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Income Tax Appellate Tribunal, DELHI BENCH `A’ NEW DELHI
Before: SHRI CHANDRA MOHAN GARG & SHRI L.P. SAHU
This appeal by the assessee has been directed against the order of the CIT(A)- XVII, New Delhi dated 27.08.2012 passed in assessee’s first appeal no. 107/CIT(A)-XVII/11-12 for assessment year 2003-04.
The grounds raised by the assessee read as under:-
[Type text] “1) THAT in the facts and circumstance of the case, the Learned CIT(A) erred in confirming the addition to the appellant’s income made by the Learned A.O. of the amount of Rs. 26,31,257/- received from appellant’s bank account in Singapore.
2. THAT in the facts and circumstances of the case, the Learned C1T(A) erred in not accepting the appellant’s alternative plea that only $ 46000 had been received from outside party viz Giang Tran into appellant’s bank account in Singapore and addition, if any, is to be restricted to such receipt into assessee’s bank account.”
Briefly stated the facts giving rise to this appeal emerging from the appeal records are as follows:-
“Originally return declaring an income of Rs. 3254510 was filed on 27.11.2003 which was assessed at Rs. 6402471. The assesses preferred an appeal against the order of ACIT circle 24(1) who made additions to the returned income on account of telephone expenses, vehicle expenses, entertainment expenses, business promotion expenses and an addition of Rs. 2746531 was made on account of undisclosed income from foreign remittance. The CIT (Appeals) - X New Delhi vide his order dated 27-12-2007 in appeal number 90/05-06 gave relief to the assessee of Rs. 200715 on disallowances made by AO on account of vehicle running expenses, telephone expenses, entertainment and business expenses. However the addition made on account of undisclosed foreign remittance to the tune of Rs. 2746531 was confirmed by the CIT appeal. Further the CIT appeal observed that the assessee had credited an amount of Rs. 2531257 to his capital account as remittance from overseas. It was further stated by the learned CIT (Appeal) - X, New Delhi, that the AO noted that the appellant/assessee has not explained the source of credit of remittances from overseas of Rs. 2631257 in the capital account.
[Type text]
“While confirming the addition of Rs. 2746531 made by the AO on account of undisclosed foreign remittance. The CIT appeal observed that the credit of Rs. 2631757 made by the assessee to his capital account during the year on account of credit of remittances from overseas was left unexplained before the AO but no addition on this account was made in the assessment year. Hence the assessee was asked to furnish the details at appellate stage with regard to the nature of receipt of remittances from overseas amounting to Rs 2631257 credited to the capital account of the assessee. As the learned CIT appeal in page-10 in para 7 has given the details of the capital account of the assessee wherein it was noticed by Assessing Officer that the appellant had credited his capital account by Rs.2631257 as remittances from overseas.” The assessee preferred an appeal against the order of CIT (Appeal) - X dated 27-12 2007 to ITAT. The honorable ITAT in its order dated 27 11-2009 in IT A No. 846/Del/2008 deleted the addition of Rs. 2746531 made by the AO. However on the issue of enhancement of Rs 26,31,257 made by CIT (Appeal) – X, the honorable ITAT has restored the matter back to the file of the assessing officer with a direction to examine the contention of the assessee and after examining the same to consider the said credit in the capital account as per the provisions of the law. In pursuance to the above said order of Honorable ITAT, a notice under section 143(2) of IT Act was issued on 10-08-2010 fixing the case for 20-08-2010. On 2008-2010, Shri Sandeep Gupta attended and filed a letter and part information. The case was adjourned for 31-08-2010. Shri Sandeep Gupta attended and filed his submission as under:- We refer to your notice above. In this regard we would like to submit that during the proceedings in the office of CIT (A), the Id. CIT(A) had given enhancement notice to the assessee with respect to the receipts of remittances from overseas amounting to Rs. 26,31,25/ credited in the capital account of the assessee The Ld.CIT (A) had contended that there is no evidence was put on record by the assessee to substantiate his explanation that when the loan was given and that there was no confirmation.
[Type text]
With reference to above, we would like to submit that, the assessee was a non-resident working in Singapore during the period September 1989 to March 1996 as a director of M/s Hughes Network System. Out of the savings in the account the assessee vide letter to the bank dated 14thApril 2000 had provided a friendly loan to his friend Mr. Giang Tran through his company iyou.com. (Annexure 1). The amount was duly debited to the assessee HSBC account no.252 033 816 270 on 16th April 2000 (Annexure 2).
