IN INCOME TAX APPELLATE TRIBUNAL SMC BENCH , CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA No. 898/CHD/2016 Assessment Year: 2008-09 M/s Beant Rice Mills, Vs ITO, Village Jarg,Teh-Payal, Ward 1, Khanna. Khanna, Distt.- Ludhiana. PAN: AAIFB0548C (Appellant) (Respondent) Appellant by : Shri Parikshit Aggarwal Respondent by : Shri S.K. Mittal,DR Date of Hearing : 15.09.2016 Date of Pronouncement : 16.09.2016 ORDER This appeal by assessee has been directed against order of ld. CIT(Appeals)-2 Ludhiana dated 09.05.2016 for assessment year 2008-09. 2. I have heard ld. Representatives of both parties and perused material on record. 3. Ground No. 1 is general and needs no adjudication. 4. On ground Nos. 2 and 3, assessee challenged t he addition of Rs. 4 lacs under section 68 of Income Tax Act on account of unexplained cash credit from Ms. Parneet Kaur. assessee submitted copy of bank account of Ludhiana Cooperative Bank from which DD has been issued in favour of assessee firm, source of this cash has been stated to be agriculture income. In order to 2 substantiate source of agriculture income, copy of Fard in respect of land holding in name of creditor Ms. Parneet Kaur has been furnished, total joint land holding as per Fard is 20 acres and share of creditor comes to 3.50 acres approximately. No J-Form regarding sale of produce and source of cash deposit in bank has been submitted by assessee. Assessing Officer, therefore, observed that mere production of fard does not indicate that she has source of income to advance loan of Rs. 4 lacs to assessee. assessee despite asking by Assessing Officer, did not produce Form-J to prove sale of agriculture produce therefore, onus upon assessee to prove credit worthiness of creditor was not proved. Assessing Officer, therefore, made addition of Rs. 4 lacs considering same as investment from undisclosed sources under section 68 of Income Tax Act. 5. assessee challenged addition before ld. CIT(Appeals) and submissions are reproduced in impugned order in which assessee reiterated same submissions and also submitted that assessee proved credit worthiness of creditor by filing her confirmed copy of account, bank statement and copy of Fard of land holding of creditor. It was also submitted that bank account of creditor shows bank balance of Rs. 1,50,200/- on 28.03.2007 which was transfer entry from husband of creditor and thereafter, there are cash deposits on 15.09.2007 in sum of Rs. 1,58,000/- and Rs. 3 90,000/- (total Rs. 2,48,000/-. Out of same, creditor has given loan of Rs. 4 lacs to assessee. It was also submitted that creditor s family members Smt. Pritam Kaur, mother-in-law, Shri Bhupinder Singh, brother-in-law and Shri Rajinder Singh, husband of creditor have withdrawn Rs. 2 lacs, Rs. 30,000/- and Rs. 18,000/- on 1 5 . 0 9 . 2 0 0 7 f r o m t h e i r b n k c c o u n t s w h i c h w s t h e s o u r ce of deposit in bank account of creditor. ld. CIT(Appeals), however, did not accept contention of assessee, because assessee could not produce evidence of credit worthiness of creditor and genuineness of transaction in matter and confirmed addition. 6. After hearing rival contentions, I am not inclined to interfere with orders of authorities below. It is well settled principle of law that for proving ingredients of Section 68 of Act, burden would be upon assessee to prove identity of creditor, his credit worthiness and genuineness of transaction in matter. assessee claimed credit of Rs. 4 lacs from Mrs. Parneet Kaur and submitted Ferd of land holding of creditor but no J- Form regarding sale of agriculture produce and source of cash deposited in her bank account were submitted before Assessing Officer. T h e s s e s s e e , t h e r e f o r e , f i l e d t o p r o ve credit worthiness of creditor and genuineness of transaction in matter. ld. counsel for assessee also referred to bank statement of creditor (PB-12). Copy is also reproduced in impugned order which shows 4 that creditor has advanced Rs. 4 lacs to assessee f i r m o n 1 5 . 0 9 . 2 0 0 7 n d o n t h e s m e d y , t h e c r e d i t o r h as deposited cash of Rs. 1,58,000/- and Rs. 90,000/- twice on same day i.e. 15.09.2007 in order to give loan to assessee. ld. counsel for assessee referred to bank statement and certificates of Smt. Pritam Kaur, Shri Bhupinder Singh and Shri Rajinder Singh to show that family members of creditor have withdrawn Rs. 2 lacs, Rs. 30,000/- and Rs. 18,000/- from their bank accounts on 15.09.2007. These amounts did not tally with amount deposited in bank account of creditor and even no confirmations or certificates from these relatives of creditor were filed before authorities below. Therefore, in absence of any co-relation between withdrawals made by family members of creditor and deposit of cash in bank account of creditor, assessee failed to prove source of deposit of cash in bank account of creditor. 