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TMI Blog2017 (8) TMI 370X X X X Extracts X X X X X X X X Extracts X X X X ..... e opinion that taxable income had escaped assessment.He completed the assessment on 21/02/2014,u/s.143 (3) r.w.s.147 of the Act,determining its income at Rs. 99.87 lakhs. 2.Effective ground of appeal is about confirming the addition of Rs. 15 lakhs.During the assessment proceedings, the AO found that the assessee had taken a loan from Basant Marketing Pvt.Ltd.(Basant),amounting to Rs. 15 lakhs.He directed the assessee to file necessary documentary evidences to prove the genuineness of the transaction.As per the AO,the assessee filed confirmation letter of Bansant along with the copy of ledger accounts for the AY.2008-09 and 2009-10.After considering those documents and the bank statements of Basant,he held that just before lending loans to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d filed confirmation letter and copies of ledger account,that copy of assessment order of Basant was also furnished,that the transaction was through banking channels,that there was no doubt about the genuienity of the transaction.The Departmental Representative(DR)contended that Basant was engaged in the business of providing bogus entries,that it had advanced loan to the assessee without charging interest and without obtaining any security,that Rs. 15 lakhs were deposited in cash in the bank account of Basant before it advanced the loan,that the genuineness of the transaction was not proved. 5.We have heard the rival submissions and perused the material before us.Before proceeding further,we would like to refer to some of the general prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or irrelevant for the purpose of the section. To this extent, the action of an AO in starting proceedings u/s. 147 in respect of income escaping assessment is open to challenge in a court of law. vii.The reasons recorded by the AO to believe that income had escaped assessment should have a live link with an objective fact in the form of information or materials on record to reopen an assessment. viii.Matters reopened without referring to tangible material are liable to be quashed. 5.1.If the facts of the case under consideration are tested on the touchstone of the above referred principles,it becomes clear that the AO had prima facie case to believe that taxable income had escaped assessment.Considering the information received from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in to by an assessee reveal that course of events of such a transaction is not as per the prevailing market practice or as per that particular business.Higher judicial forums have endorsed the view that tax issues can be decided considering the surrounding circumstances of the transactions and the probabilities of human behavior.In other words it is open to the AO/FAA not merely to look at the documents, but to consider the surrounding circumstances so as to conclude what is the real character of the transaction.In the case of Sumati Dayal (214 ITR 81) Hon'ble Apex Court held as under: "In all cases in which a receipt is sought to be taxed as income, the burden lies on the Department to prove that it is within the taxing provision and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidering the above discussion,it can safely be held that generally,the taxation authorities consider that the apparent is real.But,in certain cases when it is found that there are reasons to believe that the apparent is not real then they can look into the surrounding circumstances to find out the reality.In other words,the principle-that the income-tax authorities are entitled to decide as to whether a transaction is illusory or a device or a ruse-has become a part of tax juris - prudence.It is also accepted that for that purpose they can penetrate the veil covering such transaction and ascertain the truth. 5.3.1.It is said that human motives are obscure, difficult of ascertainment and sometimes conjectu ral.So,the income tax authoritie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed aside lightly especially when it is not brought on record that as to a how a Kolkata party agreed to advance loans to the assessee without help of any broker.It is not the case of the assessee that the creditor is also in the same line of business or that their business relationship is very old.Soundness of balance sheet of the lender only proves capacity of the lender but not the genuineness of the transaction.No authority is required to hold that bank transaction do not prove genuineness of the loans.Surprisingly, no agreement was produced before the departmental authorities or us that could justify non charging of interest by the lender. In short,there is prima facie evidence against the assessee which it had failed to rebut and bein ..... X X X X Extracts X X X X X X X X Extracts X X X X
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