TMI Blog2015 (2) TMI 935X X X X Extracts X X X X X X X X Extracts X X X X ..... ecided in favour of assessee. Unaccounted loan - CIT(A) confirmed addition on amount received from Shri Vijay Kumar s/o of the Proprietor, despite confirmation and source of source of Shri Vijay Kumar explained during the course of assessment - Held that:- Burden casted on the assessee to prove the identity of creditor, genuineness of the transaction and credit worthiness of the person giving loan, is proved then such loans should have been accepted. Therefore, the addition is not justified and accordingly we set aside the order of the ld. CIT(A) and delete the addition. - Decided in favour of assessee. - ITA No. 327/Chd/2011 - - - Dated:- 31-10-2012 - SHRI T.R. SOOD AND MS. SUSHMA CHOWLA, JJ. For the Appellant : Shri Sudhir Sehgal For the Respondent : Shri Manjit Singh ORDER PER T.R.SOOD, A.M This appeal is directed against the order passed by the CIT(A) , Patiala dated 24.2.2011. 2. In this appeal various grounds have been raised but at the time of hearing the ld. counsel of the assessee submitted that only grounds No. 1(a) and 2(a) can be taken as effective grounds for adjudication. Grounds No. 1(a) and 2(a) read as under : 1(a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were not genuine because according to him the assessee opened eight commodity trading accounts in the name of aforesaid eight persons with M/s Satya Narayan Online Trading Pvt Ltd., Ludhiana by issuing eight cheques from his own bank account with HDFC bank. Further a cheque for margin money amounting to ₹ 5,000/- each were issued to the commodity brokerage by the assessee on the same date. Profit was received thrice by all the parties. Against all these eight persons accounts were opened simultaneously on 12.9.2006 and were also closed on 18.1.2007 and 25.1.2007. It was further noticed that major chunk of profits was received in equal installments simultaneously by all the parties as detailed below: Date Name Relation/ Cheque No Amount (Rs.) Total (Rs.) 10.10.2006 Sewa Ram HUF Self (Karta) 200 48,200 10.10.2006 Shakuntla Rani Wife 201 49,500 10.10.2006 Raj Kumari D-in- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.1.2007 Vijay Kumar HUF Son Karta 330 1,01,300 25.1.2007 Vinod Kumar Son 331 1,03,450 25.1.2007 Vinod Kumar HUF Son Karta 332 1,07,150 8,28,500 17,21,100 According to the AO the assessee had routed the transactions through these people because most of these persons had very low income without the commodity profit. Information was called from M/s Satya Narayan Online Trading Pvt Ltd., Ludhiana. Copies of the client registration form were furnished by this company which depicted that all the forms bear same date i.e. 2.9.2006. The statement of Shri Kawitansh Khana, Director of the company was also recorded. In reply to the question who signed these forms, Shri Khanna stated that he knew only one person i.e. Shri Vijay Kumar who came for registration of these persons and also for other discussions and he could not state who had signed these form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 56,554/-. Some other cheques have also been issued to other parties like a cheque for ₹ 1500/- on 23.5.2006. Another cheque for ₹ 6894/- on 25.10.2006, ₹ 7000/- on 15.3.2007, ₹ 70,000/- on 9.3.2007 and ₹ 30,000/- on 19.3.2007. In fact these accounts are being treated by the assessee as well as family members like current account and whenever any payment is required to be made to anybody such cheques are issued by the assessee on the instructions of the family members directly to such parties. Page 24 25 is copy of bank account which shows receipt of the profit from commodity broker and payment to the assessee. Therefore, merely because the account with assessee have been used as current account and cheques for margin have been issued by the assessee will not make any difference particularly because family members had sufficient credit balance with the assessee. He also referred to page No. 27 to 29 which are copy of contract note issued by M/s Satya Narayan Online Trading Pvt Ltd., Ludhiana to Sewa Ram HUF showing various profits earned. Page 30 31 is copy of return filed by Sewa Ram HUF. Further it is usual in every family that financial matters a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smissed. In this case certain cash credits were received in the name of assessee s wife, Son and Daugher-in-law by the firm which were added back by the Officer as unexplained cash credits. The Tribunal allowed assessee s appeal because cash credits came from bank account held by the wife, Son and d-in-law. It was observed that since cash credit came through bank account the same could not be added to the income unless it was proved that such persons were benamidar of the assessee. He also relied on the decision of Hon'ble Punjab Haryana High Court in case of CIT V. Ram Narain Goel, 224 ITR 180. In that case the assessee had received four credit entries which according to the AO were fictitious and unaccounted income of the assessee. However, the Tribunal gave a finding that moneys had been advanced by account payee cheque and had been returned by the assessee with interest through account payee cheque and since copy of the bank account have been filed along with the confirmation, no addition could be made. These findings were confirmed by the Hon'ble Court. In case before us the assessee had filed the copies of the confirmation, bank account and proof of filing of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... family members had received gifts worth ₹ 1.79 crores and certain findings were recorded against the assessee by the AO. The comments made by the Hon'ble Supreme Court were in the context of those findings and in the line relied on by the ld. DR for the revenue, the Court has made clear that the addition would be confirmed if the assessee failed to rebut the evidence whereas in case before us, the AO has never doubted the profit made from commodity transactions. He has simply observed that profit has not been made or earned by such individual but by the assessee without pointing out any evidence in this regard. 