KBJ DEVELOPERS PVT LTD,MUMBAI vs. ASST COMMISIONER OF INCOME TAX- 4(2)(1), MUMBAI

Both the appeals are having involved identical facts and issues and, therefore, for the sake of brevity, the same were heard together and are being disposed of by this composite order by taking into consideration the facts of as a lead case, and result of the same shall apply mutatis mutandis to both the appeals under consideration. the instant case, the Assessee had shown loss of Rs. (-) 9,03,171/- by filing its return of income for the assessment year under consideration on dated 25/09/2012, which was initially processed by the CPC u/sec. 143(1) of the Act and subsequently, selected for scrutiny under CASS. Accordingly, statutory notices dated 09/08/2013 u/sec. 143(2) and 07/08/2014 and 30/09/2014 u/s 142 (1) of the Act, along with questionnaire were issued to the Assessee, whereby, Assessee was asked to furnish the required details for completion of assessment proceedings.

The Assessing Officer (AO) thus on perusing the details filed by the Assessee, observed “that the Assessee is engaged in the business of construction and from the accounts and tax audited report of the Assessee, it appears that the Assessee had taken unsecured loan of Rs. 37,13,24,958/- from various parties” and therefore in order to verify the transactions, asked the Assessee to prove the creditworthiness and genuineness of the parties, from whom the loans were taken and confirmation of the parties as well.

The AO further, on the basis of the submissions given by the Assessee, sent notices u/sec. 133(6) of the Act to various parties out of which, notices sent to two parties namely (i) Pilot Constructions Pvt. Ltd. (Rs. 7,00,00,000) and (ii) Mumbadevi Bullion (Rs. 14,48,20,650) returned unserved with the postal remarks ‘left/ not known’ and therefore the AO on this reason, show caused the Assessee, who though submitted the details regarding the above said parties, but the same were not found acceptable by the AO, who ultimately made the addition of Rs. 21,48,20,650/- and added back to the total income of the Assessee.

The AO further considered the loan confirmations of unsecured loans provided by the Assessee vide letter dated 20/03/2015 and noticed that Assessee has filed confirmation letters in respect of few parties but without supporting documents, such as, ledger account, copy of return of income, balance sheet, profit and loss account etc. In absence of these supporting documents, genuineness and creditworthiness of the parties could not be verified. The AO further observed that despite of affording several opportunities to the Assessee, it has neither filed any supporting documents nor cogent explanation, in respect of the following parties: - Sr. No. Name of the party Amount (in Rs.) 1 Aksha Realty Ltd. 47,308 2 B. Chandan 11,00,000 3 Dev Jewels 10,26,85,000 4 Dinesh Parmar 10,00,000 5 Girdhai Jain Sanghvi 23,44,000 6 G.J. Jalshinghani 10,00,000 7 Javed Raza Shroff 55,00,000 8 Kalawati P. Kothari 21,00,000 9 Mukesh Mehta 5,00,000 10 Sancheti and Sons 2,50,000

The AO also by perusing the AIR information also noticed that Assessee has sold a property i.e. Plot No. 564, sub-urban scheme No.3, Chembur, admeasuring 418 sq.ft. for Rs. 1,92,86,000/-, but has not disclosed the said transaction in ITR. Therefore, the AO collected the information from the office of Joint Sub-Registrar, Kurla-3 and purchaser {M/s. Jay Ambe Developers}, who both confirmed the aforesaid transactions and, therefore, the AO ultimately added the market value of land at Rs. 1,92,86,000/-, in the total income of the Assessee.

The Assessee, being aggrieved, challenged the said additions by filing first appeal before the Ld. Commissioner, who by impugned order deleted some of the additions and affirmed the rests, therefore, both the parties have preferred their respective appeals which are under consideration.

First, we will deal with the appeal field by the Revenue Department against the deletion of some of the additions. The grounds of appeal raised by the Revenue Department, are as under: “1) Whether on the facts and circumstances of the case, the Ld. CIT(A)/NFAC is right in deleting the disallowance of Rs. 1,30,40,000/ - made by the AO?

Ground of appeal

The Ld. Commissioner on perusing the records, duly recognized the aforesaid facts and found the contention/submission along with the documents made by the Assessee as true, and therefore, held that no differential amount can be legitimately arrived at, which could attract addition made by the AO. The Ld. Commissioner also observed that the disallowance made in para 7 of the assessment order, the AO has taken unsecured loan figure as Rs. 35,14,90,958/-, which is more than total unsecured loan taken by the Assessee during year and this fact has neither seen nor taken in account by the Ld. AO, which is a grave error, therefore, no such addition can be made, as there exists no difference as concluded by the AO. The Ld. Commissioner, therefore, on the aforesaid facts and circumstances and documents available on record and verifying independently, ultimately deleted the addition of Rs. 1,30,40,000/- made by the AO.

We have given thoughtful consideration to the decision of the Ld. Commissioner in deletion of the addition of Rs. 1,30,40,000/- as observed above. The Assessee before the Ld. Commissioner demonstrated the real figures, such as, closing balance as on 31/03/2012 and opening balance as 01/04/2012 and also filed the relevant documents in support of such claim. Therefore, the Ld. Commissioner by examining such peculiar facts and circumstances and making verification independently, ultimately deleted the addition. Thus, we are of the considered opinion that the decision of Ld. Commissioner in deletion of the addition under consideration neither suffers from any perversity nor impropriety or illegality, as the same is based on independent analyzation of relevant documents and facts and circumstances of the case, as observed above. Thus, the decision of the Ld. Commissioner in deleting the addition of Rs. 1,30,40,000/- is affirmed. Consequently, Ground No.1 raised by the Revenue Department is dismissed.

Grounds of appeal

The Assessee before the Ld. Commissioner has claimed that in order to prove identity, genuineness and creditworthiness of the parties, has provided details of loan amounts taken, list of parties containing 26 names with the addresses, their PAN nos., AO’s jurisdictions, ITR acknowledgments, ledger account and bank account statements highlighting loan amounts taken. The Assessee also claimed that details of all 13 parties, which were in question before the Ld.AO, were very much in the list of 26 names, as appears from the list reproduced herein below: -

Ledger account 3 Choksi Arun AABPM6376N 23-26 2,00,000 Ganesh 2. Confirmation account (Arunkumar 3. ITR acknowledgment Rajkumar Mehra) 4. Bank statement 4 Rajesh Amrutlal AAAPJ8106A 1. Ledger account 27-51 4,00,000 Jain 2. Confirmation account 3. ITR acknowledgment 4. Bank statement 5 Rakhi Kapil AAJPP6966H 1. Ledger account 52-55 2,00,000 Parekh 2. Confirmation account 3. ITR acknowledgment 4. Bank statement 6 Shashikala Jain ADTPJ0696D 1. Ledger account 56-59 10,00,000 2. Confirmation account 3. ITR acknowledgment 4. Bank statement 7 Shree Ramashree AAICS1687C 1. Ledger account 60-63 50,00,000 Const. (P) Ltd.

ITR acknowledgment 4. Bank statement 9 Vagrecha Kamlesh AAAPV5510C 1. Ledger account 101-04 2,00,000 B 2. Confirmation account 3. ITR acknowledgment 4. Bank statement 10 Vinod G Jain AAIPJ3836D 1. Ledger account 105-08 5,00,000 2. Confirmation account 3. ITR acknowledgment 4. Bank statement 11 A.H. Pokharana AISPP5282H 1. Ledger account 109-12 15,00,000 Jewellery (Amit 2. Confirmation account Anil Pokharana) 3. ITR acknowledgment 4. Bank statement 12 Asiya Idris Shaikh MIFPS9263N 1. Ledger account 113-15 25,00,000 2. Confirmation account 3. ITR acknowledgment 4. Bank statement 13 Sanjay Shantilal AABPJ3761A 1. Ledger account 116-19 15,00,000 Jain 2. Confirmation account 3. ITR acknowledgment 4. Bank statement 14 Pilot Construction AACCP2128D 1. Ledger account 120-24 7,00,00,000 P. Ltd. 2. Confirmation account 3. ITR acknowledgment 4. Bank statement 15 Mumbadevi ASXPM8236D 1. Ledger account 125-35 14,48,20,650 Bullion (Irtesh 2. Confirmation account Jawaharlal 3. ITR acknowledgment Mishra) 4. Bank statement 16 Aksha Realty AADCK6060G 1. Ledger account 136-38 47,308 (KBJ Hotel 2. Confirmation account Varanasi Ltd.) 3. ITR acknowledgment 4. Bank statement 17 B. Chandan & Co AFQPJ4084E 1. Ledger account 139-42 11,00,000 (Manikumari 2. Confirmation account Chandanmal Jain) 3. ITR acknowledgment 4. Bank statement 18 Dev Jewels (Dev AYXPG4410F 1. Ledger account 143-50 10,26,85,000 Gupta) 2. Confirmation account 3. ITR acknowledgment 4. Bank statement 19 Dinesh Parmar AAAHD3898M 1. Ledger account 151-55 10,00,000