6(i) ITAT Agra Bench in case of Smt. Suman Gupta Vs ITO 138 ITD 153 considered identical issue in which b e f o r e i s s u i n g t h e c h e q u e s t o t h e s s e s s e e , e q u l m o u n t of cash was deposited in bank accounts of creditors, Tribunal did not accept it to be genuine credit and c o n f i r m e d t h e d d i t i o n . T h e o r d e r o f t h e T r i b u n l h s b e en confirmed by Hon'ble Allahabad High Court by dismissing appeal of assessee in IT Appeal No. 680/2012 dated 07.08.2012. Hon'ble Gujrat High Court in case of 5 Blessing Construction Vs ITO 32 Taxman.com 366 held, W h e r e s i z e ab l e mo u n ts we r e d e p o s i te d i n c as h i n ac c o u n t o f d e p o s i to r s o n l y b e f o r e th e i r wi t h d r wa l t h r o u g h c h e q u e s i n f av o u r o f th e as s e s s e e , ad d i t i o n wa s ju s t i f i e d . 7. Considering above facts and fact that there was meager bank balance in account of creditor prior to giving loan to assessee, would clearly indicate that creditor Ms. Parneet Kaur was not having credit worthiness to give any loan to assessee. assessee also failed to prove genuineness of transaction in matter. I, therefore, do not interfere with orders of authorities below in confirming addition under section 68 of Income Tax Act. Ground Nos. 2 and 3 of appeal of assessee are accordingly, dismissed. 8. O n g r o u n d N o . 4 , s s e s s e e c h l l e n g e d t h e d d i t i o n of Rs. 1,50,000/-. Briefly facts of case are that earlier regular assessment under section 143(3) of Act was framed vide order dated 07.12.2010. CIT exercised jurisdiction under section 263 of Act because Assessing Officer has failed to conduct proper inquiry/verification/investigation on several issues including valuation of closing stock. Assessing Officer, therefore, taken up matter with regard to valuation of stock and noted sale rate and closing rate in para 5 of assessment order and found that sale rate of different items are less. explanation of assessee was called for in which assessee explained that sales have been made 6 on market rate prevailing at that time and sale proceeds have been received through cheque from buyers which have been entered into books of account and accounts have been audited. Th e s s e s s e e f u r t h e r e x p l i n e d t h t s l e s r e subject to VAT returns and sales have been reported to VAT authorities and there is no evidence on record to prove any amounts received over and above what is mentioned as sale consideration. Assessing Officer, considering reply of assessee and order of ITAT Chandigarh Bench in which assessee offered for addition of Rs. 1,50,000/-, made addition of Rs. 1,50,000/- only. 9. assessee challenged addition before ld. CIT(Appeals), however, addition has been confirmed. 10. After considering rival submissions, I am of view addition is wholly unjustified. ld. counsel for assessee pointed out that assessee did not challenge order under section 263 of Act. CIT, Ludhiana has directed Assessing Officer to make enquiries/verification/investigation on valuation of closing stock. However, Assessing Officer has made addition on account of enhancement in valuation of s l e o n w h i c h t h e r e w s n o d i r e c t i o n i s s u e d u n d e r s e c t i on 263 of Act. I agree with contention of ld. counsel for assessee that there was no direction issued under section 263 with regard to substitute of sale price. Since, assessee has made sales which were subject to VAT returns and no evidence have been found against assessee 7 of making any under-valuation of sales, it appears to be adhoc addition and without any justification. Assessing Officer has exceeded his jurisdiction on this issue because CIT has directed to verify valuation of closing stock but Assessing Officer made addition on account of substitution of sale price shown by assessee in books of account. 11. In this view of matter, I set aside orders of authorities below and delete addition of Rs. 1,50,000/-. Ground No. 4 of appeal of assessee is allowed. 12. Other grounds are general in nature and need no adjudication. In result, appeal of assessee is partly allowed. Order pronounced in Open Court. Sd/- (BHAVNESH SAINI) JUDICIAL MEMBER Dated: 16th September,2016. Poonam Copy to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT,DR Assistant Registrar, ITAT/CHD M/s Beant Rice Mills v. ITO, Ward–1, Khanna