ITO, W-1(3), CHANDIGARH vs. SMT. RENU ANAND, CHANDIGARH

Order PER PARESH M. JOSHI, J.M. : This is an appeal filed by the Revenue under section 253 of the Income Tax Act, 1961(which is hereinafter referred to as Act). The Revenue is aggrievedby the order dt. 29/08/2018 passed by the Commissioner of Income Tax (Appeals) in First Appeal No. 10316/16-17 which is hereinafter referred to as the “impugned order”. The relevant assessment year is 2013-14 and the corresponding previous year period is From 01/04/2012 to 31/03/2013. Factual Matrix 2. The return of income declaring income of Rs. 10,85,000/- was filed by the assessee on 28/09/2013 which was processed as such. That the case was selected through CASS for the limited scrutiny to 3. examine the large investment in property as compared to total income declared by the assessee in her return of income. Accordingly, notices under section 143(2) was issued on 02/09/2014 by the Dy. CIT Circle1(1) Chandigarh 2 and served upon the assessee on 08/09/2014. Thereafter the case record was transferred to ITO Ward1(3) which was received on 26/05/2015. That further proceedings were taken up by issuing notice u/s 142(1) alongwith questionnaire on 11/06/2015 followed by on 30/07/2015. That the assessee derives income from salary from M/s Rahul Sales Ltd.

4. Chandigarh.

7. That the explanation of the “sources” was as under: S. N. Particulars 1. Payment Mode Amount (in Rs.) Source of Payment 2. 5,00,000/- Thru Indusind Bank A/c No. Unsecured Loan from 100001449713 in the joint name of Shri Rahul Sales Ltd.- Onkar Anand and Mrs Renu Anand on lndusind Bank A/c- 28.06.2012 vide RTGS under UTR No. 004186650060. INDBH12180300100.(purchase PAN:AADCR4815N consideration) 1,95,00,000/- Thru Indusind Bank A/c Unsecured Loan from No. 100001449713 in the joint name of Mr. Gagan Suri- Shri Onkar Anand and Mrs Renu Anand Insusind Bank A/c- on 23.07.2012 vide RTGS under UTR 0014B15750001 No.lNDBH12205300605 (purchase PAN:ALDPS3238A consideration) 3. 1,00,00,000/- Thru Indusind Bank A/c No.100001449713 Unsecured Loan from in the joint name of Shri Onkar Anand Rahul Sales Ltd. and Mrs Renu Anand on 12.12.2012. Indusind Bank a/c- (stamp duty) 004186650060. PAN:AADCR4815N 4 75,00,000/- Thru Indusind Bank A/c No.100001449713 Unsecured Loan from 3 in the joint name of Shri Onkar Anand Rahul Sales Ltd- and Mrs Renu Anand on 13.12.2012 vide Indusind Bank A/c- DD No.412043. (purchases 004186650060. consideration) PAN:AADCR4815N 5. Vide DD.895929 dated 31.10.2012 17,25,00,000/- Financing by PNB issued by PNB Housing Finance Ltd as Housing Finance Ltd. per Loan sanction dated 21.08.2012. (purchase consideration) Total 21,00,00,000/- 8. That the assessee has stated that amount of Rs. 1.95 Crores was remitted through RTGS to the seller on 23/07/2012 from Indusind Bank by raising unsecured loan fromMr. Gagan Suri Which was repaid in March 2013. That the loaner Mr. Gagan Suri has filed confirmation that he has paid short term loan of Rs. 7,12,50,000/- from his Indusind Bank Account to Mr. Onkar Anand, husband of the assessee on 18/07/2012. That in order to verify the unsecured loan given by loaner Shri Gagan Suri was examined on 15/02/2016. That during the course of the examination, the loaner was specifically asked to furnish the source of the availability of funds with him. It was stated by him that he has received the funding from NSEL and was not able to produce any documentary evidence. That however on 22/06/2016 the copy of the current account of loaner and that of his proprietorship concern M/s Yathuri Associates and NSEL Settlement account of M/s Yathuri Associates were filed but loaner Shri Gagan Suri did not attend the office of Ld. AO.

In response to the letter, the assessee filed the reply as hereunder: - "Reference to your letter F.No.lTO/W-l(3)/CHD/2015-16 dated 15.3.2016 received on 16.03.2015 requiring in person to appear before your good self on 18.03.2016 with relevant to the captioned cited subject. In this regard, we hereby submit as under:

5, Yathuri Associates prop Gagan Suri bank account opened as NSEL Settlement Account with the bank for receiving/paying trade amount on account of sugar trades with NSEL in FY 2012-13 shows monthly receipt and payment as under:

Summations of Yathuri Associates A/c No. 00990630025086 (NSEL SETTLEMENT ACCOUNT) Month Debit Credit June2012 1932,25,418.86 19,41,41000.00 July, 2012 144,10,26,250.57 145,95,16,558.32 August 2012 213,67,08,047.66 213,83,30,990.77 September2012 154,25,72,448.12 157,91,01,140.00 6 October 2012 156,10,47,514.17 162,03,73,390.00 November 2012 146,69,98,468.18 144,24,45,520.00 December 2012 183,64,50,218.02 183,72,07,960.00 January 2013 239,57,64,283.26 236,42,34,831.11 February 2013 393,99,30,693.80 409,90,00,920.00 March 2013 377,67,51,524.14 355,94,69,210.00 The yearly summations in the above account for various trades with the exchange is more than Rs 2000 Crore the bank statement for the whole year is annexed herewith for your kind satisfaction and record. Summations of Yathuri Associates A/c No. 01070340001167(Current Account)

Month Debit Credit May 2012 7,50,000.00 7,60,000.00 June2012 15,69,49,056.18 17,45,25,000.00 July, 2012 129,94,22,702.30 128,36,92,324.00 August 2012 69,48,14,168.54 87,00,65,774.95 September2012 21,68,00,252.81 5,84,50,000.00 October 2012 26,22,00,112.36 24,62,00,000.00 November 2012 27,66,50,028.09 27,42,00,000.00 December 2012 37,65,42,968.54 38,52,00,028.09 January 2013 41,89,00,000.00 40,99,40,000.00 February 2013 162,40,50,224.72 166,83,15000.00 March 2013 211,23,66,840.45 223,37,000.00 There are voluminous transactions in the firm account being transferred to/from the firms above settlement account. The bank statement for the whole year is annexed herewith for your kind satisfaction and record.

6. It Is correct whatever he has stated In his statement with the department. He became member of the exchange on 7.5.2012 as per the application form submitted by him with exchange, a copy of which is enclosed herewith for your record. He has stated that his tentative turnover on account of sugar trade was Rs 10-12 Crore in FY2012-13 which excludes his turnover with the exchange. The receipt and payment of funds from NSEL in the NSEL settlement account is sufficient to prove his credit worthiness being a member of the exchange.

7 1. The Identify of the Creditor 2. The capacity of the creditor to advance money 3. Genuineness of transaction. The assessee has tried to explain the creditworthiness of the creditor/loaner Sh. Gagan Suri, proprietor of M/s Yathuri Associates from whom theunsecured loan of Rs.7,12,50,000/- have been received during the year. Reply of the assessee is not acceptable in view of the following observations: (1) During the course of examination, the loaner was specifically asked to furnish the source of availability of funds with him. It has been stated by him that he has received the funding from NSEL and not able to produce any documentary evidence as of now and request for grant of time till 19.02.2016. - Thereafter on 22.02.2016 copy of current account of loanee and his proprietorship concern M/s Yathuri Associates and NSEL settlement account of M/s Yathuri Associates were filed but loanee Sh. Gagan Suri did not attend the office. The counsel of assessee on 22.02.2016 has admitted that the loaner has not filed income tax return and not got his accounts audited from any practicing CA and also stated that his books of accounts are not available as the same are in the custody of investigation agencies. In the absence of any income tax return, audit report and books of accounts, the credit worthiness of the loaner is not established. (2) The assessee has now furnished the copy of unaudited balance sheet of the loaner as on 31.03.2013. During the course of examination the loaner has stated that his, books of accounts are not available with him. It is now not understandable as to how the so called unaudited balance sheet has been prepared. Moreover, unaudited balance sheet has no value in the eyes of law as the loaner was required to get his accounts audited since the turnover exceeds the prescribed limited for getting the accounts audited u/s 44AB of the IT. Act. Hence the creditworthiness of the loaner is not established by any stretch of imagination. (3) The loaner Sh. Gagan Suri during the course of recording of his statement has stated that prior to financial 2012-13 he was engaged in the business of manufacturing of carry bags and he discontinued that business about the closing of the year 2011 as he suffered losses and thereafter shifted to the business of trading of sugar. Further he submitted that during the finandal 2012-13 relevant to A.Y 2013-14 tentative turnover was about 10-12 Cr. from trading of Sugar. As per record the loaner has filed the income tax return for the A.Y. 2012-13 declaring total income of Rs.3,47,330/-, Rs.2,69,650/- in the A.Y. 2011-12, Rs.2,69,000/- in the A.Y. 2010-11 and Rs.4,72,440/- in the A.Y. 2009-10. Furthermore the capital of the loaner is shown at Rs. 14,47,304/-- only as on 31.03.2012 as per ITR for the A.Y. 2012-13. Thereafter, the loaner has not filed the Income tax return for the A.Y. 2013-14 and onwards. This all gives the conclusion that the loaner has no creditworthiness of advancing such a huge amount of Rs.7,12,50,000/- in legitimate way. (4) The loaner has been shown as having huge liability towards National Spot Exchange Limited. It is gathered that the loaner Sh. Gagan Suri, proprietor of M/s Yathuri Associates is defaulter of National Spot Exchange Limited of the amount of Rs.264.96 crores as mentioned in the official website of National Spot Exchange Limited vide order dated 18.12.2014. It seems that the loaner is only an accommodation entry provider and he has provided the entry to the assessee only as he has no real creditworthiness on its own to provide the huge loan.

1 Returned income 10,85,000/- 2 Additions as discussed above 7,12,50,000/- 3 Assessed Income 7,23,35,000/- 4 Income on which tax to charged in terms of 7,12,50,000/- section 115BBE of the income tax act by giving the treatment to the additions of Rs.l,95,00,000/- and Rs.5,17,50,000/- 14. The Ld. AO in his assessment order dt. 29/03/2016 on page 11 has held and observed as office note the following: The information is being passed on to the assessing officer, 1TO, Ward 3(5), Chandigarh of Mr.Gagan Suri having PAN: ALDPS3238A with regard to his claim of advancing the amount of Rs.7,12,50,000/- during F.Y. 2012-13 relevant to A.Y. 201314 to my assessee for further necessary action as the aforesaid person has not filed the Income tax return for the A.Y. 2013-14 and onwards.

5.3 I have perused the assessment order and examined the reply of the assessee. The appellant along with her late husband Sh. Onkar Anand purchased a property in Hauz Khas, New Delhi for Rs. 20 crores. The payment for the purchase was made from saving bank account with Indusind Bank which was in the joint name of Late Sh. Onkar Anand and the appellant. The Assessing Officer verified the sources of these payments and came to the conclusion that a single entry of Rs. 7,12,50,000/- was made from unexplained sources and added it to the income of the appellant u/s 69 and 69A of the Act. The impugned amount was received from the brother of the appellant Sh. Gagan Suri. Sh. Gagan Suri is proprietor of Yathuri Associateswh i ch i s member of National Spot Exchange Ltd. (NSEL). The payment was made from his bank account on18.07.2012. The Assessing Officer examined Sh. Gagan Suri who admitted that he had paid this amount and tried to explain the 9 source. He explained that a sum of Rs. 9,31,38,527/- was transferred to his account from the current account in HDFC from his proprietary firm Yathuri Associates which in turn received Rs. 9,69,05,000/- on 17.07.2012 as a result of settlement with that NSEL. He further submitted that his firm Yathuri Associates had an annual turnover of Rs. 93.93 crores during the year and submitted copies of balance sheet and profit &loss account to the Assessing Officer. He however had not filed return for that particular year. The Assessing Officer did not find that Sh. Gagan Suri creditworthiness was proved because he had not filed his returns for the year, did not produce his books stating them to be in custody of investigating agencies and did not get his books audited. The Assessing Officer further observed that Sh. Gagan Suri has shown his own capital at Rs. 14,47,304/- in his Income Tax Return for the year ending 31.03.2012 (A.Y. 2012-13) which proves that he was man of no means. Sh. Gagan Suri had a huge outstanding liability totaling to Rs. 264.96 crores to be paid to NSEL as per their official website. The Assessing Officer came to the conclusion that Sh. Gagan Suri's creditworthiness is not proved and he was only entry provider. 5.3.1 The arguments of the appellant were that since the property was purchased by Late Sh. Onkar Anand (husband of the appellant) from his' own sources and the name of appellant was added for social security purposes and that in case of a joint account, funds are presumed to belong to first holder or equally to both parties and not exclusively to second holder, therefore the impugned amount could not be treated as income of the appellant. Further, the Ld. AR submitted, that without prejudice to the argument above the case was not covered u/s 69/69A but came under the purview of section 68 of the Act. The appellant argued that from the facts of the case, it is clear that all the requirements with respect to section 68 have been fulfilled. 5.3.2 In my opinion since the appellant is a joint holder of the bank account along with her husband the entire sum received in the account cannot be treated as her unaccounted income. Further, I am of the view that the addition cannot be made under section 69/ 69A of the Act. Since there is a sum credited in the accounts of the appellant, section 68 would come in force. The relevant provisions of section 68 are reproduced below for ready reference:- "Cash credits.

