TMI Blog2017 (12) TMI 1348X X X X Extracts X X X X X X X X Extracts X X X X ..... cerned four creditors by treating the same as unexplained and allow this appeal of the assessee - I.T.A No. 1568/Kol/2017 - - - Dated:- 22-12-2017 - Shri P.M. Jagtap For The Assessee : Shri Somnath Ghosh, Advocate For The Revenue : Shri Satyajit Mondal Addl. CIT ORDER This appeal filed by the assessee is directed against the order of Ld. CIT (Appeals) 6, Kolkata dated 20.04.2017 and the solitary issue involved therein relates to the addition of ₹ 13,03,000/- made by the A.O. and confirmed by the Ld. CIT (A) on account of loans taken by the assessee from four parties by treating the same as unexplained cash credits under section 68. 2. The assessee in the present case is an individual who is engaged in the business of trading of potatos. The return of income for the year under consideration was filed by him on 25.09.2011 declaring a total income of ₹ 10,92,457/- including agricultural income of ₹ 10,000/-. In the balance sheet filed along with the said return, loans received from six parties were shown by the assessee. In order to verify the same, notices under section 131 were issued by the A.O. to the four loan creditors viz. Sri Bis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount, the balance amount stands at his account is only ₹ 28,452/-. It must had made a crunch in his financial position and therefore will harshly hamper with the smooth proceedings in his potato business during February-March, 2011, which is the pick time of potato business. Further, the alleged loan creditor was a small trader, the alleged loans would taken out a fair chunk of his capital and he would be incapacitated by taking out a huge sum from his circulating fund. It is not in human nature to give loans without interest to relatives who are financially strong by stifling his own business. ii) Sri Ashis Rov Ashis Roy had stated that he is a potato trader. From the copy of the balance sheet and return of the income Sri A.shis Roy it reveals that he had earned ₹ 1,43,750/- front his business of potato trading out of gross sales at ₹ 15.97 lakhs during the relevant financial year 2010-. Gross total income was shown at ₹ 1,85,370/-. In the balance sheet as on 3l/03/201I unsecured loan to K.K.Roy was .shown at ₹ 2,65,000/- In his statement deposed before this office Sri A.shis Roy had stated the assessee is his own uncle. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 3,20,000/- and investment in Alok Dighi Hathcery (P) Ltd. was shown at ₹ 1,00,000/-. In his statement deposed before this office Sri Ram Chandra Samanta had stated the assessee is his brother in law. He had given loan for ₹ 3,20,000/- on 13.12.2010. The loan was given on his request as he was in need of cash for his business need. No interest was charged on this loan. He did not know the business for which his brother in law was taking the loan. When asked whether he had any investment in Alok Dighi Halhcery(P) Ltd., he stated that he made investment at that time but could not remember the time when he made the investment. He further stated that investment in the company was made with an amount of ₹ 1,00,000/- by cheque. He was not engaged in any, business activity of the company and had not received any income from it till the date of deposition, i.e., on 07/01/2014. He also had stated that there was contract with Sri Kajal Kumar Roy regarding the investment that whenever fishes produced in the ponds of the company, respective share of the profit of the deponent until be paid within two three days. However, the facts that there was no such debit entry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with his balance sheet as on 31.03.2011. No other payments by issuing cheques were made by the assessee. All the payments in his business was, therefore, maintained by cash only. It is seen that after debiting the alleged loan as on 18.12.2010 for ₹ 3,18,000/- in his bank account, the balance amount stands at his account is only ₹ 3,306/-. 3. On the basis of the findings and observations recorded by him as above, the A.O. was of the view that the concerned loan creditors were financially weak and the alleged loans given to the assessee had made a crunch in their financial position adversely affecting their potato business. According to him, the relevant loan transactions as shown by the assessee with the said four creditors thus were unbelievable. He accordingly issued a notice to the assessee requiring him to show cause as to why the relevant four loans should not be treated as unexplained and the amount of such loan credits aggregating to ₹ 13,03,000/- should not be added to his total income under section 68. In reply, it was submitted by the assessee that all the four loan creditors have advanced the loans to him by cheques on different dates and they hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the evidence adduced on record by the appellant in support of the loan transactions, e.g. copies of bank statements, P/L Accounts, Balance Sheets, confirmations, copies of return etc. of the respective lenders, were vague or depicted an untrue state of affairs of those loan creditors. In spite of that, the Ld. Assessing Officer presumed the loans given by these loan creditors as the income of the appellant from other sources. It was for the Ld. Assessing Officer to prove this possibility by bringing proper evidence on record for the burden of showing that the loan amount was