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2016 (2) TMI 617 - ITAT LUCKNOW

2016 (2) TMI 617 - ITAT LUCKNOW - TMI - Addition u/s 69A/68 - CIT(A) allowed the claim - Held that:- Assessing Officer has summarily made addition without discussing as to why he was not convinced with a particular credit entry and before the ld. CIT(A). The assessee has filed all the relevant evidence and the ld. CIT(A) has called a remand report on the written submissions and evidence filed before him, but the Assessing Officer did not submit his remand report in time. The ld. CIT(A) has also .....

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ort of its claim. The ld. CIT(A), however, has examined the details furnished before him and he has observed that before him assessee has filed confirmations of the depositors/creditors with full address, PAN, complete details of cheque amount & number loans/deposits; etc. The assessee has also furnished the details of TDS amount on interest payment to different creditors/depositors; photocopy of bank statement showing the deposits of loan/borrowed fund; etc. Since the assessee has furnished all .....

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ni For the Respondent : Rakesh Garg ORDER Sunil Kumar Yadav (Judicial Member) This appeal is preferred by the Revenue against the order of the ld. CIT(A), inter alia, on the following grounds;- 1. The Commissioner of Income-tax (Appeals), Lucknow has erred in law and on facts of the case in deleting the addition of ₹ 42,40,000/- made u/s 69A/68 of the Income-tax Act, on account of unexplained deposit in capital account ignoring the fact that the assessee did not produce any substantial evi .....

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and on facts of the case in deleting the addition of ₹ 17,000/- made on account of disallowable interest for delayed payment of TDS ignoring the fact that interest being penal in nature is not allowable expenditure. 4. The Commissioner of Income-tax (Appeals), Lucknow has erred in law and on facts of the case in deleting the addition of ₹ 25,384/-, disallowed depreciation on Car @ 20% for personal use, ignoring the fact that the assessee did not produce any evidence to establish that .....

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ect to the entries for a sum of ₹ 42.40 lakhs and made addition of the same. 3. Likewise, the Assessing Officer has also noted credit entries of unsecured loan in the name of various persons for which explanations were sought. Though the assessee has furnished explanations, but the Assessing Officer was not convinced with all these credit entries and he accordingly made addition of ₹ 2,00,50,000/-. 4. Against these additions, the assessee preferred an appeal before the ld. CIT(A) and .....

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ld. CIT(A) in his order has extracted the assessment order as well as the written submissions filed by the assessee in his order. 5. From a careful perusal of the order of the ld. CIT(A), we find that the ld. CIT(A) has categorically recorded in his order that the assessee has filed confirmations of the depositors/creditors with full address, PAN, complete details of cheque amount & number of loans/deposits; photocopy of PAN of depositors/creditors; photocopy of ITRs of depositors/creditors .....

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om assessee has received loan during the year under consideration and also the amount was introduced in the capital account in the light of various judicial pronouncements. For the sake of reference, we extract the relevant portion of the order of the ld. CIT(A) as under:- Ground Nos. 2 to 5 are common relating to addition made by A.O. under section 68 of I.T. Act, 1961 of ₹ 42,40,000/- and ₹ 2,00,50,000/- on account of unexplained deposits in capital account and unsecured loans resp .....

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at these deposits in his bank account were represented the borrowed money received from different persons and same were recorded in his capital account directly. However the A.O. has not accepted the money received to the extent of ₹ 42,40,000/- mentioned in para-8 (ii) to (vii) of assessment order as explained and added back to the income of the appellant. Further the A.O. has made the addition u/s 68 of I.T. Act, 1961 of ₹ 2,00,50,000/- vide para-9 (a), 9(b)(i) & (ii) and 9(c) .....

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iness and genuineness of the creditors, before A.O. during the assessment proceedings. The papers/ documents which were called by A.O. during assessment proceedings were furnished. The books of accounts, bills & vouchers etc. were produced before A.O. during assessment proceedings and the A.O. has examined the same. The A.O. himself mentioned in assessment order that the required details were furnished by him which are placed on record. During appellate proceedings the appellant has furnishe .....