1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in allowing appeal of the assesse without appreciating the facts of the case.

2. It is prayed that the order of the Ld. CIT(A) be cancelled and that of the assessing officer may be restored.

3. Whether in the facts and the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition amounting to Rs.7,12,50,000/- made u/s 69of the Act, holding that the addition was to be made u/s 68_of the Act, when the amount was found credited in the bank account of the assesse and she was not maintaining books of accounts.

4. Whether in the facts & circumstances of the case Ld. CIT(A) has erred in deleting the addition of Rs. 7,12,00,000/- made u/s 69 of the Act holding that the amount was received through banking channel, when the assesse could not prove the creditworthiness of the creditor. 5. The appellant craves leave to add or amend any grounds of appeal before the appeal is heard or is disposed off.

17. Record of hearing 17.1 The hearing in the matter took place on 15/10/2024 when the Revenue was represented by Ld. DR ad the assessee was represented by Ld. AR. 17.2 The Ld. Dr for and on behalf of the Revenue has fully supported the aforesaid assessment order of Ld. AO dated 29/03/2016 were in correct addition of Rs. 7,12,50,000/- has been made.

The Ld. DR contended that aforesaid amount of Rs. 7,12,50,000/- was advanced to her husband’s and her account (joint) account as and by way 11 of short term loan from Gagan Suri. The amount came from his Indusind Bank to Mr. Onkar Anand the husband of the assessee on 18/07/2012. Shri Gagan Suri was examined on 15/02/2016. During the course of examination, the loaner Shri Gagan Suri was specifically asked to furnish the source of availability of funds with him. It was stated by him that he had received funding from NSEL(National Spot Exchange Limited). However no documentary evidence at that time was produced by him in support thereof and time was sought till 19/02/2016. On 22/06/2016 copy of current account of loaner Shri Gagan Suri and his proprietary concern M/s Yathuri Associates and NSEL Settlement account of M/s Yathuri Associates were filed but loaner Shri Gagan Suri did not attend the office. That the counsel of the assessee on 22/02/2016 has admitted that the loaner Gagan Suri has not filed Income Tax Return and also has not got his accounts audited from any practicing CA and also stated that his books of accounts are not available as the same are in the custody of the investigation agency. Thereafter by letter dt. 15/03/2016 the assessee was called upon to show cause why the amount of Rs. 7,12,50,000/- which is claimed to have been received from Gagan Suri be not treated as undisclosed income of the assessee as no credit worthiness to receive the amount as advance / short term loan has been proved. The salient features of said letter briefly can be summed up as under: (1) During the assessment proceedings it is noticed that assessee have claimed to have received unsecured loan amounting to Rs. 7,12,50,000/- from Shri Gagan Suri.

