BHARAT BHUSAN DEO,JAJPUR vs. ACIT, CIRCLE-1(1), CUTTACK

O R D E R

Per L.P.Sahu, AM:

1. The order of Assessment as well as the appellate order is against law, weight of evidences and probabilities of the case.

2. The learned Assessing Officer most arbitrarily added to the total income of the assessee the amount of Rs.29,00,000/- received as loan on different dates from friends, relatives and staff at the time of constraint of funds and utilized in the business of M/S Chaitanya Minerals, a proprietory concern of Shri Bharat Bhusan Deo, for the running and survival of the business, without considering the facts and circumstances under which the same was taken.

3. The learned Assessing Officer most arbitrarily added the amount of Rs.29,00,000/-U/S 68 of the Income Tax Act as income from undisclosed source without accepting the fact of creditworthiness of the persons giving loans and the genuineness of the transactions.

4. Rs.29,00,000/- received as unsecured loan wrongly and arbitrarily included in total income should be deleted and reduced from the total income of the assessee basing on the facts & circumstances of the case.

5. Unsecured Loan taken during FY 2006-07 has been repaid during the FY 2009-10 by cash amounting to Rs.5,72,200/- and during the FY 2010-11 (in the month of June 2010) an amount of Rs.2,66,600/- was refunded towards unsecured loan through cheque and during the FY 2010-11 (in the month of October 2010) an amount of Rs.1,37,500/- was refunded towards unsecured loan through cheque. All the details were submitted to Ld. CIT (Appeals) in the course of hearing. 6. Loan confirmation from 98 (Ninety Eight) persons were submitted to Ld. CIT (Appeals) in the course of hearing to prove the genuineness of the transactions. 7. That the Ld. CIT(APPEALS) has erred in law and facts in confirming the additions made by the A.O. amounting to Rs.29,00,000/- representing loans received by the assessee. 8. For these other reasons to be argued at the time of hearing the order of assessment shall be squashed to meet the end of Justice.

2. The assessee has taken as many as eight grounds out of which ground No.1 & 9 are general in nature, which require no adjudication and the only effective ground contained in ground Nos.2 to 7 is with regard to confirming the addition of Rs.29 lakhs by the CIT(A) which was made by the AO on account of unsecured loan, which is being decided in the following paragraphs.

Thereafter the hearing of the appeal was fixed on 31.10.2013, 19.11.2013, 09.01.2014 & 24.01.2014, respectively. It is evident from the fixing the date of hearing that none appeared on behalf of the assessee, therefore, the AO initiated the penalty proceedings u/s.271(1)(b) of the Act and also completed the assessment u/s.144 of the Act after issuing show cause notice to the assessee thereby making addition of Rs.29 lakhs for non-compliance of the notices as stated above. The AO noticed that identity of loan creditors and their creditworthiness was remained unestablished and genuineness of the transaction were also remained unsubstantiated. Accordingly, the assessee could not discharge the onus cast upon him to prove the genuineness of the transactions, identity of the creditors and also creditworthiness of the loan creditors, therefore, the AO added the entire Rs.29 lakhs u/s.68 of the Act to the total income of the assessee.

4. Feeling aggrieved from the above order, the assessee appealed before the CIT(A). The CIT(A) after considering the order of AO and documents produced before him has sustained the addition made by the AO after observing as under :-

“9. Due to the insistent notices for hearing from the office of the undersigned, the appellant has submitted ledger account of unsecured loan received by him from 98 persons in cash each being less than Rs.20,000/- in denomination. From the ledger account, it is also evident that almost every day, the appellant was receiving unsecured loan in cash amounting to less than Rs.20,000/- from some persons and recorded the same in his accounts. The appellant submitted that the unsecured loan in cash were accepted from friends, relatives and staff because of constraints of funds and the amount was taken in cash as and when required for running and survival of the business. Needless to mention -» that the amount was taken as interest free deposits. It is a matter of utter surprise that the appellant could gather 93 friends, relatives and staff who have given him cash loan almost ' every day of his business. The appellant is engaged in the business of mineral beneficiation i.e. exploration of minerals and running of transport business. It is a matter of surprise again that with such pressing business, the appellant could contact 93 of his relatives and friends located at different villages from whom he received cash loan almost every day of his business. This is a matter of impossibility. Further, the appellant has stated that "most of the persons were income-tax assessees and were capable of giving this small amount." While going through the xerox copies of the loan confirmations submitted by the appellant for 93 persons not in a single confirmation the income-tax assessment details of the loan creditor or his PAN number has been mentioned. It is therefore hard to take into account that most of the loan creditors are income-tax assessees and are capable of giving such small amounts. Moreover, in the absence of PAN or any other mode of identification, the loan confirmation submitted by the appellant becomes doubtful as far as the identity of such persons are concerned, in none of the loan confirmations the source of such loan was mentioned which leads to the fact that the creditworthiness of the loan creditors are not explained. Thus, the appellant has failed the test of identifying the loan creditors as well as the genuineness of the transaction and the creditworthiness of the loan creditors are not explained. The .important aspect still remains that the appellant was given sufficient opportunities by the AO for furnishing the details and verification of the same which the appellant has avoided to comply with. The Hon'ble Supreme Court in the case of Smt. Sumati Dayal have held that "the maxim, the apparent is real is not always sacrosanct. If facts and circumstances so warrant that the same do not accord with the best of human probabilities, transfers are to be held as non-genuine."

5. Ld.AR filed the paper book containing page Nos.1 to 102 and also filed the written submissions, which read as under :-

That the instant appeal has been preferred "against the impugned and erroneous order passed by the learned Commissioner of Income Tax (Appeals), Cuttack, Odisha dt. 22.01.2016 passed in IT Appeal No.152/2014- 15 only by relying the order of assessment passed by the Assessing Officer dt. 28.03.2014 U/s. 144/254 of the Income Tax Act, 1961 for the assessment year 2007-08 determining the total assessment at Rs.80,53,670/- on the pretext that the loan to the tune of Rs.29,00,000/- which is the subject matter of assessment received by the assessee for the financial year 2006-07 be treated as undisclosed cash credit U/s. 68 of the Income Tax and added to the total income.

BACKGROUND OF THE CASE IN BRIEF

1. That the appellant is the proprietor of M/s Chaitanya Minerals and deals with processing and selling of Chrome Ore. During the assessment year 2007-08, due to the business need and to get rid of financial-crisis, the appelant approached his friends, rel-atives and staff for financial help and in the process received refundable interest free unsecured loan of Rs.29,00,000/-during the financial year 2006-07. In this context it is to be clarified here for better appreciation of the factual matrix of the case that M/s. Chaitanya Minerals has shown this amount as Unsecured Loan in the Balance Sheet.

2. The appellant has already partly repaid loan to the tune of Rs.9,76,300/- out of which Rs. 5,72,200/- was paid through cash during the FY 2009-10 and Rs. 4,04,100/- was paid through cheque during the FY 2010-11. The learned assessing officer by misconstruing - the provision of law as is contemplated U/s. 68 of the Income Tax Act 1961 has wrongly assessed the income U/s. 144/254 of Income Tax Act,1961 at Rs.80,53,670/- by not accepting, the receipt of loan of Rs.29,00,000/-which was received by the assessee from different persons and accordingly added the aforesaid amount of loan treating the same as income U/s. 68 of the Income Tax Act.

