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Facts
The assessee challenged an order of the NFAC/CIT(A) that confirmed an addition of Rs. 1,95,25,000/- made by the AO under section 68 of the Income Tax Act, 1961. The addition was related to unsecured loans taken by the assessee. The assessee had provided confirmations and other documents for these loans, but the AO found issues with the identity, creditworthiness, and genuineness of the creditors.
Held
The Tribunal noted that the assessee had provided confirmations, PAN details, and ITR copies for all 24 creditors, and the transactions were through banking channels. The Tribunal referred to various case laws and concluded that the assessee had discharged the onus of proving the identity, genuineness, and capacity of the creditors. The addition was therefore deleted.
Key Issues
Whether the addition of Rs. 1,95,25,000/- on account of unsecured loans under section 68 of the Income Tax Act, 1961, was justified without sufficient evidence and opportunity to the assessee.
Sections Cited
68, 801A, 143(3), 133(6)
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”B” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA No. 322/JP/2024
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA No. 322/JP/2024 fu/kZkj.k o"kZ@Assessment Year: 2018-19 cuke Venkateswara Wires Pvt Ltd., Assistant Commissioner of Vs. E-55, Road No. 5, VKI Area, Income Tax, Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AACCV 5085 F vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. S. L. Poddar, Adv. jktLo dh vksj ls@ Revenue by : Sh. Anoop Singh, Addl. CIT lquokbZ dh rkjh[k@ Date of Hearing : 06/08/2024 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 09/09/2024 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM
Because the above named assessee aggrieved by the order of National Faceless Appeal Centre, Delhi [ for short NFAC/CIT(A) ] dated 13/03/2024 for assessment year 2018-19, the present appeal is filed. That order of the ld. CIT(A) arises because the assessee has challenged the finding of the National e-Assessment Centre, Delhi [ for short NeAC or ld. AO ] vide order dated 24.03.2021 which was passed under section 143(3) of the Income Tax Act [ for short Act ].
“1. In the facts and circumstances of the case the ld. CIT(A) has erred in confirming the addition of Rs. 1,95,25,000/- u/s 68 of the Income Tax Act, 1961 without considering the evidences filed before the ld. AO as well as before the ld. CIT(A) as the documents submitted was only in support of confirmations and other documents already submitted and no new documents were submitted.
The assessee craves your indulgence to add amend or alter all or any grounds of appeal before or at the time of hearing.”
Succinctly, the fact as culled out from the records is that the assessee filed its return of income for the year under consideration declaring total income of Rs. 4,80,41,000/- on 14.09.2018. The case was selected for Complete Scrutiny assessment under the E-assessment Scheme, 2019 on the following issues:-- S. No. Issues i. Unsecured Loans Issues ii. Deduction Claimed for Industrial Undertaking u/s 80IA/801AB/80IAC/IB/IC/IBA/80ID/80IE/10A/10AA 3.1 Statutory notices u/s. 142(1) and 143(2) were issued to the assessee along with a detailed questionnaire. Ld. AO on perusal of the details so submitted noted that the assessee is engaged in the business of power generation though windmill at Sangli, Jaisalmer and Barmer and thereby discussed so recorded in the order added a sum of Rs. 4,02,369 being the amount of apportionment of the expenses to the eligible and non-eligible business. The ld. AO also added a sum of Rs. 32,684/- being the amount of receipt not eligible for deduction u/s. 80IA of the Act.
3.2 The assessee in support of loan taken from 24 different parties filed confirmation. Based on those confirmations so filed by the assessee, the ld.
AO issued notices u/s. 133(6) of the Act directing them to file the various details including the details of source of unsecured given by them to the assessee. The ld. AO also asked for the details of relevant page of bank statement and ITR-V for the A. Y. 2018-19. Consequent to that notice 10 parties have replied, and the remaining parties have not replied. Therefore, the assessee was asked to submit the email account of all the 24 parties and was directed to follow up the reply in response to notice u/s. 133(6) issued by the ld. AO. Since the said notices were replied in part the ld. AO made the addition of Rs. 1,95,25,000/- in the hands of the assessee that identity, creditworthiness was not established and therefore was treated as unexplained u/s. 68 of the Act.
Center, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below:
“6. Appellant Findings The various grounds of appeal are adjudicated upon as below:-
7. Ground No.1: This ground has been raised against the action of the A.O in making an addition of Rs 4,02,369 by disallowing the deduction u/s 801A of the Act. 7.1 I have perused the assessment order and the submissions of the appellant. The A.O disallowed the claim u/s 801A to the extent of Rs 4,02,369 on the grounds that the expenses claimed under the head "printing charges, dyeing charges, stitching charges, embroidery, designing, sampling etc, fuel, (dying plant), rent and taxes, commission paid to other selling agents, credit card sale expenses, carriage outward, shop expenses, royalty expenses are directly related to business activities of non-eligible business and, therefore, they have to be excluded for apportionment of expenses between eligible and non-eligible expenses. I am in agreement with the appellant that there is no basis for this addition since no such expenses have been claimed in the P&L account by the assessee. The business of the assessee is the manufacture of conduct wire and cables and generation of electricity by windmill and hence such expenses as listed by the A.O amounting to printing, dyeing, stitching, embroidery, are neither incurred nor claimed by the assessee. It is not known on what basis the A.O got these details which are not borne out by the facts on record. Accordingly, the addition of Rs 4,02,369/- is deleted and the Ground of Appeal is Allowed.
8. Ground has been raised against Ground No 2: This Ground has been raised against the action of the A.O in making an addition of Rs 32,684/- by disallowing the claim of this amount u/s 80IA of the Act. 8.1 I have perused the assessment order and the submissions of the appellant on this issue. I do not find any justification for the said addition. The A.O has not given any proper reason why the explanation of the appellant that these amounts were on account of the shor late payment of the bills of the 2 units were not to be included in the claim for 801A especiall- since they are a part of the 10CCB report and audit report. Accordingly, the addition deleted and the Ground of Appeal is Allowed.
9. Ground No. 3: This ground has been raised against the action of the A.O in makin an addition of Rs 1,95,00,000/- u/s 68 of the Act on account of the unverified unsecure loans taken during the year.
9.1 I have perused the assessment order and the submissions of the appellant.
9.2 Section 68 of the Income-tax Act, 1961 entitled "Cash Credits" reads as under: "Where any sum is found credited in 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: [Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share pplication money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless- (a) The person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited,- and (b) Such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23F13) of section 10.1" 9.3 From a perusal of the provisions of section 68 it is clear that the, following conditions are required to be met:- i. The assessee has maintained 'books' ii. There should be credit of amounts during the year; INCOME TAY DEPARTMEN in the books maintained by the assessee of a sum iii. The taxpayer offers no explanation about the nature and source of such credit found in the books or the explanation offered by the taxpayer in the opinion of the Assessing Officer is no satisfactory; iv. If the taxpayer is a closely held company and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such company shall be deemed to be not satisfactory unless [As amended by Finance Act, 2012, w.e.1.1.4.2013]: (a) The person, being a resident in whose name such credit is recorded in the books of suc company, also offers an explanation about the nature and source of such sum so credited and (b) Such explanation in the opinion of the Assessing Officer has been found to be satisfactory. If all the above conditions exist, sum so credited may be charged to tax as income of the taxpayer of that year.
9.4 The Burden of proof is on the assessee who is required to offer an explanation to the satisfaction of the Assessing Officer so as not to ho is required thief of section 68 or for that matter section 69A. This aspect has been deliberated upon by the Hon'ble Supreme Court in numerous decisions. Relevant portion from following case laws are extracted below: i. Sreelekha Banerjee v CIT (1963) 49 1TR 112 (SC)
"It seems to us that the correct approach to questions of this kind is this. If there is an entry in the account books of the assessee which shows the receipt of a sum or conversion of high denomination notes tendered for conversion by the assessee himself, it is necessary for the assessee to establish, if asked, what the source of that money is and to prove that it does not bear the nature of income. The Department is not at this stage required to prove anything. It can ask the assessee to bring any books of account or other documents or evidence pertinent to the explanation if one is furnished, and examine the evidence and the explanation. If the explanation shows that the receipt was not of an income nature, the Department Gannet act unreasonably and reject that explanation to hold that it was income. If, however, the explanation is unconvincing and one which deserves to be rejected, the Department can reject it and draw the inference that the amount represents income either from the sources already disclosed by the assessee or from some undisclosed source. The Department does not-then proceed on no evidence, because the fact that there was receipt of money, is itself evidence against the assessee. There is thus prima facie evidence,, against the assessee which he fails to rebut, and being unrebutted, that evidence can be used against him by holding that it was a receipt of an income nature. The very words "an undisclosed source" show that the disclosure must come from the assessee and not from the Department". ii. Kale Khan Mohammad Hanif v CIT[1963] 50 INCO ITR 1 (SC) MENT "It is well established that the onus of proving the source of a sum of money found to have been received by the assessee is on him. If he disputes liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the Income-tax Officer is entitled to treat it as taxable income". (iii) Roshan Di Hatti v CIT [1977] 107 ITR 938 (SC) "Now, the law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee is on him. If he disputes the liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the revenue is entitled to treat it as taxable income. To put it differently, where the nature and source of a receipt whether it be of money or of 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 that income is from any particular source." iii. Sumati Dayal v. CIT [1995] 80 Taxman 89 (SC)
"But, in view of Section 68 of the Act, where any sum is found credited in the books of the assessee for any previous year the same may be charged to income tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In such case there is, prima facie, evidence against the assessee, viz., the receipt of money, and if he fails to rebut, the said evidence being unrebutted, can be used against him by holding that it was a receipt of an income nature. While considering the explanation of the assessee the Department cannot, however, act unreasonably." iv. CIT v. P. Mohanakala [2007] 161 Taxman 169 (SC) "The expression "the assessees offer no explanation" means where the assessees offer no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessees. It is true the opinion of the Assessing Officer for not accepting the explanation offered by the assessees as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material available on record. Application of mind is the sine qua non for forming the opinion".
9.5 From a careful perusal of the above decisions, it is established that primary onus to prove the source of the money and necessary evidences to support credit entries u/s 68 of the Act is on the assessee. The Hon'ble Supreme Court has further held that explanation offered by the assessee should be carefully examined by the AO to ascertain whether all the ingredients of the onus are proved by the assessee or not. Essentially, the explanation of the assessee is required to be tested on the touchstone of Genuineness, both of the parties as well as the transaction. Thus it is for the assessee to produce the materials, evidence and an explanation that is comprehensive and accurate.
9.6 Furthermore, it needs to be pointed out that only because payments have been made by cheque through proper banking channels does not necessarily prove the genuineness of the transaction. According to the legal principles as laid down in the plethora of judicial decisions mere production invoice numbers or bills or PAN or details of cheque and bank statements only indicate and reflect proper paper work or documentation but genuineness, creditworthiness and identity are deeper and obtrusive.
The Guwahati High Court in Nemi Chand Kothari v. CIT [2004] 136 Taxman 213/[2003] 264 ITR 254 held that merely because a transaction takes place by cheque is not sufficient to discharge the burden. The assessee has to prove the identity of the creditors and genuineness of the transaction.:
"It cannot be said that a transaction, which takes place by way of cheque, is invariably sacrosanct. Once the assessee has proved the identity of his creditors, the genuineness of the transactions which he had with his creditors, and the creditworthiness of his creditors vis-a-vis the transactions which he had with the creditors, his burden stands discharged and the burden then shifts to the revenue to show that though covered by cheques, the amounts in question, actually belonged to, or was owned by the assessee himself"
The Hon'ble ITAT, Delhi in the case of Pee Aar Securities Ltd. vs. DCIT, Circle- 14(1), New Delhi [(2018) 96 taxmann.com 602 (Delhi - Trib.)] has held as under: "It is also a settled legal position that the onus of the assessee, of explaining nature and source of credit, does not get discharged merely by filing confirmatory letters, or demonstrating that the transactions are done through the banking channels or even by filing the income tax assessment particulars. In the case of CIT v. United Commercial and Industrial Co (P.) Ltd [1991] 187 ITR 596/56 Taxman 304 (Cal), Hon'ble Calcutta High Court has held that "it was necessary for the assessee to prove prima facie the identity of creditors, the capacity of such creditors and lastly the genuineness of transactions". Similarly, in the case of CIT v. Precision Finance (P.) Ltd [1994] 208 ITR 465/[1995] 82 Taxman 31 (Cal), it was observed that "it is for the assessee to prove the identity of creditors, their creditworthiness and genuineness of transactions". There is thus no escape from proving genuineness of a transaction." In the case of PCIT vs. NRA Iron & Steel (P) Ltd. [(2019) 103 taxmann.com 48 (SC)] the Hon'ble Supreme Court has held that "merely because assessee company had filed all primary evidence, it could not be said that onus on assessee to establish credit worthiness of investor companies stood discharged"
The following observation of Hon'ble ITAT of Ahmadabad Bench in the case of Nakoda Fashion Pvt. Ltd. in ITA No. 1716/Ahd./2012 dated 18.08.2016 is also relevant, wherein it has been hel as under:- "19. From going through all the above judgments and decision, we find that along with evidences, surrounding circumstances, human probability and intentional acts are also to be taken note off while accepting the identity, creditworthiness and genuineness of the cash creditors which in this case is the share applicants. In the case before us we observe that assessee is trying to assert again and again upon the PAN, IT returns, bank statement and confirmations of the impugned 5 parties but has nowhere tried to clarify or disclose the fact which has embedded in the financial statement of these 5 parties which speaks in itself that they are paper companies. Further if it has been genuine transaction and assessee company is asked to produce the new share holders who have been allotted a substantial portion of equity shares, he would have easily called upon the investors. The investors could have come along with all the financial documents and could have clarified about his intention to make investment in the equity shares of the company because every investor wants to earn income from investment in the form of dividend as well as expects appreciation in the valuation of shares with the growth of business. If this has been the situation, then there would have been no doubt on the genuineness of the transactions. If the assessee has adduced evidences to establish the prima facie, the aforesaid onus shifts to the Department. However, mere furnishing of particulars or the mere fact of payment by account payee cheque or the mere submission of confirmation letter by the share applicant is by itself, not enough to shift the onus to the Department although these facts may, along with other facts be relevant in establishing the genuineness of the transaction. As held by Hon. Supreme Court in the case of CIT vs. N. Tarika Properties Investment (2014) 51 taxmann.com 387(SC) that "PAN cannot be treated as sufficient disclosure of identity of the person. PANs are allowed on the basis of application without actual de facto clarification of identity or ascertainment of activities, nature of business activity and are just as to facilitate the Revenue to keep track of transactions and thus PAN cannot be blindly and without consideration of surrounding circumstances treated as sufficient disclosing the identity of individual". 9.7 Looking to the assessment order it is seen that the assessee had taken unsecured loans during the year. The loans taken from 24 persons had been squared up during the year, as under:-
Sl. No. Name of the Creditors PAN Loan squared- up during F.Y 2017-18 (In Rs.) 1 M/s Nav Bharat Machineries Pvt. Ltd. AAACN4713G 15,00,000/- 2 Arjun Singh ADVPS9417M 10,00,000/- Hulas Chand Shreepal AAAHH8042K 10,00,000/- 3. Jai AAAHJ6317B 45,00,000/- 4. Kishan Mohit Jajoo
Jaishree Bhandari 30,00,000/- 5. Ranjit Ladha ABAPL7896G 1,00,00,000/- 6. Rohit Shreyans AAJHR2509E 7. 10,00,000/- Sablawat ABZPB8037G 10,00,000/- Sunil Bhargava 8. Umesh 9. ACOPB5632R 30,00,000/- Bhandari 10 Yatendra Bihani ALAPB3202C 10,00,000/- AADPF374OR 5,50,000/- 11 Apurva Fomra 12 Dinesh Kalan AHDPK2216N 5,00,000/- 13 Manish sarda AEGPS9344M 7,00,000/- AANPD1118M 16,00,000/- 14 Man Mohan Das Daga Naresh 15 AITPJ6478L 11,75,000/- Jakhotia Nikita Loiwal 16 AARPL1054G 10,00,000/- 17 Purvi Chainani BEQPC5971G 4,00,000/- Rajeev Loiwal- AAEHR4197R 18 5,00,000/- HUF Rahu Krishan 19 5,00,000/- Kumar Marfatia
HUF
20 Ramesh ABDPG1277F 15,00,000/- Chand Gupta Sanjeev 21 ADUPS4439G 4,00,000/- Sachan Sarthak 22 AQWPG3813A 55,0,000/- Bhandari 23 Shoba Daga AARPD4827B 5,00,000/- Suman 24 ADRPD4827B 5,00,000/- Kothari
The A.O issued notices u/s 133(6) of the Act. Replies were received from 10 of the 24 persons which were accepted by the A.O as under:
Shoba Daga - This person submitted the desired information along with documentary evidence.
Rohit Shreyans Sablawat - This person submitted the desired information along with documentary evidence. 3. Hulas Chand Shreepal - This person submitted the desired information along with documentary evidence. 4. YatendraBihani This person submitted the desired information along with documentary evidence. 5. Jaishree Bhandari- This person submitted the desired information along with documentary evidence. 6. Jai Kishan Mohit Jajoo- This person submitted the desired information along with documentary evidence. 7. Rajeev Loiwal-HUF- This person submitted the desired information along with documentary evidence. 8. Sanjeev Sachan- This person submitted the desired information along with documentary evidence. 9. Man Mohan Das Daga- This person submitted the desired information along with documentary evidence. 10. Umesh Bhandari- This person submitted the desired information along with documentary evidence.
9.8 Thus it was seen that the replies were received only from the above 10 parties and from the others there was no response. Thus it is clear that the non compliance from the rest of the parties showed that the identity and the genuineness of the respective parties had not been proved. The A.O has noted in the order that * Apart from the 10 persons mentioned above, none of the entities furnished the complete replies. Therefore, a reminders Notice u/s 133(6) of the I.T. Act, 1961 were issued for obtaining desired submission but even after reminder replies were not received.
Accordingly, it is clear that the balance parties did not submit the replies even after the reminders were issued. Hence it cannot be said that the identity and the Venkateshwara Wires Pvt. Ltd. vs. ACIT creditworthiness of the transactions have been proved. Furthermore, in the present proceedings, the appellant has submitted the confirmation, the ITR acknowledgement as well as the copy of the bank statement of some of the parties. However, looking to the assessment order it is seen that the A.O has mentioned that only the confirmations of the parties were submitted and the rest of the details such as ITR as well as the bank statements were not submitted. The appellant has not given any evidence that these details were also submitted before the assessing officer during the assessment proceedings i.e the copy of the bank statements. Accordingly, this would amount to additional evidence under Rule 46 A which cannot be considered. The appellant has not provided any application for the admission of additional evidence during these proceedings. Also, the appellant has not submitted any evidence that these details were submitted before the A.O during the assessment proceedings.
9.9 Even so, looking at the details it is seen that there are either incomplete or not legible or do not substantiate the creditworthiness of the parties. In the case of Sunil Bhargav(loan 10 lakhs) the ITR shows Gross Total Income of Rs 11.92 lakhs and the bank statement does not show the outstanding balance in the account. In the case of Naresh Jakhotia( loan of Rs 11.75lakhs), no ITR is given and the extract of the bank statement does not pertain to the relevant period when the loan was given. Also the extract does shows that the balance at any point of time did not exceed 7.21 lakhs and hence does not establish that such person was able to give a loan of Rs 10 lakhs to the assessee. In the case of Raju HUF(loan 5 lakhs), the bank extract is illegible and hence it is not possible to see the bank balances and other entries. In the case of Dinesh Kalani who gave a loan of Rs 5 lakhs, there are credit entries just prior to the date when the loan was given to the assessee and after the said loan the balance of the said person came down to Rs 20,901 and remained below Rs 1,00,000 till 8th Jan 2018 (end of the extract provided). In the case of Apurva Fomra against the loan of Rs 5.5 lakhs, the ITR of Sudarshan Fomra shows a Gross Total income of only Rs 4,84,582 and the bank extract is illegible. In the case of Purvi Chalnani (loan of Rs 4 lakhs) the ITR shows GTI of only Rs 197801 and the bank extract shows a cheque deposit of Rs 800000 on the same day that the loan is given to the assessee, after which the balance in the account reduces to Rs 20000. In the case of Ramesh Chand Gupta (loan of Rs 15lakhs), the bank extract shows a credit entry (deposit) of Rs 10 lakhs one day prior to the loan being given to the assessee. In the case of Nav Bharat Machinery(loan of Rs 15 lakhs) no extract of the bank statement has been provided nor the ITR acknowledgement. In the case of Ranjit Ladha who has given a loan of Rs 1 crore, no bank statement or acknowledgement of ITR is provided. In the case of Sarthak Bhandari (loan of Rs 55lakhs) again no ITR or bank extract is provided. In the case of Manish Sharda (loan of 7.4 lakhs) the bank statement is not legible. With regard to the rest of the parties from whom loans were taken and squared up during the year, no details have been submitted even in these proceedings.
