TMI Blog2020 (9) TMI 1048X X X X Extracts X X X X X X X X Extracts X X X X ..... st the order of Ld. CIT(A), 14, Kolkata dated 04-12-2019 for the assessment year 2016-17. 2. The grounds of appeal raised by the assessee are as under:- 1. For that the Ld. CIT(A) erred in confirming the addition of ₹ 55,00,000/ u/s. 68 when the said credit was a genuine home loan from M/s. Gourav Rose Real Estate Pvt. Ltd (GRREPL) and all the supporting documents were produced and the department failed to prove otherwise. 2. For that the Ld. CIT(A) erred in confirming the addition made by AO only on the basis of the statement of one, Mr. Monohar Nangalia recorded u/s. 131 by some other authority, a copy of which was also not provided to the assessee and without himself examining the deponent and allowing the assessee to cross examine. 3. For that the Ld. CIT(A) erred in confirming the addition made by AO u/s 68 when the identity and creditworthiness of the transaction was proved and the onus of the assessee was discharged. 4. For that on the facts and in the circumstances of the case, the addition was not justified and is liable to be deleted. 5. For that even otherwise the addition is not called for since the shareholding of GRREPL has changed af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the AO, mere removal of Shri Nangalia from the position of director does not change the essentials of the financials of the company and its true nature. Thereafter, the AO notes that assessee s reply again he contested the allegation that it had received money/loan from bogus sham/shell company and submitted that even the assertion of the AO that Shri Nangalia (erstwhile director of M/s. GRREPL) had admitted that M/s. GRREPL is engaged in the business of providing in accommodation entries is wrong and it was informed by M/s. GRREPL that Mr. Nangalia has not given such statement. Even the assessee requested the AO to provide him such copy of admission, if any. It was again pointed out that Shri Nangalia, ex- director of M/s. GRREPL was way back removed from directorship from 24-08-2011. Thus according to assessee the receipt of loan from M/s. GRREPL cannot be disbelieved on a statement, which can be termed as mere hearsay. The assessee also brought to the notice of the AO that the assessee had taken a housing loan of ₹ 55 lakhs from M/s. GRREPL for which two (2) properties costing more than ₹ 1.59 crores have been given as securities. According to assessee, the loan a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business of non-banking financial institution without accepting public deposits and subject to certain conditions. We note that Mr. Nangalia, ceased to be director of M/s. GRREPL from 24 August 2011. We note that the present directors are S/Shri Gaurav Agarwal and Bal Kishan Agarwal, which is discernible from page 55 of the P.B. It is noted that the assesee had had been sanctioned a loan of ₹ 55 lakhs against security of two immovable properties worth more than ₹ 1.59 crores. As per loan agreement the same has to be refunded back by assessee to M/s. GRREPL by 55 quarterly instalments of ₹ 1 lakhs each + interest @ 10% p.a. And it is noted that the assessee continues to repay the same (said loan) as per loan agreement without any defaults. We note that the loan amount of ₹ 55 lakhs has been paid by a/c payee cheque. In order to show the creditworthiness of the lender, M/s. GRREPL, the Ld.AR of the assessee drew our attention to the audited profit and loss account and balance sheet P L account of M/s. G.RREPL as on 31.3.2015, which is placed at pages-8 of the paper book. It reveals that the lender s (M/s GRREPL) gross income was to the tune of ₹ 85 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) it continues to do business by providing loans to several persons. Before the AO, the assessee filed bank statement, confirmation from lender, M/s. GRREPL, source of source to M/s. GRREPL . i.e ₹ 55 lakhs of loan from M/s. G. K Ispat Ltd., etc. However, we find that the AO has not brought out any infirmities in the said documents, which were filed before the AO. The AO erred in brushing aside all the aforesaid documents without controverting the veracity of it. Rather, the AO got carried away by the un-substantiated so called statement of Shri Nangalia, who remitted office from M/s. GRREPL as early as on 24.08.2011, a copy of the statement despite asked by the assessee was not given to him. In any case, if the statement, if any, of Shri Nangalia was intended to be used against the assessee, then in all fairness, a copy of the same should have been served upon the assessee, which the AO did not do and even the statement if any recorded behind the back of assessee cannot be relied upon by the AO to draw adverse inference against the assessee unless the same is tested on the touch-stone of cross-examination, which action was also not done, so the AO erred in relying on the so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d about the source of cash deposited in the bank accounts of the creditors, the proper course would be to assess such credit in the hands of the creditor (after making due enquiries from such creditor). In arriving at this conclusion, the Hon'ble Court has further stressed the presence of word may in section 68. Relevant observations at pages 369 and 370 of this report are reproduced hereunder:- Merely because summons issued to some of the creditors could not be served or they failed to attend before the Assessing Officer, cannot be a ground to treat the loans taken by the assessee from those creditors as non genuine in view of the principles laid down by the Supreme Court in the case of Orissa Corporation [1986] 159 ITR 78. In the said decision the Supreme Court has observed that when the assessee furnishes names and addresses of the alleged creditors and the GIR numbers, the burden shifts to the Department to establish the Revenue's case and in order to sustain the addition the Revenue has to pursue the enquiry and to establish the lack of creditworthiness and mere non compliance of summons issued by the Assessing Officer under section 131, by the alleged creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quiry into the source(s) of the credit and/or sub creditor. The language employed by section 68 cannot be read to impose such limitations on the powers of the Assessing Officer. The logical conclusion, therefore, has to be, and we hold that an inquiry under section 68 need not necessarily be kept confined by the Assessing Officer within the transactions, which took place between the assessee and his creditor, but that the same may be extended to the transactions, which have taken place between the creditor and his sub creditor. Thus, while the Assessing Officer is under section 68, free to look into the source(s) of the creditor and/or of the sub creditor, the burden on the assessee under section 68 is definitely limited. This limit has been imposed by section 106 of the Evidence Act which reads as follows: Burden of proving fact especially within knowledge. When any fact is especially within the knowledge of any person, the burden) of proving that fact is upon him. ******** What, thus, transpires from the above discussion is that white section 106 of the Evidence Act limits the onus of the assessee to the extent of his proving the source from which he has receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge of the assessee. ********** ... 