TMI Blog2013 (10) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... iscussed in the cases of various creditors, we find that the assessee has been able to prove the creditworthiness of the creditors and genuineness of the transactions in certain cases of the creditors, for which the additions have been deleted. However, in other cases, the assessee failed to prove the creditworthiness of the creditors and genuineness of the transaction, for which the additions have been sustained. In the result, the appeal of the assessee is partly allowed. - ITA No.115,132/Agra/2011 - - - Dated:- 28-6-2013 - Bhavnesh Saini And A L Gehlot, JJ. For the Appellant : Shri Waseem Arshad, Sr. DR For the Respondent : Shri Deependra Mohan, CA ORDER:- PER : Bhavnesh Saini: Both the cross appeals by the Revenue and the assessee are directed against the order of ld. CIT(A), Ghaziabad dated 14.02.2011 for the assessment year 2006-07. 2. The Revenue on ground No. 1 challenged the deletion of addition of Rs.12,75,000/- on account of unsecured loans u/s. 68 of the IT Act. The assessee on all the ground of appeal challenged the confirmation of addition of Rs.24,25,000/- made by the AO u/s. 68 of the IT Act on account of unsecured loans. 3. The revenue on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and order of ITAT Hyderabad Bench in the case of Paras Collins Distilleries vs. ITO, 130 ITD 114. The ld. DR, therefore, submitted that the ld. CIT(A) should have not deleted even the part additions. On the other hand, the ld. Counsel for the assessee reiterated the submissions made before the authorities below and referred to the detailed paper book filed on record, which contained all the documents filed before the authorities below in respect of the creditors to prove their identity, creditworthiness and genuineness of the transactions. He has also filed chart of each and every creditor indicating page numbers with reference to the paper book. He has submitted that in some of the cases, even the amounts of loan have been repaid during the year itself and the accounts have been squared up. Interest has been allowed on the loans and that copy of confirmations, IT return, PANS, bank account etc., have been filed in respect of the genuine credits. He has submitted that even in cases where cash is found to be deposited on the date of issue of credit entry in favour of the assessee, same is supported by cash flow statement and the balance sheets. Two creditors were produced before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng loan to the assessee or on the date of issuing cheques to the assessee. In the case of the creditor, Shri Rampal Singh, his bank statement is filed at page 45 of the paper book, in which Rs.2,50,000/- has been deposited, but neither it is mentioned that it was cash nor it is mentioned how the amount similar to the credit was credited in his bank account. No explanation is given before the authorities below and even during the course of arguments before us. Nothing is clarified as to how equivalent amount of cash credit was deposited in his bank account. In the case of remaining creditors, it is not a denying fact that equivalent amounts of cash credit was deposited in their bank accounts in cash for issuing cheques in favour of the assessee. This created serious doubt in the explanation of the assessee regarding genuineness of the transaction in the matter. The AO asked the assessee to produce all the creditors for examination on oath in order to find out truth in the matter. The assessee produced one of the creditors before the AO for examination, but showed his inability to produce other creditors, which is also clear from the order sheet dated 18.12.2007 (PB-126). Prior to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year under appeal, she has filed return of income at Rs.1,01,000/- only. In the case of Smt. Mithlesh Maheshwari, the bank balance before issue of cheque was Rs.10,794/- and equivalent amount of cash credit was deposited in her bank account for issue of cheque in favour of assessee. For assessment year under appeal, she filed return of income at Rs.1,02,476/- only. In the case of Sh. Rampal Sing, it is already noted above that the deposit entry in his case is not explained and prior to issue of cheque, there was bank balance of Rs.3708/- only. He has filed the return of income for the assessment year under appeal at loss with agricultural income (PB- 102). In the case of Shri Shariq Ali Khan, the bank balance is his account was Rs.1055/- prior to issue of cheque and equivalent cash amount was deposited for issuing cheque in favour of the assessee. He has filed return of income at Rs.70,373/- plus agricultural income (PB-116). These details noted in the assessment order and the details verified from the paper book would clearly support the findings of the AO that none of the creditors were persons of sufficient means to advance any loan to the assessee. Filing of balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Income -tax Act, 1961, on the alleged creditors and since those notices came back unserved, the Incometax Officer treated the loan as assessee s income from undisclosed sources. The Appellate Assistant Commissioner dismissed the assessee s appeal on the ground that the assessee could not even establish the identity of the parties. On further appeal by the assessee, the Appellate Tribunal held that mere filing of confirmatory letters did not discharge the onus that lay on the assessee and there was no material on the record to establish the identity of the creditors: Held, that the Tribunal had taken all the relevant facts into consideration and the conclusion arrived at by the Tribunal that the loans represented the assessee s income from undisclosed sources was not perverse or unreasonable. 