KANAGI SIDDESHWAR SHRISHILAPPA (HUF),SOLAPUR vs. INCOME-TAX OFFICER, WARD - 1(2), SAOLAPUR

आदेश / ORDER PER ANIL CHATURVEDI, AM :

This appeal filed by the assessee is emanating out of the order 1. of Commissioner of Income Tax (A) – 9, Pune dt.22.09.2017 for the assessment year 2004-05.

2.1 Assessee is an HUF, who filed its return of income for A.Y. 2004-05 on 31.01.2005 declaring income of Rs.5,75,000/- from agriculture and the return of income was filed as assessee was covered under one by six scheme. The case was taken up for scrutiny and thereafter, assessment was framed u/s 143(3) of the Act vide

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order dt.28.01.2006 and the total income was determined at

Rs.8,84,950/-. Aggrieved by the order of AO, assessee carried the

matter before Ld.CIT(A), who vide order dt.22.09.2017 (in appeal

No.PN/CIT(A)-7/Wd.1(2)/436/2014-15) granted partial relief to the

assessee. Aggrieved by the order of Ld.CIT(A), assessee is now in

appeal and has raised the following grounds :

“1. On the facts and in the circumstances the case, Learned CIT (A) 9 Pune has erred in treating unexplained cash credit amounting to Rs. 4,25,000/- and wrongly added in the assessed income. 2. Unexplained cash credit amounting to Rs. 4,25,000/- consisting Rs. 3,00,0001-belonging to Mr. Hingmere & amount of Rs. 1,25,000/- belonging to Mrs. Hingmere wrongly added in the assessed income in spite of Mrs. & Mrs. Hingmere were having the source of income from agriculture. 3. Learned CIT (A) 9 Pune has not considered the fact that Mr. & Mrs. Hingmere are having Supporting evidences for Sources of income of agriculture. 4. Learned CIT (A) 9 Pune has not considered the following facts. a) Creditors Mr. & Mrs. Hingmere are having Substantial documentary evidence for the source of agriculture income and the payments are made by the cheque by the creditor to the appellant and the same amount is returned subsequently through cheque by the appellant to the creditors Mr. & Mrs. Hingmere. b) Your appellants creditors Mrs. & Mrs. Hingmere are having the substantial supporting documentary evidences for their agriculture Income like sale Patties of the Traders and the Sahakari Sutgirni.”

assessee has stated to have taken loan of Rs.3,00,000/- from Mr.

Hingmire and an amount of Rs.1,25,000/- from Mrs. Hingmire. He

noticed that both the persons from whom the assessee has taken the

loans are agriculturists, their only source of income was agriculture

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and are not tax-payers. To verify the genuineness of the transaction,

AO issued summons to the aforesaid persons. AO has noted that only

Mr. Hingmire attended his office and his statement was recorded. In

his statement, he admitted that he and his wife had advanced loan to

the assessee. The source of loan was stated by Mr. Hingmire to be

partly out of his own income, partly from loan and partly from bank

loans. AO noted that Mr. Hingmire has not quantified as to how

much was his own income, how much hand loans and Mr. Hingmire

could not identify the parties from whom the hand loans were taken.

AO also noted that though Mr. Hingmire has stated to have paid

interest on bank loans but no interest was charged on the alleged

loan given to the assessee. AO also noted that the amount has been

advanced to the assessee from their separate bank accounts and in

their accounts, the amount has been deposited and has withdrawn

on the same day. The amounts have been deposited in cash and

withdrawn through cheque. Mr. Hingmire submitted that the loans

have since returned but he could not furnish the details of

repayments. AO noted that the creditors could not show as to

whether the amount was returned in one lumpsum or in piece-meal

and on what dates. AO noticed that though the amount has been

stated to have repaid but the assessee was showing the amount of

loan as payable. AO therefore, concluded that Mr. and Mrs. Hingmire

did not have the financial capacity to provide loan to others. He

therefore concluded that the aggregate sum of Rs.4,25,000/- shown

as loan by the assessee from Mr. and Mrs. Hingmire was assessee’s

own money from undisclosed sources. He accordingly treated it as

income from undisclosed sources and made its addition. Aggrieved by

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the order of AO, assessee carried the matter before Ld.CIT(A), who

vide order dt.22.09.2017 (in appeal No.PN/CIT(A)-

7/Wd.1(2)/436/2014-15) upheld the order of AO by observing as

under :

7.3. I have considered carefully the facts of the case and submissions of the appellant on the ·issue. The AO noticed that there is credit entry of Rs.3,00,000/- in name of Mr. Hingmire and Rs. 1,25,000/- in name of Mrs. Hingmire. The AO issued summons to both the person and statement of oath of Mr. Hingmire recorded. Mrs. Hingmire did not attend in response to summon. The AO observed that the cash has been deposited in accounts of Mr. Hingmire and Mrs. Hingmire and amount were advanced to the assessee through cheque. Mr. Hingmire claim that payments has been returned and no details furnished. The AO observed that the credit is still appearing in the liability side despite of repayment through cash. The AO also observed that Mr. Hingmire has paid interest on back borrowings and no interest has been charged from the assessee. The AO also observed that Mr. Hingmire are of small financial means. The AO observed that in the financial standing of Mr. Hingmire are not proved and Rs.4,25,000/- are assessee’s own money. The AO added Rs.4,25,000/- as undisclosed income of the assessee u/s 68.

