M/s Ekta Construction Co., Dhuri V. ACIT, Ludhiana

CO 34/CHANDI/2010

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 0954 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 year(s) 10 month(s) 20 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 23-06-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 08-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 03-08-2010
• Court: TRIBUNAL
• Department Lawyers: RITISH A NAND; DEEPAK K ANAND
• Assessee Lawyers: MANJIT SINGH
• Keywords: Loose papers; Proportionate interest; Question of law; Accommodation entries; Onus to prove
• Section: 133A; 131; 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI. BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO. 885/CHD/2010 ASSESSMENT YEAR: 2007-08 THE ACIT, VS. M/S EKTA CONSTRUCTION CO. CIRCLE-IV, LUDHIANA DHURI, PUNJAB PAN NO. AABFE9216B & C.O.NO. 34/CHD/2010 (IN ITA NO. 885/CHD/2010) ASSESSMENT YEAR: 2007-08 M/S EKTA CONSTRUCTION CO. VS. THE ACIT, CIRCLE IV, DHURI, PUNJAB LUDHIANA PAN NO. AABFE9216B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH RESPONDENT BY : S/SHRI DEEPAK K. ANAND & RITISH A NAND DATE OF HEARING : 08/06/2015 DATE OF PRONOUNCEMENT : 23/06/2015 ORDER PER T.R.SOOD, A.M. THE APPEAL BY THE REVENUE AND CROSS OBJECTION BY TH E ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 16.3.2010 OF CIT(A)-II, LUD HIANA. 2. IN THE APPEAL OF THE REVENUE, FOLLOWING GROUNDS HAVE BEEN RAISED:-. 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N DELETING THE ADDITION OF RS. 10,75,832/- MADE BY AS SESSING OFFICER ON ACCOUNT OF FAILURE ON THE PART OF THE AS SESSEE TO INCLUDE THE NET PROFIT OF THE POST SURVEY PERIOD. 2 2. THAT LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITION OF RS. 10,96,280/- MADE BY ASSESSING O FFICER ON ACCOUNT OF DISALLOWANCE OF THE INTEREST ON DEBIT BALANCE OF THE PARTNERS. 3. THAT THE LD. CIT(A)-II HAS ERRED IN LAW AND ON FACT S IN DELETING THE ADDITION OF RS. 25,00,000/- MADE BY AS SESSING OFFICER UNDER SECTION 68 OF THE INCOME-TAX ACT, 196 1. 4. THAT THE LD. CIT(A) II HAS ERRED IN LAW AND ON FAC TS IN DELETING THE ADDITION OF RS. 1,75,910/- MADE BY ASS ESSING OFFICER BY MAKING OF DISALLOWANCE OF INTEREST PAID ON UNSECURED LOANS. 5. THAT THE ORDER OF CIT(A)-II BE SET ASIDE AND THAT O F ASSESSING OFFICER BE RESTORED. 3. GROUND NO.1 : AFTER HEARING BOTH THE PARTIES WE FIND THAT A SURVEY WAS CONDUCTED IN THE PREMISES OF THE ASSESSEE ON 7.9.2 006. DURING THE SURVEY, THE ASSESSEE SURRENDERED A SUM OF RS. 1,60,00,000/- ON ACCOUNT OF CERTAIN DISCREPANCIES FOUND DURING THE SURVEY. AS PER THE S URRENDER LETTER FILED BY THE ASSESSEE ON 13.9.3006, IT WAS UNDERTAKEN THAT ASSES SEE WOULD DECLARE A NET PROFIT OF RS. 1,60,00,000/- UPTO 7.9.2006 WITHOUT CLAIMING ANY KIND OF DEDUCTION OR EXEMPTION. HOWEVER, FROM THE PERUSAL OF PRE-SURVEY AND POST-SURVEY PROFIT AND LOSS ACCOUNT, THE ASSESSING OFFICER NOTICED THAT FO R THE PERIOD 1.4.2006 TO 7.9.2006, ASSESSEE HAD SHOWN A NET PROFIT OF RS. 83 ,47,719/-. FOR THE LATER PERIOD I.E FORM 8.9.2006 TO 31.3.2007, THE ASSESSEE HAS SH OWN NET PROFITOF RS. 77,75,032/- WHICH INCLUDE AN AMOUNT OF RS. 67 LAKHS AS INCOME SURRENDERED DURING THE SURVEY. THUS, THE NET PROFIT FOR POST-S URVEY PERIOD ITSELF COMES TO RS. 10,75,832/- WHICH WAS REQUIRED TO BE INCLUDED IN TH E SURRENDERED INCOME OF RS. 1.60 CRORES FOR THE PRE-SURVEY PERIOD. THEREFORE, A SSESSEE WAS REQUIRED TO EXPLAIN THAT WHY THIS AMOUNT OF RS. 10,75,832/- SHOULD NOT BE INCLUDED IN THE INCOME OF THE ASSESSEE. IN RESPONSE VIDE LETTER DATED 11.12.2 009 IT WAS SUBMITTED AS UNDER:- 'THAT IT IS ADMITTED FACT THAT ASSESSEE HAS UNDERTA KEN TO DECLARE THE NET PROFIT IN RETURN FOR A.Y.2007-08 AMOUNTING TO RS.1,60,00,000/-(ONE CRORE SIXTY LAC). THIS WAS UND ERTAKEN 3 DURING THE COURSE OF SURVEY OPERATION U/S 133A OF I NCOME TAX ACT 1961 ON 07.09.2006. THE ASSESSEE FIRM DECLARED THE NET INCOME OF RS.1,61,23,551/-FOR A..Y.2007-08. NO DOUB T THE PROFIT & LOSS ALREADY FILED FOR THE PERIOD 01.04.2006 TO 3 1.03.2007 REVEALS THE NET PROFIT OF RS.83,47,719/-WHEREAS PRO FIT & LOSS A/C AS ON 31.03.2007 (08.09.2006 TO 31.03.2007) THE NET PROFIT HAS BEEN SHOWN AT RS.77,75,832/, WRONGLY STATED IN NOTI CE PARA NO.15 AT RS.70,75,832/-. BY INCLUDING BOTH FIGURE THE TOT AL INCOME COMES TO RS.1,61,23,551/- WHICH IS MORE THAN THE PR OFIT UNDERTAKEN TO BE DECLARED IN RETURN. THERE IS NO SU CH VARIATION IN DECLARING THE PROFIT AND AS PER AGREEMENT, WITH DEP ARTMENT THE NET PROFIT OF RS.1,61,23,551/- WAS DECLARED (MORE T HAN RS.L,60,00,000/).THE ASSESSEE PREPARED TRADING ACCO UNT FROM THE BOOKS OF ACCOUNTS ON 07.09.2006 AND VALUED THE CLOS ING STOCK BY TAKING HYPOTHETICAL FIGURE AND PROFIT WAS WORKED OU T AT THE TIME OF SURVEY U/S L33A OF INCOME TAX ACT 1961.THE CLOSI NG STOCK ON 07.09.2006 REMAINED AS OPENING STOCK ON 08.09.2006 AND BY TAKING THIS FIGURE OF OPENING STOCK THE NET PROFIT WAS DETERMINED AT RS.77,75,832/- .BY ACCUMULATING THESE TWO PROFIT & TRADING ACCOUNTS THE NET PROFIT DETERMINED AT RS.1,61,23,55 1/- WHICH WAS TAKEN AS RETURNED INCOME. DURING THE COURSE OF SURV EY THE ASSESSEE UNDERTAKEN TO DECLARE THE NET PROFIT OF RS .1,60,00000/- FOR THE F.Y 2006-07 RELEVANT TO ASSTT. YEAR 2007-08 .THE ASSESSEE HAS NOT BACKED OUT ITS UNDERTAKING AND PAID THE TAX ON THE RETURNED INCOME OF RS.1,61,23,551. DURING THE COURSE OF SURVEY NO BOOKS OF ACCOUNTS WE RE IMPOUNDED HOWEVER IT WAS MERE AGREEMENT IN BETWEEN THE ASSESSEE AND THE DEPARTMENT AND PROFIT WAS WORKED O UT IN ACCORDANCE TO ACTUAL PROFIT EARNED BY THE ASSESSEE. THE DEPARTMENT HAS NO SUCH DOCUMENTS WITH WHICH PROFIT CAN BE DETERMINED AT HIGHER FIGURE THAN THE AMOUNT SURREND ERED. THE NET PROFIT MAY BE ACCEPTED AS SUCH. UNDER THE PROVISION OF LAW IT HAS BEEN CLEARLY DECI DED THAT PROFIT