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nded that the papers/documents submitted during appellate proceedings should have not been entertained, as the same are additional evidences. Further the A.O. did not provide assessment record, despite of specific direction was given to attend the appellate proceedings alongwith assessment record on 24.07.2014. The A.O. has requested to allow time for 30 days for filing of remand report vide her letter 16.07.2014 but till date the remand report has not been submitted by A.O. As mentioned the app .....

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ors/creditors with full addresses, PAN Nos. and complete details of cheques amount and number of loans/deposits. 2. Photo copy of PAN of depositors/creditors 3. Photo copy of ITR of depositors/creditors showing the interest income received from appellant by different creditors on borrowed funds/loans, which were treated unexplained by A.O. u/s 68 of I.T. Act, 1961. 4. Details of TDS amount on interest payment to different creditors/depositors filed by the appellant. 5. Photo copy of bank stateme .....

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dings, therefore, the objection raised by A.O. not to admit these evidences at appellate stage cannot be considered proper and justified. Even the CIT(Appeals) may admit the additional evidences filed during appellate proceedings, in response to direction given by him to appellant, without providing opportunity being heard to A.-O. As mentioned as above the A.O. has provided an opportunity being heard to submit the remand report on written submission of appellant and papers/documents filed along .....

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ce. The second category deals with such evidence, which is directed to be produced by the CIT (Appeals) for the disposal of appeal before it. The voluntary character of filing the additional evidence in the first situation is missing in the second as the filing of additional evidence is necessitated due to the direction of the CIT(Appeals). When the additional evidence is filed under the second category, then there is no requirement for confronting the Assessing Officer with the documents/eviden .....

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nal evidence furnished by the assessee before the appellate authority is in the nature of clinching evidence leaving no further room for any doubt or controversy, no useful purpose would be served in performing the ritual of forwarding the evidence or material to the Assessing Officer and obtaining his report. In such exceptional circumstances, the requirement of providing a reasonable opportunity to] the Assessing Officer, may be dispensed with." I have examined the finding given by A.O. i .....

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whom the appellant has received loans during the assessment year under consideration. The appellant has discharged the obligation to prove the identity, credit worthiness and genuineness of creditors, by furnishing the confirmations, copy of PAN, copy of ITR , copy of bank account and details of cheques received from lenders showing the details of TDS on interest payment on the loans obtained by appellant which were treated by A.O. as unexplained u/s 68 of I.T. Act, 1961. Further the appellant .....

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the books of accounts , which were considered by A.O. as unexplained in the hands of appellant. The amount of TDS deducted in the name of different creditors were duly paid and these said creditors have duly shown the interest income and TDS in their respective ITR for the period under consideration. Looking into these facts & circumstances, papers/documents filed during appellate proceedings and written submissions of appellant, I find that the action of A.O. in treating the loan amount rec .....

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provided to the A.O. to plead the case in person alongwith assessment record but the A.O. did not avail opportunity. As mentioned above the papers/documents which were received during appellate proceedings alongwith written submission of appellant, have been sent to A.O. for remand report and it was the duty of A.O. to submit the comprehensive remand report within the time provided but the A.O. did not make the compliance of the letters issued by this office. As mentioned supra the appellant has .....

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ly made the additions of ₹ 2,42,90,000/-, treating loan amount, unexplained u/s 68 of I.T. Act, 1961. The entire transactions in respect of money received from different lenders were under taken through banking channel. Since the assessee has filed relevant evidences to establish the identity, genuineness of the transaction and credit worthiness of the creditor. A detailed chart of different persons from whom the appellant received the monies which were accounted for in his books of accoun .....

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ferent creditors as unexplained unless and until it is proved otherwise. Hence such type of addition cannot be sustained in the eye of law. Reliance is also placed on following judicial decisions:- (l)COMMISSIONER OF INCOME TAX vs. JAI KUMAR BAKLIWAL RAJASTHAN 267CTR 396 (Raj) Held : Three things are required to be proved by recipient of money i.e. (1) identity of the creditor (2) capacity of the creditor to advance money and (3) genuineness of the transaction. From the facts emerging on the fac .....

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tted fact that most of the cash creditors appeared before the AO and their statements under s. 131 were also recorded on oath. The cash creditors appeared to be from small place and it is quite possible that they may not be in a position to pin pointedly or specifically say about everything but by and large stood to the testimony and were able to explain various issues as per the question and answer reproduced by the AO himself in the assessment order. It may be that most of the cash creditors a .....

