IN INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR BEFORE: SHRI BHAGCHAND, AM AND SHRI KUL BHARAT, JM ITA No. 376/JP/2014 Assessment Year : 2009-10. Deputy Commissioner of cuke Shri Munawwarali Munshi Lohar, Income-tax, Circle-4, Vs. Flat No. 509, Balaji Tower-1, Jaipur. Near S.K. Soni Hospital, Sikar Road, Jaipur. PAN No. ABXPL 7233 L Appellant Respondent ITA No. 332/JP/2014 Assessment Year : 2009-10. Shri Munawwarali Munshi Lohar, cuke Joint Commissioner of Income-tax, Flat No. 509, Balaji Tower-1, Vs. (OSD) Circle -4, Near S.K. Soni Hospital, Jaipur. Sikar Road, Jaipur. PAN No. ABXPL 7233 L Appellant Respondent Revenue by : Shri R.A. Verma (Addl. CIT) Assessee by : Shri S.L. Poddar (Advocate) Date of Hearing : 27.09.2016. Date of Pronouncement : 07/10/2016. ORDER PER SHRI KUL BHARAT, JM. These are two cross appeals by revenue and assessee directed against order of ld. CIT (Appeals)-II, Jaipur dated 21.03.2014 pertaining to A.Y. 2009-10. Both appeals are taken up together and are being disposed off by this consolidated order, for sake of convenience. effective grounds in both appeals are as under:- 2 ITA No. 376 & 332/JP/2014 Shri Munawwarali Munshi Lohar. Ground of revenue s appeal:- (i) Whether on facts and in circumstances of case and in law Ld. CIT (A) has erred in allowing relief of Rs. 11,50,000/- out of addition of Rs. 22,00,000/- made U/s 68 of I.T. Act, 1961 on account of unexplained capital introduced by partner. Ground of assessee s appeal:- 1. assessment order framed by ld Assessing Officer has erred in passing order U/s 144 of Income Tax Act, 1961 in void ab-initio deserves to be quashed. 2. Under facts and circumstances of case ld CIT(A) has erred in confirming trading addition of Rs. 17,24,548/- by invoking provisions of Section 145(3) and in estimating GP rate of 15.40%. 3. Under facts and circumstances of case ld CIT(A) has erred in confirming addition of Rs. 10,50,000/- unexplained/unverifiable cash creditors u/s 68 of Income Tax Act of Rs. 700000/- received from Smt. Naseeb Bano and Rs. 350000/- received from Shri Sageer Ahmed. 4. Under facts and circumstances of case ld CIT(A) has erred in confirming addition of Rs. 3,25,000/- on account of unexplained/unverifiable cash deposit U/s 69 of Income Tax Act. First we take up assessee s appeal in ITA No. 332/JP/2014. 2. Briefly stated facts of case are that case of assessee was picked up for scrutiny assessment and assessment under section 144 of Income 3 ITA No. 376 & 332/JP/2014 Shri Munawwarali Munshi Lohar. Tax Act, 1961 (hereinafter referred to as Act) was framed vide order dated 13.12.2011. While framing assessment, AO made trading addition of Rs. 17,24,548/-, unexplained cash creditors u/s 68 Rs. 22,00,000/-, unexplained bank deposits u/s 69 of Rs. 3,25,000/-. assessee aggrieved by this order, preferred appeal before ld. CIT (A), who after considering submissions partly allowed appeal. While partly allowing appeal, ld. CIT (A) confirmed rejection of books of account and trading addition, sustained addition under section 68 of Rs. 10,50,000/- and confirmed addition of Rs. 3,25,000/- made under section 69 of Act. 3 Aggrieved by this order, both revenue and assessee has come in appeal before us. 4. Ground No. 1 of assessee s appeal is against order passed u/s 144 of Act and Ground No. 2 is against trading addition of Rs. 17,24,548/-. Both these grounds are being taken up together and are being disposed off accordingly. 4.1 ld. Counsel for assessee submitted that AO has not given sufficient opportunity to assessee for representing his case. ld. Counsel submitted that AO has made trading addition on basis that no books of accounts etc. were filed. He submitted that in remand proceedings all bills, vouchers etc. were submitted before AO and therefore, trading addition was not called for. He drew our attention to letter dated 14.02.2013 to buttress contention and further letter dated 11.03.2014 which is unsigned. 4.2 On contrary, ld. D/R opposed submissions. Vide order sheet dated 11.8.16 ld. Counsel of assessee was required to produce books of account. On that day no books of accounts were produced. 4 ITA No. 376 & 332/JP/2014 Shri Munawwarali Munshi Lohar. 4.3. In rejoinder, ld. Counsel submitted that requisite books of accounts were submitted before AO. He has drawn our attention to paper book filed on 21.10.2015 wherein copy of audit report of proprietary concern of assessee has been filed. 4.4. We have heard rival contentions and perused material available on record. We have given our thoughtful consideration to rival submissions. Both authorities below have made and confirmed trading addition on basis that assessee has not filed books of account and failed to produce necessary evidence in support of claim. assessee has filed audit report along with computation of Profit & Loss account, Bank statement. These evidences were required for verification at end of AO. Therefore, order of ld. CIT (A) on trading addition is hereby set aside. issue of trading addition is restored to file of AO for decision afresh. assessee would furnish books of accounts and other evidences in support of his claim. Ground No. 2 is allowed for statistical purposes. 