TMI Blog2022 (1) TMI 605X X X X Extracts X X X X X X X X Extracts X X X X ..... been done by the Assessing Officer is to express doubts as regards the genuineness of the entries. We fail to understand what the Assessing Officer has tried to convey. When a partnership firm says that it received a particular amount in its capital through its partners and the identity of such partners with necessary details is disclosed, any further information in that regard would be asking the assessee to disclose source of the source. Even this part has been taken care of by the firm. In other words, the source of the source has also been disclosed. The relevant aspects as pointed out by the assessee cannot be said to have been looked into from a proper perspective. We don t find any discussion in the impugned assessment order. This is the reason why we are saying that the procedure as contemplated under Section 144B cannot be said to have been duly followed in the case on hand. It is open to the Assessing Officer to undertake further investigation with regard to that individual who has deposited this amount. So far as the responsibility of the assessee-firm is concerned, it is satisfactorily discharged. Whether that individual person is an income tax payer or not or fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disposal of this application, this Hon ble Court be pleased to stay operation and implementation of the assessment order passed u/s.143(3) r.w.s. 144B dated 19.04.2021 at Annexure-F and further stay the recovery of demand in pursuance of the notice issued u/s.156 at Annexure-G. D) This Hon ble Court be pleased to grant any further or other relief as this Hon ble Court deems just and proper in the interest of justice, and E) This Hon ble Court be pleased to allow this application with costs against the respondents. 2. The facts, giving rise to this litigation, may be summarized as under; 2.1 The writ applicant came to be incorporated as a partnership firm on 16.12.2017. The partnership firm is engaged in the business of real estate development. It is the case of the firm that it has ten partners. For the year under consideration, as the firm was constituted on 16.12.2017 and had no business activity by that period of time, it filed its return of income on 02.06.2018 at Rs.Nil. 2.2 The case of the writ applicant was selected for scrutiny assessment and, accordingly, notice was issued under Section 143(2) of the Act dated 22.09.2019. The main ground on w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, as required the assessee has not prove the onus of the creditworthiness of the partners in introducing the capital in the assessee firm and also the genuineness and creditworthiness of the other parties from whom funds have been received from the partners. 4.6 In connection with the same for clear understanding, the provisions of Section 68 of the I.T. Act are reproduced as under; Section 68; Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him, is not, in the opinion of the (Assessing Officer, satisfactory, the sum so credited may be charged to Income Tax as the income of the assessee of that previous year. 4.7 From the plain reading of the same, it is seen that the onus is on the assessee to clearly establish the genuineness, nature and sources of the transaction, to prove the identity and creditworthiness of the lenders from whom funds received. The initial catchphrase of the section is where any sum is found credited in the books of account of the assessee meaning thereby that Section 68 is at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbhai K. Zalavaidya 22,63,000 2. Bharatbhai M. Khunt 28,96,000 3. Hareshbhai J. Zalavadiya 27,15,000 4. Hashmukhbhai M. Khunt 28,96,000 5. Jagdishbhai B. Hirpara 50,68,000 6. Kaushik Kanubhai Hirpara 50,68,000 7. Narendrabhai B. Hirpara 4,00,000 8. Ravjibhai K. Patel 17,06,000 9. Sanjaykumar M. Kanani 41,63,000 Total 2,71,75,000 4.11 The amount of ₹ 2,71,75,000/- is treated as unexplained cash credit in the books of the assessee firm and brought to tax under Section 68 r.w.s 115BBE of the Act being unexplained cash credits. Penalty proceedings u/s. 271AAC of the I.T. Act 1961 is initiated separately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the firm. According to Mr. Shah, the matter should have stopped at that stage. There could not have been any further inquiry with the firm. If the Assessing Officer had any doubts with regard to the genuineness of the entire transaction, it could have questioned the individual partners and not the firm. This, according to Mr. Shah, would be in tune with Section 68 of the Act. 4. The second submission of Mr. Shah is that the impugned assessment order is an exact reproduction of the draft assessment order. It fails to consider any of the details/information furnished by the writ applicant with respect to the specific queries raised by the Investigating Officer. Mr. Shah would submit that it is just a mechanical exercise undertaken by the Assessing Officer and the same would frustrate the very object with which Section 144B came to be introduced in the Act with effect from 01.04.2021. Mr. Shah laid much emphasis on the subclause (9) to Section 144B which starts with a non-obstante clause. Sub-section (9) to Section 144B provides that notwithstanding anything contained in any other provision of the Act, the assessment made under sub-section (3) of Section 143 or under Section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he judgment of this High Court in the case of Malini Construction Company (supra) to fortify his submission that the present matter needs to be remitted for de novo consideration as the impugned order is not sustainable in view of Section 144B(9) of the Act. In other words, Malini Construction Company (supra) has been relied upon in support of the submission that when the impugned assessment order is bereft of reasons, then the same could be said to be passed in gross violation of the principles of natural justice and the alternative remedy of filing an appeal under Section 246 of the Act before the Commissioner would not be a bar in entertaining the writ application. 