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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI ABY T. VARKEY, JM & SHRI S. RIFAUR RAHMAN, AM
IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI ABY T. VARKEY, JM AND SHRI S. RIFAUR RAHMAN, AM आयकर अपील सं/ I.T.A. No.4285/Mum/2019 (निर्धारण वर्ा / Assessment Year: 2010-11) & आयकर अपील सं/ I.T.A. No.6384/Mum/2018 (निर्धारण वर्ा / Assessment Year: 2010-11) DCIT-4(3)(1) बिधम/ Shri Mohit Deepak Room No. 649, 6th Floor, Kamboj Vs. Aayakar Bhavan, Mumbai- A-15, Venus Co-op. 400020. Society, R. G. Thandani Marg, Mumbai-400018. & आयकर अपील सं/ I.T.A. No.801/Mum/2018 (निर्धारण वर्ा / Assessment Year: 2012-13) ACIT, Cir-6(3)(2) बिधम/ Shri Mohit Deepak R. No. 522, 5th Floor, Kamboj Vs. Aayakar Bhavan, M. K. A-15, Venus Co-op. Road, Mumbai-400020. Society, R. G. Thandani Marg, Mumbai-400018 स्थधयी लेखध सं./जीआइआर सं./PAN/GIR No. : ALCKP2213G (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) Assessee by: Shri Satyaprakash Singh Revenue by: Shri P. R. Mane सुनवाई की तारीख / Date of Hearing: 15/07/2022 घोषणा की तारीख /Date of Pronouncement: 28/09/2022 आदेश / O R D E R PER ABY T. VARKEY, JM:
The appeal in ITA No.6384/Mum/2018 filed by the Revenue is against the order dated 03.08.2018 passed by the Ld. Commissioner of Income Tax (Appeals)-12, Mumbai (hereinafter “CIT(A)”) in relation to the order dated 21.03.2013 passed by the AO u/s 143(3) of the
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj Income Tax Act, 1961 (hereinafter “the Act”). The appeal in ITA. No. 4285/Mum/2019 is against the order of the Ld. CIT(A)-12, Mumbai dated 15.03.2019 passed in relation to the appeal filed against the order u/s 143(3)/147 of the Act dated 22.11.2017 for AY. 2010-11. The appeal in ITA No.801/Mum/2018 is against the order of the Ld. CIT(A)-12, Mumbai dated 22.11.2017 in relation to the order dated 20.03.2015 passed u/s 143(3) of the Act by the AO for AY 2012-13. Since issues involved were common, all the appeals were heard together. Both the parties also argued them together raising similar arguments on these issues. Accordingly, for the sake of brevity, we dispose all the appeals by this consolidated order.
We first take up the appeal of the Revenue for AY 2010-11 in ITA. No. 6384/Mum/2018. Briefly stated, for AY 2010-11, the assessee had filed return of income on 02.08.2010 declaring total income of Rs.45,60,170/-. The case of the assessee was selected for scrutiny under CASS and notices u/s 143(2) & 142(1) of the Act were issued by the AO. The income-tax assessment was completed u/s 143(3) of the Act by order dated 21.03.2013, wherein the AO made the following additions viz., (a) deemed rental income of Rs.10,98,908/- on account of vacant residential house property u/s 23 of the Act, (b) deemed dividend of Rs.22,05,935/- u/s 2(22)(e) of the Act and, (c) addition of unsecured loans of Rs.22,58,21,128/- by way of unexplained cash credit u/s 68 of the Act. Aggrieved by the order of the AO, the assessee preferred an appeal before the Ld. CIT(A) who
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj partly allowed the appeal. Being aggrieved by the same, the Revenue is now in appeal before us on the following grounds:
“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to delete addition made on account of deemed rent without appreciating the fact that rent receivable from one of the two properties is chargeable to tax as income house property u/s.23 of the I.T Act.
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in admitting additional evidences in contravention to rule 46A of the I.T Rules holding that the assessee was proven sufficient cause to furnish the details without appreciating the fact that the assessee failed to establish that it was prevented by sufficient cause to furnish details before the AO during assessment proceedings to establish the creditworthiness of loan creditors.
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in admitting additional evidences without considering the objections raised by the AO Rule 46A of the I.T Rules.
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in direction the AO to delete addition made u/s.68 of the I.T Act on account of unsecured loans taken by the assessee without appreciation the fact that the assessee failed to establish with support of authentic documentary evidences like copy of bank statement, the creditworthiness of loan creditors.
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj 5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to delete addition made u/s.68 of the I.T act on account of unsecured loans taken by the assessee by merely co-relating the book entries of the balance sheet without establishing the nexus, which does not prove the creditworthiness of the loan creditors.”
Ground No. 1 of the appeal of the Revenue is against the Ld. CIT(A)’s action of deleting the deemed rent assessed by the AO u/s 23 of the Act. It is noted that the assessee owned three (3) house properties being- (i) Property at Juhu, 3rd Floor, Anuradha Satyamurty Residency, JVPD Scheme, Vile Parle, Vithal Nagar, Mumbai-49 (ii) Property at Worli, Flat No. 3001, 30th Floor, Avarsekar Heights, 130, dr. AB Road, Worli, Mumbai-400018 and (iii) Property at Zaveri Bazar, Zaveri Bazar, 66/66A, KBJ Plaza, Zaveri Bazar, Mumbai-02. The AO has noted in the impugned order that, the assessee has derived rental income from the property situated at Zaveri Bazar under the head income from “House Property”. The other two properties were vacant/self-occupied. According to the AO, as per the Section 23 of the Act, since the assessee owned more than one self-occupied house property, the assessee was required to offer the annual value of the second house property by way of deemed rent u/s 23 of the Act. The AO accordingly required the assessee to offer his explanation and choose which of the two vacant properties i.e. properties at Worli and Juhu, which he wants to choose as his self-occupied property. Since the AO did not receive any response from the assessee, he treated as
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj Worli property as self-occupied property and accordingly proceeded to compute the annual value of the Juhu Property. According to the AO, 8.5% of the investment in the property was a reasonable annual letable value. He thus worked out the gross annual value at Rs.15,69,869/- i.e. 8.5% of Rs.1,84,69,045/-. After allowing standard deduction of 30% u/s 24(a) of the Act, the AO computed and assessed deemed rental income of Rs.10,98,908/- under the head ‘House Property’. On appeal, the Ld. CIT(A) partly allowed the appeal of the assessee and by holding as under: -
“9. I have considered the facts of the case, the assessment order and the written submission of the appellant. The main objection of the appellant regarding the unreasonableness of valuation of the deemed rent at 8.5% of the investment in the property is considered to be not acceptable as the appellant has not furnished any reasons in support of this contention. As regards the without prejudice contention of the appellant, it is seen that out of the two house properties at Juhu and Worli under the occupation of the appellant, the AO treated the Worli property as the Self-occupied Property and Juhu property as the deemed let out property at his discretion. However, as per the provisions of section 23(4)(a) of the Act, the assessee has the option to choose the property that should be considered as Self-occupied Property in a case where the assessee has more than one house under self-occupation. The assessee who did not get the opportunity to exercise the said option during the assessment proceedings has exercised the option as per the provisions of section 23(4)(a) during the appellate proceedings to treat the Juhu property as the Self- occupied Property. Consequently, the Worli property has to be treated
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj as the deemed let out property for the purpose of computing the income from house property u/s 23(1).
In view of the above discussion, the AO is directed to re-compute the addition made towards the Income from deemed let out property by considering the Worli property as the deemed let out property instead of the Juhu property considered in the assessment order. This ground of appeal is therefore partly allowed.” (emphasis supplied)
Aggrieved by the aforesaid action of the Ld. CIT(A), the Revenue is now before us. At the time of hearing, the Ld. CIT, DR fairly agreed with us that the Ld. CIT(A) had not deleted the addition made u/s 23 of the Act and therefore the Ground No. 1 raised by the Revenue was erroneous and untenable. As noted from the findings reproduced above, the Ld. CIT(A) had only allowed the assessee to choose and exercise the option vested in him u/s 23(4)(a) of the Act viz., as to which of the two properties he wants to treat as self- occupied. It is noted that the assessee had opted to treat his property at Juhu as self-occupied and accordingly the Ld. CIT(A) had directed the AO to re-compute the taxable annual value of the other vacant property at Worli. To this, the Ld. AR of the assessee brought to the notice of the Bench that, pursuant to the directions issued by the Ld. CIT(A), the AO vide his order passed u/s 250/143(3) of the Act dated 22.10.2018 had computed the annual letting value of Worli Property at Rs.2,43,255/- being 8.5% of Rs.28,61,827/-. After giving allowance for standard deduction @ 30% u/s 24(a) of the Act, the taxable value
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj was computed at Rs.1,70,279/-. The Ld. AR further submitted that this order dated 22.10.2018 passed u/s 250/143(3) of the Act has been accepted by the assessee in as much as no appeal has been filed against the aforesaid addition retained u/s 23 of the Act. The Ld. CIT, DR was unable to controvert these admitted facts. We do not see any merit in this ground raised by the Revenue and therefore, the same is accordingly dismissed.
