BHUSHAN UTTAMRAO BACHHAV,NASHIK vs. INCOME-TAX OFFICER,

आदेश आदेश / ORDER आदेश आदेश

PER D. KARUNAKARA RAO, AM :

This appeal is filed by the Assessee against the order of CIT(A)-1, Nashik dated 19-02-2015 for the Assessment Year 2010-11.

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various customers as advance for sale of sand to them and hence the said advances were outside the scope and purview of the provisions of Section 68 of the I. T. Act 1961 and therefore the impugned addition may please be deleted.

made by the AO u/s.68 of the Act. The assessee is an individual and is

a sand contractor in this year. He executed Civil contracts in the past.

The sand contract is the new one for the year under consideration.

Otherwise, assessee filed the return of income in the past and invoking

the provisions of section 44AD, i.e. total income was estimated applying

rate of 8% on the said civil contract receipts. In the current year,

assessee applied for the contract of sand excavation and the following

are the chronology of events with regard to the said contract involving

payment of Rs.1.80 crores by the assessee for getting the said contract :

Sr. Particulars Dates Page Nos. of the No. paper book 1 Auction Advertisements 17-12-2009 213 2 Declaration of bidding date 22-12-2009 229 3 Date of bidding and 02-01-2010 229 allotment 4 Payment of 25% amount 05-01-2010 228 5 Payment of balance 75% 08-01-2010 227 amount 6 Work order 12-01-2010 213 7 Sand extraction allowed 31-07-2010 213 upto 8 Advance money deposited 18-12-2009 to by 45 parties between 06-01-2010

the assessee raised the said amount of Rs.1.80 crores from various

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individuals @Rs.4 lakhs per individual. The details are extracted here

asunder :

Sundry Creditors Group Summary 01-04-2009 to 31-03-2010

Transactions Particulars Opening Debit Credit Closing Balance Balance Amol U. Sawant -- -- 4,00,000.00 -- Anil S. Bacchav -- -- 4,00,000.00 -- Arun K. Bacchav -- -- 4,00,000.00 -- Bhagwan N. Gaykwad -- -- 4,00,000.00 -- Bhushan B. Bacchav -- -- 4,00,000.00 -- Chandulal D. Patil -- -- 4,00,000.00 -- Chetan S. Nikam -- -- 4,00,000.00 -- Dinesh Z. Jadhav -- -- 4,00,000.00 -- Dyaneshwar D. Patil -- -- 4,00,000.00 -- Gopal S. Sonawane -- -- 4,00,000.00 -- Janaradan G. Khairnar -- -- 4,00,000.00 -- Jitendra D. Hahiray -- -- 4,00,000.00 -- Jitendra N. Bambare -- -- 4,00,000.00 -- Kiran K. Pandit -- -- 4,00,000.00 -- Madhukar R. Bacchav -- -- 4,00,000.00 -- Nitin R. Chaudhary -- -- 4,00,000.00 -- Prahalad K. Nikam -- -- 4,00,000.00 -- Prakash D. Bacchav -- -- 4,00,000.00 -- Prakash N. Khairnar -- -- 4,00,000.00 -- Prashant B.Pawar -- -- 4,00,000.00 -- Prashant S. Sonawane -- -- 4,00,000.00 -- Prashant T. Jagtap -- -- 4,00,000.00 -- Pravin A. Bhamre -- -- 4,00,000.00 -- Pravin D. Salunke -- -- 4,00,000.00 -- Pyaralal B. Shelar -- -- 4,00,000.00 -- Rahul J. Pawar -- -- 4,00,000.00 -- Rajendra B. -- -- 4,00,000.00 -- Suryawanshi Rajendra P. Salunke -- -- 4,00,000.00 -- Rajesh Alizad -- -- 2,00,000.00 -- Ravindra B. -- -- 4,00,000.00 -- Suryawanshi Ravindra K. Bacchav -- -- 4,00,000.00 -- Ravindra P. -- -- 4,00,000.00 -- Suryawanshi Ravi R. Wagh -- -- 4,00,000.00 -- Sahebrao M. Mandale -- -- 4,00,000.00 -- Sandip V. Thakare -- -- 4,00,000.00 -- Sarjerao D. Jadhav -- -- 4,00,000.00 -- Shekhar Ragunath Bagul -- -- 4,00,000.00 -- Shirish K. Patil -- -- 4,00,000.00 -- Shivdas D. Hiray -- -- 4,00,000.00 -- Udhay N. Mahale -- -- 4,00,000.00 -- Ujjwal Automobiles -- -- 4,45,810.00 -- Vinod N. Wagh -- -- 4,00,000.00 -- Vishal K. Bhed -- -- 4,00,000.00 -- Yogesh C. Bacchav -- -- 4,00,000.00 -- Yogesh N. Pawar -- -- 4,00,000.00 -- Yogesh R. Patil -- -- 4,00,000.00 -- Yogesh S. Bacchav -- -- 4,00,000.00 -- Grand Total -- -- 1,86,45,810.00 --