actually paid by the appellant to those persons who only acted as conducts for its ultimate destination to the appellant himself and that it represented the concealed income of the appellant was on him. So neither a priori nor a posterior, the Ld. Assessing Officer could not derive an adverse conclusion against the appellant. Assailing this specious approach of the Ld. Assessing Officer in the facts and circumstances of the case, it is vehemently pointed out that the Ld. Assessing Officer had made an addition of ₹ 13,03,000/- by invoking the provisions of section 68 of the Income Tax Act, 1961 by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oan transactions were recorded in the balance sheets and duly reflected in their returns filed with the respective Assessing Officers of the loan creditors and therefore, the genuinity of the transactions cannot be called into question. Apropos the credit worthiness of the loan creditors, they had disclosed substantial capital balances in their return. The Ld. Assessing Officer had no grounds to pronounce himself dissatisfied in respect of any of the relevant criteria in this respect. Therefore, all the criteria as mandated in the provisions of section 68 of the Act stood satisfied. However, the Ld. Assessing Officer disbelieved such genuine transactions on a tenuous pretext. Nonetheless, there is no grievance on the part of the Ld. Assessing Officer that there was any dearth of proof in support of the loan transactions received by the appellant from the loan creditors as the copies of the returns of income along with Financial Statements, Bank Statement and Confirmation were filed with him. The entire gamut of transactions was undertaken by way of account payee cheques only. In respect of all the loan creditors there were more than enough funds available to advance loans to the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in his books of account but whether they are genuine. The appellant has furnished the copies of the income tax returns of the loan creditors for the A.Y. 2011-12 along with the respective balance sheets but it is not known whether income tax returns were filed by them for earlier years also. The alleged loan creditors have declared substantial opening capital and cash balances and opening outstanding balances of debtors (which have been apparently liquidated during the previous year to generate cash which was deposited in the respective bank accounts before advancing loans to the appellant), which cannot be considered sacrosanct in the light of low incomes declared by them and the absence of any evidence to show their ability to save out of them meagre incomes. The details of income, capital, cash balances and balances of debtors of the loan creditors as are evident from the balance sheets, cash flow statements and copies of income tax return acknowledgements furnished by the appellant are as under: Sl No Names of lenders Amount of loan(Rs) Total income declared in A.Y. 2011-12 (Rs) Opening ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nominal incomes declared by the alleged loan creditors show that the cash flow statements and balance sheets filed by them are not credible. The foundation of the appellant s arguments are the balance sheets and cash flow statements which are not reliable. Hence, I agree with the AO that he was entitled to look into the circumstantial evidence of rely upon preponderance of probabilities in the case of the appellant to decide whether the onus laid down by section 68 of the Act on the appellant had been discharged. 6. It has been held in various judicial pronouncements that the buden under section 68 of the Act is discharged by the assessee only when the assessee proves three things to the satisfaction of the AO viz, identity of the creditor, capacity of the creditor and genuineness of the transactions. The Hon ble Jurisdictional High Court in CIT vs Korlay Trading Co. Ltd. (1998) 232 ITR 820 (Cal) has held that mere filing of the income tax file number of the creditors is not enough to prove the genuineness of the cash credit. The creditor should be identified. There should be creditworthiness. There should be a genuine transaction. In K.M. Sadhukhan Sons P. Ltd vs CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejected unreasonably and the finding that the said amounts are income of the appellant from other sources is not based on evidence . In view of the factual and legal position described above, the addition of ₹ 13,03,000/- is confirmed. The last two grounds of appeal are general in nature and need no separate adjudication. In the result, the appeal is dismissed. Aggrieved by the order of the Ld. CIT(A), the assessee has preferred this appeal before the Tribunal. 6. I have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that the loan amount taken from the concerned four creditors aggregating to ₹ 13,03,000/- was treated by the A.O. as unexplained mainly by relying on their statements recorded by him wherein he found certain discrepancies and anomalies. As rightly contended by the learned counsel for the assessee in this regard, the so-called discrepancies and anomalies pointed out by the A.O. in the statements of the creditors were not material enough to doubt the genuineness of the loans given by them to the assessee. As a matter of fact, the said creditors nowhere had denied of having ..... X X X X Extracts X X X X X X X X Extracts X X X X
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