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2015 (11) TMI 1056 - ITAT DELHI

2015 (11) TMI 1056 - ITAT DELHI - TMI - Addition u/s 68 - addition on the basis of copy of the bank account statement of the assessee by holding that the genuineness of the transaction and creditworthiness of the payer have not been established - Held that:- Assessing Officer and the CIT(A) did not bother to consider the documentary evidence filed by the assessee showing the factum that the amount was actually not a loan or advance to the assessee but the same was refund or return of advance/loa .....

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t year 2003-04 which is under consideration in this appeal. In this situation, we are inclined to hold that the assessee discharged its onus to prove identity and creditworthiness of the payer and the genuineness of the transaction as required u/s 68 of the Act. We are also of the opinion that the addition cannot be made u/s 68 of the Act where the assessee has established this fact that he made advance/loan to payer on 14.2.2000 which was returned during previous year under consideration and th .....

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peal no. 107/CIT(A)-XVII/11-12 for assessment year 2003-04. 2. The grounds raised by the assessee read as under:- 1) THAT in the facts and circumstance of the case, the Learned CIT(A) erred in confirming the addition to the appellant s income made by the Learned A.O. of the amount of ₹ 26,31,257/- received from appellant s bank account in Singapore. 2. THAT in the facts and circumstances of the case, the Learned C1T(A) erred in not accepting the appellant s alternative plea that only $ 460 .....

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s to the returned income on account of telephone expenses, vehicle expenses, entertainment expenses, business promotion expenses and an addition of ₹ 2746531 was made on account of undisclosed income from foreign remittance. The CIT (Appeals) - X New Delhi vide his order dated 27-12-2007 in appeal number 90/05-06 gave relief to the assessee of ₹ 200715 on disallowances made by AO on account of vehicle running expenses, telephone expenses, entertainment and business expenses. However .....

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confirming the addition of ₹ 2746531 made by the AO on account of undisclosed foreign remittance. The CIT appeal observed that the credit of ₹ 2631757 made by the assessee to his capital account during the year on account of credit of remittances from overseas was left unexplained before the AO but no addition on this account was made in the assessment year. Hence the assessee was asked to furnish the details at appellate stage with regard to the nature of receipt of remittances from .....

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46/Del/2008 deleted the addition of ₹ 2746531 made by the AO. However on the issue of enhancement of ₹ 26,31,257 made by CIT (Appeal) - X, the honorable ITAT has restored the matter back to the file of the assessing officer with a direction to examine the contention of the assessee and after examining the same to consider the said credit in the capital account as per the provisions of the law. In pursuance to the above said order of Honorable ITAT, a notice under section 143(2) of IT .....

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to ₹ 26,31,25/ credited in the capital account of the assessee The Ld.CIT (A) had contended that there is no evidence was put on record by the assessee to substantiate his explanation that when the loan was given and that there was no confirmation. With reference to above, we would like to submit that, the assessee was a non-resident working in Singapore during the period September 1989 to March 1996 as a director of M/s Hughes Network System. Out of the savings in the account the assessee .....

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hen subsequently returned the money over a period of 6 months and has also given a confirmation to the effect that he had in fact taken the loan and the same was returned - (Annexure 4). 4. In pursuance to the order of the Tribunal dated 23.2.2010, the Assessing Officer, after affording due opportunity of hearing made addition of ₹ 26,31,257 u/s 68 of the Income Tax Act, 1961 (for short the Act) by observing as follows:- The assessee was specifically asked to file the copy of bank account .....

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ven for furnishing the requisite details and prove the genuineness of loan as claimed since it was not reflected in the balance sheet of the assessee as reproduced on the order of CIT(Appeals)- X page -14. He was required to produce the full evidence with documentary proof date wise when this claimed loan was shown and copy of bank account showing these transactions and copy of bank account of payer from where the foreign money was sent along with his IT return. The case was adjourned for 26.11. .....

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sessee has been repeatedly asked to give the same. In the absence of the said account from where the money travelled the sources & genuineness of the claim of the assessee remains unverifiable. The assessee though proved the identify yet failed to prove and establish the other two crucial aspects namely genuineness of the transaction since payer s bank account copy is not given and the creditworthiness of the payer. Under the given circumstances it is held that the assessee has not been able .....

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and penalty proceedings under section 271(1)(c) have been initiated separately for furnishing inaccurate particulars of income. 5. The aggrieved assessee preferred first appeal before CIT(A) which was also allowed by him observing and concluding as follows:- 4.4 Since the addition is made u/s 68 of the I.T. Act, the important aspect is whether the AO was satisfied with the explanation given by the appellant. In this case the Assessing Officer was not satisfied with the explanation and recorded .....