9. We have heard the rival submissions carefully and it has to be noted that addition has not been made u/s 68 of the Act but the addition has been made by observing that commodity profit earned by eight family members is income from undisclosed sources of the assessee. It is very strange that the AO has nowhere stated that income from commodity transactions is bogus or not genuine. In fact the assessee has shown an amount from eight members as per detailed below as loans:- Sewa Ram (HUF) ₹ 2,09,700.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,000.00 -- 882,326.00 19.3.2007 To cheque No. 813878 70,000.00 -- 812,326.00 19.3.2007 To cheque No. 813881 30,000.00 -- 782,326.00 31.3.2007 By Amount of interest -- 87,325.00 869,651.00 31.3.2007 To amount of TDS 8,907.00 -- 860,744.00 Total 129,301.00 990,045.00 Credit balance as on 31.3.2007 860,744.00 Above clearly shows that during the year Sewa Ram HUF has further given four cheques amounting to ₹ 36,466/-, ₹ 48,200/-, ₹ 60,200/- and ₹ 101,300/- on 28.9.2006, 13.10.2006, 3.11.2006, 30.1.2007. Out of these last three cheques i.e. ₹ 48,200/-, ₹ 60,200/- and ₹ 101,300/- have been d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmon practice where the transactions are entered in the family concerns. Copies of account of all the family members are also same and we are not discussing each and every copy of account separately. Other serious objection raised by the AO is that profits have been earned in the equal installments by all the family members, this may be matter of chance. This may even raise some doubt also but in that case the AO should have specifically enquired from each of the family members but no such enquiries have been made. Third serious objection raised by the AO is that since income of various family members was lower and that is why it cannot be accepted and it must have been earned by the assessee. This objection is not correct because there is no finding that such individual family members were acting as benamidar of the assessee. Family members are regular income tax assessees and even similar income from commodity transactions was accepted in the hands of such family members in the immediately previous year also. Fourth serious objection raised is irregularity in the filing of registration forms but the AO has not pointed out what is the irregularity. Only thing which has been pointe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other names of Sampathkumr. The AO while appreciating the contents of the letters brought on record came to the conclusion that Sampathkumar had obliged in giving gifts to Srinivasan and his family members. It is further held that in all probabilities Sampathkumar may have received compensatory payments in lieu of the gifts made by him. The letters according to the AO suggest that Sampathkumar reserved his right to receive suitable compensation from the respondents-assessees. The AO in the circumstances came to the conclusion that the gifts though apparent are not real and accordingly treated all those amounts credited in the books of the assessee as the income of the assessees. The additions were confirmed by the ld. CIT(A). The matter traveled to the Tribunal where there was a difference of opinion between the two Members, therefore, the matter was referred to the Sr. Vice President who concurred with the findings of the AO. In this background the Court referred to various decisions including the decision of Sumati Dayal, 214 ITR 801 and made various observations including observations in para 24 which reads as under:- It is true that even after rejecting the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case if the observation is interpreted in this manner then nobody would be allowed to rebut the findings of the AO by any evidence howsoever strong it may be. In any case the Hon'ble Supreme Court has itself mentioned in this observation that the same is rebuttable and we again highlight the observation, Such opinion formed itself constitutes a prima facie evidence against the assessees, viz., the receipt of money, and if the assessees fail to rebut the said evidence the same can be used against the assessees by holding that it was a receipt of an income nature. Whereas in case before us the assessee had discharged its onus by clearly filing copy of account, PAN No., income-tax return, bank statement, source of funds regarding loan to discharge burden envisaged u/s 68 of the Act. The above observations are definitely in the context of gift received in that case and cannot be made applicable in all the cases of cash credits. In any case, it has not been shown before us how reply of the assessee is not satisfactory. As pointed out earlier that in case of loan transaction only three ingredients i.e. identity of the creditor, genuineness of the transaction and capacity of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were received by the same family members in the earlier years and copy of contract notes for such profits are placed in the paper book at page 162 to 163 were accepted by the Department. Therefore, even in this year without pointing out any defect in such amounts or without recording the finding of such profit was bogus, same could not have been addedto the income of the assessee. In these facts and circumstances of the case we set aside the order of ld. CIT(A) and deleted the addition of ₹ 17,21,100/-. 