TMI Blog2019 (3) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... tal loan amount of ₹ 1,38,23,606/-, the assessee had paid back ₹ 70,88,606/-. These facts were taken into consideration by the Ld. CIT(A) to give relief to assessee. So we sustain the action of CIT(A) except that of ₹ 5 lakhs. Before us the Ld. AR of the assessee failed to substantiate the money lent by Mohan Prasad Khemka to the tune of ₹ 5 lakh which addition is sustained since assessee failed to substantiate the capital account balance of this lender so it is confirmed and thus the appeal of the revenue is partly allowed. Unexplained introduction of cash in the guise of sale of sarees - HELD THAT:- No adverse view can be drawn when there is no infirmity can be pointed out, when transaction of purchase/sale in the business of saree exhibition is entered in cash, more so when the relevant documents were furnished and confirmations have been received by the AO from suppliers of goods (sundry creditors). We note that in cloth business, it is a practice to get goods on credit, particularly, when the assessee is not new in the trade and we note that CIT(A) has given a factual finding at para 7 of his order that the A.O. has accepted a similar sale made in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , creditworthiness genuineness of the loan creditors from whom the assessee has the loan taken, he issued summons to 36 persons of whom AO acknowledged that 11 persons appeared before him (whereas at page 31 of assessment order, the AO recorded that 16 persons statements was recorded). However, he was not convinced about the creditworthiness and genuineity of the transaction, so he added the entire loan amount of ₹ 1,38,23,606/-. Aggrieved the assessee preferred an appeal before the Ld.CIT(A) who was pleased to delete the same. Aggrieved, the Revenue is before us. 3. We have heard both the parties and perused the record. Assailing the action of the Ld. CIT(A), the Ld. DR drew our attention to the assessment order and contended that assessee had raised huge loan from persons (74 numbers) who did not have the means to provide loan to assessee and the AO has dealt with the documents filed by the assessee and was not convinced by the genuineness of the loan, since creditworthiness of the loan creditors could not be substantiated by the assessee. So AO made the addition. However, according to Ld. DR, the Ld. CIT(A) accepted the affidavit of 74 creditors and gave relief to ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncy in the number of creditors appearing before the AO as acknowledged by the AO. In one place, the AO has cited only Eleven Numbers name and their depositions whereas he has put 16(Sixteen) number of loan creditors having appeared before him (Refer page no 31 of the assessment order.). It was brought to our notice that the AO ignored the affidavit and did not give any credence to Income Tax Return, Balance Sheet, confirmation of loan, Bank Statement filed of each individual loan lenders and ordered addition of the entire loan amount. We note that though there was 74 loan creditors, the AO issued the summons to only 36 creditors out of which as per AO, eleven creditors (para 16 at page 31 of assessment order) appeared and their depositions were recorded by the AO and it was brought to our notice, out of 36 loan creditors, 24 creditors duly replied to the AO wherein they acknowledged giving loan to assessee. 5) We note that when the AO asked the assessee to present on 15.12.2010 eight loan creditors the assessee produced them before the AO and they produced the following documents to prove their identity, creditworthiness and genuineness of the loan transaction with assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Asstt.CIT [2002] 76 TTJ(jd), Rohini Builders v Dy. CIT[2002] 76 TTJ(Ahd) 521, R.Dalmia through L.R. v. CIT [2002] 172 CTR (Del.) 180 and B Brothers Engg. Works v Dy.CIT [2003] 78 TTJ (Ahd.) (FM) 876 relied on. 8. Therefore, the Ld. AR contended that under the aforesaid fact and circumstances since the assessee has discharged the onus to prove the identity, creditworthiness and genuineness of the loan creditors the addition by the AO was deleted by the Ld. CIT(A) which does not require any interference from our part. 9. (a) Before the Ld. CIT(A), the assessee made the following submissions (reproduced at pages 4 5 of his order)- Ground No 1 (Addition of Loan taken during the year of Rs.l,38,23,606/- by the Ld Income Tax Office Without considering the fact that the said loan was to repay the old loan of ₹ 1,37,78,776/-.) In compliance to the notice issued u/s. 143(2) 142(1) of the Income Tax Act 1961 dated 15.09.2009 and 26.04.2010 respectively written submission dated 07.05.2010 submitted on 15.06.2010 subsequent submission dated 13.07.2010 and 31.08.2010 were submitted to the assessing officer. (Copy enclosed and marked as A', B C ) .In repl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... KYC documents. 2) When the source of transaction have been proved by producing Bank Statement, Balance Sheet and all of them are Income Tax Assessee and have produced their income tax return acknowledgement. 3) Source of fund available to them as shown in the Balance sheet filed by them along with their income tax return. In support we submit the following:- 1. we submit herewith the documents of 74 (Seventy Four) Loan Creditors total amounting to ₹ 1,38,23,606/-supported by an Affidavit from each loan creditors along with Income Tax Acknowledgement Receipt, Bank Statement, Balance Sheet Loan confirmation of the loan creditors. (Copies enclosed and marked as I ) 2. We also submit herewith a summary of Loan repaid till the date year wise against the total loan taken during the Assessment Year 2009-09,where ₹ 70,88,606/- has already been repaid out of ₹ 1,38,23,606/- which constitutes 51.2B % of the loan taken. (Copies enclosed and marked as J ) When Cash creditors are Income Tax assessee, having Bank accounts, and produced Balance Sheet and Affidavit etc.: In Jagdamba Construction Co. V. ITO [2004] 82 TTJ (Jd.) (Trib.) 13, so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest-free loan to the assessee. (v). Most of the Loan Creditors had a very low personal drawings (about Rs. 20,000/-). It suggests that they had no means to advance interest-free loan to the assessee. (vi). It is unacceptable that Loan Creditors with low income and low personal drawings would advance interest-free loan to a lady who is not closely related family member. (vii). The returns of income of Loan Creditors were not under scrutiny assessment for the A. Y. 2008-09 (relevant to F. Y. 2007-08) when the alleged loan has been claimed. In other words income and monetary affairs stated in return of income of Loan Creditors for the A. Y. 2008-09 (relevant to F. Y. 2007-08) were not verified and examined by the Income Tax Department. (viii). In view of the above findings, the genuineness of loan transactions and creditworthiness of loan creditors was not proved beyond doubt and the explanations offered by the assessee could not be accepted as satisfactory. Accordingly, there was correct finding in the assessment order that the amount on account of unsecured loan claimed for the sum of ₹ 1,38,23,606/- was from bogus loan creditors and the same was correctly a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss, and does raise some suspicion about the said transactions. However, suspicion howsoever strong it may be, and suggested circumstantial evidence cannot be the basis for assessment, especially when there is direct evidence to the contrary. On perusal of the facts in the present case, it is observed that the amounts advanced are not substantial when the assessee discharged the burden so placed on her the onus thereafter shifts to the Assessing Officer, and if the Assessing officer assesses the said loan as income of the assessee from undisclosed sources, then the burden of proof is upon the Assessing Officer and he has to bring the necessary evidence on record, either by direct evidence or indirect/circumstantial evidence that money which the assessee received from the creditor actually belong to and was owned by the assessee herself/ himself'. (d) The ld.CIT(A) also took note of the order of the Tribunal in assessee s own case for A.Y. 2007-08 which were also on similar facts wherein the addition was ordered to be deleted the to the tune of ₹ 21,45,000/-. 10. We note from a perusal of the copy of depositions reproduced by the A.O. and the documents filed like a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lenders in the guise of loan. In a similar case, wherein the AO made the addition citing the same reason to disbelieve the loan, the Hon ble High Court of Calcutta in CIT Vs. Jamna Devi dated 15.02.2011 has upheld the action of Ld. CIT(A) and Tribunal in deleting the addition. B. As for their net worth and income aspect, their final accounts is sufficient to justify their claim of net worth. C. As for low drawings reflected in their accounts, no adverse inference can be drawn against the assessee. D. It is quite common that family friends advance money in case of necessity. And, moreover, we note that in some cases advances were not made interest free. E. The fact that the I.T. Returns of the loan creditors were not scrutinised, cannot be used against the assessee since it is the department who decides which cases are to be scrutinised. (h) Since we are adjudicating the assessment for AY 2008-09, the following cases are relied upon where it was held that source of source need not be proved. It has been held in these cases that it is not the assessee to find out the source from where the creditor has accumulated the loan amount which has been advanced to the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re credit worthy. Income earned during the year cannot be the only criteria to determine the creditworthiness. 11. We have gone through the two paper books comprising of 319 pages wherein the assessee has filed the list of loan creditors from pages 36 38, loan confirmation from pages 39 to 111. From pages 112 to 177 of the paper book contain the reply filed by the loan creditors to the AO pursuant to notice u/s. 133(6) of the Act. Copies of ITR acknowledgement, final account, bank statement of loan creditors along with affidavit in sample basis placed from pages 178 to 319 of paper book. The Ld. AR pain stackingly took us through each of the loan creditors details of which are enclosed in the paper book. We note that out of 74 loan creditors only few creditors have given loan to assessee in excess of ₹ 3 lakhs. 