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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SHRI PRAMOD M JAGTAP&
The instant appeal filed by the assessee is directed against the order dated 25.07.2018 passed by the Commissioner of Income Tax (Appeals)-3, Vadodara arising out of the order dated 29.03.2016 passed by the ITO, Ward- 3(1)(1), Vadodara under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for A.Y. 2013-14.
None appeared on behalf of the assessee at the time of call. It appears from the record that on many occasions when the matter was called none appeared on behalf of the assessee neither filed any written notes of submission including today. We, therefore, have decided to dispose of the matter as ex-parte.
The Ld. DR relied upon the order passed by the authorities below.
Kankuben Udesingh Machi vs. ITO Asst.Year –2013-14 - 2 - 4. The brief facts leading to the case is this that the assessee engaged in the business of trading of scrap. filed its return of income on 26.09.2013 declaring total income at Rs. 4,88,390/- which was processed under Section 143(1) of the Act. The case was selected under scrutiny and notice under Section 143(2) dated 02.09.2014 was issued but without any result. Show-cause for finalization under Section 144 was issued to the assessee on 15.03.2016 whereupon written submission was filed on 28.03.2016 before the Ld. AO. It appears from the balance sheet that the assessee has shown unsecured loans totaling to Rs. 93,97,881/- from the following three persons: (i) Manjulaben U Machi Rs. 8,51,000/- (ii) Rajesh U Machi Rs. 74,75,000/- (iii) Udeshi C Machi Rs. 10,71,881/- Total Rs. 93,97,881/-
No details, information in response to the notice sent to the assessee in respect of this unsecured loan availed by the assessee was furnished before the Ld. AO. Subsequently, confirmation and copy of PAN cards of the creditors were furnished. But the bank statement of those persons to verify the genuineness of the transaction and the copies of the return of income filed by them for enabling the Ld. AO to verify the creditworthiness of each depositor was not furnished. Since the creditworthiness of those persons from whom the loan was received and credited by the assessee could not be proved the unsecured loan of Rs. 58,98,406/- has been treated as unexplained and added to the total income of the assessee under Section 68 of the Act which was, in turn, confirmed by the First Appellate Authority. Hence, the instant appeal before us.
It appears from the records that while confirming the order passed by the Ld. AO, the Ld. CIT(A) came to a finding that the bank statements of all
Kankuben Udesingh Machi vs. ITO Asst.Year –2013-14 - 3 - the three creditors demonstrated the fact that immediately before issuance of cheque to the appellant credit entries of almost similar accounts were made and after issuance of cheque the balance remained negligible. In fact, he has come to a conclusion that the account has been used by the parties to provide accommodation entries in the garb of unsecured loans. While confirming the addition the Ld. CIT(A) observed as follows: “6.1 I have carefully considered the submissions of the Authorized Representative and the order of the Assessing Officer. During the year under consideration assessee has received unsecured loan of Rs.58,98,404/-. The A.O. has made addition of this amount as the assessee has not furnished copies of the statement and return of income of the depositor. During the appellate proceedings the assessee has submitted copies of confirmation letter along with their addresses, PAN card, bank statement etc. During the remand proceedings, the Assessing Officer has not disputed the evidences/source furnished by the assessee but questioned the creditworthiness of the loan creditors. The Authorized Representative has contended that once the appellant has submitted the confirmation of the party along with their identity, address and genuine source, the onus of the appellant is discharged. He has further argued that if the A.O. is not satisfied with the evidences/sources made available to him, he could record the statement of the creditor u/s 131 of the Income-tax Act or he could pass information to the A.O, of the creditors. It is submitted that in the present case, the appellant has submitted the confirmation, identity and source of creditors and therefore, there is no justification in making the addition in the hands of the appellant in summery manner. Ld. Authorized Representative has also relied upon the decision of Hon'able Gujarat High Court in case of CIT Vs. Pankaj Dyestuff Industries and vehemently argued that assessee had discharged his onus by filing confirmations, PAN and bank statements of the loan creditors and all loans are received by cheques only. He has also submitted that in one case, copy of the ITR has also been filed during remand proceedings and therefore, additions cannot be made in the hands of the assessee. 6.2. On a close scrutiny of the bank statements of all the three creditors, it is seen that immediately .before issue of cheque to the appellant, there is credit of almost similar amount and after issue of cheque, balance remain negligible. The assessee has taken loan of Rs.8,51,000/- and Rs.5,92,406/- from Manjulaben Udesingh Machhi and Udesingh Chunilal Machhi respectively. However, the assessee has not furnished copy of the returns of income filed by them to verify the creditworthiness of each depositor. From their bank statements also, their creditworthiness is not proved as balance in Kankuben Udesingh Machi vs. ITO Asst.Year –2013-14 - 4 - their accounts are always meager. The assessee has taken loan of Rs.44,55,000/- from Rajesh Udesingh Machhi and during the course of assessment proceedings the assessee had not submitted any substantial evidences to prove his creditworthiness. During appellate proceedings, the Authorized Representative has submitted Return of Income [ITR-4S (Sugam)], Gram Namuno 7/12, Gram Namuno 8-A etc. in the case of Rajesh Udesingh Machhi. It is seen that Shri Rajesh Udesingh Machhi had declared total income at Rs.1,98,994/- for the A.Y. 2013-14. From his bank statement it is seen that whenever cheque is issued to the assessee, cash of same amount plus Rs.1,000/- to Rs.2,000/- is deposited in his bank account on the same date before issue of cheque. After issue of cheque, negligible balance is left in the account. Following are the instances of issue of cheque and cash deposited in the account of Rajesh Udesingh Machhi in respect of his bank account maintained with Induslnd Bank (Account No. 100013784233):-
1. 1. On 25/04/2012 cheque of Rs. 2,50,000/- is issued to the assessee and immediately before that on the same day cash of Rs. 2,51,000/- was deposited in his Bank Account. After issue of cheque, balance of Rs. 3,290/- was found in his Bank Account.
