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Income Tax Appellate Tribunal, DELHI BENCH: ‘D’: NEW DELHI
Before: SH. H.S. SIDHU & SH. O.P. KANT
ORDER
PER O.P. KANT, A.M.: This appeal by the assessee is directed against order dated 07/09/2015 of the learned Commissioner of Income-tax (Appeals)-7, New Delhi for assessment year 2011-12 raising following grounds:
1. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in sustaining the addition of Rs. 3,25,50,000/- made under section 68 of the Income Tax Act, 1961 by the learned Deputy Commissioner of Income Tax, Circle- 15(1), New Delhi.
2. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in failing to appreciate that appellant had duly satisfied all the conditions of section 68 of the Act in respect of the receipt of loans aggregating to Rs. 3,25,50,000/- , as such addition made by the learned Deputy Commissioner of Income Tax was wholly unwarranted. 2.1 That the learned Commissioner of Income Tax (Appeals) has erred in failing to appreciate that appellant had received loans aggregating to Rs. 3,25,50,000/- from the family member s and close relatives and such persons has also duly appeared and deposed before the learned Deputy Commissioner of Income Tax to the factum of granting of loan as such, addition made by learned Deputy Commissioner of Income Tax and sustained by learned Commissioner of Income Tax (Appeals) is unsustainable in law. 2.2 The learned Authorities have failed to comprehend that the assessee had duly discharged his initial onus and in the absence of any adverse material brought on record in rebuttal, the addition made was untenable and unsustainable in law. 2.3 That the learned Commissioner of Income Tax (Appeals) has erred in failing to appreciate that all sums had been received as a loan by the assessee through account payee cheques as such, once the loan has been received through banking channels, creditworthiness of the creditor could not have either been doubted or could be held not to have been satisfied more particularly when almost all the creditors are assessed to tax. 2.4 That the learned Commissioner of Income Tax (Appeals) has erred in failing to appreciate that all the creditors have provided the loan to the appellant out of their own funds, and there is not an iota of evidence or material even to remotely suggest that unaccounted income of the appellant has been routed through their bank accounts in the form of loan as such, addition made purely on suspicion and on arbitrary assumptions is wholly unsustainable and deserves to be deleted. 2.5 That the learned Commissioner of Income Tax (Appeals) has erred in failing to appreciate that appellant has furnished complete documentary evidences to discharge its initial burden under section 68 of the Act as such, addition made by learned Deputy Commissioner of Income Tax and sustained by learned Commissioner of Income Tax (Appeals) is unsustainable in law and deserves to be deleted. 2.6 That the instant addition made is entirely arbitrary and is based on mere speculation, surmises and conjectures and without there being any adverse material, in rebuttal to the evidence tendered by the assessee, as such, addition made and sustained is per-se legally invalid and is vitiated.
3. That neither during the assessment proceedings, nor in the remand proceedings nor even in appellate proceedings, a fair, proper and meaningful opportunity of being heard was provided to the appellant as such, addition made by Deputy Commissioner of Income Tax and sustained by learned Commissioner of Income Tax (Appeals) in violation of the principles of natural justice is unsustainable in law.
4. That computation made in the demand notice determining the tax liability of the appellant is arbitrary and hence unsustainable in law. It is therefore, prayed that it be held that the addition made of Rs. 3,25,50,000/- by learned Deputy Commissioner of Income Tax and sustained by learned Commissioner of Income Tax (Appeals) is not in accordance with law and, therefore, the addition so made along-with interest levied be kindly deleted and appeal of the appellant be kindly allowed.
2. The facts in brief as culled out from the records are that the assessee, an individual, filed return of income for the year under consideration declaring taxable income of Rs. 80,45,590/- and agriculture income of Rs. 31,02,251/- on 17/08/2011. In the year under consideration, the assessee was one of the directors of M/s Roma Hanny Security Services Private Limited and M/s Mahesh Sunny Enterprises Private Limited and shown annual salary of Rs. 1,44,000/- from each of the aforesaid two companies. Under the head ‘profit and gains of business’, the assessee shown income from proprietary concern ‘M/s Lovelin Enterprises’, which was engaged in the business of selling tea and coffee. The assessee also shown income under the head ‘capital gains’ and ‘income from other sources’. The return of income filed by the assessee was selected for scrutiny and notices under section 143(2) and 142 (1) of the Income- tax Act, 1961 (in short ‘the Act’) were issued and served within the stipulated period. In the course of scrutiny, the learned Assessing Officer observed that the assessee obtained fresh unsecured loan from following persons:
S. No. Name of the Person Amount 1. Amar Singh Rs. 50,00,000/- 2. Chandan Smgh Rs. l,10,00,000/- 3. Harpreet Singh Rs. 3,50,000/- 4. Om Prakash Rs. 9,00,000/- 5. Ram Charan Rs. 10,00,000/- 6. Shiv Tej Rs. 25,00,000/- 7. Sunita Rs. 98,00,000/- 8. Virender Yadav Rs. 20,00,000/- Total Rs. 3,25,50,000/-
3. According to the Assessing Officer, the assessee failed to furnish evidence in support of identity and creditworthiness of above persons as well as genuineness of the transactions and failed to produce these persons before him, thus, the assessee could not discharge its onus under section 68 of the Act. Therefore, he held all the above unsecured loans as the unaccounted/undisclosed funds of the assessee routed through the channel of the banks of those persons 68 of the Act. Aggrieved, the assessee filed appeal before the learned Commissioner of Income-tax (Appeals). Before the learned Commissioner of Income-tax (Appeals), the assessee submitted that the loans received were from the near relatives and villages co-brothers and related to each other for generations. The assessee further submitted that confirmations and documents in respect of identity, creditworthiness and genuineness of the transaction in respect of Smt. Sunita, who happened to be wife of the assessee and Sh. Chandan Singh, were filed before the AO in assessment proceeding . In respect of other creditors, the assessee filed necessary documents before the learned Commissioner of Income- tax (Appeals), who forwarded those documents to the Assessing Officer for his comments. The Assessing Officer objected to the admission of the additional evidences, however, he issued summons to all those creditors and the assessee was also given opportunity to submit documents in support of his contention. The Assessing Officer recorded the statements of the persons except the creditors, i.e., Sh. Shiv Tej Singh, Sh. Om Parkash and Sh. Virender Yadav, however, the Assessing Officer was not satisfied with respect to the either creditworthiness or genuineness of the transaction of the creditors in question. The learned Commissioner of Income-tax (Appeals) forwarded the remand report for the comments of the assessee and after considering the remand report of the Assessing Officer as well as the comments of the assessee, he observed that the sum of money was advanced to the assessee but the source of the same was not clear. He also observed that there were huge deposits in the accounts of the creditors but the source of deposit was not explained. He further observed that though it was stated that the amount advanced was from sale proceeds of land, however, no details of land holdings and copy of agreement etc. was given. He further observed that all the creditors advanced huge sums of money but details of their income, saving and expenditure was not available. In view of these observations, the Ld. Commissioner of Income-tax (Appeals), relying on the judgments cited in the impugned order, found that the identity, creditworthiness and the genuineness of the transaction in respect of the creditors was in doubt. The Ld. Commissioner of Income-tax (Appeals) concluded that the assessee could not establish the creditworthiness of the persons from whom the impugned credit was received nor had proved genuineness of the transaction of Rs. 3,25,50,000/-credited in the books of accounts and, thus, he confirmed the addition made by the Assessing Officer. Aggrieved, the assessee is in appeal before the Tribunal raising the grounds as reproduced above.
