SHRI ARPIT MAMODIA,JAIPUR vs. INCOME TAX OFFICER, JAIPUR

PER BHAGCHAND, AM

The assessee has filed an appeal against the order of the ld.

CIT(A)-2, Jaipur dated 30-05-2017 for the assessment year 2012-13

raising therein following grounds of appeal.

‘’That on the facts and circumstances of the case and in law the ld. CIT(A) grossly erred in sustaining an addition of Rs. 4,60,000/- u/s 68 of the I.T. Act, 1961 on account of alleged bogus/unexplained cash credits from the following. S.N. Name Relation Loan Addition Addition Taken made by sustained (Rs. ) AO (Rs. ) by ld. CIT (A) (Rs.)

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the order of the ld. CIT(A) are as under:-

‘’3.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The appellant has taken loans from four people and the Assessing Officer after discussing the same has held an amount of Rs. 6,10,000/- out of Rs. 6,50,000/- as unexplained. Each case is discussed (i) Ankit Mamodia – total loan claimed is Rs. 1,50,000/- out of which Rs. 1,20,000/- has been treated as unexplained. It is seen that cash amounts of Rs. 45,000/- have been deposited on 4-10-2011 and 8-10-2011 and Rs. 30,000/- on 10-10-2011 and cheque of Rs. 1,50,000/- issued on 11-10-2011. The sources include salary of Rs. 1.50 lakhs from Dinesh & Company in Assessment Year 2010-11, Rs. 1.08 lakhs in Assessment Year 2009-10 and Rs. 96,000/- in the Assessment Year 2008-09. However, as per the sworn statement recorded by the Assessing Officer, it was claimed that the amount of Rs. 1.50 lakhs was forwarded from savings from this income. Further, as per income tax returns the salary was shown as Rs. 60,000/- and the difference between the salary as per confirmation of Dinesh & Company and that shown in the return could not be reconciled by the party. Further, it was seen that the confirmation filed by Ankit Mamodia referred to Rs. 1 lakh as loan while in the sworn statement the same was claimed at Rs. 1.5 lakhs. Since the person is getting a meager salary of Rs.8,000/- to Rs. 10,000/- per month, there is discrepancy in

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amounts extended and confirmed, the amounts shown as salary in income tax returns are not tallying with confirmation filed and cash amounts were deposited in the bank before extending the loan, the addition made by the Assessing Officer is confirmed as the creditworthiness of the creditor could not be satisfactorily proved.

(ii) Dilip Mamodia –He is the uncle of the assessee and extended Rs. 2,00,000/- and the entire amount has been disallowed by the Assessing Officer. The amount was claimed to be from savings relating to salary received. His bank balance on 15-09-2009 was only Rs. 4,390/- and cash was deposited prior to issue of cheques to the assessee. The person is receiving a salary of Rs. 20,000/- to Rs. 25,000/- per month but could not give details of monthly expenditure and savings thereon. As evidence of salary audit report of Shri Shiv Prasad Shyam Sunder, showing a salary of Rs. 2,16,000/- and interest and bonus of Rs. 55,616/- and Rs. 18,000/- was filed. M/s. Shiv Prasad Sunder is the proprietary of Shri Shyam Sunder Mamodia. Further cash has been deposited on different dates before issue of cheque to the appellant. However, the person is assessee's uncle and could have helped assessee from his savings. Considering the totality of facts and limited salary, an amount of Rs. 50,000/- is taken as explained and the balance amount is disallowed.

(iii) Smt. Pushpa Mamodia – she is the aunt of the assessee and extended an amount of Rs. 1,00,000/- out of which Rs. 90,000/- has been held unexplained by the Assessing Officer.She is housewife and does not filed the return of income. In the sworn statement she stated that her husbanbd is aware of the transaction and she has no knowledge of the same. It is seen that amounts of Rs. 45,000/- are deposited on 4-10-2011 and 8-10-2011 before issuing the cheque on 11-10-2011. The sources were stated as relating to her savings from amounts received on religious and social occasion, no documentary evidence of the savings

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was produced, further cash is deposited before issuance of cheque and the person is not an income tax assessee, the creditworthiness could not be proved, the addition is sustained.

(iv) Shri Dinesh Gupta – He is an LIC/GIC agent having commission income of around Rs. 5.50 lakhs and is an income tax assessee as well as maintains his books of accounts. The purpose of loan was stated by him as his closeness to the assessee's grandfather who had helped him in the past. As regards deposit of cheque of Rs. 50,000/- and Rs. 1.50 lakhs in cash he stated that the cash was deposited out of Rs. 50,000/- withdrawn by him on 25-04-2011 and further amounts withdrawn by him from other accounts from time to time. In view of the fact that Rs. 50,000/- relates to a amount deposited by cheque in the bank account of the party and withdrawal of Rs. 50,000/- is evidenced from the bank statement provided by him, an amount of Rs. 1,00,000/- is considered as explained and addition of Rs. 1,00,000/- balance made by the Assessing Officer is confirmed.

2.2 During the course of hearing, the ld.AR of the assessee prayed for

deletion of addition sustained by the ld. CIT(A) for which the ld.AR of

assessee pleaded and also filed the written submission.

‘’A. Any Sum credited cannot be partly explained and partly unexplained: The ld A.O out of sum credited as loan from certain relative person treated partly explained and partly unexplained as table given above and addition sustained for part of credit as unexplained credit u/s 68. However out of any deposit received and credited in books, how it could be partly unexplained for purpose of charge to income tax under this section.

The clear reading of section as under: 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

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Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. From the clear reading of section, the satisfaction of explanation required for sum so credited and not out of sum so credited and hence satisfaction of explanation can be complete for sum so credited can not be partly satisfied and partly unsatisfied. Once the ld A.O/CIT Appeal is satisfied for any explanation offered by assessee, the satisfaction is to be treated for whole so sum credited and there is no question of partly unexplained out of such sum. The ld CIT Appeal grossly erred in sustaining addition u/s 68 by treating credit partly explained for purpose of charging tax u/s 68.

B. On merit we further submit as under: 1. The appellant submitted following document in support of verifying the transaction: Ankit Mamodia(Credit Rs 150000, addition sustained Rs 120000) Confirmation (PB24) An affidavit (PB 25-26) Copy of bank statement(PB 27) Coy of salary certificate from M/S Dinesh &Co (Relative firm) alongwith copy of audit report u/s 44AB in form 3cd of that firm specifying salary paid by that firm.(PB 28-50) Dilip Mamodia(Credit Rs200000-addition sustained Rs150000 ) Confirmation (PB60) An affidavit (PB 61-62) Copy of bank statement (PB63) Coy of audit report u/s 44AB in form 3cd of M/s Shiv Prashad Shyam Sunder for verification of salary received from that firm specifying salary paid by that firm.(PB64-94) Copy of ITR(PB 95-98) Puspa Mamodia( Credit Rs 100000, addition sustained Rs 90000) Confirmation (PB106) An affidavit (PB 107-1808) Copy of bank statement (PB 109) Shri Dinesh Gupta(Credit Rs 200000, addition sustained Rs 100000) Confirmation (PB 113) An affidavit (PB114-115) Copy of bank statement (PB116) Copy of ITR,computation and balance sheet (PB117-120)

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theconfirmations. affidavits, statements recorded by the A. 0. and other evidences on record (supra). The Id. AO wrongly reproduced some part of the statements recorded in the assessment order. The entire statements are read as a whole in sequence establishes that the loans is genuine & the creditors are capable to advance such loans. 3. From the documents submitted and statement of credited as above, it is amply evident that the oans received aregenuine & the creditors had capacity to advance the loans. The ld A.O made addition erely because cash is deposited in the bank accounts of the creditors before issue of cheque, it does not necessarily imply either that the cash does not belong to the creditor or the creditor does not have capacity to deposit such amount in his bank account. During the period of demonetization all citizens are depositing their past savings in their respective bank accounts and the government itself has accepted the fact that no inquiry shall be conducted in case a person deposits his/her cash savings in his/her bank accounts upto a limit of Rs.2.5 lakhs in savings account. In this regard, CBDT issued notification No. 104/2016-IT on 15.11.2016 amending Rule 114B providing that no reporting shall be made upto Rs.2.5 lakhs cash deposit in saving account (copy of notification is enclosed). This clearly evident that past saving upto 2.50 lacs in cash is justified. In the appellant case, non of creditor deposited more than 1.50 lac for loan to him.

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• Smt. Pushpa Mamodia is aunt of the appellant has given cheque amounting Rs 100000 for which he has deposited cash Rs 90000 out of accumulated past savings from sum received on religious and social occasions as stated in her statement recorded during course of hearing(PB 112 q10).The ld A.O treated it unexplained by saying that she is not filing ITR and no documentary evidence to prove her contention arbitrarily. It is humbly submitted that simply because a cash creditor does not file his/her return of income or simply because she is a housewife, it does not necessarily mean that the loan is bogus or not genuine. It Is a well established fact that housewives in India generally do not have banking habits. Reliance is being placed on the following judgments in this regard :-

Prabhajee kaur Vs. ITO (ITAT Jaipur Bench) XXXIV Tax World 101

• Shri Dinesh Kumar Gupta is friend of appellant’s late father has given Rs 200000/-. He LlC/GIC agent having commission income of around Rs.5.50 lakhs and prepares financial statements comprising of P&L Account, Capital Ale, Balance sheet etc. which was also submitted with his return of income filed. The loan given is correctly appearing in his balance sheet(PB 120).He has also explained source of cash deposited in bank in his statement recorded during course of hearing by A.O(PB 123 q.no 11). The ld A.O found cash deposit not satisfactory arbitrarily without considering the fact and with irrelevant ground.

4.1 IDENITITY, CAPACITY OF CREDITORS AND GENUINENESS OF TRANSACTION STANDS ESTABLISHED APPELLANT HAS DISCHARGED ITS ONUS.

