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Facts
The assessee company took loans from various parties aggregating to Rs.3,85,50,000 during AY 2009-10. The AO assessed this amount as unexplained cash credit. The CIT(A) granted partial relief, deleting some additions and confirming others.
Held
The Tribunal held that the assessee discharged the initial onus for most creditors by providing identity, creditworthiness, and transaction genuineness, except for Shri Anil Jadhav. The AO failed to disprove the submissions for the deleted additions.
Key Issues
Whether the assessee discharged the onus under Section 68 for the cash credits, and whether the AO discharged the burden to disprove the assessee's submissions.
Sections Cited
68, 133A, 131, 142(1), 133(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI “A” BENCH : MUMBAI
Before: SHRI B.R. BASKARAN & SHRI NARENDER KUMAR CHOUDHRY
ORDER PER B.R. BASKARAN, A.M : The cross appeals are directed against the order dated 11-11-2024 passed by the Ld CIT(A)-51, Mumbai and they relate to the AY.2009-10. The Ld CIT(A) granted partial relief in respect of addition made by the AO u/s 68 of the Income Tax Act, 1961 („the Act‟). Hence, both the parties are in appeal before the Tribunal.
The assessee was earlier known as KBJ Developers Ltd. It is engaged in real estate business of constructing and selling residential and commercial properties. The revenue carried out survey operation u/s 133A of the Act in the hands of the assessee on 13-08-2008. During the course of survey operations, it was noticed that the assessee has taken money from 26 persons aggregating to Rs.3,85,50,000/-. In the statement taken from Director of the assessee company named Shri Mohit Kamboj, he stated that they are short term loans obtained by the assessee company from market @ 12% without giving any security. In view of the survey operations, the return of income filed by the assessee for the year under consideration was taken up for scrutiny by the AO. During the course of assessment proceedings, he issued summons u/s 131 of the Act to all the creditors. In response thereto, one person named Smt Beena Dipesh Chheda attended and stated that no agreement was entered for giving loan. There was no response from remaining persons. Before the AO, the assessee furnished copies of Memorandum of Understanding entered with those persons stating that they are investors.
Thereafter, the AO, vide notice u/s 142(1) of the Act dated 07-12-2010, asked the assessee to furnish complete details of loans taken and the assessee, vide its submissions dated 22-12-2010, furnished various details relating to the loans/investments that were called for by the AO. The assessing officer, however, assessed the credit amount of Rs.3,85,50,000/- as unexplained cash credit u/s 68 of the Act.
In the appellate proceedings, the Ld CIT(A) classified all cash credits aggregating to Rs.3,85,50,000/- into four categories. Out of them, the Ld CIT(A) held that first three categories do not call for any addition u/s 68 of the Act. They are discussed below:-
(a) There was a casting error of Rs.7,50,000/-. Hence the Ld CIT(A) granted relief to that extent. (b) The assessee pointed out that it has not taken loans/investments from six persons, viz., Harla Bharat Punshi (HUF), Ramji Ganshi Visharai, Pinkesh Jagshi Mota, Nirmala Chandulal Soni, Meena Kishor Shah and Arving Gala Patel. The aggregate amount mentioned against the name of above said persons was Rs.42,50,000/-. It was stated that the loans from above said persons were taken by a group concern named M/s KBJ Jewellery P Ltd. It was also noticed by Ld CIT(A) that the assessee has also informed the same to the AO in response to the notice issued by him u/s 133(6)/131 of the Act. Accordingly, the Ld CIT(A) directed the AO to delete the addition of Rs.42,50,000/-. (c) The list of the loans noted down by the AO in the assessment order contained two unnamed entries in serial no.18 and 19, viz., OW(outward) of Rs.66.00 lakhs and SB2351011 of Rs.24.00 lakhs aggregating to Rs.90.00 lakhs. The assessee submitted that these two entries were not available in the books of accounts. The assessee also submitted the copy of bank statements to substantiate the above said submissions. Accordingly, the Ld CIT(A) deleted these additions of Rs.90.00 lakhs. The remaining entries aggregate to Rs.2,45,50,000/-. The Ld CIT(A) confirmed to the extent of Rs.10.00 lakhs and granted relief with regard to the remaining addition.
The Revenue is aggrieved by the relief granted by the Ld CIT(A) and the assessee is aggrieved by the addition confirmed by Ld CIT(A).
