In view of above, following the judgment of Hon’ble Guwahati High Court in the case of Nemi Chand Kothari (supra) and the judgment of Madhya Pradesh high Court in the case of Metachem Industries (supra), we hold that the AO and the CIT(A) did not make any effort to verify the confirmations, identity and creditworthiness of the creditors in question and they also ignored the fact that the transaction of cash credits received and its repayment were made through bank and we also hold that the authorities below did not bring any incriminating material or evidence against the assessee trust to establish that the amount shown in the balance sheet as cash credits amounting to Rs.1,70,000 actually belonged or was owned by the assessee trust itself.
Accordingly, we arrive to a conclusion that the addition of Rs.1,70,000 u/s 68 of the Act confirmed by the CIT(A) is not sustainable in the facts and circumstances of the case. We, therefore, allow the appeal of the assessee trust, setting aside the orders of the authorities below in this regard.
INCOME TAX APPELLATE TRIBUNAL, DELHI
I.T.A.No.723/Del/2012 – Assessment Year: 2005-06
The Gurukul Trust Vs. ADIT (E)
O R D E R
PER CHANDRA MOHAN GARG, JUDICIAL MEMBER
This appeal has been preferred by the assessee against the order dated 13.12.2011 of the CIT(A)-XXI, New Delhi for AY 2005-06, passed u/s 143(3) of the Income Tax Act (hereinafter referred to as the Act).
2. The grounds of appeal read as under:-
“1. The ld. CIT(A) has erred in disallowing the expenditure of Rs.1,70,000/-.
2. The CIT(A) has failed to appreciate the facts in the case and submissions of the assessee and thus the order is contrary to the facts of the case.
3. The disallowance of the expense is bad in law and the order deserves to be corrected.
4. The assessment order as well as the order of the CIT(A) has been passed in contravention to the principle of natural justice. The same is liable to be set aside and the case deserves to be decided on the basis of facts.”
3. Briefly stated, the facts of the case giving rise to this appeal are that the assessee filed a return showing income as Nil and his case was selected for scrutiny assessment and a notice u/s 143(2) of the Act was served on the assessee. The assessee trust was registered u/s 12A of the Act w.e.f. 12.05.2010. The AO allowed the benefit of Section 11 and 12 of the Act to the assessee with a noting that he has not found any violation of Section 13 of the Act. Further, on examination of balance sheet of the assessee trust, the AO noted that the following loan creditors of the assessee trust were not assessed to income tax:
