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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’, NEW DELHI
Before: SH. R.K PANDA
1. This appeal filed by the assessee is directed against the order dated 03.11.2017 of the CIT(A)-12, New Delhi relating to A. Y. 2003-04.
The only effective ground raised by the assesee reads as under :-
“Learned CIT Appeal has erred on fact as well as law in sustaining the addition of Rs.7,50,000/- even though the appellant produced own bank account, cheques issued by creditors, their confirmations which proved that they were regular assesses both the creditors having died and shifted to new addresses which were also supplied.”
Facts of the case, in brief, are that the assessee is an individual and the original assessment was completed u/s 153A on 28.12.2007 at an income of Rs.8,72,120/- against the returned income of Rs.1,22,120/- wherein addition of Rs.7,50,000/- was made as undisclosed income u/s 68 of the IT Act on account of unexplained loan. The assessee had shown to have received loans from two parties i.e. Rs.2,50,000/- from Shyam Gopal & Sons, 367-A, Katra Hussain, Khari Baoli and Rs.5,00,000/- from Prem Lata. Against order of the Assessing Officer, the assessee filed an appeal before the CIT(A) who confirmed the same and on further appeal filed by the assesee, the Tribunal vide order dated 23.01.2015 admitted the additional evidences filed by the assesee and restored the matter back to the file of the Assessing Officer for deciding the issue denove after affording reasonable opportunity to the assessee of being heard.
3.1 During the course of assessment proceeding the Assessing Officer asked the assessee to prove the genuiness of the transaction and credit worthiness of the lenders in respect of loan of Rs.2,50,000/- and Rs.5,00,000/- raised from M/s. Shyam Gopal and Smt. Prem Lata. The assessee in response to the same filed written submission alongwith bank statement of Sh. Rajesh Bhatia showing the receipt of the aforementioned amount of Rs.2,50,000/- and Rs.5,00,000/- respectively. The assessee accordingly argued that the identity and genuiness of the transactions are proved. The Assessing Officer, thereafter issued notice u/s 133 (6) dated 25.07.2017 and 11.08.2016 to United Bank of India, Canara Bank, M/s. Shyam Gopal & Sons (HUF) and Mrs. Prem Lata respectively for verification of the confirmation of advances, genuiness of the transaction and credit worthiness of the persons. United Bank of India reported that the bank account of the person for the relevant period is not available since their system got on line from 31.12.2007 and annual records are also not available. It was submitted that after 8 years they do not keep the records in their custody. The ward Inspector was deputed by the Assessing Officer to serve notice u/s 133 (6) and to verify the presence of the said parties. It was reported that no such persons are found at the given address. On being asked by the Assessing Officer to produce the above parties before him, there was no compliance from the side of the assesee. Due to the failure of the assessee to substantiate the credit worthiness of the loan creditors and genuiness of the transactions, the Assessing Officer invoking the provision of section 68, added the amount of Rs.7,50,000/- to the total income of the assesee.
3.2 Before CIT(A) it was submitted that assessee had substantiated the identity and credit worthiness of the loan creditors and the genuiness of the transactions by filing the following documents :-
"i) Affidavit of the Appellant explaining that these parties are engaged in money lending business. ii) Confirmations from Km. Prem Lata. iii) Her copy of account of Financial Year 2001-02 with M/s. R. L. Traders, to whom loan was given by her and returned to her in February, 2002. This she gave to Shri Rajesh Bhatia i.e. Appellant 3 on 27.04.2002. iv) Copy of cheque issued by Km. Prem Lata, bank slip showing the deposit of this cheque in Shri Rajesh Bhatia’s account. v) Confirmation of M/s. Shyam Gopal & Sons, whose position is explained in the Affidavit of the Appellant. vi) Copy of bank account of Shri Rajesh Bhatia, showing receipt of both loans. vii) Similarly copy of account of Shri Rajesh Bhatia showing the return of loan to Km. Prem Lata.”
