LAKSHYA EDUCATIONAL TRUST,GHAZIABAD vs. ADDL. CIT, RANGE-1, GHAZIABAD

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “D”: NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA No. 4128/Del/2017 (Assessment Year: 2010-11) Lakshya Educational Trust, Vs. Addl. CIT, Range-1, Akhilesh Kumar, Adv., Chamber Ghaziabad NO. 206-207, Ansal Satyam, RDC Raj Nagar, Ghaziabad, PAN: AATL6943M (Appellant) (Respondent)

Assessee by : Shri Akhilesh Kumar, Adv Revenue by: Smt Naina Soin Kapil, Sr. DR Date of Hearing 01/04/2019 Date of pronouncement 04/06/2019

O R D E R PER PRASHANT MAHARISHI, A. M. 1. This appeal is filed by the assessee, Lakshya Educational Trust, AOP, through its trustee against the order of the ld CIT (A), Muzaffarnagar dated 26.03.2017, wherein, the addition made by the ld AO of Rs. 30 lakhs on account of unexplained credit u/s 68 is upheld. The assessee has challenged the same as per following grounds:- 1. The learned CIT (A) grossly erred in sustaining addition of Rs. 30 lakhs, being loan received from a party supported with ITR, confirmation, B/s disclosing loans and bank a/c of said party and even after verifying rat loan is repaid cases of subsequent years are accepted, which is against the ratio of decision of hon‟ble Jurisdictional high court/other courts etc. 2. That in addition to above, Id. CIT(A) failed to appreciate that the allegation of AO about enquiries about address of company is found wrong beside there is no material against the mass evidences/material placed on record and accepted other loans Id. AO failed to discharge the shifted onus lay upon him even after remanding case twice. 3. That in addition to above, learned CIT(A) failed to appreciate that loans was taken long before the start of activities hence neither there was any possibility to have earned so much of income and failed to follow the ration of apex / jurisdictional courts etc. on the issue. 4. That without prejudice to above and without any dilution in above grounds but in alternative, learned CIT(A) failed to follow the ratio of Page | 1

jurisdictional/other courts holding that provisions of s. 68 has no applicability where deemed income u/s 68 is applied for charitable purposes. 2. The brief facts of the case shows that the assessee is a charitable trust assessed as Association of Persons, running an educational institute, filed its return of income on 12.10.2010 showing total income of Rs. Nil. 3. During the course of assessment proceedings, it was found that the assessee has obtained unsecured loan of Rs. 30 lakhs from M/s. Atoll Vyapaar Pvt ltd, Kolkata, and West Bengal during the financial year 2009- 10. Assessee submitted confirmation, copy of the income tax return wherein, the gross total income of the depositors was of Rs. 37989/- only. Assessee submitted the bank statement of the lenders from Punjab National Bank from 09-03-2010 to 12.03.2010 which showed that there are debits and credits of huge amounts ranging from Rs. 5 lakhs to Rs. 50 lakhs resulting into meager income to the lender despite such heavy deposit and withdrawals. The ld AO conducted an enquiry through the Investigation Wing of Kolkata and such enquiry confirmed that no such company exists at the given address. The ld AO also noted that he has made repeated requests to produce the directors of that company which were not complied with. Therefore, the ld AO held that the assessee failed to prove the identity, creditworthiness of the lenders as well as genuineness of the transaction of unsecured loan of Rs. 30 lakhs and he made an addition u/s 68 of the Act. He further relied upon several judicial precedents to make the above addition. Further, he held that as the addition has been made u/s 68 of the Act the benefit of application of provision of section 11 and 12 are also not eligible to the assessee because the cash credit is not genuine, is not voluntary contribution. Accordingly, order u/s 143(3) of the Act was passed on 15.03.2013 determining the total income of the assessee of Rs. 30 lakhs. 4. The assessee aggrieved with the order of the ld AO preferred an appeal before the ld CIT (A). It also made an application for admission of additional evidence in the form of annual accounts of the depositor, Form NO. 18, the copy of ledger account and the copy of bank account of the lender for subsequent year stating that the above amount has also been repaid. The ld CIT (A) also obtained the remand report from the AO dated 21.03.2016 which objected to admission of additional evidences. Assessee Page | 2