Ground Nos. 2 & 3 raised by the Revenue is against the action of the Ld. CIT(A) admitting the additional evidences filed by the assessee in terms of Rule 46A of the Income-tax Rules, 1962. It is noted that the assessee was unable to comply with the notice u/s 142(1) of the Act issued by the AO calling for details in relation to the unsecured loans received during the relevant year and therefore the same was added as unexplained cash credit u/s 68 of the Act. Before the Ld. CIT(A), the assessee had contended that the AO did not give adequate time to the assessee to file the documentary evidences to substantiate the identity, creditworthiness and genuineness of the loan creditors. Taking into account this plea, the Ld. CIT(A) who has co- terminus powers of the AO was pleased to exercise the discretion vested with him and accordingly admitted the additional evidences filed by the assessee to substantiate the identity, creditworthiness and genuineness of the loan creditors. Moreover, we note that the Ld. CIT(A) after admitting the additional evidences had forwarded the same to the AO for his comments vide letter dated 09.03.2016 and had
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj sought remand report from the AO, which has been extensively reproduced by the Ld. CIT(A) in his appellate order. Similarly, even the subsequent rejoinder dated 04.01.2018 filed by the assessee was forwarded to the AO for his comments, and the AO furnished his report vide letter dated 12.04.2018. It is therefore noted that, the Ld. CIT(A) did not cause any prejudice to the Revenue by allowing the assessee to file additional evidences, in as much as the AO was given proper opportunity to examine the same and offer comments. It is the Revenue’s contention that the case of the assessee did not fall under the exceptions set out in Rule 46A of the Income-tax Rules, 1962. In this regard, we observe that the Ld. CIT(A) has dealt with this objection before admitting the additional evidence. In our view, the issue raised by the revenue in these grounds of appeal is identical to the objection raised by the AO in his remand report, which has been addressed by the Ld. CIT(A) at Para 25 of the appellate order. For the sake of clarity, we reproduce the same below: -
“25. The reasons explained by the appellant and the comments of the AO in the remand report regarding the admission of the additional evidence have been carefully examined. The AO required the appellant to furnish the specified documentary evidences in support of the unsecured loans vide notice u/s 142(1) dated 03.12.2012. The assessment was concluded thereafter on 21.03.2013. The contention of the appellant that he required considerable time to compile the documentary evidences called for by the AO as they had to be gathered from third parties and therefore the time available with him to comply with the requirements of the notice issued by the AO was inadequate is considered to be acceptable considering the facts
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj stated above. In this regard, it needs to be borne in mind that the tax liability sought to be fastened on the appellant on account of the addition made u/s 68 of the Act on the ground of non-furnishing of supporting evidences is of such a high magnitude that the admission of additional evidence which has a direct bearing on the same is essential in the interest of justice and fair play. Hence, having regard to the facts of the case, it is considered that the appellant was prevented by sufficient cause from furnishing the evidences called for by the A.O. during the assessment proceedings within the meaning of Rule 46A(1)(b) and the additional evidence filed by the appellant is therefore admitted.”
According to us, the Ld. CIT(A) has exercised the vested discretion under Rule 46A of the Income Tax Rules, 1962, [herein after the Rules] and further, the Ld. CIT(A) has powers co-terminus to that of the AO and even enhance the addition made by AO by calling for further evidence suo-motto. It has to be appreciated that these statutory powers are vested in the First Appellate Authority to do justice and technicalities should not come in the way of substantiatial justice unless there was proved deliberate/mischievous conduct attributable to assessee. Therefore, the action of Ld CIT(A) to accept the additional evidence filed before him on the facts and circumstances of the case cannot be faulted. We therefore do not see any reason to interfere with the finding of the Ld. CIT(A) on admitting the additional evidences for the purpose of adjudicating the merits of the additions. In the result, Ground No. 2 and 3 raised by the Revenue are dismissed.
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj 7. Ground no. 4 is against the action of the Ld. CIT(A) deleting the additions made by the AO u/s 68 of the Act. The facts of the case in brief, are that, the AO had noted from the balance-sheet of the assessee, that he had outstanding unsecured loans from various parties aggregating to Rs. 22,58,21,128/-. According to the AO, out of the twenty-two (22) parties, the assessee had only given confirmation of accounts for three (3) parties namely i.e. Deepak Kumar HUF, Mumbadevi Bullion and KBJ Jewellery (Varanasi branch). Even in respect of these three (3) parties, the AO noted that, the assessee had only filed loan confirmations, and not supported the same with ledger account, Balance Sheet and P&L Account, return of income and bank statements of the lenders. Since the assessee failed to file proper details of the loan creditors, the AO added the entire closing balance of loan creditors of Rs.22,58,21,128/- u/s 68 of the Act. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A). Before the Ld. CIT(A) the assessee filed loan confirmations along with financial statements, income-tax returns, bank statements of the lenders etc. The assessee also pointed out that the addition of Rs.22,58,21,128/- comprised of opening balance of Rs.2,34,97,924/- which could not be legally added u/s 68 of the Act. These additional evidences were forwarded by the AO on 09.03.2016 and the AO furnished his remand report vide letter dated 07.04.2017. In response to the same, the assessee filed another rejoinder along with additional details which was again forwarded to the AO vide letter dated 04.01.2018 and the AO furnished his second remand report dated 12.04.2018. Taking into
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj account the submissions, details and evidences furnished by the assessee and the remand reports of the AO, the Ld. CIT(A) first noted that out of total addition of Rs.22,58,21,128/-, sum of Rs.2,34,97,924/- comprised of opening balance of loan creditors which was brought forward from earlier years. According to Ld. CIT(A), Section 68 of the Act only applied to sum which is found credited in the books of an assessee during the previous year for which no explanation has been furnished or explanation furnished is found to be false. Since the opening balance of Rs.2,34,97,924/- represented monies received in earlier years and not in the relevant FY 2009-10, the Ld. CIT(A) held that Section 68 had no application in relation thereto and therefore deleted the same by observing as under:
“28. Based on examination of the additional evidence and further evidences furnished to the AO during the remand proceedings, the A.O. has confirmed that out of the unsecured loans of Rs.22,58,21,128/- added to the total income u/s. 68 of the Act, the loans actually taken during the year aggregated to Rs.20,23,23,204/- and the balance amount of Rs.2,34,97,924/- represents the opening balance in the loan accounts. The addition u/s. 68 applies only to the unexplained cash credits credited in the books of account during the previous year relevant to the assessment year under consideration. Hence, the amount of opening balance in the loan accounts amounting to R5.2,34,97,924/- Is required to be excluded from the amount of unsecured loans of Rs.22,58,21,128/- added by the A.O. u/S.68 of the Act. Hence, the A.O. is directed to delete the addition made u/s.68 of
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj the Act to the extent of Rs.2,34,97,924/- representing the opening balance in the loan accounts.”
We have heard both the parties on this aspect. The Ld. CIT-DR appearing on behalf of the Revenue was unable to controvert the fact that the sum of Rs.2,34,97,924/- represented opening balance of loan creditors brought from earlier years. We agree with the Ld. CIT(A)’s finding that, the addition made by the AO to the extent of Rs.2,34,97,924/- was unsustainable as it did not represent credit found in the accounts during the relevant FY 2009-10. In this regard, we may gainfully refer to the judgment of the Hon’ble jurisdictional Bombay High Court in the case of Ivan Singh vs ACIT (272 Taxman 36). In the decided case, the Hon’ble High Court has held that the rigors of Section 68 shall only apply to sums found credited in the books of accounts in that particular year, and not to those which were credited in earlier years. The relevant findings of the Hon’ble High Court are as follows:
“3. Insofar as the first substantial question of law is concerned, Dr. Daniel has pointed out that section 68 of the Income-tax Act, 1961 (IT Act), is very clear in providing that where any sum is found to be credited in the books of the assessee for the previous year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to the income tax as the income of the assessee of that previous year. Relying upon several decisions, Dr Daniel submits that since, it is the case of Revenue that some amounts were
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj found credited in the book of account for the financial year 2006-07, there was no question of taking cognizance of such amounts for the assessment year 2009-10 and the corresponding previous year 2008-09. He submits that on this short ground, the first substantial question of law, is liable to be answered in favour of the appellant-assessee and against the respondent-Revenue.
………..
From the plain reading of the provisions of section 68 of the IT Act, it does appear that where any sum is found to be credited in the books of Account maintained for any previous year and there is no proper explanation for such credit, the sum so credited can be charged to the income tax as the income of the assessee of "that previous year".
In the present case, the material on record indicates that the Assessing Officer has relied upon the credits for the financial year 2006-07. However, the sum so credited, in terms of such credit, is sought to be brought to tax as the income of the appellant-assessee, for the assessment year 2009-10, which means for the previous year 2008-09, in terms of the definition under section 3 of the IT Act. Dr. Daniel is justified in submitting that this is not permissible.
The view taken by this Court in CIT v. Bhaichand H. Gandhi [1982] 11 Taxman 59/[1983] 141 ITR 67 and by Rajasthan High Court in CIT v. Lakshman Swaroop Gupta & Brothers [1975] 100 ITR 222, supports the contentions raised by Dr. Daniel. Similarly, we find that in Bhor Industries Ltd. v. CIT [1961] 42 ITR 57 (SC), the Hon'ble Apex Court in the context of provisions of the Merged States (Taxation Concessions)
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj Order (1949) has interpreted the expression "any previous year" to mean as not referring to all the previous years but, the previous year in relation to the assessment year concerned Again, this decisions also, to some extent supports the contentions of Dr. Daniel.
The crucial phrase in section 68 of the IT Act, which provides that the sum so credited in the books and which is not sufficiently explained may be charged to the income tax as income of the assessee of "that previous year " also lends support to the contentions of Dr. Daniel.
For all the aforesaid reasons, we answer the first substantial question of law in favour of the appellant-assessee and against the respondent- Revenue.”
In view of the above, we see no reason to interfere with the order of Ld. CIT(A) directing the AO to delete the addition made u/s 68 of the Act to the extent of Rs.2,34,97,924/-.
As regards the remaining addition of Rs.20,23,23,204/- made by the AO u/s 68 of the Act, it is noted that the Ld. CIT(A) had confirmed the addition to the extent of Rs.1,25,000/- made in relation to the loan obtained from Mr. Aditya R. Seth. The Ld. CIT(A) took note of the fact that, apart from loan confirmation, the assessee was unable to furnish any further supporting evidences to discharge the identity, creditworthiness and genuineness of this particular loan. In so far as the balance sum of Rs.20,21,98,204/- was concerned, the Ld. CIT(A) noted that these loans were received from six (6) loan creditors. After
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj examining the details furnished by the assessee, the AO in his remand report noted that, four (4) loan creditors had furnished the requisite details but according to the AO, the source of their funds out of which they advanced loans remained unproved. In respect of remaining two (2) creditors, the AO noted that the assessee had failed to provide Income Tax (IT) return and loan confirmation of M/s Sai Silver [Prop: Dinesh J Mehta] and he had also failed to provide the Income Tax (IT) acknowledgment and bank statement of M/s Sharc Trading [Prop : Sanjay Kothari]. According to AO therefore, these loans remained unproved. The relevant comments offered by the AO in his first remand report were as follows:
Sr. Name of the Loan Received Comments of the A.O. No. lender during the year (Rs.) 1. Aditya R. 1,25,000 The assessee submitted ledger Seth confirmation of the said party only. As no other evidences were furnished, the creditworthiness has not been established. 2. Deepak 7,28,667 On perusal of the confirmation, a Kumar HUF balance of Rs.7,28,667/- is outstanding in the name of the assessee. Also, on perusal of the audited balance sheet, an amount of Rs.7,28,667/- is appearing in the name of the assessee under the assets
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj side. However, the source of the funds in the hands of Deepak Kumar HUF is unproved.
Gurukripa 2,00,00,000 On perusal of the confirmation, a Exports balance of Rs.2,00,00,000/- is outstanding in the name of Mohit Kamboj. The Balance sheet shows total Capital of Shri Sanjay Kumar Panwar at Rs.2,00,000/- only, the Sundry Creditors are at Rs.25,20,06,711/- and Sundry Debtors at Rs.6,42,29,138/-, Loans and advances at Rs.17,15,90,801/-. No details of sundry creditors/Debtors/Loans & advances has been furnished. However, the assessee has furnished bank statement of Gurukripa Exports for the period 01.01.2010 to 31.01.2010 which shows 5 entries to Mohit Kamboj totalling to Rs.2,00,00,000/-. However, the source of the funds in the hands of Gurukripa Exports is unproved. 4. KBJ 22,00,000 On perusal of the confirmation, there Jewellery is an opening balance of Rs.5935/- Pvt. Ltd. and adjusting the transaction during the year, there is a closing balance of
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj Rs.22,05,935/- outstanding in the name of the assessee. Whereas, on perusal of the audited balance sheet, an amount of Rs.3,06,68,121/- is appearing as loans and advances given. However, the source of the funds in the hands of KBJ Jewellery is unproved.
Mumbadevi 9,46,69,537 On perusal of the confirmation, there Bullion is an opening balance of Rs.30,00,000/- and adjusting the transaction during the year, there is a closing balance of Rs.9,76,69,537/- outstanding in the name of the assessee. Whereas, on perusal of the audited balance sheet, an amount of Rs.9,76,69,537/- is appearing in the name of the assessee under the head Loans & advances. The Capital of Shri Irtesh Jawaharlal Mishra is only Rs.9,37,327/- and the source of funds in the hands of Mumba Devi jewels (Irtesh Mishra) from which the loans has been given to the assessee is not clear.
Sai Silver 96,00,000 The assessee has failed to furnish the copy of acknowledgement of IT
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj return and loan confirmation. On perusal of the audited balance sheet, an amount of Rs.96,00,000/- is appearing in the name of the assessee under the head Loans & advances. The Capital of Shri Dinesh Jugraj Mehta is only Rs.2,40,137/- and the source of funds in the hands of M/s. Sai Silver (Prop. Dinesh Jugraj Mehta) from which the loans has been given to the assessee is not clear.
Sharc 7,50,00,000 On perusal of the confirmation, it is Trading evident that M/s. Sharc Trading has given loan of Rs.3,50,00,000/-, Rs.3,50,00,000/- & Rs.50,00,000/- total amounting to Rs.7,50,00,000/- to Mohit Kamboj. On perusal of the audited balance sheet, an amount of Rs.7,50,00,000/ is appearing in the name of the assessee under the head Loans & advances. The capital of Shri Sanjay Kothari is (-) Rs.5,72,887/-. The source of funds in the hands of M/s. Sharc Trading (Prop. Sanjay Kothari) from which the loans has been given to the assessee is not clear. The assessee
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj also has failed to produce the ITR acknowledgement and copy of bank statement of the concerned party reflecting the said transactions.
Total 20,23,23,204
To this, the assessee furnished the necessary evidences i.e. Income Tax (IT) Acknowledgments, loan confirmation and bank statements of the parties mentioned at (3), (6) & (7) above, under the cover of letter dated 04.01.2018. These additional evidences were also admitted and forwarded by the Ld. CIT(A) to the AO for his comments. By his report dated 12.04.2018, the AO acknowledged that the requisite details (not filed earlier) were submitted by the assessee, but according to him the source of funds in the hands of these loan creditors remained unproved. The relevant comments offered by the AO (second remand report) are as under: “(a) The assessee has submitted the complete set of balance sheet of M/s. Gurukripa Exports as on 31.03.2010 along with the break- up of the loan and advances which was not submitted during the original remand proceedings. As per the break-up of loans and advances, an amount of Rs.2,00,00,000/- is receivable from the assessee. However, the source of the funds in the hands of Gurukripa Exports is unproved.
(b) The assessee has submitted the copy of ITR and confirmation of M/s. Sai Silver (Prop. Dinesh J. Mehta) for A.Y. 2010-11. As per the loan confirmation, an amount of Rs.96,00,000/- is
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj outstanding. However, the source of the funds in the hands of Gurukripa Exports is unproved.
(c) The assessee has submitted the copy of ITR and bank statement of M/s. Sharc Trading (Prop. Sanjay Kothari) for A.Y.2010-11. As per the bank statement, an amount of Rs.3,50,00,000/-, Rs.3,50,00,000/- and Rs. 50,00,000/- aggregating to Rs.7,50,00,000/- has been advanced to the assessee. However, the source of the funds in the hands of Gurukripa Exports is unproved.” 12. Upon examining the remand reports of the AO (supra) and the submissions & details furnished by the assessee, the Ld. CIT(A) held that the correctness of the documentary evidences viz., loan confirmation, ledger, financial statements, IT Acknowledgments, bank statements etc. furnished by the assessee was not disputed by the AO. According to Ld. CIT(A) therefore the identity and genuineness of these loan creditors stood substantiated. The relevant findings recorded by the Ld. CIT(A) in this regard, is reproduced below:
“37. As regards the remaining 6 loan creditors, from whom the balance unsecured loans of Rs.20,21,98,204/- were shown to have been received during the year, the appellant has furnished documentary evidences by way of ledger account confirmations, copies of ITR acknowledgement, computation of total income, balance sheet, P & L account and bank account statement of the said 6 loan creditors as additional evidence during the appellate proceedings on 07.03.2016 and 04.01.2018. The AO examined the said evidences and furnished his remand reports dated 07.04.2017 and 12.04.2018. On examination
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj of the said documentary evidences, the identity of the creditors and the genuineness of the loan transactions have been accepted by the A.O. In remand reports. On examination of the returns of income filed by the loan creditors for the relevant A.Y.2010-11 and the bank account statements of the loan creditors wherein the loans advanced to the appellant are duly reflected as payments made through RTGS or account payee cheques, I am in agreement with the A.O. that the identity of the loan creditors and the genuineness of the loan transactions have been substantiated by the appellant through documentary evidences in respect of the 6 loan creditors.
According to the Ld. CIT(A), the AO had only adversely commented on the creditworthiness of the loan creditors in as much as he had stated that the source of funds in the hands of loan creditors were either unproven or unclear. It is noted that, this grievance of the AO was addressed by the Ld. CIT(A) at Para 38 of his appellate order, wherein he himself examined the source of funds/ bank statements of the loan creditors and thereafter concluded that the assessee had satisfactorily explained the nature and source of credits received from these six (6) loan creditors. The Ld. CIT(A) accordingly deleted the addition of Rs.20,21,98,204/- being the sum of loans received from these six parties.
Assailing the action of the Ld. CIT(A), the Ld. CIT, DR for the Revenue argued that not only the creditworthiness of the loan creditor was unproven but according to him the genuineness of the transaction was not satisfactorily established by the assessee and therefore he
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj urged that the order of AO ought to be restored. In support of his contentions, the Ld. CIT, DR filed written submissions dated 27.06.2022 and 07.07.2022 wherein he has set out his specific comments on each of the six (6) creditors and his reasons, according to which, their creditworthiness and the genuineness of the transactions was in doubt. Per contra, the Ld. AR appearing on behalf of the assessee supported the order of the Ld. CIT(A) and filed a rebuttal dated 14.07.2022 in response to the written submissions furnished by the Revenue.
Having heard both the parties and after giving thoughtful consideration to the facts of the case and upon examining the material on record, it is noted that the assessee had furnished name, complete address, PAN details, account confirmation and the financial statements of all the six (6) lenders in question. It is also not in dispute that the loans were transacted through banking channel and each of the loan creditor was assessed to income-tax. The Ld. AR showed us that, the financial statements of each loan creditor for the financial year 2009-10 reflected the transaction with the assessee. These facts are noted to have been acknowledged by the AO in his remand reports as well. It was further brought to our notice that the loans in question had been fully re-paid in subsequent FYs 2010-11 to 2013-14 and as such repayments were not doubted or questioned by the succeeding AOs.
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj 16. It is noted from the remand reports furnished by the AO, that his only case before the Ld. CIT(A) was that the source of funds of the lenders remained unproven. This contention has been reiterated before us in the present appeal. To this, the Ld. AR pointed out that this particular argument of the AO was of no consequence in as much as according to him, the provisions of Section 68 of the Act does not require the assessee to substantiate the source of source of loans. He thus argued that, this additional burden put upon the assessee by the AO was without the mandate of law and hence the Ld. CIT(A) had rightly rejected this contention of the AO. To examine this legal contention, let us first have a look at the provisions of Section 68 of the Act (relevant) as it stood during the relevant AY, i.e. 2010-11 and the provision as amended by the Finance Act, 2022, which reads as under:
Section 68 - as it stood as on 1st April 2010
“Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year:”
Section 68 – As amended by Finance Act, 2022
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj “Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year:
……
Provided that where the sum so credited consists of loan or borrowing or any such amount, by whatever name called, any explanation offered by such assessee shall be deemed to be not satisfactory, unless—
(a) the person in whose name such credit is recorded in the books of such assessee also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:”
Let us first examine the provisions of Section 68 of the Act, as it stood during AY 2010-11. Reading of this provision shows that, where any sum of money is found credited in the books of the assessee, then the initial burden is on the assessee is to substantiate its nature of source. If the explanation so furnished is not found to be satisfactory then, the same may be added by the AO by way of unexplained cash credit as income of the assessee. The initial burden on the assessee was thus to substantiate the first source of credit in the books.
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj 18. The newly introduced proviso to Section 68 of the Act, which was inserted by the Finance Act, 2022, has now cast a new burden on the assessees, who have been credited sums comprising of loans or borrowings, that they shall be required to substantiate the source of source of the sums so credited. The said proviso has been made applicable prospectively, i.e. from 1st April 2023. Meaning thereby, from AY 2023-24 and onwards, the assessees are required to not only substantiate the source from which they received the loan, but also the source of funds of their lenders. In this regard, we may also gainfully refer to the following decisions wherein the Hon’ble jurisdictional High Court in the context of the earlier first proviso to Section 68 of the Act, which was itself introduced by the Finance Act, 2012, [only in respect of shares collected by private companies and not for other creditors like assessee for receipt of loan/borrowing which was with effect from 01st April 2013], which was held to be applicable prospectively and not have any retrospective effect.
(i) CIT Vs Gagandeep Infrastructure Private Limited (394 ITR 680) [Bom HC]:
“We find that the proviso to section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced "for removal of doubts" or that it is "declaratory". Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso....”
