ASSISTANT COMMISSIONER OF INCOME TAX,, KOLHAPUR vs. NITIN MOHAN WADIKAR PVT.LTD,, KOLHAPUR

The Revenue has raised the following ground of appeal:-

The Revenue is in appeal against deletion of addition made under section 68 of the Act.

Briefly, in the facts of the case, the assessee was engaged in the business of manufacturing of high quality machines. The assessee had declared unsecured loan of ₹ 1,04,83,000/- from one Mr. Ramesh Havele. The Assessing Officer asked the assessee to explain the said loan. In reply, the assessee pointed out that there was opening balance of ₹ 11,83,000/- in the said account and during the year ₹ 93 lakhs was received by account payee cheques. The assessee further explained that actually it was money received from Mr. Prafulla Anil Madiwale by cheque as advance against proposed sale of shares but by mistake it was wrongly posted in the account of Mr. Ramesh Havele, since both the persons were from same group. The Assessing Officer notes that when enquiries were made, the assessee has changed its stand that loan was actually taken from Mr. Prafulla Anil Madiwale and not from Mr. Ramesh Havele. The assessee had filed audited Balance Sheet and Profit and Loss Account and it claimed that by mistake it had wrongly entered the name of Mr. Ramesh Havele. The Assessing Officer observed that the assessee never

The Assessing Officer further on 15.03.2016 issued Summons under section 131 of the Act to Mr. Ramesh Havele and asked him to produce copy of return of income, computation of income, bank pass book, etc. and he was also asked to establish source from which he had paid the said amount. However, he neither attended the office nor furnished any submissions. The assessee was also asked to prove the genuineness and creditworthiness of unsecured loan creditor and the reply is reproduced under para 6.7. The assessee explained that transactions were in fact with Madiwale group and entire amount was received through cheques. The cheques and amounts both were tallied and hence, it was stated that transactions were genuine. The Assessing Officer did not accept the explanation of assessee on the ground that creditworthiness, genuineness of Mr. Ramesh Havele and Mr. Prafulla Anil Madiwale was not proved and hence, sum of ₹ 93 lakhs was added to the income of assessee.

The CIT(A) on the other hand, refers to an affidavit filed by assessee that by an inadvertent mistake on the part of his accountant, the entries were posted in the wrong name. The CIT(A) further refers to confirmation of transaction from Mr. Prafulla Anil Madiwale and from the bank account of Mr. Prafulla Anil Madiwale, the CIT(A) holds that the person had received total sum of ₹ 2.33 crores from Mr. Ramesh Havele and only ₹ 93 lakhs was transferred to assessee. Relying on the bank statement of Mr. Prafulla Anil Madiwale, the CIT(A) accepts that the amount had been received by assessee in the form of

The Revenue is in appeal against the order of CIT(A).

The learned Departmental Representative for the Revenue placed strong reliance on the order of Assessing Officer and pointed out that from the conduct of assessee, it is seen that in the books of account the amount was shown in the name of Mr. Ramesh Havele but before the Assessing Officer the assessee changed its stand that the name was mentioned wrongly, it was actually Mr. Prafulla Anil Madiwale. The learned Departmental Representative for the Revenue also pointed out that the CIT(A) accepted the affidavit filed by assessee, which is self serving document and since the ingredients of section 68 of the Act have not been fulfilled, the addition needs to be upheld in the hands of assessee.

The learned Authorized Representative for the assessee on the other hand, pointed out that the cheques have been received from bank account of Mr. Prafulla Anil Madiwale and by an error in the books of account of assessee the name of Mr. Ramesh Havele was posted by the accountant, which error was corrected before assessment proceedings. He further stressed that source of source cannot be asked.

We have heard the rival contentions and perused the record. The issue arising in the present appeal is against addition made under section 68 of the Act. There are three ingredients of said section 68 of the Act, which need to be fulfilled by the assessee. The first is identity of creditor, second is

Now, coming to the facts of the case, first is identity; the assessee in the books of account mentioned that it had received loan of ₹ 93 lakhs from Mr. Ramesh Havele; but during assessment proceedings the assessee changed its stand and says it wrongly mentioned the name as Mr. Ramesh Havele instead of Mr. Prafulla Anil Madiwale. Before the CIT(A), the assessee files an affidavit which at best is self serving document. The Assessing Officer had served Summons on Mr. Ramesh Havele, which remained not complied. The claim of assessee in the written note filed before the Assessing Officer was that it was having dealings with Mr. Ramesh Havele and by mistake his name was written in the books of account and not the correct name of Mr. Prafulla Anil Madiwale. In case the assessee has dealings with Mr. Ramesh Havele, then the said person should have been produced before the Assessing Officer or the CIT(A). But that is not so and further the question of creditworthiness of creditors, wherein the CIT(A) has accepted that the transactions are through bank i.e. from bank account of Mr. Prafulla Anil Madiwale to the bank account of assessee and hence, needs to be accepted. We find no merit in the stand of CIT(A) in this regard especially in the peculiar facts of the present case, wherein initially the assessee has shown the transaction with Mr. Ramesh Havele and later had modified its case that the loan was received from Mr. Prafulla Anil Madiwale. The onus was on the assessee to establish and fulfill all the three conditions of section 68 of the Act, which have not been fulfilled. In any case, the creditor is not person of means and the plea of receiving money and advancing the same cannot be accepted at face value. Accordingly, we

In the result, the appeal of Revenue is allowed.