8. In such circumstances, referred to above, Mr. Shah prays that there being merit in this writ application, the same be allowed and the reliefs as prayed for be granted. 9. On the other hand, this writ application has been vehemently opposed by Ms. Kalpana Raval, the learned senior standing counsel appearing for the Revenue. Ms. Raval vehemently submitted that no error, not to speak of any error of law, could be said to have been committed by the Assessing Officer in passing the impugned assessment order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me to be inserted w.e.f. 01.04.2021. Section 144B starts with a non-obstante clause. Section 144B(1) reads thus; 144B. (1) Notwithstanding anything to the contrary contained in any other provisions of this Act, the assessment under sub-section (3) of section 143 or under section 144, in the cases referred to in subsection (2), shall be made in a faceless manner as per the following procedure, namely:- (i) the National Faceless Assessment Centre shall serve a notice on the assessee under sub-section (2) of section 143; (ii) the assessee may, within fifteen days from the date of receipt of notice referred to in clause (i), file his response to the National Faceless Assessment Centre; (iii) where the assessee- (a) has furnished his return of income under section 139 or in response to a notice issued under subsection (1) of section 142 under or sub-section (1) of section 148, and a notice under sub-section (2) of section 143 has been issued by the Assessing Officer or the prescribed income-tax authority, as the case may be; or (b) has not furnished his return of income in response to a notice issued under sub-section (1) of section 142 by the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the report received from the verification unit or the technical unit, based on the request referred to in clause (viii) or clause (ix) to the concerned assessment unit; (xi) where the assessee fails to comply with the notice referred to in clause (vi) or notice issued under sub-section (1) of section 142 or with a direction issued under sub-section (2A) of section 142, the National Faceless Assessment Centre shall serve upon such assessee a notice under section 144 giving him an opportunity to show-cause, on a date and time to be specified in the notice, why the assessment in his case should not be completed to the best of its judgment; (xii) the assessee shall, within the time specified in the notice referred to in clause (xi) or such time as may be extended on the basis of an application in this regard, file his response to the National Faceless Assessment Centre; (xiii) where the assessee fails to file response to the notice referred to in clause (xi) within the time specified therein or within the extended time, if any, the National Faceless Assessment Centre shall intimate such failure to the assessment unit; (xiv) the assessment unit shall, after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause (xvi); (xix) the National Faceless Assessment Centre shall, upon receiving suggestions for variation from the review unit, assign the case to an assessment unit, other than the assessment unit which has made the draft assessment order, through an automated allocation system; (xx) the assessment unit shall, after considering the variations suggested by the review unit, send the final draft assessment order to the National Faceless Assessment Centre; (xxi) the National Faceless Assessment Centre shall, upon receiving final draft assessment order follow the procedure laid down in- (a) sub-clause (a) of clause (xvi); or (b) sub-clause (b) of clause (xvi); (xxii) the assessee may, in a case where show-cause notice has been served upon him as per the procedure laid down in sub-clause (b) of clause (xvi), furnish his response to the National Faceless Assessment Centre on or before the date and time specified in the notice or within the extended time, if any; (xxiii) the National Faceless Assessment Centre shall, - (a) where no response to the show-cause notice is received as per clause (xxii),- (A) in a case where the dra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use (b) of clause (xxv); (xxvii) where the draft assessment order or final draft assessment order or revised draft assessment order is forwarded to the eligible assessee as per item (A) of sub-clause (a) of clause (xxiii) or item (A) of sub-clause (a) of clause (xxv), such assessee shall, within the period specified in sub-section (2) of section 144C, file his acceptance of the variations to the National Faceless Assessment Centre; (xxviii) the National Faceless Assessment Centre shall,- (a) upon receipt of acceptance as per clause (xxvii); or (b) if no objections are received from the eligible assessee within the period specified in sub-section (2) of section 144C, 12 . Thus, the assessment order under sub-section (3) of Section 143 shall now have to be made in a faceless manner in accordance with the procedure prescribed. 