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ITO,Ward 1(3), Ghaziabad. Vs. Harish Chaudhary,Village Pavi Sadakpur Loni, Ghaziabad.
August, 14th 2014
                DELHI BENCHES : C : NEW DELHI


                          ITA No.99/Del/2013
                       Assessment Year : 2008-09

ITO,                               Vs.   Harish Chaudhary,
Ward 1(3),                               Village Pavi Sadakpur Loni,
Ghaziabad.                               Ghaziabad.

                                         PAN : AFBPC4491D

     (Appellant)                            (Respondent)

              Assessee By      :    Shri Sameer Kapoor, CA
              Department By    :    Shri Satpal Singh, Sr.DR



       This appeal by the Revenue is directed against the order

passed by the CIT (A) on 19.10.2012 in relation to the assessment

year 2008-09.

2.     The first ground is against the deletion of addition of

`15,02,456/-.      Briefly stated, the facts apropos this ground are

that the AO, on perusal of income-tax return, observed that the
                                                     ITA No.99/Del/2013

assessee had shown `Source of funds' at ` 13,85,570/- against

which the `Application of funds' was shown at ` 28,88,026/-

leading to difference of ` 15,02,456/-, divulging unexplained

investment. Despite several notices/reminders issued by the AO,

there was improper participation from the assessee's end which

led to the passing of the assessment order u/s 144. The AO made

addition of ` 15.02 lac as unexplained investment.     During the

course of first appellate proceedings, the assessee submitted

detailed reasons about the difference in the figures given in the

return showing `sources' and `application' of funds.         It was

explained that the Counsel who filed the return of income was not

well fully conversant with the accounting practices and made

mistakes in mentioning the figures relating to the assessee's

balance sheet. The position was correctly explained before the ld.

CIT(A) with the help of some evidence. The ld. CIT(A) called for

the remand report from the AO on the assessee's explanation

about the difference in the balance sheet figures. Considering all

the facts, the addition so made by the AO came to be deleted.

The Revenue is aggrieved against such deletion of addition.

                                                      ITA No.99/Del/2013

3.   We have heard the rival submissions and perused the

relevant material on record. It is seen from the copy of income-

tax return, available on pages 1 onwards of the paper book that

there are certain glaring mistakes in mentioning the figures in

Part A-BS of the return. To cite a few, capital of ` 547,570/- has

been shown as `Proprietor's capital' and the same amount has

been inadvertently included in the Fixed assets as `Capital work-

in-progress.' Similarly, as against the gross value of the block of

assets at ` 7,79,400/- and depreciation of ` 77,940/-, the net

balance has been shown at ` 6,78,960/- as against the correct

balance which ought to have been at ` 7.01 lac. Similarly, under

the head `Cash and bank balance', balance with bank has been

shown at ` 5,54,488/-. In fact, this amount represents the balance

payable to bank on account of car loan. Thus it can be seen that

the person who filed the return mentioned the figures incorrectly,

which ultimately distorted the figures of Assets and Liabilities.

The correct position was placed before the AO during remand

proceedings. From a copy of remand report available on pages

87 onwards of the paper book, it can be seen that the assessee

explained the difference in balance sheet amounting to ` 15.02

                                                    ITA No.99/Del/2013

lac, which was the basis for addition. The AO considered these

figures but did not adversely comment upon the same.         Under

such circumstances, we are of the considered opinion that no

fault can be found with the ld. CIT(A) in deleting the addition

based on the explanation tendered by the assessee before him as

well as the AO in remand proceedings, completely explaining the

difference in the figures of `Source' and `Application' of funds,

which were originally wrongly taken. We, therefore, uphold the

impugned order on this score. This ground is not allowed.

4.   Ground No.2 is against the reduction in addition of `

4,76,640/- to ` 57,197/-.

5.   Briefly stated, the facts of this ground are that the

assessee's passbook showed deposit in bank account amounting

to ` 25,75,000/- during the year. The AO observed that the total

sales effected by the assessee were to the tune of ` 20,98,360/-.

Even if it was accepted that the entire cash sales were deposited

in the bank account, the AO observed that still there was a

difference of ` 476,640/-. The AO further noted that there was

                                                      ITA No.99/Del/2013

huge cash deposit of ` 12.50 lac in a very short interval from

04.12.2007 to 20.12.2007.      In view of the fact that he made

addition of `15,02,456/- on account of difference in balance sheet

figures, he treated this amount of ` 4,76,640/- of excess cash

deposit in the bank as covered by the above addition. As such,

no separate addition was made on this score.        The ld. CIT(A)

observed that there was a difference of ` 4,76,640/- in the figure

of total sales and cash deposits in the bank.       He, therefore,

enhanced the sales figure by such cash deposits of ` 4,76,640/-.