11. Ground No. 2 - With regard to second issue after hearing both the parties we find that during assessment proceedings the AO noticed that the assessee has received a sum of ₹ 14.00 lakhs on 6.2.2007 and another sum of ₹ 10.00 lakhs on 16.2.2007 from Shri Vijay Kumar. On enquiry it was explained that Shri Vijay Kumar in turn has taken a loan of ₹ 24.00 lakhs from one Shri Subhash Kinger. Affidavit of Shri Subhash Kinger was also furnished. Shri Subhash Kinger was produced before the AO and his statement was also recorded. The AO made following observations on the basis of affidavit and other documents as under:- i) Shri Subhash Kinger isa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve or never had that capacity to lend such huge sum of money to anybody without any consideration to anybody ever having been received. As per the statement given by Sh. Subhash Kinger before the undersigned, he had earlier been living in Japan where he was working as a labourer and had been sending money to his family in India for their daily needs. But the copy of his bank account shows no deposits or withdrawals made in this manner. It is not possible for a person of such level of income and status having given his entire hard earned money to any third person without any consideration whatsoever and he himself not even been able to lead a life beyond basic subsistence level. It has been held in judgement of Karnal Motors V. CIT that The record revealed that creditor 'M' was not a' man of means. The onus was on assessee to discharge that he was a man of means to allow the cash credit. There should be identification of the creditors and he should be a person of means. Therefore, there was no justification to interfere in respect of addition on account of cashcredit shown in the name of M . It is clear that this bank account seems to have been operated by some o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e paper book. Since Shri Vijay Kumar had arranged these funds out of loans taken from Shri Subhash Kinger who was close relatives of Shri Vijay Kumar. His affidavit was also filed, copy of which is placed at page 105 of the paper book. Copy of Passport as well as bank statement of Shri Subhash Kinger and bank certificate of State Bank of India confirming that FDR amounting to ₹ 14,50,725/- was encashed by Shri Subhash Kinger on 3.2.2007, has also been filed at page 107 to 112 of paper book. Copy of cheques was also filed which is placed at page 115 and 116. Once all these documents were filed the AO should have been satisfied that the loan was correctly taken. However, the AO called upon the assessee to produce Shri Subhash Kinger who was accordingly produced and his statement was also recorded. However, the AO was still not satisfied and made addition which was confirmed by the ld. CIT(A). He drew our attention to all those documents and pointed out that Shri Subhash Kinger had gone to Japan in the year 1993 where he worked as labourer and had stayed with his elder brother. He earned certain amounts of money which were regularly deposited in his NR NR account out of which so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has taken the loan from Shri Vijay Kumar who is regular income-tax assessee and had filed his confirmation and the matter should have ended there. However, since the AO was not satisfied, affidavit of Shri Subhash Kinger from whom Shri Vijay Kumar arranged funds was also filed and he was produced before the AO. The AO mainly objected to some of the answers given in the statement like Shri Subhash Kinger did not remember how much balance was there in his account or whether any loan against FDR was taken. The AO has also expressed that why any person would take loan against FDR on which he was receiving an interest of 9% whereas he has given loan to Shri Vijay Kumar @ 6%. As explained by the ld. counsel of the assessee normally no person would remember the balances or some of the transactions in the bank. As far as charging of lower interest is concerned, Shri Subhash Kinger seems to be deeply obliged because Shri Vijay Kumar has been helping Shri Kinger before he went to Japan in his day to day expenses whenever required it becomes clear from followings question and answers in the statement recorded by the AO: Question: Have you taken any loan from him? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account alongwith necessary support justifying the availability of such money with his father. The statement of the father of the assessee was taken by the Assessing Officer on 6.12.2006 which is placed at pages 43 to 48 of the paper book. Shri Parkash Chand had in his statement admitted to have advanced the said sum of ₹ 35 lakhs to his son and source was explained to the out of his agriculture income on his land holding of 50 acres in Longowal Village. The support by way of copies of form *Jn justifying the agriculture income earned by the father of the assessee were also Tiled during the course of assessment proceedings and is admitted in the statement recorded. The Deponent further admitted that out of advance of ₹ 35 lakhs, he has yet to receive only sum of ₹ 4,70,000/-. The perusal of the copies of account of Shri Parkash Chand with M/s Ashok Kumur Raj Kumar placed at page 50 of the paper book reflects the source of money i.e. the agriculture produce which in turn is evidenced by the copies ol form No. *J* placed at pages 51, 72 73 of the paper book. Further, the assc-ssee had advanced loans to various parties by way of mortgage deed which in turn were re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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