12 (2) The bank account of the loaner Shri Gagan Suri hs been examined and it is noticed therein that there are entries of credit and debit of small amounts only. (3) It is also relevant that whenever there is credit entry, the almost same amount is debited on the same day or the next day leaving nominal closing balance only in the account. (4) Also the entry of unsecured loan amounting to Rs. 7,12,50,000/- stated to be given by the loaner was credited in the account of assessee on 18/07/2012 and that proceeds transferred to assessee’s account on same day. Similarly the same amount was received back by the loaner Gagan Suri as and by way of transfer proceeds out of asessee account with late Shri Onkar Anand on 01/03/2013 and 02/03/2013 which resulted in square up of account during the year itself with same amount. (5) That during the course of examination the loaner Gagan Suri was examined on 15/02/2016 and that during the course of examination, the loaner Shri Gagan Suri was specifically asked to furnish the source of availability of funds with him. It was stated by him that he had received the funding from NSEL. (6) On 22/02/2006 copy of current account of loaner Shri Gagan Suri and his proprietary concern M/s Yathuri Associates and NSEL Settlement account of M/s Yathuri Associates were filed but loaner Shri Gagan Suri did not attend the office. It was found that loaner Gagan Suri had not filed income tax return and has not got his accounts audited from any practising CA. His books of accounts are with investigating agencies. Hence in the absence of any income tax return, audit reports and books of accounts, the credit 13 worthiness of loaner Shri Gagan Singh is not established, further Gagan Suri the loaner has stated that prior to financial year 2012-13, he was engaged in the business of manufacturing of carry bags and that he discontinued that business about the closing of the year 2011 as he suffered losses and thereafter shifted to the business of trading of sugar. Further he submitted that during the F.Y. 2012-13 relevant to A.Y. 2013-14 the tentative turnover was about 10-12 crores from trading of sugar. (7) It was averred therein the letter that basis above facts, it can be safely inferred that the loaner Shri Gagan Suri from whom unsecured loan of Rs. 7,12,50,000/- claimed to have been received, had no credit worthiness to advance such huge amount and therefore it is proposed to be assessed as assessee’s undisclosed income. Photocopy of the statement of Shri Gagan Suri was enclosed with the letter dt. 15/03/2016. 17.3 Per contra the assessee defence / reply to above letter dt. 15/03/2016 can be briefly summarised as follows:

(1) Confirmation letter of Shri Gagan Suri dt. 19/01/2016 evidencing payment of short term unsecured loan of Rs. 7,12,50,000/- is on record of Ld. AO. (2) Bank account statement of M/s Yathuri Associates Proprietor Gangasuri in HDFC as NSEL settlement account bearing no. 00990680025086 showing the receipt of funds amounting to Rs. 9,67,05,000/- on 17/07/2012 already on record as a valid source. Out of the above amount a sum of Rs. 9,31,38,527/- was transferred in the firm’s C A No. 010703400001167 on 18/07/2012 from which a sum of Rs. 7,12,50,000/- was subsequently transferred 14 in Gagan Suri personal account bearing no. 100001540397 and then finally transferred in the account of the assessee. (3) Gagan Suri is a member of NSEL. (4) Unaudited balance sheet of M/s Yathuri Associates evidencing turnover of Rs. 93,93,38,675/- (sale and purchase of sugar) for year end 31/03/2013 and liability of Rs. 293,06,51,567/- towards NSEI relied upon. (5) Summation of M/s Yathuri Associates Account No. 00990630025086 (NSEL) settlement account) and summation of M/s Yathuri Associates account no. 01070340001167 CCA) given. (6) Tentative turnover on sugar of Shri Gagan Suri is Rs. 10-12 crores for F.Y 2012-13 excluding his turnover in exchange proof enough to establish his credit worthiness. (7) Mere non filing of ROI, unable to get accounts audited does not mean that Gagan Suri has unexplained source of income and liable to be taxed in the hands of assessee Mrs. Renu Anand being recipient of unsecured loan from Gagan Suri. Documents are self explanatory in nature and shows valid source of payments hence not liable to be taxed in the hands of the assessee u/s 68 of the Act.