The Ld. Commissioner by considering the list submitted by the Assessee observed that addresses of all 13 parties, in question, are very much there in the list at serial No. 1 to 13. Therefore, the finding of the AO that no addresses of these 13 parties were provided, is factually incorrect and hence, the addition made only for the reason of not providing addresses, cannot be accepted, as the same is against the facts and cannot be sustained, and liable to be deleted. The Ld. Commissioner further observed that Assessee vide letter dated 07/08/2024 in ‘reply to point No.10’ before the AO submitted all the details of unsecured loans taken during the year along with names of the parties, from whom loans taken, PAN Nos., address of the parties along with ITR acknowledgments, ledger accounts and bank statements, highlighting loan amounts taken.

We observe from the orders of the authorities below and relevant material available on record that the facts as demonstrated by the Assessee are not in denial, to the effect that the Assessee has duly filed all the details with regard to the aforesaid 13 parties before the AO, such as PANs, ITR acknowledgments, ledger accounts and bank statements highlight the loan amount taken and by producing the list of 26 names, also provided their addresses, PAN nos. and AO’s jurisdiction and amounts taken, as well. . Thus, by considering the aforesaid peculiar facts and circumstances, the Ld. Commissioner though deleted the addition of Rs. 1,63,44,000/-, however, affirmed the addition of Rs. 2,50,000/- each, respectively in the cases of Bharat Mandalia and Chirag Vinodraj Mehta, which we will deal later in Assessee’s appeal. We also by independently verifying the aforesaid facts and circumstances, and documents, found that the decision of the Ld. Commissioner in deleting the addition under consideration, is not only based on the relevant documents submitted by the Assessee in order to discharge its prima facie onus casted u/sec. 68 of the Act, but also based on the independent verification by himself on the factual aspects and on the logical reasoning and material available on record and thorough examination of the details and documents, specifically, to the effect that the Assessee had duly provided the details of 13 parties by producing the details such as, ledger accounts, confirmation accounts, ITR acknowledgments and bank statements etc. Thus, the decision of the Ld. Commissioner in deletion of addition of Rs. 1,63,44,000/- in our considered view is correct and logical based on documents and plausible reasonings and therefore the same is sustained.

We further observe that AO also made the addition of Rs. 21,48,20,650/- mainly on the reason that the notices u/sec. 133(6) of the Act, sent to the following parties namely (i) Pilot Constructions Pvt. Ltd. (Rs. 7,00,00,000) and (ii) Mumbadevi Bullion (Rs. 14,48,20,650) returned unserved with the postal remarks ‘left/ not known’, which resulted into making the addition of Rs. 21,48,20,650/- by the AO.

The Assessee before the Ld. Commissioner, in respect of the aforesaid addition, more or less has claimed as under: -

The Ld. Commissioner thoroughly considered the aforesaid submissions of the Assessee and examined the details filed, and ultimately came to a conclusion that Assessee has explained the nature and source of transactions with supporting documentary evidence and legal mandate for enquiring into the source of credits as introduced in the Act vide Finance Act, 2012 w.e.f. 01/04/2013 applicable from FY 2013-14 onwards, therefore, for the assessment year in question, the Assessee is not legally bound to explain the source of source . Lack of statutory provision mandate, ties hands of the Income Tax authorities for making enquiries on the same. Further, mere return of notices u/s 133(6) of the Act sent, as unserved, cannot be a reason for making addition, where the Assessee has discharged its legal obligation explaining the nature and source of the impugned credits in the books. From the details and documents furnished by the Assessee, the identity, genuineness and creditworthiness of the two persons have been established satisfactorily. And therefore, in view thereof, the Ld. Commissioner, ultimately deleted the addition of Rs. 21,48,20,650/-.

The Ld. DR, therefore being aggrieved has claimed that admittedly the notices sent to the aforesaid parties were returned/unserved and, therefore, genuineness of the transactions of Rs. 21,48,20,650/- is in doubt, as mere furnishing the documents, are not sufficient to establish the genuineness.

