Filing of Confirmation, Affidavit, Bank Statement and Marking of Personal Presence is Sufficient to Consider Genuineness of Depositors: ITAT Deletes Addition u/s 68 of Income Tax Act [Read Order]

The Jodhpur Bench of Income Tax Appellate Tribunal (ITAT) has deleted addition under Section 68 of the Income Tax Act 1961, as the filing of confirmation, affidavit, bank statement and making personal presence was sufficient to consider the genuineness of depositors.

A return declaring total income was e-filed by the assessee,Sampat Lal Lodha on 28.07.2010 which was processed under Section 143(1) of the Income Tax Act. Thereafter, as per information received, it was gathered that the assessee has made investment for construction of residential complex during the financial year 2009-10 relevant to assessment year 2010-11.

However, as per return of income filed for the year, AO noted that no sources of such investment were disclosed by the assessee in his return of income. As the assessee made investment out of undisclosed sources therefore, income chargeable to tax escaped assessment in terms of Section 147 of the Income Tax Act.

In the assessment proceeding the AO noted that the assessee is proprietor of Mangal Jewellers and engaged in the business of trading of silver jewellery. During the year, gross profit had been shown on total turnover declaring GP rate of 18.90% which was better than the G.P. rate of 15.22% declared for the just preceding year but lesser than the G.P. rate of 19.90% declared for the Assessment year 2008-09.

Books of accounts consisting of cash book, ledger, bank books, purchase & sales vouchers, bills and vouchers for expenses, details of loans and advances etc. along with relevant documents were produced. The details furnished and records produced were put to test. After scrutiny of the records produced, trading results declared by the assessee were accepted without any further interference

During the course of assessment proceedings, it was also noticed that during the year, the assessee has made investment for construction of a complex at Nathdwara. On examination of details with regard to sources of investment, it was noticed that during the year the assessee has received on account of unsecured loans. Further in all the affidavits, mode of payment was not mentioned. It was not mentioned whether the amounts were paid in cash or through cheques. In compliance, following creditors were presented by the assessee for verification

During the course of statements of the above persons, it was noticed that the bank accounts of the above creditors were credited by way of cash deposits of the same amount of the loan just before the date on which they had paid the amount to the assessee , it was noticed that they were not having sufficient cash balance with them on the date of loan. In view of these facts, the creditworthiness of the creditors was not justified.

In view of above discussion, credits in the names of above persons stands unexplained and therefore addition was added to the total income of the assessee on account of unexplained credit under Section 68 of the Income Tax Act. 

Mukul Moondra, on behalf of the assessee submitted that the AO had travelled beyond the reasons for scrutiny which was for the investment in property, whereas the additions were made of the unsecured loans and disallowance of interest which is beyond the scope of the assessment.

S. M. Joshi, on behalf of the revenue submitted that the case of the assessee was selected for investment and the same was out of the unsecured loan he supported the order of the assessing officer and the relief sought in this appeal on technical reasons had not merits as discussed by the lower authorities.

The two-member Bench of S. Seethalakshmi, (Judicial Member) and Rathod Kamlesh Jayantbhai, (Accountant Member) observed that the assessee had filed the confirmation and affidavits of having given the money to the assessee. Not only that all these 8 depositors appeared before the AO and their statements were recorded, their bank statements were verified and after extensive verification he had considered 4 depositors for which the onus of depositor is considered as discharged and for balance 4 not considered and the amount were added.

Respectfully following the decision in Labh Chand Bohra Vs. ITO, the Bench allowed this ground of appeal filed by the assessee holding that the assessee had filed the confirmation, affidavits, bank statement and personal presence marked as sufficient to consider these depositors as genuine.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates