DCIT, CENTRAL CIRCLE-1(2), AHMEDABAD vs. M/S.DHARMEN MARBLE & STONE, AHMEDABAD

आदेश/O R D E R

PER WASEEM AHMED ACCOUNTANT MEMBER:

The captioned appeal and CO have been filed at the instance of the Revenue and the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-12, Ahmedabad, dated 08/02/2019 (in short “Ld. CIT(A)”) arising in the matter of assessment order passed under s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 (here-in-after referred to as "the Act"). The assessee has filed the Cross

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Objection in the Revenue’s appeal bearing ITA No. 794/Ahd/2019 for the Assessment Year 2010-2011.

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on current account basis and said amount of Rs. 5,00,0007- has been repaid back within two days and hence no interest has been paid by the Respondent. In nutshell, The Ld. CIT(A) has rightly deleted the entire addition of Rs. 3,81,00,0007- made by the AO u/s. 68 of the Act while holding that " on careful consideration of the above material, the identity of the depositors Saral Management and Kalpesh Patel and creditworthiness is duly established. Therefore, the addition made by the AO on account of unsecured loan of Rs. 3,81,00,000/- received from Saral Management and Consultancy and Kalpesh Patel is not justified and the same is hereby deleted". 3. Your Respondent craves right to add, amend, alter, modify, substitute, delete or modify all or any of the above grounds of cross objection.

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different individuals/parties. In the bank account of the assessee, there was the deposit of cash amounting to ₹ 5 lacs in the assessment year 2011-12 i.e. subsequent AY which was not explained and therefore the same was treated as unexplained cash credit under section 68 of the Act in the hands of the assessee.

4.1 Based on the above, the AO analyzed the bank statements for the period beginning from 1 April 2008 to 31 March 2015 of different persons whose names were appearing in such excel sheet. As per the AO, all the names of the persons appearing on the excel sheet were of ‘Sutaria Family/Group’. As per the analysis, the AO found that there were deposits of cash in the bank accounts of ‘Sutaria Family/ group/concerns during the period as discussed above aggregating to ₹47,17,00,273/- only during the F.Y. 2008-09 to 2014-15 . The breakup of the cash deposits in bank account of ‘Sutaria Family/Group’ for the financial year 2008-09 to 2014-15 is recorded on pages 74 to 76 of the PB.

4.2 Out of such deposits of cash, a sum of ₹ 95,58,227/- in cash was deposited in the bank account of the assessee in the year under consideration which was immediately transferred to various firms and companies controlled and managed by ‘Sutaria Family/Group’ and Barter Group. Such cash deposit was not reflected in the return of income filed by the assessee. As such the assessee has filed the return of income declaring an income of Rs. 2,21,601/- only under the head business and profession. Accordingly, the AO formed the reasons to believe that the income of the assessee to the extent of cash deposit of ₹ 95,58,227/- has escaped assessment in respect of which the assessee failed to disclose fully and truly all material facts necessary for the assessment. Likewise assessee has not claimed the TDS of Rs. 16,897/- credited from city union bank and Prism Cement, thus the corresponding income of Rs. 1,68,970 also remain unexplained and escaped assessment. Therefore, the AO initiated the proceedings under section 147 of the Act by issuing a notice under section 148 of the Act.

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4.3 However, the assessee before the AO has challenged the initiation of the proceedings under section 147 of the Act by contending that notice under section 148 of the Act has issued on basis of some MS excel sheet found from the premises of third party which is neither supported nor corroborated by any other material or evidence. As such, the reason to believe for escapement of income for Rs. 97,22,197/- has been formed without any basis, as it was not expressed how the figure of escaped income was worked out. The statement recorded in connection with excel sheet found and impounded does not mentioned the name of assessee firm in any manner. Furthermore, such alleged Excel sheet pertains to A.Y. 2011- 12, therefore no reliance can be placed on the information pertaining to different years for forming the believe for the year under consideration without having fresh/ independent material on record. Likewise, the substantive addition has been made in the assessment framed under section 153A of the Act, in case of Sarthav Infrastructure Pvt. Ltd. on basis of impugned excel sheet in different assessment years i.e. 2009-10- to 2015-16. According to the CBDT circular, once substantive addition has been made on basis of search materials then no further addition in case of other assessee on the basis of same material can be made. Hence, there was not any fresh tangible material available with AO for forming reason to believe that income of the assessee has escaped assessment.

4.4 However the AO, disposed off the objection of the assessee by observing as under: It is noticed that assessing officer had reopened the case after duly recording reasons. On verification of the reasons recorded, it is clearly evident that the assessing officer had duly applied his mind, made belief on the base of the fact available on record. It is also noticed that during assessment proceeding u/s 153A of the Act in case of Sarthav Infrastructure Pvt Ltd, Gross Profit derived from unaccounted receipt has been added to its income. Further, if any, addition has already made in the hands of other assessee related to escaped income, then the same can be verified in detail and considered during assessment proceeding. Also it is already discussed in the reason recorded that assessee was holding two bank accounts with CUB bank and assessee kept silence on the correlation of the cash deposit in the account no. CA 124684. This indicated that the source of the cash deposit are unexplained. Further, Anil Hiralal Shah is one director of Sarthav Infrastructure Pvt Ltd which is managed by Sanjay M SutariajKey person of the Sarthav/Sutaria group) and details of the activity carried out by Sarthav group and Barter group and their correlation are already discussed in the reasons recorded. Therefore the contention of the assessee that Anil Shah and Sanket Shah are not related to assessee in any manner is not acceptable at all and the material seized

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from their premises have due relevance in case of assessee. Further, Assessing officer has also correlated the data in the seized sheet with the bank account of the assessee and only after such detailed correlation, AO has made belief that the income has escaped assessment. Therefore, there was new tangible material on record being seized sheet and finding in the assessment proceeding u/s 153C for AY 2011-12 In case of assesses and based on the new tangible material, information and analysis & correlation of the bank account with seized material and genuineness of the transactions, the AO made reason to believe that the income has escaped assessment. Further, onus is on assessee to bring some contradictory fact from the seized material and then only ask for any statement or cross examination. Therefore, the objection of the assessee is general and not tenable. Hence, the objections of the assessee are not acceptable at all. The facts of the present case of the assessee is different from the cases Common Cause (A Registered Soc.) Vs. UOI & Others and other cases relied upon by assessee as in present case of assessee, It is clearly mentioned in the reasons recorded that there was new tangible material on record being seized sheet and finding in the assessment proceeding u/s 153C for AY 2011-12 in case of assessee and based on the new tangible material, information and analysis & correlation of the bank account with seized material and genuineness of the transactions, the AO made reason to believe that the income has escaped assessment. Hence, there are independence evidences which were relied upon and correlated with the books of the assessee by AO to made belief that income has escaped assessment. Therefore, the farts of these decisions relied upon by assessee are not applicable in case of the assessee. 4. Assessee will be granted proper opportunities for submitting any submission/clarification as per provision of the I T Act & principal of Natural Justice and assessment will be competed in the judicious manner. Assessee will also provided all the material relied upon by this office to complete reassessment proceeding. Further, assessee is also requested to cooperate in the re-assessment proceeding and submit his explanation/submission within time allowed by assessing officer so that assessing officer has enough time to consider his submission for the completion of re-assessment proceeding in judicious manner. 5. It is also to be noticed that as per section 147 of the !.T. Act, the Assessing Officer is expected to form only a prima facie opinion or belief regarding the applicability of the provision in question at the time of recording of reasons for reopening the assessment, and it is not necessary for Assessing Officer to conclusively establish that his belief or opinion is correct even on the merits. In view of the above discussion regarding objections of the assessee and fact of the case, the assessee's all the objections are hereby rejected and disposed off discussing the same in the preceding paras.

4.5 The assessee carried the matter to the learned CIT(A). The assessee besides reiterating the submission made before the AO further contended that the AO for reopening the assessment relied on the documents found and seized during the search proceedings. However, under the provision of the Act, in case of search and seizure operation only recourse available with the AO to initiate proceeding under section 153A in case of searched person or under section 153C in case document found and seized belong to other than search person. Both these section have

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overriding effect over the provisions of section 147 and 148 of the Act. Therefore, the AO exceeded his jurisdiction in issuing notice under section 148 of the Act on basis of search materials. The assessee in support of its contention relied upon the various case laws which are incorporated in the assessee’s submission, reproduced in the order of the learned CIT(A).