Mr. Gaing Tran is an American Citizen and is a serial entrepreneur. His passport number is 203746221 (Annexure 3). He had promoted a company called iyou.com for which he had requested for a friendly loan from the assessee.
Mr. Giang Tran had then subsequently returned the money over a period of 6 months and has also given a confirmation to the effect that he had in fact taken the loan and the same was returned – (Annexure 4).”
In pursuance to the order of the Tribunal dated 23.2.2010, the Assessing Officer, after affording due opportunity of hearing made addition of Rs.26,31,257 u/s 68 of the Income Tax Act, 1961 (for short the Act) by observing as follows:-
“The assessee was specifically asked to file the copy of bank account of the payer from where the money was sent along with his IT return to prove his credit worthiness. The case was adjourned for 16.9.2010. However no one attended the case on 16.9.2010. Hence a notice under section 143(2) was issued again on 9.11.2010 fixing the case 19.11.2010. On 19.11.2010, Shri J Kamath from Sandeep Ramesh Gupta & Co. attended and expresses his inability to file the details as asked for vide note sheet entry dated 31.8.2010.
[Type text]
He is apprised that sufficient time has been given for furnishing the requisite details and prove the genuineness of loan as claimed since it was not reflected in the balance sheet of the assessee as reproduced on the order of CIT(Appeals)- X page -14. He was required to produce the full evidence with documentary proof date wise when this claimed loan was shown and copy of bank account showing these transactions and copy of bank account of payer from where the foreign money was sent along with his IT return. The case was adjourned for 26.11.2010. On 26.11.2010, Shri Sandeep Gupta CA attends and seeks more time. A final opportunity for filing the details was given for 3.12.2010. However no one attended on the date. Hence I’m fortified to hold the view that the assessee has nothing to say or explain or produce in support of his claim. The copy of Bank account in which money has been received is filed however the genuineness of the transaction is not complete unless the copy of account of the payer is produced. Though the AR of the assessee has been repeatedly asked to give the same. In the absence of the said account from where the money travelled the sources & genuineness of the claim of the assessee remains unverifiable. The assessee though proved the identify yet failed to prove and establish the other two crucial aspects namely genuineness of the transaction since payer’s bank account copy is not given and the creditworthiness of the payer. Under the given circumstances it is held that the assessee has not been able to file any evidence or cogent reason to prove the creditworthiness of the creditor and genuineness of the transaction regarding receipt of Rs. 26,31,257/- credited to his accounts. In view of the circumstances of the case, it is held that the assessee has not been able to support his claim of genuineness of the transaction despite umpteen opportunities and sufficient time given to him for the same. Hence an addition of Rs. 26,31,257 is made to assessed income under section 68 of IT Act and penalty proceedings under section 271(1)(c) have been [Type text] initiated separately for furnishing inaccurate particulars of income.”
The aggrieved assessee preferred first appeal before CIT(A) which was also allowed by him observing and concluding as follows:-
“4.4 Since the addition is made u/s 68 of the I.T. Act, the important aspect is whether the AO was satisfied with the explanation given by the appellant. In this case the Assessing Officer was not satisfied with the explanation and recorded the fact that the appellant had failed to prove genuineness of the transaction and the creditworthiness of the creditor. The above mentioned decision makes it clear that if the AO was not satisfied with the explanation offered by the appellant the burden was on the appellant to rebut the same. As appellate authority even I am not satisfied with the explanation offered by the appellant as the evidence submitted during the appellate proceedings do not prove the genuineness of the transaction or the creditworthiness of the creditor. As per the above decision of the Hon'ble Supreme Court, the burden is on the appellant to take the plea that even if the explanation is not acceptable, the material and attending circumstances available on record do not justify the sum found credited in the books to be treated as a receipt of income nature. But such a plea was not taken by the appellant during the appellate proceedings. In this connection, it is pertinent to note that in the initial assessment order itself, the AO had pointed out that the case the AO was not appellant had received foreign exchange totaling to Rs.1,32,69,395/- from M/s Hughes Network Systems, USA, but only Rs.1,05,22,863/- was shown as his income from consultancy. The AO’s original suspicion was that the balance amount of Rs.27,46.531/- was [Type text] credited in the capital account as remittance from overseas and the additional evidence in this regard was filed subsequently before CIT(A) only. But the difference between the receipt and income shown in the P&L a/Commissioner was confirmed by the CIT(A) as he written submissions not satisfied with the additional evidence submitted by the appellant.
