TMI Blog2022 (9) TMI 375X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007-08. AR has highlighted the transactions with the details of payments made to the assessee and supporting bank statements of M/s Time Star Ltd which cannot be over looked - DR could not controvert the findings of the CIT(A) with any new evidence or information to take a different view. We find that the CIT(A) relied on the judicial decisions and also the facts, additional evidence, remand report and provisions of Sec. 68 of the Act has passed a reasoned order. Accordingly, we are not inclined to interfere with the order of the CIT(A) and upheld the same and dismiss the grounds of appeal of the revenue - ITA No. 6805/Mum/2018 - - - Dated:- 26-7-2022 - SHRI M BALAGANESH, ACCOUNTAT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER For the Appellant : Mr.T.Shankar.DR For the Respondent : Mr.Anuj Kishnadwala.AR ORDER PER PAVAN KUMAR GADALE, JM: This appeal is filed the by the revenue against the separate orders of the Commissioner of Income Tax (Appeals)-77, Mumbai passed u/s 143(3) and 250 of the Act. The revenue has raised the following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the concerned party. Therefore the loan documents could not prove the genuineness of the transactions. Since the details are not filed with proper information, The A.O. has issued show cause notice referred at Para 5.5 of the AO order. 3.The assessee has filed the information and whereas the A.O. found that the loan confirmations to the extent of Rs.1,94,93,998/- in respect three groups were not filed and the assessee failed to prove the identity, genuineness and creditworthiness of the lenders and the interest on loan of Rs 14,17,828/- and made addition U/sec68 of the Act. On the second disputed issue, the A.O. found that the assessee has disclosed loan obtained from the M/s Timestar Ltd and to test the genuineness of the transaction has issued notice U/sec133(6) of the Act and the lender has denied about the loan transaction. Whereas, in response to notice the assessee has filed a letter dated 30-03-2015 but remained silent on the disputed issue. Finally the AO was not satisfied and no explanations were offered and made the addition of Rs. 3,02,25,000/- and assessed the total income of Rs. 5,11,36,830/- and passed the order u/s 143(3) of the Act dated 31.03.2015. 4. Agg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. The sole crux of the disputed issue as envisaged by the Ld. DR that the CIT(A) has erred in deleting the addition of unsecured loans and interest on loans considering the additional evidences filed. Further, the CIT(A) has overlooked the facts that the investor group companies are providing accommodation entries. The Ld.AR has demonstrated the submissions made before the lower authorities and emphasized that the CIT(A) has rightly considered the facts, submissions and evidences and relied on the judicial decisions and deleted the addition. The contentions of the Ld. AR that the assessee has cooperated in submitting the information in reassessment proceedings and in response to notice u/s 142(1) of the Act a questionnaire was filed and also complied with the information. Whereas the A.O. has made addition of opening balance of unsecured loan amount which was wrongly treated as the current year transactions. At this juncture, we consider it appropriate to refer to the observations of the CIT(A) at page 8 Para 6.1 to 10.11 of the order read as under: 6.1 I have considered the facts, oral contentions and written submissions of the appellant as against the observations/findings o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e omission of the ground from the form of appeal was not wilful. It is clear from the above provisions that the powers of the AAC are much wider than the powers of an ordinary court of appeal. The scope of his powers is coterminous with that of the ITO. He can do what the ITO can do. He can also direct the ITO to do what he failed to do. The power conferred on the AAC under subsection (4) of section 250 being quasi-judicial power, it is incumbent on him to exercise the same if the facts and circumstances justify. If the AAC fails to exercise his discretion judicially and arbitrarily refuses to make enquiry in a case where the facts and circumstances so demand, his action would be open for correction by a higher authority. 4. On a conjoint reading of section 250 and rule 46A, it is clear that the restrictions placed onthe appellant to produce evidence do not affect the powers of the AAC under sub-section (4) of section 250. The purpose of rule 46A appears to be to ensure that evidence is primarily led before the ITO. 5. We are supported in our above conclusion by the decision of the Orissa High Court in B.L. Choudhury v. CIT (1976] 105 ITR 371 in which it was held: Wide pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court and relied on by the Kerala High Court (discussed above) clearly indicates that even if the repeated opportunities were given to the appellant to produce evidence and even if the appellant does not suomotu produce any additional evidence, in the spirit of justice and fair-play, it is incumbent on the first appellate authority, being a quasi-judicial authority, to require the appellant to produce requisite evidence or to m ke necessary inquiry and admit any such fresh and additional evidence, by virtue of section 250(4) and (5) read with subrule(4) of rule 46A. 7.3 In the present case, the details submitted by the appellant are crucial to the grounds raised in appeal. The impugned order and remand reports do not contain any details to controvert the assertion of the appellant nor do they bring on record -anything to establish that the appellant willfully abstained from attending during the scrutiny proceedings. As noted before, the evidence produced by the appellant is relevant to the grounds in appeal. Therefore after considering the principles laid down by the jurisdictional High Court in the case of Smt. Prabhavati S. Shah (cited supra) the additional evidence subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,998/-, the A.O. has disallowed the interest of Rs. 14,17,828/- accordingly. The appellant has submitted detailed explanation along with the documentary evidence during the appellate proceedings. The same was forwarded to the A.O. for verification of transactions Further, during the remand proceedings, the app llant has submitted necessary sufficient documents before the A.0. and A.O. did not Found any discrepancy in their submission except interest of Rs. 89,960/-.The A.0. has stated in this regard that interest paid of Rs. 89,960/- cannot be accepted as the Pan is not evident on confirmation. Further, the appellant has stated that the PAN is already mentioned in confirmation on bank statement. 