4. At the outset, the learned counsel of the assessee requested for admission of the additional evidences filed at serial No. 19 to 23 of the additional paper book and submitted that those documents have been obtained from the creditor Smt. Sunita to rebut the assumption of the learned CIT(A). He prayed that same might be admitted under Rule 29 of the ITAT Rules.
5. The learned Sr. Departmental Representative, on the other hand, opposed admission of the additional evidences as sufficient opportunity was already provided to the assessee by the Ld. Assessing Officer as well as the Ld. CIT(A), therefore the additional evidences might not be admitted.
We have heard the rival submission on the issue of the admissibility of the additional evidences. We find that the additional evidences submitted by the assessee are as under: Sl. No. Particulars 19 Photocopy of Cheque of Rs. 39,04,027/- issued to Smt. Sunita from Land Acquisition Collector 20 Photocopy of cheque of Rs. 45,07,224/- issued to Smt. Sunita from Land Acquisition Collector 21 Photocopy of cheque of Rs. 27,18,750/- issued to Smt. Sunita from DLF Utilities ltd.
Photocopy of cheque of Rs. 64,841/- issued to Smt. Sunita from Goyal Traders Copy of notice of Land Acquisition Collector Gurgaon issued to Smt. 23 Sunita for acquisition of her land
We find that the additional evidences are in respect of source of money in the hands of the creditor Smt. Sunita, which are relevant in deciding the issue of creditworthiness of Smt. Sunita and as these evidences were not available with the assessee at the time of proceedings before the lower authorities, and now the assessee has collected the same, therefore in the interest of justice, we admit these additional evidences.
8. In the grounds of appeal from 1 to 2.6, the main grievance of the assessee is the addition of unsecured loans Rs. 3,25,50,000/- received from eight persons, under section 68 of the Act. 8.1 Before us, Ld. counsel of the assessee addressing the grounds and referring to the synopsis filed, submitted that all the documents establishing identity, genuineness of the transaction and creditworthiness in respect of the creditors were already filed before the lower authorities. He further submitted that out of the eight creditors, five creditors (who advanced loans to the extent of Rs. 2,71,50,000/- out of the loan of Rs. 3,25,50,000/-) duly appeared before the Assessing Officer and confirmed the advances made. According to the learned counsel, the Assessing Officer completely overlooked the fact that all the transactions were made through cheques. The learned counsel relying on the judgment of the Hon’ble Delhi High Court in the case of CIT Vs. Divine Leasing and Finance Private Limited reported in 299 ITR 268 (Del), wherein it has been held that where the transactions were through cheque , the genuineness of the transaction is duly established. He also further relied on the judgement in the case of additional CIT Vs. Bahri Brothers Private Limited reported in (1985) 154 ITR 244 (Pat.) wherein it is held that very fact that all the transactions were entered into between the parties through the account payee cheques makes a question of identity of creditors for into oblivion and it becomes absolutely irrelevant. 8.2 The Ld. counsel further relying on the judgment of the Gujarat High Court in the case of DCIT Vs. Rohini Builders reported in 256 ITR 360, wherein 68 of the Act stands discharged by proving the identity of the creditors by giving complete address and permanent account number, submitted that in the case in hand entire money originated from the bank account of the creditor parties, who are fully identifiable and have also confirmed advancing loan to the assessee as such the addition made by the AO and sustained by the ld. CIT(A) was unsustainable in law. 8.3 The learned counsel of the assessee also submitted that it was a settled law that if an assessee has furnished the evidences/material to establish the transaction, and the learned AO was not inclined to believe the material placed with assessee, then burden was upon him to bring the material to rebut the same as held by the Hon’ble Delhi High Court in the case of CIT Vs. Genesis Comnet Private Limited reported in 163 taxmann 482. The learned counsel also relied on the number of judicial pronouncement in support of his above contention. 8.4 The learned counsel further submitted that the ld. CIT(A) has completely failed to appreciate that it was a settled law that it is not a business of the assessee to find out the source of the money of the creditor. In support of the contention, the learned counsel relied on the judgments of the Hon’ble High Court of Delhi pronounced on 21/12/2015, in the case of CIT Vs. M/s Shiv Dooti Pearls & Investment Ltd. (429/2003), judgment of the Hon’ble Apex Court in the case of CIT vs. Daulat Ram Rawatmull reported in 87 ITR 349 and judgment of the Hon’ble Delhi High Court in the case of CIT Vs. Dwarkadhish Investment Private Limited reported in (2011) 330 ITR 298 (Delhi) . 8.5 It was further submitted that despite the assessee having discharged its initial onus to establish the identity of the creditors, creditworthiness of the creditors and genuineness of the transactions, the addition has been sustained primarily on the ground that the assessee had failed to establish the source of the source. The learned counsel further submitted that in the instant case, the assessee had established source of the source, yet the addition has been made and sustained on the aforesaid ground, which is wholly unsustainable as has been held in the aforesaid judicial pronouncements. 8.6 In reply to the above , the learned Senior Departmental Representative, relying on the orders of the authorities below submitted that in the statements recorded of the five creditors, it is manifested that there annual income and savings were not commensurate to the loans or money advanced to the assessee. She referred to the statement of Sh. Amar Singh, one of the creditors available on page number 37 to 39 of the Revenue’s paper book, wherein, in response to a question by the Assessing Officer, monthly earning was stated to be Rs. 2000/- to Rs. 2005/- and he could not explain how the loan of Rs. 50 lacs was given with such a small income. Similarly, she referred to the statement of Smt. Sunita available at pages 33 to 34 of Revenue’s paper book, wherein she admitted that she was not doing any job and her husband was only available sources of income of the family and she could not confirm whether she advanced any money to the assessee. Further, it was submitted by the learned Senior Departmental Representative that the assessee was claiming on one side that the loans and advances were received from close relatives, whereas on the other side, the assessee failed to produce them before the Assessing Officer and the Assessing Officer was required to issue summons to the creditors and even out of eight creditors, only five creditors appeared and summons to the two creditors returned unserved. The ld. Senior Departmental Representative in support of contentions relied on the judgment of the Hon’ble Supreme Court in the case of Durga Prasad More reported in 82 ITR 540, judgment of the Madras High Court in the case of Mangilal Jain Vs. ITO reported in 315 ITR 105, judgment of the Hon’ble Calcutta High Court in the case of Precision Finance Private Ltd reported in 208 ITR 465 and judgment of the Hon’ble Delhi High Court in the case of NR portfolio private limited reported in (2013) 29 taxmann.com 291 (Delhi).
8.7 In the rejoinder, the learned counsel of the assessee submitted that the assessee has already demonstrated the immediate source in the hands of the creditor of money advanced to the assessee and the credit in their bank accounts was much ahead of the day on which money was advanced to the assessee. He further submitted that annual income of the creditors being a small amount does not mean that they were not capable of extending loans to the assessee. According to him, for examination of the creditworthiness, the financial capability of the assessee has to be examined and in the case of creditors in reference, enough resources in the form of compensation received on sale of land and credit received through banking channel were available and therefore, creditworthiness was duly established. 9.1 We have heard the rival submissions and perused material on record. Before we advert to the facts of the case in hand, we would like to go through judicial pronouncements cited by the learned counsel of the assessee as well as by the learned Sr. DR , which are relevant to the issue in dispute before us . 9.2 The learned counsel of the assessee relied on the judgment of the Hon’ble High Court of Delhi in the case of CIT versus Divine Leasing and Finance Ltd. (supra). In the said case, the assessee was a public limited company. The Hon’ble High Court in para 6 of the judgment referred to the judgment of the Hon’ble Delhi High Court in the case of CIT versus Sophia Finance Ltd. ( 1994) 205 ITR 98 (Del) (FB) and decision of the Supreme Court in the case of Orissa Corporation Private Limited (1986) 159 ITR 78 (SC), wherein it is observed that the assessee had given names and address of the alleged creditors and said creditors were income tax assessees and if the assessee could not produce the parties or did not attend in response to summons issued under section 131 of the Act, in the circumstances the assessee could not do anything further and Tribunal came to the conclusion that the assessee has discharged the burden that lay on him and held that such a conclusion was not unreasonable or perverse or based on no evidence. In subsequent part of paragraph 6, the Hon’ble High Court has agreed that above reasoning must apply to cases of large scale subscription of shares of a public company and may not apply to the circumstances where shares were allotted directly to the share applicants. The relevant finding of the Hon’ble Court is reproduced as under:
“This reasoning must apply a fortiori to large-scale subscriptions to the shares of a public company where the latter may have no material other than the application forms and bank transaction details to give some indication of the identity of these subscribers. It may not apply in circumstances where the shares are allotted directly by the company/assessee or to creditors of the assessee. This is why this Court has adopted a very strict approach to the burden being laid almost entirely on an assessee which receives a gift.” 9.3 Thereafter, in paras - 7 to 10 of the judgment, Hon’ble High Court considered the decision of the Hon’ble of Supreme Court in the case of Sumati Dayal versus CIT (1995) 214 ITR 801 (SC), decision of the Hon’ble Delhi High Court in the case of Gee Vee Enterprises versus Additional CIT (1975) 99 ITR 375 (Del) and full bench decision of Hon’ble Delhi High Court in the case of Sophia Finance (supra). In paragraph 12, the Hon’ble High Court has considered the decision in the case of CIT versus Precision Finance Private Limited (supra), which has been cited by the learned Sr. DR in the instant case in support of her contention. After considering all the above decisions, the Hon’ble High Court in para 13, concluded as under:
13. There cannot be two opinions on the aspect that the pernicious practice of conversion of unaccounted money through the masquerade or channel of investment in the share capital of a company must be firmly excoriated by the Revenue. Equally, where the preponderance of evidence indicates absence of culpability and complexity of the assessee it should not be harassed by the Revenue’s insistence that it should prove the negative. In the case of a public issue, the company concerned cannot be expected to know every detail pertaining to the identity as well as financial worth of each of its subscribers. The company must, however, maintain and make available to the AO for his perusal, all the information contained in the statutory share application documents. In the case of private placement the legal regime would not be the same. A delicate balance must be maintained while walking the tightrope of ss. 68 and 69 of the IT Act. The burden of proof can seldom be discharged to the hilt by the assessee; if the AO harbours doubts of the legitimacy of any subscription he is empowered, nay dutybound, to carryout thorough investigations. But if the AO fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the company.