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editor and genuineness of the transaction stood proved. In so far as the assessee is concerned, it is correct that he is not required to prove source of the source and if the AO had any doubt, then the AO, assessing the assessee could have sent the information to the AO assessing the cash creditors for appropriate action in their cases but insofar as the assessee is concerned, the assessee has been able to discharge the burden which lay upon him. (Para 9) Certainly, deposit of cash and immediate .....

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f the cases even the Karta of the HUF had produced the cash book and their ledger account before the AO and the AO has drawn adverse inference finding some discrepancies in their respective cash books but as observed above, the doubt, if any, may be true but insofar as the assessee is concerned, that issue cannot be converted into an addition of income under s. 68 in the hands of the assessee and appropriate course, as observed hereinabove, was that the AO could have informed the AO assessing th .....

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r to the creditors was income of the assessee from undisclosed sources unless there is evidence direct or circumstantial, to show that the amount which had been advanced by the sub-creditor to the creditor had actually been received by the sub-creditor from the assessee. If there is direct evidence to show that the loan received by the assessee actually belong to the assessee, there will be no difficulty in assessing such amount as the income of the assessee from undisclosed source but if there .....

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ustained and has been rightly deleted by the both the two appellate authorities. There is no clinching evidence in the present case nor the AO has been able to prove that the money actually belonged to none but the assessee himself. The action of the AO appears to be bases on mere suspicion. (Paras 17 to 20) Conclusion : Once the amount was advanced by the creditors by account payee cheque from their respective bank accounts and the said creditors were being assessed to income-tax, then capacity .....

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No material was brought on record by A.O. to show that assessee had any other source of income which could have routed inform of loan given by third party. On other hand, interest payable by assessee on said loans was allowed by A.O. Since initial onus placed upon 'A ' stood discharged and there was no material to prove source explained by 'A ' and creditors were not genuine, the A. O. was not justified in calling upon assessee to prove source of source. Therefore, impugned addit .....

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atory letters and other evidence to prove the creditworthiness of the creditors. In response thereto, assessee furnished relevant information. The Assessing Officer was convinced with the explanation furnished by the assessee with regard to major cash credit of ₹ 17,01,759/- received from Shri. Hari Har Singh and he accepted the same to be genuine, but the remaining cash credit, which are ranging between and he accordingly made an addition of ₹ 10,97,3 80/- under section 68 of the Ac .....

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nt observations of the Id. CIT(A) are extracted hereunder for the sake of reference:- "4(4) I have examined the facts and circumstances of the case and I have considered the findings of the Assessing Officer and the written submissions of the appellant, As per the facts emerging from the assessment order, the appellant raised unsecured loans of ₹ 27,99,139/- from 27 persons. Out of this, an amount of ₹ 17,01,759/- concerned Shri Hari Har Singh, the Karta of the HUF-appellant, th .....

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ssessment, the appellant discharged the onus by giving the identity of the persons from whom the money was received by furnishing the PAN numbers and where over possible, the copies of Voters ID card or Driving License etc. The transactions with the creditors are through cheques and interest has been paid to the creditors. The creditors who have advanced loans to the appellant have given their conformations which were filed with the AO. I am therefore of the opinion that the assessee has dischar .....

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y the AO. The Assessee has made payment of interest to the persons and even though addition under section 68 of the Act has been made by the AO there is no corresponding disallowance of interest which has been accepted by the AO. The deposit of cash by Shri O.P. Singh in his bank account prior to issue of cheque to the appellant is immaterial if the person giving the loan accepts the same in his confirmation. In the case of Nemi Chand Kothari Vs CIT & another 264 ITR 254 (Gauhati), the Hon&# .....

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oney or part thereof from the creditor, by way of cheque in the form of loan and in such a case, if the creditor fails to satisfy as to how he had actually received the said amount and happened to keep it in the bank, the said amount cannot be treated as income of the assessee from undisclosed sources. " 4(4) Another crucial point to note is that the assessee made pay met of interest to creditors which were accepted by the AO as no corresponding disallowance has been made. The issue has bee .....