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constitutes the source of investment for the assessee and the same was

remitted to the Government by 08-01-2010. However, during the

assessment proceedings, the AO noted that the said amounts were

received by the assessee in cash in all. Further, on examination of the

contribution of each individual payee, AO noticed that the said sum of

Rs.4 lakhs each is the aggregation of minor cash transaction of

Rs.20,000/- each over the period of mere 20 days or so. Considering

the above, AO called for an explanation of the assessee regarding the

conditions of identity, credit worthiness, genuineness of the

transactions and discharge the onus of assessee on the said conditions

specified in section 68 of the Act.

of the cases and also the affidavits in all cases confirming the said

payment of Rs.4 lakh each in cash to the assessee. Lack of credit

worthiness and genuineness of the transactions etc. were scrupulously

examined by the AO. Unsatisfied with the explanation of the assessee,

AO issued summons to all the 45 payees. Out of this, only 18 persons

made appearance before the AO and of course, confirmed the basic

transaction of payment of Rs.4 lakhs in cash. However, they could not

confirm the extent of payment and there are no confirmation about the

cash transactions of Rs.20,000/- each transaction. On finding in most

of the cases, sources of the income is Agriculture and the documents of

7/12 extracts is the only evidence in respect of the said 27 persons out

of 45 payees. AO found discrepancies in the reply given by the payees

in the proceedings u/s.131 of the Act. Considering the discrepancies

found in the statements given by the payees, AO took adverse inference

against the assessee and proceeded to make addition of Rs.1.80 crores

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u/s.68 of the Act. Further, AO inferred that confirmations and

affidavits are stereotyped and self-serving. Admittedly, the payees are

not assessed to income-tax. Relevant operational para of the AO is

extracted here asunder :

“4.7 Thus, the source of cash advances of Rs.1,80,00,000/- in the name of 45 persons is not established. As already discussed above the assessee has fabricated and manipulated its accounts and has shown that, he has received Rs.20,000/- cash per day from all these 45 persons within the period of 20 day. Thus, the genuineness of this transaction is also not established. The onus lies on the assessee to establish the credit worthiness of persons from whom the loans/advances taken by him and to prove the genuineness of transactions. However, the assessee has not established with any evidence the genuineness of transactions and credit worthiness of creditors. It appears that the assessee has introduced his own unaccounted funds in the names of 45 different persons for getting sand contract.

. . . . . . . . . . . . . . . . . . . . . . . . . .

of the payees and the genuineness of the transaction. Further, AO held

that the assessee introduced his own funds in the name of 45 different

persons for raising the said amount of Rs.1.80 crores in a short time of

20 days for meeting the deadline/requirement of making the payments

to the Government for getting the sand contract. It is also a fact that

these 45 persons were the beneficiaries of the said contract. To that

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extent, the cash transactions are not to be considered at arm’s length

and independent ones.

improve his case. CIT(A) decided the issue against the assessee as per

the discussion given in Para Nos. 6 to 11. In the said paragraphs,

CIT(A) highlighted (1) the urgency of raising the capital of Rs.1.80 crores

in short time and (2) considered only 27 persons making appearance to

the AO’s office in response to the notice u/s.131 of the Act. CIT(A) also

discussed the failure of the payees to confirm the exact amounts and

the denial of making the payment in cash of Rs.20,000/- per day from

18-12-2009 to 06-01-2010, ownership of the loans so relied upon by

the payees as the source of income of their HUF’s was also discussed.

In Para No.7 of his order, the CIT(A) discussed the fact of calling for a

detailed report by the AO by sending the income-tax inspector for cross

verification and his adverse report was also relied. According to them,

most of the payees are found to be the Agriculturists with no means of

funding Rs.4 lakhs in short period of 20 days. Accordingly to CIT(A),

they lack the financial capacity to fund the sum of Rs.4 lakhs in 20

days. Remand reports were supplied to the assessee and considered

the counter submissions made by the assessee. CIT(A) also discussed

the self-serving nature of the affidavits in Para No.9 and discussed the

assessee’s failure to furnish further evidences if any in support of the

credit worthiness of the 45 payees. CIT(A) analysed one of the payees

by name Shri Anil S. Bacchav and inserted the scanned ledger extract

involving him at Page 21 of his order. This is the case where

Rs.20,000/- per day was claimed to have been received by the assessee

during the period 18-12-2009 to 06-01-2010. For the sake of

completeness, we proceed to extract the same here asunder :

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Anil S. Bacchav 18-12-2009 Dr. Cash Receipt 9 20,000.00 Adv. rec. 19-12-2009 Dr. Cash Receipt 40 20,000.00 Adv. rec. 20-12-2009 Dr. Cash Receipt 71 20,000.00 Adv. rec. 21-12-2009 Dr. Cash Receipt 102 20,000.00 Adv. rec. 22-12-2009 Dr. Cash Receipt 133 20,000.00 Adv. rec. 23-12-2009 Dr. Cash Receipt 164 20,000.00 Adv. rec. 24-12-2009 Dr. Cash Receipt 195 20,000.00 Adv. rec. 25-12-2009 Dr. Cash Receipt 226 20,000.00 Adv. rec. 26-12-2009 Dr. Cash Receipt 257 20,000.00 Adv. rec. 27-12-2009 Dr. Cash Receipt 288 20,000.00 Adv. rec. 28-12-2009 Dr. Cash Receipt 319 20,000.00 Adv. rec. 29-12-2009 Dr. Cash Receipt 350 20,000.00 Adv. rec. 30-12-2009 Dr. Cash Receipt 381 20,000.00 Adv. rec. 31-12-2009 Dr. Cash Receipt 412 20,000.00 Adv. rec. 01-01-2010 Dr. Cash Receipt 443 20,000.00 Adv. rec. 02-01-2010 Dr. Cash Receipt 474 20,000.00 Adv. rec. 03-01-2010 Dr. Cash Receipt 505 20,000.00 Adv. rec. 04-01-2010 Dr. Cash Receipt 536 20,000.00 Adv. rec. 05-01-2010 Dr. Cash Receipt 567 20,000.00 Adv. rec. 06-01-2010 Dr. Cash Receipt 598 20,000.00 Adv. rec.

per the discussion given in Para No.11 of his order and the same reads

as under :

“11. A perusal of the facts clearly reveals that the appellant had manipulated the availability of cash of Rs. 1,80,00,000/- that he was required to deposit with the collector's office, Nashik to obtain the sand mining contract. It is not a sheer coincidence that each of the 45 persons has deposited Rs. 20,000/- in cash daily from 18/12/2009 to 06/01/2010. No agriculturist would have availability of cash in such a fashion. I have gone through the statements of some of the 27 persons recorded by the AO u/s 131 of the Act. Prima facie I find that none of the persons could convincingly answer about the source of the cash advances alleged to have been given to the appellant. Further, they also