Venkateshwara Wires Pvt. Ltd. vs. ACIT 9.10 Accordingly, it is seen that in the above cases there was no reply received by the A.O during the assessment proceedings. Further even in the instant appellate proceedings the details are either incomplete or raise questions regarding the creditworthiness of the parties. Also reliance has already been placed on numerous judicial decisions to show that merely filing the documents like PAN and ITR etc does not in itself prove the genuineness of the transactions. For all these reasons, it is held that the appellant has failed to discharge the onus of proof u/s 68 of the Act and hence the addition of Rs 1,95,000/- made by the A.O is confirmed. The Ground of Appeal is Not Allowed.
10. Ground No 4 is general in nature and does not require adjudication.
11. Resultantly, the appeal preferred by the appellant is ALLOWED IN PART.”
5. Feeling dissatisfied with the finding recorded by the ld. CIT(A) while sustaining the addition of Rs. 1,95,25,000/- the assessee has preferred the present appeal. To support the solitary ground so raised by the assessee, ld. AR of the assessee, has filed the written submissions in respect of the ground raised by the assessee. The written submission so filed by the assessee reads as follows:
“The assessee is a private limited company engaged in the business of power generation through windmill at Sangli, Jaisalmer and Barmer, which is eligible for deduction u/s 801A of the Income Tax Act, 1961. The assessee filed return declaring total income of Rs. 4,80,41,000/- for A.Y. 2018-19 on 14/09/2018. A copy of acknowledgement of return of income along with computation of total income is available on Paper Book on Page No 1-3. The return of income was filed along with audit report u/s 44 AB along with form No. 10CCB with calculation for claim of deduction u/s 801A. Copy of the same are available on Paper Book Page No 4-44.
The case of the assessee was selected for scrutiny for verifying squared up loans and deduction u/s 80IA etc. Notice u/s 143(2) was issued on 22/9/2019. During the course of assessment proceedings, the assessee furnished copy of ledger account, confirmation and PAN of cash creditors/ squared up accounts. This is so mentioned on page 3 of the assessment order by the Learned Assessing Officer himself, which is quoted " the assessee furnished copies of ledger accounts/confirmations for squared up account with PAN". In this regard, Venkateshwara Wires Pvt. Ltd. vs. ACIT copies of letters dated 21/12/2020 and 28/12/2020 furnishing information regarding squared up accounts are available on Paper Book Page No.45-49. The Learned Assessing Officer had direct correspondence with the entities of unsecured loans in respect of squared up accounts by issuing notice u/s 133(6), asking them to furnish copy of ITRs and bank accounts. This is so mentioned on Page 12 of the assessment order, which is quoted below :- "Further, during faceless assessment proceedings, the notices u/s 133(6) of the IT Act, 1961 were issued to entities for submission of source of unsecured loan, copy of ITR-V and relevant page of bank statement reflecting unsecured loan transaction. Consequent upon the issuing of notice u/s 133(6), only some persons have furnished incomplete reply. Subsequently, a reminder was issued for submission of desired reply." All these enquiries were conducted by the Learned Assessing Officer at the back of the assessee. Subsequently, the Learned Assessing Officer has mentioned that in the bank account statement submitted by these entities, it was noticed that amount was deposited in the bank account of the creditors prior to transferring the same to the assessee. These transactions have been treated as suspicious and consequently added to the income of the assessee. (Page 12 of the assessment order). Before making addition, the Learned Assessing Officer did not afford any opportunity to the assessee as in how many cases of creditors information was received and in what manner it was incomplete. The particulars of bank account where the money was deposited prior to transferring the same to the assessee were not disclosed to the assessee so as to enable him to furnish its defence. In these circumstances, the addition of Rs.1,95,25,000/- made by the Learned Assessing Officer without providing adequate opportunity to the assessee is arbitrary and against the principles of equity and justice. Although it is stated that the addition is in respect of 14 squared up accounts as against total 24 squared up accounts, the learned Assessing Officer has not given the break up of Rs. 1,95,25,000/- added u/s 68. Aggrieved with the order of the Learned Assessing Officer, the assessee preferred appeal before the Learned CIT(A), NFAC, who has confirmed the addition made by the Learned Assessing Officer. Before the Learned CIT(A), the assessee furnished a detailed submission, which has been quoted on Page 6 to 20 of the appellate order of the Learned CIT(A). In this submission, the assessee had furnished PAN, copy of bank account and confirmation in respect of all the 14 squared up accounts. The Learned CIT(A) has at first observed that the assessee had submitted additional evidences without any application under Rule 46A and hence, the additional evidence could not be considered. But then, the Learned CIT(A) was kind enough and good enough to consider the evidences furnished by the assessee in respect of the squared up accounts. The Learned CIT(A) has found fault with the information furnished by the assessee inasmuch as some of the bank accounts were found illegible, in some cases, return of income was not found commensurate with the deposits and in other cases, there were deposits in the bank accounts of the squared up accounts just Venkateshwara Wires Pvt. Ltd. vs. ACIT prior to transfer of the amount to the assessee. These observations have been made by the Learned CIT(A) in para 9.9. of his order appearing on page 29 and 30. Thus, for all intents and purposes, the information submitted by the assessee was considered by the Learned CIT(A), but was found incomplete. In these circumstances, the Learned CIT(A) upheld the addition of Rs.1,95,25,000/- made by the Learned Assessing Officer. The Learned CIT(A) has wrongly mentioned the addition at a figure of Rs. 1,95,000/- only. Aggrieved with the order of the Learned CIT(A), the assessee has come in appeal before the Hon'ble Tribunal. Although the assessee is not furnishing any such evidence which may be said to be fresh and not furnished earlier before the Learned Assessing Officer or before the Learned CIT(A). However, as a matter of abundant caution, the assessee is moving an application under Rule 29 of the Income Tax Appellate Tribunal Rules, 1963 for considering the evidences furnished by the assessee, including any fresh evidence so found. It is the submission of the assessee that the evidences furnished include only copies of IT returns or copy of bank account, which neither can be manipulated or created and hence, these need to be considered in the interest of equity and justice. The Hon'ble Tribunal is humbly requested to admit all these evidences and consider the same sympathetically for deleting the addition made by the Learned Assessing Officer and wrongly sustained by the Learned CIT(A). With this background of the case, the individual grounds of appeal
are discussed hereunder :- Ground No.
1. In the facts and circumstances of the case, the Learned CIT(A) has erred in confirming the addition of Rs. 1,95,25,000/- u/s 68 of the Income Tax Act, 1961 without considering the evidences filed before the Learned Assessing Officer as well as before the Learned CIT(A) as the documents submitted was only in support of the confirmations and other documents already submitted and no new documents were submitted.
It is submitted that in the case of the assessee, addition of Rs. 1,95,25,000/- has been made under section 68 of the IT Act, wrongly treating the deposits in 14 squared up accounts as unexplained, first by the Learned Assessing Officer and later on upheld by the Learned CIT(A). The particulars of these 14 squared up accounts are noted below. Against each of the squared up accounts, the reason on account of which same has not been accepted as genuine by the Learned CIT(A) is mentioned and assessee has now met the objections /observations of the Learned CIT(A) which were more or less trivial and flimsy. It is submitted that each squared up account is genuine. In each account, money has come through banking channel and has been returned before the close of the year. All the depositors are having PAN and in respect of all, copy of IT returns have been furnished. Further, copy of relevant bank account in respect of each depositor has also been furnished explaining the source of source. In these circumstances, these squared up accounts need to be considered as genuine and addition is required to be deleted.
Table of 14 squared up accounts S. Name of the creditor Amount of loan Objection/observation of Remarks/Compliance No with PAN Learned CIT(A) 1 Apurva Fomra Rs. 550000 1. Gross total income in It is submitted that ITR of Sudarshan AADPF3740R the ITR of Sudarshan Fomra is not relevant. He is guardian of Fomra is only of the creditor. In the bank account of Rs.484582/- Apoorva Fomra, the amount has come 2.Bank extract is illegible from Smt. Basanti Devi Fomra. Copy of bank account of Smt. Basanti Devi Fomra is furnished reflecting the loan given by her to Apoorva.
Legible copy of bank account No.04182010071460 with Oriental Bank of Commerce, Heerapura, Jaipur is furnished.
Thus, the objections raised are complied.
The creditor is assessed to income tax having PAN AADPF3740R. The assessee has furnished confirmation, copy of acknowledgement of return for AY 2018-19, and copy of bank account of the creditor reflecting the transaction of loan. These evidences establish that the loan is fully explained. The identity of the creditor, its creditworthiness and genuineness of transaction stands established.
2 Manish Sarda Rs. 700000 1.Bank statement is not Legible copy of bank statement is AEGPS9344M legible furnished. The bank transaction is (Actual loan appearing on 19/11/2017. Manish Sarda amount is Rs. is assessed to ta and copy of his ITR for 7,40,000 and ASSESSMENT YEAR 2018-19 is filed not Rs 7,00,000 reflecting income of Rs. 1,31,76,610/-. as taken by the Assessing Officer) Thus, the capacity of the creditor is beyond doubt.
Copy of ITR, bank statement and confirmation are furnished 3 Dinesh Kalani Rs. 500000 1.The deposits in bank Bank account of the assessee with SBI, AHDPK2216N account are just prior to Mansarovar, Jaipur (A/c the date of loan. No.00000051009006855) running from 2.Later on, the balance is April 2017 to January 2018 is furnished . below Rs. 1 lac
The perusal of the bank account reveals that it has balance of Rs. 3,72,843/- as on 1.4.2017. The loan has been given by this person to the assessee on 29/11/2017. On 28/11/2017, there is deposit on account of LIC of Rs.103050 and on 29/11/2017, there is transfer of Rs. 1,00,000 from HDFC Bank account of Dinesh Kalani. Thus, it is assessee's own money which has come in the bank account of the assessee. There is no outside deposit. It is further submitted that the balance of the assessee has been fluctuating from Rs. 5,27,403/- as on April 13, 2017 to Rs. 63,310/- on 18/1/2018. The perusal of the account reveals that the assessee has been advancing loans to other persons, such as Rajeev Enterprises (Rs.250000 on 26/7/2017, Rs. 250000 on 28/7/2017 to Mohan Jhaveri) Thus, the amount of loan is proved beyond doubt. The objections raised by the Learned CIT(A) are duly met.
4 Naresh Jakhotia Rs. 1175000 1.Copy of ITR not given. It is submitted that there appears to be AITPJ6478L 2.The bank statement is some inadvertence at the stage of the not of the relevant period. Learned CIT(A). The assessee had 3. The balance in the furnished copy of bank account of Dr. bank account is not Naresh Jakhotia with SBI, Shyam Nagar, exceeding Rs. 7.21 lacs, Jaipur having Account No. hence, the creditor was No.00000061010466929 for the relevant not in a capacity to give period 1/4/2017 to 31/3/2018. The loan of Rs. 11 lacs. amount of loan has been advanced Rs.6,75,000 on 30/6/2017 and Rs.5,00,000 on 30/11/2017. It is submitted that the account of the assessee normally has a balance ranging from Rs.18,10,000 as on 28/7/2017 to Rs. 804801/- as on 31/3/2018. It is further submitted that the entries of deposits in the bank account are by way of transfer/cheque and there are no cash deposits which may be doubtful. In view of this, the creditor was in a capacity to advance loan to the assessee.
Further, copy of ITR is furnished. Disclosing income of Rs. 20,22,660/- for A.Y. 2018-19, which was furnished on 28/7/2018. .
5 Nikhita Loiwal Rs. 1000000 No comments by the The creditor is assessed to income tax AARPL1054G Learned CIT(A) having PAN AARPL1054G. The assessee has furnished confirmation, copy of acknowledgement of return for AY 2018-19, and copy of bank account of the creditor reflecting the transaction of loan. These evidences establish that the loan is fully explained. The identity of the creditor, its creditworthiness and genuineness of transaction stands established. The ld. AO has made the addition on the basis of surmises and conjectures and without providing adequate opportunity to the assessee to furnish the details. Therefore, the addition made is illegal, unjust and unlawful and deserves to be deleted.
6 Purvi Chainani Rs. 400000 1.Gross total income as It is submitted that returned income of BEQPC5971G per ITR is Rs.197801 Rs.197801/- is not a small amount only. looking to the deposit of Rs. 4 lac only. It 2.There is deposit of Rs.8 is submitted that Purvi Chainani has also lacs on the same day advanced loan of Rs. 6 lac to Shri Raj when loan is given. Shree Kumar, Rs.600000 to Royal 3.The balance in the bank Pharma and Rs.400000 Subash K Bawzi. account is reduced to Rs. This shows the capacity of Purvi 20000 only Chainani.
Copy of ITR, Balance sheet and bank account are furnished 7 Raju Krishan Kumar Rs. 500000 1.Bank statement is not Legible copy of bank account is Marfatia HUF legible furnished, which discloses loan of Rs.
AAMHS9614N 500000 on 04/12/2017. The bank account discloses continuously balance of more than 5 lac from 1/4/2017 and goes up to Rs. 49,57,000/-. The bank account discloses closing balance as on 31/3/2018 of Rs. 6,10,854/-. It is further submitted that there is more than one transaction exceeding Rs. 20 lacs in the bank account, which establishes the capacity of the depositor.
8 Ramesh Chand Rs. 1500000 1.There is deposit in the The creditor is assessed to income tax Gupta bank account of Rs. 10 having PAN ABDPG1277F. The ABDPG1277F lac just a day before the assessee has furnished confirmation, amount of loan given. copy of acknowledgement of return for AY 2018-19, and copy of bank account of the creditor reflecting the transaction of loan.
These evidences establish that the loan is fully explained.
The return of income of the assessee for ASSESSMENT YEAR 2018-29 has been filed on 23/8/2018 disclosing income of Rs. 38,56,261/-. The returned income discloses that the assessee was capable of advancing the loans. Further a detailed copy of bank account discloses that the assessee was having numerous transactions of heavy amounts during the year under consideration. The opening Balance in the account is also running into several lacs. The bank account continuously has got a balance running into lacs. All these facts establish the genuineness of the deposits.
9 Sarthak Bhandari Rs. 550000 1.Copy of ITR not Copy of ITR for A.Y. 2018-19 filed on AQEPG3813A (The correct furnished 07/07/2018 is furnished. It discloses amount of loan 2.No bank account returned income of Rs. 5,60,070/-. is Rs. furnished Copy of relevant bank account is also 55,00,000) enclosed. It discloses that the amount of Rs. 5500000 has been advanced on 28/11/2017 and just a day earlier Rs. 50 lacs has been received from Shri Umesh Bhandari. Confirmation of Shri Umesh Bhandari and copy of his bank account is enclosed. It is submitted that the bank account of Umesh Bhandari is a joint account with Jayasree Bhandari. The bank account has got heavy balance and there are several transactions exceeding Rs.25 lacs, which shows that Umesh Bhandari was in a capacity to advance loan of Rs. 5000000 to Sarthank Bhandari as on the date , i.e. 17/11/2017, Shri Umesh Bhandari was having balance in his account of Rs. 79,69,950/ - and it is out of this that loan of Rs. 50,00,000 has been advanced. Thus, the source is fully proved.
10 Suman Kothari Rs. 500000 No comments by the The creditor is assessed to income tax ADRPD4827B Learned CIT(A) having PAN ADRPD4827B. The assessee has furnished confirmation, copy of acknowledgement of return for AY 2018-19, and copy of bank account of the creditor reflecting the transaction of loan. These evidences establish that the loan is fully explained 11 M/s Navbharat Rs.1500000 1.Copy of ITR not filed Copy of ITR for A.Y. 2018-18 filed on Machineries P. Ltd 2.No bank statement filed 29/10/2018 is furnished. It discloses AAACN4713G returned income of Rs. 62,23,000/-. It is submitted that the returned income itself establishes the capacity of the depositor for advancing Rs. 15 lacs.
Copy of bank account is also enclosed.
12 Arjun Singh Rs. 1000000 No comments by the The creditor is assessed to income tax ADVPS9417M Learned CIT(A) having PAN ADVPS9417M. The assessee has furnished confirmation, copy of acknowledgement of return for AY 2018-19, and copy of bank account of the creditor reflecting the transaction of loan. These evidences establish that the loan is fully explained. The identity of the creditor, its creditworthiness and genuineness of transaction stands established. The ld. AO has made the addition on the basis of surmises and conjectures and without providing adequate opportunity to the assessee to furnish the details. Therefore, the addition made is illegal, unjust and unlawful and deserves to be deleted.
13 Ranjit Lodha Rs.10000000 1.Copy of ITR not filed. Copy of ITR for A.Y. 2018-19 disclosing ABAPL7896G 2. Copy of bank returned income of Rs. 50142777/- filed statement not filed on 26/10/2018 is furnished. The quantum of income shown in the return of income itself establishes the capacity of the depositor. Copy of bank account is also furnished. The amount has been advanced on 12/12/2017. In the bank account, Rs. 1 crore has come on 8/12/2017 from Gravita Metals. Confirmation from Gravita Metals is furnished.
14 Sunil Bhargava Rs. 1000000 1.ITR shows gross total Copy of ITR for A.Y. 2018-19 disclosing ABZPB8037G income of Rs. 11.92 lacs income of Rs.1042820/- is furnished. 2.Bank statement does The returned income is good enough to not show outstanding establish the capacity of the depositor for balance in the account. advancing loan of Rs. 10 lacs. Copy of bank account No.676801500303 with ICICI Bank is furnished. It discloses loan advanced on 28/11/2017 and the same has been returned on 23/3/2018.
The confirmation of the creditors, copy of their Income Tax returns and copy of their bank statements reflecting the loan given are available on Paper Book from Page No.50-119.
(a) Deposits in the squared up accounts are genuine
It is submitted that as mentioned in the chart above, the assessee has furnished complete information which establishes the identity of the creditor, capacity of the creditor to give the loan and genuineness of the transaction. In this regard, the assessee has furnished confirmation of account in respect of each creditor, which leads to the fact that amount was advanced by the creditor. Copy of IT return of the creditor has been furnished, which establishes the capacity of the Venkateshwara Wires Pvt. Ltd. vs. ACIT creditor in lending the money. The assessee has also furnished the copy of bank account, from where the money has come in the account of the assessee. This establishes the fact that the transaction is through the banking channel and also establishes the source of source. The bank account and the copy of ITR in respect of each creditor establishes both their capacity and capability in lending the money to the assessee. In view of these facts, it is humbly submitted that all the parameters which go to establish the creditors as genuine have been met by the assessee. In view of this, the addition made by the Learned Assessing Officer and sustained by the Learned CIT(A) deserves to be deleted.