ALWAYS ACCRUED AT THE END OF THE YEAR AND DAY TO DA Y PROFIT SHALL NOT BE CONSIDERED WHILE TAKING THE PROFIT OF THE WH OLE OF THE YEAR. 4 THE PROFIT OF RS. 83,47,719 WAS WORKED OUT AT AN ES TIMATE FIGURE WHICH HAS BEEN DULY ACCUMULATED IN THE TRADING ACCO UNT PREPARED FROM 01.04.2006 TO 31.03.2007. THE ADDITION OF RS.10,75,832 IS HIGHLY OBJECTED AND NOT CALLED FOR IN ACCORDANCE TO FACTS OF THE CASE.' 4. THE ASSESSING OFFICER EXAMINED THIS REPLY AND WA S OF THE OPINION THAT ASSESSEE WAS TRYING TO CIRCUMVENT THE UNDERTAKING G IVEN BY HIM DURING THE SURVEY BY MISINTERPRETING THE WORDING USED IN THE SURRENDE R LETTER DATED 13.9.2006. THE ASSESSEE ACCORDING TO THIS LETTER HAD CATEGORICALLY UNDERTAKEN TO DECLARE NET PROFIT OF RS. 1.60 CRORES UPTO 7.9.2006, THEREFORE, ASSESS ING OFFICER AGAIN ISSUED A SHOW CAUSE NOTICE ALONG WITH THE SURRENDER LETTER T O EXPLAIN. IN THE SECOND REPLY, IT WAS SUBMITTED AS UNDER:- 'THAT IT IS ADMITTED FACT THAT LETTER OF SURRENDER/ DECLARATION ON INCOME WAS FILED DURING THE COURSE OF SURVEY OPERAT ION U/S.133A OF INCOME TAX ACT 1961. THE SECOND PARA OF THE LETT ER REVEALS WHICH STATES THAT 'THE ASSESSEE FIRM AGREED TO DECLARE NET PROFIT UPTO 07.09.2006 AMOUNTING TO RS.1,60,00,000/ - INCLUSIVE OF BOOK PROFIT IN FINANCIAL YEAR 2006-07 RELEVANT TO ASSESSMENT YEAR 2007-08 SUBJECT TO NO PENAL ACTI ON & PROSECUTION'. NO DOUBT THERE IS SOME CONFLICTING AGREEMENT HOWEVER ASSESSEE UNDERSTOOD TO DECLARE THE PROFIT O F RS,1.60,00,000/- INCLUSIVE OF BOOK PROFIT OF TOTAL FINANCIAL YEAR. THE SURRENDER LETTER IS A OFFER MADE TO THE DEPARTM ENT WITHOUT ANY CONCRETE EVIDENCE OR DOCUMENTS IMPOUNDED DURING THE COURSE OF SURVEY OPERATIONS. THERE WAS NO IMPOUNDED DOCUMENTS ON WHICH INCOME CAN BE DETERMINED ABOVE THE INCOME SHOWN BY THE ASSESSEE. THE APEX COURT OF INDIA CLEARLY HELD THAT BENEFICIAL INTERPRETATION IN FAVOUR OF ASSESSEE SHO ULD BE TAKEN INTO CONSIDERATION WHILE ASSESSING UNDER INCOME TAX ACT, THE PROFIT DECLARED BY THE ASSESSEE IS IN ACCORDANCE TO FACTS AND IMPOUNDED DOCUMENTS.' 5. THE ASSESSING OFFICER AFTER EXAMINING THE ABOVE REPLY DID NOT FIND ANY FORCE IN THE SAME AND ACCORDINGLY HE ADDED A SUM O F RS. 10,75,832/- TO THE INCOME OF THE ASSESSEE. 5 6. ON APPEAL, THE SUBMISSIONS MADE BEFORE THE ASSES SING OFFICER WERE REITERATED AND IT WAS EMPHASIZED THAT THERE WAS SOM E CONTROVERSY REGARDING THE WORDING USED IN THE SURRENDER LETTER AND THEIR INTE RPRETATIONS FAVORABLE TO THE ASSESSEE SHOULD BE MADE. THE LD. CIT(A) OBSERVED T HAT THERE IS FORCE IN THE SUBMISSIONS THAT ADDITION HAS BEEN WORKED OUT INCOR RECTLY. THE ASSESSEE HAS DECLARED NET PROFIT OF RS. 83,47,719/- UPTO 7.9.200 6. IN ADDITION TO THE BOOK PROFIT, THE ASSESSEE HAD FURTHER INCLUDED A SUM OF RS. 67 LAKHS IN THE POST-SURVEY PERIOD. IF THIS AMOUNT IS INCLUDED, THEN TOTAL INCO ME WOULD BE RS. 1,50,47,719/- AND ASSESSEE HAS DECLARED INCOME OF RS. 1,60,00,000 /- UPTO THIS DATE. THEREFORE, ADDITION IF ANY SHOULD HAVE BEEN MADE FOR RS. 9,52, 281/-. 7. AFTER THE ABOVE OBSERVATION, THE LD. CIT(A) PROC EEDED TO DELETE THE TOTAL ADDITION BY MAKING FOLLOWING OBSERVATIONS VIDE PARA S 8.2 TO 8.5 WHICH ARE AS UNDER:- 8.2 FURTHER THOUGH THE A.O. HAS MENTIONED THAT TH E APPELLANT HAD DECLARED RS.1.60 CRORES DURING THE COURSE OF SURVEY ON ACCOUNT OF CERTAIN DISCREPANCIES FOUND DURING THE COURSE OF SU RVEY, SUCH DISCREPANCIES HAVE NOT BEEN DISCUSSED. RATHER BEFOR E THE A.O. ITSELF THE APPELLANT HAD SUBMITTED THAT DURING THE COURSE OF SURVEY NO BOOKS OF ACCOUNTS WERE IMPOUNDED AND THAT THERE WAS NO DOCUMENT AS PER WHICH PROFIT COULD BE DETERMINED AT AN AMOUN T HIGHER THAN THAT SURRENDERED BY THE APPELLANT. IT WAS FURTHER S UBMITTED BEFORE THE A.O. VIDE LETTER DATED 18,12.2009 BY THE APPELLANT THAT THE APPELLANT MADE THE OFFER OF SURRENDER WITHOUT ANY CONCRETE EV IDENCE OR DOCUMENTS IMPOUNDED DURING THE COURSE OF SURVEY OPE RATIONS. IT WAS SPECIFICALLY MENTIONED THAT THERE WAS NO IMPOUNDED DOCUMENT ON THE BASIS OF WHICH INCOME COULD BE DETERMINED ABOVE THE INCOME SHOWN BY THE APPELLANT. 8.3 THEREFORE, THOUGH AS PER THE SURRENDER LETTE R THE APPELLANT APPEARS TO HAVE AGREED FOR SHOWING INCOME OF RS.1,6 0 CRORES UPTO 7.9.2006 IN THE ABSENCE OF ANY SPECIFIC EVIDENCE DI SCUSSED BY THE 6 A.O. THERE WOULD NOT BE ANY JUSTIFICATION TO MAKE F URTHER ADDITION TO THE INCOME OF THE APPELLANT. 8.4 THE STAND OF THE APPELLANT IN THIS REGARD APP EARS TO BE JUSTIFIED IF SEEN FROM ANOTHER ANGLE ALSO. BEFORE THE A.O. AN D DURING APPEAL PROCEEDINGS THE LD. COUNSEL HAS EXPLAINED THAT THE BOOK PROFIT AS ON 7.9.2006 HAS BEEN CASTED TAKING INTO ACCOUNT THE VA LUE OF CLOSING STOCK AT A HYPOTHETICAL FIGURE. THIS CONTENTION OF THE APPELLANT HAS NOT BEEN SHOWN TO BE INCORRECT BY THE A.O, IF THI S CONTENTION OF THE APPELLANT IS TAKEN TO BE CORRECT, THEN THIS WOULD M EAN THAT NET PROFIT SHOWN UPTO THE DATE OF SURVEY AND AFTER THE DATE OF SURVEY COULD BE DIFFERENT FROM WHAT WAS SHOWN IN THE BOOKS. THEREFO RE, THE BOOK PROFIT SHOWN IN THE BOOKS UPTO THE PERIOD 7.9.2006 AT RS. 83,47,719/- WOULD NOT BE REAL NET PROFIT UPTO THAT DATE AS PER BOOKS. ACCORDINGLY THE ACTUAL NET PROFIT FOR THE PERIOD UP TO 7.9.2006 COULD BE MORE THAN RS.83,47,719/- AND FOR THE POST SURVEY PERIOD LESS THAN RS.10,75,832/-. THEREFORE, IT WOULD NOT CHANGE THE POSITION MATERIALLY IF THE OVERALL INCOME SHOWN BY THE APPEL LANT IS OTHERWISE THE CORRECT INCOME. 8.5 KEEPING IN VIEW THE ABOVE DISCUSSED POSITION , IN MY OPINION, THERE IS NO CASE FOR MAKING ANY FURTHER ADDITION ON THIS GROUND TO THE INCOME SHOWN BY THE APPELLANT IN THE RETURN OF INCO ME. THIS GROUND OF APPEAL IS, THEREFORE, ALLOWED. 8. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT NO INCRIMINATING MATERIAL WAS SEIZED DURING THE SURVEY AND ADDITION HAS BEEN MADE MERELY ON THE BASIS OF STATEMENT RECORDED FROM THE ASSESSEE WHICH IS NOT TENABLE PARTICULARLY IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN TH E CASE OF CIT V S. KHADER KHAN SON 352 ITR 480(SC). HE FURTHER SUBMITTED THA T THOUGH ASSESSEE SURRENDERED A SUM O OF RS. 1.60 CRORES BUT HAS FILE D RETURN OF INCOME AT RS. 1,61,23,710/-, THEREFORE, THERE WAS NO JUSTIFICATIO N IN FURTHER ADDITION OF RS. 10,75,832/-. 7 9. ON THE OTHER HAND LD. DR FILED A COPY OF THE STA TEMENT OF ASSESSEE WHICH WAS RECORDED DURING THE SURVEY ALONG WITH THE ANNEX URE A SHOWING VARIOUS DOCUMENTS WHICH WERE FOUND DURING THE SURVEY AND PO INTED OUT THAT VARIOUS LOOSE PAPERS WERE FOUND WHICH WERE CONTAINING VARIOUS DIS CREPANCIES WHICH ASSESSEE COULD NOT EXPLAIN AND ASSESSEE WAS FULLY CORNERED A ND THE SURRENDER WAS MADE TO ESCAPE FROM THIS SITUATION. HE REFERRED TO THE STA TEMENT RECORDED DURING THE SURVEY THROUGH WHICH VARIOUS AGREEMENTS ETC. WERE C ONFRONTED TO ASSESSEE, WHICH CLEARLY SHOWS THAT MANY INCRIMINATING DOCUMENTS WER E FOUND. IN VIEW OF THESE INCRIMINATING DOCUMENTS IT CANNOT BE SAID THAT THE SURRENDER WAS WITHOUT ANY BASIS. THEN HE REFERRED TO THE COPY OF THE SURRENDE R LETTER WHICH HAS BEEN FILED AT PAGE 1 OF THE PAPER BOOK WHICH CLEARLY SHOWS THAT A SSESSEE HAD UNDERAKEN TO SURRENDER A SUM OF RS. 1,60,00,000/- INCLUDING BOOK PROFIT UP TO 7.9.2006. THE ASSESSING OFFICER HAS NOT DISTURBED THE RESULTS DEC LARED BY THE ASSESSEE AND HE HAS SIMPLY ADDED THE PROFITS WHICH WERE THERE IN TH E BOOKS OF THE ASSESSEE AFTER 7.9.2006 AND THEREFORE, ADDITION IS JUSTIFIED. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY. NO DOUBT THE HON'BLE SUPREME COURT CONFIRMED THE DECISION OF HON'BLE MAD RAS HIGH COURT IN THE CASE OF CIT V S. KHADER KHAN SON (SUPRA). THE DECISION O F HON'BLE SUPREME COURT IS NOT ELABORATIVE, THEREFORE, WHEN THE DECISION OF M ADRAS HIGH COURT IS PERUSED, IT BECOMES CLEAR THAT NO ADDITION CAN BE MADE PRIMARIL Y ON THE BASIS OF STATEMENT RECORDED DURING THE SURVEY. THEREFORE, CLEARLY THIS RATIO WOULD BE APPLICABLE IF ADDITION HAS BEEN MADE PURELY ON THE BASIS OF STATE MENT MADE DURING THE SURVEY. HOWEVER, IN THE CASE BEFORE US THE STATEMENT RECORD ED DURING THE SURVEY ITSELF SHOWS THAT THE AGREEMENT DATED 9.6.2006 WHICH WAS E XECUTED BETWEEN THE ASSESSEE AND SMT. SONIA JAIN FOR SALE OF PLOT @ RS. 75000/- PER BISWA WAS FOUND. THE ASSESSEE HAD REPLIED IN RESPONSE TO THE QUERY REGARDING THIS AGREEMENT THAT HE WAS NOT ABLE TO EXPLAIN ABOUT THIS AGREEMEN T. ANOTHER AGREEMENT DATED 25.4.2006 WAS EXECUTED BETWEEN SHRI ASHOK KUMAR WIT H THE ASSESSEE FOR SALE 8 DEED MEASURING 285 SQUARE YARDS @ 1500/- PER SQUAR E YARD. THE ASSESSEE WITH REFERENCE TO THIS AGREEMENT HAD ALSO REPLIED THAT H E WOULD NOT BE ABLE TO SAY ANYTHING WITHOUT CONSULTING BOOKS OF ACCOUNTS. SOM E LOOSE PAPERS WERE ALSO FOUND WHICH HAVE RECORDED CERTAIN PURCHASES ETC. AN D DETAILED QUESTIONS WERE ASKED FROM THE ASSESSEE. IN FACT ANNEXURE ANNEXED T O THE STATEMENT SHOWS THAT VARIOUS ANNEXURES OF LOOSE PAPERS WERE FOUND WHICH RUN INTO HUNDREDS OF PAGES AND HAVE BEEN LISTED AS UNDER:- DOCUMENT IMPOUNDED S.NO. ANNEXURE PARTICULARS PAGES (FROM TO) 1 A ORIGINAL DOCUMENTS 1 TO 111 2 B -DO- 1 TO 181 3 C LOOSE PAPERS 1 TO 113 4 D -DO- 1 TO 156 5 E -DO- 1 TO 84 6 F -DO- 1 TO 116 7 G -DO- 1 TO 153 8 H -DO- 1 TO 119 9 I -DO- 1 TO 34 11. ALL THESE FACTS CLEARLY SHOWS THAT VOLUMINOUS I NCRIMINATING MATERIAL WAS FOUND DURING SURVEY I.E. WHY ASSESSEE PREFERRED TO MAKE A SURRENDER. IN FACT BY OFFERING SURRENDER WHAT HAPPENS IS THAT FURTHER INQ UIRY IS SHUT. THE REVENUE HAS ACCEPTED THIS SURRENDER. THE SURRENDER LETTER READS AS UNDER:- TO, THE INCOME TAX OFFICER, WARD-IV-(3) MALERKOTLA. SUB: DECLARATION OF INCOME U/S.133A IN THE CASE OF M/S EKTA CONSTRUCTION CO., DHURI. SIR, RESPECTFULLY SUBMITTED AS UNDER. 9 THAT THE SURVEY U/S 133A WAS CONDUCTED ON THE BUSI NESS PREMISES ON 07-09-06. CERTAIN LOOSE PAPERS/DOCUMENT S WERE IMPOUNDED DURING THE COURSE OF SURVEY OPERATION. TH ERE MAY BE DISCREPANCY IN THE DOCUMENTS OR LOOSE PAPERS AND IN ORDER TO AVOID LITIGATION WITH DEPARTMENT AND FOR PEACE O F MIND AND THE FIRM HEREBY AGREED TO DECLARE NET INCOME OF RS. 1 CRORE 60 LACS INCLUDING BOOK PROFIT UPTO 07-09-2006 TO CO VER UP DIFFERENCE IN PURCHASE/SALE PRICE OF PLOTS AND ALL OTHER DEFECTS IN BOOKS/LOOSE PAPERS AND DOCUMENTS. THE FIRM HAD PURCHASED AND SOLD THE PLOTS ON DIFFE RENT DATES TO DIFFERENT PARTIES AGAINST ADVANCES AND REG ISTRATION DEEDS IMPOUNED BY YOUR HONOUR. THE ASSESSEE FIRM AG REED TO DECLARE NET PROFIT UPTO 07-09-2006 AMOUNTING TO RS. 1 CRORE 60 LACS INCLUSIVE OF BOOKS PROFIT IN FINANCIAL YEAR 2006-07 RELEVANT TO A.Y. 2007-08 SUBJECT TO NO PENAL ACTION AND PROSECUTION. THE FIRM SHALL DECLARE NET PROFIT OF R S. 1 CRORE 60 LACS UPTO 07-09-2006 AND SHALL NOT CLAIM ANY KIN D OF DEDUCTION OR EXEMPTION. THE FIRM SHALL MAKE ENTRY O F NET PROFIT OF RS. 1 CRORE 60 LACS UPTO 07-09-2006 WHICH SHALL BE INCLUSIVE OF BOOK PROFITS. THE FIRM SHALL PAY ADVAN CE TAX ON DECLARED NET PROFIT IN ACCORDANCE TO PROVISION OF L AW. THIS AGREEMENT IS WITHOUT ANY PRESSURE AND MADE VOLUNTARILY. THANKING YOU. YOURS FAITHFULLY M/S EKTA CONSTRUCTION CO., DHURI THROUGH PARTNER 12. THE ABOVE CLEARLY SHOWS THAT SURRENDER OF RS. 1 ,60,00,000/- WAS MADE UPTO THE PERIOD OF 7.9.2006. THE ASSESSING OFFICER HAS N OT DISTURBED THE TRADING RESULTS DECLARED BY THE ASSESSEE AND HE HAS SIMPLY PROVED THAT PROFIT AFTER 7.9.2006 TO 31.3.2007 AS PER BOOKS WAS RS. 10,75,83 2/- IN ADDITION TO SURRENDERED INCOME. IN OUR OPINION, THE ASSESSING OFFICER HAS RIGHTLY ADDED THIS AMOUNT TO THE INCOME OF THE ASSESSEE. THE LD. CIT(A) HAS MADE GENERAL OBSERVATIONS AND HAS NOT BOTHERED TO VERIFY THE SURVEY FOLDER TO SEE WHETHER ANY INCRIMINATING MATERIAL WAS FOUND OR NOT AND SIMPLY ALLOWED THE RE LIEF BY OBSERVING THAT BOOKS OF ACCOUNT AND DISCREPANCIES WERE NOT DISCUSSED DUR ING THE SURVEY. IN OUR 10 OPINION, THIS CANNOT BE THE REASON FOR GIVING RELIE F WITHOUT REFERRING TO THE STATEMENT RECORDED DURING SURVEY WHICH CLEARLY SHOW S THAT INCRIMINATING MATERIAL WAS FOUND. THEREFORE, WE SET ASIDE THE ORDER OF LD. CIT(A) AND RESTORE THAT OF ASSESSING OFFICER. 