M/S. ADHAR TECHNOLOGIES PVT. LTD.,BHUBANESWAR vs. DCIT, CIRCLE-1(1), BHUBANESWAR

This is an appeal filed by the assessee against the order of CIT(A)-3,

Bhubaneswar. Dated 24.2.2016, for the assessment year 2011-12.

confirming the addition of Rs.14,00,000/- made by the Assessing Officer as

unexplained cash credit.

unsecured loan of Rs.14,00,000/- on 7.10.2010 from two persons namely

2 ITA No. 228/CT K/ 2016 Asse ssment Year :20 11- 12 Shri Harish Chandra Mohanty of Rs.7 lakhs and Smt. Nikita Subodhi of Rs.7

lakhs. He observed from the bank account of the loan creditors that they

deposited cash of Rs.7 lakhs on 7.10.2010 in the bank accounts and

immediately on the very same date, they issued cheques to the assessee

and the same was credited in the account of the assessee company on the

very same day i.e. on 7.10.2010. According to the Assessing Officer, the

assessee could not prove the creditworthiness of the loan creditors to

advance loan of Rs.7 lakhs each to the assessee company as they had

deposited cash in their bank accounts before issue of cheque to the

assessee on the very same date and the amount was credited in the

account of the assessee company on the very same date.

Subudhi, is the wife of Tapendra N Senapathi, who is the C.E.O. of Tatwa

Technologies, a group of companies having turnover of Rs.12 crores and

above, that she is the daughter-in-law of a highly established family of

Rabindra Group of Bhubaneswar, that she had invested money in other

companies during the year and that, when the assessee company required

money, she arranged money from different sources as loan and deposited

the money in her personal account and issued the cheque to the assessee

company. Similarly, Shri Harish Chandra Mohanty is an engineer and he is

father of Ayaskanta Mohanty who is the Managing Director of Tatwa

Technoligies Ltd., having a turnover of Rs.12 crores. It was stated that

both the loan creditors were having creditworthiness, reputed personality

3 ITA No. 228/CT K/ 2016 Asse ssment Year :20 11- 12 and are directors of the assessee company. The CIT(A) did not accept the

explanation of the assessee and held that the deposit of Rs.14 lakhs on

7.10.2010 in the bank account of the assessee company is the fund of

Rs.7,00,000/- each transferred from bank account of Shri Harish Chandra

Mohanty and Smt. Nikita Subudhi on the same date and cash deposit of

Rs.7,00,000/- each by the creditors in their respective bank accounts on

same date and immediately before issuance of cheque in favour of the

assessee company is not in dispute. In the circumstances, the assessee

could not prove the source of cash deposit in each creditor bank account

and for failure, the same is assessed as deemed income of the assessee

u/s.68 of the Act. In support of his contention, the CIT(A) relied on the

following decisions:

1) Sethi Cotton Traders vs ITO, 286 itr 548.

2) Shri Khushal Prasad Manhar vs CIT, 236 CTR 192.

3) ITO vs. Blessing Construction, 32 taxmann.366.

submissions made before the lower authorities and submitted that the

assessee was required to prove the source of credit in his books of account

and not the source of source. He submitted that the source of deposit of

Rs.14 lakhs in the bank account of the assessee was the loan given by Smt.

Nikita Subudhi of Rs.7 lakhs and Shri Harish Chandra Mohanty of Rs.7 lakhs

which was received by the assessee company through banking channel. He

4 ITA No. 228/CT K/ 2016 Asse ssment Year :20 11- 12 relied on the decision of Hon’ble Supreme Court in the case of CIT vs. Orissa

Corporation Pvt.Ltd.,159 ITR 78 (SC), wherein, it was held that if the

assessee had given names and address of the alleged creditors, and 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, the Revenue,

apart from issuing notices under s. 131 at the instance of the assessee, did

not pursue the matter further and did not examine the source of income

of the said alleged creditors to find out whether they were credit-worthy,

the addition cannot be made in the hands of the assessee on the ground

that the loan creditors were not creditworthy to advance the same to the

assessee.

authorities.

authorities and materials available on record. In the instant case, the

assessee received unsecured loan of Rs.14,00,000/- from two persons from

Shri Harish Chandra Mohanty and Smt. Nikita Subudhi of Rs.7 lakhs each.

