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TMI Blog2020 (7) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... olding the same as unexplained additions as his finding in Para 7.6.7 of the appellate order. 2.(b) That the Worthy Commissioner of Income Tax (Appeals)-2, Ludhiana has erred in upholding the addition made by the AO in respect of capital addition made by the assessee ignoring the fact that the complete sources of addition were duly furnished by the appellant being transfer of funds from M/s Euro Steels. 2.(c) That the Worthy Commissioner of Income Tax (Appeals)-2, Ludhiana has factually erred in holding that there were any cash deposits in the bank account of M/s Euro Steels as per his finding in Para 7.6.5 of his order. 2.(d) That the Worthy Commissioner of Income Tax (Appeals)-2, Ludhiana has erred in concluding that the assessee was liable to explain the source of deposits in the hands of M/s Euro Steels as per his findings in Para 7.6.5 of his order. 3. That the Worthy Commissioner of Income Tax (Appeals)-2, Ludhiana has erred in confirming an addition to the tune of Rs. 1,62,50,000/- on account of alleged unexplained unsecured loans taken by the appellant during the assessment year as per his findings in Para 7.7.9 of the appellate order. 4. That the Worthy Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the remand report, counter objections of the assessee on the said remand report and also after considering the submissions of the assessee, the Ld. CIT(A) partly allowed the appeal of the assessee. He, however, has confirmed the additions as contested vide above noted grounds of appeal. 5. We have heard the rival contentions of the Ld. Authorized Representatives of both the parties and have gone through the record. Our findings in respect of the matter are as under: 6. Ground No.1 : Ground No.1 is general in nature. The assessee, in this ground has contested the total addition amounting to Rs. 2,66,60,000/- . However the assessee vide subsequent grounds has contested specifically the each part of the aforesaid total addition . Hence this ground will be automatically taken care in our adjudication on the subsequent grounds. 7. Ground No.2 : The assessee vide this ground has contested the addition of Rs. 1,03,10,000/- on account of introduction of the said amount in the capital account of the assessee treating the same as unexplained income of the assessee. The assessee claimed that out of the aforesaid amount, Rs. 90,75,000/- were received by way of transfer through banking c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order to verify the creditworthiness and genuineness of the unsecured loan given by Sh. Rohit Jain, partner of M/s. Euro Steels, the copy of ITRs for the A.Ys.2012-13 and 2013-14 and audited balance-sheet were called for from the ITO, Ward-1, Patiala where the PAN of the firm was lying. After verification of documents supplied by the assessee and documents called for from ITO, Ward-1, Patiala, the following discrepancies have been noticed: (b) During the year under consideration, the assessee has introduced capital of Rs. 1. 031 crores and out of this amount, Rs. 90,75,000/- have been given by the firm M/s. Euro Steels, Mandi Gobindgarh. Further the firm M/s Euro Steels has also given Rs. 57,55,000/- in the shape of unsecured loans. But on perusal of ITR of the firm, it has been noticed that the firm has filed ITR for the A.Y.2013-14 declaring an income of Rs. 99,057/- only. Hence the creditworthiness and genuineness of the loans revised from the firm has not been proved. (e) Regarding capital formation of Rs. 4,75,000/-, the assessee has simply stated that these amounts have been received through banking channels, but has failed furnish any documentary evidence in this regard. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee, however, this allegation of the Ld. AO is not at all correct as we have duly filed the copy of the savings bank statement of the Karta of the assessee on Page 32-33 of the paperbook and from a perusal of the same it is clear that the Karta has received the said amount from the banking channels and no adverse remarks against the same has been given by the Ld. AO in the remand proceedings, therefore, the explanation given by the assessee may kindly be considered and the addition with regard to the same may please be deleted. 9. However, the Ld CIT(A) has given his findings in respect of each of the above additions as under:- "7.6.4 On careful consideration of the rival contentions, it has been noticed that although the learned AR of the assessee HUF has tried to explain the source of addition to capital account to the extent of Rs. 98,35,000/- [Rs. 90,75,000/- + Rs. 2,60,000/- + Rs. 5,00,000/-] from various sources but failed to explain the source of capital addition of Rs. 4,75,000/-at all. During the course of appellate proceedings, it has only been submitted that the addition to capital account to the extent of Rs. 4,75,000/- has been made through banking channels but n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discharged, the source of capital contribution to the extent of Rs. 2,60,000/- in the books of assessee HUF cannot be treated as explained. So, the addition to the extent of Rs. 2,60,000/- made by the Assessing Officer on account of unexplained addition to capital account of the assessee HUF out of total addition of Rs. 1,03,10,000/- is upheld too. 7.6.7 In nutshell, whole of the addition of Rs. 1,03,10,000/- made by the Assessing Officer in this on account of unexplained addition to capital account of the assessee HUF is, therefore, upheld." 10. We have considered the rival contentions of the Ld. Representatives of the parties and have also gone through the record. So far as the addition of Rs. 90,75,000/- and further a sum of Rs. 5,00,000/- claimed to have been received from M/s Euro Steels is concerned, the AO in his remand report, as noted above, has rejected the contention of the assessee solely on the ground that as per the ITR return of the said firm, the firm had declared a low income of Rs. 99,057/- only for AY 2013-14. He, on this score alone, observed that the creditworthiness and genuineness of the loan from the said firm had not been proved. However, it is a fact m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT(A) has rejected the contentions of the assessee and upheld the additions made by the AO citing different reasons saying that the assessee could not prove the source of numerous deposits in the bank accounts of M/s Euro Steels. However, as observed above, the AO in his remand report has not pointed out any doubt about the source of numerous deposits in the bank accounts of M/s Euro Steels. Further, the assessee has been stating that the source of said deposits in the accounts of M/s Euro Steels was out of its business receipts in normal course. In the remand proceedings neither the AO asked the assessee to furnish further evidences in respect of the source of deposit into the accounts of M/s Euro Steels nor the AO himself called the M/s Euro Steels to prove the source of deposits. Moreover, the AO himself called for the necessary details and documents from the concerned AO which were available in record as per the ITR (Income Tax Return) filed by the M/s Euro Steels and has not rebutted the authenticity of the said documents, hence, in the appellate proceedings, the findings of the CIT(A) upholding the additions made by the AO on this ground cannot be held to be justified. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e evidence the source of the said amount and the creditworthiness of the creditor and genuineness of the transaction. 11. In view of the above discussion, the addition to the extent of Rs. 4,75,000/- is upheld whereas, the remaining part of the additions out of the total additions Rs. 1,03,10,000/- is ordered to be deleted. This ground of the appeal is accordingly partly allowed. 12. Ground Nos. 3 & 4 : The assessee through these grounds of appeal has agitated the addition of Rs. 1,62,50,000/- on account of alleged unexplained unsecured loans. The assessee in this respect explained that the assessee HUF availed many short and long term loans from various banks as well as financial institutions. As the position of the business further declined, the assessee was in dire need of funds, therefore, the brother in law of the Karta of the assessee and other family members of the Karta of the HUF advanced different sums of money to the assessee in order to help it out of the financial crunch. The assessee received a total loan of Rs. 2,19,71,000/- from the family members and friends of the Karta of the HUF. The assessee in this respect has given the details of the parties as under:- (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the copy of the bank statement enclosed at Pages 44-45. It is also for your information that Mrs. Smiti Jindal is the sister of Rohit Jain Partner in M/s Euro Steels. We are also filing before your goodself the Return of Income in the paperbook at pages- 43 and the confirmed copy of account of Smiti Jindal to further substantiate the genuineness of the transaction. * From Ramesh Jain-Rs. 54.31.000/- For the addition amounting to Rs. 54,31,000/-, it is submitted before your goodself that the said amount was lent by Sh. Ramesh Jain who is the Father in Law of the Karta of the assessee HUF. We are enclosing herewith the bank statement of Ramesh Jain for the relevant assessment year which makes it amply clear that not only the sources of the loan are very much verifiable but are from genuine sources. Further, from a perusal of the bank statement of Sh. Ramesh Jain it can be seen that Rs. 34,34,213/- has been brought forward from the earlier years. Further, as evident from the bank statement the lender had availed loan from PNB on 48-49 amounting to Rs. 33.60 Lakhs out of which funds has been advanced to assessee. It is also for your information here that the lender had passed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Paper Book. The said amount has been earned in the regular course of business of M/s Euro Steels. Further, the remaining amount of Rs. 2,90,000/- has been lent from the personal savings account of the Karta of the assessee HUF. The said amount of Rs. 2,90,000/- was received by the assessee from his father namely Sh. Dev Krishan Jindal. The same is being duly reflected in the attached bank statements at Pg 60-61 to of the Paper Book. In addition to the above, the Income Tax Return alongwith confirmed copy of account is attached herewith at Pg _to _ of Paper Book. 5.5 It is for your information here that the transfer of funds made from M/s Euro Steels has been reflected as unsecured loans from Mrs. Superna Jindal and not in its own name due to the fact that the assessee HUF required funds in order to avail additional loans from the bank. In order to submit the documents to the bank, the assessee required funds in its Balance Sheet and that too to increase the current ratio of the assessee. Had the assessee shown the unsecured loan from a single person namely, M/s Euro Steels, then the bank would have suspected the fact that the transfer of funds has been made merely to get some fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditworthiness of Sh. Ramesh Jain has also not been proved by the assessee and deserves to be rejected. (d) Further the assessee has submitted in his written submissions that Sh. Dev Krishan Jindal HUF has given unsecured loans of Rs. 19,95,000/-, which were raised from M/s. Kiran Industries, which is the proprietorship of Sh. Dev Krishan Jindal. But on checking the PAN of M/s. Kiran Industries (AAQPR1921D), it has been found that the proprietor of the concern is Smt. Santosh Rani. But the assessee has not produced the documentary evidence with regard to the source of the concern M/s Kiran Industries, who has given such loans of Rs.l9,95,000/-. Hence the creditworthiness has not been proved by the' assessee. 8. In view the above facts, it is clear that the assessee has knitted a concocted story to justify the capital formation and unsecured loans raised by him from M/s. Euro Steels, Sh. Rohit Jain, partner of M/s. Euro Steels, Sh. Ramesh Jain (PAN:ADVPJ2567M). However, documents supplied by the assessee and the documents called for from ITO, Ward-1, Patiala are submitted herewith for verification. Hence the additional evidence produced by the assessee at time of appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly because the return of income has not been filed of a dead person, it cannot be held that the creditworthiness of the said lender cannot be proved when the sources of the loan are genuine and bona fide. d. In Point d the Ld. AO with regard to the loan received from Dev Krishan Jindal has alleged that the source of the source of the said loan, which was from M/s Kiran Industries is not the Proprietorship concern of Dev Krishan Jindal, (as stated by the assessee in the detailed submissions) but of Santosh Rani (Wife of Dev Krishan Jindal). In this regard, it is stated that although due to some miscommunication it has been inadvertently written as prop concern of Dev Krishan Jindal while it is correct that it is a prop concern of Santosh Rani, but it is also a fact here that it does not make much of a difference because the sources of the funds have never been disputed and no adverse remarks against the same has even been provided by the Ld. AO in the remand report. Moreover, it is also for information here that the income as declared by Santosh Rani is also sufficient enough to justify her creditworthiness. Thus, the contention raised by the Ld. AO that the creditworthiness of Kr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UF cannot be treated as explained. So, the addition to the extent of Rs. 1,42,55,000/- made by the Assessing Officer on account of unexplained unsecured loans out of total addition of Rs. 2,19,71,000/- is, therefore, upheld. 7.7.6 As regards the transfer of funds to the extent of Rs. 2,90,000/- from the bank account of Sh. Rohit Kumar Jindal, Karta of assessee HUF, is concerned, it has been noticed that the amount has been transferred from receipts on account of EPF transfer. It means, the source of Rs. 2,90,000/- taken by way of unsecured loan to the extent of Rs. 2,90,000/- (out of total loan amount of Rs. 13,90,000/-) from Sh. Rohit Kumar Jindal is fully explained. As the unsecured loan to the extent of Rs. 2,90,000/- (out of total loan amount of Rs. 13,90,000/-) is fully explained, the addition to the extent of Rs. 2,90,000/-made by the Assessing Officer on account of unexplained unsecured loan from Sh. Rohit Jindal cannot be said to be justified. So, the addition to the extent of Rs. 2,90,000/- (out of total loan amount of Rs. 13,90,000/-) made by the Assessing Officer on account of unexplained unsecured loan out of total addition of Rs. 2,19,71,000/- is, therefore, directed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee HUF, is only at Rs. 1,18,63,037/-. Apart from this an amount of Rs. 5,00,000/- has been shown as recoverable from Sh. Rohit Kumar Jindal (HUF) but no amount has been shown as recoverable from any other person of the assessee HUF group. This also gives indication that the amount received by the assessee HUF from M/s Euro Steels is unexplained as the source of receipts in the bank account of this concern remained unexplained even during appellate proceedings. 7.7.9 In nutshell, the addition of Rs. 1,62,50,000/- [Rs. 1,42,55,000/- + Rs. 19,95,000/-] made by the Assessing Officer on account of unexplained unsecured loans out of total addition of Rs. 2,19,70,000/- is upheld whereas the balance addition of Rs. 57,21,000/-[Rs. 2,90,000/- + Rs. 54,31,000/-] out of total addition of Rs. 2,19,70,000/- is deleted. The assessee HUF will thus get a relief of Rs. 57,21,000/- out of total addition of Rs. 2,19,70,000/- made by the Assessing Officer on account of unexplained unsecured loans." 17. We have heard the rival contentions on this issue and have also gone through the record. So far as the observation of the AO on the remand report that Shri Rohit Jain, Partner had withdrawn on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es was the proprietorship concern of Smt. Santosh Rani and that even the income declared by Smt. Santosh Rani was sufficient enough to justify her creditworthiness. The Ld CIT(A) in this respect has observed that there were some transfer entries of equal amount of Rs. 19,95,000/- in the bank account of M/s Kiran Industries. That since the source of deposit in the bank account of M/s Kiran Industries remained unexplained, he, therefore, held that the genuineness of the transaction is not proved. However, in our view, the fact that there was sufficient income declared by Smt. Santosh Rani to prove her creditworthiness of the amount advanced to M/s Dev Krishan Jindal & Sons HUF, is enough evidence so far as the onus on the assessee to prove the creditworthiness of the creditor is concerned. The assessee, in fact, has proved the source of source. The observation of the CIT(A) that there were other entries of the equal amount in the bank account of M/s Kiran Industries, in our view, is not relevant so far as the genuineness of the transaction and creditworthiness of the creditor in respect of the funds received by the assessee is concerned. In view of the above discussion made, these ..... X X X X Extracts X X X X X X X X Extracts X X X X
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