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did not remember the exact amount which was given to the appellant on various dates. No documentary evidences in the form of cash receipts from the appellant in respect of the alleged cash advances were produced by them. In fact, Shri Shekhar Raghunath Bagul and Shri Rajendra P. Salunkhe stated that they did not give Rs. 20,000/- to the appellant continuously. It may be recalled that the appellant has shown to have received Rs. 20,000/- in cash from each of the 45 persons daily from 18/12/2009 to 06/01/2010. After going through the material available on record, I am of the opinion that the appellant has introduced his own funds in the form of cash in the name of 45 persons to arrange the availability of cash of Rs. 1,80,00,000/- with him to make onward payment to District Collector's office, Nashik for obtaining the sand mining contract. During the course of assessment as well as remand proceedings, none of the persons could produce any single document to support purchase of sand from the appellant. Similarly, not a single documentary evidence was produced by any of the 45 persons in support of subsequent sale of sand which they had stated to have purchased from the appellant. Similarly, none of the 45 persons could produce any single documentary evidence to explain the availability of cash with them. No receipts for sale of agricultural produce were produced by any of the agriculturists who claimed to have given cash out of the sale proceeds of their agricultural produce. The appellant has also failed to produce sale bills for the alleged sale of sand to the above referred 45 persons. He has also failed to furnish any quantitative details of extraction of sand and subsequent sale of sand to the above referred 45 persons. In the facts and the circumstances of the case, I am of the considered opinion that the appellant has tried to circumvent the provisions of the I.T. Act, 1961 by keeping cash deposits from each person at Rs.20,000/- per day. The appellant has concocted the documents to prove the transactions as genuine. In view of the above, I am of the considered opinion that the appellant has failed to prove the genuineness of the transaction of sale of sand to the above referred 45 persons from whom he has allegedly received cash advances for sale of sand. The appellant's contention that cash advances were received against sale of sand is devoid of merit and hence not acceptable. In view of the above the appellant's contention that AO was not justified in invoking the provisions of sec. 68 of the Act is also dismissed. Appellant's reliance on various case laws in this regard is misplaced as the nature of cash advances, alleged to have been received against sale of sand, is found to be that of cash credits. It is a clear case of introduction of unexplained cash. These 45 persons have tried to accommodate the appellant in explaining the source of Rs.1,80,00,000/- in his hands by furnishing fictitious affidavits. While the identities of these persons may have been proved, their creditworthiness and genuineness of the transactions are clearly found to be bogus. In view of the above, I am of the opinion that AO was justified in making the addition of Rs. 1,80,00,000/- in the hands of the appellant u/s 68 of the Act. The same is hereby confirmed.”

present appeal with the ground referred above.

developments led to the addition of Rs.1.80 crores and confirmation of

the same by the CIT(A). It is the case of the Ld. Counsel that all the 45

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payees duly confirmed the cash payment of Rs.4 lakhs each to the

assessee which formed part of Rs.1.80 crores. He also submitted that

the said amount was paid to the Government account for getting the

sand contract after making the requisite TDS. Therefore, as per the Ld.

DR for the Revenue, the identity of the individuals is undoubted.

Regarding credit worthiness also, assessee furnished the requisite

details about all the payees. Therefore, as per the Ld. AR for the

assessee, the decision of the AO/CIT(A) against the assessee is required

to be reversed.

Regarding genuineness of the transaction, not much of the

arguments were made by the assessee’s counsel except by stating that

these are all genuine transactions as evident from the final payment of

Rs.1.80 crores to the Government account.

