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Income Tax Appellate Tribunal, MUMBAI BENCHES “D”, MUMBAI
Before: Shri Joginder Singh, & Shri N.K. Pradhan
आदेश / O R D E R
Per Joginder Singh (Judicial Member) The Revenue is aggrieved by the impugned order dated 10/03/2015 of the Ld. First Appellate Authority, Mumbai, deleting the addition of Rs.55,50,000/- made on account of unsecured loans taken by the assessee during the year added as unexplained credit u/s 68 of the Income Tax Act, 1961 (hereinafter the Act).
During hearing, Shri Purushottam Kumar, ld. DR, defended the addition made by the Assessing Officer by contending that the First Appellate Authority deleted the addition without appreciating the fact that onus was upon the assessee to prove the genuineness of transaction and even after providing opportunity to the assessee, the onus was not discharged. It was contended that the addition was deleted in a mechanical manner, when there was evidence that there were suspicious deposits, made by the assessee and the same were not explained. It was also contended that the parties were not produced by the assessee. Reliance was placed upon the decision in CIT vs P. Mohankala (2007) 291 ITR 278 (SC), CIT vs Durga Prasad More 82 ITR 540 (SC), Kamal Motors vs CIT (2003) 131 taxman 155 (Raj.), Focus Export Pvt. Ltd. (2014) 51 taxman 46 (Del.), CIT vs United Commercial and Industrial Company Pvt. Ltd. 187 ITR 596 (Cal.), etc.
2.1. On the other hand, ld. counsel for the assessee, Shri Shashank Dundu, strongly defended the order of the Ld. Commissioner of Income Tax (Appeal) by contending that onus cast upon the assessee was duly discharged, confirmation were filed from the concerned parties, for which our attention was invited to page-294 of the paper book. It was explained that two parties personally appeared before the Assessing Officer, for the third party, the husband appeared and for the remaining one, the authorized representative appeared before the Assessing Officer along with confirmation. It was contended that the loans were repaid by the assessee. Reliance was placed upon the decision in ORIENT TRADING CO. LTD vs. COMMISSIONER OF INCOME TAX 49 ITR 723 (Bom.) and COMMISSIONER OF INCOME TAX vs. CHANDELA TRADING CO. P. LTD. 372 ITR 232 (Cal.).
2.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee, a partnership firm, was engaged in the business of manufacturing and dealing in textiles and other merchandises, consisting of two partners. During the relevant period, the assessee borrowed loans for its business activities. The Assessing Officer issued summons u/s 133(6) of the Act to four parties. Out of these parties, two parties i.e. Alka Jain and Ms. Lalita Jain responded to the notices and in one case, the husband of the party personally appeared before the Assessing Officer and the last one was represented by his authorized representative to explain the source of the loans. Miss. Priyanka Deora and her mother Smt. Meena Deora also appeared and explained the source from which loan were given to the assessee. Totality of facts, clearly indicates that the concerned parties accepted to have provided loan to the assessee. The case of the assessee is further fortified by the fact that the summons issued u/s 133(6) of the Act to all the parties were duly received and complied with, meaning thereby, all the parties/loan creditors are existing one and confirmed to have provided loan to the assessee. It is not the case that bogus claim was made by the assessee and the parties are non-existence. Genuineness of loan is not in doubt and further the loan was repaid to all the parties. In such a situation, now question arises whether addition u/s 68 was rightly made by the Assessing Officer. The obvious reply is “No” because the onus cast upon the assessee, as provided u/s 68 of the Act, has been duly discharged by the assessee as identity of the parties/loan creditors, genuineness of the transactions and source of loan amount has been duly explained.
2.3. As per the provisions of section 68 of the Act, the assessee is expected to offer an explanation with respect to the nature and source of cash credits to the satisfaction of the Assessing Officer. For ready reference section 68 of the Act is reproduced hereunder:-
“68. Where any sum is found credited in the 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 application 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 (23FB)of section 10.”
2.4. As per section 68 of the Act, onus is upon the assessee to discharge the burden so cast upon. First burden is upon the assessee to satisfactorily explain the credit entry contained in his books of accounts. The burden has to be discharged with positive material (Oceanic Products Exporting Company vs CIT 241 ITR 497 (Kerala.). The legislature had laid down that in the absence of satisfactory explanation, the unexplained cash credit may be charged u/s 68 of the Act. Our view is fortified by the ratio laid down in Hon’ble Apex Court in P. Mohankala (2007)(291 ITR 278)(SC). A close reading of section 68 and 69 of the Act makes it clear that in the case of section 68, there should be credit entry in the books of account whereas in the case of 69 there may not be an entry in such books of account. The law is well settled, the onus of proving the source of a sum, found to be received/transacted by the assessee, is on him and where it is not satisfactorily explained, it is open to the Revenue to hold that it is income of the assessee and no further burden lies on the Revenue to show that income is from any other particular source. Where the assessee failed to prove satisfactorily the source and nature of such credit, the Revenue is free to make the addition. The principle laid down in Ganpati Mudaliar (1964) 53 ITR 623/A. Govinda Rajulu Mudaliar (34 ITR 807)(SC) and also CIT vs Durga Prasad More (72 ITR 807)(SC) are the landmark decisions. The ratio laid down therein are that if the explanation of the assessee is unsatisfactory, the amount can be treated as income of the assessee. The ratio laid down in Daulat Ram Rawatmal 87 ITR 349 (SC) further supports the case of the assessee. In the case of a cash entry, it is necessary for the assessee to prove not only the identity of the creditor but also the capacity of the creditor and genuineness of the transactions. The onus lies on the assessee, under the facts available on record. A harmonious construction of section 106 of the evidence Act and section 68 of the Income Tax Act will be that apart from establishing the identity of the creditor, the assessee must establish the genuineness of the transaction as well as the creditworthiness of the creditors. In CIT vs Korlay Trading Company Ltd. 232 ITR 820 (Cal.), it was held that mere mention of file number of creditor will not suffice and each entry has to be explained separately by the assessee (CIT vs R.S. Rathaore) 212 ITR 390 (Raj.). The Hon’ble Guwahati High Court in Nemi Chandra Kothari vs CIT (264 ITR 254)(Gau) held that transaction by cheques may not be always sacrosanct. In the present appeal, the assessee duly fulfilled the conditions enshrined u/s 68 of the Act and produced necessary evidence for its claim.
2.5. The ratio laid down in ACIT vs Rajeev Tandon 294 ITR (AT) 219 (Del.), which was confirmed by Hon’ble High Court , in 294 ITR 488, supports the case of the Revenue. Identical ratio was laid down in CIT vs Anil Kumar 392 ITR 552 (Del.), wherein it was held that mere identification of the donor and movement of gift through banking channel is not sufficient to prove the genuineness of gift. Keeping in view, the totality of facts, attendant circumstances, human probabilities, and in the presence of plausible explanation by the assessee, relevant material, and fulfillment of ingredients enshrined in section 68 of the Act, we find that onus cast upon the assessee was duly discharged, therefore, we find no infirmity in the conclusion drawn by the Ld. Commissioner of Income Tax (Appeal), resulting into dismissal of appeal, filed by the Revenue.
Finally, the appeal of the Revenue is dismissed.
This Order was pronounced in the open court in the presence of ld. representatives from both sides at the conclusion of the hearing on 21/03/2017.