It was further submitted that Sh. Shyam Gopal had died and his legal heirs had sold the property vide copy of the sale deed dated 03.02.2011. Their whereabouts are also not known because the person who purchased the property had also sold the property. The loans were taken in 2002 and one cannot have control over the creditors once the loans were repaid. It was argued that Smt Prem Lata is the daughter of Sh. Rajesh Kumar Garg, her brother and cousins are still residing in Naveen Shahdara. Relying on various decisions it was submitted that assessee cannot ensure the attendance of the loan creditors and since the lenders are persons of means and assessee had discharged its onus and the amounts are already returned back no addition is called for.
However, the Ld. CIT(A) was not satisfied with the arguments advanced by the counsel for the assessee and 4 upheld the action of the Assessing Officer by observing as under :-
“7.6 I have carefully considered the facts of the case and the submission of the Appellant. Before the Assessing Officer, the Appellant filed an affidavit sworn in by him, confirmation from Smt. Prem lata of her account with R. L. Traders, cheque issued by Smt. Prem Lata, slip showing deposit of cheque, confirmation from Shyam Gopal & Sons , copy of the bank account showing receipt of two loans and copy of the bank account showing return of cheque to Smt. Prem Lata.
7.7 If the above documents are taken on their face value, the identity and capacity of the creditors and the genuineness of the transaction will be treated as proved. But the Hon’ble ITAT directed the Assessing Officer to decide the issue de novo after affording reasonable opportunity of being heard. In this process, the Assessing Officer deputed his Inspector to locate the creditors on the given addresses. The Inspector reported that the said persons were not residing on the given addresses. The Assessing Officer also issued notice u/s 133(6) to the said lenders but those notices were not replied. The Assessing Officer issued summons u/s 131 of the Act to the said lenders but the summons also remained uncomplied with. The Assessing Officer issued show cause notice to the Assessee in the backdrop of these developments but the Assessee did not appear before the Assessing Officer and instead objected on the ground of limitation for passing the Assessment Order. The Assessing Officer disposed off the objection. Inspite of all that the Appellant did not appear before the Assessing Officer nor was he able to produce the show called lenders before the Assessing Officer. Mere transactions through the banking channel and filing of return by the said lenders do not prove the capacity of the creditor and genuineness of the transaction. I find support from the following decisions :
1. CIT vs. Precision Finance Pvt. Ltd., 208 ITR 465 (Cal) 2. Mange Lai Jain vs. ITO, 315 ITR 105 (Mad)
7.8 In the above cases, the Courts have held that mere proof of identity of creditor or that transaction was by cheque, is not sufficient to satisfy the requirement of section 68.
7.9 Similarly, in the following cases, the Apex Court has held that the onus of proving the source of a sum of money found to have been received by an Assessee is on him.
Roshan Di Hatti vs. CIT, 107 ITR 938 (SC) 2. Kale Khan Mohammad Hanif vs. CIT, 50 ITR 1 (SC) 7.10 The peculiar facts of this case are different from the case of Sh. Sunil Kumar Bhatia for AY 2003-04. The Assessing Officer has diligently conducted the inquiry to verify the facts of the case and to look beyond the apparent. I do not agree with the contention of the Appellant that the parties could not be produced as the matter was old. Once the Assessing Officer doubted the genuineness of the evidences produced before the Hon’ble 1TAT by conducting the inquiry, the burden of proof was on the Assessee to satisfy the Assessing Officer that the outcome of his inquiry was not correct. I also find that the facts in the cases relied on by the Appellant are distinguishable. In view of these facts and in the circumstances, I confirm the addition and dismiss the ground of appeal.”
6. Aggrieved with such order of the CIT(A), the assesse is in appeal before the Tribunal.
The Ld. Counsel for the assessee referring to page 10 of the paper book drew the attention of the bench to the cheque issued by Sh. Shyam Gopal & Sons amounting to Rs.2,50,000 on 15.04.2002. Referring to page 11 of the paper book he drew the attention of the bench the refund of Rs.2,50,000/- M/s. Shyam Gopal & Sons (HUF). Referring to page 16 of the paper book he drew the attention of the bench to amount of Rs.5 lacs given by Smt. Prem Lata vide cheque dated 27.04.2002. Referring to page 19 of the paper book he drew the attention of the bench to the refund of Rs.5,00,000/- to Mrs. Prem Lata on 17.11.2004. He submitted that the above two lenders have already expired and there was no possibility on the part of the assessee to produce the above two persons. He submitted that Sh. Shyam Gopal had died and his legal heirs have sold the property owned by Shyam Gopal.