13. GROUND NO.2: DURING ASSESSMENT PROCEEDINGS IT WAS NOTICED BY ASS ESSING OFFICER THAT ASSESSEE HAS ADVANCED CERTAIN AMOUNTS TO THE PARTNERS. SUCH ADVANCES WERE NOT FOR BUSINESS PURPOSES. FURTHER, ASSESSEE H AS BORROWED VARIOUS SUMS AS UNSECURED LOANS AND WAS PAYING INTEREST @ 12%, THER EFORE, A SHOW CAUSE NOTICE WAS ISSUED THAT WHY PROPORTIONATE INTEREST SHOULD N OT BE DISALLOWED. IN RESPONSE IT WAS MAINLY CONTENDED THAT TOTAL DEBIT BALANCE ON DIFFERENT DATES WAS RS. 66,39,000/- IN THE ACCOUNT OF VARIOUS PARTNERS AND IF SURRENDERED AMOUNT OF RS. 67,00,000/- WOULD BE CONSIDERED THAN THERE WOULD BE NO DEBIT BALANCE. FURTHER, THE PROFIT WOULD ACCRUE FROM DAY-TO-DAY AND IF THAT WAS ACCOUNTED FOR, NO DEBIT BALANCE WOULD REMAIN. THE ASSESSING OFFICER DID NOT ACCEPT THIS SUBMISSIONS AND REFERRED TO THE DECISION OF HON'BLE PUNJAB & HARYA NA HIGH COURT IN THE CASE OF M/S ABHISHEK INDUSTRIES LTD 286 ITR 1 AND ACCORDINGLY WORKED OUT THE INTEREST IN THE HANDS OF VARIOUS PARTNERS ON THE BASIS OF DE BIT ENTRIES AMOUNTING TO RS. 10,96,280/-. THIS INTEREST WAS DISALLOWED. 14. ON APPEAL IT WAS MAINLY STATED THAT AMOUNT OF R S. 10,96,280/- HAS BEEN WORKED OUT MAINLY ON THE BASIS OF DEBIT ENTRIES AND NOT ON THE BASIS OF DEBIT BALANCE. THERE WERE OPENING CREDITS AND IF THE INCO ME SURRENDERED WAS CONSIDERED THERE WOULD BE NO DEBIT BALANCE IN THE P ARTNERS ACCOUNT. FURTHER, IT WAS SUBMITTED THAT THERE WAS NO PROVISION FOR CHARG ING INTEREST ON DEBIT BALANCE OR ALLOWING INTEREST ON CREDIT BALANCE, THEREFORE, THERE IS NO QUESTION OF CHARGING THE INTEREST. 11 15. THE LD. CIT(A) OBSERVED THAT BECAUSE OF THE DEC ISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V ABHI SHEK INDUSTRIES LTD (SUPRA), THE PROPORTIONATE INTEREST HAS TO BE DISALLOWED. HE FURTHER OBSERVED THAT SUCH INTEREST HAS TO BE WORKED OUT AFTER CONSIDERING THE CREDIT BALANCE ALSO. HE FURTHER OBSERVED THAT PROPORTIONATE PROFIT SHOULD ALSO BE C REDITED. ACCORDINGLY, HE REWORKED THE DISALLOWANCE OF RS. 50,570/-. 16. BEFORE US, LD. DR SUPPORTED THE ORDER OF ASSES SING OFFICER. 17. ON THE OTHER HAND LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN VIEW OF THE ABSENCE OF ANY PROVISION FOR CHARGING OF INTE REST IN THE PARTNERSHIP DEEED, NO INTEREST SHOULD HAVE BEEN DISALLOWED. 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY AND FIND THAT LD. CIT(A) HAS RIGHTLY OBSERVED THAT INTEREST CANNOT BE CALCULATED MERELY ON THE BASIS OF DEBIT ENTRIES. THE LD. CIT(A) HAS RECALCULATED THE INTEREST AFTER CONSIDERING THE VARIOUS CREDIT ENTRIES IN THE PARTNERS ACCOUNT AND ALSO PROPORTIONATE PROFIT. THE CALCULATION HAVE BEEN REPRODUCED IN PARA 10.2 A T PAGES 9 & 10. WE ARE SATISFIED WITH THIS CONCLUSION AND, THEREFORE, UPHO LD THE ORDER OF LD. CIT(A). 19. GROUND NO.3 : AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICE D THAT ASSESSEE HAS TAKEN UNSECURED LOANS FROM VARIOUS PERSONS. HOWEVER, FRO M THE DOCUMENTARY EVIDENCE FILED BY THE ASSESSEE IN SUPPORT OF THE SAME, IN L ARGE NUMBER OF CASES IN THE SHAPE OF CONFIRMATION, COPIES OF I.T. RETURNS AND C OPIES OF THE BANK ACCOUNTS OF SUCH PERSONS, IT WAS NOTICED THAT RELEVANT FUNDS WE RE TRANSFERRED TO THE ASSESSEES ACCOUNT AFTER INVARIABLY DEPOSITING CASH IN THE VAR IOUS ACCOUNTS ON SAME DATE OR FEW DAYS EARLIER AND THE SAME AMOUNTS WERE TRANSFER RED TO THE ASSESSEE. THEREFORE, CREDIT WORTHINESS OF SUCH PARTIES WAS NO T SATISFACTORILY PROVED. 12 THEREFORE, ASSESSEE WAS ASKED TO SHOW CAUSED WHY SU CH UNSECURED LOANS SHOULD NOT BE ADDED. 20. IN RESPONSE, IT WAS MAINLY SUBMITTED THAT ALL T HE CONFIRMATIONS HAVE BEEN FILED AND MOST OF THE CREDITORS ARE EXISTING ASSESS EES AND FILED THE TAX RETURNS. THEREFORE, NECESSARY INGREDIENTS OF SECTION 68 I.E. IDENTITY OF THE PARTY, GENUINENESS OF THE TRANSACTIONS AND CAPACITY & CRED IT WORTHINESS OF THE PARTY WAS FULLY PROVED. RELIANCE WAS ALSO PLACED ON SOME CAS E LAWS. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THESE REPLIES AND, T HEREFORE, ISSUED SUMMONS TO 12 PARTIES WHICH ARE AS UNDER:- S.NO NAME & ADDRESS AMOUNT ADVANCED (RS) 1. SH. HARI PAL GUPTA S/O SH BANT RAM, DHURI 3,50,000/- 2. M/S KRISHNA SILK HOUSE, DHURI 4,00,000/- 3. SH. KHEM SINGH S/O SH GURDIAL SINGH, DHURI 3,00,000/- 4. SMT. KAMLESH RANI W/O SH. LAI CHAND, DHURI 3,00,000/- 5. SH. HARDEV SINGH C/O M/S SHIV KUMAR PRATHAM RICKSHAW WORKS, DHURI. 1,00,000/- 6. SH. JATINDER SHAH C/O M/S VIJAY KUMAR BHARAT BHUSHAN ELECTRICIANS, DHURI. 1,00,000/- 7. SMT. DEVANTI W/O SH JATINDER SHAH C/O SHIV RICKSHAW WORKS, DHURI. 3,00,000/- 8. SMT. KUSHAL RANI W/O SH. PAWAN KUMAR C/O M/S M.S.G RICKSHAW WORKS, DHURI 3,00,000/- 9. SH. SURINDER SHARMA C/O M/S RAJ KUMAR DEEPAK KUMAR, DHURI 2.00.000/- 10. SMT. RANJIT KAUR W/O SH. MUNSHI SINGH C/O M/S SUSHIL KUMAR DEEPAK KUMAR, DHURI. 3,00, 000/- 11. SMT. RAKSHA DEVI W/O SH. KULDIP KUMAR C/O M/S SUSHIL KUMAR BHARAT BHUSHAN, DHURI. 3,00,000/- 13 12. SMT. RENU W/O SH. ASHOK KUMAR, DHURI. 