9.4 Further, after considering the various decisions of the Hon’ble High Courts in paragraph 14 and 15 of the judgment, the Hon’ble High Court considered the decision of the Hon’ble Calcutta High Court in the case of Hindustan Tea Trading Company Limited Vs. CIT (2003) 263 ITR 289 (Cal), wherein the bench opined that in case of a subscription to share capital, section 68 of the Act is to be resorted, it is necessary for the assessee to prove and establish the identity of the subscriber, their creditworthiness and the genuineness of the transaction and once material to prove these ingredients are produced it is for the AO to find out as to whether, on these material, the assessee has succeeded in establishing the ingredients mentioned above and the AO can ‘lift the veil’ on enquiry into the real nature of transactions. 9.5 After considering the decisions available in the context of section 68 of the Act, the Hon’ble High Court concluded in para 16 of the judgment, the requirement of section 68 as under:
“16. In this analysis, a distillation of the precedents yields the following propositions of law in the context of s. 68 of the IT Act. The assessee has to prima facie prove (1) the identity of the creditor/subscriber; (2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels; (3) the creditworthiness or financial strength of the creditor/subscriber; (4) if relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the shareholders register, share application forms, share transfer register, etc. it would constitute acceptable proof or acceptable explanation by the assessee; (5) the Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices; (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessee nor should the AO take such repudiation at face value and construe it, without more, against the assessee; (7) the AO is dutybound to investigate the creditworthiness of the creditor/ subscriber, the genuineness of the transaction and the veracity of the repudiation.” 9.6 Further, the learned counsel of the assessee relied on the judgment of the Gujarat High Court in the case of DCIT versus Rohini Builders (supra). In the said decision, the Hon’ble High Court, followed the judgment of the Hon’ble Apex Court in the case of Orissa Corporation (supra). The Hon’ble jurisdictional High Court in the case of Divine Leasing and Finance Ltd (supra), which is discussed earlier, has duly considered the judgment of the Hon’ble Apex Court Orissa Corporation (supra) and, therefore, we do not find it necessary to discuss it again. 9.7 In the case of CIT Vs. Genesis Comnet Private Limited (supra), the issue involved was of commission payments and failure to produce the parties for cross-examination, the AO disallowed the expenditure but the Tribunal held that AO did not take efforts for enforcing attendance of the parties and therefore allowed the expenses and Hon’ble High court did not find any substantial question of law. 9.8 Further, the learned counsel of the assessee in support of the proposition that the Assessing Officer cannot ask the assessee source of the source, relied on the judgment in the case of CIT Vs. Shiv Dooti Pearls and Investment Ltd. (supra), wherein the Hon’ble Court has held that that there was no requirement in law for the assessee to prove the genuineness and creditworthiness of sub- creditor. Hon’ble Apex Court in the case of CIT versus Daulat Ram Rawatmull (supra) has also given similar findings. Further, in the case of CIT vs. Dwarkadhish Investment Private Limited (supra), Hon’ble Delhi High Court has held as under:
“8. In any matter, the onus of proof is not a static one. Though in s. 68 proceedings, the initial burden of proof lies on the assessee yet once he proves the identity of the creditors/share applicants by either furnishing their PAN or income-tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue. Just because the creditors/share applicants could not be found at the address given, it would not give the Revenue the right to invoke s.
One must not lose sight of the fact that it is the Revenue which has all the power and wherewithal to trace any person. Moreover, it is settled law that the assessee need not to prove the ‘source of source’.” 9.9 In view of the above judgments, it is clear that an assessee is not expected to explain the source of the source except the cases where the closely held company receives share application money, share capital or share premium or the like w.e.f. 01/4/2013, in view of two provisos inserted to section 68 of the Act through amendment to Finance Act, 2012.
9.10 The learned senior DR cited the case of CIT versus Durga Prasad More (supra) submitting that the human probabilities test should be considered while examining the transactions entered into the books of accounts by the assessee. In the said case, the Hon’ble Supreme Court has held as under:
“10. Now we shall proceed to examine the validity of those grounds that appealed to the learned judges. It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals, other-wise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents.
Now, coming to the question of onus, the law does not prescribe any quantitative test to find out whether the onus in a particular case has been discharged or not. It all depends on the facts and circumstances of each case. In some cases, the onus may be heavy whereas, in others, it may be nominal. There is nothing rigid about it. Herein the assessee was receiving some income. He says that it is not his income but his wife's income. His wife is supposed to have had two lakhs of rupees neither deposited in banks nor advanced to others but safely kept in her father's safe. Assessee is unable to say from what source she built up that amount. Two lakhs before the year 1940 was undoubtedly a big sum. It was said that the said amount was just left in the hands of the father-in-law of the assessee. The Tribunal disbelieved the story, which is, prima facie, a fantastic story. It is a story that does not accord with human probabilities. It is strange that the High Court found fault with the Tribunal for not swallowing that story. If that story is found to be unbelievable as the Tribunal has found, and in our opinion rightly, then the position remains that the consideration for the sale proceeded from the assessee and, therefore, it must be assumed to be his money.
12. It is surprising that the High Court has found fault with the ITO for not examining the wife and the father-in-law of the assessee for proving the Department's case. All that we can say is that the High Court has ignored the facts of life. It is unfortunate that the High Court has taken a superficial view of the onus that lay on the Department. It is true that neither the principle of res judicata nor the rule of estoppel is applicable to assessment proceedings. But the fact that the assessee included the income of the premises in his returns for several years, and that after objecting to the inclusion of that income in his total income in the asst. yr.