9.1 During the remand proceedings, the appellant has submitted sufficient documents and established the genuineness of loan transactions of Rs.1,92,93,998/- : The A.O. did not found any discrepancy of submission of appellant. Therefore, after considering the totality of facts and judicial decision, it is decided by the undersigned in the ground no.1 that. the loan transactions of Rs. 1,92,93,998/- are genuine. In view of the above decision, there is no question of disallowance of interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of M/s. Sadguru Homes Ltd. Further stated that as the Sadguru Homes was closed and no IT return beyond A.Y.2006-07 could be filed. The last balance sheet of Sadguru Homes has already submitted and prove the capital balance of appellant. 10.2 The expression nature and source has to be understood together as a requirement of identification of the source and the nature of the source, so that the genuineness or otherwise could be inferred. The Hon'ble Supreme Court, in Kale Khan Mohd.Hanif vs. CIT,. pointed out that the onus on the assessee has to be understood with reference to the facts of each case and proper inference drawn from the facts. If the prima facie inference on the fact is that the assessee's explanation is probable, the onus will shift to the Revenue. As far as the creditworthiness or financial strength of the creditor/subscriber is concerned, that can be proved by producing the bank statement of the creditors/subscribers showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. Once these documents are produced, the assessee would have satisfactorily discharged the onus cast upon him. Thereafter, it is for the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such, an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession ofthe appellant themselves to explain as to why their. ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. As mentioned above, the appellant had contested the truthfulness of the statements of these two winesses and wanted to discredit their lestimony for which purpose it wanted to avail the opportunity of cross-examination. That apart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out though to various issue raised and the decisions cited by Mr Traishawalla and finding that on a very fundamental aspect, the revenue was not justified in making an addition at the time of re-assessment without having first given the assessee an opportunity to cross examine the deponent on the statements relied upon by the ACIT. Ouite apart from denial of an opportunity of cross examination, the revenue did not even prove the material on the basis ofwhich he department sought to conclude that the loan was a bogus transaction. 10.6 It is clear from the submission of appellant that the transactions were through account payee cheques and appellant has submitted sufficient details before the AO during the assessment proceedings. The source of receipt through banking channel clearly establish the genuineness of the credit which is reflected in the books of accounts. The decision of the Hon'ble Gujarat High Court in the case of Dy. CIT vs Rohini Builders - [256 IT 3601 is held that all the loans were received by the assessee by account payee cheques and the repayment of loans have also been made by account payee cheques along with interest in relation to those loans and that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the creditor. However, the onus of the assessee is limited to the extent of proving the source from which he received the cash credit. The credit worthiness of the creditor has to be judged vis- -vis the transaction which had taken place between the assessee and the creditor, and it is not the burden of the assessee to find out the source of creditworthiness of the lender to prove the-genuineness of the transaction. This issue is dealt by the Gauhati High Court in the case of CIT v. Smt. Sanghamitra Bharali (2014) 361 IT 481 (Gau). The aforesaid points were also affirmed in the past by the Appex Court in the case of CIT v. Ofissa Corporation P. Ltd reported in (1986) 159 IT 78 (SC). In the case of CIT v. Varinder Rawley (2014) 366 IT 232 (P H) the court held that where the assessee shows that the entries regarding credit in a third party's account were in fact received from the third party and are genuine, he discharges the onus. In that case, the sum, cannot be charged as the assessee's income in the absence of any material to indicate that it belongs to assessee , particularly in a case where no summons u/s 131 is jssued against the third party. 10.9 From the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted out that section 68 under which the addition has been made by the Assessing Officer reads as under-: 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 ls 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. 10.10 The phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this, case the legislative mandate is not in terms of the words shall be charged to income-tax as the income of the assessee of that previous year . The Supreme Court while interpreting similar phraseology used in section 69 has held that in creating the legal fiction the phraseology employs the word may and not shall . Thus the unsatisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epted. On the second disputed issue of unsecured loan disclosed in the Balance sheet received by the assessee in the earlier years in full and final settlement with the partnership firm, the Ld.AR has demonstrated the submissions made before the A.O by letter filed on 27-03-2015 at page 8 of the paper book explaining the facts and circumstances of receipt of money in the financial year 2007-08. The Ld.AR has highlighted the transactions with the details of payments made to the assessee and supporting bank statements of M/s Time Star Ltd at page 10 to 16 of the paper book which cannot be over looked. Whereas, the Ld. DR could not controvert the findings of the CIT(A) with any new evidence or information to take a different view. We find that the CIT(A) relied on the judicial decisions and also the facts, additional evidence, remand report and provisions of Sec. 68 of the Act has passed a reasoned order. Accordingly, we are not inclined to interfere with the order of the CIT(A) and upheld the same and dismiss the grounds of appeal of the revenue.. 9. In the result, the appeal filed by the revenue is dismissed. Order pronounced in the open Court on 26.07.2022. - - TaxTMI - T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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