also submitted the rejoinder to the same. The ld CIT(A) admitted the additional evidence and thereafter vide Para No. 10 onwards proceeded to decide the ground No. 3 and 5 of the appeal of the assessee vide page No. 17 to 24 as under:- “10. Grounds of appeal Nos.3 to 5 are against the addition of Rs.30,00,000/- on account of unexplained unsecured loans u/s 68 of the Act and application of section 11/12 of the Act. 11. The facts of the case, submissions made by the appellant, remand report of the AO and rejoinder of the appellant have been considered. The appellant is a society which is not registered u/s 12Aof the Act during the year under consideration. The AO has required the appellant to prove identity, creditworthiness‟ 'and genuineness in respect of above unsecured loans. The appellant has received loan of Rs.30 lac from M/s Atoll Vyapaar Pvt. Ltd., registered at 19, Ilnd Floor, Main Building, R.N. Mukerjee Road, Calcutta. Similar loans have been raised in the case of Society for Institute of Professional Studies for 2010-11 where trustees are common with the appellant and being assessed with the same AO. It was found by the AO that its director is Sh. Sunil Kumar Gupta whose address as per the ROC/MCA records is 234, DDA Office Complex, Jhandewalan Extension, New Delhi. The AO has issued notice u/s 131 of the Act on 16-04-2012 in the case of Sh. Sunil Kumar Gupta in the case of Society for Institute of Professional Studies to verify the unsecured loans taken by the appellant from 3 companies including M/s Atoll Vyapaar. The Inspector Income Tax deputed to serve the said notice has reported that there was a firm in the name of M/s Alok and Company about a year back on this address and presently there is a sign board of M/s Niwas Associates. On the local enquires it has been gathered that Shri Sunil Kumar Gupta had never lived at that address. The AO on 12-03-2013 after going through, the documents furnished by the appellant and other material on record has required" the appellant to produce the Director of M/s Atoll Vvapaar. No compliance was made by the appellant. The AO in view of discussion made in the assessment order has treated the amount of Rs.30 lac in respect of Atoll Vypaar Pvt. Ltd. Calcutta as unexplained sum and added the same u/s 68 of the Act. During the appellate proceedings the appellant has relied on the confirmations giving addresses, details of loan, mode of payment through banking channel, copy of ITR, bank statement and repayment of loan in subsequent years, copy of the balance sheet and profit and loss account in respect of M/s. Atoll Vypaar. The AR has argued that primary onus has been sufficiently discharged it. The AR has stated that he was not required to prove the source of source of loan. In the rejoinder the AR has stated that the AO has made addition merely on presumptions. The AR has argued that the appellant was never confronted with the adverse findings made by the AO as discussed in the assessment order. In the rejoinder the AR has stated that no such addition can be made which has been received before the start of Page | 3

activities or even soon after the start of activities. The AR has relied upon the decision of the Hon‟ble Allahabad High Court in the case of Abhudaya Pharmaceuticals vs. CIT (2013) 350 ITR 358 (All) and Hon‟ble Supreme Court in the case of CIT vs. Bharat Engineering & Construction Company (1972) 83 ITR 187. The detailed submission has been reproduced as above. 12. The facts of the case on the above issues have been gone in detail with the material on record. On going through the documents furnished by the appellant in respect of Attol Vyapaar P. Ltd. it is noted that the appellant has received loan of Rs.30 lac on 4th/9th March, 2010 on which no interest has been paid during the year. M/s Attol Vyapaar has filed return showing petty income of Rs.37989/- for AY- 2010-11. From its balance sheet as on 31-03-2010 it is noted that it has shown share capital of Rs.33.56 lac with huge premium of Rs.7.81 crore. The available funds have been parked into unquoted shares investments and loans advances from which there is no income. In the profit & loss account it has shown petty interest receipts of Rs.78082/- with net profit of Rs.37989/-. It has no fixed asset. The loan has been repaid on 02-04-2014 without paying any interest and much after the completion of the assessment proceedings on 15-03-2013. From the above analysis, it is noted that the above entity is not doing any real business activities to support the availability such large funds of getting share capital, huge share premium at their disposal to make such investment with the appellant. This entity has been found to be a paper company. In the view of the above facts, it is noted that identity, creditworthiness and genuineness of the above entity is not established from the above documents and results of enquiries made by the AO. The above entity has been found to have been existing only on papers without having any real or physical worth to support the alleged investments made with the appellant. Therefore, appellant has failed to explain/ prove-the identity, creditworthiness and genuineness of the sum credited satisfactorily by furnishing relevant documents. The appellant has failed to discharge the onus cast upon it. It is found that the alleged depositor is non-existent and is just paper company. It is noted in this case that the appellant has not provided any satisfactory document during the assessment proceedings as well as appellate proceedings to establish the identity and creditworthiness of the depositor. The submission of the appellant that the amounts have been received through banking channel and information regarding PAN, ITR, MCA record etc. are not relevant to explain the transactions in the absence of facts as discussed above. The AR has argued that the status of these companies is ACTIVE as per ROC records. It is pointed out here that merely filing balance sheet with the ROC does not prove its creditworthiness and genuineness automatically. Other corroborating observations are relevant to decide these factors. In view of the above facts that the reliance of the AR on the case laws referred above does not help its case as facts of this case are entirely different from the referred cases as identity and creditworthiness of the depositor has not been proved in this case. v

