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Income Tax Appellate Tribunal, ‘’ A’’ BENCH, AHMEDABAD
Before: SHRI WASEEM AHMED
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)-11, Ahmedabad, dated 07/02/2019 (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
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Act, 1961 (here-in-after referred to as "the Act"). The assessee has filed the Cross Objection in the Revenue’s appeal bearing ITA No. 796/Ahd/2019 for the Assessment Year 2010-2011.
First, we take up the CO filed by the assessee. The assessee in the CO has raised the following grounds:
All the grounds in this Cross-Objections are mutually exclusive and without prejudice to each other: 1. The Ld. CIT(A) has erred in law and on facts in dismissing the appeal filed by the Respondent in respect Lack of Jurisdiction and proceedings initiated under section 147 of the Act. The Respondent respectfully submits that entire reason to belief is not sustainable in the eyes of law in its entirety since consolidated reasons are recorded for different assessment years corelatable to impugned notice issued under section 148 for the concerned assessment year 2010-11 so as to say that the case of the Respondent cannot be reopened on the strength of subject matter of reasons recorded by the Ld. AO as the reasons are based out of seized material so impounded from the premises of Barter Group relevant to A.Y. 2011-12 and thus the reason recorded for reopening by the clearly lack of jurisdiction u/s. 147 /148 2. The Ld. CIT(A) after considering the assessment order, facts of the case, submission of the Respondent as well as various judicial pronouncements relied upon by the Respondent particularly the decision of Hon'ble jurisdictional Gujarat High Court in the case of CIT vs. Shailesh Kumar Rasiklal Mehta (2014) 41 taxmann.com 550 (Guj.) held that " the cash deposit in aggregate of Rs.1,83,07,500/- is out of the cash withdrawn from bank account which is duly explained by the appellant. The appellant 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. The appellant submitted cash book before the AO, which reflects withdrawals and deposits in the bank account. These facts have been mentioned in para 5.1(iii) of the assessment order. No defect was found in the cash book maintained by the appellant" and the Ld. CIT(A) has rightly deleted the addition of Rs.1,83,07,500/- made by the AO. 2. The Ld. CIT (A) after carefully considering the facts of the case, various details and explanation furnished by the Respondent to establish the identity, creditworthiness and genuineness of the unsecured loan as well as various judicial pronouncements relied upon by the Respondent held that in respect of unsecured loan received from Saral Management and Consultancy, the AO being Assessing Officer of Sarthav Infrastructure Pvt.Ltd has duly provided in the assessment order of Sarthav Infrastructure Pvt.Ltd for A.Y. 2010-11 at Page No. 99 as well as at Page No. 19 the details with regard to Saral Management and Consultancy the PAN No, returned income from A.Y. 2009-10 till A.Y. 2015-16 in a tabular form and there was an opening balance of Rs. 1,88,19,622/- and the Respondent had received unsecured loan of Rs. 2,60,33,000/- totaling to Rs. 4,48,52,622/- and an amount of Rs. 4,39,39,042/- has been repaid back during the year under consideration. In respect of lender party and Shreej Infrastructure (A Sarthav Group concern) the AO on Page 19 of the assessment order Sarthav Infrastructure Pvt.Ltd has duly provided the PAN No of the said party and the said party was also under the assessment proceedings u/s. 143(3) of the Act and therefore the return of income of the aforesaid two parties as well as bank statements and books of accounts of the aforesaid parties were already on the record of the
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AO, the Ld. AO has correctly deleted the addition made by the AO under section 68 of the ActofRs.,4,60,33,000/-. 3. Your Respondent craves right to add, amend, alter, modify, substitute, delete or modify all or any of the above grounds of cross objection.
The assessee in the CO has challenged the virus of the notice issued under section 148 of the Act on the reasoning that there was no tangible material available with the AO for forming the belief that income of the assessee has escaped assessment for the year under consideration.
3.1 The necessary facts to be stated in brief for the purpose of the adjudication of the impugned CO are that the assessee in the present case is an individual. There was a search and seizure operation under section 132 of the Act, at the premises of Barter Group dated 4th December 2014. Shri Anil Hiralal Shah and Sanket Jitendra Bhai being part of the group were also subjected to the same search. As a result of search, an excel sheet marked as ‘ccccc’ was found from the computer of Shri Anil Hiralal Shah. The hard copy of the same sheet was also found from the premises of Shri Sanket Jitendra Bhai. The impugned excel sheet was containing various financial transactions such as deposit of cash and withdrawal of cash from the bank besides other financial transactions. The impugned sheet was containing the transactions for the period beginning from 2nd April 2010 to 27th August 2010 in the name of different persons including the assessee. It was showing the cash receipt of ₹ 69,31,41,997/- only. Out of such receipt, a sum of ₹68,86,46,970/- was deposited in different banks accounts of different persons, used for personal expenses or used for arranging the accommodation entries. Such deposit of cash was ultimately utilized for the purchase of lands by the different persons. The entries reflected in the excel sheet was duly correlated with the cash deposits in the bank accounts of different individuals/parties. In the bank account of the assessee, there was the deposit of cash amounting to ₹ 35 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.