2. On 15/05/2012 cheque of Rs. 2,00,000/- is issued to the assessee and immediately before that on the same day cash of Rs. 2,01,000/- was deposited in his Bank Account. After issue of cheque, balance of Rs. 6,063/- was found in his Bank Account.
3. On 16/05/2012 cheque of Rs. 3,00,000/- is issued to the assessee and immediately before that on the same day cash of Rs. 3,01,000/- was deposited in his Bank Account. After issue of cheque, balance of Rs. 7,063/- was found in his Bank Account.
4. On 18/05/2012 cheque of Rs. 3,00,000/- is issued to the assessee and immediately before that on the same day cash of Rs. 2,01,000/- was deposited in his Bank Account. After issue of cheque, balance of Rs. 9,063/- was found in his Bank Account.
5. On 23/05/2012 cheque of Rs. 2,00,000/- is issued to the assessee and immediately before that on the same day cash of Rs. 2,01,000/- was deposited in his Bank Account. After issue of cheque, balance of Rs. 9063/- was found in his Bank Account.
6. On 26/05/2012 cheque of Rs. 2,00,000/- is issued to the assessee and immediately before that on the same day cash of Rs. 2,00,000/- was deposited in his Bank Account. After issue of cheque, balance of Rs. 10,063/- was found in his Bank Account.
7. On 29/05/2012 cheque of Rs. 3,00,000/- is issued to the assessee and - immediately before that on the same day cash of Rs. 3,01,000/- was deposited in his Bank Account. After issue of cheque, balance of Rs. 11,063/- was found in his Bank Account.
Kankuben Udesingh Machi vs. ITO Asst.Year –2013-14 - 5 - 8. On 30/08/2012 cheque of Rs. 4,00,000/- is issued to the assessee and immediately before that on the same day cash of Rs. 4,01,000/- was deposited in his Bank Account. After issue of cheque, balance of Rs. 11,482/- was found in his Bank Account.
On 22/09/2012 cheque of Rs. 4,00,000/- is issued to the assessee and immediately before that on the same day cash of Rs. 4,50,500/- was deposited in his Bank Account. After issue of cheque, balance of Rs. 58,586.94 was found in his Bank Account.
On 22/09/2012 cheque of Rs. 50,000/- is issued to the assessee and immediately before that on the same day cash of Rs. 4,50,500/- was deposited in his Bank Account.
On 22/09/2012 cheque of Rs. 4,00,000/- is issued to the assessee and immediately before that on the same day cash of Rs. 4,50,500/- was deposited in his Bank Account. After issue of cheque, balance of Rs. 8,586/- was found in his Bank Account.
On 10/10/2012 cheque of Rs. 6,00,000/- is issued to the assessee and immediately before that on the same day cash of Rs. 6,00,000/- was deposited in his Bank Account. After issue of cheque, balance of Rs. 5,366/- was found in his Bank Account.
On 11/10/2012 cheque of Rs. 4,55,000/- is issued to the assessee and immediately before that on the same day cash of Rs. 4,55,000/- was deposited in his Bank Account. After issue of cheque, balance of Rs. 5,366/- was found in his Bank Account.
On 21/12/2012 cheque of Rs. 5,00,000/- is issued to the assessee and immediately before that on the same day cash of Rs. 5,02,000/- was deposited in his Bank Account. After issue of cheque, balance of Rs. 3296/- was found in his Bank Account.
