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2016 (9) TMI 501

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..... vant and is to be established, or else it would leave the door wide open for tax evasion by merely executing self-serving documents, and that the Revenue authorities were fully entitled to look at the surrounding circumstances to find out the reality of the transaction and not put blinkers while looking at documents produced before them. In the present case, we have ‘statements’ instead of ‘documents’, so that the said decision is in ratio fully applicable in the facts and circumstances of the case. The ld. CIT(A) has incorrectly shifted the burden of proof and furnishing a reasonable explanation, substantiating the same, on the Revenue. When the assessee’s case falls either under part (A) or (B) of Explanation 1 to section 271(1)(c), he is deemed to have concealed particulars of income. There is, further, in the admitted and undisputed facts and circumstances, no case for application of the decision in Reliance Petroproducts (P) Ltd. (2010 (3) TMI 80 - SUPREME COURT), which stands wrongly applied by the ld.CIT(A). What the said decision states is that where a claim is found as not correct or valid in law, the same cannot by itself lead to the levy of penalty. It is trite law th .....

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..... ntiated, good for the purposes of section 68, it is not sufficient for the purpose of levy of penalty, particularly considering that the creditors had appeared in person and confirmed the transaction. The same has also not been found incorrect and neither there is any reason to doubt the same, considering that they later became partners in the firm. Further, relying on CIT vs. Reliance Petroproducts (P) Ltd. [2010] 322 ITR 158 (SC), it is argued that making an incorrect claim does not tantamount to furnishing inaccurate particulars of income. Aggrieved, the Revenue is in appeal before us. 4. We have heard the parties, and perused the material on record, and given our careful consideration to the matter. The primary facts of the case are simple and undisputed. The addition stands made on account of furnishing non-satisfactory explanation by the assessee-firm in respect of the cash credit appearing in its books (as to nature and source thereof), i.e., establishing the same, described as loans from family members of the the continuing partner, as genuine credit/s. The same, as is well-settled, requires proving the credit on the parameters of identity, creditworthiness and genu .....

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..... s of himself and his family. No wonder, no return of income is admittedly filed except for A.Y. 2007-08, the extent of which is also not mentioned. This clearly appears to be by design, with no returns following for the subsequent years as well. All this in fact becomes academic in view of the admission of the source of funds lent being borrowings from relatives from their native place, whose identity/s is conspicuous by its absence. It is these relatives who thus are the stated source of funds . Who are they, i.e., their names and addresses? What is their occupation; sources of income, etc., i.e., their financial capacity? Why would they lend to the named creditors, considering that they have no repayment capacity? Rather, considering that the amounts lent to the firm are toward enabling it to maintain its capital in view of the imminent capital withdrawal by the outgoing partner (and which perhaps also forms the reason for admitting the creditors as partners) and, therefore, no or little scope for its return, the advancing of loans from the so-called relatives who remain unspecified, itself becomes highly suspect and quizzical. Why, the raising of loans by persons with n .....

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..... in the documents (or the truth of their contents) that is relevant and is to be established, or else it would leave the door wide open for tax evasion by merely executing self-serving documents , and that the Revenue authorities were fully entitled to look at the surrounding circumstances to find out the reality of the transaction and not put blinkers while looking at documents produced before them. In the present case, we have statements instead of documents , so that the said decision is in ratio fully applicable in the facts and circumstances of the case. The Apex Court therein also emphasized the primacy of the test of human probabilities in appreciating and evaluating evidence absent in the instant case (also refer ss. 103 and 114 of the Indian Evidence Act and Sumati Dayal vs. CIT [1995] 214 ITR 801 (SC)). In Chuharmal vs. CIT [1988] 72 ITR 250 (SC), the Hon ble Apex Court, applying the test of human probabilities, upheld the levy of penalty u/s. 271(1)(c) of the Act on a failure to satisfactorily explain the possession of watches by the assessee. Sections 68 and 69/69A are para materia in-as-much as the assessee is the beneficiary in case of section 68. The rel .....

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