TMI Blog2017 (5) TMI 1261X X X X Extracts X X X X X X X X Extracts X X X X ..... reditors, genuineness of the transactions and identity of the creditors. So much so that the loan creditors in response to the notice issued under section 133(6) appeared before the AO and confirmed the that they have given interest bearing loans to the assessee on which TDS have been deducted and paid and form no.16A issued to the loan creditors also filed before the AO. The AO has merely proceeded and relied on the information received from the DGIT(Inv), Mumbai that the assessee is one of the beneficiary of the accommodation entries without bringing any material against the assessee on record by contrary to the defense put up by the assessee during the course of appellant proceedings. No cross examination was allowed to the assessee and information was used against the assessee causing violation of natural justice. - Decided in favour of assessee. - I.T.A. No. 1069 to 1071 /Mum/2017, I.T.A. No. 4946/Mum/2016 - - - Dated:- 12-4-2017 - SHRI D.T. GARASIA, JM AND SHRI RAJESH KUMAR, AM Assessee by : Dr.P.Daniel Revenue by : Shri Purushottam Kumnar ORDER Per Rajesh Kumar, A. M. The assessee has filed three appeals against the order dated 10.2.2017 passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 143(3) dated 20.3.2013 thereby making two additions namely unexplained cash credit from the parties referred hereinabove of ₹ 1,29,04,231/- and unexplained expenditure of ₹ 3,45,000/- under section 69C of the Act. The assessee filed before the AO various informations/details like loan confirmations from the lenders, ledger account, PAN of the parties, Profit Loss account and the balance sheet etc including the bank statement of the lenders and also of the assessee confirming the receipt of money through banking channel and form No.16 qua the TDS deducted. The lenders confirmed the loans having been given to the assessee during personal appearance before the AO in response to notice u/s 133(6) of the Act However, the AO acting solely on the information received from DGIT(Inv), Mumbai rejected the contentions of the assessee and framed the assessment as stated above. 5. Aggrieved by the order of the AO, the assessee preferred and appeal before the ld.CIT(A) who dismissed the appeal of the assessee ex-parte on the ground that the assessee failed to appear before the ld.CIT(A) by observing and holding as under : 4 Decision on grounds of appeal no.1: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 is accordingly dismissed. Aggrieved by the order of the FAA, the assessee is in appeal before us. 6. The ld. AR vehemently submitted before us that the order upholding the addition by the FAA was wrong and against the provisions of the Act. The ld. AR respectfully submitted before the Bench in order to make addition u/s 68C of the Act when the following three things are not establishedi.e. (i) identity of the creditors (ii) genuineness of the transactions and (iii) creditworthiness of the creditors. The ld.AR submitted that the onus is cast upon the assessee to explain the sources from which he has received the cash credit and the creditworthiness of the creditors is to be gauged vis a-vis the transactions which occurred between the assessee and the creditors. The ld. AR submitted that it was not the burden or responsibility of the assessee to find out the source of creditors or the capacity of the creditors in order to prove the genuineness of transactions as has been held by the Hon ble Gauhati High Court in the case of CIT V/s Smt. Sangmitra Bharali reported in 361 ITR 481). The ld AR further submitted that the addition was made out of unsecured loans raised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i V/s CIT (2003) 264 ITR 254(Gauhati); vi) CIT V/s Shalimar Buildwell Pvt (2014) 220 Taxman 138) (All); vii) CIT V/s Lalpuria Construction P L (2013) 215 Taxman 12(Mag) (Raj) viii) M/s Rushabh Enterprise V/s ACIT (Mum) WP 167/2015 ix) Andaman Timber Industries V/s CCE (2015) 281 CTR 0241 (SC) x) CIT V/s M/s Ashish International in ITA 4299/Mum/2009 7. Per contra, the ld.DR relied upon the orders of the authorities below by submitting that the loan creditors M/s Bhanvarilal Jain group was found to be engaged in the business of providing accommodation entries during the search and seizure action his group and the assessee was found to be the one of the beneficiaries of the said accommodation entries. The ld. DR submitted that in the present case though the assessee has filed all the necessary information but since the assessee borrowing monies from the tainted parties who were provided accommodation entries, it is beyond doubt that money borrowed by the assessee was nothing but accommodation entries. Lastly, the ld. DR prayed that in view of the facts and the order of the FAA should be upheld by dismissing the appeal of the assessee. 