(ii) Pr. CIT vs. Apeak Infotech (88 Taxmann.com 695) [Bom HC]:
“Similarly, the amendment to section 68 of the Act by addition of proviso was made subsequent to previous year relevant to the subject assessment year 2012-13 and cannot be invoked. It may be pointed out that this court in CIT v. Gagandeep Infrastructure (P.) Ltd. [2017] 80 taxmann.com 272/247 Taxman 245/394 ITR 680 (Bom.) has while refusing to entertain a question with regard to section 68 of the Act has held that the proviso to section 68 of the Act introduced with effect from April 1, 2013 will not have retrospective effect and would be effective only from the assessment year 2013-14.”
From the above it is therefore amply clear that the requirement to substantiate the source of source of borrowings, brought in by the Finance Act, 2022, is not applicable in the relevant AY 2010-11. Further, from the remand reports, it is noted that the AO has not disputed the fact that the assessee has availed unsecured loans from the above named six entities and that the assessee has provided the source
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj of receipt of the unsecured loans from these six entities. We accordingly agree with the Ld. CIT(A) that, the assessee was not required to further substantiate the source of source of funds in the hands of the lender, as required by the AO in his remand report. Accordingly, the submissions made by the Ld. CIT, DR questioning the source of source of funds of these borrowers to justify the addition made by the AO, is not acceptable in relation to the relevant AY 2010- 11.
In the written submissions filed before us, the Ld. CIT, DR has primarily questioned the creditworthiness of these six (6) lenders and in connection therewith he has also pointed out specific infirmities in the documents of the lenders. For this, let us first now look into the relevant facts of each lender/s.
(i) Mumbadevi Bullion – Rs.9,46,69,537/-
It is noted that the Ld. CIT(A) had examined the bank statements/ financials of this lender and had found it to be credit-worthy, by observing as follows:
“The outstanding loan of Rs. 9,76,09,537/- in the name of the appellant, comprising of opening balance of Rs. 30,00,000/- and loan received during the year of Rs. 9,46,69,537/-, is found to be duly reflected in the balance sheet of the loan creditor as on 31.03.2010 under the head ‘Loans & Advances’ on the asset side. Apart from the
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj capital of Rs.9,37,327/-, the balance sheet of the loan creditor as on 31.03.2010 shows sundry creditors of Rs.12,77,25,965/- and unsecured loans of Rs.1,70,07,000/- on the liabilities side. The sources for the loan advanced to the appellant are therefore from the sundry creditors and unsecured loans as evident from the balance sheet itself. Further, the bank account statement of the loan creditor shows that amounts have been received through RTGS or account payee cheques prior to advancing loans to the appellant or cash deposits were made in the bank account out of the cash sales made by the creditor in his business of trading in gold and silver bullion prior to advancing the loans to the appellant.”
To this, the Ld. CIT, DR in his submissions has stated that, the loan of Rs.5,00,000/- from M/s Mumbadevi Bullion is not appearing in the bank statement. In response, the Ld. AR brought to our notice that, the cheque issued by the lender was encashed at a later date and the receipt was appearing in the bank statement on 16.04.2009. The Ld. CIT, DR further contended that the repayment of loan of Rs.24,00,000/- did not appear in bank statement and therefore was not carried out through bank channel. In this regard as well, the Ld. AR took us through the bank statement of M/s Mumbadevi Bullion, which was placed at Page 1 of his rebuttal, which clearly evidenced that the repayment of loan was received through proper banking channel. The Ld. CIT, DR further questioned the cash deposits aggregating to Rs.37.65 crores found in the bank account of the lender, which according to him raised
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj doubt on the source of funds advanced to the assessee. The Ld. AR pointed out that the lender was engaged in the business of dealing in gold, bullion, jewellery etc. having turnover in excess of Rs.52.76 crores. Having regard to the nature of trade, the Ld. AR submitted that it was understandable that the sales comprised of both sales made in cash and cheque. He thus pointed out that the cash deposits in the bank account comprised of cash sales, which were credited in the books of the lender and formed part of their operating results. It was also brought to our notice that the assessee had obtained loans from this lender in the earlier years as well and in the income-tax assessments which were completed u/s 143(3) of the Act for AYs 2008-09 & 2009-10, the AO’s predecessor had not doubted the identity and creditworthiness of this lender or the genuineness of the transaction. Having regard to the foregoing facts, we hold that the reasoning given by the Ld. CIT, DR doubting the genuineness of the transaction and the creditworthiness of this lender was unjustified.
(ii) Deepak Kumar HUF – Rs.7,28,667/-
It is noted that the Ld. CIT(A) had noted that the loan was received by the assessee from the HUF of his father and therefore the genuineness could not be doubted. The Ld. CIT(A) also examined the bank statements/ financials of the
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj HUF and held that it had the capacity to advance the impugned sum, by observing as follows:
“The outstanding loan of Rs.7,28,667/- in the name of the appellant is found to be duly reflected as an asset in the balance sheet of the loan creditor as on 31.03.2010. It is seen from the balance sheet that the loan creditor has capital of Rs.76,22,553/-as on 31.03.2010. Hence, the source for the loan of Rs.7,28,667/- advanced to the appellant is seen to be from the capital of the loan creditor as evident from the balance sheet Itself. Further, the bank account statement of the loan creditor shows that amounts have been received through RTGS or account payee cheques prior to advancing loans to the appellant and no cash deposits are found in the bank account prior to advancing the loans to the appellant.”
In the written submissions filed before us, it is noted that the Ld. CIT, DR was unable to cogently controvert the above findings of the Ld. CIT(A). Instead he has raised inconsequential issues such as the signature of the Karta of the HUF was not verifiable or that the HUF had received equivalent amount of sum in its bank account prior to advancement of loan or that the other transactions of the HUF were also with members/relatives. In our view, these are irrelevant considerations in the facts and circumstances of this case, and are therefore rejected. We therefore see no reason to interfere with the Ld. CIT(A)’s above findings qua the creditworthiness of this lender.
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj
(iii) Gurukripa Exports – Rs.2,00,00,000/-
It is noted that the Ld. CIT(A) in his order had elaborately examined the bank statements/ financials of this lender and had found it to be credit-worthy, by observing as follows:
“The outstanding loan of Rs. 2,00,00,000/- in the name of the appellant is found to be duly reflected in the balance sheet of the loan creditor as on 31.03.2010 under the head ‘Loans & Advances’. Apart from the capital of Rs.20,00,000/-, the balance sheet of the loan creditor as on 31.03.2010 shows sundry creditors of Rs.25,20,06,711/- on the liabilities side as against the sundry debtors of Rs. 6,42,29,138/- on the assets side. The sources for the loan advanced to the appellant are out of the sundry creditors as evident from the balanced sheet. Account statement of the loan creditor shows that amounts have been received through RTGS or account payee cheques prior to advancing loans to the appellant and no cash deposits are found in the bank account prior to advancing the loans to the appellant.”
According to Ld. CIT, DR, this loan was not advanced by the lender out of own surplus funds, but it was given out of borrowings made from M/s Sunshine and therefore he questioned the capacity of this creditor to advance the loan. The Ld. AR has rightly pointed out that there is no such requirement that the loan ought to be advanced by an assessee only from its own funds and not borrowed funds. It is noted
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj that the Ld. CIT(A) has examined the account statement of the creditor from whom the lender had received the monies and thereafter accepted the creditworthiness of the lender. The Ld. CIT, DR has not pointed out the specific defect in the above finding of Ld. CIT(A). Hence, the reasoning given by the Ld. CIT, DR doubting the creditworthiness of this lender is held to be unjustified.
(iv) KBJ Jewellery Pvt Ltd – Rs.22,00,000/-
It is noted that the Ld. CIT(A) in his order after examining the bank statements/ financials of this lender upheld its creditworthiness, by observing as follows:
“The outstanding loan of Rs. 22,05,935/- in the name of the appellant (opening balance of Rs. 5,935/-) is found to be duly reflected in the balance sheet of the loan creditor as on 31.03.2010 under the head ‘Loans & Advances (unsecured)’ on the asset side. Apart from the share capital, Reserves & Surplus of Rs.19,35,50,924/-, the balance sheet of the loan creditor as on 31.03.2010 shows loan funds and other liabilities of Rs.43,50,09,960/- on the liabilities side. The sources for the loan advanced to the appellant are therefore evident from the balance sheet itself.
Further, it is pertinent to state that this amount of loan advanced to the appellant has been treated as deemed dividend in the hands of the appellant u/s 2(22)(e) of the Act by the AO and was added to his total
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj Income. The said addition has been upheld in this order to the extent of Rs.22,00,000/- while disposing off ground No.2 above.”
From the above it is noted that this loan of Rs.22,00,000/- has already been separately assessed by the AO as income of the assessee u/s 2(22)(e) of the Act holding it to be in the nature of deemed dividend and this addition has already been upheld by the Ld. CIT(A). It is noted that the assessee has accepted this addition u/s 2(22)(e) of the Act and the same has not been disputed by him. It was further brought to our notice that the assessee had received loan from this company in the earlier AYs as well wherein also its identity, creditworthiness and genuineness was accepted by the AO’s predecessors and the only adverse inference drawn was u/s 2(22)(e) of the Act. The Ld. AR has also rightly pointed out that, if this addition is upheld, then it would amount to double addition of the same sum. When this fact was pointed out to the Ld. CIT, DR, he has also not seriously disputed the above findings of the Ld. CIT(A), and therefore we are not interfering with the same.
(v) Sai Silver – Rs.96,00,000/-
It is noted that the Ld. CIT(A) in his order after examining the bank statements/ financials of this lender upheld its creditworthiness, by observing as follows:
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj “The outstanding loan of Rs. 96,00,000/- in the name of the appellant is found to be duly reflected in the balance sheet of the loan creditor as on 31.03.2010 under the head ‘Loans & Advances’ on the assets side. Apart from the capital of Rs. 2,40,137/-, the balance sheet of the loan creditor as on 31.03.2010 shows Advance against goods of Rs. 1,86,00,000/- under the current liabilities & provisions of Rs. 1,87,00,924/- on the liabilities side. The sources for the loan advanced to the appellant are out of the said current liabilities as evident from the balance sheet itself. The bank account statement of the loan creditor shows that amount has been received through RTGS from KBJ Gold Ornaments Pvt. Ltd. prior to advancing the loan of Rs.96 Lakhs to the appellant during the year and the same is shown as advance against goods in the balance sheet. No cash deposits are found in the bank account prior to advancing the loan to the appellant.”