On the contrary, learned counsel for the Assessee submitted that for making addition u/sec. 68 of the Act, non-serving notices u/sec. 133(6) of the Act, is not an exclusive criterion, but in fact, other factors also required to be seen. Admittedly, in this case, the Assessee has duly filed the relevant details/documents, such as, PAN nos., AO’s jurisdiction, copy of ledger accounts, copy of loan confirmations, copy of bank statements highlighting the amount of loan taken and copy of ITR acknowledgments along with annual financial statements of the Assessee and the parties, and therefore, Assessee has duly discharged its prima-facie onus casted u/sec. 68 of the Act. Learned Counsel further relied on the judgment of the Hon'ble Delhi Tribunal specifically in the case of CIT vs. HLT Finance Pvt. Ltd. [2011] 12 Taxmann 247 (Del.Trib.), wherein it has been held that Department would not be justified in drawing an adverse inference, only because the creditor/subscriber, fails or neglects to respond to its notices u/sec. 133(6) of the Act.

We have given thoughtful consideration to the peculiar facts and circumstances and determinations made by the authorities below and rival contentions raised by the parties. We observe that the Assessee by furnishing the relevant documents, has duly discharged its prima-facie onus casted u/sec. 68 of the Act. The Assessee by producing PAN nos. and ITR acknowledgments, has duly proved the identity of the parties. Further, by producing ledger account, loan confirmations and bank statements highlighting the amount of loans taken and copy of ITRs along with annual financial statements of the Assessee as well as lenders/creditors, demonstrated and/or established the genuineness of the transactions and the creditworthiness of the parties. Admittedly, in the assessment year under consideration, the Assessee was not supposed to establish the source of source, as has rightly been held by the Ld. Commissioner, as the amendment in the provision of section 68 of the Act, came into effect from 01/04/2013 and made applicable from A.Y. 2013-14 onwards as per Finance Act, 2012, and therefore the same is not to be applied for previous years.

We observe that with regard to this issue, whether non- serving the notices u/sec. 133(6) of the Act, would entail making the addition u/sec. 68 of the Act or not, there is plenty of judgments and thus for brevity and ready reference, we are quoting few, which are as under:

Considering the above, no substantial question of law arises. The appeal stands dismissed. However, there is no order as to costs.” 27.3 Further, the Hon’ble Jurisdictional High Court in the case of Creative World Telefilm Ltd. (2011) 15 taxmann.com 183 also dealt with the identical issue, wherein the summons sent to the creditors were ultimately returned back with an endorsement “not traceable”, whereas the Assessee by filing relevant document discharged its onus casted and the Hon’ble High Court in that eventuality affirmed the decision of the Tribunal in deleting the addition by following the judgment of Hon'ble Apex Court in the case of CIT Vs. Lovely Exports Ltd. (2008) 216 CTR 195 (SC). 27.4 We further observe that Hon’ble Delhi High Court in the case of Commissioner of Income Tax Vs Dwarikadish Investement (P) Ltd. {(2010) 194 Taxman 43(Delhi} as well, has also dealt with identical situation, wherein creditors/share applicants could not be found at the address given, and therefore the Hon’ble High Court has held that it would not give the Revenue the right to invoke section 68. One must not lose sight of the fact that it is the Revenue, which has all the power and wherewithal to trace a person. For brevity and ready reference, the conclusion drawn by Hon’ble High Court is reproduced herein below: “8. In any matter, the onus of proof is not a static one. Though in section 68 proceedings, the initial burden of proof lies on the assessee yet once he proves the identity of the creditors/share applicants by either furnishing their PAN number or Income-tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the revenue. Just because the creditors/share applicants could not be found at the address given, it would not give the revenue the right to invoke section 68. One must not lose sight of the fact that it is the revenue which has all the power and wherewithal to trace an person. Moreover, it is settled law that the assessee need not to prove the 'source of source”.

Coming to the instant case again, we observe that the AO and the Ld. DR in this case, stressed upon the facts that notices sent to two parties namely (i) Pilot Constructions Pvt. Ltd. (Rs. 7,00,00,000) and (ii) Mumbadevi Bullion (Rs. 14,48,20,650) returned unserved with the postal remarks ‘left/ not known’ and therefore, genuineness of the transactions of Rs. 21,48,20,650/- is in doubt, as mere furnishing the documents, are not sufficient to establish the genuineness and hence the addition is warranted. Whereas from the aforesaid judgments, it has become clear that the Revenue apart from issuing the notices u/s 133(6) or 131 of the Act, is supposed to pursue the matter further. Only because the creditors had not appeared before the AO, would not negate the case of the Assessee, who had produced the entire records. Simply returning of summons sent to the creditors with an endorsement ‘left/ not known’ would not entail making the additions, where the Assessee by filing relevant document, has specifically discharged its onus casted u/s 68 of the Act.