to prove identity, creditworthiness and genuineness of the unsecured loans taken from this company. It is also relevant to mention here that in view of the facts of the case as discussed above, even the identity of the depositor has not been proved and established. Mere filing of names, addresses, copies of ITRs, balance sheets, ROC record is not enough to establish the identity and creditworthiness and genuineness in respect of depositor. These are paper documents which are prepared in each and every case of the corporate entity (real or paper entity) but are not adequate enough to show their actual creditworthiness and genuineness particularly in view of the enquiries made by the AO. The profile of this company was analyzed and it was found that it is a paper company without having any real base. These observations lead to conclusion that these transactions are not genuine. Further, it is noted that the verification letter sent by the AO have remained uncomplied with (ii) the case of Society for Institute of Professional Studies), whereas, the appellant has produced certain documents as discussed above. Though M/s Allot Vyapaar is a entity set up for earning of profit but it has not charged any interest for such a huge loan outstanding for such a long period. This also leads to the suspicion on the genuineness of transactions. Once it is proved that unsecured loans have not been explained then, there is no duty upon the AO to point out the source from which the money was received by the assessee. Reliance is put on the decision of the Hon‟ble Apex Court in the case of A. Govindarajulju Mudaliaar v. CIT (1958) 34ITR 807. 15. It is observed from the above that the above adverse finding have been made on the strengthen of enquiries conducted by the AO and by making independent analysis of the documents to arrive at the conclusion that the appellant has failed to prove identity, creditworthiness and genuineness in respect of unsecured loan as discussed above. The appellant has been required by the AO to produce the Director of Atoll Vyapaar during the assessment proceedings on 12- 03-2013. However, no compliance has been made. As per the requirement of section 68 of the Act, onus has been shifted back on the appellant by confronting the appellant on the basis of adverse findings as a result of enquiries conducted to verify the genuineness of documents submitted by the appellant and about non-existence of company at the address given by the appellant. The documents furnished by the appellant have thus remained unverifiable. Therefore, the appellant has failed to discharge the onus cast upon it u/s 68 of the Act to explain the credits. The various adverse observations made above in the cases of this alleged depositor entity is corroborating to infer that their identity, genuineness and creditworthiness has not been proved. 16. The appellant has relied upon the fact that these loans have been repaid in the subsequent years. However, this fact is not relevant as the unsecured loans have not been explained in the year in which the same have been received by the appellant as required u/s 68 of the Act. It is relevant to mention here that the loans in this case have been repaid on 02-04-2014 much later than completion of the assessment proceedings on 15-03-2013. the AR has stated that no addition u/s 68 Page | 7