The Assessing Officer observed from the bank statement of the loan

creditors that before issue of cheque to the assessee, they had deposited

cash of Rs.7 lakhs each in their bank account and on the very same date

of deposit of cash, the cheques were cleared and the same was credited in

the bank account of the assessee company. From this, the Assessing

Officer inferred that the loan creditors did not have the creditworthiness to

5 ITA No. 228/CT K/ 2016 Asse ssment Year :20 11- 12 advance the sum of Rs.14 lakhs to the assessee company and made

addition of Rs.14 lakhs u/s.68 of the Act in the hands of the assessee

company.

for the very same reason.

loan of Rs.7 lakhs each was received from two persons namely Shri Harish

Chandra Mohanty and Smt. Nikita Subudhi, who are the directors of the

assessee company. He further submitted that the amount of loan was

received through banking channel. He submitted that the loan

confirmations together with PAN of the loan creditors was filed before the

Assessing Officer and the CIT(A). Thus, the assessee discharged his initial

burden to prove the identity of the loan creditors, genuineness of the

transaction and creditworthiness of the loan creditors from whom

unsecured loan was received by the assessee. It was his contention that

the department thereafter did not make any effort to verify whether the

loan creditors had the creditworthiness of advancing the loan to the

assessee company or not and without doing so, it cannot be held that the

loan creditors were not having the capacity to advance the unsecured loan

to the assessee and make addition u/s.68 of the Act in the hands of the

assessee company. For this, he relied on the decision of the Hon’ble

Supreme Court in the case of Orissa Corporation Pvt Ltd (supra). Ld D.R.

has relied on the orders of lower authorities. He could not controvert the

6 ITA No. 228/CT K/ 2016 Asse ssment Year :20 11- 12 submissions made by ld Authorised Representative of the assessee. The

assessee has discharged its initial burden that lay upon it by giving the

name and address of the loan creditors and their PAN nos. Thereafter, the

Assessing Officer after enquiry has brought no material on record to show

that the loan creditors did not have creditworthiness to advane the loan to

the assessee company. Merely from the fact that there was cash deposit

in the account of the loan creditors before issue of cheque of equal amount,

it cannot be said that they did not have the capacity to advance the loan to

the assessee. In law, the assessee is not required to explain the source of

the source of credit in his books of account. The source of cash deposit is

required to be ascertained from the loan creditors and if on enquiry no

satisfactory explanation is given by the loan creditors about the same, the

Assessing Officer can make addition in their hands under section 69 of the

Act. No material has been brought on record by the revenue to show that

it is assessee’s own money which has flown in the bank account of the loan

creditors and they issued cheques to the assessee for same amount. In

the given facts and circumstances of the case, I am of the considered view

that the assessee has discharged its initial burden u/s.68 of the Act. Hence,

I set aside the orders of lower authorities and delete the addition of Rs.14

lakhs made u/s.68 of the Act and allow this ground of appeal of the

assessee.

7 ITA No. 228/CT K/ 2016 Asse ssment Year :20 11- 12 10. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 08/03/2017 in the presence of parties. Sd/- (N.S Saini) ACCOUNTANT MEMBER

Cuttack; Dated 08/03/2017 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : M/s. Adhar Technologies (P) Ltd., Plot No.6, 2nd floor, Kharvel Nagar, Unit-III, Bhubaneswar. 2. The respondent : DCIT, Circle 1(1), Bhubaneswar. 3. The CIT(A)-3, Bhubaneswar. 4. Pr.CIT-1, Bhubaneswar. 5. DR, ITAT, Cuttack BY ORDER, 6. Guard file. //True Copy// SR.PRIVATE SECRETARY ITAT, Cuttack