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3.2 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.
3.3 Out of such deposits of cash, a sum of ₹ 1,66,00,000/- 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. 47,79,810/- 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 ₹ 1,66,00,000/- has escaped assessment in respect of which the assessee failed to disclose fully and truly all material facts necessary for the assessment. Therefore, the AO initiated the proceedings under section 147 of the Act by issuing a notice under section 148 of the Act.
3.4 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 ₹ 1,66,00,000/- has been formed without any basis, as it was not expressed how the
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figure of escaped income was worked out. The statement recorded in connection with excel sheet found and impounded does not contain the name of assessee. Furthermore, such alleged Excel sheet pertains to A.Y. 2011-12, therefore no reliance can be placed on the information pertaining to different year 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.
3.5 However the AO, disposed of the objection of the assessee and confirmed the proceedings for the assessment framed under section 147 of the Act.
3.6 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 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 material. 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).
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3.7 However the learned CIT (A) rejected the contention of the assessee by observing as under: 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 the AO 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.153C 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 search 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 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.
Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us.
The learned AR before us filed a paper book running from pages 1 to 484 and contended that there was no tangible information available with the AO for the year under consideration suggesting that there was the escapement of income which has not been offered to tax. As per the learned AR, the entire thrust of the Revenue for initiating the proceedings under section 147 of the Act was based on the excel sheet recovered during the search from the premises of barter group. However, such excel sheet was containing the financial transaction pertaining to the financial year 2010-11 corresponding to assessment year 2011-12. There was no iota of information pertaining to the year under consideration which was available with the AO for forming the reason to believe for the escapement of income. Thus, in the absence of any fresh/ tangible material pertaining to the year under consideration, the proceedings under section 147 of the Act cannot be initiated.
5.1 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
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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.
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 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.
We have gone to the rival submissions made by both the sides and the order of the authorities below as well as the judgment relied upon by the respective parties. As per the assessee there was no tangible material available with the AO leading to form the reasons to believe that income of the assessee has escaped assessment. As such, the AO has initiated the proceedings under section 147 of the Act merely on the excel sheet found and seized in search proceedings at the premises of third party which was not containing any information pertaining to the year under consideration. There was no independent information available with the AO for the year under consideration to reach to the conclusive opinion that the income has escaped assessment.
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
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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. 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 analyzed and found that such information containing detail of cash deposit in the bank account pertaining to the AY 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
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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 Shri 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 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
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consideration has 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 reported 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 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 formed his 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 one of the year out of six 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
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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.
7.9 In the result cross objection of the assessee is allowed.
Coming to ITA No. 796/Ahd/2019 an appeal by Revenue on merit
The Revenue has raised following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in deleting the addition of ?1,83,07,5007-on account of unexplained cash credits u/s.68 of the Act. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in deleting the addition of ?4,60,33,0007- on account of unexplained credits u/s.68 of the Act. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in holding that unsecured loan from Saral Management & Consultancy was received as loan to meet the temporary requirement of fund for the business on current account, whereas it had also cash deposit of Rs.163,87,9397- during F.Y.2009-10, the source of which was not explained by the assesses. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 5. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent.
The 1st issue raised by the Revenue is that the learned CIT (A) erred in deleting the addition made by the AO for ₹ 1,83,07,500/- by treating the cash deposit as unexplained cash credit under section 68 of the Act.
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The assessee in the year under consideration has deposited cash of Rs. ₹ 1,83,07,500/- in its bank accounts. During the assessment proceedings, it was explained that in order to buy peace and to avoid litigation, the assessee was willing to offer an amount of Rs. 4,00,000.00- as additional income under the head income from other sources whereas the cash deposits were made out of the cash balance available with it on account of cash withdrawal from banks on earlier occasion. As per the assessee, she has withdrawn the cash during the year on regular interval which was utilized to redeposit in the bank account in the year under consideration. The assessee, likewise, further submitted that entire basis of allegation is excel sheet found from the premises of third party and statement recorded therein, but none of document or statement, her name has been identified. Therefore no addition can be made on the basis search material without providing opportunity of cross examination.