Assailing the action of Ld. CIT(A), the Ld. CIT, DR has contended that the above loan did not carry any interest and was not repaid which raised doubt on the genuineness of this loan transaction. The Ld. AR, on the other hand, brought to our notice that this loan, which was obtained for short-term purpose on 10.01.2010, had been repaid within ten months on 10.11.2010 and placed on record the copy of the bank statement evidencing the same. The Ld. CIT, DR further questioned the credentials of the lender. He submitted that, although the lender was engaged in the business of trading in silver and gold bars but it did not have opening and closing stock, which according to him raised doubt on the genuineness
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj of operating activities of the lender. The Ld. AR has rightly stated that this averment of the Ld. CIT, DR are mere aspersions based on surmises and there is nothing brought on record to disprove the fact that the lender was engaged in business of trading in silver and gold items. Taking us through the financials and tax audit report of the lender, he showed that the lender was subject to local VAT laws on the trading business and therefore the genuineness of the business could not be doubted. Having regard to the foregoing, the reasoning given by the Ld. CIT, DR doubting the creditworthiness of the lender and the genuineness of the transaction with this lender is held to be unjustified.
(vi) Sharc Trading Co. – Rs. 7,50,00,000/-
The relevant findings recorded by the Ld. CIT(A) after examining the bank statements/ financials of this lender is as follows: “The outstanding loan of Rs.7,50,00,000/- in the name of the appellant is found to be duly reflected’ in the balance sheet of the loan creditor as on 31.03.2010 under the head ‘Loans & Advances’ on the assets side. The balance sheet of the loan creditor as on 31.03.2010 shows sundry creditors of Rs. 8,99,44,866/- on the liabilities side as against the sundry debtors of Rs. 96,67,289/- on the assets side. The sources for the loan advanced to the appellant are out of the said sundry creditors as evident from the balance sheet itself. Further, the bank account statement of the loan creditor shows that amounts have been
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj received through RTGS or account payee cheques prior to advancing loans to the appellant and no cash deposits are found in the bank account prior to advancing the loans to the appellant.”
At the time of hearing and in his written submissions, the Ld. CIT, DR had raised doubts on creditworthiness of the above lenders on the premise that they had filed returns of income declaring meagre income and that their own capital funds did not inspire any confidence regarding their capacity to advance loans to the assessee. The Ld. AR first pointed out that this was never the case of the AO before the Ld. CIT(A) and therefore this new argument raised by the Revenue should not be accepted. Alternatively, the Ld. AR contended that, if it is case of the Revenue that the financial position of lenders was doubtful, and yet the lenders had accepted the fact of granting loan to the assessee, then in such case, the proper course of action for the AO was to inform the AO of the respective loan creditor for taking remedial action, if so desired. In this regard, we note that the Ld. AR has rightly relied on the judgment in the case of CIT Vs Tantia Investments (P) Ltd (322 ITR 394) wherein the following observations were made by the Hon’ble Bombay High Court;
“4. The learned Tribunal in its order, in order to answer the said contention, observed as under :
"The learned Assessing Officer having any doubt with regard to capacity of the party to advance loan, no one prevented him to verify the capacity of the creditors."
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj
In our opinion, the books of account were available to the Assessing Officer. The books of account itself would indicate the capacity of the party to advance loan. There was no further need on the part of the assessee to prove the capacity of the creditors.
In the instant case, it is not possible to hold that the reasoning adopted by the Tribunal is devoid of merit and/or unsustainable. In the light of that, there is no merit in the appeal, which is accordingly, dismissed.
We find that similar view was expressed by the Hon’ble Calcutta High Court in the case of CIT Vs Dataware Pvt. Ltd. [GA No.2856 of 2011] wherein it was held as follows:
“In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj identity of the creditor and the genuineness of transaction through account payee cheque has been established.”
The Ld. AR has rightly relied on the decision of the Hon’ble Delhi High Court in the case of CIT Vs Shiv Dhooti Pearls & Investment Ltd (64 taxmann.com 329) as well. In the decided case the assessee had received unsecured loans in the year in question. In the course of assessment, the AO requisitioned the details of the loans received by the assessee. From the details furnished by the assessee, the AO observed that few loan creditors had returned loss and their source of advancing loans were other bodies corporate who had also returned miniscule taxable income in their income-tax returns. The AO therefore doubted the creditworthiness of the lenders. The AO accordingly made addition u/s 68 of the Act. On appeal, the Hon’ble High Court deleted the addition and held that the onus of the assessee is 'to the extent of his proving the source through which he has received the cash credit.' The Hon’ble High Court further held that, the AO has ample 'freedom' to make inquiry 'not only into the source(s) of the creditor, but also of his (creditor’s) sub-creditors’. The assessee however was found to have discharged his onus of proving the creditworthiness and genuineness of the lender by furnishing the documents & details, which he was required to maintain in the normal course and under law. The relevant findings of the Hon’ble High Court are as follows:
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj “12. The Court has examined the decision of the Gauhati High Court in Nemi Chand Kothari (supra). Therein the Gauhati High Court referred to Section 68 of the Act and observed that the onus of the Assessee "to the extent of his proving the source whom which he has received the cash credit." The High Court held that the AO had ample 'freedom' to make inquiry "not only into the source(s) of the creditor, but also of his (creditor's) sub-creditors and prove, as a result, of such inquiry, that the money received by the Assessee, in the form of loan from the creditor, though routed through the sub-creditors, actually belongs to, or was of, the assessee himself." Thereafter, the High Court, on a harmonious construction of Section 106 of the Evidence Act and Section 68 of the Act, held as under:
"What, thus, transpires from the above discussion is that while Section 106 of the Evidence Act limits the onus of the Assessee to the extent of his proving the source from which he has received the cash credit, Section 68 gives ample freedom to the Assessing Officer to make inquiry not only into the source(s) of the creditor, but also of his (creditor's) sub-creditors and prove, as a result, of such inquiry, that the money received by the Assessee, in the form of loan from the creditor, though routed through the sub-creditors, actually belongs to, or was of, the Assessee himself. In other words, while Section 68 gives the liberty to the Assessing Officer to enquire into the source/sources from where the creditor has received the money, Section 106 makes the Assessee liable to disclose only the source(s) from where he has himself received the credit and it is not the burden of the Assessee to show the source(s) of his creditor nor is it the burden of the Assessee to prove the creditworthiness of the source(s) of the sub-creditors. If Section 106 and Section 68 are to stand together, which they must, then, the interpretation of Section 68 has to be in such a way that it
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj does not make Section 106 redundant. Hence, the harmonious construction of Section 106 of the Evidence Act and Section 68 of the Income Tax Act will be that though apart from establishing the identity of the creditor, the Assessee must establish the genuineness of the transaction as well as the creditworthiness of his creditor, the burden of the Assessee to prove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transactions, which have taken place between the Assessee and the creditor. What follows, as a corollary, is that it is not the burden of the Assessee to prove the genuineness of the transactions between his creditor and sub-creditors nor is it the burden of the Assessee to prove that the sub-creditor had the creditworthiness to advance the cash credit to the creditor from whom the cash credit has been, eventually, received by the Assessee. It, therefore, further logically follows that the creditor's creditworthiness has to be judged vis-a-vis the transactions, which have taken place between the Assessee and the creditor, and it is not the business of the Assessee to find out the source of money of his creditor or of the genuineness of the transactions, which took between the creditor and sub-creditor and/or creditworthiness of the sub-creditors, for, these aspects may not be within the special knowledge of the Assessee." (Emphasis Supplied)
The above observations, far from supporting the case of the Revenue, does the opposite. In the subsequent decision of this Court in Mod. Creations (P.) Ltd. v. ITO [2013] 354 ITR 282 / [2011] 202 Taxman 10 (Mag.) / 13 taxmann.com. 114 (Delhi), the position was clarified by the Court and it was held:
"It will have to be kept in mind that Section 68 of the I.T. Act only sets up a presumption against the Assessee whenever unexplained credits
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj are found in the books of accounts of the Assessee. It cannot but be gainsaid that the presumption is rebuttable. In refuting the presumption raised, the initial burden is on the Assessee. This burden, which is placed on the Assessee, shifts as soon as the Assessee establishes the authenticity of transactions as executed between the Assessee and its creditors. It is no part of the Assessee's burden to prove either the genuineness of the transactions executed between the creditors and the sub-creditors nor is it the burden of the Assessee to prove the creditworthiness of the sub-creditors."
In Mod. Creations (P.) Ltd. (supra) this Court negatived the case of the Revenue that the onus was on the Assessee to prove the source of the sub-creditor. It was observed as under:
"14. With this material on record in our view as far as the Assessee was concerned, it had discharged initial onus placed on it. In the event the revenue still had a doubt with regard to the genuineness of the transactions in issue, or as regards the creditworthiness of the creditors, it would have had to discharge the onus which had shifted on to it. A bald assertion by the A.O. that the credits were a circular route adopted by the Assessee to plough back its own undisclosed income into its accounts, can be of no avail. The revenue was required to prove this allegation. An allegation by itself which is based on assumption will not pass muster in law. The revenue would be required to bridge the gap between the suspicions and proof in order to bring home this allegation. The ITAT, in our view, without adverting to the aforementioned principle laid stress on the fact that despite opportunities, the Assessee and/or the creditors had not proved the genuineness of the transaction. Based on this the ITAT construed the intentions of the Assessee as being mala fide. In our view the ITAT
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj ought to have analyzed the material rather than be burdened by the fact that some of the creditors had chosen not to make a personal appearance before the A.O. If the A.O. had any doubt about the material placed on record, which was largely bank statements of the creditors and their income tax returns, it could gather the necessary information from the sources to which the said information was attributable to. No such exercise had been conducted by the A.O. In any event what both the A.O. and the ITAT lost track of was that it was dealing with the assessment of the company, i.e., the recipient of the loan and not that of its directors and shareholders or that of the sub- creditors. If it had any doubts with regard to their credit worthiness, the revenue could always bring it to tax in the hands of the creditors and/or sub-creditors. [See CIT v. Divine Leasing & Finance Ltd. (2008) 299 ITR 268 (Delhi) and CIT v. Lovely Exports (P.) Ltd. (2008) 216 CTR 195 (SC)]."
In view of the legal position explained in the above decisions, the Court holds that as far as the present case is concerned, the Assessee has indeed discharged its onus of proving the creditworthiness and genuineness of the lender (TIL). There was no requirement in law for the Assessee to prove the genuineness and creditworthiness of the sub- creditor, which is in this case was TCL.”