We shall first take up the appeal of the assessee, wherein it is contesting the addition of Rs.10.00 lakhs, being the amount taken from Shri Anil Jadhav sustained by Ld CIT(A). 6.1. The Ld CIT(A) examined the documents furnished by the assessee in order to verify as to whether the assessee has discharged the initial onus placed upon it u/s 68 of the Act. The Ld CIT(A) has prepared a table containing following questions and the compliance of the same against each of the creditors:-
(a) Whether the creditor has responded to the notice u/s 133(6) of the Act issued by the AO. (b) Whether the creditor has confirmed the loan. (c) Whether the I T return copy of creditor was submitted. (d) Whether the bank statement of creditor was submitted.
The Ld CIT(A) noticed that Shri Anil Jadhav did not respond to the notice issued u/s 133(6) of the Act. Further, the assessee did not furnish any other documents mentioned above, meaning thereby, the assessee did not discharge the initial onus placed upon it in respect of Shri Anil Jadhav. Hence the Ld CIT(A) confirmed the addition of Rs.10.00 lakhs taken from Shri Anil Jadhav u/s 68 of the Act.
6.2. We heard the parties on this issue and perused the record. We notice that the addition has been made u/s 68 of the Act, wherein the initial onus to prove cash credits is placed upon the assessee. In order to discharge the initial burden placed upon the shoulders of the assessee, it is required to prove three main ingredients, viz., identity of the creditor, credit worthiness of the creditor and the genuineness of transactions. The Ld CIT(A) has given a finding that the assessee did not discharge its burden in respect of amount taken from Shri Anil Jadhav. Before us also, the assessee could not file any document to prove the amount taken from above said person. Accordingly, we are of the view that the Ld CIT(A) was justified in confirming the addition of Rs.10.00 lakhs relating to the amount taken from Shri Anil Jadhav. Accordingly, we reject the appeal of the assessee.
We shall now take up the appeal filed by the revenue. We noticed earlier, the Ld CIT(A) has classified the addition into four categories and the first three categories are related to casting mistake, loan taken by another group company and the cases where no loan was taken. Accordingly, the Ld CIT(A) has deleted additions relating to these three categories. Before us, the revenue could not file any material to contradict the findings given by Ld CIT(A) in respect of the first three categories. Accordingly, we confirm the relief granted by the Ld CIT(A) in respect of these three categories.
7.1. With regard to the fourth category amounting to Rs.2,45,50,000/-, the Ld CIT(A) confirmed addition of Rs.10.00 lakhs and granted relief for the remaining amount of Rs.2,35,50,000/-. We notice that the AO has prepared a table containing the details of the documents furnished in respect of these credits. In the table it is explained that (a) these parties have responded to the notices issued by the AO. (b) they have given confirmation letters (c) they have furnished copies of their I T returns and (d) they have furnished copies of their bank statements. Based on these documents, the Ld CIT(A) has held that the assessee has discharged the initial burden placed upon it u/s 68 of the Act by proving three ingredients of identity of the creditors, credit worthiness of creditors and the genuineness of transactions. Accordingly, the ld CIT(A) has deleted the addition of Rs.2,35,50,000/-. 7.2. We heard the parties and perused the record. We noticed earlier that the Ld CIT(A) has tabulated the details relating to the loans as under:-
From the above said table prepared by the Ld CIT(A), we noticed that the assessee has discharged the initial burden placed upon it u/s 68 of the Act by proving three ingredients of identity of the creditors, credit worthiness of creditors and the genuineness of transactions in respect of all the creditors except in the case of Shri Anil Jadhav listed at serial no.8. Hence the ld CIT(A) confirmed the addition of amount taken from Shri Anil Jadhav and granted relief in respect of remaining credits. 7.3. Under the provisions of sec.68 of the Act, the initial burden is placed upon the assessee and if the assessee discharges the said burden, then the burden would be shifted to the shoulders of the assessing officer to disprove the submissions made by the assessee. If the AO fails to discharge the burden shifted to his shoulders, then the AO has to accept the cash credits and in that case, no addition u/s 68 of the Act could be made by the AO. In the instant case, we notice that the assessee has discharged the onus placed upon it u/s 68 of the Act in respect of the above said creditors except in case of Shri Anil Jadhav. We further notice that the AO has not discharged the onus shifted to his shoulders. Hence, the AO could not have made the addition u/s 68 of the Act. Accordingly, we are of the view that the Ld CIT(A) was justified in deleting the addition of Rs.2,35,50,000/-. 7.4. Accordingly, we confirm the relief granted by Ld CIT(A) and also confirm the addition sustained by Ld CIT(A).