of the Act can be made as it is the first year of operation and has relied upon the decision of the Hon‟ble Allahabad High Court in the case of Abhudaya Pharmaceuticals vs. CIT (2013) 350 ITR 358 (All) and Hon‟ble Supreme Court in the case of CIT vs. Bharat Engineering & Construction Company (1972) 83 ITR 187. On this issue it is observed that the appellant has shown commencement of activities during the year as evident from the balance sheet and income & expenditure statement furnished along with the return of income for the year under consideration. In the balance sheet the appellant has shown purchase of land for Rs.5597250/- along with construction for Rs.l350000/- during the year and has shown expenses of Rs. 12360/- . Whereas, these loans have been taken at the fag end of the year. A lot of activities have been done by that time this sum has been introduced in the books of account by the appellant. Whereas, in the above referred case of Abhudaya Pharmaceuticals (supra)relied upon the appellant it was a case of partnership firm which has been formed on 05-07-90 and capital had been introduced on 07-07-90 and identity of the depositor was not in dispute as being partner. Whereas in the present case, identity of the depositor is in dispute and loan has been introduced at the fag-end of the year under consideration. Similarly, it has been held by the Hon‟ble Supreme Court in the case of Bharat Engineering Construction (supra) that what inference has to be drawn from the facts proved is a question of fact and in the absence of satisfactory explanation from the assessee the ITO might assume that cash credit entries in its books represented income from undisclosed sources. In this case also based upon factual matrix of the case, unexplained sum has been treated by the AO as unexplained income of the appellant. The AR has further stated that provision of section 68 are not applicable in this case as it is covered u/s 11/12 of the Act and even if income u/s 68 is added the same is eligible for exemption u/s 11/12 of the Act. The AR has relied upon the decision of CIT vs. Uttranchel Welfare Society (supra) and Hon‟ble ITAT, Delhi in the case of Dayanand Pushpa Devi Charitable Trust ITA No.3848/Del/2009. The appellant has not submitted any evidence that it is registered u/s 12A/12AA of the Act for the year under consideration. Therefore, this submission is not based upon documentary evidence without prejudice to this, It is noted that in the case of Uttranchel Welfare Society the unverified donations of Rs.96.5 lac added by the AO u/s 68 of the Act were already a part of income & expenditure account and were declared as income in the hands of the assessee whereas in the present case unverified loans which have been added by the AO u/s 68 of the Act are not part of income & expenditure statement of the appellant The said decision has been given by the Hon‟ble Allahabad High Court after considering the ratio of Hon‟ble Delhi High Court in the case of DIT vs. Keshav Social & Charitable Foundation in which it has been held that section 68 has no application in a case where the assessee has disclosed the donations as its income. Further, it is also mentioned that provisions of section 11 are applicable in respect of income derived from the property held for charitable purposes. Whereas, in the facts of the case it has been found that these unexplained sums in the shape of unexplained unsecured loans though Page | 8

are income of the appellant but the same are not in the nature „income derived‟ from the property held for charitable purposes. As the appellant is not registered u/s 12A/12AA of the Act during the year under consideration, therefore, Ground to appeal No.5 has no relevance. 17. In this case it is noted that keeping in view the surrounding circumstances and by applying the test human probabilities, there are reasons to believe that the apparent is not real. Reliance is placed on the decision of the Hon‟ble Supreme Court in the CIT vs. Durga Prasad 82 ITR 540 (SC). In the circumstances after considering all the facts from record as above, discussion made, respectfully following the ratio of the decisions relied of the Hon‟ble Courts (supra) and principle of preponderance of probability upon which the Income-tax Law is based, it is held that the appellant has failed to explain the credit of Rs.30,00,000/- as required u/s 68 of the I.T. Act and therefore the AO was justified make addition of Rs.30,00,000/- on account of unexplained unsecured loan. The same is hereby confirmed. Grounds of appeal Nos.3 to 5 are dismissed.” 5. Against this order the assessee is aggrieved, hence, this appeal. The ld AR submitted that assessee has submitted the complete details in the form of i. income tax return, ii. Annual report , iii. bank account, iv. confirmation of the above lender Therefore, assessee has discharged its initial onus; hence, addition has been made wrongly. He referred to page No. 1 to 28A of the paper book filed by him. He further stated that loan is supported by the confirmation etc and is also backed through banking channel; same cannot be added in the hands of the assessee. He also submitted that when the complete details are filed and no cash is deposit in depositor’s account, the onus stands discharged. He further submitted that merely low income returned by the depositor does not prove that the transactions are not genuine. 6. Further, referring ground No. 3 of the appeal, he submitted that both the lower authorities have failed to appreciate that the loan was taken long before the start of the activities, hence, there was any possibility of the trust having earned so much of income and therefore, the addition cannot be made in the hands of the assessee u/s 68 of the Act. He further relied upon the following judicial precedents for each of the above arguments as under:-