3,00,000/- 21. OUT OF THE ABOVE PARTIES, ONLY ONE PERSON I.E M /S KRISHNA SILK HOUSE, DHURI RESPONDED THROUGH PROPRIETOR SHIR PRAVEEN KUMAR WHO SE STATEMENT WAS RECORDED IN THE ABSENCE OF SHRI DEEPAK ANAND, ADVOCATE OF T HE ASSESSEE. FURTHER, SHRI DEEPAK ANAND APPEARED ON BEHALF OF THE SHRI HARI PA L GUPTA AND FILED THE LETTER WRITTEN BY HIM ALONG WITH NECESSARY DOCUMENTS. THE ASSESSING OFFICER ACCEPTED THESE TWO TRANSACTIONS BUT IN THE ABSENCE OF ANY EV IDENCE OR CREDITOR BEING PRODUCED BEFORE HIM, HE OBSERVED THAT NO EVIDENCE W AS AVAILABLE IN RESPECT OF THE PARTIES LISTED AT SR NOS. 3 TO 12. HE ALSO OBSERVE D THAT THESE PERSONS NEITHER CONTACTED HIS OFFICE NOR SOUGHT ANY ADJOURNMENT, TH EREFORE, SHOW CAUSE NOTICED DATED 18.12.2009 WAS ISSUED TO THE ASSESSEE WHY THE SE UNSECURED LOANS SHOULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE U/S 68 OF THE ACT. IT WAS AGAIN REITERATED THAT ALL THE DETAILS HAVE ALREADY BEEN F ILED AND THESE PERSONS WERE EXISTING ASSESSES. IT WAS POINTED OUT THAT SINCE SU MMONS WERE RECEIVED BY SUCH PARTIES ON 16.12.2009 AND 17.12.2009, THEREFORE, TH EY COULD NOT PRESENT THEMSELVES BEFORE THE ASSESSING OFFICER. THE ASSESS ING OFFICER OBSERVED THAT SINCE THESE PERSONS HAVE FAILED TO APPEAR BEFORE HI M DESPITE SUMMONS AND HAVE NOT PROVED THEIR CREDITWORTHINESS, THEREFORE, SUCH SUMS WERE REQUIRED TO BE ADDED TO THE INCOME OF THE ASSESSEE AND IN THIS REGARD HE REFERRED TO VARIOUS DECISIONS OF TRIBUNAL AS WELL AS THE DECISION OF HON'BLE PUN JAB & HARYANA HIGH COURT IN THE CASE OF TODAR MAL VS. CIT 106 ITR 619 (P&H) AND CALCUTTA HIGH COURT IN THE CASE OF CIT VS. PRECISION FINANCE PVT LTD.(CAL. ) AND ADDED A SUM OF RS. 25,00,000/- U/S 68 OF THE ACT. 22. ON APPEAL, THE SUBMISSIONS MADE BEFORE THE ASSE SSING OFFICER WAS REITERATED AND CERTAIN CASE LAWS WERE ALSO RELIED. THE LD. CIT(A) OBSERVED THAT ASSESSEE HAS ALREADY FILED AFFIDAVITS, PAN NOS. WIT H DOCUMENTARY EVIDENCE 14 SHOWING FILING OF THE RETURNS, CONFIRMED COPY OF AC COUNT, COPY OF BANK ACCOUNT, COPY OF BALANCE SHEET OF CREDITORS. HE FURTHER OBSE RVED THAT THESE DOCUMENTS SHOW THAT THESE PERSONS WERE INCOME TAX ASSESSES. FURTHER, SINCE THE WHOLE OF THE AMOUNT DUE TO THESE PARSONS HAVE ALREADY BEEN R ETURNED THROUGH CHEQUES AND, THEREFORE, THERE WAS NO JUSTIFICATION FOR MAKING TH E ADDITION AND ACCORDINGLY HE DELETED THE ADDITION. 23. BEFORE US LD. DR POINTED OUT THAT ASSESSING OFFICER HAD ISSUED SUMMONS TO TWELVE PARTIES OUT OF WHICH ONLY TWO PARTIES NAM ELY M/S HARI PAL GUPTA AND M/S KRISHNA SILK HOUSE APPEARED BEFORE THE ASSESSIN G OFFICER AND SUBMITTED DOCUMENTARY EVIDENCE REGARDING UNSECURED LOANS AND, THEREFORE, NO ADDITION HAS BEEN MADE IN RESPECT OF THESE TWO PARTIES. IN RESPE CT OF OTHER 10 PARTIES, NOBODY APPEARED. FURTHER ASSESSING OFFICER HAD CLEARLY NO TED THAT CASH WAS DEPOSITED IMMEDIATELY BEFORE ISSUING OF CHEQUES TO THE ASSESS EE WHICH ITSELF SHOWS THAT TRANSACTIONS ARE NOT GENUINE. HE FURTHER POINTED O UT THAT THE LD. CIT(A) DELETED THE ADDITION MERELY BY OBSERVING THAT ASSESSEE HAD FURNISHED THE CONFIRMATIONS, PAN NUMBERS, EVIDENCE ETC. BUT HE DID NOT BOTHER TO SCRUTINIZE THE BANK ACCOUNTS OF THE DEPOSITORS WHICH WOULD HAVE SHOWN REAL FACTS . SIMPLY BECAUSE LOANS HAVE BEEN ULTIMATELY RETURNED THROUGH ACCOUNT PAYEE CHEQ UES, CANNOT BE BASIS FOR ACCEPTING THE UNSECURED LOANS. 24. ON THE OTHER HAND LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE HAS FURNISHED THE CONFIRMATIONS, PAN NUMBERS ETC. BEFOR E THE ASSESSING OFFICER AND ALL THE PARTIES FROM WHOM LOANS WERE RAISED WERE I NCOME-TAX PAYEES. ONCE THOSE PERSONS WERE INCOME TAX ASSESSEES, THEN NO FU RTHER BURDEN WAS ON THE ASSESSEE TO PROVE ANYTHING ELSE. IN THIS REGARD, H E RELIED ON THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V AMAR CHAND AND SONS ITA NO. 243 OF 2011 (COPY OF THE DECISION WAS FILED ). HE ALSO RELIED ON ANOTHER DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V LAUL 15 TRANSPORT CORPORATION 214 TAXATION 329 (P&H). HE A LSO RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. ORI SSA CORPORATION P. LTD 159 ITR 78. HE FURTHER SUBMITTED THAT ONCE IT IS PROV ED THAT LOANS HAVE BEEN GIVEN THROUGH CHEQUES BY REGULAR INCOME-TAX ASSESSEES, TH EN NO FURTHER BURDEN LIES ON THE ASSESSEE BECAUSE REVENUE CANNOT ASK FOR SOURCE OF SOURCE. IN THESE CIRCUMSTANCES, HE STRONGLY SUPPORTED THE IMPUGNED O RDER. 25. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY. IT IS SETTLED LAW THAT IF AN ITEM APPEARS AS A CREDIT ENTRY IN THE BOOKS OF A CCOUNT, THEN ASSESSEE HAS TO PROVE THE IDENTITY OF THE PARTY, GENUINENESS OF THE TRANSACTION AND THE CREDIT WORTHINESS OF THE DEPOSITORS. 26. IN THE CASE BEFORE US, ASSESSING OFFICER HAD IS SUED SUMMONS TO 12 PARTIES OUT OF WHICH ONLY TWO PARTIES APPEARED AND FURNISHE D DOCUMENTS ON WHICH THE ASSESSING OFFICER WAS SATISFIED AND NO ADDITION WAS MADE. THE OTHER TEN PARTIES DID NOT BOTHER TO APPEAR OR SOUGHT ANY ADJOURNMENT. THE ASSESSING OFFICER FURTHER NOTED THAT CASH HAS BEEN DEPOSITED EITHER O N THE DATE OF ISSUE OF CHEQUES TO THE ASSESSEE OR IMMEDIATELY FEW DAYS BEFORE ISSU E OF SUCH CHEQUES. THESE CIRCUMSTANCES ITSELF CREATES DOUBT REGARDING THE CR EDITWORTHINESS OF SUCH DEPOSITORS. THE LD. CIT(A) HAS DELETED THE ADDITION BY OBSERVING THAT ONCE IT IS PROVED THAT SUCH DEPOSITORS WERE REGULAR INCOME-TAX ASSESSEES AND THAT THEIR AFFIDAVITS AND PAN NUMBERS WERE FURNISHED AND LOANS WERE RETURNED THROUGH CHEQUES, THEN, THERE IS NO JUSTIFICATION OF THE ADD ITION. IN OUR OPINION, THIS IS NOT A VERY GOOD REASON FOR DELETING THE ADDITION BECAUS E THE LD.CIT(A) HAS FAILED TO SCRUTINIZE THE BANK ACCOUNT TO DETERMINE THE CREDIT WORTHINESS OF SUCH PARTIES. 27. BEFORE WE PROCEED TO DISCUSS INDIVIDUAL PARTIES DETAIL, LET US EXAMINE THE DECISIONS CITED BY LD. COUNSEL FOR THE ASSESSEE. 