4.6 However the learned CIT (A) rejected the contention of the assessee by observing as under: The submission of the appellant, the facts mentioned in the assessment order! have been considered carefully and in totality. The First and Second grounds of appeal are against the proceedings initiated u/s. 147 of the Act. The AO in Para 4 of the assessment order has discussed that "during search at the residence of Anil Hiralal Shah at 36, Amrashirish Bunglow, Opp. Chimanbhai Institute, Nr. Prahladnagar Garden, Prahtadnagar, Ahmedabad on 04.122014 at path "DATA FROM ANILALJENWARE/PRESENT FILES/XLS FILES" in the "sheet 1", MS Excel file named "CCCCC xls" was seized. Same sheet was also seized in form of e-data from the residence of Sanket Jitendra Shah (Vora) C-104, Pushkar-3, Opp. Vitrag Society, P.T. College Road, Paldi, Ahmedabad during the course of search conducted on 04 12 2014. These persons belongs to Accommodation Entry Providers Group (AEPGOA) also known by the name of 'Barter' group, 'Barter' being the nick name of Anil Hiralal Shah." Thereafter, in Para 5 of the assessment order, the AO has stated that "On verification of bank account of the assessee, it is noticed that during the year under consideration, assessee was having cash deposit of Rs.95,53,227/- in the City Union Bank, Account No.37976, Navrangpura Branch and Rs 5.000/- in the City Union Bank A/c No 124684, Navrangpura Branch and Rs 2,73.2347- in the Ahmedabad Mercantile Co.Op Bank, A/c. No.1091. Accordingly, the case was reopened and the proceedings for re-assessment were commenced. The reasons for reopening u/s. 146 were duly provided to the assessee, opportunity under natural justice was given to it and the procedure as per judicial pronouncements was followed as mentioned in initial paras of this order Subsequently assessee was asked regarding source of the same vide show-cause notice dated 17.11.2017, Assessee submitted its reply vide submission dated 05.12.20T7 and 12.12-2017. The submission and contentions of the assessee were duly considered. However the same are not found to the AO. 4.3. The appellant contended that the entire reassessment notice was issued based upon documents found during the course of search at the premises of a third party and A.O. was of the view that appellant has obtained accommodation entry against transactions carried with Barter group and hence the AO ought to have issued notice u/s.l53C of the Act and not the notice u/s.148 of the Act. Provision of section 147 of the Act provides for reopening of the assessment subject to certain conditions which have been fulfilled in this case. The section does not bar reopening of assessment on the basis of information contained the material seized during the course of scorch u/s 132 of the Act at the premises of a third party On careful consideration it is observed that the documents relied upon by the A.O for reopening the assessment u/s. 147 do not belong to the appellant but as per A.O they contain information relating to the unaccounted income of the appellant, the seized documents belong to Anil Hiralal Shah and Sanket Jitendra Shah (Vora) of Barter group and not to the appellant. Therefore the assertion made by the appellant on this account is without any merit. In view of the aforesaid facts and legal position the assessment has been found

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to be correctly reopened by the A.O as per the provisions of section 147 of the Act and hence, the First & Second grounds of appeal are dismissed.

6.1 The ld. AR vide letter dated 24th August 2021 also submitted that the entire basis of reopening the assessment is based on the excel sheet found and seized in search proceeding at the premises of third party. Therefore, the only recourse available with the AO is to initiate proceedings u/s 153C of the Act. Thus, the proceedings initiated under section 147 of the Act are not maintainable.

6.2 On the other hand, the learned DR submitted that the proceedings under section 153C of the Act can be initiated by the AO if, there was any document found during the search proceedings at the premises of the 3rd party pertaining/belonging to the assessee. As such, there was no document found in the search proceedings pertaining/belonging to the assessee for the year under consideration. Therefore, the AO did not initiate the proceedings under section 153C of the Act. Thus, the AO

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has rightly initiated the proceedings under section 147 of the Act after forming the reasons to believe that income of the assessee has escaped assessment. The learned DR vehemently supported the order of the authorities below.

7.1 The proceedings under section 147 of the Act can be initiated if the assessing officer has reasons to believe based on clinching tangible material that any income chargeable to tax has escaped assessment for any assessment year. The relevant extract of the provisions of section 147 of the Act reads as under: 147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) :

7.2 From the above, it is transpired that it is necessary for the AO before initiating the proceedings under section 147 of the Act to form reasons to believe for the escapement of income. The words ‘reasons to believe’ contains 2 components. Firstly, the ‘reasons’ which refers to the cause or justification. Secondly, the word believe which refers to accept something as true or have faith in some facts to exist. On the contrary, the words reasons to suspect is contrary to the reasons to believe.

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The words reasons to suspect refers to something which is not true or capable of being trusted. Thus, the reasons to suspect cannot be equated with the reasons to believe.

7.3 In the present case, admittedly the information was received by the AO from the external sources, based on which the proceedings were initiated under the provisions of section 147 of the Act. Undeniably, the information was containing the financial transactions for the assessment year 2011-12 and there was no whisper about any financial transaction for the year under consideration. Thus, the question arises whether the information pertaining to other assessment year can be considered a tangible material for initiating the proceedings under section 147 of the Act. Indeed, the assessing officer upon receiving the information has analysed and found that such information containing detail of cash deposit in the bank account during A.Y. 2011-12. Thereafter the AO perused the bank statement of the assessee for the year under consideration where cash deposits was also made. The AO on the basis of the same reached to the conclusion that income to the extent of cash deposit escaped for assessment.