Coming to another addition Rs.11,98,26,308/- made by the AO, qua loans from following 12 parties: - Sr. No. Name of the party Amount (in Rs.) 1 Aksha Realty Ltd. 47,308 2 B. Chandan 11,00,000 3 Dev Jewels 10,26,85,000 4 Dinesh Parmar 10,00,000 5 Girdhai Jain Sanghvi 23,44,000 6 G.J. Jalshinghani 10,00,000 7 Javed Raza Shroff 55,00,000 8 Kalawati P. Kothari 21,00,000 9 Mukesh Mehta 5,00,000 10 Sancheti and Sons 2,50,000 11 Satish Goyal (HUF) 15,00,000 12 Lalit Mehta and Associates 18,00,000 Total 11,98,26,308 29.1 The AO observed that in response, the Assessee vide letter dated 20/03/2015 filed loan confirmations of unsecured loan, however, same were not supported by copy of ledger account, copy of return of income of the said parties, balance sheets, profit and loss account etc. In absence of these supporting documents, genuineness and creditworthiness of the parties could not be verified. Further, inspite of several opportunities offered to the Assessee, neither any of the supporting nor any cogent explanation for the aforesaid parties, have been filed by the Assessee. Thus, the AO on the aforesaid reasons, made the addition of Rs. 11,98,26,308/- accordingly.

The Assessee, before the Ld. Commissioner, on the contrary, claimed that during the course of assessment proceedings, the Assessee has duly submitted the following documents: - i. Details of unsecured loan taken along with relevant page of the balance sheet ii. details of the parties from whom laons are taken i.e. name, address, PAN and jurisdiction of the AO. iii. Copy of the ledger accounts iv. Copy of loan confirmations v. Copy of bank statements highlighting amounts of loan taken vi. Copy of the income tax return along with annual financial statement of Assessee 30.1 The Assessee has also claimed that it has been able to discharge its prima-facie burden/onus casted with reference to the genuineness of the transaction by filing necessary evidences, but still the AO made the addition, without applying his mind to the aforesaid documents.

We observe from the impugned order that the Ld. Commissioner thoroughly examined the issue, as well as list of 26 persons submitted by the Assessee and thus categorically held that in all these 12 cases, the Assessee has filed confirmations from the parties concerned and all these transactions are routed through banking channel, which are duly reflected in the books, therefore, the genuineness of the transactions also stands established, except in cases persons namely, Mr. B. Chandan, who has given Rs. 11.00 lac as unsecured loan and Mr. Girdhai Jain Sanghvi, who has given Rs. 23.44 Lac and Mr. G.J. Jaisanghani, who has given Rs. 10.00 Lac.

We have given thoughtful consideration to the peculiar facts and circumstances, again in respect of addition of Rs. 11,98,26,308/- and observe that the Assessee in order to discharge its prima-facie onus, has submitted all the relevant details and documents and thus satisfied the conditions enshrined in section 68 of the Act and therefore, Ld. Commissioner by thoroughly examining the same deleted the addition made on account of 10 parties, except 02 parties, which we will deal later in Assessee’s appeal. In our considered view, the decision of the Ld. Commissioner in deletion of addition qua 10 parties is not only based on the documents itself, but in fact the same is based on the independent verifications, analyzations and findings arrived at and therefore, the decision of the Ld. Commissioner in deleting the addition, does not require any interference. Thus, the decision of the Ld. Commissioner on this aspect, is hereby upheld.

Coming to ultimate finding of the AO in respect of addition of Rs. 35,14,90,958/- in total, treating as unexplained cash credit taxable u/sec. 68 of the Act. We observe that AO ultimately held that when the Assessee receives any loans, primary onus is on the Assessee to establish the genuineness of the same, but in the instant case, Assessee has not even been able to file confirmations from the parties, which have lent loan and therefore, the amount of Rs. 35,14,90,958/- is held to be unexplained cash credit, taxable u/sec. 68 of the Act.

The aforesaid finding of the AO, appears to be contrary to the documents submitted by the Assessee, such as, details of unsecured loans taken along with relevant pages of balance sheets, details of the parties from whom loans were taken i.e. name, address, PANs and jurisdiction of the AOs, copy of ledger accounts, copy of loan confirmations, copy of bank statements highlighting amounts of loan taken and copy of ITRs along with annual financial statements of the Assessee and lenders and copy of acknowledgment of detailed submissions filed by the Assessee before the AO. These facts were also duly examined by the Ld. Commissioner independently and, therefore, on examining, the Ld. Commissioner held that provisions of section 68 of the Act, will not be attached. The Ld. Commissioner further observed that the amended provisions of section 68 as introduced by Finance Act 2012, came into effect from 01/04/2013 and, therefore, those provisions are effectively from FY 2013-14 onwards and not for the instant assessment year, which is A.Y. 2012-13.