16 28. THE FIRST DECISION WAS IN THE CASE OF CIT V AMA R CAHND & SONS (SUPRA). IN THAT CASE THE ASSESSEE HAD TAKEN LOAN FROM 18 PERSO NS ON WHICH ASSESSING OFFICER REACHED THE CONCLUSION THAT THOUGH IDENTITY OF THE CREDITORS WAS PROVED BUT HE WAS NOT SATISFIED WITH THE CREDITWORTHINESS AND GEN UINENESS OF THE TRANSACTIONS OF 15 CREDITORS AND THUS ADDED THE AMOUNT PERTAINING T O THESE 15 CREDITORS TO THE INCOME OF THE ASSESSEE. THE ADDITION WAS ULTIMATELY DELETED BY THE TRIBUNAL AND ON AN APPEAL, THE HON'BLE HIGH COURT OBSERVED THAT IT HAS COME ON RECORD THAT CREDITORS ARE EXISTING INCOME-TAX PAYERS WHO HAVE F ILED THEIR RETURNS SHOWING THE MODE OF ADVANCES AND THEIR SOURCES OF SUCH AFFAIRS HAVE BEEN ACCEPTED BY THEIR RESPECTIVE ASSESSING OFFICERS AND THEIR CREDITWORTH INESS COULD NOT BE DOUBTED AND IT WAS FOR THE ASSESSING OFFICER IF HE DOUBTED THEI R CREDITWORTHINESS, HE HAS TO BRING SOME EVIDENCE ON RECORD. THEREFORE, IT IS CLE AR THAT NORMALLY IF THE DEPOSITOR OR CREDITOR IS A REGULAR INCOME-TAX ASSES SEE AND HIS SOURCES HAS BEEN DULY REFLECTED IN HIS RETURN AND AFFAIRS OF SUCH CR EDITORS HAVE BEEN ACCEPTED BY THE RESPECTIVE ASSESSING OFFICER, THEN NO FURTHER D OUBT CAN BE RAISED UNLESS CONTRARY EVIDENCE IS AVAILABLE. WHEREAS IN THE CASE BEFORE US NO SUCH ASSESSMENT ORDER WAS PRODUCED BEFORE THE ASSESSING OFFICER WHE REIN THE RESPECTIVE OFFICER HAVE RECORDED THE SATISFACTION. IN FACT TO PROVE TH AT CREDITWORTHINESS WAS NOT GENUINE, ASSESSING OFFICER SUMMONED THESE PARTIES WHO NEVER APPEARED BEFORE HIM. SIMILARLY IN THE CASE OF CIT V LAUL TRANSPOR T CORPORATION (SUPRA) THE ASSESSEE HAD TAKEN LOAN OF RS. 25,49,000/- FROM 18 PARTIES. THE ASSESSING OFFICER ACCEPTED THE LOAN FROM THREE PERSONS AMOUNTING TO R S. 7,65,000/- AND IN RESPECT OF BALANCE OF RS. 17,84,000/-, IT WAS CONCLUDED THA T ASSESSEE HAS NOT SATISFACTORILY EXPLAINED AND THE AMOUNT WAS ADDED T O THE INCOME OF THE ASSESSEE. IN THIS CASE ALSO THE ADDITION HAS BEEN DELETED BY THE TRIBUNAL. THE HON'BLE HIGH COURT OBSERVED AS UNDER:- IN THE PRESENT CASE, A PERUSAL OF THE IMPUGNED ORD ER PASSED BY THE TRIBUNAL REVEALS THAT IN THE INSTANT CASE TH E ASSESSEE HAS DISCHARGED ITS ONUS TO PROVE THE GENUINENESS OF THE CASH 17 CREDIT BY PLACING ON RECORD BEFORE THE ASSESSING OF FICER SUFFICIENT MATERIAL / EVIDENCE. NOT ONLY THE IDENTI TY OF THE CREDITOR HAS BEEN ESTABLISHED BY PRODUCING THE RECO RD OF THE ASSESSEE IN WHICH THOSE TRANSACTIONS HAVE BEEN DULY ACCOUNTED FOR, BUT THE ASSESSEE HAS ALSO DISCHARGED ITS ONUS IN EXPLAINING THE NATURE OF SOURCE AND THE CASH CREDIT. IT IS ALS O WELL SETTLED THAT THE ASSESSEE CAN BE MADE TO EXPLAIN THE SOURCE OF THE CREDITS IN THE BOOKS OF ACCOUNT BUT NOT THE SOURCE OF THE SOURCE, I.E. SOURCE OF THE CREDITORS. 29. IN THIS CASE ALSO IT IS CLEAR THAT SUFFICIENT E VIDENCE WAS FILED I.E. WHY THE ADDITION WAS DELETED. 30. IN BOTH OF THE ABOVE CASES THE CASH WAS NOT DEP OSITED WHEN CHEQUE WAS GIVEN TO THE ASSESSEE OR IMMEDIATELY 2 -3 DAYS BEFO RE THAT BY THE CREDITORS, THEREFORE, FACTS BEFORE US ARE TOTALLY DIFFERENT TH EN WHAT HAS BEEN DECIDED BY THE HON'BLE COURT. 31. THE LD. COUNSEL HAD ALSO RELIED ON THE DECISIO N OF CIT VS. ORISSA CORPORATION P. LTD (SUPRA) . IN THAT CASE THE ASSE SSEE WAS A PRIVATE LIMITED COMPANY. CERTAIN AMOUNTS WERE SHOWN TO HAVE BEEN RE CEIVED BY WAY OF LOAN AMOUNTING TO RS. 150,000/- FROM THREE INDIVIDUAL C REDITORS OF CALCUTTA ON HUNDIES. BEFORE INCOME-TAX OFFICER, ASSESSEE PRODU CED LETTERS OF CONFIRMATION, DISCHARGED HUNDIES AND PARTICULARS OF DIFFERENT CRE DITORS WHOSE GIR NUMBERS WERE WITH THE DEPARTMENT. SINCE THE CREDITORS COULD NOT BE PRODUCED BEFORE THE INCOME-TAX OFFICER, THEREFORE, SUMMONS WERE ISSUED U/S 131 BUT SAID NOTICE WERE RETURNED WITH THE ENDORSEMENT LEFT. THE INCOME-TA X OFFICER, THEREFORE, TREATED THE ENTIRE AMOUNT OF RS. 1,50,000/- AS INCOME OF TH E ASSESSEE BEING UNPROVED CASH CREDITS. ON APPEAL, THE TRIBUNAL OBSERVED THA T ASSESSEE COULD NOT PRODUCE CREDITORS BUT IT DID NOT FOLLOW AUTOMATICALLY THAT AN ADVERSE INFERENCE CAN BE DRAWN THAT THIS AMOUNTS REPRESENTS UNDISCLOSED INCO ME OF THE ASSESSEE. IT WAS 18 ALSO NOTICED THAT CREDITORS WERE INCOME-TAX ASSESSE E AND THEY HAVE MADE STATEMENT BEFORE THE RESPECTIVE INCOME TAX OFFICER ADMITTING THAT THEY WERE ALLOWING THEIR NAMES TO BE LENT WITHOUT REALLY GIVI NG LOAN TO DIFFERENT ASSESSEES. A LIST OF ASSESSES HAD ALSO BEEN GIVEN BUT THE NAME OF THE PRESENT CASE DID NOT FIGURE IN THAT LIST. IN THESE CIRCUMSTANCES THE T RIBUNAL HELD THAT ADDITION COULD NOT BE SUSTAINED. WHEN THE MATTER TRAVELLED TO THE SUPREME COURT THE ISSUE WAS DISCUSSED IN DETAIL AND A REFERENCE WAS MADE TO THE VARIOUS EARLIER DECISIONS OF HON'BLE SUPREME COURT. ULTIMATELY, IT WAS OBSERVED AS UNDER:- IN THIS CASE, THE ASSESSEE HAD GIVEN THE NAMES AND ADDRESSES OF THE ALLEGED CREDITORS. IT WAS IN THE KNOWLEDGE O F THE REVENUE THAT THE SAID CREDITORS WERE INCOME-TAX ASS ESSEES. THEIR INDEX NUMBERS WERE IN THE FILE OF THE REVENUE . THE REVENUE, APART FROM ISSUING NOTICES UNDER SECTION 1 31 AT THE INSTANCE OF THE ASSESSEE, DID NOT PURSUE THE MATTER FURTHER. THE REVENUE DID NOT EXAMINE THE SOURCE OF INCOME OF THE SAID ALLEGED CREDITORS TO FIND OUT WHETHER THEY WERE CRE DITWORTHY OR WERE SUCH WHO COULD ADVANCE THE ALLEGED LOANS. THER E WAS NO EFFORT MADE TO PURSUE THE SO-CALLED ALLEGED CREDITO RS. IN THOSE CIRCUMSTANCES, THE ASSESSEE COULD NOT DO ANYTHING F URTHER. IN THE PREMISES, IF THE TRIBUNAL CAME TO THE CONCLUSIO N THAT THE ASSESSEE HAS DISCHARGED THE BURDEN THAT LAY ON HIM, THEN IT COULD NOT BE SAID THAT SUCH A CONCLUSION WAS UNREAS ONABLE OR PERVERSE OR BASED ON NO EVIDENCE. IF THE CONCLUSION IS BASED ON SOME EVIDENCE ON WHICH A CONCLUSION COULD BE ARRIVE D AT, NO QUESTION OF LAW AS SUCH ARISES. 