We may also gainfully refer to the decision of the jurisdictional Hon’ble Bombay High Court in the case of Gaurav Triyugi Singh Vs ITO (121 taxmann.com 86). In the decided case, the assessee had received loan from another individual whose source of funds was suspected to be doubtful by the AO and therefore added u/s 68 of the
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj Act. On appeal the Ld. CIT(A) upheld the order of the AO. On further appeal, this Tribunal noted that the source of source of a portion of the loan amount stood explained and thus deleted the same. The addition of the balance loan amount was confirmed on the ground that the source of funds of the lender was not proved. On appeal, the Hon’ble High Court deleted the addition made by the lower authorities on the ground that the assessee was under no obligation to substantiate the source of source of funds. The relevant findings of the Hon’ble High Court are as follows:
“14. In Pr. CIT v. Veedhata Towers (P.) Ltd. [2018] 403 ITR 415 (Bom), this court has held that assessee is only required to explain the source of the credit. There is no requirement under the law to explain the source of the source. In the instant case, there is no dispute as to the identity of the creditor. There is also no dispute about the genuineness of the transaction. That apart, the creditor has explained as to how the credit was given to the assessee. Thus assessee had discharged the onus which was on him as per the requirement of section 68 of the Act. What the Assessing Officer held was that sources of the source were suspect i.e., he suspected the two sources Shri Rajendra Bahadur Singh and Smt. Sarojini Thakur of the source Smt. Savitri Thakur. 15. In view of discharge of burden by the assessee, burden shifted to the revenue; but revenue could not prove or bring any material to impeach the source of the credit. Though Mr. Walve, learned standing counsel, has pointed out that the creditor had no regular source of income to justify the advancement of the credit to the assessee, we are of the view that the assessee had discharged the onus which was on
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj him to explain the three requirements, as noted above. It was not required for the assessee to explain the sources of the source. In other words, he was not required to explain the sources of the money provided by the creditor Smt. Savitri Thakur i.e. Shri Rajendra Bahadur Singh and Smt. Sarojini Thakur. 16. Considering the above, we are of the view that the Tribunal was not justified in sustaining the addition of Rs. 14 lakhs to the total income of the assessee as undisclosed cash credit under section 68 of the Act.”
The Ld. AR’s reliance on the decision of the Hon’ble Gujarat High Court in the case of CIT Vs Apex Therm Packaging (P) Ltd reported in 42 taxmann.com 473 is also found to be of much relevance. In the decided case, the assessee had furnished complete details of loan creditors along with their PAN, financial statements, loan confirmations, bank statements etc. The AO however added the entire loan received u/s 68 of the Act. On appeal the Ld. CIT(A) allowed the assessee’s appeal which was also affirmed by this Tribunal. On appeal by the Revenue, the Hon’ble High Court observed that, when the full particulars, inclusive of the confirmation with name, address, PAN, IT returns, balance sheet & profit and loss account in respect of all the lenders were furnished and it had been found that the loans were received through cheques, then the AO was not justified in making addition u/s 68 of the Act. Accordingly, the Hon’ble High Court dismissed the appeal of the Department. The relevant findings of the Hon’ble High Court are as follows:
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj
“5. Heard Shri Sudhir Mehta, learned advocate appearing on behalf of the revenue. At the outset, it is required to be noted that the Assessing Officer directed to make the addition of Rs. 33,55,011/- under Section 68 of the Income Tax Act with respect to 17 lenders. However, it has been found that with respect to most of the lenders, except two, necessary documents, inclusive of confirmation with name, address and PAN Numbers, copy of the IT return and acknowledgment, balance sheet and profit and loss account and computation of total income in respect of all the parties, except two parties, were furnished before the Assessing Officer. Even with respect to the remaining two depositors the assessee filed the confirmation, address and PAN Numbers. Under the circumstances, when it was found that the assessee already discharged the initial onus cast upon him with respect to all the creditors and accordingly when the CIT(A) has deleted the addition of Rs. 33,55,011/- made under Section 68 of the Income Tax Act and consequently deleted the disallowance of Rs. 3,10,478/-, which was made with respect to interest and when the same has been confirmed by the ITAT, it cannot be said that ITAT has committed any error and/or illegality, which calls for the interference of this Court.
In paragraph 11, ITAT has observed and held as under:
"We have heard the rival submissions and perused the material on record. It is an undisputed fact that during the year the assessee had received loan from 17 parties aggregating to 33,35,011/-. The details of which are listed at page 2 of Assessing Officer order. CIT(A) while deleting the addition has given a finding that the assessee had filed before Assessing Officer the confirmations with name, address, PAN Number, copy of ledger account, copy of balance sheet and profit and loss account, copy of Income Tax
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj returns and computation of total income in respect of all the parties except two depositors. With respect to the two depositors, the assessee had filed confirmation, address and PAN Numbers and hence the assessee had also discharged the initial onus cast upon the assessee with respect to the two creditors. He has further noted that the loans were received through cheques and the loan account were duly reflected in the balance sheet of lenders CIT(A) has further held once the onus was fulfilled by the assessee, it was for the Assessing Officer to examine and bring any material on record which may help in rebutting the onus of assessee. The Assessing Officer has not brought any material on record in its support CIT(A) while deleting the addition has also relied on the decision of the Hon'ble Gujarat High Court in the case of Dy. CIT v. Rohini Builders [2002] 256 ITR 360 and the decision of Hon'ble Supreme Court, in the case of Orissa Corpn. Ltd. 153 ITR 78. Before us, nothing has been brought on record by the revenue to controvert the findings of CIT(A). Revenue has relied on the decision of Hon'ble Delhi High Court in the case of N.R. Portfolio (supra). We however find that the ratio of the aforesaid Delhi High Court decision are distinguishable on facts and therefore cannot be applied to the facts of the present case. In view of the aforesaid facts, we find no reason to interfere with the order of CIT(A) and thus dismiss this ground of revenue."
We are in complete agreement with the reasoning given by the CIT(A) as well as the ITAT. When full particulars, inclusive of the confirmation with name, address and PAN Number, copy of the Income Tax Returns, balance sheet, profit and loss accounts and computation of the total income in respect of all the creditors/lender were furnished and when it has been found that the loans were received through cheques and the loan account were duly reflected in the balance sheet, the Assessing Officer was not justified in making the addition of Rs. 33,55,011/-. Under the circumstances, no question of law, much less substantial question of law arises in the present
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj Tax Appeal. Accordingly, the present Tax Appeal deserves to be dismissed and is accordingly dismissed.”
Further, as pointed out by the Ld. AR, all the loans in question had been repaid in the subsequent years. It was brought to our notice that the Hon’ble Gujarat High Court in the case of CIT Vs Ayachi Chandrashekhar Narsangji (42 taxmann.com 251) had upheld the order of this Tribunal deleting the addition made on account of unsecured loan u/s 68 of the Act after taking note of the fact that, the loans had been repaid in the immediately next year and the Department had accepted the repayment of loan without probing into it. The relevant findings of the Hon’ble High Court are as follows:
“6. Having heard Shri Pranav Desai, learned Counsel appearing on behalf of the revenue and on perusal of the order passed by the CIT(A) confirmed by the ITAT, it appears that CIT(A) was satisfied with respect to the genuineness of the transaction and creditworthiness of Shri Ishwar Adwani and, therefore, deleted the addition of Rs.1,45,00,000/- made by the Assessing Officer. It is required to be noted that as such an amount of Rs.1,00,00,000/- vide cheque no. 102110 and an amount of Rs.60 lakh vide cheque no. 102111 was given to the assessee and out of the total loan of Rs.1.60 crore, Rs.15 lakh vide cheque no. 196107 was repaid and, therefore, an amount of Rs.1,45,00,000/- remained outstanding to be paid to Shri Ishwar Adwani. It has also come on record that the said loan amount s been repaid by the assessee to Shri Ishwar Adwani in the immediate next financial year and the Department has accepted the repayment of loan without probing into it. In the aforesaid facts and circumstances of the
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj case, when the ITAT has held that the matter is not required to be remanded as no other view would be possible, we see no reason to interfere with the impugned order passed by the ITAT. No question of law, much less substantial question of law arises in the present Tax Appeal. Hence, the present Tax Appeal deserves to be dismissed and is accordingly dismissed.” 27. For the elaborate reasons as discussed in the foregoing, we therefore hold that the additions made u/s 68 of the Act in AY 2010-11 was untenable both on facts as well as in law and was, therefore, rightly deleted by the Ld. CIT(A). Accordingly, Ground No. 4 of the Revenue stands dismissed.
We now take up the appeal in ITA No.4285/Mum/2019 for AY 2010-11. Briefly stated, the AO had reopened the assessment u/s 147 of the Act and framed the re-assessment order on 30.11.2017 for AY. 2010-11. According to AO, the assessee had received advances aggregating to Rs.25,92,36,224/- during the relevant year. Out of this amount, his predecessor had already made an addition of Rs.20,52,04,139/- which was added in the first round in the original assessment u/s 143(3) of the Act. The AO was therefore of the view that the remaining amount of Rs.5,46,38,020/- had escaped assessment. It was noted that this impugned amount was received from the father of the assessee (i) Deepak Kumar B. Kamboj, and two companies/entities belonging to the assessee viz., (ii) KBJ Jewellery Pvt. Ltd. (iii) KBJ Developers Ltd. The AO had issued notices u/s 133(6) to these three parties but according to him none responded. The
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj AO however, acknowledged that the assessee filed the loan confirmation, income-tax acknowledgment, financial statements and bank statements of these three parties, which was kept on record. The AO however held that the response of the assessee was not acceptable and hence added the impugned sum of Rs.5,46,38,020/- u/s 68 of the Act. Aggrieved by the order of the AO, the assessee preferred an appeal before the Ld. CIT(A) who deleted the addition by holding as under: -
“3.3 I have considered the assessment order, the submissions of the appellant and perused the material available on record including the judicial decisions relied upon by the assessee. The point for adjudication is whether the AO was justified in treating the amount Rs.5,46,38,020 as cash credit u/s 68 of the Act. It is seen that the AO reopened the assessment based on letter from the Investigation wing. asking the AO to enquire the credits in the Saraswat Bank account of the assessee. AO recorded reasons (Paper Book page 38) which does not show any incriminating information passed on by the Investigation wing. The amounts mentioned in the reasons are credits in the bank account and assessment was already completed u/s 143(3) after verification of the credits of Rs.25,92,36,224 in the same bank account. The then AO added Rs.20,52,04,139 in the assessment from the same bank account, therefore, there was no reason to reopen the assessment for the same credits in the same bank account.