On 28/12/2012 cheque of Rs. 3,00,000/- is issued to the assessee and immediately before that on the same day cash of Rs. 3,01,000/- was deposited in his Bank Account. After issue of cheque, balance of Rs. 9,553/- was found in his Bank Account. From the aforementioned analysis it is abundantly clear that the financial worth of this loan creditor is approx Rs.10,000/- which is the regular balance in his bank account. From the above, it can be safely inferred that this account is used by both the parties, i.e., appellant as well as Sri Rajesh Udesingh Machhi to provide accommodation entries in the garb of unsecured loans. It is also seen that amount of cash deposited by Sri Rajesh Udesingh Machhi in his account is in excess of amount of cheque issued to the assessee by just Rs.1,000/- to Rs.2,000/- which appears to be the amount of commission paid by the assessee to the said person for using his bank account for providing accommodation entries. It is imperative to refer to a recent judgment of the Hon'ble Gujarat High Court rendered in the case of Pavankumar M Sanghvi Vs ITO [2018] 90 taxmann.com 386 (Guj.) wherein it
Kankuben Udesingh Machi vs. ITO Asst.Year –2013-14 - 6 - has been held by the Hon'ble High Court that where assessee received loan from two companies, in view of fact that on date assessee was given loan there were credit entries of almost similar amounts and balance after these transactions was a small amount and moreover assessee failed to produce these lenders for verification, impugned amount was rightly brought to tax under section 68. ITAT, Ahmedabad had examined the creditworthiness of the loan creditors in the light of the credit balances on each day when cheques were issued to the assessee. The facts of the present case-are-mere conspicuous and glaring where same amount of cash (with commission amount) is deposited in the account of the creditor. It was argued by the Ld. Authorized Representative that in Remand Report, the Assessing Officer has commented adversely about the affairs of the appellant merely on the basis of very low income shown in the ITR by the creditor. That fact is not to be seen in isolation and when the low return of income in one case and no returns of income in respect of other two creditors is seen coupled with the nature of credit or cash entries in the bank accounts of the loan creditors, the creditworthiness of these creditors comes under serious doubts and I am of the considered opinion that in view of the analysis of the bank accounts of the loan creditors and their ITRs (showing meager or no income), the genuineness of the loan transactions is not proved. It is also seen that in view of specific shortcomings noted above and arrangement of accommodation entries by the appellant the reliance by the A.R. on the decision of the Hon'able Gujarat High Court in case of CIT Vs. Pankaj Dyestuff Industries is misplaced. It is also a settled legal position that the onus of the assessee, of explaining nature and source of credit, does not get discharged merely by filing confirmatory letters, or demonstrating that the transactions are done through the banking channels or even by filing the income tax assessment particulars. In the case of CIT Vs United Commercial and Industrial Co (P.) Ltd [1991] 187 ITR 596 (Cal), Hon'ble Calcutta High Court has held that "it was necessary for the assessee to prove prima facie the identity of creditors, the capacity of such creditors and lastly the genuineness of transactions". Similarly, in the case of CIT Vs Precision Finance (P.) Ltd [1994] 208 ITR 465 (Cal), it was observed that "it is for the assessee to prove the identity of creditors, their creditworthiness and genuineness of transactions". There is thus no escape from proving genuineness of a transaction. In view of the aforementioned judicial decisions and undisputed facts of the case where neither the creditworthiness of the loan creditors nor the genuineness of the transactions is proved by the appellant despite giving sufficient opportunities including remand proceedings, I hereby upheld the action of the A.O. in making the addition u/s. 68 of Rs. 58,98,404/- on account of unexplained cash credits. Accordingly, the addition made of RS. 58,98,404/- is hereby confirmed.
Kankuben Udesingh Machi vs. ITO Asst.Year –2013-14 - 7 -
7.0 In result, the appeal of the appellant is dismissed.”
We have perused the order passed by the Ld. CIT(A). It appears that the assessee has not filed any substantial evidence to proof the parties from whom the assessee claimed to have taken loan. The details of the bank account maintained with the Indusind Bank by such parties have also been narrated by the Ld. CIT(A). Since the creditworthiness of the loan creditors neither the genuineness of the transaction has been proved by the assessee despite providing sufficient opportunities including the remand proceeding, the Ld. CIT(A) having no other alternative confirmed the order passed by the Ld. AO. In the absence of any assistance from the assessee, we do not find any infirmity in such findings of the Ld. AO and the Ld. CIT(A) as well for the reason discussed above, we confirm the addition. This appeal is, therefore, found to be devoid of any merit and thus, dismissed.