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ith interest - thus, assessee has discharged the initial onus which lay on it in terms of sec. 68 - Assessee is not further expected to prove the genuineness of cash deposited in the bank accounts of the creditors - Merely because summons issued to some of the creditors could not be served or they failed to appear before the AO (he loans taken from those creditors could not be treated as non genuine - Further, AO has not disallowed the interest paid in relation to these credits and tax has been .....

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aining cases - All loans were received and repaid by the assessee by account payee cheques along with interest - Tribunal deleted the addition - no substantial question of law arises - appeal of the department dismissed. C. CIT vs. Rohini Builders 254 ITR 275 Supreme Court dismissed the SLP filed by the revenue against the judgement dated 19.03.2001 of the Gujarat High Court in Tax Appeal No. 65 of 2001, whereby the high Court dismissed the appeal of the revenue on the ground that no substantial .....

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deeming the amount credited in the books as the income of the assessee. The Assessing Officer had not disallowed the interest paid in relation to these credits and the tax had been deducted out of such interest: CIT v. Rohini Builders: S LP. © No. 515 of 2002. 4(5) The AO has made addition under section 68 of the Act by making reference to examination in the case of 4 persons. This examination in the case of 4 persons is also not heating to the conclusion that the creditors are not genuine .....

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of Jalan Timbers vs CIT 223 ITR 11 (Gauhati) and Sana Electric Co. vs CIT 152 ITR 507 (Delhi), the Hon.ble Court have laid down that In order to establish thafact of receipt of a cash credit as required under section 68 of the Act the assessee must prove three important conditions, namely, (1) the identity of the person, (2) the genuineness of the transaction, and (3) the capability of the person giving the cash credit, Section 68 of the Ac: makes it clear that in respect of a cash credit entry .....

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has been accepted by the AO. It is evident therefore from the above that once the existence of the creditors is proved and such persons own the credits which are found in the books of the assessee, the assessee's onus stands discharged and the latter is not further requires to prove the source from which the creditors could have acquired the money deposited with him, and therefore, the addition under section 68 cannot be sustained in the absence of anything to establish that the sources of .....

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and there in no justification in making an addition in the case of the appellant. The addition of ₹ 10,97,380/- made by the Assessing Officer is directed to be deleted giving consequential relief to the appellant. Ground of appeal is allowed." Aggrieved, the Revenue has preferred an appeal before the Tribunal, but could not point out any specific defect in the order of the Id. CIT(A). We, however, have carefully examined the order of the Id. CIT(A) and we find that except one, all the .....

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nces and various judicial decisions mentioned above, 1 hold that the A.O. was not justified in treating the creditors as unexplained. Further the A.O. was also not justified in treating the deposits in the capital account of appellant as unexplained deposits, which were received by appellant out of sale proceeds of land mentioned supra and loan obtained from different persons. Thus the total addition made by A.O. of ₹ 2,42,90,000/- (Rs.42,40,000/- + ₹ 2,00,50,000/-) is liable to be d .....

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ance upon the order of the ld. CIT(A), has contended that during the course of assessment proceedings the Assessing Officer was not afforded proper opportunity to produce all the evidence on record. He, however, explained each and every credit entry found in its capital account or introduced as unsecured credit. Before the ld. CIT(A) the assessee has filed all the relevant details in order to prove the genuineness of the transaction, identity & creditworthiness of the creditors. The ld. CIT( .....

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addition. 7. Having carefully examined the orders of the lower authorities in the light of the rival submissions, we find that the Assessing Officer has summarily made addition without discussing as to why he was not convinced with a particular credit entry and before the ld. CIT(A). The assessee has filed all the relevant evidence and the ld. CIT(A) has called a remand report on the written submissions and evidence filed before him, but the Assessing Officer did not submit his remand report in .....

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the evidence furnished by the assessee in support of its claim. The ld. CIT(A), however, has examined the details furnished before him and he has observed that before him assessee has filed confirmations of the depositors/creditors with full address, PAN, complete details of cheque amount & number loans/deposits; etc. The assessee has also furnished the details of TDS amount on interest payment to different creditors/depositors; photocopy of bank statement showing the deposits of loan/borrow .....

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