“A. Where loan is supported with confirmation/ITR etc. and loan is received and refunded back the. banking channel — Can‟t be added in the hands of assessee u/s 68: CIT V Rahul Vineet Traders[2014] 41 taxmann.com 86 (All) 01-03 CIT V Kapoor Chand Mangesh Chand[2013]38 taxmann.com 239 (AIL) 04-05 CIT v ABT ITD. (2015)370 ITR 159 (Madras) 06-06 B. Where loan is supported with confirmation/ITR/address and loan is received th. banking channel and no cash is deposited in depositor a/c—Onus discharged. AO may add in the hands of depositor or has to conduct enquiry to bring material to reject loan CIT V Shalimar Buildwell Pvt. Ltd. [2013] 40 taxmann.com 285 (All) 07-09 CIT VSURENDRA CHAND BANSAL [2014) 42 TAXMANN.COM 201 (ALL) 10-10 CIT S. Kamaljeet Singh (2005) 147 Taxmann 18 (ALL) CIT vGangeshwari Metals P. LTD [2014] 361 ITR 10 (DEL) 11-12 ACIT V Shyam Indus Power solutions P Ltd. (2018) 90 taxmann.com 424(DEL-B) 11A-11Q

C. When loan is received before or even at the time of starting of business, addition cant be made in the hands of assessee: CIT V Lai Mohar [2017] 88 taxmann.com 260 (Allahabad) C.I.T. V. BHARAT ENGG. AND CONST.CO. (19721 83 ITR 167 (SC) ABHYUDAYA PHARMACEUTICALS v CIT [2013] 350 ITR 358 (ALL) CIT v. Smt. P.K. Noorjahan(1999)237ITR 570: 155 CTR 509 (SC) Kundles Loh Udyog V ITO (2017) 83 taxmann.com 333(Chd-trib) D. Addition u/s 68 cant be made for unproved donations etc. where the same are utilized for charitable purposes CIT V UTTRANCHAL WELFARE SOCIETY [2014]364 ITR 398(ALL) E. NO addition u/s 68 for non-production of depositors or for not proving source of source etc. Himachal Fibers Ltd. [2018] 98 taxmann.com 173 (SC)-Affirming DEL.H.C. 24-26 CIT V Jalan Hard Coke Ltd. [2018] 95 taxmann.com 330 (Rajasthan)-- SLP dismissed in [2018] 95 taxmann.com 331 (SC)/[2018] 257 Taxman 91 (SC) 27-27 CIT v Goel Sons Golden Estate P. Ltd. -ITA 212/2012 -Order dt.11.4.12(DEL) 28-29 CIT V Shiv Dhooti Pearls & Investment Ltd [2015] 64 taxmann.com 329 (Delhi) 30-30 F. No addition for behind the back, unilateral, uncontroverted enquiries: KISAN CHAND CHELLA RAM V. CIT 125 ITR 713 (SC) Page | 10

Pr. CIT Vs. Best Infrastructure (India) (P) Ltd (2017) 84 Taxmann.com 287 (Delhi) 31-31” 7. In view of this he submitted that the addition made by the ld AO and confirmed by the lower authorities deserves to be deleted. 8. The ld DR supported the orders of the lower authorities and stated that the assessee has failed to discharge initial onus of the identity, creditworthiness of the lender as well as genuineness of the transaction. He vehemently referred to the order of the ld CIT (A) who has carefully considered all these aspects and confirmed the addition. He further submitted that despite repeated requests the assessee could not produce the directors of the above company. He further stated that investigation conducted by ld AO through Kolkata clearly shows that the company does not exist at the given address and is a shell company. He further stated that repayment of the loan by the cheque is not excuse to establish that the provision of section 68 of the Act does not apply. He referred to the provision of section 68 of the act and stated that it does not say that if the loan is repaid provisions of section 68 does not apply. He further relied upon the decision of the coordinate bench in ITA No. 4778/Del/2013 dated 08.03.2019 where the addition u/s 68 in the hands of that assessee is confirmed. He further referred to the decision of the Hon'ble Supreme Court in case of NRA Iron and Steel Co. and the decision of the Hon'ble Delhi High Court in case of NDR Promoters Pvt. Ltd. On the issue of making addition when the activities of the trust has not started, He stated that during the year the assessee has already started its activities and constructed building on the land purchased and further obtained unsecured loan of Rs. 70 lakhs, which clearly shows that assessee has setting up its activities therefore, it cannot be stated that assessee has not carried out its activities during the year. He further stated that the trust is registered by 12.01.2009 and has already commenced its activities, therefore it has made application for registration u/s 12 AA and 80G (5) of the act, therefore, it cannot be said that it has not set up its business. He further referred to the trust deed of the assessee wherein, the assessee has started receiving the donation. Therefore, he submitted that the trust has already been set up, obtained substantial unsecured loan, purchased huge land, constructed building thereon, applied for registration u/s 12AA and 80 G (5) and after that, Now it cannot say that it has not set up its Page | 11

