SAINI) VICE PRESIDENT ACCOUNTANT MEMBER JANUARY 21ST 2011. COPY TO THE : 1. APPELLANT 2. RESPONDENT 3. CIT(A) (4) CIT 5.DR. A.R. ITAT LUCKNOW. SRIVASTAVA. 14