1942-43, in the absence of any satisfactory explanation, is undoubtedly a circumstance which the taxing authorities were entitled to take into consideration. Now, coming to the grounds that commended themselves to Mukharji, J. (the present Cheif Justice of the High Court of Calcutta), we are unable to find out how the learned judge was able to come to the conclusion that there was no proof or charge that the assessee had concealed any income of his. The orders of the ITO, AAC and the Tribunal proceeded on the basis that the assessee was attempting to conceal a portion of his income by putting forward the story that the income from the premises is the income of the trust created by his wife. The proof of that charge depends on the correctness of the findings of those authorities.” 9.11 Further , the Hon’ble High Court in case of Mangilal Jain versus Income Tax Officer (supra), has given finding that the alleged creditor having made contradictory statements regarding the ownership of the money which is said to have been advanced by him to the assessee as well as source thereof, his evidence cannot be relied upon and, therefore, the alleged loan cannot be accepted as a genuine transaction, consequently deduction towards interest on said loan also cannot be allowed. 9.12 In the case of CIT versus Precision Finance Private Limited(supra), the Hon’ble High Court of Calcutta held as under: 6. It is for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. In our view, on the facts of this case, the Tribunal did not take into account all these ingredients which have to be satisfied by the assessee. Mere furnishing of the particulars is 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, accordingly, it is 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 proves the identity of the creditors and their creditworthiness. Mere payment by account payee cheque is not sacrosanct nor can it make a non-genuine transaction genuine. In that view of the matter, the question before us is answered in the negative and in favour of the Revenue.
9.13 Further in the case of CIT versus NR portfolio private limited (supra) , Hon’ble jurisdictional High Court after referring judgement in the case of CIT versus divine leasing and finance ltd and other decisions on the subject held as under:
8. This court is conscious of a view taken in some of the previous decisions that the assessee cannot be faulted if the share applicants do not respond to summons, and that the state or revenue authorities have the wherewithal to compel anyone to attend legal proceedings. However, that is merely one aspect. An assessee’s duty to establish that the amounts which the AO proposes to add back, under Section 68 are properly sourced, does not cease by merely furnishing the names, addresses and PAN particulars, or relying on entries in a Registrar of Companies website. One must remember that in all such cases, more often than not, the company is a private one, and share applicants are known to it, since they are issued on private placement, or even request basis. If the assessee has access to the share applicant’s PAN particulars, or bank account statement, surely its relationship is closer than arm’s length. Its request to such concerns to participate in income tax proceedings, would, viewed from a pragmatic perspective, be quite strong, because the next possible step for the tax administrators could well be re-opening of such investor’s proceedings. That apart, the concept of "shifting onus" does not mean that once certain facts are provided, the assesse’s duties are over. If on verification, or during proceedings, the AO cannot contact the share applicants, or that the information becomes unverifiable, or there are further doubts in the pursuit of such details, the onus shifts back to the assessee. At that stage, if it falters, the consequence may well be an addition under Section 68. This court recollects the robustness with which the issue was dealt with, in A. Govindarajulu Mudaliar v CIT,(1958) 34 ITR 807, in the following terms: - "Now the contention of the appellant is that assuming that he had failed to establish the case put forward by him, it does not follow as a matter of law that the amounts in question were income received or accrued during the previous year, that it was the duty of the Department to adduce evidence to show from what source the income was derived and why it should be treated as concealed income. In the absence of such evidence, it is argued, the finding is erroneous. We are unable to agree. Whether a receipt is to be treated as income or not, must depend very largely on the facts and circumstances of each case. In the present case the receipts are shown in the account books of a firm of which the appellant and Govindaswamy Mudaliar were partners. When he was called upon to give explanation he put forward two explanations, one being a gift of Rs. 80,000 and the other being receipt of Rs. 42,000 from business of which he claimed to be the real owner. When both these explanations were rejected, as they have been it was clearly upon to the Income-tax Officer to hold that the income must be concealed income. There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipt are of an assessable nature. 9.14 Thus in the case of Divine Leasing and Finance Ltd (supra) , it was emphasized that the while examining burden of proof under section 68 of the Act in case of companies other than subscribed through public issue, very strict approach may be adopted. The Hon’ble High Court in the case of NR portfolio private limited (supra) has further elaborated the onus in case of closely held companies that by merely filing documents in respect of name, address and PAN particulars etc may not be sufficient to discharge the onus and the Assessing Officer may request their participation in income-tax proceedings. Thus, Individual like assessee, who accepts credit from friends and family members also fall in the category of cases requiring strict approach for discharging onus under section 68 of the Act.
9.15 In the light of the judicial pronouncements discussed above, now we advert to the facts of the instant case and examine whether the assessee has discharged its onus under section 68 of the Act in respect of the credit received from the 8 creditors.
Smt. Sunita Rs. 98,00,000/-. (i) In the remand report, the Assessing Officer reported that the statement of Smt. Sunita was recorded on 06/05/2015 , and she expressed ignorance about the loan given to the assessee and she was made to sign the documents by her husband , which were not understood by her, and, therefore, in view of the Assessing Officer, the genuineness and creditworthiness of loan given by Smt. Sunita was not established. (ii) The learned CIT(A) observed that no details about the source of funds in the hands of Smt. Sunita were filed as her bank accounts showed huge deposits followed by immediate withdrawals. He further observed that her Income-tax return showed income of Rs. 1,69,144/- and with that small amount of income, it was not clear how Smt. Sunita was able to advance, Rs. 98,00,000/- to the assessee, and thus he raised doubt on the creditworthiness of the creditor. (iii) Before us, the learned counsel of the assessee submitted that Smt Sunita is wife of the assessee and her financial affairs were being looked after by the assessee and the transactions of the loan were made through banks and thus merely it was said by her that she did not know about the loan transactions, it cannot be held as non- genuine transaction and lack of creditworthiness. Further, the learned counsel submitted that confirmations and documents in respect of identity genuineness of the transaction and creditworthiness of Smt. Sunita were filed before the lower authorities and which are available from pages 113 to 118 of the assessee’s paper book. He also submitted that source of money in the hand of Smt Sunita, was out of money received from ‘Land Acquisition Collector’, ‘DLF Utilities’ and cheques received from ‘Goyal Traders’ as reflected in the additional evidences, which are available from pages 133 to 136 of the additional paperbook filed by the assessee. The ld Counsel further stated that though, it was not the responsibility of the assessee to submit the source of money in the hand of creditors relying on the judgment dated 21/12/2015 of the Hon’ble Delhi High Court in the case of CIT versus M/s Shiv Dooti Pearls and Investment Ltd (429/2003). (iv) We find that the copy of confirmation obtained from Smt. Sunita and a copy of PAN Card of Smt. Sunita were filed by the assessee before the lower authorities, which are available on page 113 and 114 of the assessee’s paper book respectively. Thus in our opinion, identity of Smt. Sunita gets established from these documents. Further, the copy of bank account of Smt. Sunita was also filed before the lower authorities and which is available on page 116 of the assessee’s paper book. We find that the loan amount of Rs. 37,00,000/- on 10/06/2010, loan amount of Rs. 39,00,000/- on 25/08/2010 and loan amount of Rs. 22,00,000 on 16/11/2010 given to the assessee are appearing in bank account of Smt. Sunita. The ld Counsel submitted that there was opening balance of Rs.