(b) The Learned Assessing Officer erred in making addition on the grounds of suspicion
It is submitted that in the case of the assessee, the Learned Assessing Officer made addition of Rs. 1,95,25,000/- under section 68 treating the 14 squared up loans as unexplained. It is submitted that the Learned Assessing Officer conducted inquiries at his own level by issuing notices u/s 133(6) to the all the 24 creditors. The Learned Assessing Officer got complete information in respect of ten creditors and in the remaining 14 cases, the information furnished was allegedly incomplete and as such, the Learned Assessing Officer sought information in respect of the 14 creditors from the assessee. As mentioned in the assessment order on page 12, the Learned Assessing Officer informed the assessee that in 14 cases, replies received from the parties were not complete. It was also mentioned that in the case of certain parties, money was deposited in bank account and later on transferred to the assessee. Accordingly, in the view of the Learned Assessing Officer these transactions were of suspicious nature. However, the Learned Assessing Officer did not disclose the name of parties where the information was incomplete and there were deposits in bank account just prior to transfer to the assessee. The Learned Assessing Officer, thus, violated the principles of equity and justice . As a matter of fact, the Learned Assessing Officer was required to furnish the results of inquiries conducted by him by issuing notice u/s 133(6) before rejecting the same. It was only on knowing the results of inquiries conducted by the Learned Assessing Officer that the assessee could be competent to remove the defects and complete the information to the satisfaction of the Learned Assessing Officer. The Learned Assessing Officer has doubted the genuineness of deposits in the squared up accounts simply because the depositors failed to furnish some information, such as, copy of IT return or copy of bank account. However, in all cases, confirmations and PAN stood furnished. Further, out of 24 squared up accounts, complete information was received by the Learned Assessing Officer directly in compliance of notice issued by him u/s 133(6). This was good indication that the deposits in the case of the assessee were genuine. It so happened that in some cases the depositors were prevented on account of circumstances beyond their control in furnishing the copy of IT returns and bank account. For this default on the part of the depositors, the assessee should not have been punished. The Learned Assessing Officer has not taken any action against the depositors who Venkateshwara Wires Pvt. Ltd. vs. ACIT could not comply to notice issued u/s 133(3). It is settled principle of law that if a cash creditor or depositor fails to make compliance of summons u/s 131/133(6), the assessee cannot be held responsible for it. The following case-laws are quoted in support :-
(1) CIT Vs. Orissa Corporation (P) Ltd (1986) 159 ITR 78 (Hon'ble Supreme Court)
Held that in case the creditor does not appear in response to summons issued u/s 131, no adverse inference can be drawn in the case of the assessee.
(2) CIT Vs. Chandela Trading Co P. Ltd (2015)372 ITR 232 (Cal)
Held that the Revenue failed to bring material on record that the amount of credits in fact belonged to the assessee. Mere omission on the part of the creditors to subject themselves to the inquiry by the revenue or their failure to furnish accounts would not lead to the conclusion that the creditors lacked identity. The facts/accounts furnished by the assessee remained uncontroverted.
Further, the Learned Assessing Officer did not grant enough time to the assessee to enable him to get in touch with the depositors for obtaining copies of the bank account and IT returns. Thus, the addition made by the Learned Assessing Officer was in violation of principles of equity and justice. The Learned CIT(A) was not justified in sustaining the addition without going into the facts and circumstances of the case. Without affording due opportunity to furnish the requisite details, the ld.AO proceeded to make the impugned addition, which action is against the principles of natural justice and fair play. The Learned CIT(A) also sustained the addition without providing sufficient opportunity to the assessee. Thus, there has been complete violation of principles of natural justice in this case and on this count also, the addition made by the ld.AO deserves to be deleted. The following case-laws are quoted in support :- (a) Union of India Vs. Tulsiram Patel (AIR 1985 SC 1416-1469)Hon’ble Supreme Court
The Hon’ble Supreme Court held that the principles of natural justice have come to be recognized as being part of the guarantee contained in Article 14 of the Constitution of India because of the new and dynamic interpretation given by the Supreme Court to the concept of equality which is the subject-matter of that Article and that violation of principles of natural justice by a State action is a violation of Article 14.
(b) Maneka Gandhi Vs. Union of India (AIR 1978 SC 597) Hon’ble Supreme Court/ Gangadharan Pillai Vs. ACED (1980) 126 ITR 356 (Kerala)
Venkateshwara Wires Pvt. Ltd. vs. ACIT A quasi-judicial or administrative decision rendered or an order made in violation of the rule of audi alteram partem is null and viod and the order mas in such a case can be struck down as invalid on that score alone.
(c) Shri Ram Durgaprasad Vs. Settlement Commission (1989) 176 ITR 169 (SC)
The order made in violation of principal of natural justice is void and nullity (d) CIT v. Panna Devi Saraogi [1970] 78 ITR 728 (Cal.). The opportunity of being heard should be real, reasonable and effective. The same should not be for name sake. It should not be a paper opportunity. (e) Tinbox Company Vs CIT (2001) 249 ITR 216 (SC) The principle of natural justice is so fundamental that failure to observe the principle of natural justice cannot be made good in appeal. Lack of opportunity before the A O cannot be rectified by the appellate authority by giving such opportunity. (f) Smt. Ritu Devi v. CIT [2004] 141 Taxman 559 (Mad.) Time of just one day was given to the assessee to furnish reply. This was held as denial of opportunity. Denial of opportunity may make an order void. Limitation of time cannot stand in the way of not giving adequate opportunity. The principle is inviolable. (g) Nedunchezhian (Dr K) Vs DCIT (2005) 274 ITR 37 (Mad) Opportunity should be a reasonable one, reasonable time should be given to the assessee to furnish his reply. (c) The Learned CIT(A) sustained the additions violating the principles of equity and justice It is submitted that not only the Learned Assessing Officer, but the Learned CIT(A) has also acted in violation of the principles of equity and justice. The assessee has furnished paper book before the Learned CIT(A) containing 97 pages, which included confirmations, copy of IT returns and bank accounts in respect of the 14 squared up accounts. Copy of the submission filed before the Learned CIT(A) is is available on Page Book Page No.120-132. It is submitted that the information furnished by the assessee was in support of details furnished before the Learned Assessing Officer which were found in complete. The Learned CIT(A) noticed that the assessee has not furnished any application u/s 46 A. However, the Learned CIT(A) went on considering the information furnished by the assessee, but found fault with them inasmuch as the information was found incomplete. In the view of the Learned CIT(A), in some cases, IT return was not furnished and in other cases, copies of bank accounts were not legible whereas in some cases, there were deposits in the bank account of the parties just prior to transfer of the amount to the assessee. On account of all these infirmities in the information furnished by the assessee, the Learned CIT(A)
Venkateshwara Wires Pvt. Ltd. vs. ACIT sustained the addition made by the Learned Assessing Officer. It is relevant to mention that both the Learned Assessing Officer as well as the Learned CIT(A) passed orders in a very hasty manner as if they were bent up on in making/sustaining the addition. The Learned Assessing Officer, while making addition of Rs. 1,95,25,000/-, has failed to give the details of this amount. In fact, the total of deposits in respect of the 14 squared up accounts found unexplained by the Learned Assessing Officer comes to Rs.2,58,65,000/-Not only a mistake was committed by the Learned Assessing Officer, the same was also overlooked by the Learned CIT(A) as he was also in haste in confirming the addition. Not only this, the Learned CIT(A) further committed a blunder in mentioning the amount of addition at Rs. 1,95,000/- only. All these facts go to establish that the authorities in passing the order were careless and also failed to consider the information furnished by the assessee in correct perspective. It is submitted that although the Learned CIT(A) perused and considered the information submitted by the assessee, but found the same incomplete and defective. In these circumstances, it was incumbent upon the Learned CIT(A) to have provided the assessee an opportunity for removing the defects. But this was not done. Thus, the principles of equity and justice stand violated, which render the order of the Learned CIT(A) vitiated. The Hon'ble Tribunal is requested to delete the additions in view of the detailed information furnished by the assessee. (d) Case-laws in support The assessee had submitted a number of case-laws before the Learned CIT(A). The ratio of these case-laws is fully applicable to the facts of the case. The assessee has proved beyond doubt that the deposits in the squared up accounts are genuine and beyond doubt. Most importantly, in all these cases the amount has been returned before the close of the year, which itself proves the genuineness of the transaction. Case-laws quoted are again reproduced hereunder :-
(1) COMMISSIONER OF INCOME TAX vs. ORISSA CORPORATION (P) LTD. (Hon'ble Supreme Court of India) (1986) 52 CTR 0138, (1986) 159 ITR 0078,
Held
Income—Cash credit—Burden of proof—Assessee had given the names and addresses of the creditors—It was in the knowledge of the Revenue that the said creditors were income-tax assessees—Their index number was in the file of the Revenue—Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not pursue the matter further—Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the allowed loans—Tribunal came to the conclusion that the assessee has discharged the burden that lay on him
(2) Aravali Trading Co. V/s ITO (2008) 8 DTR (Raj) 199 Hon’ble Rajasthan High Court The Hon’ble High Court held that once the the existence of the creditors is proved and such person own the credits which are found in the books of the assessee, the assessee's onus stand discharged and the latter is not further required to prove the source from which the creditors could have acquired the money deposited with him either in terms of section 68 or on general principle.
(3) CIT Vs. Jai Kumar Bakliwal (2014) 101 DTR 377 (Raj)
Once the amount was advanced by the creditors by account payee cheque from their respective bank accounts and the creditors were being assessed to income tax, the capacity of the creditor and genuineness of the transaction stood proved. Addition u/s 68 not sustainable.
(4) Commissioner of Income Tax Vs. Heeralal Chaganlal Tak HIGH COURT OF RAJASTHAN (2002) 176 CTR 0495, (2002) 257 ITR 0281, (2002)
Income—Cash credit—Burden of proof—Identity of the creditor is established— He has confirmed the loan—Whether the amount was advanced by the alleged creditor or not is basically a question of fact—Tribunal is the final fact-finding body—Finding of the Tribunal accepting the genuineness of the loan and deleting the addition could not be said to be perverse.
(5) DEPUTY COMMISSIONER OF INCOME TAX vs. MAHALAXMI TMT PVT. LTD. (2021) 190 ITD 582 (ITAT, Pune)
Assessee has discharged its onus by furnishing the necessary details such as a confirmation of the parties, copy of ITR- V, copy of bank statement of parties along with their balance sheet, share certificate, MOA, AOA etc. in support of identity of the parties and genuineness of transaction and credit worthiness of the parties. Similarly, there is also no dispute to the fact that all the transactions were carried out through the banking channel. What is the inference that flows from a cumulative consideration of all the aforesaid contending facts is that the assessee has discharged its onus imposed under section 68. Accordingly the AO had a suspicion that the investors as discussed above were acting as the conduit for converting the unaccounted money of the assessee in the guise of share capital /share application money and premium on shares. Conversely the AO has not brought anything on record suggesting amount credited in the books of (6) Balaji Healthcare Pvt. Ltd Vs. ITO (ITA No.566&567) dated 30/1/2019 (ITAT, Jaipur)
Without examination or investigation in the case of the investors or disputing the documents or controverting the facts submitted by the assessee, the addition in the hands of the company cannot be sustained.
(7) CIT Vs. H.S. Builders 78 DTR 169 (Raj)
Deposit of cash in the account of the creditor just before giving loans to the assessee company would not lead to the conclusion that the money was deposited by the assessee company. Therefore, the ITAT was justified in deleting the addition.