17.4 It was then contended by Ld. DR on above factual narration which are all incorporated in the Ld AO’s order dt. 29/03/2016 under section 143(3) that the Ld. AO has tested above parameters vis a vis three important ingredients under section 68 of the Act which are (1) identity of the creditor (2) the capacity of the creditor to advance money (3) genuineness of transaction. The Ld. AO has rightly held that explanation offered that Gagan Suri has 15 received funding from NSEL is not proved by any evidence whatsoever. No ITR is on record of Shri Gagan Suri. No audited balance sheet is on record of Shri Gagan Suri despite voluminous assertion about huge volume of both sugar trading and trading on NSEL.Hence creditworthiness not proved at all. Further against assertion of tentative turnover of 10-12 Crores in sugar during F.Y. 2012-13, A.Y. 2013-14 the loaner Gagan Suri ITR for A.Y. 2012-13 delares total income of Rs. 3,47,330/-, Rs. 2,69,650/-in A.Y 2011-12, Rs. 2,69,000/-in A.Y. 2010-11 and Rs. 4,72,440/- in A.Y 2009-10. No ITR for A.Y 2013-14 and onwards loaner Shri Gagan Suri,lacks credit worthiness to advance loan of Rs. 7,12,50,000/- in legitimate way(good money). Loaner has huge liability towards NSEL. He is defaulter of NSEL to the tune of Rs. 264.96 crores. He is an entry provider and has no creditworthiness. Hence addition of Rs. 7,12,50,000/- rightly made by Ld. AO and his order should be restored.

17.5 The Ld. DR then contended that the impugned order of Ld. CIT(A) is totally illegal, not proper and is bad in law. It ought to be set aside by this Tribunal as Ld. CIT(A) has miserably failed to appreciate the bare minimum facts of the present case which are gross perse. There is total non consideration of material facts (supra) by the Ld. CIT(A)in his impugned order. The Ld. CIT(A) has allowed the appeal of the assessee without appreciating the core and hard facts of the case. There is no denial by the assessee that she never received the short term loan from Shri Gagan Suri. She has miserably failed to establish source of the original source of money / short term loan as good money. She has failed to establish credit worthiness of the loaner by any material document all by herself. During the course of the 16 assessment proceedings she presents her brother as a source for huge sum of Rs. 7,12,50,000/-. Upon query made to the brother Gagan Suri he too miserably fails to establish his own credit worthiness at the outset and threshold itself of assessment proceedings a little later he turns around and disappear from scence of the assessment proceedings. Here records of the case speaks about his conduct. Be that as it may AR too who represents him/them further fails to establish credit worthiness of Shri Gagan Suri basis legal documents like duly audited balance sheet of his and his concerns. ITR’s speaks that he is a person of no means or less means having genuine and bonafide capacity to lend money / loan worth Rs. 7,12,50,000/- basis genuine and legal documents. Huge turnover of his be in sugar trading or commodity trading is not established on basis of any documents whatsoever. Mere assertion of turnover in crores without any supporting is not sufficient compliance of law on credit worthiness of a person. The Ld. CIT(A) has not correctly appreciated bare facts of the case which are all recorded in the order of Ld. AO dt. 29/03/2016 which were not effectively rebutted in appeal before CIT(A). The Ld. DR effectively submitted that chain of transaction as it relates backward from date of receipt of loan are gross leaving source and source of sources unexplained / unexplainable even though funds have come from normal baking channel. Merely because funds / loan amount has come from banking channel that ipsofacto cannot lend to a inference that source of money is adequately explained. The entire transaction of loan is sham and make believe arrangement solely with a view to evade tax deliberately an approach wholly untenable in lawon basis of facts found by Department of Income Tax.

17.6 Per contra the Ld. AR of the assessee has supported the impugned order of Ld. CIT(A). They have placed on record of this Tribunal a paper book dt. 05/08/2021 containing pages 1 to 159 under different captions in index to paper book. We have perused the same, very minutely. They have also placed on record another paper book dated 14/10/2024 from pages 1 to 101 wherein copy of assessment order for A.Y 2013-14 of Gagan Suri and papers related to further appeal to CIT(A) are enclosed. We have perused the same carefully. They have placed on record compilation of judgement from page 1 to 51 (not recited at Bar).

17.7 The Ld. DR vide letter dt. 14/10/2024 has brought to the notice of this Tribunal following:

F.No. CIT{DR-l)/ITAT/CHD/2024-25/478 Dated: 14.10.2024 To, The