7.4 The 1st question that arises for our adjudication whether cash deposits represent the income of the assessee and gives rise to the AO to believe that income has escaped assessment within the meaning of the provisions of section 147 of the Act. In our considered view, the mere deposit of cash itself does not represent income unless and until some tangible material available on record evidencing that such deposits is the income of the assessee. Therefore, mere information of cash deposit does not give any rise to form believe that the income of the assessee has been escaped assessment. In this regard we draw support and guidance from order of Delhi tribunal in case of Bir Bahadur Singh Sijwali vs. ITO reported in 53 taxmann.com 366, the relevant finding of the coordinate bench of Delhi tribunal reads as under: 8. Let us, in the light of this legal position, revert to the facts of the case before us. All that the reasons recorded for reopening indicate is that cash deposits aggregating to Rs

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10,24,100 have been made in the bank account of the assessee, but the mere fact that these deposits have been made in a bank account does not indicate that these deposits constitute an income which has escaped assessment. The reasons recorded for reopening the assessment donot make out a case that the assessee was engaged in some business and the income from such a business has not been returned by the assessee. As we donot have the liberty to examine these reasons on the basis of any other material or fact, other than the facts set out in the reasons so recorded, it is not open to us to deal with the question as to whether the assessee could be said to be engaged in any business; all that is to be examined is whether the fact of the deposits, per se, in the bank account of the assessee could be basis of holding the view that the income has escaped assessment. The answer, in our humble understanding, is in negative. The Assessing Officer has opined that an income of Rs 10,24,100 has escaped assessment of income because the assessee has Rs 10,24,100 in his bank account but then such an opinion proceeds on the fallacious assumption that the bank deposits constitute undisclosed income, and overlooks the fact that the sources of deposit need not necessarily be income of the assessee. Of course, it may be desirable, from the point of view of revenue authorities, to examine the matter in detail, but then reassessment proceedings cannot be resorted to only to examine the facts of a case, no matter how desirable that be, unless there is a reason to believe, rather than suspect, that an income has escaped assessment.

7.5 The 2nd aspect that arises for our adjudication that there was tangible material received by the AO from any other source for the year under consideration. In other words, the information received by the AO was pertaining to the financial year 2010-11 corresponding to assessment year 2011-12 based on which the proceedings under section 153C of the Act were initiated against the assessee. Now the question arises the information pertaining to the assessment year 2011-12 can be used for the year under consideration being the financial year 2009-10 corresponding to assessment year 2010-11. In our considered view, such information cannot be used for forming believe that income in the year under consideration also escaped assessment unless and until fresh tangible material pertaining to the year under consideration brought on record. The information or material pertaining to different assessment year may give rise to suspicion but not the reason to believe. In this regard we find support and guidance from the judgment of Hon’ble Supreme court in case of ITO vs. Lakhmani Mewal Das reposted in 103 ITR 437, where the Hon’ble court held as under: "the reasons for the formation of the belief must have rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the ITO and the formation of this belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the Court cannot go into sufficiency or adequacy of the material

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and substitute its own opinion for that of the ITO on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment."

7.6 In view of the above discussion, we are of the view that reason to believe formed by the AO for reopening the assessment is not valid as the same is not based on any tangible material which prima facie suggest income has escaped assessment rather the AO form believe merely based on suspicion, surmise and conjecture.

7.7 With respect to the contention of the learned AR that initiation of the proceedings under section 147 of the Act is invalid for the reason that the assessment should have been framed only under the provisions of section 153C of the Act as the year under consideration is 1 of the year out of 6 assessment years. This question has been answered by the jurisdictional ITAT in the case of Shaialesh S Patel vs. ITO reported in 97 taxmann.com 570 wherein it was held as under: The overriding provisions of section 153C merely enables the Assessing Officer to set aside the pending reassessment proceedings and grants primacy to section 153C. As noted earlier, exercise of power under section 153C is governed without any stringent fetters of holding 'reason to believe' contemplated under section 147. Therefore, while exercise of overriding power under section 153C will render section 147 otiose, the converse case of clipping the powers available under section 147 in search cases per se is not found to be reconcilable to the scheme of the Act. In the light of scheme of the Act narrated above, the Assessing Officer of the assessee (person other than searched person) cannot be compelled to pursue remedy necessarily under section 153C in exclusion to remedy available to the Assessing Officer under section 147. Thus, on this count also, the action of the Assessing Officer under section 147 was within the four corners of law and not be faulted.

7.8 In view of the above, we are not in agreement the contention of the learned AR for the assessee. However in preceding paragraph we have held that reason to be belief formed by the AO is not based on any fresh tangible material. Therefore we hereby quashed the proceeding under section 147 of the Act. Hence the ground of cross objection of the assessee is allowed.

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7.9 In the result, the cross objection of the assessee is allowed. Coming to ITA No. 794/Ahd/2019 an appeal by Revenue on merit

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on regular interval which was utilized to redeposit in the bank account in the year under consideration.

11.1 The assessee, likewise, further submitted that entire basis of allegation is excel sheet found from the premises third party and statement recorded of such parties, but none of document or statement, its name has been identified. Therefore no addition can be made on the basis such material without providing the opportunity cross examination.

