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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI A.MOHAN ALANKAMONY
आदेश / O R D E R
Per A. Mohan Alankamony, AM:-
This appeal by the assessee is directed against the order passed by the Ld. Commissioner of Income Tax (Appeals)-5, Chennai dated 07.08.2017 in for the assessment year 2013-14 passed U/s.250(6) r.w.s. 143(3) of the Act.
The assessee has raised several grounds in his appeal however the crux of the issue is that the Ld.CIT(A) has erred in confirming the order of the Ld.AO who had made addition of Rs.1,53,50,000/- U/s.68 of the Act by treating it as ‘income from undisclosed sources’.
The brief facts of the case are that the assessee is an individual engaged in the business of manufacture of steel, filed his return of income for the assessment year 2013-14 electronically on 30.09.2013 admitting total income of Rs.1,20,58,2000/-. Initially the return was processed U/s.143(1) of the Act and subsequently the case was selected for scrutiny under CASS and notice U/s.143(2) of the Act was issued on 03.09.2014. Finally the assessment order was passed U/s.143(3) of the Act on 15.03.2016 wherein the Ld.AO made addition of Rs. 1,53,50,000/- as income from undisclosed sources invoking the provisions of Section 68 of the Act.
During the course of scrutiny assessment proceedings it was noticed by the Ld.A.O that the assessee has disclosed unsecured loans aggregating to Rs.3,11,65,726/-. It was further noticed that during the relevant assessment year the assessee has received cash from following eight creditors on various dates aggregating to Rs.1,53,50,000/-.
Sl.No. Name Amount 1 Mr. Anthony Rs.20,00,000/- 2 Mr. Chokkalingam Rs.15,00,000/- 3 Mr. Elayaperumal Rs.15,00,000/- 4 Mr. Ratnam Rs.1,50,000/- 5 Mr. T. Rajendran Rs.30,00,000/- 6 Mrs. Parameswari Prakash Rs.20,00,000/- 7 Mr. V.R. Ramesh Prabhu Rs.30,00,000/- 8 Mr. Suresh Bhagyaraj Rs.22,00,000/- Total Rs.1,53,50,000/-
On query the assessee submitted confirmation statement and copies of ledger accounts signed by all the above individuals. It was further explained that all the above persons were earning income from transport business and trading activities. It was further explained that all the above persons have paid advance to the assessee for supply of materials. The assessee had also furnished the PAN numbers of the above mentioned persons. However rejecting the submission of the assessee and by relying on the decision of the Hon’ble Apex Court in the case Roshan Di Hatti Vs. CIT reported in 107 ITR 938 and Kalekhan Mohameed Harif Vs. CIT reported in 50 ITR 1, the Ld.AO made addition of Rs.1,53,50,000/- in the hands of the assessee by invoking the provisions of Section 68 of the Act. On appeal, the Ld.CIT(A) confirmed the order of the Ld.AO by agreeing with his view and also by relying in the following decisions 6.41. In [2015] 60 taxmann.com 37 (Patna - Trib.) Prabhat Construction Company vs Commissioner of Income-tax-1, Patna, the hon'ble ITAT Patna Bench held - "Confirmation from creditors would at best go to establish their identity, and would not establish their capacity or genuineness of credit transactions as required under section 68"
6.4.2 In [2014] 44 taxmann.com 364 (Delhi) Commissioner of Income-Tax vs Youth Construction (P.) Ltd, the hon'ble High Court of Delhi held- "Sole fact that share applicants had established their identity by filing confirmation letters and copies of their income-tax returns is not sufficient for purpose of discharging creditworthiness of share applicants and genuineness of transactions."
6.4.3 In [2015] 56 taxmann.com 17 (SC) Y.M. Singla vs Commissioner of Income-tax, the hon'ble Supreme Court of India, dismissed the SLP against ruling of High Court that where assessee could not prove capacity of creditor and genuineness of transaction, addition of gift amount under section 68 was to be allowed."
6.4.4 In [2017] 77 taxmann.com 1 (SC) E. Ummer Bava vs Commissioner of Income-tax, Kozhikode, the hon'ble Supreme Court of India dismissed the SLP against High Court's ruling that where assessee failed to establish creditworthiness of donor and genuineness of transaction, addition made in terms of section 68 of gift amount was justified."
6.4.5 In [2013] 33 taxmann.com 64 (Karnataka) Smt. Rekha KrishnaRaj vs Income-tax Officer, Ward-I, Hospet, the hon'ble High Court of Karnataka held - "Addition under section 68 can be made even for an unexplained credit amount on account of supply of goods, land not necessarily only for a cash credit"
Before us the Ld.AR submitted a paper book containing 1 to 26 pages wherein the list of the name of the trade agents, copy of their ledger accounts, copy of the confirmation letters from the trade agents and copy of financial statements for the assessment year 2013-14 were enclosed. The Ld.AR vehemently argued before us stating that the assessee had furnished all the details of the trade creditors who had advanced cash to the assessee for procuring materials from him. He further submitted that the address of the trade creditors, PAN number, copies of their ledger account with their signatures were also furnished. It was therefore argued that the onus has shifted on the Revenue to establish that the documents furnished by the assessee are bogus or unreliable which the Revenue had failed to exercise. Hence it was pleaded that the addition made by the Ld.AO which was further sustained by the Ld.CIT(A) was erroneous and hence the same may be deleted. The Ld.DR on the other hand could not controvert to the facts presented by the Ld.AR.
We have heard the rival submissions and carefully perused the materials on record. It is apparent from the facts of the case, that the assessee has furnished the requisite particulars before the Ld.Revenue Authorities, however the Ld.Revenue Authorities without examining and verifying the same and further without summoning the trade creditors, arrived at a conclusion that the transactions are bogus based on surmises and conjectures. In this situation the decision of the Hon’ble Apex Court cited supra wherein it was held that “onus of proving the source of a sum of money found to have been received by an assessee is on him. When the nature and source of a receipt, whether it be of money or other property, cannot be satisfactorily explained by the assessee, it is open to the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that the income is from any particular source” is not applicable to the facts of the case of the assessee. Since the assessee has furnished all the particulars of the trade creditors before the Ld.Revenue Authorities, as pointed out by the Ld.A.R the onus has now shifted on the Revenue to establish the fact to be otherwise. However we find that the Ld. Revenue Authorities has not made any enquiry or verification with respect to the details furnished by the assessee. In this situation, we are of the considered view that the conclusion arrived at by the Ld.Revenue Authorities based on surmises and conjectures is not appreciable. Therefore we hereby direct the Ld.AO to delete the addition of Rs.1,53,50,000/- made on the assessee invoking the provisions of Section 68 of the Act.
In the result appeal of the assessee is allowed.
Order pronounced on the 05th March, 2018 at Chennai.