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2023 (4) TMI 93

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....s and three HUFs, who are relatives of the Directors of the assessee company. It was the submission that the three individuals were also the shareholders of the assessee company. It was the submission that in the course of assessment, the Assessing Officer had invoked the provisions of section 68 of the Act and had treated the loans taken by the assessee as unexplained cash credit. It was the submission that in the course of assessment, the assessee had produced the copies of returns of income of the lenders alongwith their computation of total income, balance sheet, bank statements and confirmation of the lenders. It was the submission that the Assessing Officer had also issued notice u/s. 133(6) of the Act to the lenders who had also confirmed the transactions directly to the Assessing Officer. It was the submission that the Assessing Officer, only on the ground that there were cash deposits in the bank accounts of the lenders before loans were granted to the assessee, had treated the loans transaction as bogus and had invoked the provisions of section 68 of the Act. It was the submission that the assessee had initially taken the loans as interest free but subsequently, as the as....

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.... in favour of the assessee. It was noticed that such creditors did not maintain any books of account. Nowhere their capacity to raise such amount for drawing cheque of sizable amounts was established. In short therefore, the very genuineness of the transaction was not established. This therefore, is not a case where the Revenue makes addition on the assessee failing to establish source of the source. All issues are essentially based on facts and appreciation of evidence on record. No question of law arises. Tax Appeal is dismissed. 5. Ld. Sr. DR also relied upon the decision of Hon'ble High Court of Gujarat in the case of Umesh Krishnani vs. ITO (2013) 35 taxmann.com 598 (Guj), wherein, the principles laid down by the Hon'ble High Court of Gujarat in the case of Blessing Construction (supra) has been reiterated. Ld. Sr. DR further submitted that the Ld. CIT(A) has relied on various decisions to uphold the decision of the Assessing Officer in making the addition u/s. 68 of the Act. It was the submission that the order of the Assessing Officer and that of the Ld. CIT(A) is liable to be upheld. 6. In reply, Ld. AR placed reliance on the decision of the Hon'ble High Court....

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....e by account payee cheques drawn from bank accounts of the creditors and the assessee is not expected to prove the genuineness of the cash deposited in the bank accounts of those creditors because under law the assessee can be asked to prove the source of the credits in its books of account but not the source of the source as held by the Bombay High Court in the case of Orient Trading Co. Ltd. v. CIT [1963] 49 ITR 723. The genuineness of the transaction is proved by the fact that the payment to the assessee as well as repayment of the loan by the assessee to the depositors is made by account payee cheques and the interest is also paid by the assessee to the creditors by account payee cheques. 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 ....

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....ed the interest claimed/paid in relation to these credits in the assessment year under consideration or even in the subsequent years, and tax deducted at source has been deducted out of the interest paid/credited to the creditors, we are of the opinion that the Departmental authorities were not justified in making the addition of Rs. 12,85,000 which is directed to be deleted." 7. He further relied upon the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs. Baishnab Charan Mohanty, reported in 212 ITR 199 (Ori), wherein, the Hon'ble Jurisdictional High Court has held as follows: "6. When a question arises as to whether a cash credit appearing in the books of account of an assessee has to be accepted or to be rejected and addition to be made in accordance with s. 68 of the Act, the assessee is required to establish the identity of his creditor, the capacity of the creditor to advance the money and the genuineness of the transaction. If the assessee establishes the aforesaid three pre-conditions, then it would be for the Department to disprove the same. In the present case, the first appellate authority as well as the Tribunal had accepted the identity....

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....could not do anything further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises." 9. It was the submission that on perusal of the various decisions referred (supra) clearly shows that once the assessee has proved the identity, creditworthiness and genuineness of the transaction, no addition u/s. 68 of the Act can be made in the hands of the assessee. It was the prayer that the addition as made by the AO and as confirmed by the Ld. CIT(A) is liable to be deleted. 10. We have considered the rival submissions. The facts in the present case clearly show that the allegation by the Assessing Officer and the Ld. CIT(A) is that there has been cash deposits in the bank account of the creditors before granting of the loans and before deposit of cash, there was meager funds available in the bank accounts of the lenders. A perusal of the bank account of Suman Agarwal shows that admittedly, there is cash d....

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....est received from the assessee and they have claimed the benefit of TDS and the returns have been accepted by the issuance of orders u/s. 143(1)(a) of the Act. With these facts in perspective, if one is to see the principles laid down in various decisions, it becomes clear that the decision relied upon by the Revenue in the case of Blessing Construction (supra) would not apply insofar as in that case, the fact that has led to the said decision was that in respect of the creditors, their bank accounts contain meager balance before sizeable amounts were deposited and the loans given to the assessee. This is not the fact in assessee's case. A perusal of the decision of the Hon'ble High Court of Gujarat High Court in the case of Rohini Builders (supra) shows that under identical circumstances, the Hon'ble High Court has held that in case the AO was not satisfied with the cash amount deposited by those creditors in their bank accounts, the proper course would have been to make assessments in the cases of those creditors by treating the cash deposits in their bank accounts as unexplained investments of those creditors u/s. 68 of the Act. This view of the Hon'ble High Cour....