4.5. Apropos to Ground No. 1, ld. Counsel has not addressed any argument in support of his contention. However, we find that AO has recorded in assessment order that various opportunities were given to assessee by way of notice dated 23.08.2010, 19.05.2011, 04.10.,2011, 04.11.2011 and 15.11.2011. Therefore, we do not find any fault with AO s action for proceedings under section 144. This ground of assessee is rejected. 5. Ground No. 3 is against confirmation of addition of Rs. 10,50,000/-. 5.1. ld. Counsel for assessee submitted that authorities below have failed to appreciate evidences given by assessee in right perspective. He 5 ITA No. 376 & 332/JP/2014 Shri Munawwarali Munshi Lohar. submitted that confirmation letter of Shri Sageer Ahmed was duly submitted to AO. He further submitted that PAN number of Shri Sageer Ahmed and bank statement was also given. He submitted that confirmation letters of Shri Nayeem Ahmed and Naseem Bano along with copy of ITR and bank statements were given. He submitted that these evidences were not considered by ld. CIT (A). 5.2. On contrary, ld. D/R opposed submissions and submitted that assessee has not submitted evidences before AO. 5.3. We have heard rival contentions, perused material available on record and gone through orders of authorities below. We find that ld. CIT (A) has decided issue by observing as under :- 3.5. I have considered facts of case; assessment order, appellant s written submission, AO s remand report and appellant s rejoinder. Assessing Officer made addition in respect of loans taken by appellant from three persons in absence of confirmation and production of these persons for examination. Even AO issued summons to persons but they did not attend. During appeal proceedings, appellant submitted confirmation, bank statement and copy of income tax return to support that credits are explained. Evidences submitted by appellant were sent to AO for remand report. remand report of AO and rejoinder of appellant were quoted earlier. As per remand report, AO mentioned that these lenders did not have sufficient source of income and immediate source of money given to appellant is cash deposits in their bank accounts. In rejoinder, appellant disputed AO s claim and submitted that in case of Shri Nayeem Ahmed who lent Rs. 11.5 lakhs to be appellant, source was not cash deposit but transfer from proprietary concern of lender in which substantial income was disclosed to Department. In case of Mrs. Naseem Bano who lent Rs. 7 lakhs to appellant, source of money lent was cash deposits received by her from sale of personal jewellery. In case of third lender Shri Sagar Ahmed, who lent Rs.3.5 lakhs, immediate source was not cash deposit but balance carried over in bank account. Appellant submitted their confirmations with PAN were filed and accordingly credits cannot be treated as unexplained. 6 ITA No. 376 & 332/JP/2014 Shri Munawwarali Munshi Lohar. I have considered all evidences submitted by appellant during appeal proceedings. In case of Shri Nayeem Ahmed who lent Rs. 11.5 lakhs to appellant, there was no cash deposit in bank account of lender. Copy of his PAN card and bank statement alongwith income tax return for relevant year was submitted and as per that this identity, creditworthiness and genuineness were established since transactions were completely through banking Channel and there was no cash deposit in his bank account. As per return of income, he declared total income of Rs.13.30 lakhs. total of his balance sheet is of Rs.1.24 crores. From these details, his creditworthiness is clearly established. Considering all these facts, credits of Rs.11.5 lakhs in name of Shri Nayeem Ahmed is clearly explained nad therefore no addition of this amount can be made. Accordingly, addition of Rs.11.50 lakhs is deleted. As regards Mrs Naseem Bano who lent Rs.7 lakhs to appellant, immediate source of money lent was indisputably cash deposits. source of money lent was indisputably cash deposits. source of cash deposit was claimed to be sale of personal jewellery. However neither appellant nor lender submitted any evidence with regard to sale of such jewellery. In absence of any evidence, source of cash deposit in bank account of lender is not explained. Further lender filed income tax return with disclosing income below taxable limit and did not pay any tax. Considering this, source of Rs.7 lakhs cannot be from income disclosed by her. Therefore creditworthiness in case of Mrs. Naseem Bano who lent Rs.7 lakhs to appellant is not explained. When assessing officer asked appellant in remand proceedings to produce lender for examination and