TMI Blog2000 (9) TMI 204X X X X Extracts X X X X X X X X Extracts X X X X ..... s, Ward, etc. amount advanced to the assessee in the assessment year under consideration, repayment of the loan by the assessee in the year and whether the statement of the creditor was recorded or not and what happened to the summons issue by the AO, are given in a tabular form as under: Name Amount P.A. No. and Ward Repayment in year ending Whether statement recorded Whether summons issued 1 2 3 4 5 6 1. S.D. Desai 60,000 S-824/Wd 3(3) 31-3-1993 Yes NA 2. R.P. Dalal 70,000 Wd-2(8) SRT 31-3-1993 Yes NA 3. C.S. Dalal 50,000 Wd-2(8) SRT 31-3-1993 Yes NA 4. P.N. Shah 50,000 P-830/Wd 1(9) 31-3-1990 Yes NA 5. I.S. Patel 85,000 I-769/Wd 2(1) 31-3-1990 No No 6. Smt. S.B. Shah 50,000 S-971/Wd 2(1) 31-3-1989 Yes NA 7. M.R. Acharya 60,000 M-849/Wd 2(3) 31-1-1990 Yes NA 8. N.K. Shah 60,000 736-N/Wd 2(3) 31-3-1990 N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that she got money in Kanyadan, all were deposited in bank on 20th June, 1988, and then loan was given to Rohini Builders. It cannot be believed that depositor would keep money at home for an amount upto Rs. 60,000 and then suddenly deposit in bank to give loan to Rohini Builders. As per her statement she was married in December, 1988, and the money had come in Kanyadan, but deposit was made in June, 1988, only. Therefore, her statement cannot be believed. This is, therefore, taken as unexplained credit. (3) Shri Chintan Dalal, Surat, had deposited with the assessee Rs. 50,000 on 21st June, 1988, had examined on oath. He submitted that he received gift from 2 parties and loan from one party, and with this amount he had advanced money to the assessee, but he could not furnish any proof of gift/loan hence his capacity is not proved, therefore, this is treated as unexplained credit. (4) Shri Praful Manilal Shah, Surat: This depositor has deposited with the assessee Rs. 50,000 on 2nd Sept., 1988. On examination he submitted that the deposit was given out of his savings. He could not submit anything as to where the amount was lying immediate before deposited with the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m one party and was deposited to the extent of Rs. 15,000 is treated as explained. The receipt of Rs. 45,000 is treated as unexplained and capacity to advance money was not proved. (9) Shri N.K. Prajapati Surat, had deposited Rs. 70,000 on 30th Sept., 1988, with the assessee. Notice under s. 131 was issued to the depositor which came bank from the postal authority with the remark "not known". Therefore, this is treated as unexplained credit. (10) Smt. Lilavati Jayantilal Modi, Surat, had deposited sum of Rs. 60,000 to the assessee on 6th Sept., 1988. She stated that she has income from embroidery. She is assessed to tax. The deposit was out of her savings. No immediate source was explained as to wherefrom sum of Rs. 60,000 came suddenly. If it was accumulated over a period of time, then nothing was submitted as to where the amount was lying earlier. Therefore, this is treated as unexplained. (11) Prajapati Chhaganlal, Devsheri, Surat, has deposited sum of Rs. 50,000 on 2nd Sept., 1988, with the assessee. He is assessed to tax and having income from diamond brokerage. A draft was purchased in cash and deposited with the assessee but immediate source of such big money was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest to these creditors also by account payee cheques and the repayments have also been made to some of the depositors even in the accounting year under consideration and to other depositors in the subsequent years. It was submitted that the repayments were also made by account payee cheques. It was pleaded that merely because the summons issued by the AO to the creditors were received back unserved, the credits introduced in the books of account of the assessee cannot be considered as bogus and treated as the income of the assessee-firm. The CIT(A), however, did not find any merit in the submissions of the assessee and he upheld the action of the AO for the reasons given in the impugned order on the ground that the assessee is required to prove the identity and capacity of the creditors/depositors as well as the genuineness of the loan transaction. According to the CIT(A) in this case the assessee has although proved the identity of the creditors/depositors, it has failed to prove capacity of the creditors and genuineness of the credits because according to the learned first appellate authority the creditors were having very meagre source of income and as such they were not havin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of the creditors and this fact was given in the accounts confirmation filed before the AO, copies of which have been furnished to us at pp. 67, 88, 94, 151, 153 and 170 of the paper book. In respect of credit at Sr. No. 9 in the case of N.K. Prajapati, copy of Form No. 15-H by the creditor for not deducting the tax at source as the total income of the creditor was likely to be less than the minimum liable to tax, was also filed, copy of which is given to us at p. 112 of the paper book. Accordingly, it was submitted that there was absolutely no justification for treating the cash credits in the names of these 21 creditors as non-genuine particularly when the interest in relation to these credits has been allowed by the AO as a business expenditure. It was submitted that the main basis for making the addition by the AO and confirmation of the same by the CIT(A) is that the depositors who have advanced the loans to the assessee, could not explain the source of cash deposits in their respective bank accounts. It was submitted that the assessee can be asked to prove only the source of the credits in its books of account but it cannot be required to explain the source of the source o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh the identity of the creditors was established, the capacity of the creditors and the genuineness of the transactions relating to the total cash credits of Rs. 6,40,000 was not established because it was seen that the cash was deposited in their respective bank accounts prior to the issue of cheques by those creditors favouring the assessee. It was submitted that it was a circumstantial evidence to indicate that the cash belonging to the assessee was introduced as deposit in the bank account of the creditor for taking an equivalent amount by cheque by way of an accommodation entry. It was submitted that the so-called income-tax returns in some of the cases of the creditors were filed under the Amnesty Scheme and were intended only to create evidence that the creditors were income-tax assessees. Accordingly, it was submitted that the Departmental authorities were perfectly justified in treating the amount of Rs. 12,85,000 as the income of the assessee. Reliance was placed on the decision of the Calcutta High Court in the case of Shankar Textile Industries vs. CIT (1978) 114 ITR 689 (Cal) and Prakash Textile Agency vs. CIT (1980) 121 ITR 890 (Cal) and the decision of the Punjab H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Hon'ble Bombay High Court in the case of Orient Trading Co. vs. CIT (1963) 49 ITR 723 (Bom). 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 AO, 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 Hon'ble Supreme Court in the case of Orissa Corporation. In the said decision the Hon'ble 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 la ..... X X X X Extracts X X X X X X X X Extracts X X X X
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