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 the assessee to obtain such amount of money or part thereof from the creditor, by way of cheque in the form of loan and in such a case, if the creditor fails to satisfy as to how he had actually received the said amount and happened to keep the same in the bank, the said amount cannot be treated as income of the assessee from undisclosed source. In other words, the genuineness as well as the creditworthiness of a creditor have to be adjudged vis a vis the transactions, which he has with the assessee. The reason why we have formed the opinion that it is not the business of the assessee to find out the actual source or sources from where the creditor has accumulated the amount, which he advances, as loan, to the assessee is that so far as an assessee is concerned, he has to prove the genuineness of the transaction and the creditworthiness of the creditor vis a vis the transactions which had taken place between the assessee and the creditor and not between the creditor and the sub creditors, for, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said loan amounts actually belonged to, or were owned by, the assessee. Viewed from this angle, we have no hesitation in holding that in the case at hand, the Assessing Officer had failed to show that the amounts, which had come to the hands of the creditors from the hands of the sub creditors, had actually been received by the sub creditors from the assessee. In the absence of any such evidence on record, the Assessing Officer could not have treated the said amounts as income derived by the appellant from undisclosed sources. The learned Tribunal seriously fell into error in treating the said amounts as income derived by the appellant from. undisclosed sources merely on the failure of the sub creditors to prove their creditworthiness. 8. Further, in the case of CIT v. S. Kamaljeet Singh [2005] 147 Taxman 18(All.) their lordships, on the issue of discharge of assessee's onus in relation to a cash credit appearing in his books of account, has observed and held as under:- 4. The Tribunal has recorded a finding that the assessee has discharged the onus which was on him to explain the nature and source of cash credit in question. The assessee discharged the onus by placi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(A) upheld and the Hon ble High Court has held that when the basic evidences are on record the mere failure of the creditor to appear cannot be basis to make addition. The court held as follows: 8. Assailing the said judgment of the learned Tribunal learned counsel for the appellant submits that Income tax Officer did not consider the material evidence showing the creditworthiness and also other documents, viz., confirmatory statements of the persons, of having advanced cash amount as against the supply of bidis. These evidence were duly considered by the Commissioner of Income tax (Appeals). Therefore, the failure of the person to turn up pursuant to the summons issued to any witness is immaterial when the material documents made available, should have been accepted and indeed in subsequent year the same explanation was accepted by the Income tax Officer. He further contended that when the Tribunal has relied on the entire judgment of the Commissioner of Income tax (Appeals), therefore, it was not proper to take up some portion of the judgment of the Commissioner of Income tax (Appeals) and to ignore the other portion of the same. The judicial propriety and fairness dem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der with due care all the material facts and record its finding on all the contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law. 11. The Tribunal must, in deciding an appeal, consider with due care all the material facts and record its finding on all contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law. It is also ruled in the said judgment at page 465 that if the Tribunal does not discharge the duty in the manner as above then it shall be assumed the judgment of the Tribunal suffers from manifest infirmity. 12. Taking inspiration from the Supreme Court observations we are constrained to hold in this matter that the Tribunal has not adjudicated upon the case of the assessee in the light of the evidence as found by the Commissioner of Income tax (Appeals). We also found no single word has been spared to up set the fact finding of the Commissioner of Income tax (Appeals) that there are materials to show the cash credit was received from various persons and supply as against cash credit also made. 13. Hence, the judgment and order of the Tribunal is not sustaina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sence of any investigation, much less gathering of evidence by the Assessing Officer, we hold that addition cannot be sustained merely based on inferences drawn by statement of ex director as discussed supra at para 4. Applying the propositions laid down in these case laws to the facts of this case, we are inclined to allow the appeal of assessee 13. To sum up section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its undisclosed income. In the facts of the present case, both the nature source of the loan received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the lender. The CIN details, bank account statements, audited financial statements and the lender is Income Tax assessee. Accordingly all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on so called stat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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