11.2 However, the AO during the assessment proceedings observed that the assessee has taken a loan through the banking channel in the year under consideration which was withdrawn in cash and recorded in the cash book as cash in hand. Subsequently, the assessee claimed to have re-deposited the same cash in the bank account which was utilized for repayment of the impugned loan either on the same day or immediately after deposit of cash. The AO also found that there was sufficient cash balance available with the assessee all the time but despite that the assessee was withdrawing cash and depositing the same in the bank account in the denomination of ₹ 5 Lacs. The AO also perused the cash book of the assessee and found that there was no other transaction in the cash book except withdrawal from the bank and deposit the same in the bank. As per the AO, the transactions of withdrawing cash and depositing the same in the bank account was very unusual and without any rationality. Furthermore, the assessee also failed to justify the modus operandi adopted by it for withdrawing and depositing the cash in the bank account. Thus, in the absence of any justification, the AO was of the view that the transactions reflecting in the cash book are not genuine. Further, the assessee’s contention with regard to evidentiary value of the excel sheet found from seized from third party and pertaining to different period and demand of cross examination is also devoid of merit for the reason that addition is purposed on the basis of huge cash deposit which was made during the year. As per the AO, it was the onus upon

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the assessee to explain the transactions of cash deposits and withdrawals based on the documentary evidence. But the assessee failed to do so.

11.3 Thus, the AO treated the same as a device of tax evasion adopted by the assessee and therefore treated the amount of Rs. 98,31,461- as unexplained cash credit under section 68 of the Act by making the addition to the total income of the assessee.

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cash loan so repaid was deposited in the regular bank account of the appellant firm. The appellant firm has explained each item of cash deposit with regards to its books of accounts i.e. cash book vis-a-vis bank statement and hence it cannot be said that the appellant firm had unexplained cash deposit and hence the addition made by the AO is found incorrect and is based on merely on surmises and conjectures. The cash book itself clearly reflects that the appellant firm had sufficient cash in hand to deposit the same in the bank. The appellant firm has discharged its onus by submitting cash book which clearly reflects all the cash deposits and withdrawals as all entries of withdrawals and deposits in the bank both stand recorded in the cash book and the availability of funds with the appellant firm is sufficient to meet the outflow of money deposited in the bank account. The appellant firm relied upon the judgment in the case of Dhakeshwari Cotton Mills Ltd, vs. CIT. 26 ITR 775 (SO. Considering all the aforesaid facts, I am in agreement with the contention of the appellant firm that the cash deposit in aggregate of Rs 98.31.461/- is out of the cash withdrawn from bank account which is duly explained by the appellant firm. The appellant firm also in support of the contention that mere cash deposits made in the bank account of the appellant firm do not render the transactions to be questionable relied upon following judicial pronouncements ;- i) CIT vs. Shailesh Kumar Rasiklal Mehta [2014] 41 taxmann.com 550 (GujaratJ ii) Gurpal Singh vs. ITO (2016] 71 taxmann.com 108[2016] 159 ITD 797 (Amritsar - Trib.) iii) BirBahadurSijwali vs. ITO [2015] 53 taxmann.com 366 (Delhi-Trib] iv) Jaspal Singh Sehgalvs. ITO [2017] 83 taxmann.com 246 (Mumbai-Trrb] v) Mehul V. Vyasvs.lTO [2017] 80 taxmann.com 311 (Mumbai-Trib] vi) SudhirbhaiPravinkantThaker vs. ITO. (2017) 88 taxmann.com 382 (Ahmedabad-Trib] Considering the facts of the appellant firm's case and the judicial pronouncements relied upon by the appellant firm, I hold that the addition made by the AO for unexplained cash credit u/s. 68 for an amount of Rs.98,31,461/- is not justified and the same is hereby deleted. This ground of appeal is allowed.

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books. Similarly, the explanation of credit entries in bank is available on pages 363 to 365 of paper book.

19.1 On a plain reading of the above provisions, it is revealed that, the following conditions should be fulfilled for attracting the provisions of section 68 of the Act. i. There should be a credit entry in the books of accounts. ii. No explanation was offered by the assessee with respect to such credit entry or iii. The explanation offered by the assessee was not satisfactory to the AO.