to submit evidence in respect of sale of jewellery, appellant did not submit any evidence and also did not produce lender. Considering these facts, appellant did not discharge his onus cast upon him by AO after examining confirmation and details submitted. Accordingly, it is held that credit in respect of Mrs. Naseem Bano who lent Rs.7 lakhs to appellant is treated as unexplained. Addition of Rs.7 lakhs made by AO is confirmed. As regards third lender Shri Sagar Ahmed, who lent Rs.3.5 lakhs to appellant, I have examined his bank account and as per that there are only cash deposits in his bank account from which cheque was issued to appellant. Cash deposit may not be immediately before issuing cheque but entire credit in his bank account is out of cash deposits therefore his creditworthiness cannot be treated as explained. Appellant submitted confirmation, PAN of this person however his income tax return was not submitted. Considering 7 ITA No. 376 & 332/JP/2014 Shri Munawwarali Munshi Lohar. source of money lent to appellant out of cash deposits, his creditworthiness is not explained. Accordingly, credit in name of Shri Sagar Ahmed is treated as unexplained and addition of Rs.3.5 lakhs is confirmed. As per Section 68 of Act, assessee has to establish identity, genuineness and creditworthiness of cash creditors. In case of Mrs. Nassem Bano and Shri Sageer Ahmed, assessee has proved only identity of persons and genuineness of transactions but creditworthiness of both persons have not been proved as there was no source of income of creditors. One of them have filed below taxable return and source of loan in case of Mrs. Naseem Bano was from out of sale of personal jewellery, as such no evidence was produced before Assessing Officer as well as ld CIT(A). assessee also has not explained source of income in case of Shri Sageer Ahmed, therefore, we uphold order of ld CIT(A). assessee s appeal on this ground is dismissed. 6. Ground No. 4 of assessee s appeal is against confirming addition of Rs. 3,25,000/- U/s 69 of Act. 6.1. ld. Counsel for assessee has reiterated arguments made before ld CIT(A) i.e. cash were deposited out of cash book, books of account maintained by assessee, which was audited U/s 44AB of Act. Therefore, he prayed to delete addition. 6.2. On contrary, ld DR has vehemently supported order of ld CIT(A) and argued that even before Hon ble ITAT, assessee has not been able to explain source of cash deposited in bank account and also 8 ITA No. 376 & 332/JP/2014 Shri Munawwarali Munshi Lohar. assessee has also not produced cash book for verification before lower authorities as well as before Hon ble ITAT. 6.3. We have heard rival contentions of both parties and perused material available on record. Even before us, assessee replied that cash was deposited out of cash available in cash book of firm but as such books alleged to be maintained by assessee was not produced before us. There is no evidence in paper book suggesting that assessee is maintaining cash book. However, after considering totality of facts and more particularly when assessment is made u/s 144 of Act, we deem it proper in interest of justice to restore this issue to file of AO for verification. assessee is directed to produce cash book before AO. In event AO finds that cash was deposited out of cash in hand, he would delete addition. This ground of assessee s appeal is allowed for statistical purposes. 7. Now we take up appeal of revenue in ITA No. 376/JP/2014. 8. revenue s sole ground of appeal is against deleting addition of Rs. 11,50,000/- as against total addition of Rs. 22,00,000/- made u/s 68 of Act. 8.1. We have heard rival contentions, perused material available on record and gone through orders of authorities below. As per Section 68 of Act, assessee has to establish identity, genuineness and creditworthiness of cash creditors. In case of Shri Nayeem Ahmed who had given loan to assessee at Rs. 11.5 lacs, assessee has fully made compliance of Section 68 that assessee has received this loan through banking channel. There was PAN, 9 ITA No. 376 & 332/JP/2014 Shri Munawwarali Munshi Lohar. assessee has disclosed substantial income in income tax return, therefore, ld CIT(A) has rightly deleted addition of Rs. 11.5 lacs, which was made by ld Assessing Officer U/s 68 of Act. ground of revenue is rejected. 9. In result, appeal of assessee is partly allowed for statistical purposes whereas appeal of revenue is dismissed. Order is pronounced in open court on 07/10/2016. Sd/- Sd/- ( BHAGCHAND) ( KUL BHARAT ) Accountant Member Judicial Member Jaipur Dated:- 07/10/2016. Copy of order forwarded to: s 1. Appellant- DCIT, Circle-4, Jaipur. 2. Respondent Shri Munawwarali Munshi Lohar, Jaipur. 3. CIT(A). 4. CIT, 5. DR, ITAT, Jaipur 6. Guard File (ITA No. 376 & 332/JP/2014) By order, Assistant. Registrar Deputy Commissioner of Income-tax, Circle-4, Jaipur v. Munawwarali Munshi Lohar