32. THEREFORE, IT IS CLEAR THAT CASE WAS DECIDED ON PECULIAR FACTS BECAUSE REVENUE DID NOT PERUSE THOSE CREDITORS DESPITE THEI R STATEMENT THAT THEY WERE ONLY LENDING THE NAMES PARTICULARLY WHEN THE NAME OF THE ASSESSEE WAS NOT IN THE LIST WHOM THESE PERSONS HAD LENT THEIR NAMES. THE REVENU E DID NOT EXAMINE THE SOURCES OF THOSE CREDITORS. THE FACTS IN THE CASE B EFORE US ARE DIFFERENT WHICH WE WILL SEE LITTLE LATER. IN ANY CASE WE WOULD LIKE TO OBSERVE THAT LAW IS NOT STATIC AND LOT OF DEVELOPMENTS HAVE TAKEN PLACE IN RESPECT OF INTERPRETATION SECTION 68. THE ISSUE REGARDING SECTION 68 WAS DISCUSSED IN DET AIL BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT V P. MOHANKALA 291 ITR 278 WHEREIN IT WAS OBSERVED 19 THAT HUMAN PROBABILITIES HAVE TO BE KEPT IN VIEW BE FORE ACCEPTING THE EXPLANATION IN RESPECT OF CASH CREDITORS U/S 68. THE RELEVANT OBSERVATIONS HAVE BEEN MADE AT PARAS 15 TO 18, WHICH ARE AS UNDER:- 15. IN ORDER TO APPRECIATE THE CONTENTIONS URGED B EFORE US IT WOULD BE APPROPRIATE TO NOTICE SECTION 68 OF THE AC T WHICH IS RE-PRODUCED : '68. CASH CREDITS.WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOU S YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERE D BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER , SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME- TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR.' 16. THE QUESTION IS WHAT IS THE TRUE NATURE AND SCO PE OF SECTION 68 OF THE ACT? WHEN AND IN WHAT CIRCUMSTANC ES WOULD SECTION 68 OF THE ACT COME INTO PLAY ? A BARE READI NG OF SECTION 68 SUGGESTS THAT THERE HAS TO BE CREDIT OF AMOUNTS IN THE BOOKS MAINTAINED BY AN ASSESSEE ; SUCH CREDIT H AS TO BE OF A SUM DURING THE PREVIOUS YEAR ; AND THE ASSESSEES OFFER NO EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH CRE DIT FOUND IN THE BOOKS ; OR THE EXPLANATION OFFERED BY THE AS SESSEES IN THE OPINION OF THE ASSESSING OFFICER IS NOT SATISFA CTORY, IT IS ONLY THEN THE SUM SO CREDITED MAY BE CHARGED TO INC OME-TAX AS THE INCOME OF THE ASSESSEES OF THAT PREVIOUS YEA R. THE EXPRESSION 'THE ASSESSEES OFFER NO EXPLANATION' MEA NS WHERE THE ASSESSEES OFFER NO PROPER, REASONABLE AND ACCEP TABLE EXPLANATION AS REGARDS THE SUMS FOUND CREDITED IN T HE BOOKS MAINTAINED BY THE ASSESSEES. IT IS TRUE THE OPINION OF THE ASSESSING OFFICER FOR NOT ACCEPTING THE EXPLANATION OFFERED BY THE ASSESSEES AS NOT SATISFACTORY IS REQUIRED TO BE BASED ON PROPER APPRECIATION OF MATERIAL AND OTHER ATTENDING CIRCUMSTANCES AVAILABLE ON RECORD. THE OPINION OF T HE ASSESSING OFFICER IS REQUIRED TO BE FORMED OBJECTIV ELY WITH REFERENCE TO THE MATERIAL AVAILABLE ON RECORD. APPL ICATION OF MIND IS THE SINE QUA NON FOR FORMING THE OPINION. 20 17. IN SUMATI DAYAL V. CIT [1995] 214 ITR 801 (SC) ; [1995] SUPP 2 SCC 453 THIS COURT HELD : 'IN ALL CASES IN WHICH A RECEIPT IS SOUGHT TO BE TA XED AS INCOME, THE BURDEN LIES ON THE DEPARTMENT TO PROVE THAT IT IS WITHIN THE TAXING PROVISION AND IF A REC EIPT IS IN THE NATURE OF INCOME, THE BURDEN OF PROVING THAT IT IS NOT TAXABLE BECAUSE IT FALLS WITHIN EXEMPTION PRO V IDED BY THE ACT LIES UPON THE ASSESSEE. BUT, IN VIEW OF SECTION 68 OF THE ACT, WHERE ANY SUM IS FOUND CREDI TED IN THE BOOKS OF THE ASSESSEE FOR ANY PREVIOUS YEAR THE SAME MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR IF THE EXPLANATI ON OFFERED BY THE ASSESSEE ABOUT THE NATURE AND SOURCE THEREOF IS, IN THE OPINION OF THE ASSESSING OFFICER , NOT SATISFACTORY. IN SUCH A CASE THERE IS, PRIMA FACIE, EVIDENCE AGAINST THE ASSESSEE, VIZ., THE RECEIPT OF MONEY, AND IF HE FAILS TO REBUT, THE SAID EVIDENCE BEING UNREBUTTED, CAN BE USED AGAINST HIM BY HOLDING THAT IT WAS A RECEIPT OF AN INCOME NATURE.' 18. IN THAT CASE THE AMOUNT WAS CREDITED IN THE CAP ITAL ACCOUNT IN THE BOOKS AND THE ASSESSEE OFFERED HER E XPLANATION ABOUT THE SAID RECEIPT BEING HER WINNINGS FROM HORS E RACES. THE EXPLANATION WAS NOT ACCEPTED. THERE WAS NO DISP UTE THAT THE AMOUNT WAS RECEIVED BY THE ASSESSEE FROM VARIOU S RACE CLUBS ON THE BASIS OF WINNING TICKETS PRESENTED BY HER. THIS COURT BASED ON THE MATERIAL AVAILABLE ON RECORD FOU ND THAT AN INFERENCE ABOUT SUCH A PURCHASE HAS TO BE DRAWN ON THE BASIS OF THE CIRCUMSTANCES AVAILABLE ON RECORD INASMUCH A S NO DIRECT EVIDENCE ABOUT SUCH PURCHASE WOULD BE RARELY AVAILABLE. THIS COURT ACCORDINGLY UPHELD THE MAJORI TY OPINION OF THE SETTLEMENT COMMISSION BASED ON SURROUNDING CIRCUMSTANCES AND APPLYING THE TEST OF HUMAN PROBAB ILITIES. THIS AUTHORITATIVE PRONOUNCEMENT IN OUR CONSIDERED OPINION IS THE COMPLETE ANSWER TO REJECT THE SUBMISSIONS MA DE BY THE LEARNED SENIOR COUNSEL ON BEHALF OF THE RESPONDENTS . 33. THEREFORE, IT IS CLEAR THAT WHEREVER THE ASSESSEE HAS FURNISHED AN EXPLANATION THEN ASSESSING OFFICER HAS TO GIVE REA SON FOR NOT ACCEPTING THE SAME. 21 34. IN VIEW OF THE ABOVE DISCUSSION LET US FIRST SE E VARIOUS DOCUMENTS FURNISHED BY THE ASSESSEE. THE ASSESSEE HAS FURNISHED AFFIDAV ITS OF ALL THE 10 PARTIES WHICH READS AS UNDER:- 22 23 24 25 26 27 28 29 30 31 35. THE CAREFUL READING OF THE ABOVE AFFIDAVITS WOU LD REVEAL THE FOLLOWING IMPORTANT POINTS:- I) INCOME OF ALL THE DEPOSITORS IS BELOW TAXABLE L IMIT; II) ALL OF THEM HAVE BANK ACCOUNT IN PUNJAB NATIONAL BANK, DHURI BRANCH. III) THE CONTENTS OF THE AFFIDAVITS ARE IDENTICAL WHIC H SHOWS THAT AFFIDAVITS WERE DRAFTED BY SAME PERSON. IV) EVEN THE COMPUTER PRINTOUTS SEEM TO BE FROM THE S AME COMPUTER. THE ABOVE POINT CLEARLY CAST DOUBT ON THE GENUINENE SS OF AFFIDAVITS AS WELL AS CONTENTS LEADING TO THE DOUBTS ON CREDITWORTHINESS OF THE DEPOSITORS. 