19.2 Admittedly, there was credit entry in the books of accounts of the assessee, reflecting the deposits of cash in the bank account. The explanation was offered by the assessee to the AO that the cash was deposited out of the cash withdrawal from the earlier year as well as in the year under consideration. However, the explanation offered by the assessee was not found satisfactory by the AO. As such, the AO was of the view that there was sufficient cash balance available with the assessee throughout the year and therefore there was no reason for the assessee to withdraw the cash in the denomination of ₹ 5 lacs and re-deposit the same. As per the AO the modus operandi of the assessee was very unusual. Thus the AO treated the

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amount of cash deposit as unexplained cash credit under section 68 of the Act. However, the learned CIT (A) was pleased to delete the addition made by the AO. In the light of the above discussion, we note that, admittedly the activity of the assessee i.e. withdrawing the cash and depositing in the bank account on regular basis, appears to be very unusual. It is for the reason that no prudent businessman will do so, particularly in a situation where there was already sufficient cash in hand available with the assessee all the time. Indeed, a suspicion arises in the mind for the genuineness of the transaction on hand as discussed above.

19.3 It is the settled law, a suspicion cannot take the place of the evidence as held by Hon’ble Supreme Court in the case of CIT vs. Daulat Ram Rawatmull reposted in 53 ITR 574, the relevant extract reads as under: “The circumstances relied upon by Mr. Sastri do raise suspicion, but suspicion cannot take the place of evidence.”

19.4 In view of the above, there cannot be any addition made to the total income of the assessee based on suspicion. A suspicion/doubt requires to investigate the facts in more detailed in order to find out some evidence so as to unearth the income of the assessee.

19.5 For the sake of repetition, we also note that indeed, the activity of withdrawing the cash and redeposit in the same in the bank is very unusual practice but there is no prohibition under any of the law for the time being in force for doing such activity. Thus, merely an unusual activity of the assessee does not give any authority to the revenue to make the addition to the total income of the assessee. In fact the assessee in the given facts and circumstances has discharged the onus imposed under the provisions of section 68 of the Act by furnishing the necessary details which has been elaborately discussed in the preceding paragraph. Thus the onus shifted upon the AO to disprove the contention of the assessee based on the tangible materials. But we note that the AO has not brought any iota of evidence suggesting that the amount of cash deposit was not out of the cash withdrawal from

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the bank. Likewise, there was no information that the assessee has spent the cash withdrawal somewhere else either towards the capital or revenue expenses/ personal expenses. At this juncture we also find pertinent to refer the order of this Tribunal in case of Sudhirbhai Pravinkant Thaker vs. ITO reported in 88 taxmann.com 382, where in similar facts and circumstances it was held as under: 4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below as well as the judgements relied upon by the ld. counsel for the assessee. There is no dispute with regard to the fact that the assessee had deposited the cash of Rs.11,27,800/- starting from 07/06/2007 to 31/02/2008. The cash withdrawn from the bank was of Rs.4,20,000/- on 01/07/2006, Rs.4,90,000/- on 06/07/2006, Rs.83,000/- on 26/06/2007, Rs.51,000/- on 20/11/2007, Rs.1,28,000/- on 14/12/2007 and Rs.2,00,000/- on 07/01/2008. However, the cash was deposited on 07/06/2007 of Rs.2 lacs, on 08/06/2007 of Rs.2 lacs, on 11/06/2007 of Rs.1,50,000/-, on 12/06/2007 of Rs.2 lacs, on 13/06/2007 of Rs.2,25,000/-. The total deposits till 13/06/2007 was of Rs.9,75,000/- and the amount withdrawn till 06/07/2006 was of Rs.9,10,000/- (Rs.4,20,000 + 4,90,000). Rest of the deposits of the total addition were made on 18/06/2007, 26/06/2007 and 13/02/2008. However, withdrawal after 06/07/2006, the assessee had withdrawn on 26/06/2007 of Rs.83,000/-, on 20/11/2007 of rs.51,000/-, on 14/12/2007 of Rs.1,28,000/- and on 07/01/2008 of Rs.2,00,000/-. From 20/11/2011 to 07/01/2008 the assessee had withdrawn total amount of Rs.3,79,000/-. However, cash was deposited in the bank account after 13/06/2007 of Rs.1,52,800/-. So far as the amount of Rs.83,000/- is concerned, i.e. matching from withdrawals and deposits and rest of the amount, there is a gap between withdrawals and deposits of the amount. In respect of deposit made on 13/02/2008 is also within one month from the withdrawal of amount on 07/01/2008. In respect of other entries, the cash withdrawal is even before one year of deposit of the amount. The contention of the assessee is that the amount was kept as cash in hand. The authorities have doubted about the explanation furnished by the assessee. The authorities below have doubted the source of the cash deposits, however, the contention of the ld. counsel for the assessee is that he had withdrawn the amount from his bank account and there is no finding by the authorities below that the cash withdrawn by the assessee was utilized for any other purpose. In the absence of such finding, addition is not justified. We find merit into the contention of the ld. counsel for the assessee that there is no dispute that the amount which was withdrawn by the assessee on various dates during the year 2006 was available with him for making deposits. In the absence of finding that the amount which was previously withdrawn by the assessee had been utilized for any other purpose merely on the basis of conjecture that the amount might have been utilized for any other purpose and was not available with the assessee for making the deposits, we are unable to accept the reasoning of the authorities below. In our considered view, when the assessee has demonstrated that he had withdrawn cash from the bank and there is no finding by the authorities below that this cash available with the assessee was invested or utilized for any other purpose, in that event, it is not open to the authority to make the addition on the basis that the assessee failed to explain the source of deposits. Moreover, the authorities below have not disputed the fact that the assessee had withdrawn amount of Rs.9,10,000/- before the deposits made on various dates during the FY 2007-08. Therefore, the orders of the authorities below are set aside and the AO is directed to delete the addition. Thus, ground raised in the assessee's appeal is allowed.