We further observe that the Hon'ble Apex Court in the case of Lovely Exports 317 ITR 218, which is a landmark and celebrated judgment, on the issue qua share application money added u/s 68 of the Act, which is parimateria to the addition made qua loan u/s 68 of the Act, where the Hon'ble Apex Court has clearly laid down “ that if share application money is received by the Assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law, but the share money cannot be regarded as undisclosed income u/sec. 68 of the Act”.

Copy of sale agreement dated 25.05.2011.

Copy of relevant page of Balance Sheet as on 31.03.2012 along with summary of inventory.”

The Assessee further claimed that the property was purchased on a consideration of Rs. 51.00 Lac on 10/11/2008 and sold the same for a consideration of Rs. 54.00 Lac on 02/05/2011. Further perusing the audited books of account for the A.Ys . 2010-11 to 2012-13 and summary of stock, it can be observed that Assessee has recorded the said property in the audited books of accounts as ‘inventory’ and has also considered the receipt of payment, as recorded in the books of accounts, while filing return of income, as per the provisions of the Act and, therefore, the action of the AO, is without application of mind and consequently the addition of Rs. 1,92,86,000/- is liable to be deleted.

We observe that Ld. Commissioner by thoroughly examining the issue under consideration and the relevant documents filed by the Assessee deleted the said addition by observing and holding as under: “That from the documents available on record, it is seen that actual sale consideration received by the Assessee on the said property is of Rs. 54.00 Lac, as is evident from the bank statement and also from the sale deed. Further, stamp duty was paid by the purchaser for Rs. 1,38,86,000/- and therefore, the differential amount between the stamp duty valuation and the actual sale consideration received, possesses the potential of assuming the nature of ‘income from other sources’ u/sec. 56(2)(x)(b)(B) of the Act, but that enabling provision in the Act has been introduced only w.e.f. 01/04/2017, whereas the relevant assessment year under consideration is A.Y. 2012-13 and the same cannot be applied here. Any such effort, in doing so would be without the authority of law. Further from the records, it is seen that actual amount received by the Assessee as sale consideration is only Rs. 54.00 Lac, which has duly been accounted for in the books. The amount of Rs. 1,38,86,000/- would also be contestable, if the stamp duty value of purchase and other related expenses are taken into account. However, the profit arising from the transfer of the said property of Rs. 3.00 Lac (Rs. 54.00 Lac – Rs. 51.00 Lac) being the stock in trade of the Assessee, has not been offered for taxation as income from business (revenue from operations). Such revenue is shown in the profit and loss account as 0.00 for the current A.Y. under the head ‘other income’. Further, vide note no. 19 of the audited accounts also, no such income is offered (even if offered, it may not be under the right head), hence, the addition of Rs. 1,89,86,000/- hereby deleted and the addition of Rs. 3.00 Lac is sustained”.

Thus, the Revenue being aggrieved through ld. DR has claimed that the aforesaid addition was made by the AO on the basis of documents and third party evidence. The said transaction of sale of land was not reflected in the Assessee’s return of income or audited accounts at the time of scrutiny. Only based on the enquiry, the Assessee admitted the transactions, which appears to be an afterthought and, therefore the findings in the assessment order, may kindly be upheld, by allowing appeal of the Revenue Department 40. On the contrary learned Counsel for the Assessee refuted the claim made by the Ld. DR by submitting that the Assessee has duly filed the documents and also demonstrated that it has shown the consideration of Rs. 54.00 Lac in the audited books of accounts and, therefore, it cannot be said that the Assessee has not offered the said amount for taxation.

We have considered the determinations made by the Authorities below and rival claims of the parties on the issue under consideration and given thoughtful consideration to the peculiar facts and circumstances of the case. Admittedly, the Assessee before the Authorities Below as well as before us, has duly filed aforesaid documents, which are sufficient to establish the genuineness of the claim. Further, the Assessee by producing the relevant pages of balance sheets, as on 31/3/2009, 31/03/2010, 31/03/2011 & 31/03/2012 along with summary of “inventory” and “sale of stock”, has duly demonstrated that it has duly disclosed the amount of consideration received by it. It is also a fact that Ld. Commissioner thoroughly examined the documents as well as facts independently by applying his independent mind and even otherwise, upheld the addition to the extent of Rs. 3.00 Lac by considering the peculiar facts and circumstances and observing that though differential amount between the stamp duty valuation and actual sale consideration received, is liable to be taxed, as per provisions of section 56(2)(x)(b)(B) of the Act, however, enabling provision in the Act has been introduced only w.e.f. 01/04/2017, whereas the relevant assessment year herein is A.Y. 2012-13, therefore the same cannot be applied here.