10.1 The Hon ble Calcutta High Court in the case of CIT Vs United Commercial and Industrial Co. (P) Ltd., 187 ITR 596 held as under: The primary onus lies on the assessee to prove the nature and source of credits in its account. It is necessary for the assessee to prove prima facie the identity of his creditors, the capacity of such creditors to advance the money and last ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unds available in their bank account and they were having only small bank balance, which was even not sufficient to meet out their household expenses or day-to-day requirements. Therefore, it is unbelievable to accept the contention of the assessee that said persons were having creditworthiness to advance any loan to the assessee. The documents produced by the ld. counsel for the assessee in the paper book merely prove the case of assessee superficially, which is far from reality or truth. When the test of human probabilities after considering the surrounding circumstances as is propounded by Hon ble Supreme Court in the case of Durga Prasad More (supra) and Sumati Dayal vs. CIT (supra), is applied to the facts of the case, it is clear that the ld. CIT(A) was justified in confirming the addition u/s. 68 of the IT Act. In the present case, the assessee has not adduced any sufficient evidence before the authorities below to prove the creditworthiness of the creditors and genuineness of the transactions in the matter. Therefore, the assessee has not satisfied the essential ingredients of section 68 of the IT Act. 12. In the case of Rohini Builders and U.M. Shah (supra), the depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through such account. In such bank accounts, cash amounts were credited and immediately entire amounts were withdrawn through issuance of such cheques in favour of the assessee. It was noticed that such creditors did not maintain any books of account. Nowhere their capacity to raise such amount for drawing cheques of sizable amounts was established. In short therefore, the very genuineness of the transaction was not established. This therefore, is not a case where the Revenue makes addition on the assessee failing to establish source of the source. All issues are essentially based on facts and appreciation of evidence on record. No question of law arises. Tax appeal is dismissed. 7.2 In the light of the facts of the case and the judgments cited by both the parties and the judgments reproduced above, we discuss and consider all the 16 creditors separately in departmental appeal as well as in appeal of the assessee as under : Departmental Appeal: (1). Shri Deepak Varshney: 8. The ld. CIT(A) deleted the addition of Rs.1,00,000/- on account of the reason that PAN, copy of bank account, copy of the return showing sufficient cash balance and the loan shown in the balance she ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2005 through Demand Draft, copy of PAN, demand draft. At page 208, copy of bank account of the creditor is filed, in which it is shown that demand draft was prepared in the name of assessee firm on 14.11.2005 in a sum of Rs.2,75,606/- and on the same day, i.e., 14.11.2005, the creditor has deposited cash of Rs.2,80,000/- in their account for giving demand draft in favour of the assessee on the same day in a sum of Rs.2,75,606/-. Thus, prior to the deposit of cash in the bank account of the creditor on the same day of giving loan, there was meager balance of Rs.6,172/- in the bank account of the creditor. The ld. Counsel for the assessee contended that the creditor is a financer and there is availability of cash every time with them and out of the cash available with the creditor, the amount has been deposited in the bank account of the creditor for giving loan to the assessee. However, the submissions of the assessee are not supported by any evidence. No copy of any cash book to support the availability of cash with the creditor or any financial statement or copy of return have been filed in support of the same statement. Thus, nowhere, the capacity of the creditor to raise amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deleted. The assessee in the paper book filed documents in respect of genuineness of the transaction at pages 54 to 63 of the paper book, which are copy of account giving loan to the assessee on 13.03.2006 through cheque, which is confirmed by the confirmation and copy of return and PAN number. Though she has confirmed giving of loan in her statement recorded by the AO at the remand proceedings, but the ld. CIT(A) failed to note that prior to giving of cheque of Rs.1,00,000/- in favour of the assessee, the creditor has made several deposits of cash in her bank account, i.e., Rs. 25,000/- on 01.03.2006, Rs. 35,000/- on 06.03.06 and again on 11.03.06, cash of Rs.10,000/- has been deposited in bank account of the creditor. Prior to deposit of cash in first week of March, 2006, there was bank balance transferred on 16.09.2005 in a sum of Rs.1042/-. Thus, there was a meager bank balance available in the bank account of the creditor. This fact has not been considered by the ld. CIT(A) in proper perspective. The ld. Counsel for the assessee, however, submitted that the creditor has filed receipt and payment account with return of income in which sufficient cash balance was available to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he creditor and genuineness of the transaction in the matter. The decisions in the case of Smt. Suman Gupta vs. CIT(supra) and Blessing Construction (supra) squarely apply against the assessee. We, therefore, set aside and reverse the order of the ld. CIT(A) in deleting the addition. The order of the AO is restored in making addition of Rs.1,00,000/-. (7). Pramod Varshney : 14. The ld. CIT(A) deleted the addition of Rs.1,00,000/- considering that there is no cash deposit in his bank account before giving of loan to the assessee and further the Income-tax records were produced, position of receivable capital balance as well as reasonable income being returned. Therefore, the credit was considered genuine and addition was deleted. The assessee filed documents in support of the contention of the genuine deposits from pages 176 to 184 of the paper book. This shows that the loan is taken on 10.11.2005 through cheque supported by confirmation, and bank statement. Copy of bank statement is filed at page 180 of the paper book to show that before giving of cheque to the assessee, there were several clearings through banking channel and the creditor had sufficient balance to give loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, in