(8) Lalitha Jewellery mart (P) Ltd Vs. DCIT (2018) 99 taxmann.co, 408 (Mad)
Where the assessee company had completely explained sources of investments received by it by way of share application money, it had also disclosed identity of such investors and all payments had been received through banking channels, amount of share application money could not be treated as assessee’s undisclosed income under section 68.
(9) DCIT Circle 3(1)(I) vs. Orient News Prints Ltd (2018) 259 Taxman 408 (SC)
Where in order to prove the genuineness of share transactions, assessee brought on record all relevant facts, such as, names, address, PAN of share applicants, it was thereupon the duty of the AO to obtain separate confirmation from concerned parties, if required, and where he failed to do so, it could not be a ground to re-open assessment.
(10) COMMISSIONER OF INCOME TAX vs. ORBITAL COMMUNICATION (P) LTD. (2010) 327 ITR 0560 (Delhi high Court)
Income—Cash credit—Share application money—Tribunal upheld the order of CIT(A) deleting addition made by the AO on account of share application money following the decision of the Hon’ble Supreme Court in the case of CIT vs Lovely Exports (P) Ltd.(2008) 216 CTR (SC) 195 as the assessee produced substantial evidence to establish the identity and creditworthiness of share applicant— Tribunal justified in holding that the share application money cannot be regarded as undisclosed income of the assessee under s. 68 Venkateshwara Wires Pvt. Ltd. vs. ACIT In our considered opinion, the approach adopted by the CIT(A) and the Tribunal is in consonance with the decision of the Supreme Court in CIT vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195 wherein it has been held as under :
"2. Can the amount of share money be regarded as undisclosed income under s. 68 of the IT Act, 1961 ? We find no merit in this special leave petition for the simple reason that if the share application money is received by the assessee- company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment."
Keeping in view the aforesaid mandate of law, the share application money cannot be regarded as undisclosed income of the assessee under s. 68 of the Act, 1961.
(11) COMMISSIONER OF INCOME TAX vs. ORISSA CORPORATION (P) LTD. – Supreme Court of India (1986) 159 ITR 89 (SC)
The assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notice under s. 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors. There was no effort made to pursue the so- called alleged creditors. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on which a conclusion could be arrived at, no question of law as such arises. It cannot, therefore, be said that any question of law arose in these cases. The High Court was, therefore, right in refusing to refer the questions sought for.
(12) COMMISSIONER OF INCOME TAX vs. DIVINE LEASING & FINANCE LTD – High Court of Delhi (299 ITR 268)
Income—Cash credit—Share application money—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—If relevant details of address and identity of the subscribers 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 explanation by the assessee—Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices—Tribunal has noted Venkateshwara Wires Pvt. Ltd. vs. ACIT that the assessee-company is a public limited company which had received subscriptions to the public issue through banking channels and the shares were allotted in consonance with the provisions of Securities Contract (Regulation) Act, 1956, as also the rules and regulations of Delhi Stock Exchange—Complete details were furnished—Tribunal has further found that the AO has not brought any positive material or evidence which would indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented company’s own income from undisclosed sources—As regards receipt of share capital on issue of rights shares to five companies, these companies were duly incorporated under the Sikkimese Companies Act and were assessed under the Sikkimese Taxation Manual—Their share subscriptions were also received through banking channels and found to be valid by the jurisdictional AO—Therefore, no addition could be made under s. 68.
(13) CIT Vs. HS Builders 78 DTR 169 (Rajasthan High Court)
Deposit of cash in the account of creditor just before giving loan to the assessee would not lead to the conclusion that the money was deposited by the assessee. Therefore, the ITAT was justified in deleting the addition. The Learned CIT(A) has also quoted many decisions while passing the appellate order. It is submitted that it is settled position of law that where there are two opposite views on the same issue, the one favourable to the assessee has to be followed. It is further submitted that the issue of squared up accounts is mainly an issue of facts and facts of two cases can never be identical. In view of this, the Hon'ble Tribunal is humbly requested to consider each deposits independently without being guided by the case-laws quoted by the Learned CIT(A) and delete the addition made by thye Learned Assessing Officer and sustained by the Learned CIT(A).
Ground No.2
The assessee craves your indulgence to add, amend or alter all or any grounds of appeal before or at the time of hearing.
The Hon'ble Tribunal is requested to consider the submissions and case laws cited by the assessee and decide the appeal in favour of the assessee by deleting the addition made by the Learned Assessing Officer and sustained by the Learned CIT(A).”
Vide application dated 22.04.2024 ld. AR of the assessee moved an application under Rule 29 of the Income Tax Appellate Tribunal Rules, though stated to have submitted all the documents before the ld. CIT(A)
and he has discussed that the bank statements submitted are not legible this established the fact that he has considered the evidence but even though he contended that the assessee has not moved an application u/r 46A therefore, he has not considered the evidence. To counter that contention and with a view to support his grounds on merits stating that the though the records before the ld. CIT(A) were not new documents but he has considered it to be additional and considered while deciding the merits of the case, in the interest of justice the assessee has moved an application u/r. 29A to be considered those evidence even if considered as additional evidence as his alternate plea and the same reads as follows:
“1. It is submitted that in the case of the assessee, the Learned Assessing Officer made addition of Rs. 1,95,25,000/- under section 68 treating the 14 squared up loans as unexplained. It is submitted that the Learned Assessing Officer conducted inquiries at his own level by issuing notices u/s 133(6) to the all the 24 creditors. The Learned Assessing Officer got complete information in respect of ten creditors and in the remaining 14 cases, the information furnished was allegedly incomplete and as such, the Learned Assessing Officer sought information in respect of the 14 creditors from the assessee. As mentioned in the assessment order on page 12, the Learned Assessing Officer informed the assessee that in 14 cases, replies received from the parties were not complete. It was also mentioned that in the case of certain parties, money was deposited in bank account and later on transferred to the assessee. Accordingly, in the view of the Learned Assessing Officer these transactions were of suspicious nature. However, the Learned Assessing Officer did not disclose the name of parties where the information was incomplete and in which cases there were deposits in bank account just prior to transfer to the assessee. In these circumstances, the assessee was not in a position to make compliance of the Learned Assessing Officer. However, the assessee had furnished confirmations/PAN in respect of each and every creditor. Thus, because of inadequate opportunity, the assessee was prevented from furnishing copy of bank account, copy of ITRs in respect of the squared up accounts.
Even the Learned CIT(A) conducted the appellate proceedings without providing adequate opportunity to the assessee. The Learned CIT(A) at first found fault with the assessee in not furnishing application u/s 46A for additional evidences. However, later on, as the good sense prevailed upon the Learned CIT(A), he considered the information furnished in respect of the remaining squared up accounts, but found that the information was incomplete and defective and, therefore, sustained the addition. The Learned CIT(A) also did not provide any opportunity to the assessee to remove the defects mentioned in the appellate order with respect to information furnished in respect of the 14 squared up accounts. Thus, the assessee was prevented on account of inadequate opportunity in furnishing complete information and removing the defects mentioned by the Learned CIT(A) in the appellate order. The defects pointed out by the Learned CIT(A) mainly relate to copy of bank account not being legible, there being deposits in bank account just prior to transfer to the assessee, copy of ITRs having not been filed etc etc. It is submitted that the assessee is now submitting which is complete and flawless. It is the submission of the assessee that evidences being submitted before the Hon'ble Tribunal are, in fact, not additional evidence. These are mainly supporting evidences and are of the nature of ITRs and bank account. It is submitted that such evidences cannot be created by manipulation etc. As such, these may kindly be admitted for discharge of justice in the case of the assessee. The following case laws are quoted in support :- (1) GVK Industries Ltd Vs. ACIT (2012) taxmann.com 107 (Hyderabad) "Where documents sought to be submitted would help in arriving at right decision, same should be admitted".
(2) Jasmine Commerical Ltd Vs. CIT(2011) 200 Taxmann 388 (Calcutta) Under Rules 29 of Appellate Tribunal Rules, Tribunal has discretion to admit additional evidence in interest of justice once Tribunal affirms opinion that doing so would be necessary for proper adjudication of the matter. (3) CIT Vs. Text Hundred India (P) Ltd (239 CTR 263 (Delhi) Where the Tribunal found that CIT(A) had wrongly treated papers filed by assessee as new evidence, said finding was finding of fact and could not be said to be perverse. (4) CIT Vs. Sikka Overseas (P) Ltd (2010 328 ITR 641(Delhi) Once it is found that party intending to lead evidence before Tribunal for first time was prevented by sufficient cause to lead such an evidence and that said evidence would have material bearing on issue and ends of justice demanded admission of such an evidence, Tribunal could pass an order to that effect.
(5) Ram Prasad Sharma Vs. CIT (1979) 119 ITR 867 (Allahabad) Under Rule 29, the powers of the Tribunal admit additional evidences are limited and the Tribunal has a discretion which, of course, must be exercised reasonably. 3. In view of the aforesaid facts, the Hon'ble Tribunal is requested to kindly admit the additional/supporting evidences for proper adjudication of the matter.
To support the contention so raised in the written submission reliance was placed on the following evidence / records / :
Sr. Particular Page no. No. 1 Copy of acknowledgement of return with computation of total income 1-3
2 Copy of audit report along with its annexures 4-44 3 Copy of letters dated 21/12/2020 and 28/12/2020 45-49 4 Copies of confirmation, ITR and bank statements in respect of cash creditors :- 50-119 Apporva Fomra Manish Sarda Dinesh Kalani Naresh Jakhotia Nikhita Loiwal Purvi Chainani Raju Krishan Kr. Marfatia Ramesh Chand Gupta Sarthak Bhandari Suman Kothari Navbharat Machineries P Ltd Arjun Singh Ranjit Lodha Sunil Bhargava 5 Copy of submission filed before the Learned. CIT(A) 120-132 filed as above, argued that the assessee has in fact did not file any additional evidence. The ld. CIT(A) firstly found fault with the assessee in not furnishing application u/s. 46A for additional evidence but at the same time of late on good sense prevail upon the ld. CIT(A), he considered the information furnished in respect of the remaining squared up accounts found that the information was incomplete and defective and therefore, sustained the addition.