activities. He further submitted that even otherwise the provision of section 68 does not provide that the business of the assessee must start and then after the addition u/s 68 can be made. 9. The ld AR stated that assessee has furnished all the evidence available with him for proving the identity. He further submitted that assessee has started working after two years and in the impugned assessment year assessee has not started any activity. He further stated that merely buying the land cannot be considered starting of the activities of the trust. He further submitted that the directors of the lenders were required to be produced by order sheet entry dated 12.03.02013 on 15.03.2015. He further stated that there is no material against the assessee to show that the loan obtained by the assessee is not genuine. He further referred to page No. 14 of the paper book to show that the confirmation is filed by the assessee. He further referred to page No. 22 which is part of balance sheet of the trust wherein, the amount of Rs. 30 lakhs has been shown under the hand loans and advances. He further stated that enquiry has been conducted by the ld AO in some other cases and addition has been made in the hands of the assessee. He, therefore, submitted that the addition is required to be deleted. 10. We have carefully considered the rival contentions and also perused the orders of the lower authorities. The facts of the case shows that the assessee is a charitable trust formed w.e.f. 12.01.2009, filed its return of income wherein, it was found that it has obtained an unsecured loan from 9 persons amounting to Rs. 7030000/- out of which one of the lender Attol Vypaar Pvt. Ltd has also given unsecured loan of Rs. 30 lakhs to the assessee. The assessee has shown above unsecured loan in its balance sheet on liabilities side. During the course of assessment proceedings the assessee was asked to prove the identity, creditworthiness of this party as well as genuineness of the transaction. Assessee submitted the copy of the account of the above party, its return of income, bank statement of this lender vide letter dated 14.03.2013. The ld AO found that income shown the return of income of the lender is only Rs. 37989/-. Further, the bank account submitted by the lender was only for the part of the year from 09.03.2010 to 12.03.2010. he noted that there was a heavy debit and credit

in the bank statement which did not commensurate with the return of income of the assessee, he therefore, asked the assessee to produce the directors of the lender company which the assessee neither produce before the ld AO nor before the ld CIT(A). Therefore, the ld AO got the enquiry conducted and found that the company does not exist at the given address. The ld AO further noted lender has also given loan to an another trust Society For Institute And Professional Studies for FY 2010-11 which is having common trustees as of the assessee and assessed by the same AO. In that case also lender was fond to be nonexistent but a paper company as its directors were not traceable. Summons u/s 131 issued on 16.04.2012 to Mr. Sunil Kumar Gupta, director of the lender company was not complied with the summons. The inspector was deputed, who found that such company did not exist at the given address. The local enquiry revealed that directors never lived at the given address as given in MCA records. Therefore, the ld AO asked the assessee to produce those directors before the ld AO for examination. The assessee did not comply with this requirement and therefore, the addition was made u/s 68 of the Act. The ld CIT (A) also noted that the lender has shown of very petty income of Rs. 379898/-. He further noted though company has a share capital of Rs. 33.56 lakhs and premium of Rs. 7.8 crores, but all the above funds have been parked in unquoted shares and loans and advances of various companies and individuals, which does not result into any income to that company. Ld CIT (A) noted that above sum has been repaid by the assessee on 02.04.2014 without paying the interest and much after the completion of the assessment proceedings which got concluded on 15.03.2013. Therefore, it is very evident that income tax inspector did not found the lender, nor could the assessee produce those parties before the ld AO or before the ld CIT (A), but assessee has repaid same loan to the company immediately after the completion of the assessment proceedings. It is very strange that assessee could not produce the party for examination before ld AO, made no attempt to produce them before CIT (A), but found it convenient to make repayment of the loan by account payee cheque after passing of the assessment order but before the appeal disposed off by the ld CIT (A). The lender is a private limited company and is an artificial juridical

