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Income Tax Appellate Tribunal, BENCH ‘A’ KOLKATA
Before: Hon’ble Shri N.V.Vasudevan, JM & Shri M.Balaganesh, AM ]
ORDER PER N.V.VASUDEVAN, JM:
This is an appeal by the assessee against the order dated 09.08.2012 of CIT(A)-XX, Kolkata relating to A.Y.2007-08.
The only ground of appeal
raised by the assessee reads as follows :-
1. That under the facts & circumstances of the case the learned AO was unjustified in adding Rs.9,31,750/- as income from undisclosed sources in respect of loans taken from various persons and the same should be deleted.”
3. The assessee is an individual. She derives income from business and other sources besides salary income. In the course of assessment proceedings the AO noticed that the assessee had received loans from the following parties :- i) Priyanka Gupta Rs. 1,750 ii) Mahavir PrasdMalani Rs.4,00,000 iii) Suman Baid Rs.2,50,000 iv) Lakshmi Devi Malani Rs. 80,000 v) Kanchan Devi Manoth Rs.2,00,000 Rs.9,31,750. Savita Ladha ,A.Y.2007-08 The assessee had filed confirmation given by the aforesaid parties that they have given loans to the assessee which were filed before the AO.AO issued notice u/s 133(6) of the Act to the aforesaid parties. In response to the same they had also confirmed the fact that they have given loans to the assessee.
4. With regard to the reply received by the AO from Priyanka Gupta the AO found that the amount outstanding shown by the aforesaid party was Rs.51,750/-. Since the assessee claimed outstanding loan of Rs.50,000/- AO was of the view that the difference in the figures as claimed by the assessee and as confirmed by Priyanka Gupta had not been properly explained. AO, therefore treated the explanation with regard to receipt of loan from Priyanka Gupta as unexplained.
5. With regard to the remaining four persons all of them had given confirmation that they have given loans to the assessee in response to the notice u/s 133(6) of the Act by the AO. All the aforesaid four persons had given copy of their Income tax returns, profit and loss account and balance sheet, copy of the bank statement wherefrom the loan was given. They had also given evidence of re-payment of the loan by the assessee in the subsequent assessment years. Copies of the evidence filed by the aforesaid person are placed at pages 4 to 108 of the assessee’s paper book. AO found that before giving up the loans on the aforesaid parties to the assessee by cheque there was cash deposits in the bank account of the aforesaid four parties. AO called upon the assessee to produce the aforesaid four parties for examination on a specified date. According to the assessee she requested the parties to appear before AO but they declined to do so. According to the AO the facts and circumstances showed that the assessee has routed his own undisclosed income through the loan creditors. In coming to the aforesaid conclusion the AO mainly placed reliance on the fact that the assessee failed to produce the loan creditors for recording their statements regarding genuineness and creditworthiness of the so called loan creditors. AO accordingly treated the sum of Rs.9,39,715/- as unexplained cash credit u/s 68 of the Act and added the said sum to the total income of the assessee. Savita Ladha ,A.Y.2007-08
6. Before CIT(A) the contention of the assessee with regard to the loan creditor Smt. Priyanka Gupta was that the outstanding loan payable to the aforesaid party was sum of Rs.50,000/- and a sum of Rs.1,750/- as interest on the loan. It was pointed out that the AO had not even called upon the assessee to explain the discrepancy. With regard to the loans received from the remaining four parties namely, Mahavir Prasad Malani, Suman Baid, Lakshmi Devi Malani and Kanchan Devi Malani, the assessee submitted that when the assessee expressed his inability to produce the aforesaid parties for examination by the AO, the AO to find out the truth and veracity of the claim made by the assessee ought to have issued summons u/s 131 of the Act. The AO having failed to issue such summons cannot draw any adverse inference against the assessee.
7. CIT(A), however was of the view that the addition made by AO had to be confirmed. The following are the reasons given by CIT(A) to come to the aforesaid conclusion. a) Smt. Priyanka Gupta - In her confirmation she had replied that loan of Rs.50,000/- was receivable by her from the Appellant and the same had been received by her. She had not replied regarding the interest of Rs.1,750/- paid by the Appellant to her on 17- 05-2007 and the same was cleared from the Appellant bank account. b) Mahabir Prasad Malani - The party had given the loan to the Appellant and the same was cleared from the bank on 28-06-2006. At that time there was a credit balance in his account from 25-05-2006 and the credit balance was generated in his account by refund of loan from some party to whom he had given loan earlier. It is found from the bank statement filed at the appellate stage that there was an opening credit balance of Rs.7,079/-, a cash deposit of Rs.4,00,000/- was made on 17- 04-2006, on 21-04-2006 the same amount was withdrawn by some Manoj, on 25-05- 2006 the same amount was deposited through clearing ICI and on 28-06-06 the same amount was withdrawn by the appellant. c) Suman Baid –The party had given loan to the Appellant and the same was cleared from the bank on 28-06-2006. At that time there was a credit balance in their account from 25-05-2006 and the credit balance was generated in her account by refund of loan from some party to. whom she had given la an earlier.
