NETAFIM AGRICULTURAL FINANCING AGENCY PVT LTD,MUMBAI vs. ACIT CIRCLE 15(2)(1), MUMBAI

7. The First Appellate Authority erred in understanding the facts that the order cannot be passed against the appellant by completely ignoring the submissions made without offering any valid reasons as to why the said submissions are not acceptable to the revenue.

8. The First Appellate Authority has completely ignored the submissions made by the appellant with the assessing officer which was in turn submitted to the First Appellate Authority as well and has to the contrary has erred in passing order by stating that the details were not submitted to the assessing officer at all. For these reasons and for any other reason that may be adduced at the time of hearing, it is prayed that the Hon'ble Tribunal may be pleased to direct that the order of the First Appellate Authority (E-Appeals) to the extent agitated herein is not in accordance with law and facts and circumstances of the case and allow the appellant's contention.”

3. Brief facts of the case are that the assessee filed its return declaring total income of Rs. 3,45,92,760/- on 31.10.2017. The case was selected for complete scrutiny for verification of the high-value receipt of cash deposit shown during A.Y. 2017-18 Netafim Agricultural Financing Agency the demonetisation period. The assessee company is engaged in the business of providing agricultural loans to farmers and others for the purchase of drip irrigation systems. During the demonetisation period, some of the customers deposited a total of Rs. 35,04,033/- in the assessee’s bank accounts maintained with Yes Bank Ltd. and HDFC Bank Ltd. The details of these deposits were obtained from the two banks by Ld. AO, and the assessee was asked to submit the names of the borrowers along with the amounts deposited by them during the demonetisation period. The assessee submitted a list of 14 parties who had made these deposits, and therefore, notices were issued u/s 133(6) by the Ld. AO to the persons/entities who had deposited more than Rs. 3,00,000/- in the assessee’s bank accounts for verifying the identity, creditworthiness and genuineness of the transactions. However, no response was received from any of these entities, and accordingly, the assessee was asked to show cause as to why the cash deposited during the demonetisation period should not be added to its income and charged to tax at the prescribed rate. Since the assessee failed to discharge its onus of proving identity, creditworthiness of the depositors and genuineness of the transactions, the Ld. AO added the sum of Rs. 34,20,458/- to the assessee’s income u/s 68 r.w.s. 115BEE of the Act and finalised the assessment at an income of Rs. 3,80,13,218/- vide order u/s 143(3) dated 28.12.2019.

A.Y. 2017-18 Netafim Agricultural Financing Agency 4. Aggrieved with the order of Ld. AO, the assessee preferred an appeal before the Ld. CIT(A). The appeal of the assessee was dismissed by Ld. CIT(A) with the following observations: 4.3 I have considered the grounds raised in the appeal, assessment order, submission of the appellant. During the course of appellate proceedings, the appellant has submitted that the appellant has received Rs. 35,04,033/- repayments from its borrowers to whom loan has been given to various parties. The receipt of Rs. 35,04,033/- has been through cash where the borrowers have directly deposited the cash in the bank account of the appellant. 4.3.1 In order to verify the identity, creditworthiness and genuineness of the persons/entities who have deposited more than Rs 3,00,000/- in assesse's account notice u/s 133(6) of the Act were issued and served However, there was no response from the said entities/persons. The AO vide letter dated 16.12.2019 requested the assessee to produce all the creditors from whom the unsecured loan were taken. The assessee failed to discharge its onus. By non production, the assessee did not discharge its onus of proof neither did it try to shift the onus back to the revenue 4.3.2 If someone has deposited cash then the depositor would know the appellant very closely. If it is so then appellant should be in a position to file the confirmation and other details like their IT returns, bank details and bank statements and even produce the depositor/s before the AO. Depositor should also be willing to substantiate the transaction. However despite being specifically asked for, the appellant failed to file any documents before the AO. This is very important aspect that highlights that the 'apparent is not real. There is something wrong with the entries appearing in the books of the appellant. Non filing of any of the details asked for, by the appellant conclusively proves that the unsecured loan entries appearing in the books of the appellant are not genuine. Discussing a similar situation Hon'ble Supreme Court in Durga Prasad More [1971]

82. ITR 540 (SC) held. "Now we shall proceed to examine the validity of those grounds that appealed to the learned judges. It is true that the apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self- serving statements in documents either executed or taken by a party and rely on those recitals If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents,"

A.Y. 2017-18 Netafim Agricultural Financing Agency 4.3.4 The appellant simply filed the details, which were not filed before the AO during the course of assessment proceedings, cannot be accepted at this juncture. In view of the facts of the case mentioned above and the judicial pronouncements discussed above, I agree with the AO that these are unexplained cash credits in the books of the appellant and the addition of Rs.34,20,458/- as bogus and is confirmed. Hence, all the grounds raised in this appeal are dismissed.”

5. Before us, Ld. AR submitted a paper book containing copies of loan documents, some of the confirmations, along with written submissions, wherein it has been contended that the impugned cash was directly deposited in the bank accounts of the assessee by the borrowers and that no cash deposit has been made by the assessee itself. Simply because the AO was unable to get requisite details/response from the borrowers after issuing of notices u/s 133(6) does not put a burden on the assessee to ensure that they respond to the notices. Further confirmations in respect of two of the parties were submitted by the assessee. However, these were not considered while passing the assessment order. It has been contended by the Ld. AR that the requirement of establishing genuineness of the transaction has been fulfilled by submitting internal KYC documents by the assessee. It has further been stated by the Ld. AR that no cognizance has been taken of the proofs submitted before the AO as well as the CIT(A) and the addition made by the Ld. AO is without any basis and deserves to be deleted.

6. On the other hand, Ld. DR has strongly relied on the orders of the lower authorities and has argued that the plea of the assessee that he did not come to know about the deposits made in its accounts by third parties is not acceptable, A.Y. 2017-18 Netafim Agricultural Financing Agency as the assessee, being an Non-Banking Financial Company (NBFC), is required to exercise due diligence with regard to the transactions with its borrowers including deposits in its bank accounts especially during demonetisation period when huge cash has been deposited. Since there was no response from the depositors to the notices issued u/s 133(6) of the Act by the Ld. AO, it was the duty of the assessee to prove the identity and creditworthiness of its borrowers and the genuineness of the transactions. Simply providing the name, PAN and address of the parties is not enough to prove the genuineness of the transactions, and hence, Ld. AO has rightly invoked the provisions of Section 68 of the Act.