entity; it functions through its directors. The directors whereabouts are not known, the company’s address shows that it never existed at that address. Mere filing of the paper does not establish even the identity of the lender company. The depositors is a private limited company which has existed and carried out the activities therefore, its directors who are not found at the given address and further even they did not respond to the summons. The assessee could not produce them before the lower authorities and in case of some other assessee also it itself proves that the lender is nonexistent shell company. 11. Further, the balance sheet of the company itself shows it is having net worth of Rs. 8.18 cores as share capital and reserves and surpluses, but is locked in advances and investment of the identical amounts in private limited company. The lenders which has an asset base of Rs. 8.18 crores has earned a meager income of Rs. 37000/- and the income tax payable for Assessment Year 2009-10 is a meager sum of Rs. 108/- and Rs. 11739/- for the current year. Further this company does not have a fixed asset of single rupee. Further, the balance sheet produced before the lower authorities was also not accompanied with the schedules and the profit and loss account but a stray paper giving the list of various loans and advances etc was given . For example the assessee has not produced schedule 5, 6 and 4 attached with the balance sheet. It has not also produced the profit and loss account of the above company. It has not shown that bank balance and cash on hand company was having. Balance sheet does not show in which bank the lender company was having its accounts. Therefore, we are of the view that assessee has failed to produce the annual accounts of the above company. Merely producing stray list of advances without producing original schedules to annual accounts, speaks lot about the functioning of the lenders and the genuineness of the transaction entered into by the assessee with that company. Hence we reject the argument of the assessee that it has produced the annual accounts of the lender. Further the bank account of the lender which is given for 9/1/2009 to 12/1/2009 to the AO does not show the name of the bank to which it pertains to similarly bank statement for repayment period was also 18/2/2010 to 05/3/2010 has the similar story to tell. The above conduct and the balance sheet of the

lender clearly shows that the lender alleged to have deployed funds are non income producing funds s it does not result into any revenue to that company. The lender clearly is a paper company and nothing more than that. The lower authorities have correctly appreciated the whole transaction and confirmed the addition. 12. The assessee has relied upon the various decisions stating that when the lender is supported with the confirmation and loan is repaid through banking channel, no addition u/s 68 can be made. The lead decision was with respect to 41 Taxmann.Com 86. The facts of the case before the Hon’ble Allahabad High Court is clearly distinguishable on the facts as in that case The ld AO merely found that the loan taken from four firm related to infamous case of Ganga Ram Agarwal and Party. Hon’ble Allahabad High Court held in para NO. 5 that there is no admission that these parties are involved in giving bogus accommodation entry. Further, there was no enquiry by the ld AO in that case when assessee submitted the complete detail in the form of confirmation etc. In the present case the assessee failed to discharge its initial onus as cast upon it u/s 68 of the Act. The assessee was asked to produce the director which was found to be not traceable at the given address and further the assessee has also not produced the complete balance sheet. In view of this the reliance on the above decision and on 38 Taxmann.com 239, 370 ITR 159 is placed. 13. The other set of the decisions were also with respect to the fact that whether the loan is supported with the evidence and no cash is deposited in the account of the depositor, onus is discharged. In the same set of decisions it has also held that the ld AO has to conduct enquiry to prove the material on record. In the present case the ld AO has conducted the enquiry, confronted the assessee and directed the assessee to produce the directors which were not complied with. Therefore that decision does not help the case of the assessee. 14. Further the decision cited by the learned authorised representative that addition u/s 68 cannot be made for unapproved donation et cetera were some are utilized for charitable purposes relying on the decision of 364 ITR 398 of honourable above High Court. The fact of that case does not apply in the present case before us as assessee has not received any donation but

has received unsecured loan. Therefore the reliance placed by the assessee on that decision is incorrect and hence rejected. 15. The learned authorised representative has also stated that non-production of the depositors are not following the source of source cannot result into the addition u/s 68 of the income tax act. We have carefully considered the several decisions relied upon by the learned authorised representative and found that the facts of those cases are not applicable to the present case as in the present case the assessee has failed to prove the identity, creditworthiness of the depositor as well as the genuineness of the transaction. The assessee has failed to discharge its initial onus. The annual accounts of the lender produced by the assessee were also incomplete. The bank statement shown of the lender was also for part of the year. Hence, reliance placed by the assessee on those decisions is rejected. 16. The assessee further relied upon the series of decisions to substantiate its case that funds were received before starting of the business, and then addition cannot be made in the hands of the assessee u/s 68 of the act. In the present case the facts shows that the assessee is a charitable trust which came into existence on 02.01.2009, obtained huge unsecured loan, purchased land amounting to Rs. 56 lakhs, started constructing the building and spent almost Rs. 13.58 lakhs thereon itself shows that assessee trust has conducted the charitable activities by creating the assets of the trust. Apparently, the application of the assessee u/s 12AA and 80G are pending. Registration u/s 12 AA is only applicable where the activities of the trust are found to be genuine. Unless the assessee has started its activities how they can be found to be genuine. Therefore, it is apparent that the assessee has started its charitable activities for which it was formed. In order of ITAT in ITA No. 5050/ 5496 against the rejection of application u/s 12AA dated 21.01.2011 in para No. 2 and 3 it is stated that it fulfills all the conditions of the respective section, therefore, now it cannot be said that it has not carried out any activities. Further arguments of the assessee that activities of the trust having not started and therefore, no addition can be made in the hands of the assessee has been negated by the Hon'ble Supreme Court in (1986) 159 ITR 78 CIT VS.