Now, coming to the appeal filed by the Assessee, we observe that Assessee is aggrieved against the decision of the Ld. Commissioner affirming the following additions:

We will deal with the additions affirmed by the Ld. Commissioner, one by one.

Coming to the 1st addition of Rs. 2,50,000/- with regard to Mr. Bharat Mandalia, we observe that the Ld. Commissioner affirmed the said addition mainly on the reason that in the bank account statement (A/c. No. 319801010039108) submitted by the Assessee, there is no such amount is found credited on that date and not even in the nearby dates. Though there is confirmation from the said party but still creditworthiness of the party is not proved, therefore, the same cannot be allowed.

Learned counsel for the Assessee drew our attention to the documents filed in the paper book, such as, ledger account of the Assessee and confirmation of Mr. Bharat Mandalia with regard to receipt of Rs. 2,50,000/- on 22/03/2012. Further, the Assessee also drawn attention of this Court to ITR acknowledgment of Mr.Bharat Mandalia, as well as bank statement of Union Bank of India, wherein the entry of Rs. 2,50,000/- is depicting on 27/03/2012 vide instrument No. 945604, MICR outward clearing. Further in the chart containing the details/summary of unsecure loans, the Assessee has specifically mentioned about the documentary evidences filed i.e. ledger account, confirmation account, ITR acknowledgment and bank statement and therefore, addition as confirmed by the Ld. Commissioner, is un-sustainable. However, we observe from the bank statement of Union Bank of India, that though a credit entry of Rs. 2,50,000/- through instrument vide instrument No. 945604, MICR outward clearing dated 27/03/2012 is appearing, however the balance amount as on 27/03/2012 after credit entry, is still depicting low, in comparison to previous date, thus this fact requires verification by the Jurisdictional Assessing Officer. Hence on the aforesaid reasons, the Jurisdictional AO is directed to delete the addition, after verifying the credit entry of Rs. 2,50,000/- from Bank statements etc..

Coming to the addition of Rs. 2,50,000/- in respect of Mr. Bharati B Mehta (correct name Chirag Vinodraj Mehta), Ld. Commissioner affirmed the addition made by the AO mainly on the reason that in the bank statement of Union Bank of India (A/c No. 319801010039108) submitted by the Assessee, there is no such amount is found credited on that date or nearby dates in the said account. Though, there is confirmation from the said party however creditworthiness of the parties is not proved, as from the ITR of the party, it is seen that the total income of the said person only Rs. 2,02,880/- for A.Y. 2012-13, therefore same cannot be allowed. The Assessee again drew our attention to the relevant documents placed at page Nos. 19 to 22 in the paper book, and demonstrated that ledger account depicting the amount of Rs. 2,50,000/- received from Mr. Bharati B Mehta (correct name Chirag Vinodraj Mehta). Further, from page No.20 demonstrated the confirmation which is also accepted by the Ld. Commissioner and, therefore, there is no controversy with regard to that. Further, from the bank statement of Union Bank of India, the Assessee has demonstrated the entry of Rs. 2,50,000/- through instrument No.689150, MICR outward clearing being, credited on dated 27/03/2012. Further, the Assessee by producing the ITR acknowledgment, has also demonstrated the active status of Mr. Bharati B Mehta (correct name Chirag Vinodraj Mehta) and, therefore, in our considered view the Assessee has duly discharged its onus casted u/sec. 68 of the Act. Even otherwise, simply on the reason that investor has low income as compared to investment made, is no ground for making the addition u/s 68 of the Act as there is no requirement under the law that Investor has to make the investment out of income only. For the purpose of section 68 of the Act, what is relevant is the source of credit. The investor may have many sources for making the investment viz. loans, his owned accumulated funds and income etc. Further investor may have non-taxable income but still can give meager amount of Rs. 2,50,000/- as involved in this case. Thus, simply on the basis of low return of income, the genuineness of the loan transaction and/or creditworthiness of the creditor, cannot be doubted. And therefore, addition as affirmed by the Ld. Commissioner, is un-sustainable, however, we observe from the bank statement of Union Bank of India, there appears a credit entry of Rs. 2,50,000/- through instrument No.689150, MICR outward clearing dated 27/03/2012, however the balance amount as on 27/03/2012 after credit entry, is still depicting low in comparison to previous date, thus this fact requires verification by the Jurisdictional Assessing Officer. Hence on the aforesaid reasons, the Jurisdictional AO is directed to delete the addition, after verifying the credit entry of Rs. 2,50,000/- from Bank statements etc..