The ld. CIT(A) also did not provide any opportunity to the assessee to remove defects mentioned in the appellate order with respect to the 14 squared up accounts. Thus, the assessee was prevented on account of inadequate opportunity in furnishing complete information and removing the defects mentioned by the ld. CIT(A) in appellate order. The defects pointed out by the ld. CIT(A) mainly relate to copy of bank account not being legible, there being deposits in bank accounts just prior to transfer money to the assessee, copy of ITRs having not been filed etc. It is submitted by the assessee who is now stating that to complete the flawless on fact are not additional evidence and are corroborative evidence to support the primary one already on record to support the confirmation placed on record and in furtherance ITRs and bank accounts were placed before him. This evidence support this contention ld. AR of the assessee relied upon the various decisions.
On merits of the case the ld. AR of the assessee submitted that the assessee has filed all 24 confirmation and relevant details. Based on those details so placed on record, the ld. AO written letter u/s. 133(6) to all 24 of those depositors. The ld. AO has not shared the details for which he has not received the information u/s. 133(6) from third parties. The ld. AO also did not specify for which of the depositors he made the additions and how the figure of addition is arrived at.
The ld. CIT(A) has considered that the assessee has filed all the evidence but only observed that bank statements are not legible for some of the depositors and in some there are not filed. The ld CIT(A) while dealing with the bank statement so placed on record even commented that after transferring the money to the assessee balance remain is meager amount.
Here also even though all the information was placed on record, he contended that the bank statement was not filed, filed but balance after transferring the money was meager or not eligible, show that the records were available. While doing so he has not considered allowing the opportunity to the assessee to counter the contention he also moved So, to clarify that version of the assessee that they have filed all the evidence, preferred an application u/r 29 to clarify that all the information was filed and is legible. The ld. AR of the assessee submitted that ld.
CIT(A) has not given the assessee an opportunity to deal with the fact that he contended, he must have provided an opportunity to the assessee but went to confirm the view simply pointing out error which are not supportive to sustain the addition. In short, the assessee filed all the details and are already available but to avoid the confusion the assessee submitted that application for additional evidence.
The ld. DR is heard who has relied on the findings of the lower authorities and at the same time objected to the petition moved by the assessee and that too without any attachment.
The ld. DR submitted that the assessee has not submitted all the details despite the sufficient opportunity of being heard was given. So, the ld. DR objected to the application u/r 29 filed by the assessee when he failed to do before the ld. CIT(A).
The assessee while filling the application under rule 29 has not specified that which are the documents were additional evidence before ld.
CIT(A). The ld. DR submitted that out of 24 parties 10 parties filed the reply and balance not filed is clear and the assessee for the remaining parties not given sufficient details to ld. AO. Therefore, the ld. AO made the addition and the ld. CIT(A) in absence of the information sustained by the addition.
Since the assessee has not proved the identity, genuineness and creditworthiness of the depositors, the ld. CIT(A) sustained the addition, merely filling the confirmation is not sufficient. The ld. DR also filed the following written submission in support of the contentions raised :
“2. The assessee in his submission, received in the office of the undersigned on 22.04.2024, has mentioned that he is moving an application under Rule 29 of the ITAT Rules, 1963. However no such application is available on record. Therefore, the assessee has neither filed additional evidences under Rule 46A before Ld. CIT(A) nor under Rule 29 of the ITAT Rules, 1963 before the Hon'ble ITAT Bench. Hence the assessee's case should be heard based on the submission made before the Assessing Officer during the assessment proceedings.
The assessee in his written submission aforesaid has quoted case laws in his favour (Sr.1 & 2 at page no 19 and 20 respectively, Sr. 1 to 13 at page no. 26 to 34). The aforesaid case laws are clearly distinguishable on facts. The onus to prove the cash credit u/s 68 of the Act is on the assessee. This has been adjudicated upon by the various courts in the following cases:-
S.No. PARTICULARS 1 [2022] 139 taxmann.com 352 (Calcutta) HIGH COURT OF CALCUTTA Principal Commissioner of Income-tax v. Swati Bajaj 2 [1995] 80 Taxman 89 (SC) SUPREME COURT OF INDIA Sumati Dayal v. Commissioner of Income-tax 3 [1958] 34 ITR 807 (SC) SUPREME COURT OF INDIA A. GovindarajuluMudaliar v. Commissioner of Income-tax 4 [1971] 82 ITR 540 (SC) SUPREME COURT OF INDIA Commissioner of Income-tax v. Durga Prasad More [2007] 161 Taxman 169 (SC) SUPREME COURT OF INDIA Commissioner of Income-tax v. P. 5 Mohanakala 6 [1963] 50 ITR 1 (SC) SUPREME COURT OF INDIA Kale Khan Mohammad Hanif v. Commissioner of Income-tax
7 [2019] 109 taxmann.com 53 (SC) SUPREME COURT OF INDIA NDR Promoters (P.) Ltd.v. Principal Commissioner of Income-tax [1977] 107 ITR 938 (SC) SUPREME COURT OF INDIA Roshan Di Hatti v. Commissioner of Income-tax 8 9 [1995] 82 TAXMAN 31 (CAL.) HIGH COURT OF CALCUTTA Commissioner of Income-tax v. Precision Finance (P.) Ltd. [1991] 56 TAXMAN 304 (CAL) HIGH COURT OF CALCUTTA Commissioner of Income-tax v. United 10 ..,, 11 [2009] 315 ITR 105 (Madras) HIGH COURT OF MADRAS Mangilal Jain v. Income-Tax Officer 12 [2012] 18 taxmann.com 217 (Delhi) HIGH COURT OF DELHI Commissioner of Income-tax v. Nova Promoters &Finlease (P) Ltd. 13 [2003] 128 Taxman 621 (Delhi) HIGH COURT OF DELHI Sajan Dass& Sons v. Commissioner of Income- tax 14 [2011] 9 taxmann.com 179 (Delhi) HIGH COURT OF DELHI Commissioner of Income-taxv.Oasis Hospitalities (P.) Ltd
3.1 The assessee in his written submission has quoted case laws in his favour (Sr. a to g at page no 21 to 23). The aforesaid case laws are also clearly distinguishable as below:
3.1.1 The assessing officer has accorded ample opportunity to the assessee to justify cash credits as per provisions of the section 68 of the Act in the instant case.
3.1.2 Out of the 24 entries, the replies were received in the case of 10 entries which was duly considered by the assessing officer. In remaining 14 entries, notice u/s 133(6) of the Act was issued twice to the parties (creditors). However no reply was received. Further the assessee did not provide any details as per section 68 of the Act. Hence, the case was heard by the AO keeping principles of natural justice in mind.
3.1.3 Even before the Ld. CIT(A), the assessee did not file any additional evidences under Rule 46A. Even despite that, the evidences filed by the assessee were considered and found to be incomplete by the CIT(A) and it was adjudicated that the assessee had not discharged the onus u/s 68 of the Act.
3.1.4 Therefore the principle of the natural justice was not violated at any stage of the assessement and appellate proceedings. The assessee willfully did not provide the requisite details and the onus u/s 68 was not discharged by the assessee.
The assessment order passed by the AO is a reasoned order and is based on the details provided by the assessee during the course of proceedings. The CIT(A) has also adjudicated the issue u/s 68 of the Act by recording proper reasoning regarding additional evidences under rule 46A and on merits.
In the rejoinder the ld. AR of the assessee submitted that on the part of the assessee he has discharged the burden cast upon him as per provision of section 68 of the Act. It was the ld. AO who has exercised the power u/s. 133(6) and has not brought on record which of the depositor information was not received. Not only that he has not specified the fact that that letter came back as unserved or served. In the absence the service of the letter itself proves that there is no fault on the part of the assessee so far as to prove the burden cast upon them. It was the ld. AO need to improve upon the facts placed on record which he failed to do and on that part the addition cannot be sustained merely on the ground that the information called for u/s. 133(6) were not received. Be that as it may merely the parties did not reply will not be a reason to make the addition and that too without bringing anything contrary when the assessee all these loans are even squared up and repaid itself proves the loan taken by the assessee.
We have heard the rival contentions and perused the material placed on record. The solitary ground raised in this case is that whether based on the addition of Rs. 1,95,25,000/- u/s. 68 of the Act. The brief facts related to the dispute is that during the assessment proceeding assessee has submitted the confirmation of loans accepted by the assessee. Based on that information ld. AO noted that the assessee has from 24 different parties accepted the loan and that loans have been squared up during the year under consideration.
The bench noted that at page 8, 9 & 10 of the assessment order, the ld. AO has mentioned names of 24 cash creditors, to whom he has issued notices u/s. 133(6) of the Act for furnishing the details regarding the loan given by them to the assessee. The ld. AO thereafter noted that 10 cash creditors replies were received. However, there is no discussion about the remaining 14 creditors. Not only that which of the creditors which he considered as unexplained to the extent of Rs. 1,95,25,000/-. The ld. AO has already discussed and confirmed that the assessee has furnished confirmation and bank accounts in respect of all 24 parties, including persons, company and HUF. As is evident that the record that the amount of 14 creditors comes to Rs. 2,58,25,000/-, whereas ld. AO made the addition of Rs. 1,95,25,000/- without even mentioning the names of creditors and their respective amount while he arrive that figure of addition. each creditor the assessee has provided the confirmation duly signed and verified with the transactions. All these 24 creditors are duly assessed to tax and have the PAN number. The assessee also furnished the copy of ITR as to establish that they are assessed to tax. The money received by the assessee is through the normal banking channel. All these records discharge the burden casted upon the assessee to prove the Identity, genuineness and capacity. So once that is established the addition cannot be made as per the provision of section 68 of the Act and that too when the notices were served upon those parties and some of them have not replied and some has given incomplete information, do not suggest that the deposit accepted by the assessee are covered within the provision of section 68 of the Act as the responsibility casted upon the assessee to prove the identity, genuineness and capacity of the depositor is proved by the assessee.
Merely the letters written u/s. 133(6) reply has not been received will not make the transaction covered u/s. 68 of the Act. In fact, the bench noted that all the letters i.e. 24 first time and 14 second have been served and there is no finding that the same remained unserved. Be that it may so even that details of those 14 parties were not shared by providing the list of parties to the assessee. Thus, so far as regards all these 24 creditors we information so placed on record the ld. AO issued a letter u/s. 133(6) of the Act. The ld. AO in that letter issued to third parties called for ITR and bank statements. Consequent to that as noted in the assessment order that the ld. AO has received all the details to his satisfaction in the case of 10 parties. The ld. AO issued the reminder letters to those parties, which were served but the ld. AO noted these notices were not replied to by the remaining 14 parties. Here also we note that the notice was served itself, proves that the details submitted by the assessee remained correct. Thus, the addition of Rs. 1,95,25,000/- made without mentioning which party which amount he considered as unexplained.