10.1 However, the AO during the assessment proceedings observed 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 her 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 questioned to the evidentiary value of the excel sheet found and seized from third party which was 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.
10.2 Thus, the AO treated the same as a device of tax evasion adopted by the assessee and therefore treated the amount of Rs. 1,83,07,500/- as unexplained cash credit under section 68 of the Act by making the addition to the total income of the assessee.
Aggrieved assessee preferred an appeal to the learned CIT-A.
The assessee before the learned CIT(A) reiterated that cash was deposited out of opening balance and withdrawal made during the year. All the withdrawals and deposits are duly recorded in the books of accounts and explained during the assessment proceedings. The AO without doubting the cash book and bank book merely treated the deposits as unexplained cash credits on basis of surmises and conjecture. The assessee further submitted that there is no limitation under the Act with regard to cash withdrawal or deposits. There was also no evidence brought on record by the AO that cash withdrawal was invested somewhere else and cash deposited was sourced from any other sources. Therefore, the addition made merely on basis of surmise and conjecture cannot be sustained and to support the argument, the assessee relied on various case laws which are incorporated in the order of ld. learned CIT(A).
12.1 The learned CIT(A) after considering the submission of the assessee deleted the addition made by the AO by observing as under: The appellant has made regular withdrawals at regular intervals and the amounts that were remaining with the appellant out of such withdrawals were deposited in the bank account. The appellant had explained each item of ash deposits with reference to his books of accounts i.e. cash book vis-a-vis bank statement and the cash book shows adequate cash balance for making such deposits and hence it cannot say unexplained cash deposit and the AO cannot brush aside the said fact. Hence the AO is not justified in making the addition treating the cash deposit as unexplained cash deposit. It is found that the AO has not taken into consideration the said chart submitted by the appellant. The appellant has made regular withdrawals at regular intervals and the amounts that were remaining with the appellant out
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of such withdrawals were deposited in the bank account. The cash book itself clearly reflects that the appellant had sufficient cash in hand to deposit the same in the bank. The appellant 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 is sufficient to meet the outflow of money deposited in the bank account. The appellant has 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 that the cash deposit in aggregate of Rs.1,83,07,500/- is out of the cash withdrawn from bank account which is duly explained by the appellant- The appellant 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 (Gujarat] ii) Gurpal Singh vs. ITO [2016] 71 taxmann.com 108[2016] 159 ITD 797 (Amritsar - Trib.) iii) Bir Bahadur Sijwali vs. ITO [2015] 53 taxmann.com 366 (Delni-TribJ iv) Jaspal Singh Sehgalvs. ITO (2017] 83 taxmann.com 246 {Mumbai-Trib] v) Mehul V. Vyasvs.lTO [2017] SO taxmann.com 311 (Mumbai-TnbJ vi) Sudhirbhai Pravinkant Thaker vs. ITO. (2017) 88 taxmann.com 382 (Ahmedabad-Trib] vii) Arundeep Singh, Prop, vs Jt. CIT, ITA N0.860/CHD/2016. The appellant also relied upon the decision of Hqn'ble High Count of Gujarat jn the case of B.Nanji Enterprise Ltd, vs. Dy.CIT (2017). 84 taxmann.com 155 (Gui.) 5.3 The appellant submitted cash book before the AO, which reflects withdrawals & deposits in the bank account. These facts have been mentioned in para 5.1(iii) of the assessment order. No defect was found in the cash book maintained by the appellant. Keeping in view the facts above, additions of Rs.1,83,07,500/- made by the AO are deleted. This ground of appeal is allowed.
Being aggrieved by the order of the learned CIT-A, the Revenue is in appeal before us.
The learned DR before us vehemently supported the stand of the AO by reiterating the findings contained in his order which we have already adverted to in the preceding paragraph. Therefore we are not repeating the same for the sake of brevity.
On the contrary the learned the AR before us submitted that cash deposits were made out of cash withdrawal which is duly verifiable from cash books. The explanation for all the credit entries in bank and in cash book was duly furnished before the AO during the assessment proceedings. The copy of sheet explaining the sources of cash deposit and cash book is available on pages 733 to 764 of paper
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books and chart showing sources of cash deposit available on pages 236 to 237. Similarly, the explanation of credit entries in bank is available on pages 238 to 242 of paper book.
Both, the ld. DR and AR before us vehemently supported the order of the authorities below as favorable to them.
We have heard the rival contentions of both the parties and perused the materials available on record. In the present case, the cash deposited by the assessee was treated as unexplained cash credit under section 68 of the Act. The definition of Section 68 of the Act is reproduced below: 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year :
17.1 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.
17.2 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
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the modus operandi of the assessee was very unusual. Thus the AO treated the 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.
17.3 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.”
17.4 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.
17.5 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.
17.6 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
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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 the bank. Likewise, there was no information that the assessee has spent the cash withdrawal somewhere else towards the capital or revenue 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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17.7 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 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.
The next issue raised by the Revenue is that the learned CIT(A) erred in in deleting the addition made by the AO for Rs. 4,60,33,000/- on account of unexplained cash credit under section 68 of the Act.
The assessee in the year under consideration has shown the loan from following parties:
Sr.No. Name of Depositor PAN Amount(Rs.) 1. Saral Management AACHS8451H Rs.2,60,33,000/- Consultancy 2. Shreej Infrastructure ACKPS9048L Rs.2,00,00,000/-
19.1 The assessee in support of the impugned loan has filed copy of the PAN, bank statement and copy ITR acknowledgment in order to prove the identity, creditworthiness of the parties and the genuineness of the transactions. However, the AO during the assessment proceedings observed certain facts as detailed under: i. There was only PAN and bank statement has been submitted in case of Shreeji Infrastructure whereas in case of Saral Management & Consultancy leger copy has not been submitted ii. 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. Thus, the creditworthiness was not established.
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iii. The lender Saral Management Consultancy has received fund through cash deposit of Rs. 1,63,87,939/- which was held as unexplained and further received fund from concern of Barter group is controlled by Shri 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. Similar modus operandi was also in case of Shreeji Infrastructure. 19.2 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 genuineness of the transaction. Thus, the AO treated the same as unexplained cash credit of Rs. 4,60,33,000/- under section 68 of the Act and added to the total income of the assessee.
Aggrieved assessee preferred an appeal to the learned CIT-A.
The assessee before learned CIT(A) submitted that addition of Rs. 2,60,33,000/- on account loan from Saral Management & Consultancy is unjustified. It is for the reason that loan account of Saral Management & Consultancy is running account and in the year received fresh amount of Rs. 2,60,33,000/- and made repayment of Rs. 4,39,39,042/. All these transaction were carried through banking channel. Further all the details of lender Saral Management & Consultancy is available with the AO as it was also assessed by the same AO.
21.1 Similarly addition of Rs. 2 crores on account loan from Shreeji Infrastructure is also unjustified for the reason all the necessary detail such ledger copy, bank statement etc. were already submitted before the AO and this party was also assessed by the same AO. Accordingly, the assessee prayed to delete the addition made under section 68 of the Act.
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The learned CIT(A) after considering the submission of the assessee deleted the addition made by the AO by observing as under: The appellant contended that the AO in Para 8.5.1 at Page No.24 of the assessment order has observed that "It is noticed that unaccounted cash receipt of various' projects and land dealing of Sarthav/Sutaria group are deposited in bank account of various entities of Sutaria Group (s already discussed in the above paras. Therefore source of the cash deposits in their bank accounts were found to be non-genuine. This fund is routed in the accounts of family member and entities of Sutaria Group, i Thereafter at page No.26 observed that "Therefore even source of fund of the depositor/lender is not genuine. They have not offered such unexplained fund for taxation"- The said observation of the AO found not correct as the AO being the ,assessing authority of Sarthav Infrastructure Pvt. Ltd. has passed the assessment order u/s.143(3} r.w.s.153A of the Act for the A.Y.2010-11. At Page No.99 of that order, the details with regards to Saral Management and Consultancy has stated that the PAN No., returned income from A.Y.2009-10 to till A.Y.2015-16 duly provided in a tabular form, showing 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. The appellant has placed before me the said relevant Page No.99. In respect of the unsecured loan received from Saral Management and Consultancy, the AO had the details about their returns of income and the said fact has been mentioned by the AO himself on Page No.99 of the assessment order passed in case of Sarthav Infrastructure Pvt. I td. In case of Saral Management & Consultancy (Prop. Mahendra Sutaria-HUF), the income disclosed in the return of income for A.Y.201CM1 is an amount of Rs. 1,16,54,700/- and there was opening balance of Rs.1,98,00,361/- and the appellant had received unsecured loan amount of Rs. 2,23,93,000/- totaling to Rs. 4,48,52,622/- and an amount of Rs. 2,01,075/- has been remained as receivable closing balance i.e. loans and advance. The appellant contended that the loan fund received was to meet up the temporary requirement of fund for business purpose on current account basis and hence no interest has been paid on such amount. However, the A.O without verifying the facts of the case and records available at his disposal, wrongly made the addition of Rs.2,23,93,000/- treating the same as unexplained credit from Saral Management & Consultancy. The appellant has placed on my record the copy of acknowledgement of return of income filed for A.Y. 2010- 11 of lender party Saral Management and Consultancy (Prop. Mahendra Manilal Sutaria - HUF(compiled at Page No.239.of Paper Book No. 11) and ledger account of Saral Management and Consultancy from the books of appellant has also submitted before me on 09.10.2018 in the Synopsis of Arguments as per Exhibit-Ill 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.2,23,93,000/- made by the AO with respect to the unsecured loan of Saral management and Consultancy is unjustified and the said addition is deleted. 6.3 In respect of Shreej Infrastructure, a firm of Sarthav Group, the unsecured loan received for an amount of Rs.2,00,00,000/-, the details of books of accounts of Shreej Infrastructure, return of income, audited balance sheet, bank statements, and all other necessary details to examine the identity of the depositor and creditworthiness of the depositor were already on the assessment records of the AO. In the appeal proceedings the appellant has placed on record the confirmation of Shreej .Infrastructure from its books of accounts (compiled at Page No. 335 of Paper Book No.II) and ITR Acknowledgement in response to notice u/s.153C for A.Y.2010-11, Bank Statement and Ledger Account of Shreej Infrastructure from the
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books of appellant also submitted with the Synopsis of Arguments as per Exhibit-IV and the same has been considered and taken on record. Therefore, the identity of the depositor, genuineness of transactions and creditworthiness of the depositor is proved from the total income filed by Shreej Infrastructure which proves genuineness | of the unsecured loan received by the appellant for an amount of Rs,2,00,00,000/- during the year under consideration. Hence, the addition made by the AO for an amount of Rs.2,00,00,000/- on unsecured loan received from Shreej Infrastructure is not justified and the same is hereby deleted. 6.4 The A.O. himself made the assessment of creditors and huge additions were made in the hands of the creditors also. These were running loan account and loans were repaid in current or next financial years. There was no unexplained cash deposits found in the bank accounts of creditors, whatever, cash deposits in their bank account was found unexplained, the same has been offered to tax by the creditors in their hands in respective assessment years. Hence, additions of Rs.4,23,93,000/- made by the AO found unjustified, thus it is deleted. This ground of appeal is allowed.
Being aggrieved by the order of the learned CIT-A, the Revenue is in appeal before us.
The learned DR before us vehemently supported the stand of the AO by reiterating the findings contained in his order which we have already adverted to in the preceding paragraph. Therefore we are not repeating the same for the sake of brevity
On the contrary the learned the AR before us submitted that the loans were procured for temporary fund requirement through proper banking channel and same were running account where amount was received and paid throughout the year under consideration through banking channel. The learned AR in this respect drawn our attention to the page number 248 to 345 and 480 to 484 of the paper book where copies of ITR-V, bank statement of party and contra ledger copies of the parties were placed. Accordingly, the learned AR contended that there cannot be made any addition on account of loan transaction under section 68 of the Act.
25.1 Both, the ld. DR and AR before us vehemently supported the order of the authorities below as favorable to them.
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We have heard the rival contentions of both the parties and perused the materials available on record. The provision of section 68 of the Act fastens the liability on the assessee to provide the identity of the lenders, establish the genuineness of the transactions and creditworthiness of the parties. These liabilities on the assessee were imposed to justify the cash credit entries under section 68 of 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.” 26.1 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 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.
26.2 Coming to first condition cast under section 68 of the Act i.e. proof of identity we find that there is no dispute with regard to identity of lender as both the lender are regular assessee and assessed by the same AO.
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26.3 Now coming to the second and third condition, i.e. genuineness of the transaction and creditworthiness of the parties. Regarding creditworthiness of the lender namely Saral Management & Consultancy we find the lender is declaring healthy amount of taxable income and AOA also have not been doubted. With regard to Shreeji Infrastructure we note that AO doubted credit worthiness only on the basis taxable income, in our considered opinion mere taxable income cannot be the criteria for determining credit worthiness. As such all the details of Shreeji Infrastructure was available with AO who has not pointed any other adversity with regard to credit worthiness. With regard to genuineness of transaction we note that all the transactions were carried out through banking channel and fund was received and provided by the assessee for temporary requirements, as such in case of Saral Management & Consultancy, there was excess repayment. 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.”
26.4 Thus, there remains no doubt that the transaction of the advance received by the assessee from the party was 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.
26.5 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
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infirmity in the order of Ld. CIT (A). Hence the ground of appeal of the revenue is hereby dismissed.
26.6 In the result appeal of the Revenue is dismissed
In the combined result CO of the Assessee is allowed and 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