Tribunal in the case of M/s. P.P. Gogad Vs. ACIT in ITA

No.535/PUN/2015 order dated 14-06-2017 for A.Y. 2010-11 for the

proposition that the addition u/s.68 is unwarranted when the

payments are confirmed by the sub-contractors in that case. He

brought our attention to the fact that this is the case where payments

are made by the assessee to the 4 sub-contractors after making TDS as

per the provisions of section 194C of the Act. The Tribunal reversed the

finding of the lower authorities in that case in favour of the assessee.

to the belief that the provisions of section 68 are properly invoked in

this case. Raising of Rs.1.80 crores in a period of 20 days, receiving of

the said amounts all in cash from 45 payees, each transaction not

exceeded Rs.20,000/- a day by each payee, the explanation of the

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assessee for getting the contract in his name and work of extraction of

sand by all 45 payees, non-assessability of the said 45 persons to

income-tax etc. suggest that it is a case of laundering of money by

assessee involving all the said 45 payees. As per the Ld. DR for the

Revenue, this kind of transactions cannot be considered as genuine

transactions merely because they are owned by the said payees. These

payees suffer from lack of credit worthiness which is not fully evidenced

by the assessee. From this point of view, assessee failed to discharge

the onus about the credit worthiness of these payees. He also

submitted that the law allows the payments to assessee to compositely

fulfil all the conditions specified in the provisions of section 68 of the

act.

We have examined the facts of this case and found there is no dispute

about the receipt of the payment in installments of Rs.20,000/- each

per day from each payee. There is also no dispute about the cash

payments. It is an admitted fact that the payees are never subject to

income-tax. It is also a fact that all the payees never made appearance

before the AO in response to the summons u/s.131 of the Act. Least of

all, these payees could have demonstrated the exact amount paid by

them to the assessee and the manner of payment of Rs.20,000/- per

day. They are ignorant about the fact relating to payment of cash of

Rs.20,000/- per day including the weekends. The 7/12 extracts

furnished by the assessee could never demonstrate conclusively that

the lands belong to the individual payees and the income is actually

earned by them which formed the source of making of cash payments to

the assessee. Leave alone the bills evidencing the fact of conducting

agricultural operations on the said lands, the payees has no evidence to

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show the fact of earning the Agricultural income by way of the sale bills

for earning of the agricultural income. We also perused the said

extracted portions of the order of the AO as well as the order of CIT(A)

and find the reasoning given by them is one possible view.

obtaining the sand contract from the Government. Based on the

principle of probability, we find it most likely that the assessee had to

use the names of the 45 payees for mobilising the said amount.

Creation of cash books/records for all the 45 payees and recording the

each cash transactions at the rate of Rs.20,000/- per day, non

exclusion of the weekends and Sundays too comments the hurriness of

the assessee. It is undisputed fact that the payees are not assessed to

tax at tht time or at the time of assessment or now. In our view, the

assessee failed to show up all the payees before the AO. Therefore, we

confirm the conclusions drawn by the AO/CIT(A) at the relevant point of

time. It is the settled law relating to provision of section 68 of the Act

that the assessee is under obligation to discharge all the conditions

specified in the said section cumulatively to the AO. As such, the

entries in the books of account are not determinative. Therefore, we

find no reason to reverse the said finding of the AO/CIT(A). Therefore,

we are of the opinion that the grounds raised by the assessee in this

case are required to be dismissed.

Order pronounced in the open court on this 10th day of January, 2018. Sd/- Sd/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) �याियक सद�य �याियक सद�य /JUDICIAL MEMBER लेखा लेखा सद�य सद�य / ACCOUNTANT MEMBER �याियक �याियक सद�य सद�य लेखा लेखा सद�य सद�य पुणे Pune; �दनांक Dated : 10th January, 2018 सतीश

12 ITA No.503/PUN/2015 Bhushan Uttamrao Bachav

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

अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. 3. The CIT(A)-1, Nashik 4. CIT-1, Nashik िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “B Bench” 5. Pune; गाड� फाईल / Guard file. 6.

आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार आदेशानुसार

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