7.4. The appellant has filed statement of fact along with Form 35 which is matter of record. The appellant contended that Mr & Mrs. Hingmire are having agriculture income.

7.5. Ostensibly, the appellant has taken loan of Rs.3,00,000/- from Mr. Hingmire and Rs.1,25,000/- from Mrs. Hingmire through cheques. The amount has been deposited in cash in account of these persons and on the same date cheques were issued for advancing loan. The AO recorded statement of Mr. Hingmire and found that loan has been repaid though it is appearing as credit in statement of the appellant. Apparently, there is contradiction in version of the appellant and that of Mr. Hingmire. Moreover, the mode of repayment is said to be cash. It is unlikely that the amount is taken as loan through cheque and paid through cash. During appellate proceedings the appellant could not controvert the findings AO. The AO has also pointed out in respect of financial capacity of the Mr. Hingmire that he has taken loan from bank and advance loan to the appellant without charging any interest. Further, the second person Mrs. Hingmire did not attend before the AO. The burden cast on assessee to prove genuineness of the transaction and creditworthiness of the creditor has not been discharged. The onus to prove the further detail in respect of amount advanced has not been shifted to Mr & Mrs. Hingmire. The genuineness of the loan has not been demonstrated through details of the repayment of the loan which has actually been made according to appellant. Under these circumstances, the action of the AO in making addition of Rs.4,25,000/- is upheld. Accordingly, the ground No.2 of the appeal is dismissed.”

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Aggrieved by the order of Ld.CIT(A), assessee is now in appeal

before me.

and Ld.CIT(A) and further submitted that assessee has demonstrated

the identity of the creditor, the creditor in his statement has admitted

to have advanced loan to assessee, has explained his source of income

and thus the assessee has discharge the initial onus cast upon the

assessee and therefore no addition is called for. She further

submitted that assessee is under no obligation to prove that

wherefrom the creditor has got or procured the money advanced to the

assessee. She further submitted that it is not a case where the loan

has been accepted in cash but is a case where the loan has been

accepted through banking channels. She therefore submitted that no

addition is called for. She further placed reliance on the decision in

the case of Aravali Trading Co., Vs. ITO reported in (2010) 187

Taxmann 338 (Raj) and the decision in the case of Kanhailal Jangid

reported in (2008) 217 CTR 354 (Raj). Ld.D.R. on the other hand,

pointed to the findings of AO and supported the order of lower

authorities.

record. The issue in the present ground is with respect to the addition

made of Rs.4,25,000/- u/s 68 of the Act. The reason for making

addition by AO was inter-alia that the lenders were agriculturist with

low means of income and their financial standing has not been

proved. On the other hand, it is assessee’s contention that when the

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creditors has admitted to have advanced the loans through banking

channels then assessee has discharged the initial onus cast upon the

assessee and that assessee is not obliged to prove source of money

advanced. The onus u/s 68 of the Act can be said to have been

discharged only when the assessee proves identity and capacity of the

creditor along with the genuineness of transaction to the satisfaction

of the AO. All the tree constituents are required to be cumulatively

satisfied. If one or more of them is absent, the AO can lawfully make

the addition.

that in the bank account of Mr. & Mrs. Hingmire, cash was deposited

and on the same day the amount was advanced by cheque to

assessee. The aforesaid finding of AO has not been controverted by

Ld.A.R. nor the finding has been found to be untrue. Establishing the

creditworthiness and genuineness, in my view, would imply that the

lender would be having sufficient surplus savings and funds backed

by capital assets to provide loan to assessee. The genuineness of the

transaction has to be considered by looking into surrounding

circumstances also. Merely because the money is transferred through

banking channels does not prove that the transaction is genuine and

explained. Before me, Ld.A.R. has relied on the decisions cited herein

above. It is a settled law that every case depends on its own facts and

even a slightest change in the factual scenario alters the matter and

makes one case distinguishable from another. In the case of Aravali

Trading Co., (supra) the facts are distinguishable as the creditors were

assessed to tax and it was not a case where the cash was deposited on

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a day and the same amount was transferred by them. Similarly, the

other case relied upon by Ld.A.R. is also distinguishable on facts and therefore not applicable to the present case. Considering the totality

of the aforesaid facts, I am of the view that no interference to the order

of Ld.CIT(A) is called for and thus, the ground of assessee is

dismissed.

Order pronounced on the 25th day of February, 2019.

Sd/- (ANIL CHATURVEDI) लेखा सद�य / ACCOUNTANT MEMBER

पुणे Pune; �दनांक Dated : 25th February, 2019. Yamini

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to :

आदेशानुसार/ BY ORDER

// True Copy // //

व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.