TMI Blog2012 (11) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... n amount – addition deleted Regarding loan from Director – alleged that amount obtained by him from Smt. Priti Mishra does not inspire confidence because she had no sufficient cash balance on those days – Held that:- Amount advanced by Smt. Priti Mishra has been accepted by the CIT(A). Merely because her income is assessed u/s.44AD, the same cannot be a ground to disbelieve the loan obtained from Smt. Priti Mishra by Sri A.K. Mishra who has advanced as loan to the assessee company - in the instant case could have been made in the hands of Sri A.K. Mishra but definitely not in the hands of the assessee company – addition deleted Regarding loan from Sri A.K. Mishra (HUF) - HUF is assessed to tax and the copy of the acknowledgement of income tax Return, computation of income, balance sheet etc. were filed before the AO – Held that:- Creditor has shown profit of Rs. 60,630/- as indirect income and Rs. 89,820 as profit from Mangalam construction - After considering the opening capital and income during the year and the personal drawings during the year the HUF is left with sufficient funds to advance loan of Rs. 1 lakh during the year – addition deleted Regarding loan from Sri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... give an opportunity to the assessee to produce the above loan creditor and satisfy the credit worthiness of the loan creditor - appeal filed by the assessee is allowed for statistical purposes. - ITA Nos. 512/PN/2010 - - - Dated:- 24-5-2012 - Shri I.C. Sudhir, Shri R.K. Panda, JJ. Appellant by : Sri Sunil Ganoo Respondent by : Ms. Ann Kapthuama ORDER PER R.K. PANDA, AM This appeal filed by the assessee is directed against the order dated 29-10- 2009 of the CIT(A)-I, Pune relating to the Assessment Year 2005-06. 2. The assessee in its various grounds of appeal has challenged the order of the ld. CIT(A) in sustaining addition of Rs. 23,24,680/- out of addition of Rs. 49,39,680/- made by the AO under section 68 of the IT Act. 3. Facts of the case in brief are that during the course of assessment proceedings the AO noted that the assessee has availed unsecured loans amounting to Rs. 49,30,680/- from the following persons : S.No. Name of the person Amount (Rs.) 1 Smt. Anita Singh 4,95,000 2 Mr. Robit Dubey 4,90,000 3 Mrs. Ram Murty Devi Mishra 1,90,000 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reasons for not recording the statements of the remaining persons were not disclosed. Referring to the observation of the Assessing Officer that all the persons have adopted the same modus operandi for giving the loans, i.e., depositing cash immediately before giving cheques/drafts, it was submitted that such an action on the part of the creditors may have been prompted for complying with the provisions of sec.269SS which specifies that no cash deposits of Rs. 20,000/- or more should be given. The decision of the Pune Bench of the Tribunal in the case of ITO, Wd(5)(1), Pune Vs. Shri Jaynarayan Agarwal in the ITA No.843/PN/97 for A.Y. 1994-95 was brought to the notice of the CIT(A). 7. As regards the observation of the Assessing Officer regarding non production of supporting documents for agricultural income, it was submitted that proof regarding ownership of land in the form of Kisan Vahi issued by the Govt. of U.P. which is equivalent to 7/12 extracts issued in Maharastra was submitted before the Assessing Officer. Similarly, other valid documents in the form of Khasara/Khatuvani giving details of sale of agricultural products were also claimed to have been submitted befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d CIT(A) deleted the additions amounting to Rs. 26,06,000/- and sustained the addition of Rs. 23,24,680/- in the case of the following persons. S.No. Name of the person Addition made by the A.O. Addition upheld 1 Smt. Anita Singh 4,95,000 4,95,000 2 Mr. Rohit Dubey 4,90,000 4,90,000 3 Mrs. Ram Murty Devi Mishra 1,90,000 1,90,000 4 Mr. Ram Deo Awasthi 90,000 90,000 5 Mr. Ram Avtar Shukla 90,000 90,000 6 V. M. Sangle 2,00,000 2,00,000 7 Avitech Engineering Pvt. Ltd. 50,000 0 8 Virangana Mishra 40,000 40,000 9 Vidhanchandra Mishra 65,000 0 10 Chandrahas Mishra 95,000 95,000 11 Priti Mishra 3,16,000 0 12 Anilkumar Mishra (HUF) 1,00,000 1,00,000 13 Anilkumar Mishra 27,09,680 5,34,680 TOTAL 49,30,680 23,24,680 10. In the case of Virangana Mishra the learned CIT(A) n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sri A.K. Mirhsa (HUF) the ld. CIT(A) noted that the Modus Operandi in this case also is same, i.e. cash of equivalent amount was deposited prior to the issue of cheques to the assessee. The assessee could not explain the source of cash deposit satisfactorily except giving the statement that the creditor has got independent source of income and has filed the return of income. He noted that verification of the capital account of the creditor shows that it has received meager profit of Rs. 60,030/- and 89, 820/- from indirect income and from Mangalam construction respectively. After considering the drawings of Rs. 60,000/- shown in the capital account, the creditor is hardly left with any saving to advance loan to the assessee company. Rejecting the various explanations given by the assessee, the learned CIT(A) upheld the addition of Rs. 1 lakh on this account on the ground that the assessee failed to prove the credit worthiness of the creditor. 