4.5. As per section 68, the onus is on the appellant to satisfactorily explain the source of credit in the books of account maintained by him. I am of the opinion that the appellant has not satisfactorily explained the source of Rs.26,31 ,257/-. Further, the appellant had not taken the plea during the appellate proceedings that the material and attending circumstances available on record do not justify the sum found credited in the book to be treated as a receipt of income nature. The burden in this regard is on the appellant and no such attempt is made by the appellant during the appellate proceedings. Therefore, respectfully following the Hon'ble Supreme Court's decision in the case of CIT vs. P. Mohanakala reported in 291 ITR 278, the addition made by the AO is here by upheld and the ground No. 1 is rejected.”
The ld. AR firstly pointed out that the first round of proceedings, the Assessing Officer made two additions viz. (i) Rs.27,46,431 as unexplained remittance from abroad and (ii) Rs.26,31,257 u/s 68 of the Act and the CIT(A) also dismissed appeal of the assessee on both the grounds. Ld. AR further pointed out that the ITAT allowed appeal of the assessee on first ground and deleted the first [Type text] addition of Rs.27,46,431 sand ground no. 1 of the assessee was allowed by the CIT(A) and this conclusion of the CIT(A) has been accepted by the revenue as there is no appeal against that part of the Tribunal order. Ld. DR is fairly agreed to the above submissions of the ld. AR.
However, the controversy remained about second addition made u/s 68 of the Act which was restored to the file of the Assessing Officer for fresh adjudication and the Assessing Officer again made said addition which was again confirmed by the CIT(A). Ld. AR further pointed out that in the second round, the Assessing Officer rejected explanation of the assessee by wrongly observing that in absence of the said account from where the money travelled the source and genuineness of the claim of the assessee remains unverifiable. Ld. AR vehemently contended that the Assessing Officer noted that the assessee proved identity of the payer but failed to prove other two crucial aspects i.e. genuineness of the transaction and creditworthiness of the payer. Ld. AR also contended that the CIT(A) in the second round also denied relief to the assessee by wrongly taking into consideration the amount of Rs.27,46,531 instead of Rs.26,31,257. Ld. AR further pointed out that the assessee submitted a copy of assessee ‘s instruction to bank by which he remitted USD 5000 to Mr. Giang Tran, iou.com, California, USA on 14.2.2000 (PB page 1), confirmation of Mr. Giang Tran (PB page 16), copy of assessee’s bank statement of account wherefrom [Type text] USD50000 was transferred to Mr. Giang Tran on 165.2.2000 (PB page 17), copy of the statement of bank account of the assessee with HSBC, indicating the return of advance from Mr. Giang Tran (PB 51-58), affidavit of assessee (PB page 59-60), affidavit of Shri Giang Tran (PB page 61-62), profile of Mr. Giang Tran (PB page 66-67) and in totality of facts emerging from these documents, it is amply clear that the assessee gave an advance/loan to Mr. Giang Tran on 14.2.2000 transferring amount from his own bank account which was credited to the account of Mr. Giang Tran on 16.2.2000 and against this amount, the assessee, in turn, received USD 46000 (INR Rs.26,31,257) in eight instalments from Mr. Giang Tran from 20.7.2002 to 2.1.2001 as confirmed by Mr. Giang Tran. Ld. DR also pointed out that as per profile of the payer Mr. Giang Tran, he is a well qualified author of several books, widely travelled entrepreneur and well associated active person who received amount from assessee in Feb. 2000 and returned the same in instalments during 2002-03 hence, not only identity of this payer has been established but also his creditworthiness and genuineness of the transaction has been established by the assessee, thus conclusion of the Assessing Officer was not correct and the CIT(A) upheld the addition without considering the explanation and documents of the assessee and by considering the wrong and irrelevant facts, hence, addition is not sustainable.
[Type text]
Lastly, the ld. AR submitted that the affidavit of the assessee dated 12.2.2012 and affidavit of the payer Mr. Giang Tran along with all documents clearly show that not only identity of the payer is proved but the genuineness of the transaction and creditworthiness of the payer is also fully established beyond doubt and addition u/s 68 of the Act could not be made as per provisions of the Act. Ld. AR also placed reliance on the order of ITAT ‘A’ Bench Delhi in the case of Ms Mayawati vs DCIT (2008) 19 SOT 460 (Delhi) and order of Hon’ble Bombay High Court in the case of CIT vs Bhaichand N. Gandhi 141 ITR 67 (Bom) and submitted that the passbook or bank statement supplied by the bank to the assessee cannot be regarded as a cash book or accounts maintained by the assessee or under his instruction and thus the same does not fall within the ambit of section 68.
Replying to the above, ld. DR supported the action of the Assessing Officer and submitted that as per dicta laid down by Hon'ble Supreme Court in the case of CIT vs P. Mohanakala reported as 291 ITR 278 (S.C.) the addition was well founded and sustainable.
On careful consideration of rival submissions, at the very outset, from the order of the Assessing Officer passed in second round of proceedings, we note that the Assessing Officer made addition u/s 68 of the Act on the basis of copy of the [Type text] bank account statement of the assessee by holding that the genuineness of the transaction and creditworthiness of the payer have not been established. The CIT(A) upheld the same by considering amount of Rs.27,46,531 in para 4.4 and in para 4.5, the first appellate authority has mentioned amount of Rs.26,31,257 by holding that the onus was on the assessee to satisfactorily explain the source of credit in the books of account maintained by him. Per contra, the Assessing Officer in operative para, as reproduced above, has observed that the assessee has not been able to file any evidence or cogent reason to prove the genuineness of the transaction and creditworthiness of the creditor. From these observations of the authorities below, it is vivid that the Assessing Officer and the CIT(A) did not bother to consider the documentary evidence filed by the assessee showing the factum that the amount was actually not a loan or advance to the assessee but the same was refund or return of advance/loan of USD 50000 given by the assessee to Mr. Giang Tran in the year 2000 on 14.2.2000 which was credited to the bank account of Mr. Tran on 16.2.2000. From totality of the facts emerged from documentary evidence and affidavits of the assessee payee and Mr. Tran payer, this fact is amply clear that the amount of USD 46000 equivalent to INR 26,31,257 at that time was received by the assessee from Mr. Tran in eight instalments from 20.7.2002 to 2.1.2003 pertaining to FY 2002-03 relevant to assessment year 2003-04 which is under consideration in [Type text] this appeal. In this situation, we are inclined to hold that the assessee discharged its onus to prove identity and creditworthiness of the payer and the genuineness of the transaction as required u/s 68 of the Act. We are also of the opinion that the addition cannot be made u/s 68 of the Act where the assessee has established this fact that he made advance/loan to payer on 14.2.2000 which was returned during previous year under consideration and thus amount cannot be held as deemed income of the assessee u/s 68 of the Act.
We are also in agreement with the contention of the ld. AR that the ratio laid down by Hon’ble Apex Court in the case of CIT vs Mohanakala (supra) does not apply to the facts of the present case because in that case, assessee received foreign gifts from one common donor and the payments were made to them by instruments issued by foreign banks and credited to the respective accounts of the assessee by negotiation though a bank in India. Above all, the Assessing Officer brought on record positive evidence that donor was to receive compensation against donations.
Hence it was finally held, as a final fact, by the Tribunal that Assessing Officer was right in treating the donations/receipts in the hands of the assessee as income u/s 68 of the Act.
[Type text]
Per contra, when we analyse the facts of the present case, we clearly observe that in the present case, the assessee, by way of documentary evidence, properly explained that the USD 46000 equivalent to impugned addition of Rs.26,31,257 was received against advance/loan to M/s iyou.com from Mr. Giang Tran who was the promoter of iyou.com to which the assessee advanced USD 50000 from his bank account on 14.2.2000. These facts and link of advance/loan by the assessee and return of the said amount by Mr. Tran during relevant financial period clearly reveal the fact of identity and creditworthiness of payer Mr. Tran and genuineness of the transaction which was routed through banking channels to the payee assessee. The return of advance/loan cannot be held as treated as income of the payee (creditor), hence, we decline to uphold the addition made by the Assessing Officer which was incorrectly upheld by the CIT(A) in the impugned order.
The authorities below were not correct and justified in making and upholding the impugned addition and observations and conclusion of the CIT(A) in the impugned order under appeal are not only perverse but also contrary to the conclusion in the light of facts of the case which has been drawn by the authorities below without considering the relevant and trustworthy evidence of the assessee thus the same is not found to be sustainable and we dismiss the same.
[Type text]
On the basis of foregoing discussions, we are of the fortified view that the addition u/s 68 of the Act is not sustainable and we direct the Assessing Officer to delete the same being baseless and on wrong premise. Accordingly, ground no. 1 and 2 of the assessee are allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 30.10.2015.