13. Sub-section (9) to Section 144B reads thus; 9) Notwithstanding anything contained in any other provision of this Act, assessment made under subsection (3) of section 143 or under section 144 in the cases referred to in sub-section (2) (other than the cases transferred under sub-section (8), on or after the 1st day of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax as the income of the assessee of that previous year. Therefore, according to Section 68, the first burden is on the assessee to satisfactorily explain the credit entry in the books of account of the previous year. If the explanation given by the assessee is satisfactory, then that entry will not be charged with the income of the previous year of the assessee. In case the explanation offered by the assessee is not satisfactory or the source offered by the assessee firm is not satisfactory, then in that case, the amount should be taken to be the income of the assessee. 17. Once it is established that the amount has been invested by a particular person, be he a partner or an individual, then the responsibility of the assessee-firm is over. The assessee-firm cannot ask that person who makes investment where the the money invested is properly taxed or not. The assessee is only to explain that this investment has been made by the particular individual and it is the responsibility of that individual to account for the investment made by him. If that person owns that entry, then the burden of the assessee-firm is discharged. It is open to the Assessing Officer to undertake furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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. Illustrations : (a) When a person does an act, with some intention other than that which the character and circumstances of the act suggest, the burden of proving that intention is upon him. (b) A is charged with travelling on a railway without a ticket. The burden of proving that he had a ticket is on him. 14. On a careful reading of Section 106, we notice that what is the source from which an assessee has obtained the loan can be safely held to be a fact, which is actually within the special knowledge of the assessee ; hence, it is the burden of the assessee to show the source(s) from which he has received the loans. Once the assessee discloses the source(s) from which he has recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transactions, which have taken place between the assessee and the creditor. What follows, as a corollary, is that it is not the burden of the assessee to prove the genuineness of the transactions between his creditor and sub- creditors nor is it the burden of the assessee to prove that the sub-creditor had the creditworthiness to advance the cash credit to the creditor from whom the cash credit has been, eventually, received by the assessee. It, therefore, further logically follows that the creditor's creditworthiness has to be judged vis-a-vis the transactions, which have taken place between the assessee and the creditor, and it is not the business of the assessee to find out the source of money of his creditor or of the genuineness of the transactions, which took between the creditor and sub-creditor and/or creditworthiness of the sub-creditors, for, these aspects may not be within the special knowledge of the assessee. 17. A person may have funds from any source and an assessee, on such information received, may take loan from such a person. It is not th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-creditor, such an amount may be treated as the income from undisclosed source of the creditor or of the sub-creditor, as the case may be, but such failure, on the part of the creditor cannot, in the absence of any clinching evidence, be treated as the income of the assessee derived from undisclosed source. 18. Since it is not the business of the assessee to find out the source(s) from where the creditor has accumulated the amount, which he has advanced, in form of the loan, to the assessee, Section 68 cannot be read to show that in the case of failure of the sub-creditors to prove their creditworthiness, the amount advanced as loan to the assessee by the creditor shall have to be read, as a corollary, as the income from undisclosed source of the assessee himself. 19. If sections 106 and 68 have to survive together, the logical interpretation will be that while the assessee has to prove only his special knowledge, i.e., the source from where he has received the credit and once he discloses the source from which he has received the money, he must also establish that so far as his transaction with his creditor is concerned, the same is genuine and his creditor had the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... situation, it cannot be read as a corollary nor can it lead to the lone and only conclusion, in the absence of any other material, that the money that has changed hands from the sub-creditor to the creditor was received by the sub-creditor from none other than the assessee himself. 20. In other words, though under Section 68, an Assessing Officer is free to show, with the help of the inquiry conducted by him into the transactions, which have taken place between the creditor and the sub-creditor, that the transaction between the two were not genuine and that the sub-creditor had no creditworthiness, it will not necessarily mean that the loan advanced by the sub-creditor to the creditor was income of the assessee from undisclosed source unless there is evidence, direct or circumstantial, to show that the amount, which has been advanced by the sub-creditor to the creditor, had actually been received by the sub-creditor from the assessee. We are fortified in adopting this view from the following observations made in Tolaram Daga's case [1966] 59 ITR 632 (Assam) (page 635) : At the outset, we have to point out that there is no substance in the contention that the sour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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