13. So far as the amount of advance of Rs. 4,90,000/- received from Rohit Dubey the learned CIT(A) while upholding the addition made by the AO noted that the creditor is related to the directors of the company. Identical amount was found to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk account extract for considering the Modus Operandi of depositing cash in the bank account of the creditor before transfer of amounts to the account of the assessee the learned CIT(A) held that the assessee could not explain satisfactorily the source of the loan. Since the assessee failed to produce the bank account of the creditor and prove the source of credits satisfactorily in the bank account the learned CIT(A) upheld the action of the AO making addition of Rs. 4,95,000/-. 15. In the case of Mrs. Ram Murti Devi Mishra he noted that Demand Draft was purchased on 14-08-2004 from the same Oriental Bank of Commerce in the name of the assessee company for Rs. 2 lakhs out of which Rs. 1,90,000/- was transferred to the loan account and Rs. 10,000/- was transferred to share capital account. From the affidavit filed in the name of the creditor stating that the amount was advanced out of groceries shop receipts and sale of buffaloes in his native village he observed that the loan creditor has declared income u/s. 44AF and not having a bank account. From the copy of the capital account he observed that out of the income of Rs. 1,55,600/- declared during the year the loan creditor h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee made a claim that it received Rs. 4 lakhs through DD obtained from Oriental bank of commerce from each of the creditors in the earlier year. Therefore the outstanding balance in these two cases should have been Rs. 4,90,000/-each as on 31-03-2005. When this discrepancy was confronted to the assessee it was stated that in the list of unsecured loans enclosed to the return an amount of Rs. 3 lakhs each was wrongly credited to Sri. V.M. Sangle and balance outstanding in the name was shown as Rs. 6,90,000/- whereas it should have been Rs. 90,000/-. However, during the appellate proceedings, the assessee made altogether different claim regarding the source of income of the creditor and stated that the company received Rs. 2 lakhs from Sri V.M. Sangle during the year. In view of the above and in absence of any satisfactory explanation regarding the source of advancing the loan and in absence of any satisfactory explanation as to why they kept such huge amount of cash with them out of their alleged savings from Agricultural income, the learned CIT(A) confirmed the above two additions. 18. As regards the amount of Rs. 95,000/- obtained from Sri Chandrahas Mishra, the learned CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Page Nos. 1 to 10 of the Paper Book he submitted that the assessee has filed the copy of acknowledgement of return of the Income tax Return, copy of computation of total income along with balance sheet and profit and loss account for the period ending 31-03-2005. The loan confirmation letter of Smt. Anita Singh was filed before the AO. She had appeared before the AO and her statement was recorded u/s.131. During the course of such recording of statement Smt. Anita Singh has given her PAN Number, her Bank Account and has confirmed to have given the loan of Rs. 4,95,000/- and investment in shares amounting to Rs. 10,000/- . Referring to Page No. 31 of the CIT(A) s order he submitted that the learned CIT(A) has mentioned that in the absence of bank account extracts the source of loan could not be verified. The ld. Counsel for the assessee submitted that the AO has never asked the creditor to file her bank account. Referring to the decision of Hon ble Supreme Court in the case of CIT Vs. Orissa Corporation Pvt. Ltd., reported in 159 ITR 78 he drew the attention of the bench to Para 13 of the order and submitted that when the assessee had given the names and addresses of the alleged cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned counsel for the assessee submitted that the above loan creditors have filed their affidavits, details of their land holdings along with Kisan Bahi and receipts issued by Krishi Utpadan Mandi Samithi, they have appeared before the AO and have given their statements in response to summons u/s. 131 and had confirmed to have given the loan of Rs. 90,000/- each. 26. As regards the loan of Rs. 2,00,000/- obtained from Sri Vishnu Mohan Sangle he submitted that the loan creditor is an Income tax assessee and his Income tax acknowledgement for assessment year 2005-06 along with computation of income was filed. He has declared an income of Rs. 4,66,690/- for the assessment year 2005-06 and has paid tax of more than Rs. 1,08,000/- . TDS during the year was Rs. 1,20,599/-. Therefore, the loan could not have been simply disbelieved. 