It is found from the bank statement filed at the appellate stage that there was an opening credit balance of Rs.5,573.70, a deposit of Rs.2,50,000/- on 11-05-2005 through clearing ICI, on 27-07-2005 the same amount was withdrawn by some Shyam, on 18-08-2005 the same amount was deposited through clearing ICI, on 19-08-2008 the same amount was withdrawn by some Manoj, on 23-03-2006 the same amount was deposited through ICI, on 25-03-2006 the same amount was withdrawn by the party, on 11-04-2006 the same amount was deposited in cash, on 13-04-2006 the same amount was withdrawn by some Manoj Kumar, on 25-05-2006 the same amount was deposited through clearing ICI and on 28-06-06 the same amount was withdrawn by the appellant. d) lakshmi Devi Malani – The party had given the loan to the Appellant and the same was cleared from the bank on 28-06-2006. At that time there was a credit balance and the credit balance was generated in her account by refund of loan from some party to whom she had given loan earlier. It is found from the bank statement filed at the appellate stage that there was an opening credit balance of Rs.94661.97, on 08-04-2006 an amount of Rs.80,000/- was withdrawn by the party, on 17-04-2006 there was a cash deposit of Rs.2,30,000/-, on 21- 05-2006 the same amount was withdrawn, on 26-06-2006 an amount of Rs.80,000/- was deposited through transfer and on 27-06-06 an amount of Rs.80,000/- was withdrawn by the appellant. e) Kanchan Devi Munoth - The party had deposited cash in bank on 07-04-2006 and 18-04-2006 and given the loan to the Appellant and the same was cleared from the bank on 28-06-2006.
It is found from the bank statement filed' at the appellate stage that there was an opening credit balance of Rs.5,613.83 , on 07-04-2006 an amount of Rs:30,000/- . was deposited through clearing, HDF, on 18-04-2006 there was a cash deposit of Rs.1,70,000/- and on 28-06-06 an amount of Rs.2,00,000/- was withdrawn by the appellant.
4.3. The fact remains that the loans were given either out of cash deposited in their bank accounts or through clearing/transfer of funds. However, no source of deposits was explained. Further, from the details of their returned income shown by the loan creditors, it is clear that they do not have sufficient earning to give such huge loans. In view of the facts and circumstances of the case, as discussed above, it is clear that identity, creditworthiness and genuineness of the loan creditors could not be proved. Onus was on the appellant to prove the same. In absence of proving the transaction as genuine, it was rightly held by the AO to treat such loan as income of the appellant from undisclosed source which was taken u/s 68 of the I.T.Act, 1961. It is a right of the businessman to run her business in the way she feels better for her business but there should not be any angle of colourable device to reduce her tax liability. Under these facts and circumstances of the case the ground raised by the appellant is dismissed.”
Aggrieved by the order of CIT(A) assessee is in appeal before the tribunal.
We have heard the rival submissions. The ld. Counsel for the assessee primarily laid emphasis on the fact that the assessee had prima facie discharged her onus and satisfactorily explained the receipt of loan. It was submitted by her that the AO had drawn adverse inference without examining the creditors by issuing summons u/s 131 of the Act. In this regard our attention was drawn to the following judicial pronouncements for the proposition that though the assessee had filed confirmation, income tax particulars of the creditors then it is for the AO to issue summons to those creditors and examine them with regard to the source of funds.
a) CIT vs Orissa Corporation P.Ltd. 159 ITR 78 (SC) b) Nathu Ram Premchand vs CIT 49 ITR 561 (All) c) Sri Pritam Daftary vs CIT 283 ITR 259 (Cal) d) CIT vs M/s. Dataware Private Limited in GA No.2856 of 2011 Judgment dated 21.09.2011 – Hon’ble Calcutta High Court. 10. The ld. DR relied on the order of CIT(A).
We have considered the rival submissions. The law is well settled that when the income tax particulars of the creditors are given by the assessee along with the confirmation of the loan creditors the burden is on the AO to make proper enquiry by issuing of summons u/s 131 of the Act. In the present case the AO has failed to do so. AO cannot draw any adverse inference for the reason that the assessee could not produce the creditors before the AO for his examination. The AO had all the powers to issue summons to the creditors for the purpose of verifying and clarifying whatever doubts the AO had with regard to the bank account of the creditors. In the present case the AO has failed to exercise his statutory powers which are meant to find out the truth or otherwise of a claim made by the assessee before him. It appears to us that as far as the assessee is concerned the loan creditor received moneys in the form of cheques. The AO/CIT(A) has ignored this aspect and has been pointing out to an earlier introduction of cash in the bank account of the creditors which was given as a loan to the third parties and realised by the loan creditor. It is only thereafter that Savita Ladha ,A.Y.2007-08 cheques have been issued to the assessee. It thus appears to us that AO has gone into the source of source which is not permissible u/s 68 of the Act. In any event as we have already observed that the AO ought to have brought material on record that the assessee has routed his own undisclosed income through the loan creditors. In the given circumstances we are of the view that the addition sustained by the CIT(A) has to be deleted. We, accordingly direct that the addition sustained by CIT(A) be deleted. The appeal of the assessee is accordingly allowed.
In the result the appeal of the assessee is allowed.
Order pronounced in the Court on 20.01.2016.
Sd/- Sd/- [M.Balaganesh ] [ N.V.Vasudevan ] Accountant Member Judicial Member Dated : 20.01.2016. [RG PS] Copy of the order forwarded to: 1.Savita Ladha, 204, Eastern Building, 19, R.N.Mukherjee Road, Kolkata-700001. 2. I.T.O., Ward-36(3), Kolkata. 3. CIT(A)-XX, Kolkata 4. CIT-XII, Kolkata. 5. CIT(DR), Kolkata Benches, Kolkata. True Copy By order,