Purchasers have also sold the above property for which it was not possible to trace out whereabouts of the legal heirs of Mr. Shyam Gopal. He submitted that the three storey building owned by Late Sh. Shyam Gopal substantiates his standing in the society to extend the loan of Rs.2,50,000/- Similarly, Smt. Prem Lata had given the money out of the loan returned to her by M/s. R. L. Traders to whom the loan was given earlier. He submitted that assessee had filed full details to substantiate the identity and credit worthiness of the loan creditors and genuiness of the transactions. Therefore, the additions made by the Assessing officer and sustained by the CIT(A) is not justified.
The Ld. DR on the other hand strongly relied on the order of the CIT(A). He submitted that the onus is always on the assessee to substantiate with evidence to the satisfaction of the Assessing Officer regarding the identity and credit worthiness of the loan creditors and genuiness of the transaction. The assessee in the instant case has miserably failed to discharge the onus cast on him. Therefore, the addition made by the Assessing Officer and sustained by the CIT(A) should be upheld.
I have considered the rival arguments made by both the sides and perused the material available on record. I find the Assessing Officer in the instant case has made addition of Rs.7,50,000/- by invoking the provisions of section 68 of the IT Act on the ground that the assessee failed to discharge the onus cast on him regarding the loan of Rs.2,50,000/- obtained 7 from M/s. Shyam Gopal & Sons (HUF) and Rs.5 lacs obtained from Mrs. Prem Lata. I find the ld. CIT (A) sustained the addition made by the Assessing Officer, the reasons of which have already been reproduced in the preceding paragraph. It is the submission of the Ld. Counsel for the assesee that the assessee had discharged the onus cast on him by proving the identity and credit worthiness of the loan creditors and genuiness of the transactions and therefore, no addition u/s 68 of the IT is called for. It is also his argument that both the lenders have expired and it was not possible on his part to produce the said person before the Assessing Officer for his verification. I find merit in the arguments advance by Ld. Counsel for the assessee. From the details furnished by the assesee in the paper book it can be verified that the loans were obtained through banking channels and has also been returned to the loan creditors in the subsequent years. The confirmations and the affidavits were given earlier before the Tribunal for which the Tribunal had set aside the issue to the file of the Assessing Officer for denove assessment. I find force in the submission of the ld. Counsel for the assesee that both the loan creditors have expired in the meanwhile and therefore it is not possible on the part of the assesee to produce above two parties. The assessee before the Assessing Officer had filed the copy of the account of Mrs. Prem Lata for financial year 2001-02 with M/s. R. L. Traders to whom loan was given and such loan was returned to her in February 2002 and thereafter Smt. Prem Lata had extended the loan of Rs. 5 lacs on 27.04.2002 and therefore, the source of Ms. Prem Lata is established. So far as loan of Rs.2,50,000/- from Sh. Shyam Goyal is concerned, the three storey building at New Delhi which was subsequently sold shows that he is a person of means to advance a loan of Rs.2,50,000/-. It is also to be noted that the matter is very old and the lenders are already dead. It is also not in dispute that the loan obtain during the financial year 2002-03 from M/s. Shyam Goyal was returned to him in the year 2003-04 and amount of Rs. 5 lacs obtained from Smt. Prem Lata has been returned to her during financial year 2004-05. In this view of the matter I am of the considered opinion that addition u/s 68 is not justified in the facts and circumstances of this case. I, therefore, set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition of Rs.7,50,000/- made u/s 68 of the IT Act. The ground raised by the assesee is accordingly allowed.
In the result, the appeal filed by the assesee is allowed.
Order pronounced in the open court on 25.02.2019.