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19.6 In view of the above, there cannot be any addition to the total income of the assessee on account of cash deposited in the bank unless the AO demonstrate that the amount in question has been used by the assessee for any other purpose. Thus in our considered view the addition is made by the AO on inferences and presumptions which is bad in law. Accordingly, we do not find any infirmity in the order of the learned CIT(A). Thus we direct the AO to delete the addition made by him. Hence the ground of appeal of the Revenue is hereby dismissed.

Sr.No. Name of Depositor PAN Amount (Rs.) 1. Saral Management & Consultancy AACHS8451H 3,76,00,000 2. Kalpesh Patel 5,00,000 Total 3,81,00,000

21.1 The assessee in support of the impugned loan has filed copy of the PAN and the ledgers in order to prove the identity, creditworthiness of the parties and the genuineness of the transactions.

21.2 However, the AO during the assessment proceedings observed certain facts as detailed under: i. There was no detail, such as copy of the PAN, ledger, ITR, bank statement, furnished by the assessee with respect to one of the party namely Shri Kalpesh Patel.

ii. With respect to Saral Management Consultancy only part of the documents, such as PAN, contra ledger copy was submitted. As such the

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copy of the ITR, bank statement were not furnished by the assessee in order to prove the creditworthiness of the parties and genuineness of the transaction.

iii. On the independent enquiry conducted from ITD data base, it was found that there was not sufficient creditworthiness of the parties who could advance loan to the assessee.

iv. Saral Management Consultancy is concern of Sutariya Family. The lender Saral Management Consultancy has received fund through cash deposit and concern of Barter group controlled by Atul Hirala Shah which were involved in providing accommodation entries. Thus, merely the transaction was carried out through the banking channel does not establish the genuineness of the transaction. 21.3 Based on the above, the AO concluded that the assessee failed to discharge the onus cast upon it under the provisions of section 68 of the Act with respect to the identity, creditworthiness of the parties and genuineness of the transaction. Thus, the AO treated the same as unexplained cash credit of Rs. 3,81,00,000/- under section 68 of the Act and added to the total income of the assessee.

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The appellant firm contended that the AO in para 8.4 at page no.21 of the assessment order has observed that since assessee failed to prove the identity as well as creditworthiness of the depositors despite clearly asked in notices, this office undertook independent exercise to verify the creditworthiness of these depositors. The said observation of the AO found not correct as the AO being the assessing authority of Sarthav Infrastructure Pvt. Ltd. has made the assessment order of Sarthav Infrastructure Pvt. Ltd. for the A.Y.2011-12. At page no 99 the details with regards to Saral Management and Consultancy has stated that the PAN No. of Saral Management and Consultancy and income declared in the return of income by Saral Management and Consultancy for AY 2010-11 for a substantial amount of Rs.11654700/- and the said lender party has also shown substantial income through the period of seven years i.e. from A.Y.2009-10 to till A.Y.2015-16.Showcausing the fact that the AO had access to both the PAN and the return of income for all of the years of the creditor so as to say the identity and/or genuineness of the transactions was not at question since it was cross- verifiable from the said page no.99 of the assessment order so passed by him in the case of Sarthav Infrastructure Pvt. Ltd. The appellant firm has placed before me the said relevant page no.99, which is compiled as per Exhibit-Ill of synopsis of arguments, in case of Sarai Management & Consultancy (Prop.MahendraSutaria-HUF}, there was debit balance of Rs.70,32,710/- as opening balance of the aforesaid mentioned party and further unsecured loan for an amount of Rs.3,05,71,290/- has been received during the year under consideration and Rs. 2,69,82,000/- was also repaid during the year under consideration, and hence an addition of Rs. 3,76,00,000/-is not justified and in respect of the said lender party. The AO made the assessment of creditor party also. ' The appellant firm has placed on record the copy of ITR-V along with the bank statement of the lender firm namely Saral Management and Consultancy as per Exhibit-ll and the same has been duly considered and taken on record. This establishes that all the transactions have been made through proper banking channel. So, the addition of Rs.3,76,00,000/- made by the A.O with respect to