The appellant in the instant appeal, questioning the legality, propriety and sustainability of the order passed by the learned Assessing Officer assessing the income U/s. 144/254 of the Income Tax Act , 1961 treating the loan as income U/s. 68 of the Income Tax Act, 1961 has preferred IT Appeal No. 152/2014-15 before the learned Commissioner of Income Tax (Appeals), Cuttack, Odisha which was finally heard and disposed of by the learned Commissioner of Income Tax (Appeals), Cuttack, Odisha vide order dt. 22.01.2016. The learned Commissioner while dealing with the issue only relied on the order of assessment passed by the Assessing Officer in respect of aforesaid amount of Rs.29,00,000/- which was received by the appellant from different persons on account of loan and without considering the facts and evidences properly brought out on record at the time of hearing before him and finally upholding the additions made by the AO and dismissing the appeal.

3, On an opportunity given to the assessee, the confirmation letters of the loan creditors confirming the loans were filed before the CIT(A). As a result the assessee had discharged the onus which lay upon him.

Nemi Chand Kothari Vs CIT (2003) 264-ITR-254(Gauhati)

Once the assessee has proved the identity of his creditors, the genuineness of the transactions, which he had with the creditors and the creditworthiness of his creditors vis-a vis the transactions which he had with the creditors ,the burden stands discharged and the burden then shifts to the revenue to show that the amounts in question actually belonged to or was owned by the assessee himself. The identities of the creditors are on record and are accepted, the genuineness of the loan transactions is well proved ,these being made through cash of very small amounts within-the provisions of the Law and lastly the potentials or capabilities of the so-called loan creditors had merely been doubted or disbelieved by the Assessing Officer without any sum and substance and without any basis whatsoever. Onus of proving the transactions had been discharged by the assessee as the circumstantial evidence adduced showed the genuineness of the loans and the identity of the creditors had also been established.

It can never be within the exclusive knowledge of the debtor to know the sources of income of the creditor. Once he is supplied the credit that he- wants, he is satisfied. Once he has furnished the true identity, the correct address of the creditor, he has fulfilled his obligation under the Act. The assessee is not supposed to know the capacity of the money lender or the cash creditor. It is within the exclusive domain of the creditor. It is for that specific purpose that Section 131 of the I .T. Act has been introduced so that in case of any suspicion, the ITO or the authorities concerned may exercise the power of a Civil Court under that provision and call upon the creditor concerned to prove his capacity to pay and the genuineness of the transaction. Once the ITO or the authority concerned is satisfied that the creditor is not telling the truth, it has been left open to the assessee to discharge his subsequent onus of providing the genuineness of the transaction and the capacity of the creditor to pay by cross-examining him.

SUBMISSION

The moot question involved in the present appeal for consideration is as to whether the respondent is entitled to be assessed for receipt of loan of Rs.29,00,000/- as income in consonance with section 68 of the' Income Tax Act, 1961, in as much as the impugned order against which the present appeal has been preferred by the appellant part of the loan amount has already been repaid. l.That the factual matrix as is admitted by the parties "is that the appellant/Bharat Bhusan Deo during the assessment year 2007-08 had received loan from different parties to the tune of Rs.29,00,000/-and the enforceable liability is treated as income while passing the assessment order. The observation arrived at by the learned assessing officer is nothing but perverse in as much as based on absolute -surmises, conjectures, presumptions, suspicions, etc. and far away from the legal position of law.

"Presumption"/ "Suspicion", however strong, cannot take the. form of "Evidence''. The assessee has come out with necessary supporting materials, documentary evidences and* individual confirmations. Neither any contradiction, nor any in-genuineness could - be substantiated by the CIT(A) except merely disbelieving the assessee's submissions and evidences. Principle of preponderance of probability has no. role to play in assessment matters which are only to be decided on "evidences".

