SMT. GIALSO DEVI,PANIPAT vs. ITO, NEW DELHI

The only grievance of the assessee in this appeal relates to the sustenance of addition of Rs.9,75,000/- made by the AO by treating the same as income from undisclosed sources.

Facts of the case in brief are that the assessee e-filed the return of income on 07.03.2011 declaring a taxable income at Rs.1,37,782/- which was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act) on 15.05.2011. Later on, the case was selected for scrutiny. During the course of assessment proceedings, the AO noticed that the assessee had purchased a Plot No. 100, 1A, Sector- 25, Panipat measuring 535 Sq. mt. for Rs.26 lacs on 23.07.2009 and the 2 Gialso devi source of the said investment had been stated to be the unsecured loans raised from the below noted persons: Amount of Loans Dated i) Naresh Kumar Jain & Sons (HUF) (+) 3.25 lacs 10.07.2009 ii) Mukesh Kumar Jain (+) 3 lacs 10.07.2009 iii) Mukesh Kumar Jain & Sons (HUF) (+) 1 lac 10.07.2009 iv) Anju Jain (+) 1 lac 10.07.2009 v) Rameshwar Dass & Sons (+) 1.50 lacs 10.07.2009 vi) Rameshwar Dass Jain (Indl.) (+) 16.95 lacs 13.07.2009 4. The AO asked the assessee to prove the genuineness and creditworthiness of the depositors. The AO discussed the said loans as under: “i.) Naresh Kumar Jain & Sons (HUF) Rs.3.25 lacs dated 10.07.2009 The above named assessee has issued cheque of Rs.3.25 lacs to you on 10.07.2009 but a perusal of his bank account with Oriental Bank of Commerce, Panipat reveals that he has deposited Rs.3.30 lacs in cash only on 10.07.2009 i.e. on the same day and the Saving Bank account has been opened only on 07.07.2009 with a initial deposit of Rs. 1000/- and thereafter, during the whole year, no deposit has been made which reflects the poor and inadequate credit worthiness of the loan creditor. ii.) Mukesh Kumar Jain (+ ) 3 lacs dated 10.07.2009 In this case also, the loan creditor had advanced a loan of Rs. 3 lacs on 10.07.2009 by depositing cash of Rs. 3 lacs on the same day i.e. 10.07.2009. Before that date i.e. on 06.07.2009, the said person was having a credit balance of only Rs. 4229. iii.) Mukesh Kumar Jain & Sons (HUF) (+) 1 lacs dated 10.07.2009 In this case also, the loan creditor had duly 3 Gialso devi advanced a sum of Rs. One lacs on 10.07.2009 by depositing Rs. One lacs on the same date i.e. 10.07.2009. In this case also, he was having a credit balance of Rs. 1902 on 06.07.2009 and no deposit, whatsoever, was made by the loan creditor during the whole year thereafter which reflects the poor and inadequate credit worthiness of the loan-creditor. iv.) Anju Jain (+) 1 Lacs dated 10.07.2009 In this case also, the loan creditor had duly advanced a sum of Rs. One lac on 10.07.2009 by depositing Rs. One lacs in cash on the same day i.e. 10.07.2009 and she was having credit balance of Rs. 14663/- on 01.04.2009 which again reflects the poor and inadequate credit- worthiness of the loan creditor. v.) Rameshwar Dass Jain & Sons (HUF) (+) 1.5 Lacs on 10.07.2009 In this case also, the loan creditor had advanced a sum of Rs. 1.50 lacs on 10.07.2009 by depositing Rs. 1.50 lacs in cash on the same date i.e. 10.07.2009 and the account was having credit balance of Rs. 6032/- prior to that and thereafter, no worthwhile amount was deposited in the account.”

The AO finally made the addition of Rs.26,70,000/- by observing as under: “In all the above noted cases, the pattern is crystal clear and same i.e. i) The loan creditor is not having sufficient credit balance in his/her Saving Bank account on the date of Loan- Transaction.

4 Gialso devi ii) The required cash is deposited on the same date or 2-3 days before the issuance of cheque to assessee. iii) The loan cheque is issued to assessee on the same date i.e. 10.07.2009. iv) All the above noted loan creditors are filling non-Audit Returns reflecting Net income/Net Profit less than Rs. 2 lac for the A.Y. 2010-11, out of which they have reflected very minor house hold withdrawals. v) That assessee, herself, is not having any worthwhile credit balance in her saving bank account on the relevant dates i.e. assessee are having credit balance of Rs. 10456/- as on 09.07.2009 in OBC Bank account and Rs. Nil as on 10.07.2009 in State Bank of Bikaner and Jaipur (SBBJ) Account (this Saving bank account was opened only on 19.07.2009 with an initial deposit of Rs. 1000/- only). vi) That, as assessee was not having proper and explained capital with her, so, assessee obtained loans from the above noted loan creditors in order to have explained capital for the purpose of purchase of above noted plot/property. Perusal of above information reveals that the persons from whom the unsecured loan has been raised has deposited cash in their accounts on one or two days before from the date of giving unsecured loans to the assessee. Moreover, there is no sources of the persons from whom the unsecured loans has been raised regarding the depositing the cash in their accounts. Thus the modus operandi of the assessee is that the cash has been deposited by the assessee herself in the accounts of the depositors from her income as income from undisclosed sources. Therefore, the assessee was required vide show cause notice dated 04.01.2013 to prove 5 Gialso devi the genuineness and creditworthiness of the above noted depositors and the source and genuineness of the cash deposited in the accounts of the depositors. The case was fixed for hearing in this office on 14.01.2013. On the appointed date nobody attended nor any written request has been received in this office. Thus the assessee has failed to discharge his onus to prove the genuineness and creditworthiness of the depositors.”

