V.RAJENDRABABU,CHENNAI vs. ITO, CHENNAI

आदेश / O R D E R

Assessee in this appeal is aggrieved on sustenance of a addition of �22,00,000/- which was made by the ld. Assessing Officer disbelieving a claim of loan of �6,00,000/- received from one Smt.

H.Rukmani and �16,00,000/- received from one Shri. T. Gurumurthy.

ITA No.141/Mds/2017 :- 2 -:

Ld. Counsel for the assessee submitted that assessee was 2. doing real estate business during the relevant previous year. As per ld. Authorised Representative assessee had altogether taken eleven new loans during the relevant previous year and ld. Assessing Officer had found nine loans out of these to be genuine. As per ld. Authorised Representative, ld. Assessing Officer had disbelieved the claim of loan from Smt. H. Rukmani and Shri. T. Gurumurthy for a reason that parties did not appear before him when summons were issued. As per ld. Authorised Representative Smt. Rukumani was living alone and doing a business of providing small loans to number of borrowers. Contention of the ld. Authorised Representative was that she collected all such loans and converted it into a single loan to the assessee, since assessee belonged to her community and was found by her to be trustworthy. As per ld. Authorised Representative the lady who was living in Chittor, Andhra Pradesh had confirmed the loan through a letter sent to the ld. Assessing Officer. Ld. Authorised Representative submitted that ld. Assessing Officer if he disbelieved the loan of �6,00,000/- received from Smt. Rukumani, ought have issued a commission through Chittor Income Tax Officer for verification.

In so far as loan of �16,00,000/- from Shri. T. Gurumurthy 3. was concerned, submission of the ld. Authorised Representative was ITA No.141/Mds/2017 :- 3 -: that Shri. T Gurumurthy was doing transport business in Kerala. As

per ld. Authorised Representative it was due to this reason that he did not respond to the summons issued by the ld. Assessing Officer.

According to him, both the above loans were received through account payee cheques. The identity of the creditors stood established, and both these creditors, according to him, were having funds in their respective bank account. Thus, as per the ld. Authorised Representative source of the credit was also proved. According to him, it was not necessary for the assessee to show the source of the source.

That apart, as per the ld. Authorised Representative, 4. assessee was not maintaining any books of accounts. Hence, according to him, Sec. 68 of the Act could not have applied. Further according to him, unless and until the credits appeared in the books of accounts, an addition could not be made u/s. 68 of the Act.

Reliance was placed on the following judgments.

Per contra, ld. Departmental Representative submitted that 5.

despite summons, concerned creditors did not appear before ld. Assessing Officer. According to him, a number of opportunities were ITA No.141/Mds/2017 :- 4 -: granted to the assessee to bring the creditors but assessee had failed to bring them or substantiate its claim of loans. Further, according to him, onus was on the assessee to show the creditworthiness of the parties, genuineness of the loan and source for the loan. Assessee had not discharged this onus. Thus according to him, the additions were rightly made and confirmed by the ld. Commissioner of Income Tax (Appeals).

I have considered the rival contentions and perused the 6. orders of the authorities below. First dealing with the legal contention taken by the ld. Authorised Representative that an addition u/s.68 of the Act could not have been made since assessee was not maintaining any books of accounts. During the relevant previous year assessee had raised altogether loans aggregating to �79,19,794/ from eleven parties. Out of this, ld. Assessing Officer had accepted credits except for �6,00,000/- from Smt. H. Rukmani and �16,00,000/- from Shri. T.

Gurumurthy. Nature of the income of the assessee mentioned by the ld. Assessing Officer was ‘’Income from House Property’’ and ‘’Income from Other Sources’’. Even in the final assessment, only these two heads of income were considered. Thus, though assessee had claimed it was doing a real estate business, neither it had claimed any profit from this business not any loss. In other words, assessee could not ITA No.141/Mds/2017 :- 5 -: demonstrate any business to have been conducted by him during the relevant previous year. Loans taken by the assessee during the relevant previous years were obviously to justify investments made which inter alia included assets given as collateral to HDFC bank for getting overdrafts. Thus, though ld. Assessing Officer mention the addition to have been made u/s. 68 of the Act, applicable section was Sec. 69 of the Act. In other words the additions were for unexplained investments. Mentioning a wrong section in the assessment order, while making an addition, would not ipso facto make an addition unlawful, if the circumstances show that such an addition could have been rightly made under another section. Even otherwise such a mistake could be cured by Sec. 292B of the Act.

Now coming to the cases relied on by the ld. Authorised 7.

Representative. In the cases of Anand Ram Raithani (supra) decided by the Hon’ble High Court of Gujarat, the addition u/s. 68 of the Act was done where books of accounts of the firm was considered as the books of the partner. The said case has no relevance on facts here.

Similarly in the case of Bhaichand H. Gandhi (supra) decided by Hon’ble Bombay High Court what was held was that passbook supplied by a bank could not be considered as a books of accounts maintained by an assessee. The case of Smt. Shantha Devi (supra) decided by ITA No.141/Mds/2017 :- 6 -:

Hon’ble Punjab and Haryana High Court, dealt with an addition for cash credit entry found in the books of accounts of a partnership made in the hands of a partner. None of these would help the cause of the assessee since here the additions have to be considered as done u/s. 69 of the Act.

Coming to the merits of the case what the assessee filed in 8. so far as the two credits in question are concerned, were letters from the concerned creditors. It might be true that both these amounts were received by account payee cheques. The question is whether a mere confirmation and claim that loan was received by account payee cheque would satisfy the conditions for accepting the genuineness of a loan transaction. In the case of Smt. H. Rukmani source given was vague. In the case of Shri. T. Gurumurthy there was nothing on record to show that any returnwas filed by Shri.T. Gurumurthy or any income was earned by Shri. T. Gurumurthy from his transport business. Assessee was given number of opportunities for proving the credit claimed by Shri. T. Gurumurthy. Observations of the ld. Assessing Officer on the opportunities given to the assessee and his response is reproduced hereunder:-

"Your attention is invited to the above referred letters, Vide your letter dated 07-12-2011, time has been sought to submit

ITA No.141/Mds/2017 :- 7 -: the evidences in respect of loan received from Sri Gurumurthy, in respect of this it is hereby informed that the credit verification process was started vide our letter dated 01-11-2011 itself,

The onus of responsibility of proving the genuineness is vested with the assessee, However, considering your letter dated 1-11-2011, time was granted upto 05-12-2011. Necessary efforts could have been taken to produce the evidences to this office in support of loan received from Gurumurthy.

However, Considering your request time is granted up to 15- 12-2011 to submit the evidences in respect of loan received from Gurumurthy, failing which the loan will be treated as unexplained cash credit u/s 68 of the Income - Tax Act and the time barring assessment for the A-Year 2009-2010 will be completed"

Till date the assessee has not produced any evidence in respect of loan received from Sri Gurumurthy. Hence, the loan of Rs 16,00,000/- received from Gurumurthy is treated as unexplained cash credit and treated as income for the Assessment Year 2009-2010 u/s 68 Income Tax Act.

Further the assessee has received Rs 6,00,000/- from Mrs Rukmani, to verify the genuineness of the loan two summons u/ s 131 were issued to her. But both the summons were returned unserved. Hence the latest address of Smt. Rukmani was obtained from the assessee. Summon was issued to the new address and served on her. In response to our summons, the assessee submitted his reply which is reproduced below In my opinion, the facts clearly established that assessee was unable to discharge the primary onus resting on it, for proving the genuineness of the transactions, credit worthiness of the creditor. Just because money was received by cheques from bank would not be ITA No.141/Mds/2017 :- 8 -: sufficient to prove the credit worthiness of the party or the genuineness of the transactions. In the circumstances, I am of the opinion that the additions were rightly sustained by the ld. Commissioner of Income Tax (Appeals). I do not find any reason to interfere with the orders of the lower authorities.

In the result, appeal of the assessee stands dismissed. 9.

Order pronounced on Thursday, the 27th day of April, 2017, at Chennai.