1,80,000/- and Rs. 10,00,000/- was repaid leaving a balance at the close of the year at Rs. 89,80,000/-. We find that the source of money deposited in the account of Smt Sunita is also appearing in her bank statement as Rs. 36,00,000/- on 10/06/2010 from – ‘Mahesh Sunny Enterprises private limited’, Rs. 1,25,000/- as compensation from ‘Land Acquisition Department’ through instrument No. 58914 on 12/06/2010, Rs. 45,07,224/- compensation from ‘Land Acquisition Department’ through instrument No. 631430 on 02/07/2010, Rs. 39,04,027/- compensation from ‘Land Acquisition Department’ through instrument No. 635329 on 26/07/2010. We find that the assessee has also submitted photo copies of the instrument through which compensation was received from land acquisition Department which are available on page 133 and 134 of the assessee’s paper book. In view of above facts , the contention of the learned Commissioner of Income-tax (Appeals) that there were huge deposits before withdrawal, is thus no longer a valid ground for making addition , because all the deposits are duly stands explained by the assessee. In our opinion, documents and evidences filed by the assessee, clearly establish the genuineness of the transaction as well as creditworthiness in respect of the loan from Smt. Sunita and the onus of the assessee is discharged. The findings of the learned Commissioner of Income Tax (Appeals) in respect of the creditor are without appreciation of all the evidences on record and thus we delete the addition made under section 68 of the Act in respect of the loan taken during the year from Smt. Sunita amounting to Rs. 98,80,000/-.
Sh. Virender Yadav Rs. 20,00,000/- (i) In the remand report, the Assessing Officer reported that summons issued in the case of Virender Singh Yadav returned unserved and therefore creditworthiness and genuineness of transaction could not be established. (ii) The learned Commissioner of Income-tax( Appeals) held that source of loan was not explained as there were huge unexplained deposits in the bank account and he was neither assessed to tax nor appeared before the Assessing Officer therefore his identity was not established. (iii) Before us learned counsel of the assessee submitted that copy of confirmation, copy of voter identity card and PAN card were submitted before the lower authorities, however he could not be produced before the Assessing Officer in remand proceedings due to shortage of time. He further submitted that he would not object if the issue of addition in respect of Sh Virender Yadav is restored back to the file of the Assessing Officer for fresh examination. (iv) We find that the learned Commissioner of Income-tax(Appeals) has recorded that Sh Virender Yadav was not assessed to tax however the assessee has submitted PAN Card as identity, thus the identity of the creditor gets established, but the other two limbs of section 68 of the Act were not examined by the Assessing Officer as the creditor was not produced before the Assessing Officer. In view of the facts above, and in the interest of justice, we restore the matter to the file of the Assessing Officer for fresh examination of the requirement of section 68 of the Act and pass speaking order on the issue after providing sufficient opportunity of hearing to the assessee. The assessee is also directed to provide all necessary Assessing Officer.
Sh. Shiv Tej Singh Rs. 25,00,000/- (i) In remand report, the Assessing Officer reported that Sh. Shiv Tej Singh did not appear in response to the summon issued. (ii) The learned Commissioner of Income-tax(Appeals) noted that there was no copy of PAN Card or return of income filed by him and no details in respect of source of funds from compensation received against acquisition of land was provided and he also did not appear before the Assessing Officer therefore his identity was not proved. (iii) Before us, learned counsel of the assessee referred to the copy of confirmation filed by Sh Shiv Tej Singh ( page no. 108 of assessee’s paper book), copy of bank statement ( page No. 109 of the assessee’s paper book), copy of affidavit (Pages110-111 of the assessee paper book), and copy of ration card (pages 112 to 112A of the assessee’s paper book) and submitted that all the ingredient of section 68 of the Act were duly satisfied in respect of loan from Sh Shiv Tej singh, however he did not object, if the issue is restored to the file of the Assessing Officer for fresh examination and recording of statement of Sh Shiv Tej Singh. (iv) We find that the said creditor was not produced before the Assessing Officer even in the remand proceedings for verification of the requirement of section 68 of the Act. We find it appropriate in the interest of justice to restore the matter back to the file of the Assessing Officer for fresh examination of the requirement of section 68 in the case of loan from Sh Shiv Tejsingh and pass a speaking order on the issue after providing sufficient opportunity of hearing to the assessee. The assessee is also directed to provide all Assessing Officer.
Sh. Om Prakash Rs. 9,00,000/- (i) In the remand report, the Assessing Officer reported that summon issued in the case of the creditor returned unserved. (ii) The learned Commissioner of Income-tax( Appeals) concluded that there was no copy of return of income or bank account on record and no detail was given about the source of funds. He further mentioned that the creditor could also not be produced before the AO in remand proceedings and therefore identity of the creditor was not proved. (iii) Before us learned counsel of the assessee referred to the copy of confirmation (page 99 of the assessee’s paper book), copy of PAN card and voter identity card( respectively on Page 100 and 101 of the assessee’s paper book) and submitted that the creditor also appeared before the Assessing Officer on 06/05/2015 however the Assessing Officer did not examine the creditor since office time was over and no other appropriate date for his examination was given. (iv) From the documents filed before the authorities below and copy of which are available in the assessee’s paper book, we find that neither document in support of genuineness of the transaction has been produced by the assessee nor the creditor has been examined by the Assessing Officer. Therefore in the interest of justice, we feel it appropriate to restore the issue to the file of the Assessing Officer for fresh examination of requirement of section 68 of the Act in the case of the creditor and pass a speaking order on the issue in dispute after providing sufficient opportunity of hearing to the assessee. The assessee is also directed to provide all necessary Assessing Officer.