2.It is quite relevant to mention here that the learned Commissioner while dealing with the appeal preferred at the instance of the appellant has not discussed the entire factual matrix of the case as well as the settled legal propositions and passed the impugned and erroneous order which is under challenge in this appeal. The loan which is refundable being enforceable liability has been wrongly assessed as income. 3.The CIT(A) without thorough examination of the facts of the case, without careful and judicious perusal of the documentary evidences produced before him and without taking.any personal depositions for cross examination of the loan creditors and without giving sufficient opportunity to the assessee, accepted and upheld the view of the assessing officer and passed the order. PRAYER In view of the contentions advanced hereinabove with reference to the settled position of law propounded by the judicial authority by way of judicial pronouncement, it is clear that the learned Commissioner of Income Tax (Appeals) erred in confirming, accepting and upholding the assessment order thereby giving effect to the addition of Rs.29,00,000./-as income on the appellant u/s.68 of the IT Act,1961. Accordingly, it is -prayed that the present appeal filed by the appellant may please be allowed.

In addition to the written submissions, he submitted that the assessee had filed confirmations of the loan creditors and he has discharged his liability for proving the genuineness of the loan, identity and creditworthiness of the creditors and the revenue authorities did not call for any loan creditors if he was in doubt he should have been issued notice u/s.133(6) of the Act or summons u/s.131 of the Act to the concerned loan creditors for proving the genuineness of the loans received in cash and he also further submitted that the assessee has repaid the loans by way of cheques in the subsequent years which has not been considered by any of the authorities.

7. Considering the submissions of both the sides and perusing the entire material available on record as well as the orders of authorities below, we noticed that the assessee did not appear before the AO on the opportunity provided by the AO in the second round of proceedings, therefore, the AO added the entire loan was taken from cash below Rs.20,000/- or less received from his friends and relatives and staffs for non-compliance of the provisions of Section 68 of the Act as decided by various courts. In the original assessment proceedings also, the assessee could not substantiate the identity, creditworthiness and genuineness of the transactions. Before the CIT(A) the assessee submitted a ledger copy of loan confirmations, bank statements for repayments of loan but the CIT(A) was of the view that the assessee did not discharge his liability as cast upon him for proving the transactions undertaken by him regarding genuineness, creditworthiness and identity, therefore, he disallowed the entire additions made by the AO.

We also observe from the loan confirmations that the assessee has not provided complete address so that the revenue officers can make correspondence with the loan creditors. The address provided is incomplete like house no. street, area etc. has not been given creditworthiness of the loan creditors and genuineness of the transactions was also not proved and the entire loan was received in cash below Rs.20,000/- by the assessee. Even the PAN number is also not provided in many cases. Merely submission of confirmations from loan creditors is not sufficient, it is also noticed that it is incomplete also as observed above. The ld. AR of the assessee has argued that the revenue authorities should call to the loan creditors are also not correct because first it is the duty of the assessee to prove the loan. If he files complete details as required u/s.68 of the Act, then the liability for disregarding the documents submitted by the assessee is shifted upon the revenue authorities for verification which are lack in this case. In the peculiar facts and circumstances of the case, the case laws relied on by the ld.AR of the assessee are not applicable in the present case in hand. In the totality of facts and circumstances of the case and after carefully perusing the observations of the CIT(A) in this regard, we are of the opinion that no interference is required in the findings recorded by the CIT(A). Accordingly, we uphold the same and dismiss the grounds of appeal raised by the assessee.

Order pronounced in the open court on 31/08/ 2020. Sd/- Sd/- (C.M.GARG) (L.P.SAHU) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER कटक Cuttack; ददनाांक Dated 31/08/2020 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीऱाथी / The Appellant- 1. Sri Bharat Bhusan Deo, At/Po: Baragadia, Dist-Jajpur प्रत्यथी / The Respondent- 2. ACIT, Circle-1(1), Cuttack आयकर आयुक्त(अऩीऱ) / The CIT(A), 3. आयकर आयुक्त / CIT 4. ववभागीय प्रनतननधध, आयकर अऩीऱीय अधधकरण, कटक / DR, ITAT, 5. Cuttack गार्ा पाईऱ / Guard file. 6. सत्यावऩत प्रनत //True Copy// आदेशािुसार/ BY ORDER,

(Senior Private Secretary) आयकर अपीऱीय अधिकरण, कटक/ITAT, Cuttack