90% of the loan creditors ranged from ₹ 15,000/- to ₹ 2,00,000/-. And the assessee has repaid an amount of ₹ 70,88,606/- which comes to 51.28% of the loan taken from the lenders. We note that out of this total loan creditors, old loan creditors who lent the assessee was to the tune of ₹ 27,62,000/-. We note that out of 74 loan credito ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the Assessing Officer of the lender/creditor but instead of adopting such course, the Assessing Officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the lender/creditor has been rejected by its Assessing Officer, the Assessing Officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established. Without doing so in the light of the documents filed the creditworthiness of the lenders/creditors cannot be doubted. However, while scrutinizing each creditor s net worth and income they drew and money lent, we note that on sample basis we note that the lender Shri Ajit Singh had a capital account balance of ₹ 19,85,272/- and he has given ₹ 3,00,000/-to assessee. Likewise, capital account balance was exceeding ₹ 4 lakhs in most of the lenders cases, except a few and those lenders have given only ₹ 20,000/- like Arup Maity. We note that the Ld. CIT(A) has taken note that the loan lenders had filed their KYC documents to prove identity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from third party were considered but the claim of the assessee is not acceptable due to following reasons- (i) The assessee is not engaged in the trading of business of sarees. (ii) The assessee is engaged in the business of financial / insurance sector / share trading. (iii) The transaction of purchase and sale has been claimed in cash only. (iv) The period of exhibition sale claimed was for three days (13-15 April 2007) only. (v) The assessee claimed to have realised in cash the sale proceeds of exhibition sale within three days (13-15 April 2007) but payment to sundry creditors have been claimed during the period of whole year in sums less than ₹ 20000/- in cash. 15. In view of the above, it is concluded that the assessee has manufactured the transaction of exhibition sale of sarees to introduce her unaccounted income of Rs. 17,21,870/- in accounts. Accordingly, the sum of ₹ 17,21,870/- was correctly found to be unexplained in the course of assessment proceedings and the same was added to the total income of the assessee as income from undisclosed source of income. The Ld. CIT(A) has deleted the additions vide para 7 of his order at page 14 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e heard both the parties and we note that the A.O. has admitted in the Remand Report that accounts and documents viz., purchase invoice, cash sale memos, information received from third parties (i.e. sundry creditors) have been examined. We note that the sundry creditors who supplied clothes/dresses/sarees to assessee have confirmed that they have sold the sarees on credit to notice u/s. 133(6) of the Act, and the sales have been duly booked in regular books of account of assessee. In such a scenario, the AO cannot simply brush aside all the supporting documents like purchase invoice, cash sale memos etc. and without rejecting the books of account of the assessee as prescribed by law cannot disallow the entire sale consideration offered by the assessee only on the suspicion that assessee cannot have raised this sale consideration within 3 days of exhibition. For disbelieving this claim of assessee when supported by materials, the AO has to bring any evidence/material to show that there was no evidence of exhibition at all as claimed to have been conducted by assessee or no purchase/sales happened in such an exhibition. We note that in the remand report, the AO has made some general ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom exhibition) to Jyoti Saraf and not the other way round as wrongly understood by AO. And thus the AO erroneously added the same in Computation of Total Income. Before the Ld. CIT(A), it was brought to his knowledge that cash and bank flow statement was also submitted during scrutiny which show the cash flow of ₹ 12,00,000/- from M/s. Jyoti Consultancy Services to Jyoti Saraf on 20.04.2007. (out of sale proceeds of saree during exhibition conducted between 13th April to 15th April 2007 of ₹ 17,21,870/-) . 19. The aforesaid facts are corroborated by the detailed cash flow statement placed at page 2 of the paper book. From a perusal of the same, it is apparent that the assessee has substantial receipts from sale of sarees in Exhibition under - Date Amount 13.04.2007 7,18,900/- 14.04.2007 6,20,070/- 15.04.2007 3,82,900/- 20. This, according to Ld. AR proves the source of payment by the proprietor concern to the proprietor assessee and does not want us to interfere in the order of Ld. CIT(A). We ..... X X X X Extracts X X X X X X X X Extracts X X X X
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