It is humbly submitted that the appellant has established the identity and capacity of the loan creditors as well as the capacity & genuineness of the transactions. This is evident from the following :- The identity of the loan creditors has been established by filing confirmations, bank pass books, affidavits, income tax returns and also they personally appeared before the AO. u/s 131 & their statements were also recorded. The capacity of the loan creditors is proved through affidavits, income tax returns, salary certificates, audit reports of employers, bank pass books and also from the statements recorded by the Id. AO. during the assessment Loans were advanced to help the appellant (who lost his father long ago) in establishing his new business started during the year under consideration by the joint family members who resided as joint family at the same address except Sh. Dinesh Gupta who was close friend of late father of the appellant. Hence the genuineness of the transactions is also established. The alleged loans were taken through banking channels as is evident from the bank statement of the appellant as well as the bank pass books of the cash creditors.

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Statements of all the cash creditors were recorded by the Id. A.O wherein they confirmed to have advanced loan to the appellant out of their own savings. They nowhere denied not having advanced loan to the appellant. The appellant had discharged its onus of establishing the identity, capacity and genuineness. The onus shifted on the Assessing Officer to prove that the alleged cash creditors were bogus, however, he grossly failed in discharging his onus. Reliance is being placed on the following judgments in this regard:-

4.2 MATERIAL AVAILABLE ON RECORD REMAINED UNCONTROVERTED. AO FAILEDTO DISCHARGE THEN ONUS ON HIS PART. The Id. A.O.failed to point even a single defect in the evidences submitted by the appellant viz. confirmations, affidavits, bank statements, income tax returns, salary certificates, etc. Evidences which remained uncontroverted, should be accepted. The contents of the affidavits remained uncontroverted. An affidavit cannot simply be brushed aside on the basis that it is a self serving document. Its contents have to be accepted as suchunless otherwise proved. Reliance is being placed on the following judgment in this regard :-

Paras Cotton Co. Vs. CIT XXX Tax World 168 (ITAT, Jodhpur Bench)

4-3 AO FAILED TO BRING ANY MATERIAL EVIDENCES ON RECORD TO SUPPORT HIS BELIEF THAT THE CREDITORS WERE BOGUS. HE MERELY ACTED ON SURMISES AND CONJECTURES The !d. A.O. merely acted on surmises and conjectures and failed to bring any material evidences on record to support his belief that the creditors were bogus. He wrongly concluded that the appellant routed its own money through cheques from the bank accounts of cash creditors without any basis and merely on surmises and conjectures.

4.5 SOURCE OF SOURCE NEED NOT BE PROVED.

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The issue under consideration in this appeal is squarely covered by the judgment of the Hon'ble Rajasthan High in the case o M/s Aravali Trading Co. Vs. Income Tax Officer reported at (2008) 8 DTR 199,…. Hence. it is now a well established law that in case of loan transactions, source of source need not be proved. Once the identity, capacity and genuineness of a loan transaction is proved by the assessee, the primary onus which lay upon him is discharged and is shifted on the revenue. The assessee need not to prove the source ofsourceoftheloantransaction.Reliance is also being placed on the following judgments in this regard :-

2.3 On the other hand, the ld. DR supported the orders of the

authorities below.

2.4 The Bench has heard the rival submissions and perused the

materials available on record. Brief facts of the case are that the AO made

the addition of Rs. 6,10,000/- in respect of following cash creditors.

Name of Creditor Total amount of loan Amount of loan found claimed unexplained Shri Ankit Mamodia Rs. 1,50,000 Rs. 1,20,000 Shri Dilip Mamodia Rs. 2,00,000 Rs. 2,00,000 Smt. Pushpa Mamodia Rs. 1,00,000 Rs. 90,000 Shri Dinesh Gupta Rs.2,00,000 Rs. 2,00,000 Total Rs. 6,50,000 Rs. 6,10,000/-

The relevant observation as to making the addition by the AO is as

under:-

‘’assessee has proved only identity of creditors but failed to prove that they were creditworthy. Further, the transactions were not

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found genuine. The creditors are family members or relative of the assessee, the burden of proving creditworthiness of the parties and genuineness of the transactions was relatively heavier than in a normal case, and that the assessee had failed to discharge the burden I am satisfied that the true nature and source of the amounts of cash credits entered in the books of accounts of the assessee, as per investigation or enquiry is not found satisfactory. In view of above discussion Rs. 6,10,000/- is treated deemed income of the assessee u/s 68 of the Act and the same is added to the total income of the assessee.’’

In first appeal, the ld. CIT(A) has discussed the case of respective cash

creditors explicitly and partly confirmed/sustained the addition by

observing as under:-

The Bench has taken into consideration the orders of the lower

authorities and the written submissions of the assessee. It is noted that the

ld. CIT(A) has elaborately discussed the issue of cash creditors and given

the relief appropriately to the assessee as per the details available before

11 ITA No. 625/JP/2017 Shri Arpit Mamodia vs ITO, Ward-4(5), Jaipur

him. Taking into consideration the present facts and circumstances of the case, the Bench finds no reason to interfere with the order of the ld. CIT(A). Thus the appeal of the assessee is dismissed. 3.0 In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 01/05/2018.

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