Based on the overall facts and evidence placed on record we note that the assessee has provided details on the record to prove the identity [PAN number and confirmation], genuineness [ bank statement and ITR ] and capacity [ ITR ] so the made u/s. 68 is not correct and is directed to be deleted. We get support of our view from the decision of the our Jurisdictional High Court in the case CIT Vs. Jaikumar Bakliwa [ 45 taxmann.com 203 (Rajasthan) ] where the court held that;
We have heard the arguments advanced by counsel for the appellant-revenue and also perused the impugned order as well as the orders passed by the lower authorities.
Venkateshwara Wires Pvt. Ltd. vs. ACIT 9. In our view as well, three things are required to be proved by recipient of money i.e. (1) identity of the creditor (2) capacity of the creditor to advance money and (3) genuineness of the transaction. From the facts emerging on the face of record, we notice that it is an admitted fact that all the above cash creditors (12 in number) are assessed to income tax and they provided a confirmation as well as their permanent account number. They have their own respective bank accounts which they have been operating and it is not the claim of the AO that the respondent-assessee was operating their bank accounts rather they have categorically stated that they issued cheque to the respondent-assessee. It is also an admitted fact that most of the cash creditors appeared before the AO and their statements u/s 131 were also recorded on oath. The cash creditors appeared to be from small place and it is quite possible that they may not be in a position to pin pointedly or specifically say about everything but by and large stood to the testimony and were able to explain various issues as per the question and answer reproduced by the AO himself in the assessment order. It may be that most of the cash creditors are relatives of the respondent-assessee and heavy burden lay on the respondent-assessee to prove about the cash credit but once all the cash creditors appeared before the AO, their statements having been recorded u/s 131, then in so far as the respondent-assessee is concerned, the onus, which lay upon him (assessee), in our view, stood discharged as he was able to prove identity of the creditors. Once the amount was advanced by account payee cheque from their respective own bank accounts and were being assessed to income tax, then in our view, capacity of the creditor and genuineness of the transaction stood proved. In so far as the respondent-assessee is concerned, it is correct that he is not required to prove source of the source and if the AO had any doubt, then the AO, assessing the respondent-assessee, could have sent the information to the AO, assessing the cash creditors for appropriate action in their cases but in so far as the respondent-assessee is concerned, in our view, the respondent-assessee has been able to discharge the burden which lay upon him.
Certainly, deposit of cash and immediate transfer of cheque or clearance of the cheque within a day or two casts a doubt as the transaction appears to be some what doubtful but suspicion howsoever strong it may be is not sufficient itself. On perusal of the facts in the present case, we observe is that the amounts advanced are not substantial and in most of the cases, the amounts are ranging from 25,000/- to 90,000/- and in some cases, it is exceeding Rs1,50,000/-. On perusal of the facts, it is also apparent that in some of the cases (Uttan Chand Jain, HUF) even the Karta of the HUF had produced the cash book and their ledger account before the AO. Smt. Anju Gangwal had also produced her cash book so also Mr. Vinay Kumar Gangwal as well as Mr. Akhilesh Kumar Ankur Jain (HUF) and the AO has drawn adverse inference finding some discrepancies in their respective cash books but as observed herein above, the doubt, if any, may be true but in so far as the respondent-assessee is concerned, that issue cannot be converted into an addition of income u/s 68 of the Act in the hands of the assessee and appropriate course, as observed herein above, was that the AO Venkateshwara Wires Pvt. Ltd. vs. ACIT could have informed the AO, assessing the respective cash creditors for appropriate action in their case.
The Hon'ble Apex Court in the case of CIT v. Orissa Corpn. (P.) Ltd. [1986] 159 ITR 78/25 Taxman 80F (SC) held as under:— "In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assesses. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of Income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises."
Hon'ble Apex Court in the case of CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 held as under:— "The onus to prove that the apparent is not the real is on the party who claims it to be so. As it was the department which claimed that the amount of fixed deposit receipt belonged to the respondent firm even though the receipt had been issued in the name of Biswanath, the burden lay on the department to prove that the respondent was the owner of the amount despite the fact that the receipt was in the name of Biswanath. A simple way of discharging the onus and resolving the controversy was to trace the source and origin of the amount and find out its ultimate destination. So far as the source is concerned, there is no material on the record to show that the amount come from the coffers of the respondent-firm or that it was tendered in Burrabazar Calcutta branch of the Central Bank, on November 15, 1944, on behalf of the respondent. As regards the destination of the amount, it has already been mentioned that there is nothing to show that it went to the coffers of the respondent. On the contrary, there is positive evidence that the amount was received by Biswanath on January 22, 1946. It would thus follow that both as regards the source as well as the destination of the amount, the material on the record gives no support to the claim of the department."
The Gauhati High Court, in the case of Nemi Chand v. CIT [2003] 264 ITR 254/[2004] 136 Taxman 213 held that it is not the business of the assessee to find out the source or sources from where the creditor had accumulated the amount which he had advanced in the form of loan to the assessee and Section 68 cannot be read to show that in the case of failure of sub-creditors to prove their creditworthiness the amount advanced as loan to the assessee by the creditor shall have to be read as corollary as the income from undisclosed source of the assessee himself.
The Calcutta High Court, In the case of Shankar Industries v. CIT [1978] 114 ITR 689 had observed that mere establishing identity of the creditor and nothing more is not sufficient and something more is to be proved by the assessee and in Venkateshwara Wires Pvt. Ltd. vs. ACIT the aforesaid case, the assessee was unable to prove beyond identity and therefore, the Calcutta High Court upheld the findings of the Tribunal. However, in the present case, we notice that not only the identity of the creditor has been proved but from the facts which have been culled out, the assessee has been able to prove genuineness also.
This Court, in the case of Kanhailal Jangid v. Asstt. CIT [IT Appeal No. 85 of 2001, dated 2-1-2007] held that the burden does not go beyond to put the assessee under an obligation to further prove that where from the creditor has got or procured the money to be deposited or advanced to the assessee. The fact that the explanation furnished by the creditor about the source from where he procured the money to be deposited or advanced to the assessee is not relevant for the purposes of rejecting the explanation furnished by the assessee and make additions of such deposits as income of the assessee from undisclosed sources by invoking Sec. 68 unless it can be shown by the department that source of such money comes from the assessee himself or such source could be traced to the assessee itself.
This Court, in the case of Aravali Trading Co. v. ITO [2010] 187 Taxman 338 (Raj.) has gone to the extent of observing the fact that the explanation furnished by the four creditors about the sources where from they acquired the money was not acceptable by the revenue could not provide necessary nexus for drawing inference that the amount admitted to be deposited by these four persons belonged to the assessee. The assessee having discharged his burden by proving the existence of the depositors and the depositors owing their deposits, he was not further required to prove source of source.
As observed herein above, though u/s 68, AO is free to show with the help of the enquiry conducted by him into the transaction which has taken place between the creditor and the sub-creditor that the transaction between two were not genuine and that the sub-creditor had no creditworthiness, it will not necessarily mean that loan advanced by the sub-creditor to the creditors was income of the assessee from undisclosed sources unless there is evidence direct or circumstantial, to show that the amount which had been advanced by the sub- creditor to the creditor had actually been received by the sub-creditor from the assessee.
The logical interpretation will be that while the assessee has to prove as special knowledge i.e. from where he has received the credit and once he disclosed the source from which he has received money, he must also establish that so far as his transaction with his creditor is concerned, the same is genuine and his creditor had the creditworthiness to advance the loan which the assessee had received. When the assessee discharges the burden so placed on him, onus then shifts to the AO, if the AO assesses the said loan as the income of the assessee from undisclosed source he has to prove either by direct evidence or indirect/ circumstantial evidence that the money which the assessee received from the creditor actually belong to and was owned by the assessee himself.
If there is direct evidence to show that the loan received by the assessee actually belong to the assessee, there will be no difficulty in assessing such amount as the income of the assessee from undisclosed source but if there is no Venkateshwara Wires Pvt. Ltd. vs. ACIT direct evidence in this regard, then the indirect or circumstantial evidence has to be conclusive in nature and should point to the assessee as the person from whom the money has actually flown to the hands of the creditor and then from the hands of the creditor to the hands of the creditor.
When we peruse the facts herein above, it is an admitted position that all the cash creditors have affirmed in their examination that they had advanced money to the assessee from their own respective bank accounts. Therefore, when there is categorical finding even by the AO that the money came from the respective bank accounts of the creditors, which did not flow in the shape of the money, then, in our view, such an addition cannot be sustained and has been rightly deleted by both the two appellate authorities. There is no clinching evidence in the present case nor the AO has been able to prove that the money actually belonged to none but the assessee himself. The action of the AO appears to be based on mere suspicion.
Accordingly, in our view, the ITAT, after appreciation of evidence has rightly come to the aforesaid conclusion and when there is appreciation of evidence, then it is purely a finding of fact and no question much less substantial question of law can be said to emerge out of the said order of the Tribunal and we do not find any infirmity or perversity in the order of the ITAT so as to call for any interference of this Court. In our view, no substantial question of law arises out of the order passed by the ITAT.
Consequently, the appeal, being devoid of merit, is hereby dismissed in limine. No order as to costs.
Respectfully following the finding so recorded in the jurisdictional high court decision as referred and relied upon by the assessee we see no reason to sustain the addition and therefore, the same is directed to be deleted. Thus, ground no. 1 raised by the assessee is allowed. Ground no. 2 raised by the assessee being general in nature does not require our adjudication.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 09/09/2024.
Venkateshwara Wires Pvt. Ltd. vs. ACIT Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 09/09/2024 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Venkateshwara Wires Pvt. Ltd., Jaipur izR;FkhZ@ The Respondent- ACIT, Jaipur 2. vk;dj vk;qDr@ The ld CIT 3. 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत xkMZ QkbZy@ Guard File (ITA No. 322/JP/2024) 6. vkns'kkuqlkj@ By order,
सहायक पंजीकार@Aेेज. त्महपेजतंत