IN INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ITA.No.1820/Ahd/2016 Asstt. Year: 2012-2013 Shri Nileshbhai Khandubhai Patel ITO, Ward-1(2)(3) Prop. of M/s.Gayatri Electronics Vs Surat. 3, Kalindi Apartment, Majura Gate Surat 395 001. PAN : ABCPP 9221 D (Appellant) (Respondent) Assessee by : Shri Rajesh Upadhyay Revenue by : Shri G.C. Damini, Sr.DR Date of Hearing : 10/10/2016 Date of Pronouncement: 13/10/2016 O R D E R assessee is in appeal before Tribunal against order of ld.CIT(A)-II, Surat dated 1.6.2016 passed for Asstt.Year 2012-13. 2. In first ground of appeal, assessee has pleaded that ld.CIT(A) has erred in confirming addition of Rs.25,71,000/- which was added by AO with aid of section 68 of Income Tax Act, 1961. 3. Brief facts of case are that assessee was running proprietorship concern in name and style of Gayatri Electronics. He has engaged in trading of electronics goods. He has filed his return of income 7.8.2012 declaring total income at Rs.2,86,900/-. On scrutiny of accounts, it revealed to AO that assessee has shown total unsecured loan of Rs.52,28,246/-. Out of this loan, he has received loan of Rs.25,71,100/- ITA No.1820/Ahd/2016 2 from three persons, viz. Dipak K. Patel, (brother) Rs.4,50,000/-, Shri Khandubhai R. Patel Rs.6,10,000/- and Shri Vijay K. Patel of Rs.15,11,100/-. In order to explain genuineness of loans taken by assessee, assessee has submitted that all three creditors are assessed to tax. He has provided their copies of returns of income and PANs. with Department. assessee has filed copies of bank statements from where, these loans were taken. He has also filed copies of bank statements and details from where money has come to account of creditors. He has filed confirmation. ld.AO was not satisfied with regard to credit-worthiness of creditors. appeal to ld.CIT(A) did not bring any relief to assessee. 4. With assistance of ld.representatives, I have gone through record carefully. Before ld.CIT(A), assessee has filed written submissions, which has been reproduced by ld.CIT(A) on page nos.7 to 9 of impugned order. Such written submissions read as under: 5. During appellate proceedings, A.R. of appellant has filed written submission and case was heard. During course of appellate proceedings, vide his letter dtd. 19.04.2016 appellant submitted that "Lr. AO has given finding in para 4.5, 4.6 & 4.7 of his Assessment Order that appellant has filed confirmation of depositors, ledger account, acknowledgment of ROI and appellant's bank statement. On basis of these evidences, AO issued notice u/s. 133(6) upon depositors. All three depositors have duly complied AO's notice. It is also accepted fact that appellant has received deposit through account payee chaques. Chaques are appearing in bank account of depositors. Outstanding sum of deposits are also appearing in their respective balance sheet as on 31.03.2012. said deposit gets tallied with Audited Balance Sheet of appellant. Under circumstances, legal onus cast upon appellant is fully discharged in terms of Sec. 68 of Act. If depositor have not explained specific query of AO or they have made cash deposit in their bank account, prior to issue of chaque to appellant, could not drawn adverse inference in case of appellant and no addition can be made for said reason. ITA No.1820/Ahd/2016 3 Thus, addition made by AO is totally illegal and unjustifiable only on above stated facts. Even though I am producing source of each deposit, date wise and depositor wise, in following tables. A) Shri Dipak K. Patel Rs. 4,50,000/-:: Receipt of Deposit as per Source of Deposit gathered from his bank confirmation A/c Date Amount Date Amount Particulars 20/03/2012 50,000/- 13/03/2012 40, 000/- Out of cash on hand 28/03/2012 1,00,000/- 20/03/2012 20, 000/- Salary from Gayatri Electronics 31/03/2012 3,00,000/- 28/03/2012 90,000/- Loan from Hetvi D. Patel 30/03/2012 3,00,000/- Loan from Ambalal J. patel Total 4,50,000/- Total 4,50,000/- B) Khandubhai R. Patel Rs. 6,10,000/-:: Receipt of Deposit as per Source of Deposit gathered from his bank A/c confirmation Date Amount Date Amount Particulars 19.04.2011 3,00,000/- 16.04.2011 3, 10, 000 / - Loan from Sitaram U. Joshi by cheque 25.05.2011 2,50,000/- 24.05.2011 6,00, 000 /- Loan from Sanjay R. Yadav by cheque 31.05.2011 1,60,000/- 13.06.2011 4,50,000 / - Loan from Sanjay R. Yadav by cheque 24.06.2011 1,70,000/- 16.12.2011 35,000/- Gayatri Electronics ITA No.1820/Ahd/2016 4 14.09.2011. 77,700/- During 2, 40 ,000 /- Gayatri Electronics year on different dates on account of Salary (1,80,000) and Rent (70,000). 