3.4 Further, KBJ Jewellery Pvt. Ltd. and KBJ Developers Ltd. are the companies belonging to the same group, which are being assessed to tax with the same assessing officer. The AO could have verified the
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj balances from her own office records before reopening or making such addition. Sh. Deepak Kumar B Kamboj is father of the assessee. Section 68 casts on the assessee the responsibility of proving the identity, genuinely and creditworthiness of the party in whose name the credits are found it his books During the course of re-assessment proceedings the appellant had duly submitted the details in respect of the three parties i.e. ledger confirmation, Bank Statements, ITR Acknowledgement and Audited Financials to discharge the onus. Surprisingly the AO has recorded that the same are not acceptable and concluded the assessment. She has issued notices u/s 133(6) of the Act to three parties and granted only 5 days to respond. Five days time is too short for a third party to receive the AO’s letter and respond. It is also seen from the copies of the replies filed by the assessee during the appeal proceedings that she parties have responded on 24.11.2016 with all the documents asked for by the AO. However the AO did not consider the same, though the order was passed on 30.11.2016, which does not reflect well on the AO. All the three parties which the AO sought to verify through 133(6) notices are of the same group, therefore, even if the replies were filed by the same representatives, there was nothing wrong. Therefore the action of the AO in rejecting the documents filed before completion of the assessment is improper, and injustice to the procedure laid down by the Act. Appellant filed following details in respect of the parties verified by the AO.
Sr. No. Name of Party Documents Submitted 1 Deepak Kumar B. Kamboj Copy of Ledger A/c Confirmation Copy of relevant Bank Statement Copy of ITR Acknowledgment 2 KBJ Jewellery Pvt. Ltd. Copy of Ledger A/c Confirmation Copy of relevant Bank Statement Copy of ITR Acknowledgement Copy of Copy of Audited Financials Jurisdictional detail of the Assessing Officer
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj 3 KBJ Developers Copy of Ledger A/c Confirmation. Copy of relevant Bank Statement Copy of ITR Acknowledgement Copy of Copy of Audited Financials Jurisdictional detail of the Assessing Officer
3.5 It is also seen that certain credits received from M/s. KBJ Jewellery Pvt. Ltd. were also added by the then AO in the original assessment order u/s 143(3). The said additions have been deleted by my predecessor CIT(A) after calling for remand report from the same AO vide order dated 03.08.2018 holding the lender as genuine. Therefore, the findings of the AO in the present reassessment order are incorrect. Further, in respect of unsecured loans received from Tanaja Khan and Rakesh Bilani, the appellant has submitted the confirmation letters etc. from the parties, copies of which are filed. Instead of verifying the same and making any independent enquiry, AO proceeded to make the addition u/s 68.
3.6 Regarding to section 68 of the Act, it is well-established that the onus lies on the assessee to adduce necessary documentary evidence so as to prove all the three ingredients of section 68 viz. identity of the creditor, creditworthiness of the creditor and the genuineness of the transaction as the relevant facts are within the exclusive knowledge of the assessee. It has also been held that the evidences adduced by the assessee have to be examined not superficially but in depth and having regard to the test of the human probabilities and normal course of human conduct. The Hon’ble ITAT, Mumbai Bench, Mumbai in case of ITO v. Anant Shelters Pvt Ltd 51 SOT 234 (Mum) has enumerated certain legal principles regarding cash credits u/s 68 as under:
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj a) Section 68 can be invoked when there is a credit of sum of money in the books maintained by the assesse during the previous year and either the assesse offers no explanation about the nature and source of such credits or the explanation furnished by the assessee in the opinion of the AO is not satisfactory. b) The opinion of the AO for not accepting the explanation offered by the assessee as not satisfactory is required to be formed objectively with reference to the material on record. c) Courts are of the firm view that the evidence produced by the assessee can not be brushed aside in a casual manner d) The burden of proof is not static. The initial burden lies on the assessee to establish the identity and the creditworthiness of the creditor as well as the genuineness of transaction.
e) The identity of creditors can be established by either furnishing their PANs or assessment orders. The genuineness of the transaction can be proved if it was shown that the money was received by a/c payee cheque. Creditworthiness of the lender can be established by sound financials.
3.7 It is examined whether the appellant has been able to discharge the onus placed. On him u/s 68 of the Act in the light of the aforesaid legal’ principals or propositions, it is seen that the appellant had filed all the documents required to discharge the onus. If the AO was not satisfied, she had the option of making inquiries from the lenders by summoning them, .it is also noticed’ that no independent verification was carried out by the AO with loan creditors, no summons u/s 131 was issued and no statements were recorded with regard to the of loans. There is no finding by the AO that the evidences produced by the appellant were untrustworthy or lacked credibility. Thus, the
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj appellant's contention that it had discharged onus of establishing the identity and or mess of the loan creditors and genuineness of the transactions with the help of relevant Supporting evidences is in order and acceptable.
3.8 The Hon'ble Supreme Court in the case of CIT V/s Lovely Exports 6 DTR 308 has held "If the share application money is received by the assessee company from alleged bogus share holders who's name are given to the Assessing Officer then the department is free to proceed to reopen their individual assessments in accordance. with. law but it cannot be regarded as undisclosed income of assessee company". The Hon'ble Bombay High Court in the case of CIT v/s Creative World Telefilms Ltd 333 ITR 100 has held "If the share application money is received by the assessee company from alleged bogus shareholders who's name are given to the Assessing Officer then the department can always proceed against them and if necessary reopen their individual assessments. The Hon'ble Bombay High Court in the case of CIT vs. Gagandeep Infrastructure Pvt. Ltd (Bombay):
“During the previous relevant to the subject Assessment Year the assessee had increased its share capital from Rs.2,50,000/- to Rs.83.75 lakhs. During the assessment proceedings, the Assessing Officer noticed that the respondent had collected share premium to the extent of Rs.6.69 crores. Consequently he called upon the respondent to justify the charging of share premium at Rs.190/per share. The respondent furnished the list of its shareholders, copy of the share application form, copy of share certificate and Form no.2 filed with the Registrar of Companies. The justification for charging share premium was on the basis of the future prospects of the business of the assessee. The Assessing Officer did not accept the explanation/justification of
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj the respondent and invoked Section 68 of the Act to treat the amount of Rs.7.53 crores i.e. the aggregate of the issue price and the premium on the shares issued as unexplained cash credit within the meaning of Section 68 of the Act. This addition was deleted by the CIT(A) and the Tribunal, Before the High Court, the department contended that the proviso to Section 68 of the Act which was introduced with effect from Ist April, 2013 would apply in the facts of the present case even for A.Y. 2008-09. The basis of the above submission was that the. de hors the proviso also the requirements as set out therein would have to be satisfied. HELD by the High Court dismissing the appeal:
(i) We find that the proviso to Section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced “for removal of doubts” or that it is declaratory”. Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied.
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj
(ii) Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in CIT o/s. Lovely Exports (P)Ltd. 317 ITR 218 in the context to ‘the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to same to the assessee’s income as unexplained cash credit.”
3.9 In the light of the foregoing discussion, it is seen that the appellant has proved the identity of the loan creditors, the genuineness of the loan transactions and the creditworthiness of the loan creditors. Hence, it has to be considered that the appellant has satisfactorily explained the nature and source of the credits by way of unsecured loans. Hence, the A.O. is directed to delete the addition made u/s.68 of the Act. Ground number 1 and 2 are allowed.”
We have heard both the parties. After considering the rival submissions, it is observed that, the arguments raised by the Ld. CIT, DR against the findings of the Ld. CIT(A) is similar to the arguments raised to justify the additions made by the AO in the order passed u/s 143(3) for AY 2010-11. It is noted that the first party in question, Mr. Deepak Kamboj was the father of the assessee who had lent him monies and therefore his identity and genuineness stood substantiated.
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj The bank statements of Mr. Deepak Kamboj showed that the amounts were lent through banking channel and it was also shown that he was assessed to income-tax. Hence, the assessee discharged his initial burden of substantiating the creditworthiness of his father. The other two parties were (ii) KBJ Jewellery Pvt. Ltd. (iii) KBJ Developers Ltd., which belonged to the same group of the assessee. It is noted that the assessee was drawing salary from KBJ Jewellery Pvt. Ltd whose genuineness has not been disputed by the AO. Further, M/s KBJ Developers Ltd. was an existing lender from whom the assessee had obtained loans in the earlier years as well. It was pointed out that, in the income-tax assessments which were completed u/s 143(3) of the Act for AYs 2008-09 & 2009-10, the AO’s predecessor had not doubted the identity and creditworthiness of this lender or the genuineness of the transaction. Moreover both these lenders are assessed under the jurisdiction of the same AO and therefore we agree with the Ld. CIT(A) that nothing prevented the AO to examine the source of funds of these lenders in their respective assessments. According to the Revenue, although the assessee had filed all the details of the above three parties viz., PAN details, loan confirmation, income-tax acknowledgment, bank statement, accounts, balance sheet etc. but their capacity to advance loans had not been proven. We have already examined these contentions while deciding Ground No. 4 of the assessee’s appeal in ITA No.6384/Mum/2018 for AY 2010-11 above. Following our conclusions recorded in Paras 15 to 27 above, we hold that the additions of Rs.5,46,38,020/- made by the AO u/s 68
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj of the Act was rightly deleted by the Ld. CIT(A). Accordingly, the appeal of the Revenue in ITA No.4285/Mum/2019 stands dismissed.
We now proceed to take up the appeal of the Revenue in ITA. No.801/Mum/2018 for AY 2012-13. All the grounds are directed against the action of the Ld. CIT(A) in deleting the addition of Rs.107,09,85,507/- made u/s 68 of the Act. Briefly stated, the assessee has filed the return of income of Rs.1,15,19,745/- for AY 2012-13. Later, the case was selected for scrutiny. The AO noted that, the assessee has availed loan to the tune of Rs.1,07,09,85,507/- from seven (7) parties. Since no details were filed by the assessee, the AO added the entire loan amount of Rs.1,07,09,85,507/-. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee filed complete details of the lenders including their PAN details, loan confirmation, ledger, bank statements, IT acknowledgment, financial statements etc. with a prayer to admit these additional evidences in terms of Rule 46A of the Income-tax Rules, 1962. Upon admitting these additional evidences, the Ld. CIT(A) forwarded these details to the AO and sought a remand report from him. It is noted that the AO furnished his remand report vide letter dated 07.04.2017. Taking into consideration the submissions, details and evidences furnished by the assessee and the remand reports of the AO, the Ld. CIT(A) first noted that out of total addition of Rs.107,09,85,507/-, sum of Rs.31,85,28,658/- comprised of opening balance of loan creditors which was brought forward from earlier
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj years. The Ld. CIT(A) held that Section 68 only applied to sum which is found credited in the books of an assessee during the previous year for which no explanation has been furnished or explanation furnished is found to be false. The said provision had no application to amounts brought forward from earlier years and therefore the Ld. CIT(A) deleted the opening balance of Rs.31,85,28,658/-.