some of the cases, we find that there are immediate cash deposits in the bank accounts of the creditors either on the same day of giving loan to the assessee or prior to that and they did not maintain any books of account to prove the availability of cash with them. The ld. CIT(A) was, therefore, not justified in deleting the additions in those cases and we have set aside his order and restored the order of the AO. In totality we allow the departmental appeal partly. Assessee s appeal : (1). Chandrakanta : 15. The ld. CIT(A) confirmed the addition of Rs.2,25,000/- because the cash was deposited before issuance of cheques. Copy of IT return and computation of income and bank account was not filed. Therefore, creditworthiness of the creditors is not proved. The assessee in respect of the genuine credit filed documents in paper book at pages 64 to 70, which are copy of ledger account, showing giving of loan on 09.11.2005 through cheque supported by confirmation, copy of cheque and IT return for assessment year 1999-2000 and 2000-01 showing income of Rs.1,01,150/- each in both the years, which is not sufficient to give loan to the assessee. Copy of bank account is fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich are copy of ledger account showing giving of loan to the assessee on 18.10.2005 through demand draft, which is supported by confirmation, PAN, copy of account, copy of demand draft, acknowledgement of return of income supported by statement of total income Copy of bank account is filed at page 106 of the paper book, which shows that prior to issue of demand draft in favour of the assessee on 17.10.2005, the creditor has made deposit of Rs.2,01,000/- in cash on the same day and prior to that, there was a meager bank balance available in the account of the creditor in a sum of Rs.698.50. Therefore, merely because the creditor has shown the amount in his balance sheet to give loan to the assessee is not enough to prove creditworthiness of the creditor and genuineness of the transaction. The available of cash with the creditor is not proved and it is also not explained why the cash was deposited on the same day for giving loan to the assessee on the same day. The case of the assessee is, therefore, squarely covered against the assessee by the judgments in the cases of Smt. Suman Gupta vs. CIT(supra) and Blessing Construction (supra). We, therefore, confirm the order of the ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that prior to give cheque of Rs.1,00,000/-, the creditor has made several cash deposits in his bank account, i.e., 03.03.2006 Rs.30,000/-, 06.03.2006 Rs.30,000/-, 10.03.2006 Rs.20,000/-, 11.03.2006 Rs.20,000/- and 13.03.2006 Rs.10,000/- have been deposited. No evidences have been filed to explain the source of cash deposits made in the bank account of the creditor. The creditor did not maintain any regular books of account. Therefore, the assessee failed to prove creditworthiness of the creditor and genuineness of the transaction in the matter. The issue is therefore, covered against the assessee by the judgments in the cases of Smt. Suman Gupta vs. CIT(supra) and Blessing Construction (supra). We, therefore, confirm the order of the ld. CIT(A) in confirming the addition of Rs.1,00,000/-. (7). Smt. Neelam Agarwal : 21. The ld. CIT(A) confirmed the addition of Rs.5,00,000/- because copy of IT return was not produced and no copy of bank account is filed. The assessee in the paper book filed supporting documents from pages 141 to 153 of the paper book. Copy of ledger account is filed at page 141 of the paper book to show that loan was given through cheque on 01.10.2005 and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee by the judgments in the cases of Smt. Suman Gupta (supra) and Blessing Construction (supra). We, therefore, confirm the order of the ld. CIT(A) in confirming the addition of Rs.1,50,000/-. (9). Rathi Bulk Carrier : 23. The ld. CIT(A) confirmed the addition of Rs.5,00,000/- because the copy of bank account was not filed. The assessee in the paper book filed supporting documents from pages 185 to 193, which are copy of ledger account showing giving of loan on 09.11.2005 through DD supported by PAN, copy of return of income along with balance sheet, copy of bank account is also filed at page 193 of the paper book and the certificate given in the paper book of filing all these documents before the lower authorities have not been disputed before us. The bank account would reveal that before issue of cheques in favour of the assessee, there was clearing entry through banking channel on the same day. Therefore, there is no immediate cash deposits in the bank account of the creditor. The creditor is assessed to tax. The details of interest paid have been disclosed to the Revenue Department. As per ledger account the loan amount is also returned by the assessee in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the AO in some cases was due to allowance of discount by these parties, which have been accounted for in the next year. It was submitted that all the payments have been made through banking channel. Therefore, the addition of 20% out of sundry creditors is wholly unjustified. The ld. CIT(A) considering the issue in the light of material on record and the remand report filed by the AO found that the disallowance of 20% out of sundry creditors is purely adhoc disallowance which is not tenable. The assessee also filed all the details during the appellate proceedings and the AO has not questioned these evidences on merits. Therefore, the ld. CIT(A) held that these evidences are admissible in evidence being relevant to a judicious assessment The ld. CIT(A), considering the merits of the issue and evidences on record, deleted the additions. 26. The ld. DR relied upon the order of the AO and submitted that none of these documents were filed at assessment stage. Therefore, Rule 46A is violated. On the other hand, the ld. counsel for the assessee reiterated the submissions made before the authorities below and submitted that the assessee maintained proper books of account which have not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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