27. As regards the loan of Rs. 40,000/- obtained from Smt. Virangana Mishra the learned counsel for the assessee referring to Paper Book Page Nos. 56 to 66 drew the attention the Bench to the Income tax acknowledgement, computation of total income, balance sheet as on 31-03-2005, profit and loss account for the year ending 31-03-2005, loan confirmation lette ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his burden stands discharged and it is not the burden of the assessee to show the source of his creditor or to prove the credit worthiness of the source of the sub creditors. 32. Referring to the decision of the Hon ble Bombay High Court in the case of Orient Trading Co. Ltd. Vs. CIT reported in 49 ITR 273 (Bom) he submitted that when the entry stands in the name of a third party and the assessee satisfies the AO as to the identity of the third party and also supplies such other evidence which will show , prima facie, that the entry is not fictitious, the initial burden which lies on the assessee can be said to have been discharged by him and it will not thereafter be for the assessee to explain further as to why or in what circumstances the third party obtained money and how or why he came to make a deposit of the same with the assessee. The burden thereafter shifts on to the revenue to show that the entry represented the assessee s suppressed income. The department has to be in possession of sufficient and adequate material in order to reach to such conclusion. 33. Referring to the decision of Hon ble Gauhati High Court in the case of Sri P.K. Sethi Vs. CIT reported in 286 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous details before the AO and have confirmed to have given the loans to the assessee company. 37. It has been held by the Hon ble Rajasthan High Court in the case of Kanaiahlal Vs. CIT(supra) that when the assessee filed confirmation from the creditor and produced the creditor before the AO where the creditor affirmed advancement of loan to the assessee, no addition u/s. 68 could be made in the hands of the assessee on the ground that the creditor could not satisfactorily explain the source of loan. Burden of the assessee for such cases does not extend to prove the source of the creditor from where he made the advance to the assessee. The Hon ble Bombay High Court in the case of Orient Trading Co. Ltd., (supra) has held that when the entry stands in the name of a third party and the assessee satisfies the ITO as to the identity of the third party and also supplies such other evidence which will show, prima-facie, that the entry is not fictitious, the initial burden which lies on him can be said to have been discharged by him and it will not thereafter be for the assessee to explain how or in what circumstances the third party obtained money and how or why he came to make a deposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) has sustained Rs. 5,34,680/- on the ground that the amount obtained by him from Smt. Priti Mishra does not inspire confidence because she had no sufficient cash balance on those days. We find the amount advanced by Smt. Priti Mishra amounting to Rs. 3,16,000/- has been accepted by the CIT(A). Merely because her income is assessed u/s.44AD, the same, in our opinion, cannot be a ground to disbelieve the loan obtained from Smt. Priti Mishra by Sri A.K. Mishra who has advanced as loan to the assessee company. In our opinion, addition, if any, in the instant case could have been made in the hands of Sri A.K. Mishra but definitely not in the hands of the assessee company. We, therefore, set-aside the order of the CIT(A) and direct the AO to delete this addition. 40. So far as the loan of Rs. 1 lakh obtained from Sri A.K. Mishra (HUF) we find the HUF is assessed to tax and the copy of the acknowledgement of income tax Return, computation of income, balance sheet etc. were filed before the AO. The creditor has shown profit of Rs. 60,630/- as indirect income and Rs. 89,820 as profit from Mangalam construction. After considering the opening capital and income during the year and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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