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e creditworthiness of the creditor. As per the above decision of the Hon'ble Supreme Court, the burden is on the appellant to take the plea that even if the explanation is not acceptable, the material and attending circumstances available on record do not justify the sum found credited in the books to be treated as a receipt of income nature. But such a plea was not taken by the appellant during the appellate proceedings. In this connection, it is pertinent to note that in the initial assess .....

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nce between the receipt and income shown in the P&L a/Commissioner was confirmed by the CIT(A) as he written submissions not satisfied with the additional evidence submitted by the appellant. 4.5. As per section 68, the onus is on the appellant to satisfactorily explain the source of credit in the books of account maintained by him. I am of the opinion that the appellant has not satisfactorily explained the source of ₹ 26,31 ,257/-. Further, the appellant had not taken the plea during .....

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nd the ground No. 1 is rejected. 6. The ld. AR firstly pointed out that the first round of proceedings, the Assessing Officer made two additions viz. (i) ₹ 27,46,431 as unexplained remittance from abroad and (ii) ₹ 26,31,257 u/s 68 of the Act and the CIT(A) also dismissed appeal of the assessee on both the grounds. Ld. AR further pointed out that the ITAT allowed appeal of the assessee on first ground and deleted the first addition of ₹ 27,46,431 sand ground no. 1 of the assess .....

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ut that in the second round, the Assessing Officer rejected explanation of the assessee by wrongly observing that in absence of the said account from where the money travelled the source and genuineness of the claim of the assessee remains unverifiable. Ld. AR vehemently contended that the Assessing Officer noted that the assessee proved identity of the payer but failed to prove other two crucial aspects i.e. genuineness of the transaction and creditworthiness of the payer. Ld. AR also contended .....

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iang Tran on 165.2.2000 (PB page 17), copy of the statement of bank account of the assessee with HSBC, indicating the return of advance from Mr. Giang Tran (PB 51-58), affidavit of assessee (PB page 59-60), affidavit of Shri Giang Tran (PB page 61-62), profile of Mr. Giang Tran (PB page 66-67) and in totality of facts emerging from these documents, it is amply clear that the assessee gave an advance/loan to Mr. Giang Tran on 14.2.2000 transferring amount from his own bank account which was credi .....

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stalments during 2002-03 hence, not only identity of this payer has been established but also his creditworthiness and genuineness of the transaction has been established by the assessee, thus conclusion of the Assessing Officer was not correct and the CIT(A) upheld the addition without considering the explanation and documents of the assessee and by considering the wrong and irrelevant facts, hence, addition is not sustainable. 8. Lastly, the ld. AR submitted that the affidavit of the assessee .....

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he case of CIT vs Bhaichand N. Gandhi 141 ITR 67 (Bom) and submitted that the passbook or bank statement supplied by the bank to the assessee cannot be regarded as a cash book or accounts maintained by the assessee or under his instruction and thus the same does not fall within the ambit of section 68. 9. Replying to the above, ld. DR supported the action of the Assessing Officer and submitted that as per dicta laid down by Hon'ble Supreme Court in the case of CIT vs P. Mohanakala reported a .....

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ering amount of ₹ 27,46,531 in para 4.4 and in para 4.5, the first appellate authority has mentioned amount of ₹ 26,31,257 by holding that the onus was on the assessee to satisfactorily explain the source of credit in the books of account maintained by him. Per contra, the Assessing Officer in operative para, as reproduced above, has observed that the assessee has not been able to file any evidence or cogent reason to prove the genuineness of the transaction and creditworthiness of t .....

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s emerged from documentary evidence and affidavits of the assessee payee and Mr. Tran payer, this fact is amply clear that the amount of USD 46000 equivalent to INR 26,31,257 at that time was received by the assessee from Mr. Tran in eight instalments from 20.7.2002 to 2.1.2003 pertaining to FY 2002-03 relevant to assessment year 2003-04 which is under consideration in this appeal. In this situation, we are inclined to hold that the assessee discharged its onus to prove identity and creditworthi .....

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Apex Court in the case of CIT vs Mohanakala (supra) does not apply to the facts of the present case because in that case, assessee received foreign gifts from one common donor and the payments were made to them by instruments issued by foreign banks and credited to the respective accounts of the assessee by negotiation though a bank in India. Above all, the Assessing Officer brought on record positive evidence that donor was to receive compensation against donations. Hence it was finally held, .....

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