ORRISA CORPORATION P LTD, wherein, noting the new section 68 of the 1961, it was held that :- “It was argued that in view of the provisions of section 68 of the Act, the onus in these types of cases was on the assessee and, in this case, the assessee had not discharged that onus and in the premises, questions of law as indicated above arose. Section 68 of the 1961 Act was introduced for the first time in the Act. There was no provision in the 1922 Act corresponding to this section. The section states that where any sum is found Page No : 0082 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 Income-tax Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. The section only gives a statutory recognition to the principle that cash credits which are not satisfactorily explained might be assessed as income. The section enacts that if a sum is found credited in the books of an assessee maintained for any previous year (which might be different from the financial year), the cash credit might, in cases where it is assessed as undisclosed income, be treated as the income of that previous year, and the financial year may not be taken as the previous year for such a cash credit even if the undisclosed income was not found to be from the assessee's regular business for which the books were maintained. The cash credit might be assessed either as business profits or as income from other sources. Under the 1922 Act, where a large amount of cash was found credited on the very first day of the accounting year, and considering the extent of the business, it was not possible that the assessee earned a profit of that amount in Page | 17

one day, the amount could not be assessed as the income of the year on the first day on which it was credited in the books. Under this section, even in such a case, the unexplained cash credit might be assessed as the income of the accounting year for which the books are maintained. See, in this connection, the observations in Kanga and Palkhivala's Income Tax, Seventh Edition, Vol. I, pages 609 and 610.”

Therefore reliance on the decision of supreme court in 83 ITR 187 By the assessee is misplaced.

the money was deposited in the year before the commencement of the activities, such sum cannot be added as income under section 68 of the income tax act. 23. Further whether in the case of the assessee trust the provisions of the section 68 applies not. The learned CIT – A is considered the decision of the honourable Delhi High Court in case of [2005] 146 Taxman 569 (Delhi)/[2005] 278 ITR 152 (Delhi) in Director of Income-tax (Exemption)* v. Keshav Social & Charitable Foundation has held that :- “11. Section 68 of the Act has no application to the facts of the case because the assessee had in fact disclosed the donations of Rs. 18,24,200 as its income and it cannot be disputed that all receipts, other than corpus donations, would be income in the hands of the assessee. There was, therefore, full disclosure of income by the assessee and also application of the donations for charitable purposes. It is not in dispute that the objects and activities of the assessee were charitable in nature, since it was duly registered under the provisions of section 12A of the Act.” In the present case before us the issue is not about the donation but about the unsecured loan. The unsecured loan has also not been credited naturally to the income and expenditure account as income of the assessee but showed as an unsecured loan in the balance-sheet. The honourable Delhi High Court in the above case has held that the provisions of section 68 does not apply to the facts of that particular case because of the reason that assessee itself has credited the donation to the income and expenditure account and has shown it as income. Such are not the facts before us. Therefore, in the present case, the addition has been made correctly u/s 68 of the income tax act and same also applies to the AOP to whom the provisions of section 11 and 12 applies, if the impugned some was not credited to the income and expenditure account but is shown as a liability. Further the issue before us is also squarely covered by the Decision of 24. Honourable Supreme court in case of PRINCIPAL COMMISSIONER OF INCOME-TAX V NRA iron & Steel Co Ltd [2019] 412 ITR 161 (SC) and Honourable Delhi High court in PRINCIPAL COMMISSIONER OF INCOME-TAX V v. NDR PROMOTERS PVT. LTD. [2019] 410 ITR 379 (Del). Page | 20