Considering the fact that only net profit was to be added on such

excess sales and not the amount of sales itself, he brought down

the addition to ` 57,197/-, being net profit rate of 12% applied on

such sales of `4.76 lac considered to have been made outside the

books of account.    The Revenue is aggrieved against the relief

allowed in the first appeal.

6.   After considering the rival submissions and perusing the

relevant material on record, it is noticed that the AO did not

specifically make the addition of ` 4,76,640/- on the ground that

he had already made addition of ` 15.02 lac on account of

                                                      ITA No.99/Del/2013

difference in `Sources' and `Application' of funds given by the

assessee in the balance sheet.       Since the above addition of `

15.02 lac has been deleted by us, the instant addition of ` 4.76

lac crops up for consideration.      It is seen that the assessee

deposited a sum of ` 25.75 lac in his bank account. No details

about the source of such deposits were given to the AO, who

chose to make addition for the said amount by considering the

amount of total turnover declared at `20.98 lac.              In our

considered opinion, the ld. CIT(A) needlessly swayed by the

assessee's contention of sales outside the books of account to

this magnitude.   When we peruse the balance sheet of the

assessee, it can be seen that the closing stock at the end of the

year stood at ` 2.03 lac. If one has to draw a presumption that

the assessee had stock-in-trade, but sold the goods without

issuing bills, then, there should have been corresponding stock

available, which is not the case here. If, on the other hand, one

has to draw a presumption that not only the sales, but also

purchases were made outside the books of account, then, apart

from the profit element, the capital base required for making

unexplained purchases should also be added to the total income,

                                                      ITA No.99/Del/2013

which is again not the case here. It can be seen from the

assessment order that the AO did not make out a case about the

deposit of unexplained/unrecorded sales in the books of account.

There can be unexplained deposits in bank accounts even

otherwise than through unrecorded sales. Thus it is manifest that

the ld. CIT(A)'s order is clearly not sustainable. As the assessment

order was passed u/s 144, we are of the considered opinion that

the ends of justice would meet adequately if the impugned order

on this issue is set aside and the matter is restored to the file of

the AO for a fresh adjudication. We order accordingly. Needless

to say, the assessee will be allowed a reasonable opportunity of

being heard in the fresh proceedings.

7.   The last ground is against the deletion of addition of

`12,59,000/-.   The assessee showed to have received four

amounts, tabled on page 3 of the assessment order as loan from

Shri Dheer Singh.      On being called upon to establish the

genuineness of these credit entries appearing in the name of Shri

Dheer Singh, the assessee did not furnish any explanation

regarding the source of the above entries.      Even the identity,

                                                      ITA No.99/Del/2013

credit worthiness and also the genuineness of the transactions

with Shri Dheer Singh were not proved. This resulted into the

addition of ` 12.59 lac by the AO u/s 68 of the Act. The ld. CIT(A)

deleted the addition by considering that Shri Dhir Singh furnished

confirmation along with PAN and also bank account. The Revenue

is aggrieved against such deletion of addition.

8.   Having heard the rival submissions and perused the relevant

material on record, it is observed that the AO made addition u/s

68 on account of four items of loan allegedly received by the

assessee from one Sh. Dheer Singh on different dates.               No

evidence worth the name was filed before the AO to substantiate

the identity and capacity of the lender along with the genuineness

of the transactions. The ld. CIT(A) simply deleted the addition by

considering that Shri Dhir Singh had filed return of income. The

so-called return shows the name as `Dhir Singh' as against `Dheer

Singh' explained by the assessee to be the person from whom the

loan was received.     Further, the mere fact that a particular

amount has been received through banking channel is not

sufficient in itself to prove the genuineness of the transaction and

                                                       ITA No.99/Del/2013

capacity of the person. In our considered opinion, the ld. CIT(A)

was not justified in deleting this addition. Since the assessment

was framed u/s 144, we are of the considered opinion that it

would be in the fitness of things if this issue is also sent back to

the AO for a fresh adjudication.      We, therefore, set aside the

impugned order on this score and send the matter back to the AO

for a fresh determination, after allowing a reasonable opportunity

of being heard to the assessee.

9.     In the result, the appeal is partly allowed for statistical


       The order pronounced in the open court on 13.08.2014.

            Sd/-                                      Sd/-

       [H.S. SIDHU]                             [R.S. SYAL]
     JUDICIAL MEMBER                        ACCOUNTANT MEMBER

Dated, 13th August, 2014.


Copy forwarded to:

     1. Appellant
     2. Respondent
     3. CIT
     4. CIT (A)
     5. DR, ITAT                             AR, ITAT, NEW DELHI.
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