27.09.2011 4,25, 000/- 15.12.2011 35, 000/- * 25.01.2012 30,000/- 20.03.2012 50, 000/- 28.03.2012 20, 000/- Total 15,11,100/- Total 16,35,000/- 5. Section 68 of Income Tax Act, 1961 contemplates that where any sum is found credited in books of assessee maintained for any previous year, and assessee offers no explanation about nature and source thereof, or explanation offered by assessee is not, in opinion of AO satisfactory, then sum so credited in accounts may be treated as income of assessee of that previous year. During course of hearing, ld.counsel for assessee took me through supporting details. Major creditor is Shri Vijay K. Patel. He has given sum of Rs.15,11,100/- on number of dates. first amount was given on 19.4.2011. According to assessee source of this amount is loan from Shri Sitram Joshi by cheque on 16.4.2011. In order to buttress this, ld.counsel for assessee took me through page no.102 of paper book, where copy of bank account no.71762010025348 with Syndicate Bank has been placed on record. Shri Vijay K. Patel has received sum of Rs.3,10,000/- through account payee cheque bearing no.543833. Out of this amount, sum of Rs.3,00,000/- was advanced to assessee. Shri Vijay K. Patel identified as loaner and he has ITA No.1820/Ahd/2016 5 owned up advancement of amounts to assessee. Shri Vijay K. Patel is assessed to tax. Now how AO can doubt credit-worthiness of this amount ? If he can arrange amount of Rs.3,00,000/- from third party, and thereafter advance to his brother, what is wrong in transaction ? Similarly, he took loan of Rs.6,00,000/- from Shri Sanjay Yadav. This was also taken by way of account payee cheque bearing no.542627 dated 24.5.2011. Out of this, loan of Rs.2,50,000/- was given to assessee. Similarly, bank statements of other creditors have been placed on record and it has been pointed out how those creditors received funds for making advancement to assessee. Grievance of Ld.Revenue authorities was that these transactions appear to have been arranged transaction. I am of view that even if these are arranged transaction, then parties to transactions are identifiable. They have carried out transaction through banking channel. They are supporting their transactions. Their individual cases could be explored. How it can be held that money in hands of assessee unexplained one. After making analysis of supporting evidences available in paper book starting from page nos.39 to 63, and thereafter at page nos.98 to 104, I am satisfied that assessee has discharged burden put upon him by virtue of section 68 of Income Tax Act, 1961. I allow this ground of appeal and delete addition. 6. Next ground of grievance of assessee is that ld.CIT(A) has erred in confirming addition of Rs.3,25,000/-. 7. Brief facts of case are that assessee has sold Maruti Wagon R for consideration of Rs.3,25,000/-. ld.AO did not accept this claim of assessee. In support of this contention, assessee has placed on record, confirmation from Shri Amit Zaveri who purchased Wagon R for sale. He ITA No.1820/Ahd/2016 6 was doing business of sale and purchase of cars on commission basis. assessee has given mobile number and his other details. But, ld.AO was not satisfied with claim of assessee. He observed that Shri Amit Zaveri failed to submit copy of cash book, ledger account copy of assessee from his books of accounts in order to justify claim. Accordingly, ld.AO has made addition of Rs.3,25,000/-. Appeal to ld.CIT(A) did not bring any relief to assessee. 8. On due consideration of facts and circumstances, I failed to understand approach of AO. assessee was owner of this car. He has reduced this amount from his block of assets, because one of assets has been eliminated. By making higher claim of sale consideration, assessee would reduce higher value in block of assets that will fetch lower depreciation to assessee. Once asset was forming part of block and if it has been taken out from there, and then how AO can doubt sale ? I allow this ground of appeal, and delete addition. 9. next grievance of assessee is that ld.CIT(A) has erred in confirming addition of Rs.1,16,300/-. 10. With assistance of ld.representatives, I have gone through record carefully. During course of his business, assessee has made purchases from M/s.Chanda Sales. He has placed on record copy of ledger account in respect of Chanda Sales which is available at page nos.109 to 115. assessee has shown total purchases of Rs.5,70,340/-. AO did not doubt about various purchases except Rs.1,16,000/-. AO was of view that Chanda Sales did not respond to his query, and assessee failed to submit supporting details. Accordingly, he disallowed purchase cost and appeal to CIT(A) did not bring any relief to assessee. ITA No.1820/Ahd/2016 7 11. On due consideration of above facts and circumstances, I am of view that ld.Revenue authorities have failed to appreciate business transaction. M/s.Chanda Sales has closed its business and changed its address. assessee has purchased certain products of Videcon from this concern . He has sold all these products. After sales have been accepted, then, how purchases can be denied ? Similarly, assessee has alleged that he has purchased washing machine and other Videocon products. If sale of these items can be verified from sales register of assessee, then, merely on basis of non-submission of supporting purchase details from M/s.Chanda Sales, purchases cannot be disallowed. Therefore, I allow this ground of appeal, and also delete addition. 12. In result, appeal of assessee is allowed. Order pronounced in Court on 13th October, 2016 at Ahmedabad. Sd/- (RAJPAL YADAV) JUDICIAL MEMBER Nileshbhai Khandubhai Patel v. ITO, Ward-1(2)(3) Surat