Heard both the parties. Following our conclusions drawn in Paras 8 & 9 above while adjudicating the Revenue’s appeal in ITA No.6384/Mum/2018 for AY 2010-11, we uphold the order of the Ld. CIT(A) deleting the addition to the extent of Rs.31,85,28,658/-, which represented monies received in earlier years and not in the relevant FY 2011-12.
In respect of the balance sum of Rs.76,22,21,849/-, the Ld. CIT(A) noted that these loans were received from seven (7) loan creditors. After examining the details furnished by the assessee, the AO in his remand report noted that, although these seven (7) loan creditors had furnished the requisite details but according to the AO, the source of their funds out of which they advanced loans remained unproven. After examining the remand report of the AO and the submissions & details furnished by the assessee, it is noted that the Ld. CIT(A) held that the correctness of the documentary evidences viz., loan confirmation, ledger, financial statements, Income Tax Acknowledgments, bank statements etc. furnished by the assessee was
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj not disputed by the AO. He, therefore, held that the identity and genuineness of these loan creditors stood substantiated. The Ld. CIT(A) noted that the AO had only adversely commented on the creditworthiness of the loan creditors in as much as he had stated that the source of funds in the hands of loan creditors were either not proven or not clear. We note that the Ld. CIT(A) at Para 22 of his appellate order, examined the source of funds/ bank statements of the loan creditors and thereafter concluded that the assessee had satisfactorily explained the nature and source of credits received from these seven (7) loan creditors. The Ld. CIT(A) accordingly deleted the balance addition of Rs.76,22,21,849/-. Aggrieved by this action of Ld. CIT(A), the Revenue is in appeal before us.
We have heard the rival submissions and perused the material placed before us. It is noted that, except for variation in figures / lenders, the comments offered by the AO qua the lenders in his remand report and the findings given by the Ld. CIT(A) regarding their identity, creditworthiness and genuineness is the same as noted earlier while adjudicating the appeal in ITA No.6384/Mum/2018 for AY 2010-11. The averments made in the written submissions filed by the Ld. CIT, DR doubting the creditworthiness and the capacity of the below named six (6) lenders and the rebuttals of the assessee are also similar to the averments made in ITA No.6384/Mum/2018 for AY 2010-11. In this regard, we note that like AY 2010-11, the Ld. CIT(A) had extensively examined the source of funds of the lenders and
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj thereafter held that the three ingredients set out in Section 68 of the Act stood satisfied. The relevant findings recorded by the Ld. CIT(A) in respect of each of the six (6) lenders are as follows:-
Sr. Name of the Loan received Sources of funds for advancing loan to No. lenders during the year the appellant. (Rs.) 1 Arham 7,73,88,595 The outstanding loan of Rs. 7,73,88,595/- Jewellery in the name of the appellant is found to be (Proprietor: duly reflected in the balance sheet of the Shri Vishal loan creditor as on 31.03.2012 under the Ramesh Jain) head "Loans advances (Asset)’. Apart from the capital of Rs.20,44,771/-, the balance sheet of the loan creditor as on 31.03.2012 shows sundry creditors of Rs.70,47,54,747/- on the liabilities side as against the sundry debtors of Rs. 37,95,35,859/- on the assets side. The sources for the loan advanced to the appellant are therefore evident from the balance sheet itself. Further, the bank account statement of the loan creditor shows that amounts have been received through RTGS or account payee cheques prior to advancing loans to the appellant and no cash deposits are found in bank account prior to advancing the loans to the appellant.
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj 2 Dev Jewels 13,59,16,572 The outstanding loan of Rs. (Proprietor: 13,58,71,572/- in the name of the Shri Dev appellant is found to be duly reflected in Gupta) the balance sheet of the loan creditor as on 31.03.2012 under the head ‘Loans & Advances (Asset)’. Apart from the capital of Rs.9,86,965/-, the balance sheet of the loan creditor as on 31.03.2012 shows sundry creditors of Rs.65,62,37,971/- on the liabilities side as against the sundry debtors of Rs. 39,68,57,090/- on the assets side. The sources for the loan advanced to the appellant are therefore evident from the balance sheet itself, Further, the bank account statement of the loan creditor shows that amounts have been received through RTGS or account payee cheques prior to advancing loans to the appellant and no cash deposits are found in the bank account prior to advancing the loans to the appellant.
3 Lovishka 5,00,00,000 The loan was paid by the creditor to Sri Gold Vasu Bhagnani through banking channel Jewellery on behalf of the appellant. The bank Pvt. Ltd. account statement of loan creditor shows that unsecured loans of Rs.5 crores have been received through account cheques
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj from M/s. KBJ Developers Ltd. prior to advancing loans to the appellant. The reason for non-appearance of the loan balance in the name of the appellant in the balance sheet of the loan creditor as on 31.03.2012 has been explained by the appellant with supporting evidence during the remand proceedings before the AO. The appellant gave a cheque to the creditor on 31.03.2012 towards repayment of the loan and the entry regarding the same has been made in the books of account of the creditor thereby squaring up the loan. However the cheque was not presented to the bank and the entry regarding repayment was reversed on 30.04.2012.
4 Mumbadevi 9,41,23,561 The outstanding loan of Rs. Bullion 32,16,32,247/- the name of the appellant (Proprietor: is found to be duly reflected in the Shri Irtesh balance sheet of the loan creditor as on Jawaharlal 31.03.2012 under the head ‘Loans & Mishra) Advances (Asset)’. Apart from the capital of Rs.22,87,573/-, the balance sheet of the loan creditor as on 31.03.2012 shows sundry creditors of Rs.87,41,63,979/- and unsecured loans of Rs. 42,50,000/- on the liabilities side as against the sundry’
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj debtors of Rs. 32,33,40,869/- on the assets side. The sources for the loan advanced to the appellant are therefore evident from the balance sheet itself. Further, the bank account statement of the loan creditor shows that amounts have been received through RTGS or account payee cheques prior to advancing loans to the appellant and no cash deposits are found in the bank account prior to advancing the loans to the appellant.
5 Rajeshwari 37,47,93,121 The outstanding loan of Rs. Impex 37,32,93,121/- in the name of the (Proprietor: appellant Is found to be duly reflected in Shri the balance sheet of the loan creditor as Shivasare on 31.03.2012 under the head ‘Loans & Kalluram Advances (Asset)’. Apart from the capital Yadav) of Rs.9,23,034/-, the balance sheet of the loan creditor as on 31.03.2012 shows sundry creditors of Rs.37,18,18,987/- and loans of Rs.15,51,62,540/- on the liabilities side. The Sources for the loan advanced to the appellant are therefore evident from the balance sheet Itself. Further, the bank account statement of the loan creditor shows that amounts have been received through RTGS or account payee cheques prior to advancing loans to
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj the appellant and no cash deposits are found in the bank account prior to advancing the loans to the appellant. 6 Real Uttam 3,00,00,000 The outstanding loan of Rs. 8,00,00,000/- Builders & in the name of the appellant (which Developers includes the opening balance of Rs. 5,00,00,000/-) is found to be duly reflected in the balance sheet of the loan creditor as on 31.03.2012 under the head ‘Loans & Advances’. Apart from the capital of Rs. 69,11,454/-, the balance sheet of the loan creditor as on 31.03.2012 shows sundry creditors of Rs. 2,22,40,891/- and unsecured loans of Rs. 9,11,85,350/- on the liabilities side as against the sundry debtors of Rs. 3,26,15,856/- on the assets side. The bank account statement of the loan creditor shows that amount has been received through RTGS from KBJ Hotel Goa Pvt. Ltd. prior to advancing the loan of Rs 3 crores to the appellant during the year. No cash deposits are found in the bank account prior to advancing the loans to the appellant.
Total 76,22,21,849
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj 23. It is, therefore, seen that the loans have been advanced to the appellant by the loan creditors out of the funds available by way of realization of sundry debtors or funds receive way of funds loans. It is noticed from the bank account statements of the loan creditors that there are no cash deposits in the bank-account prior to advancing loans to the appellant. It is seen that funds have been received from the sundry debtors/unsecured loan creditors through RTGS or account payee cheques. In view of these facts, I am considered view that the creditworthiness of the loan creditors has been adequately established by the appellant. As already stated earlier, the identity of the loan creditors and the genuineness of the loan transactions have been substantiated by the appellant by furnishing of additional evidences during the appellate proceedings.”
Having regard to the above, the written submissions filed by the Ld. CIT, DR and the rebuttals of the Ld. AR, we note that the contentions raised therein are similar to that of AY 2010-11. The Ld. CIT, DR had raised doubts on creditworthiness of each of the above lenders on the premise that they had filed returns of income declaring meagre income and that their own capital funds did not inspire any confidence regarding their capacity to advance loans to the assessee. We have already dealt with these contentions while deciding Ground No. 4 of the assessee’s appeal in ITA No.6384/Mum/2018 for AY 2010-11 above. Therefore, following our conclusions recorded in Paras 15 to 27 above, we hold that the additions of Rs.76,22,21,849/- made by the AO u/s 68 of the Act was rightly deleted by the Ld.
ITA Nos. 801 & 6384/Mum/2018 & 4285/Mum/2019 A.Ys. 2010-11 & 2012-13 Mohit Deepak Kamboj CIT(A). Accordingly, the appeal of the Revenue in ITA No.801/Mum/2018 also stands dismissed.
In the result, all the appeals of the Revenue are dismissed.
Order pronounced in the open court on this 28/09/2022. Sd/- Sd/- (S. RIFAUR RAHMAN) (ABY T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER मुंबई Mumbai; दिनांक Dated : 28/09/2022. Vijay Pal Singh, (Sr. PS) आदेश की प्रनिनलनि अग्रेनर्ि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त(अपील) / The CIT(A)- 4. आयकर आयुक्त / CIT दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, मुंबई / DR, ITAT, Mumbai 5. 6. गार्ड फाईल / Guard file. आदेशधिुसधर/ BY ORDER, सत्यादपत प्रदत //True Copy// उि/सहधयक िंजीकधर /(Dy./Asstt. Registrar) आयकर अिीलीय अनर्करण, मुंबई / ITAT, Mumbai