8. We have heard t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived from the DGIT(Inv), Mumbai that the assessee is one of the beneficiary of the accommodation entries without bringing any material against the assessee on record by contrary to the defense put up by the assessee during the course of appellant proceedings. No cross examination was allowed to the assessee and information was used against the assessee causing violation of natural justice. The FAA dismissed the appeal of the assessee ex- parte for non attendance of the ld.AR. In the case of Lakhmani Mewal (supra) the Hon ble Supreme Court has held as under : Section 147 of the Income-tax Act, 1961 [Corresponding to section 34(1) of Indian Income-tax Act, 1922] Income escaping assessment Illustrations Assessment year 1958-59 Whether reasons for formation of belief contemplated by section 147(a) for reopening of assessment must have rational connection with or relevant bearing on formation of belief, and rational connection postulates that there must be direct nexus or live link between material coming to Income-tax Officer s notice and formation of his belief that there has been escapement of assessee s income from assessment in particular year because of his failur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4F - Held, yes [Para 44] [In favour of revenue] II. Section 68 of the Income-tax Act, 1961 - Cash credits (Advance by purchaser) - Assessment year 2001-02 - One VHPL allegedly advanced assessee cash against booking of flat - Assessee proved that amount so received was duly recorded in books of account of VHPL - Identity of VHPL was also established by filing its IT returns, balance sheets, etc. - Whether no addition could be made in hands of assessee - Held, yes [Para 59] [In favour of assessee] III. Section 68 of the Income-tax Act, 1961 - Cash credits (Advance by purchaser) - Purchaser of car advanced certain sum to assessee - Identity of purchaser and genuineness of transaction was established - Whether transaction could not be treated as bogus and impugned amount could not be treated as an undisclosed income of assessee - Held, yes [Para 64] [In favour of assessee] In the case of Gangeshwari Metal (P) Ltd (supra), the Hon ble Delhi High Court has held as under : There are two types of cases, one in which the Assessing Officer carries out the exercise which is required in law and the other in which the Assessing Officer 'sits back with folded hands' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, that all cash creditors were assessed to income-tax and they proved a confirmation as well as their permanent account number. They had their own respective bank accounts which they had been operating and it was not the claim of the Assessing Officer that the assessee was operating their bank accounts. Most of the cash creditorsappeared before the Assessing Officer and their statements under Section 131 of the Income-tax Act, 1961, were also recorded on oath. There was no clinching evidence nor had the Assessing Officer been able to prove that the money actually belonged to none but the assessee. The addition of ₹ 17,27,2501- under section 68 was not justified. In the case of Nemi Chand Kothari (supra), the Hon ble High Court has held as under : 16. A person may have funds from any source and an assessee, on such information received, may take loan from such a person. It is not the business of the assessee to find out whether the source or sources from which the creditor had agreed to advance the amounts were genuine or not. If a creditor has, by any undisclosed source, a particular amount of money in the bank, there is no limitation under the law on the part of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m undisclosed source. Held (i) that the assessee had established the identity of the creditors. The assessee had also shown, in accordance with the burden, which rested on him, under section 106 of the Evidence Act, that the said amounts had been received by him by way of cheques from the creditors which was not in dispute. Once the assessee had established these, the assessee must be taken to have proved that the creditor had the creditworthiness to advance the loans. Thereafter, the burden had shifted to the Assessing Office to prove the contrary. The failure on the part of the creditors to show that their Sub-creditors had creditworthiness to advance the said loan amounts to the assessee, could not, under the law be treated as the income by the appellant from undisclosed sources merely on the failure of the sub-creditors to prove their creditworthiness from undisclosed sources of the assessee himself, when there was neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or where owned by, the assessee. The Assessing Officer failed to show that the amounts, which had come to the hands of the creditors from the hands of the sub-c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee case are squarely covered by the ratio laid down in the decisions referred to above. We ,therefore , in view of our observations and the ratio laid down by the various decisions are inclined to set aside the order of CIT(A) and direct he AO to delete the additions of ₹ 1,29,04,231/-. Since we have decided the issue of addition u/s 68 in favour of the assessee, the addition as sustained by the ld CIT(A) u/s 69C of the Act of ₹ 3,45,000/- is also ordered to be deleted. In result the appeal of the assessee is allowed. 9. In remaining appeals of the assessee for the assessment years 2008-09 and 2009-10, the grounds taken by the assessee are same excepts figures and the loan creditors and hence the decision taken in ITA No.1071/Mum/2017 would ,mutatis mutandis, apply to these appeals as well and hence these appeals are allowed as indicated above. ITA No.4946/Mum/2016 10. Grounds of appeal taken by the revenue are as under : 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of ₹ 73,58,000/- made on account of unsecured loans and interest as the assessee has failed to prove the identity ..... X X X X Extracts X X X X X X X X Extracts X X X X
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