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the unsecured loan of Saral Management and Consultancy is unjustified and the said j addition is deleted. The AO in para 8.2 at page no.20 of the assessment order has observed that j it is to conclude that identity of Kalpesh Patel were not proved. The said observation of the AO is found not correct and unjustified as in case of Kalpesh Patel, on page no.99 of the assessment order of SIPL, the AO himself has stated the PAN No. of (he said lender party as ATSPP0295I. The appellant firm has received unsecured loan of Rs.5.00,000/- to meet the temporary shortage of fund on current account basis and the amount of Rs.5,00,000/- __has_been_repaid_back_with a period of 2 days and hence the appellant firm has not paid interest on such amount. In this regard, the appellant firm has placed on record the copy of contra confirmation alongwith the bank statement of Kalpesh Patel. The appellant firm has also placed on record the ledger account of Kalpesh Patel from the books of the appellant firm. Hence the addition of Rs.5,00,000/- made by the AO with respect to the unsecured loan of Kalpesh Patel is not justified and the said addition is deleted.

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the Act by the Hon’ble Calcutta High Court in the case of CIT Vs. Precision finance (p) Ltd reported in 208 ITR 465 wherein it was held as under:

“It was for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. On the facts of this case, the Tribunal did not take into account all these ingredients which had to be satisfied by the assessee. Mere furnishing of the particulars was not enough. The enquiry of the ITO revealed that either the assessee was not traceable or there was no such file and, accordingly, the first ingredient as to the identity of the creditors had not been established. If the identity of the creditors had not been established, consequently, the question of establishment of the genuineness of the transactions or the creditworthiness of the creditors did not and could not arise. The Tribunal did not apply its mind to the facts of this particular case and proceeded on the footing that since the transactions were through the bank account, it was to be presumed that the transactions were genuine. It was not for the ITO to find out by making investigation from the bank accounts unless the assessee proved the identity of the creditors and their creditworthiness. Mere payment by account payee cheque was not sacrosanct nor could it make a non-genuine transaction genuine.” 29.1 The assessee has discharged its onus by furnishing the necessary details such as a copy of PAN, ledger copy, confirmation and bank details in support of identity of the parties, genuineness of transaction and creditworthiness of the parties. Admittedly the AO has accepted the identity of the parties except of Kalpesh Patel but the genuineness of transaction and credit worthiness of the parties were not accepted. However the learned CIT(A) held that the assessee has discharged the primary onus cast under section 68 of the Act and deleted the addition made by the AO. In this backdrop we proceeds to adjudicate the issue on hand.

29.2 Coming to first condition cast under section 68 of the Act i.e. proof of identity. The AO has held that the identity of the Kalpesh Patel was not proven by the assessee. However we note the AO in paragraph number 8.4 of his order has given the details of income declared by Shri Kalpesh Patel for the last 3 years. Thus, there is contradiction in the finding of AO. Further the learned CIT-A has given categorical finding that the AO while framing the assessment of Sarthav Infrastructure Pvt Ltd (SIPL) for the year under consideration has accepted the identity of Shri Kalpesh Patel. Therefore in these facts and circumstances, no doubt remains on the identity of the loan parties.

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29.3 Now coming to the second and third condition, i.e. genuineness of the transaction and creditworthiness of the parties, regarding this we note that all the transactions were carried out through banking channel and the assessee has refunded the amount through banking channel to all the parties and in case of Kalpesh Patel within 2 days. The repayment of the loan amount by the assessee was duly accepted by the Revenue. In this regard, we find support and guidance from the judgment of Hon’ble Gujarat High Court in the case of the CIT Vs. Rohini builders reported in 256 ITR 360 wherein it was held as under:

“The genuineness of the transaction is proved by the fact that the payment to the assessee as well as repayment of the loan by the assessee to the depositors is made by account payee cheques and the interest is also paid by the assessee to the creditors by account payee cheques.”

29.4 Thus, there remains no doubt that the transaction of the advance received by the assessee from the parties was not genuine. In our considered view, once the assessee is able to prove that the money received by it was returned during the year in the account of the same parties, then there remains no doubt to draw an inference that the advances received by the assessee were unexplained cash credit.

29.5 Similarly, we also note that in respect of all the parties as discussed above the AO had sufficient documentary pieces of evidence including the details of the income of the loan parties namely Saral Management Consultancy who were assessed by the same AO and showing healthy amount of taxable income. Therefore in our considered view, the assessee has discharged its onus imposed under section 68 of the Act. In view of the above, we do not find any infirmity in

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the order of Ld. CIT (A). Hence the ground of appeal of the revenue is hereby dismissed.

29.6 In the result appeal of the Revenue is dismissed

Order pronounced in the Court on 27/04/2022 at Ahmedabad.

Sd/- Sd/- (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy)

Ahmedabad; Dated 27/04/2022 Manish