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Before: SHRI G. D. AGRAWAL & SHRI KULDIP SINGH
PER KULDIP SINGH, JM:
1. The appellant Pawan Jindal hereinafter referred to as the assessee by filing the present appeal sought to set aside the impugned order dated 01/04/2011 passed by Ld. CIT(A) Faridabad on the grounds inter alia:-
“that the order of the ld. CIT(Appeals), Faridabad is bad in law and on facts;
that on the facts and in the circumstances of the case, the ld. First appellate authority [CIT(A) Faridabad] is erred in: i. Confirming the addition made of Rs. 8,00,000/- on account of loans from the following creditors u/s 68 of the Income Tax Act, 1961; a) Sh. Net Ram Goel b) Sh. Anil Kumar Bansal c) Sh. Mahender Pratap Singh d) Dh. Ajay Kumar Jain e) Smt. Manju Rani f) Sh. Virender Kumar g) Sh. Vikas Kumar Jain ii. Confirming the additions of Rs. 3721/- on account of interest paid to the above referred persons. 3. that on the facts and in the circumstances of the case, the ld. CIT(Appeals) erred in holding: a) That the maintenance of books of accounts by persons filing income tax returns with income of about Rs. 1 lac is improbable and against the normal human probability. b) That the statement of affairs and cash flow statements of the persons referred to in (a) above, cannot be believed without brining contrary evidence on record. 4. the appellant craves leave to add, amend, alter vary and/or withdraw any or all the above grounds of appeal.”
2. Briefly stated the facts of this are: - During the processing of return of income filed by the assessee qua the A.Y. 2006-07 the same was subjected to scrutiny and consequent upon the notice issued u/s 143(2) and 142(1) Shri Pankaj Mittal, Chartered Accountant attended the proceedings on behalf of the assessee from time to time and filed reply to the questionnaire. The assessee is into the trading of iron pipes under the name and style of M/s Shiv Pipe & Company. From the scrutiny of the books of account it has come on record that the assessee has introduced unsecured loans, found to have been credited in the assessee’s bank account no. 0167002100071263 maintained with Punjab National Bank, N.I.T. Faridabad to the tune of Rs. 1435000/-. From 13 different persons, the assessee in the profit and loss account has debited a sum of Rs. 215388/- on account of interest towards unsecured loans. However, the detail of interest on the aforesaid loans @ 15% p.a. to the account of the aforesaid 13% comes to 17461/-. The Assessing Officer finding the explanation furnished by the assessee unsatisfactory came to the conclusion that the assessee’s unaccounted money from the undisclosed sources has been routed by adopting dubious means and thereby made an addition of Rs. 1567410/- (Rs. 1435000/- unsecured loan + Rs. 17461/- interest amount).
2.1 The assessee carried the matter before the CIT(A) who has partly allowed the appeal. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal.
2.2 The ld. AR for the assessee challenging the impugned order contended, inter-alia, that the CIT(A) has erred in confirming the addition of Rs. 8 lacs on account of loans from different creditors u/s 68 of the Act; that CIT(A) further erred in confirming the addition of Rs. 3721/- on account of interest paid to the above referred persons; that the assessee has already returned the entire loans to his creditors by way of cheques.
2.3 However, on the other hand, the ld. DR relied upon the order passed by the ld. CIT(A).
Undisputedly, during the appellate proceedings the ld. CIT(A) by allowing the admission of additional evidence called a remand report from the Assessing Officer by examining fresh evidence brought on record by the assessee. It is also not in dispute that during the remand proceedings the assessee has filed affidavits, confirmations, copies of ITR, statement of affairs and cash flow statement of Shri Anil Kumar Bansal, Mahender Pratap Singh, Vikash Kumar Jain, Manju Rani and Varender Kumar.
In the backdrop of the afore-referred facts and the facts and circumstances of the case the CIT(A) has affirmed the findings returned by the Assessing Officer primarily on two grounds: -
(i) that the assessee has failed to produce the aforesaid creditors before the Assessing Officer during the remand proceedings;
(ii) that it is improbable that the persons filing returns declaring income of about Rs. 1 lac would maintain the books of accounts so as to believe the statement of affairs and cash flow statements filed by or on their behalf, as the same is against the normal human probability.
4.1 It is settled principle of law that when the assessee has duly discharged the onus by furnishing the affidavits, confirmations, copies of Income tax returns, statement of affairs and cash flow statement of his creditors, the burden stands shifted to the Assessing Officer to rebut the same by bringing cogent evidence on the record, particularly when he has not disputed the aforesaid documents so furnished by the assessee. The Assessing Officer has the ample power to summon the aforesaid creditors of the assessee which he has apparently not exercised rather again shifted the burden on the assessee without disputing the genuineness of the documents.
No doubt it is duty of the assessee to prove the genuineness and creditworthiness of his creditors, but when all the transactions in this case have been routed through banks and the complete particulars have been furnished by the assessee, which have not been disputed by the Assessing Officer, the Assessing Officer was required to ensure the presence of creditors by using coercive method and not to proceed summarily.
As far as the question of disbelieving the statement of affairs and cash flow statement filed by on or behalf of the creditors in the face of the fact that they had filed return declaring income of about Rs. 1 lac is concerned, the same has been disbelieved on the basis of conjectures and surmises. Because it varies from person to person to maintain the books of accounts even if, their income is meager. Merely on the basis of the fact that the income was about Rs. 1 lac the statement of books of accounts cannot be disbelieved.
When all these facts are further examined in the light of the undisputed fact that all the documents to prove the genuineness and creditworthiness of S/Sh. Netram Goel, Anil Kumar Bansal, Mahender Pratap Singh, Ajay Kumar Jain, Virender Kumar, Vikas Kumar & Ms. Manju Rani lying at pages 92 to 160A of the Paper Book having been perused by the Assessing Officer and the loan amount in question borrowed by the assessee has since been repaid by the assessee by way of account payee cheques prior to 2009, the order passed by the ld. CIT(A) is not sustainable in the eyes of law.
7.1 In the view of what has been discussed above, we are of the considered view that the assessee has duly discharged the onus upon him to prove the genuineness and creditworthiness of his creditor to prove the loan of Rs. 8 lacs, otherwise proved to have been paid by way of cheques and as such the addition made to his income is not sustainable.
7.2 Consequently, the present appeal is hereby allowed.