The reliance was placed on the following case laws: � Bharti (P) Ltd. Vs CIT (1978) 111 ITR 951 (Cal) � CIT Vs W.J. Klarler & Co. (1979) 117 ITR 690 (Cal) � CIT Vs United Commercial and Ind. Co. (Pvt.) Ltd. (1991) 187 ITR 596 (Cal) � Precision Finance Ltd. (1994) 208 ITR 465 (Cal) � Nizam Wood Agency Vs ICT (1992) 193 ITR 318 (All) � Jalan Timber Vs CIT (1997) 223 ITR 11 � CIT Vs Karley Traders Co. (1998) 232 ITR 820 (Cal) � Shanker Ind. Vs CIT (1978) 114 ITR 689 (Cal) � C. Kant & Co. Vs CIT (198)) 126 ITR 63 (Cal) � Parkash Textile Agency Vs ICT (1980) 121 ITR 890 (Cal) � Oriental Wire Ind. (1981) 131 ITR 688 (Cal) � CIT Vs United Commercials & Ind. Co. (1991) 187 ITR 597 (Cal) � M. A. Uneer Kutly Vs CIT (1992) 198 ITR 147 (Ker) � Sreelekha Banerjee Vs CIT (1963) 49 ITR 112 (SC) � CIT Vs Jalan Timbers 223 ITR 11 (Gau) � CIT Vs Sreelekha Bannerjee 491 ITR 112 (SC) � Sanker Industries Vs CIT 114 ITR 689 (Cal)

Being aggrieved the assessee carried the matter to the ld. CIT(A) and furnished the additional evidence and stated as under: “Assessee hereby prays for admittance of additional evidence enclosed at Pg. 31 to 138 being the Return 6 Gialso devi Acknowledgement, Computation of Income, Capital A/c Balance Sheet, Bank A/c and Cash A/c for the A.Y. 2007-08 to 2010-11 of unsecured 6 loan parties. The same could not be submitted before AO on dt. 14.01.2013 as the said documents were, third party documents and assessee could not procure the required documents. Wherein on the said date i.e. 14.01.2013, time of furnishing the details was prayed and granted and hence the required details furnished on dt. 16.01.2013, the affidavit of the Chartered Accountant to that effect is at Pg. VIII who has been regularly attending the proceedings whereas AO passed the order on dt. 15.01.2012, 2 and ½ months before getting time barred on 31.03.2013. All these documents are verifiable from respective parties and there is nothing to conceal by assessee.”

The ld. CIT(A) forwarded the additional evidences to the AO and asked his remand report, in response the AO submitted as under: "The assessee was allowed sufficient and reasonable due opportunities (i.e. almost 14 opportunities/dates over a period of more than 15 months) for providing the sources of cash deposited by the creditors in their bank accounts, specifically in the circumstances that all, the creditors are the family member of the assessee. Moreover, on the last day of hearing i.e. 14.01.2013 nobody attended nor nay written request for adjournment has been received in this office. In spite of that no communication on-telephone was received for adjournment. Thus, there was fault on the part of the assessee and not to the part on the 'under signed." 9. The ld. CIT(A) after considering the submissions of the assessee and remand report of the AO admitted the additional evidences by observing in para 3.3 of the impugned order as under:

The submissions of the assessee before the ld. CIT(A) were as under: “The appellant was asked to establish the identity and credit worthiness of lenders together with the genuineness of loan transactions.