Coming to the 3rd addition of Rs. 11,00,000/- on account of unsecured loan taken from B. Chandan, we observe that Ld. Commissioner by holding that though the Assessee has furnished confirmation of bank proof, but creditworthiness of B. Chandan left unproved. We observe that the Assessee by submitting relevant documents i.e. page nos. 139 to 142, which are the ledger account of the Assessee, depicting receipt of Rs. 11,00,000/- from B. Chandan & Co, bank statement crediting the amount of Rs.11,00,000/- on dated 10/01/2012, ITR acknowledgment depicting PAN no., address and details of jurisdictional AO, has established the identity and creditworthiness of the lender party and genuineness of the said loan amount and therefore, in our considered view, the Assessee has duly discharged its onus casted u/sec. 68 of the Act. Thus, on this aspect as well, no addition is warranted and, therefore, the addition of Rs. 11,00,000/- on account of unsecured loan taken from B. Chandan, made by the AO and sustained by the Ld. Commissioner, is deleted.

Coming to the 4th addition of Rs. 33,44,000/-, we observe that in the assessment order, the AO mentioned the fact that Assessee has received Rs.23,44,000/- from Girdhai Jain Sanghvi and Rs. 10,00,000/- from G.J. Jalshinghani, and therefore he made the addition of Rs. 33,44,000/- mainly on the reason that Assessee has failed to establish the genuineness of the same and also not able to file confirmation from the parties.

We have given thoughtful consideration to the peculiar facts and circumstances of the case and the documents available on record on the issue under consideration. Again perusing the chart/ summary containing unsecured loans, we observe that at serial No. 20, the name of this person is depicting as “Girdhai Jain Sanghvi” and in respect of his loan entry, the ledger account, confirmation, ITR acknowledgment and bank statement, have duly been submitted before the authorities below and even otherwise, Ld. Commissioner verified the ledger copy and bank statement indicating the credit of entry of Rs. 23,44,000/- and Rs. 10,00,000/- (in total Rs. 33,44,000), but the Ld. Commissioner simply affirmed the addition mainly on the reason that person Girdhar Jaindrai Jaisinghani had no visible or reasonable creditworthiness, because of low return of income. As observed above that simply on the reason that investor has low income as compared to investment made, is no ground for making the addition u/s 68 of the Act as there is no requirement under the law that Investor has to make the investment out of income only. For the purpose of section 68 of the Act, what is relevant is the source of credit. The investor may have many sources for making the investment viz. loans, his owned accumulated funds and income etc. Thus, simply on the basis of low return of income, the genuineness of the loan transaction and/or creditworthiness of the creditor, cannot be doubted, specifically in a case where the Assessee has duly discharged its prima-facie onus casted u/sec. 68 of the Act. 49.1 As the Assessee before the Authorities below has duly filed the relevant details, such as PAN, details of the lender, jurisdiction of the AO and substantiated the amount of loan by producing the relevant documents, such as ledger account, confirmation from the lender and bank statement depicting the entry. Thus, the Assessee has duly discharged its liability/onus casted u/sec. 68 of the Act and, therefore, no addition u/sec. 68 of the Act, in any case would be sustainable, in view of the judgments of the Hon'ble Apex Court in the case of Commissioner of Income-tax Vs. Lovely Exports (P.) Ltd. (supra) wherein it has been held that once the Assessee discharged the burden casted u/sec. 68 of the Act, then the department can initiate action against the lenders, but cannot treat the amount of loan, as undisclosed income u/sec. 68 of the Act. And in the case of PCIT Vs. High-tech Residency Pvt. Ltd. (2018) 257 taxmann.com 335 (SC), wherein it has been held that where an Assessee company had discharged the onus of establishing identity, genuineness of transactions and creditworthiness of investors, then no addition can be made u/s 68 of the Act.

Resultantly, the appeal of the Assessee is allowed, subject to verification, as directed above in para no. 45 and 46.

In the result, appeal filed by the Revenue is dismissed and that of Assessee is allowed, subject to verification, as directed above in para no. 45 and 46.