BHAGWAN UKHARDU MAHAJAN,JALGAON vs. JOINT COMMISSIONER OF INCOME-TAX,

आदेश आदेश / ORDER आदेश आदेश

PER D. KARUNAKARA RAO, AM :

This is the appeal filed by the assessee against the order of CIT(A)-2, Nashik, dated 18-08-2016 for the Assessment Year 2011-12.

“1. In the facts, circumstances & position of law, Ld. CIT(A)-2, Nashik erred in confirming the addition of Rs.10,00,000/- u/s.68 of the I.T. Act, 1961 in respect of unsecured loan obtained from Shri Pramod Pndharinath Chaudhari.”

from Mr. Pramod Pandharinath Chaudhari, a senior clerk with J.D.C.C.

Bank, Sangvi and his annual salary is around Rs.2,90,000/-. The said

Chaudhari claims earning of additional income of around Rs.2 lakhs

from agricultural income by HUF. AO undertook the scrutiny of this

loan transaction of Rs.10 lakhs and summoned Mr. Pramod

Pandharinath Chaudhari u/s.131 of the Act. Mr. Pramod Pandharinath

Chaudhari confirmed the issuance of Rs.10 lakhs in two instalments

(Rs. 5 lakhs each) through Cheque Nos. 761313 and 761314 on

common date, i.e. 04-01-2011. On perusal of the bank statement & Mr.

Chaudhari, AO noticed the cash deposit of Rs.10 lakhs in the account

of Mr. Pramod Pandharinath Chaudhari on 05-01-2011 to facilitate

encashment of the cheques issued by Mr. Pramod Pandharinath

Chaudhari to the assessee. Further, it is also submitted that the

assessee repaid the said loan amount of Rs.10 lakhs to Mr. Pramod

Pandharinath Chaudhari on 07-07-2011 vide Cheque Nos. 138171 and

138173 of Rs.5 lakhs each. Further, during the proceedings u/s.131 of

the Act, the AO dug out the fact of Mr. Pramod Pandharinath

Chaudhari having taken other loans too. Eventually, AO held that

depositing the cash of Rs.10 lakhs in the bank account on 05-01-2011

is not a normal event. Therefore, the AO suspected the genuineness of

the transaction and also the credit worthiness of Mr. Pramod

Pandharinath Chaudhari, whose salary is not even enough to meet his

household requirements. Accordingly, the addition of Rs.10 lakhs is

made u/s.68 of the Act. CIT(A) confirmed the same after considering

the submissions of the assessee. Para No.5.2 constitute an operational

para on this issue. As per the CIT(A), the frequent lender cannot be the

giver of loan of Rs.10 lakhs. Thus, the CIT(A) did not approve the

assessee’s explanation and considered the fact that creditor has

otherwise many loans to repay. CIT(A) also is of the opinion that HUF

income cannot be claimed as his income. Thus, the CIT(A) confirmed

the AO’s finding of the credit worthlessness of the lender. Aggrieved

with the same, assessee filed the present appeal with the

aforementioned solitary grounds.

provisions of section 68 of the Act are wrongly invoked in this case.

Assessee discharged the onus and has successfully given the identity of

the lender, the details of creditworthiness of the lender and also the fact

of transacting the payments through the banking channels, which

evidences the genuineness of the transaction. Ld. Counsel for the

assessee submitted that the loan is taken by the assessee through

banking channels and the same is repaid again through the same

channels. This fact of repayment by assessee to Mr. Pramod

Pandharinath Chaudhari was also not appreciated by the revenue

authorities. If there is any problem with regard to the depositing of

cash by Mr. Pramod Pandharinath Chaudhari into his bank account at

the time of giving loan to the assessee, it is for the Department to take

any action against Mr. Pramod Pandharinath Chaudhari. Thus, the

assessee cannot be held as a defaulter of the provisions of section 68 of

the Act. On these facts, Ld. Counsel submitted that the provisions of

section 68 of the Act has no application. Considering the fact that the

loan is transacted through banking channels, no doubts can be raised

about the genuineness of the transaction.

orders of the AO/CIT(A) and harped on the fact of cash depositing in the

bank account of Mr. Pramod Pandharinath Chaudhari on 05-01-2011

for facilitating the encashment of the cheques issued by Mr. Chaudhari

to the assessee.

invoking the provisions of section 68 of the Act. The provisions of

section 68 are deeming ones and they have to be interpreted strictly.

The fact of Mr. Chaudhari attending to the notices issued u/s.131 of

the Act and deposing before the AO suggests that no questions can be

raised about the identity of the creditor. Regarding the credit

worthiness also, I find Mr. Chaudhari confirmed granting of loan from

his bank account and there are no two views on this issue. I have also

noticed that the AO did not bring our any evidence to demonstrate that

the cash of Rs.10 lakhs deposited on 05-01-2011 belongs to the

assessee. Mr. Chaudhari is categorical in stating that the cash does

belong to him and not to the assessee. AO also did not disprove the

assessee’s contention that the agricultural land of HUF generates the

Agricultural income of Rs.2 lakhs per annum. Further, on the issue of

genuineness of the transaction perse, I find the transaction is effected

through banking channels. It is an undisputed fact that the loan of

Rs.10 lakhs was subsequently cleared by the assessee. I cannot

appreciate that how the transaction cannot be genuine when the loan is

taken through account payee cheques and also it is already repaid to

the creditor through the same mode. Therefore, I am of the opinion that

this is not a fit case for invoking the provisions of section 68 of the Act

on this assessee.

suspicion about the ownership of cash deposited by Mr. Chaudhari in

his bank account on 05-01-2011 if the same is supplied by the

assessee. AO has no evidence in his possession to derive such an

inference. Thus, this is a case where the primary onus is discharged by

the assessee and therefore, the provision of section 68 of the Act is

wrongly invoked. Mr. Chaudhari owns up the said cash of Rs.10 lakhs

and hence, it is for the Revenue to initiate any proceedings against the

lender as per the law. There are many decisions to support this line of

adjudication.

Therefore, I am of the opinion that the ground raised by the

assessee is required to be allowed in his favour.

Order pronounced on this 01st day of June, 2018.

Sd/- (D.KARUNAKARA RAO) लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 01st June, 2018. Satish

आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : अ�ेिषत

अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-2, Nashik 3. आयकर आयु� / The CIT-2, Nashik 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “SMC” / 5. DR ‘SMC’, ITAT, Pune; गाड� फाईल / Guard file. 6.

आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार आदेशानुसार

स�यािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune