TMI Blog2011 (12) TMI 520X X X X Extracts X X X X X X X X Extracts X X X X ..... fter the loan transactions with the assessee. The AO, therefore, issued show cause notice to the assessee, in response to which it was submitted that confirmation letters from the depositors, their Permanent Account Numbers, copies of returns of income, balance sheets and bank statements had been furnished. Statements of some of the depositors had been recorded. It was thus argued that the genuineness of the loans was fully established. The AO rejected the assessee s submission and relying on the cases of Bomin Pvt. Ltd. Vs CIT, 160 ITR 477 (Guj.) and M/s. Precision Finance Pvt. Ltd., 208 ITR 465 (Cal.) gave the finding that the said loans were not satisfactorily explained in terms of sec. 68 of the IT Act and added the sum of ₹ 13,00,000/- to the assessee s total income under the said section. 3. In the written submission, it was contended before the learned CIT(A) that the assessee who is engaged in civil construction had submitted all the requisite documentary evidences before the AO. Four of the depositors were also presented before the learned AO. These were Shri Hasmukh R. Mehta, Jimit M. Mehta, M/s. Nirav Gems and Nirav M. Mehta, whose statements were recorded by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction was only ₹ 1,448.95. Her cash book shows capital buildup from stitching and embroidery income every month. The return of income filed by her for the A.Y.2005-06 declared an income of only ₹ 51,904. It is a clear case of accommodation entry being provided to the Assessee. She simply did not have the requisite creditworthiness to give the loan, 6. Coming to M/s. Nirav Gems, who claimed to have given a loan of ₹ 1,50,000, the situation was exactly the same, Cash of ₹ 1,50,000 was deposited on. 8.11.2004 and the loan was given on the very next day. Before the deposit, the balance in its account with Dena Bank, Rampura Branch was only ₹ 4,008.87. He also build up his capital by showing diamond brokerage income of approximately ₹ 3,000 per month. Once again, this is another case of accommodation entry being provided to the Assessee. Shri Nirav M. Mehta who claimed to have given a loan of ₹ 1 lakh to the Assessee, cash was deposited on 6.11.2004 in his bank account with Dena Bank and the loan was given to the Assessee on 9.11.2004.His account shows similar transactions of rotating money at regular intervals. The average balance pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... source of the loans yet, the Courts have also held that the creditworthiness of the depositors/lenders have to be necessarily established. Though this is clearly a contradictory and dichotomous situation yet, the necessity of enquiries regarding the creditworthiness of the alleged depositors cannot simply be wished away. In the case of the Assessee, such enquiries have clearly revealed that, apart from Shri Hasmukh R. Mehta, the remaining seven alleged depositors simply did not have the funds available to give the loans the Assessee. The funds were made available by surreptitious means which was not explainable. Given such facts and circumstances of the case, I hold that of the unexplained loans of ₹ 13 lakhs, only the loans of ₹ 3 lakhs in the name of Shri Hasmukh R. Mehta stood satisfactorily explained. The remaining loans of ₹ 10 lacs represented absolutely bogus accommodation entries. The addition to the extent of ₹ 10 lakhs under the provisions of sec. 68 of the IT Act is sustained. 4. The learned Counsel for the assessee reiterated the submissions made before the authorities below and submitted that the assessee submitted confirmation letters from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatement has been filed. He has referred to PB-5 cash flow statement in the case of Smt. Taraben Amrutlal Mehta referred by the learned Counsel for the assessee and submitted that some opening balances are shown and amounts received from loans and advances has been shown and by adding income of the current year the total is shown at ₹ 2,38,805/- out of which loan of ₹ 2,00,000/- is stated to have been given to the assessee. The learned DR, therefore, submitted that the explanation of the assessee is not probable because the entire income earned by the creditor is shown to have been given on loan without interest. Therefore, it the test of human probabilities is applied to the facts and circumstances of the case, it would prove that it was only accommodating entry given to the assessee. The creditors have only meager income for which also no source is explained. The learned DR, therefore, submitted that the assessee failed to prove the creditworthiness and genuineness of the transactions in the matter. The learned DR submitted that the documents produced by the assessee merely support the claim of the assessee superficially but the same could not be accepted in view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, when called upon him, to point out the nature and source of the money and if his explanation in this behalf is not found satisfactory it is open to the Assessing Officer to add the same as his income. For this purpose, it is not necessary for the Assessing Officer to rely on section 26. Even without reference to section 68, the amount can be added if the explanation of the assessee with regard to the nature and source of the receipt is not satisfactory. Therefore, the addition in the instant case was to be upheld. 6. The learned Counsel for the assessee admitted that no interest is paid to any of the creditors and further the cash flow statement is made in all the cases of the depositors. 7. We have considered the rival submissions and material on record. The findings of the learned CIT(A) reproduced above dealt with each credit have not been assailed to by the learned the learned Counsel for the assessee during the course of arguments. It is, therefore, proved on record that cash was deposited in the accounts of all the depositors prior to giving the said loans to the assessee. No evidence was furnished regarding source of depositing such cash. There was no transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Bharati Pvt. Ltd. Vs CIT, 111 ITR 951 held as under: In the course of assessment proceedings, the Income-tax Officer found that the assessee had shown ₹ 20,000 as loan in its books taken from two parties. The assessee produced the alleged confirmatory letters from those parties before the Income-tax Officer in support of the two loans. The Income-tax Officer served notices under section 131 of the Income tax Act, 1961, on the alleged creditors and since those notices came back unserved, the Income-tax 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 perver ..... X X X X Extracts X X X X X X X X Extracts X X X X
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