Sh. Ramchander Rs. 10,00,000/- (i) In the remand report, the Assessing Officer reported that the creditworthiness of Sh. Ramchander was not proved in view of the annual earnings of Rs. 1.75 to 1.8 lakhs and no savings. Further he reported that in the statement recorded, Sh Ramchander stated that that he did not file any income tax return nor he had any PAN. Further the Assessing Officer reported that genuineness of the transaction was also not established in view of the statement of Sh. Ramchander in response to one question that source of money advanced to the assessee was out of sale of land and in response to another question the source of deposit of Rs. 18.48 Lacs and Rs. 5.86 in his bank accounts was stated as money received from sister ‘Vidya’. (ii) The Ld. CIT (A) observed that no of return of income was furnished in respect of the creditor and copy of bank account showed huge deposits and withdrawals in short span of time and it was also noticed the deposits in the bank account were from sale of land but no further details had been furnished. (iii) Before us learned counsel of the assessee referred to copy of confirmation of Sh. Ramchander available at page 102 of the assessee’s paper book, copy of voter identity card available at page no. 104 of the assessee’s paper book, copy of bank statement through which loan was given to the assessee available at page no. 105 of the assessee’s paper book. It was further submitted by the learned counsel that immediate source of money advanced to the assessee was out of amount of Rs. 18.48 Lacs received through cheque having narration as OBC 206, which was also explained by Sh. Ramchander in his statement recorded in remand proceedings as received from his sister Vidya. (iv) In our view, the documents filed by the assessee before the lower authorities and copy of which are submitted in the paper book, clearly manifest that the identity and genuineness of the transaction is established. As far as creditworthiness is concerned the source of money advanced, in the hands of the creditor has been duly explained, and therefore the assessee has discharged the onus casted upon him under section 68 of the Act and thus the addition deserves to be deleted. Accordingly, we delete the addition made under section 68 of the Act in respect of the creditor Sh Ramchander for Rs. 10,00,000/-.
6. Sh. Chandan Singh Rs. 1,10,00,000/- (i) In remand report, the Assessing Officer reported as under: “The statement of Sh. Chandan Singh was recorded on 11.05.2015. Although in response to Q-4, he was stated that he gave Rs. 1.1 Crore to Sh. Bikram Singh, the reply to the other details of the transaction was “I don’t know. Sh. Chandan Singh was also not able to explain the entries in the bank state (Bank of Baroda A/c No. 21260100008461) as per Q-9. During the personal deposition, he has submitted a copy of the assessment order for the A.Y. 2011- 12. However, the same does not contain anything about the transaction of unsecured loan with Sh. Bikram Singh. Sh. Chandan Singh has also stated that he has not given loan to any person other than Sh. Bikram Singh which is unusual. It is clear that the transaction is not genuine.” (ii) The Ld. CIT(A), however observed that the bank account of the Chandan Singh showed huge deposits without any explanation about the source and copy of income tax return did not indicate anything about the transaction of unsecured loan with the assessee. (iii) Before us, the learned counsel of the assessee, referred to the copy of PAN card and voter identity card available at page no. 87 and 88 of the assessee’s paper book respectively establishing the identity of the creditor. He further referred to the bank statement indicating No. 85 and 86 of the assessee’s paper book. He further submitted that the conclusion of the learned Commissioner of Income-tax(Appeals) that said loan was not appearing in the return of income of Sh Chandan Singh was not correct as no balance sheet was enclosed with the copy of return of income filed so it was not possible to disclose the entry of impugned loan in the return of income. (iv) On perusal of the documents filed before the lower authorities and copy submitted in paper book before us, we find that the assessee has filed all the documents establishing identity, genuineness of the transaction and creditworthiness in respect of the Sh. Chandan Singh. The source of money advanced to the assessee is appearing as received through banking channel and no cash deposits as mentioned by the learned Commissioner of Income-tax (Appeals) are observed in the bank statement. Thus findings of the ld CIT(A) in respect of the creditor are without proper appreciation of the evidences. Further, relying on the judgments cited above, the assessee can’t be asked to explain source of source. Thus in our opinion the assessee has discharged the onus casted upon him under section 68 of the Act in respect of credit from Sh. Chandan Singh and the addition made deserves to be deleted. Accordingly, we delete the addition under section 68 in respect of Sh Chandan Singh amounting to Rs. 1,10,00,000/-.