The ld. CIT(A) after considering the submissions of the assessee and the remand report of the AO discussed the position relating to all the six lenders and sustained the addition of Rs.9,75,000/- and allowed the relief of Rs.16.95 lacs which was the amount received from Sh. Rameshwar Dass Jain by observing as under: a) Rameshwar Dass Jain (Ind.) (Rs. 16.95 Lacs). The above named person happens to be the husband of the appellant, During the course of the year, a cheque of Rs. 13 Gialso devi 16.95 Lacs was issued to the appellant from the bank account of Sh. Rameshwar Dass Jain. His bank account No. 00352151008924, maintained with Oriental Bank of Commerce, a copy of which was submitted during the course of appellate proceedings, shows that the said amount was given on 23.07.2009 by cheque no. 632702. The appellant submitted confirmation and affidavit of Sh. Rameshwar Dass Jain (Indi.). A copy of his bank account, Acknowledgment of his I.T. return and computation of income for the A.Y. 2008- 09, 2009-10 and 2010-11 and Balance Sheet as on 31.03.2008, 31.03.2009 and 31.03.2010 was also produced and submitted. As per the details supplied, the amount of Rs. 16,95,000/- given by Sh. Rameshwar Dass Jain (Indi.) was financed out of loans taken from the following persons:- Date Name of the person Amount (Rs.) 4.7.2009 RajinderJain 2,40,000/- 6.7.2009 Sunita Jain 90,000/- 6.7.2009 Ashok Kumar Jain, HUF 3,50,000/- 8.7.2009 AmitJain 2,00,000/- 8.7.2009 Pawan Kumar, HUF 1,50,000/- 8.7.2009 Sheelawanti 3,65,000/- 8.7.2009 Naresh Gupta 3,00,000/- In order to substantiate the identity and credit worthiness of the aforesaid seven persons who lent money, to Rameshwar Dass Jain (Indi.), the appellant gave a copy of their PAN card, latest income tax return and a copy of their bank statements. As per these details given by the appellant together with the confirmations of the aforesaid seven persons, it is found that all these seven persons were assessed to tax and had been regularly filing their income tax returns. The AO, after examining all the relevant documents establishing the identity and credit worthiness of the lenders 14 Gialso devi together with the genuineness of the transactions submitted the following in his Remand Report:- — "All the above deposits have been made through cheques in the account of the creditors from where he advanced a sum of Rs. 16,95,000/- to Smt. Gilaso Devi, the assessee. The assessee has now filed copies of bank statements and assessment particulars of all the persons from the creditors has raised loans and made advance to the assessee. On perusal of the documents now filed by the assessee during the enquiries made under remand report revealed that all the transactions have been made through account payee cheques and all the persons from the creditor has raised loans before advancing the loan to the assessee, are existing assessee with the different Assessing officers. Keeping in view the above facts, the assessee has proved the creditworthiness of the above persons and genuineness of the transactions." The above facts clearly establish that the appellant could not only prove the identity of Sh. Rameshwar Dass Jain (Indi.) but also his credit worthiness since, the amount of Rs.16,95,000/- lent by him to the appellant was financed out of loans from seven persons whose identity and credit worthiness, in turn, was established by way of documents submitted during the course of appellate proceedings. Besides, the fact that the -entire amount of loan was given by cheque to the appellant together with, receipt of cheques by Sh. Rameshwar Dass Jain (Indi.) from the aforesaid seven persons, inter-alia establishes the genuineness of transaction. Considering all these-facts in totality, I hold that since the credit worthiness of Sh. Rameshwar Dass Jain (Indi.) is clearly established, the AO erred in making the addition of Rs.16,95,000/- on account of loan received from him. Accordingly, the appellant gets relief of Rs. 16.95 Lacs.

Now the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessee discharged the onus cast upon her to prove the identity and creditworthiness of the lenders and genuineness of the transaction. Therefore, the addition made by the AO and sustained by the ld. CIT(A) was not justified. The reliance was placed on the following case laws: � CIT Vs Orissa Corporation (P) Ltd. (1986) 159 ITR 78 (SC)

I have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is not in dispute that the assessee received a sum of Rs.26,70,000/- as a loan from six persons. Since the AO did not allow a proper opportunity of being heard, the assessee furnished additional evidences to the ld. CIT(A). The said additional evidences were in the form of confirmation and affidavits, bank statement of the lenders, copies of their balance sheets and acknowledgment of Income Tax Returns filed etc. Those additional evidences were admitted by the ld. CIT(A) and a remand report was received from the AO. In the present case, it is not in dispute that the lenders furnished the bank statement which revealed that sufficient bank balance was there when the loan was advanced to the assessee all the depositors confirmed the giving of the loan to the assessee. Even the ld. CIT(A) accepted major amount i.e. Rs.16.95 lacs received from Sh. Rameshwar Dass Jain (individual) as genuine but the amount received from other five persons was considered as non-genuine and added to the income of the assessee. In my opinion, when the assessee discharged the onus cast upon her to prove the identity and 20 Gialso devi creditworthiness of the lenders in the form of confirmation and affidavits, bank statements, balance sheets, showing the loan given to the assessee, acknowledgment of filing the returns of income for the preceding years and the year under consideration, the transactions were through banking channel and the lender were having cash in hand before depositing in their respective bank account, so there was no occasion to make the addition in the hands of the assessee. If, there was any doubt relating to the deposits in the bank accounts of the lenders who were duly assessed having permanent account number than the AO could have taken the action in their respective hands but the loans given to the assessee could not have been considered as non-genuine. In that view of the matter the addition made by the AO and sustained by the ld. CIT(A) is deleted.

In the result, the appeal of the assessee is allowed. (Order Pronounced in the Court on 14/06/2017)