7. Sh. Amar Singh Rs. 50,00,000/- (i) In the remand report, the Assessing Officer reported as under: “The statement of Sh. Amar Singh was recorded on 06.05.2015. Sh. Amar Singh has stated that he does not file any ITR nor has any PAN No. His monthly income is around 2000-2500 only. His credit worthiness is thus not proved. Although in response to Q-11 he has - stated that he has given 50 lacs to Sh. Bikram Singh, the same is not supported by documentary evidence. He Bank Statement (Gurgaon Gramin Bank as submitted by the assessee nor any other fact or information which establishes the credit worthiness and genuineness of the transaction of unsecured loan as claimed by Sh. Bikram Singh. During the personal deposition, he has submitted a copy of a cheque (No. 039522) issued by Oriental Bank of Commerce which is dated 18.02.2015. Even if the cheque is considered authentic, it is issued in the year 2015 and has no relation with the transaction of unsecured loan in F.Y. 2010-11. However, the assessee in its submission dated 18.05.2015, has submitted a copy of document dated 15.5.15 issued by the land acquisition officer gurgaon to Sh. Amar Singh regarding grant of Rs. 84,44,762/- on account of land acquisition in F.Y. 2010-11. However, Sh. Amar Singh, during personal deposition could not explain the said entry and also stated that he does not understand the dealing/work of banks (Q-13). Further, Sh. Amar singh did not submit any papers relating to the land acquisition and also does not file any ITR. In fact, he submitted a copy of cheque dated 15.5.2015 and not the copy of any cheque issued in F.Y. 2010- 11. Thus, the genuineness and credit worthiness of the transaction between Sh. Amar Singh & Sh. Bikram Singh are not established.” (ii) The learned Commissioner of Income-tax (Appeals), observed that there was no copy of return of income or PAN card and copy of bank account showed huge deposits which were not explained. He further observed that copy of a document issued by the Land Acquisition Officer, Gurgaon indicating grant of Rs. 84, 44, 762/- was furnished however no further supporting documents regarding acquisition of land for explanation of the entry in the bank account was furnished. (iii) Before us, the learned counsel of the assessee referred to copy of confirmation and voter identity card available at page No. 78 and 82 respectively establishing the identity of the creditor. He further referred to copy of bank statement available at page No. 80 of the paper book and entry of deposit of Rs. 84,44,762/- on 26/06/2010 just before issue of cheque of Rs. 50 Lacs to the assessee. He also referred to page No. 83 of the assessee’s paper book, which is a letter issued by the land acquisition officer, Gurgaon in favour of Sh. Amar Singh mentioning the award of Rs. 84,44,762/-. (iv) In view of the above documents, which were furnished before the authorities below and copy of which is submitted in paper book before us, we are of the opinion that the identity, and genuineness of the transaction is duly explained in respect of credit from Sh. Amar Singh. The observation of the learned CIT(A) that there were huge deposits in the bank account of Sh. Amar Singh is not relevant as far as the impugned transaction is concerned. As regard to creditworthiness is concerned that is also duly explained from the award of Land Acquisition Officer received by Sh Amar Singh and the credit was extended to the assessee out of the said sum of award. Thus in our view, the assessee has discharged its onus casted upon as per the requirement of section 68 of the Act in respect of Sh. Amar Singh, and therefore the addition made in respect of credit from Sh Amar Singh is deleted.
Sh. Harpreet Singh Rs. 3,50,000/- (i) In the remand report, the Assessing Officer reported as under: “The statement of Sh. Harpreet Singh was recorded on 15.05.2015. In response to Q-4, he stated that he had no transaction with Sh. Bikram Singh in F.Y. 2010-11. However, in the documents submitted, it has been stated that an amount of Rs. 3.5 lacs was paid by Sh. Daksh Deep Singh S/O Sh. Harpreet Singh to Sh. Bikram Singh. The documents submitted by Sh. Harpreet Singh have not been signed by Sh. Daksh Deep Singh. However, the assessee has submitted a confirmation from Sh. Daksh Deep Singh. Again, it has been submitted by the assessee that a payment for advance against sale of shares Rs. 3.5 lacs was received by Sh. Bikram Singh from Mr. Dakshdeep Singh son of Sh. Harpreet Singh. The said amount was written in the name of his father Sh. Harpreet Singh inadvertently by the accountant of Sh. Bikram Singh. This sequence of description is dubious and thus the genuineness of the transactions is not established.” (ii) The learned Commissioner of Income-tax (Appeals) observed that only copy of PAN card was available on record and the amount was received as in the nature of advance for sale of shares. (iii) Before us the learned counsel of the assessee referred to copy of letter from Sh Harpreet Singh available at page no. 126 of the assessee’s paper book , confirming the fact that said loan of Rs. 3.5 lakh was actually given by son Mr Dakshdeep Singh through No. 58913 dated 18/06/2010 drawn on HDFC bank. This fact was also confirmed by Mr Dakshdeep Singh according to confirmation available on page no. 123 of the assessee’s paper book. The assessee also in an affidavit , a copy of which is available on page No. 127 and 128, submitted that said sum of Rs. 3.5 lakh was received as advance from Sh Dakshdeep Singh against sale of shares and name of his father sh Harpreet Singh was mentioned inadvertently by the accountant. All these documents were available before the lower authorities. (iv) In view of the above documents, we find that the identity of the Sh Harpreet Singh was though established, but identity of Sh Daksh singh and copy of bank statement of the creditor indicating the said loan or advance to the assessee has not been filed. Further, no documents in support of creditworthiness of Sh. Dakshsingh have been filed, therefore in the interest of justice, we restore the matter back to the file of the Assessing Officer to examine the identity, genuineness of the transaction and creditworthiness and decide the issue in accordance with law after affording sufficient opportunity of hearing to the assessee. The assessee is also directed to produce all the necessary documents in support as required to discharge onus casted upon under section 68 of the Act in respect of the said advance. Accordingly the addition in the respect of Sri Harpreet Singh is allowed for statistical purposes.
11. The ground No. 3 was not pressed by the Ld. counsel of the assessee and therefore dismissed as infructuous.
In ground No. 4, the assessee has challenged the computation of tax liability in demand notice issued. 12.1 We have heard the rival submissions on this issue. The Ld. counsel submitted that the Assessing Officer erroneously included a sum of Rs. 3,62,00,441/-instead of Rs. 3,28,23,704/- while computing the income of the assessee in the computation form. Further the Ld. counsel also submitted that in the computation form the Assessing Officer also included a sum of Rs. 1,48,180/- being the short-term capital gain whereas the assessee had set off the brought forward short-term capital loss and after adjustment, a sum of Rs. 23,842/-was carried forward. The Ld. senior departmental representative on the other hand submitted that these issues are of verification by the Assessing Officer and could have been disposed by way of filing rectification before the Assessing Officer. In our view, the issues are in the nature of mistake apparent from the record and therefore, we direct the Assessing Officer to verify the claims of the assessee and disposed of them in accordance with law. The ground of the appeal is allowed for statistical purpose 13. In the result, the appeal of the assessee is allowed partly for statistical purpose. The decision is pronounced in the open court on 19th July, 2016.