36. NOW LET US EXAMINE THE INDIVIDUAL CASE. I) MRS. RANJIT KAUR : IT HAS BEEN STATED THAT IN THE LETTER FILED BEFORE ASSESSING OFFICER , COPY OF WHICH IS AVAILAB LE AT PAGES 12 & 13 OF THE PAPER BOOK, THAT SHE IS EARNING INCO ME FROM PROFESSIONAL INCOME. IT IS FURTHER STATED THAT TOT AL INCOME AND EVEN THE INCOME FROM EARLIER YEARS WAS KEPT AT HOME WHICH WAS DEPOSITED IN THE BANK WHEN THE AMOUNT WAS LENT TO THE ASSESSEE. SHE HAS BANK ACCOUNT NO. 515112899, COPY OF WHICH IS AVAILABLE AT PAGES 34 TO 36 OF PAPER BOOK. THE RELEVANT PORTION OF THE ACCOUNT DURING THE YEAR REA DS AS UNDER:- 32 33 THE ABOVE WOULD CLEARLY SHOW THAT ACCOUNT IS OPENED ON 18.8.2006 WITH A SUM OF RS. 1500/- AND THEN A SUM OF RS. 3 LA KHS DEPOSITED IN CASH ON 23.8.2006 AND CHEUQE IS ISSUED TO THE ASSES SEE AGAIN ON 23.8.2006 WHICH WAS CLEARED ON THE SAME DATE. THIS CLEARLY SHOWS THAT BANK ACCOUNT OF SMT. RANJIT KAUR HAD NO BALAN CE AND CASH WAS AND DEPOSITED JUST TO FACILITATE THE LOAN TO THE AS SESSEE. IF SHE IS A PROFESSIONAL THEN WHY BANK ACCOUNT WAS NOT OPENED E ARLIER, WHY THE MONEY WAS KEPT AT HOME IF SHE WANTED TO EARN INTERE ST. HER INCOME IS STATED TO BE SUM OF RS. 81,900/- DURING THE YEAR WHICH IS A MEAGER INCOME AND HOW SHE WAS ABLE TO SAVE RS. 3 LA KHS THAT TOO IN CASH. NO EXPLANATION WAS GIVEN TO US WHEN THIS QUES TION WAS CONFRONTED TO LD. COUNSEL. THIS SIMPLY SHOWS THAT T HERE IS NOT CREDIT WORTHINESS OF THE DEPOSITOR AND RETURN HAVE BEEN FILED JUST TO PROVE THE POINT THAT DEPOSITOR IS INCOME-TAX ASSESS EE. (II) SMT. RAKSHA DEVI: IT HAS BEEN STATED THAT IN THE LETTER FILED BEFORE ASSESSING OFFICER, COPY OF WHICH IS AVAILABLE AT PAGES 15 & 1 6 OF THE PAPER BOOK, THAT SHE IS EARNING INCOME FROM PROFESS IONAL INCOME. IT IS FURTHER STATED THAT TOTAL INCOME AND EVEN THE INCOME FROM EARLIER YEARS WAS KEPT AT HOME WHICH WA S DEPOSITED IN THE BANK WHEN THE AMOUNT WAS LENT TO T HE ASSESSEE. SHE HAS BANK ACCOUNT NO. 101432322, COPY OF WHICH IS AVAILABLE AT PAGES 39 TO 41 OF PAPER BOOK. THE RELEVANT PORTION OF THE ACCOUNT DURING THE YEAR REA DS AS UNDER:- 34 THE ABOVE WOULD CLEARLY SHOW THAT ACCOUNT IS OPENED ON 13.04.2006 WITH A SUM OF RS. 1500/- AND THEN A SUM OF RS. 3 LAKHS DEPOSIT ED IN CASH ON 13.04.2006 AND CHEUQE IS ISSUED TO THE ASSESSEE AGAIN ON 13.04.200 6 WHICH WAS CLEARED ON THE 35 SAME DATE. THIS CLEARLY SHOWS THAT BANK ACCOUNT OF SMT. RAKSHA DEVI HAD NO BALANCE AND CASH WAS DEPOSITED JUST TO FACILITATE T HE LOAN TO THE ASSESSEE. IF SHE IS A PROFESSIONAL THEN WHY BANK ACCOUNT WAS NOT OPENED EARLIER, WHY THE MONEY WAS KEPT AT HOME IF SHE WANTED TO EARN INTEREST. HER IN COME IS STATED TO BE SUM OF RS. 87,790/- DURING THE YEAR WHICH IS A MEAGER INCOME A ND HOW SHE WAS ABLE TO SAVE RS. 3 LAKHS THAT TOO IN CASH. NO EXPLANATION WAS GI VEN TO US WHEN THIS QUESTION WAS CONFRONTED TO LD. COUNSEL. THIS SIMPLY SHOWS TH AT THERE IS NOT CREDIT WORTHINESS OF THE DEPOSITOR AND RETURN HAVE BEEN FI LED JUST TO PROVE THE POINT THAT DEPOSITOR IS INCOME-TAX ASSESSEE. 37. THE CASE OF OTHER DEPOSITORS ARE ALMOST SAME AN D ARE DERIVING INCOME OUT OF PROFESSIONAL INCOME OR THEY ARE WORKING AS PETTY EMPLOYEES IN SOME SHOPS. INTERESTINGLY, BANK ACCOUNTS IN ALL THESE CASES HAV E BEEN OPENED IN 2006 ONLY. ALL THESE FACTORS AND THE PETTY BALANCE IN THE BANK ACCOUNT EXCEPT IN THE LOAN TRANSACTIONS CLEARLY SHOW THAT THIS IS A MAKE BELIE F EXPLANATION WHICH CANNOT BE ACCEPTED. THE VERY FACT THAT SUBSTANTIAL CASH HAS BEEN DEPOSITED SAY TO THE TUNE OF RS. 3 LAKHS IMMEDIATELY BEFORE GIVING LOAN OF RS . 3 LAKHS, IT CASTS DOUBT. FURTHER, INTERESTINGLY THE LOAN AMOUNTING TO RS. 3 LAKHS HAVE BEEN TAKEN FROM SEVEN PARTIES OUT OF THE TOTAL 10 PARTIES. THESE F ACTORS CLEARLY ARE NOT NORMAL HUMAN BEHAVIOR AND THEORY OF HUMAN PROBABILITY HAVE ALREADY BEEN CONFIRMED BY HON'BLE SUPREME COURT IN THE CASE OF SUMITI DAYAL V CIT (SUPRA) WHICH HAS BEEN CONFIRMED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT V P.MOHANKALA (SUPRA). 38. IDENTICAL ISSUE CAME UP FOR CONSIDERATION BEFOR E HON'BLE GUJARAT HIGH COURT IN THE CASE OF BLESSING CONSTRUCTION V ITO 32 TAXMAN. COM 366 (GUJRAT). IN THIS CASE ALSO A LOAN OF RS. 1 LAKH WAS GIVEN AF TER DEPOSITING THE SAME IN CASH. IN THAT CASE ALSO, IT WAS MAINLY CONTENDED THAT REV ENUE HAS NO AUTHORITY TO 36 EXAMINE THE SOURCE OF SOURCE. THE HON'BLE COURT AFT ER CONSIDERING THESE SUBMISSIONS AT PARA 7 OBSERVED AS UNDER:- - 7. WITH RESPECT TO THE LEGAL CONTENTION THAT THE R EVENUE CANNOT INSIST ON ASSESSEE SUPPLYING THE SOURCE OF S OURCE IS IMPECCABLE. HOWEVER, THE FACTS OF THE PRESENT CASE ARE VASTLY DIFFERENT. IT IS OF-COURSE TRUE THAT SOME OF THE OB SERVATIONS MADE BY THE TRIBUNAL MAY SUGGEST THAT THE TRIBUNAL DID CONCERN ITSELF WITH THE SOURCE OF THE SOURCE. HOWEV ER, SUCH OBSERVATIONS CANNOT BE PICKED IN ISOLATION AS TO TR EAT THAT AS THE CONCLUSION OF THE TRIBUNAL. WHEN ONE READS THE_ ORDER OF THE ASSESSING OFFICER THAT THE COMMISSIONER (APPEAL S)) AND ALSO OF THE TRIBUNAL INESCAPABLE CONCLUSION ONE ARR IVES AT IS THAT THE REVENUE AUTHORITIES AS WELL AS THE TRIBUNA L FOUND THE ENTIRE TRANSACTION NOT GENUINE. THERE WAS SUFFICIE NT EVIDENCE ON RECORD TO SUGGEST THAT IN CASE OF ALL THE DEPOSI TORS, THEIR BANK ACCOUNTS CONTAINED MEAGER BALANCE SHORTLY BEFO RE SIZABLE AMOUNT OF RS. 1 LAKH AND UPWARD WERE GIVEN TO THE ASSESSEE THROUGH SUCH ACCOUNT. IN SUCH BANK ACCOUN TS CASH AMOUNTS WERE CREDITED AND IMMEDIATELY ENTIRE AMOUNT S WERE WITHDRAWN THROUGH ISSUANCE OF SUCH CHEQUES IN FAVOU R OF THE ASSESSEE. IT WAS NOTICED THAT SUCH CREDITORS DID NO T MAINTAIN ANY BOOKS OF ACCOUNT. NOWHERE THEIR CAPACITY TO RA ISE SUCH AMOUNT FOR DRAWING CHEQUE OF SIZABLE AMOUNTS WAS ESTABLISHED. IN SHORT, THEREFORE, THE V VERY GENUIN ENESS OF THE TRANSACTION WAS NOT ESTABLISHED. THIS, THEREFORE, I S NOT A CASE WHERE THE REVENUE MAKES ADDITION ON THE ASSESSEE FA ILING TO ESTABLISH SOURCE OF THE SOURCE. ALL ISSUES ARE ESSE NTIALLY BASED ON FACTS AND APPRECIATION OF EVIDENCE ON RECORD. NO QUESTION OF LAW ARISES. TAX APPEAL IS DISMISSED. 39. SIMILAR ISSUE AROSE IN THE CASE OF SMT. SUMAN G UPTA V CIT (ITA NO. 680 OF 2012). IN THAT CASE ALSO THE DECISION OF CIT VS. O RISSA CORPORATION P. LTD CIT V ORRISA (SUPRA) WAS RELIED ON. THE HON'BLE COURT MA DE THE FOLLOWING OBSERVATIONS AT PAGE 6 TO 8 WHICH ARE AS UNDER:- 6. IN THE PRESENT CASE, WE FIND THAT AFTER THE INI TIAL BURDEN WAS DISCHARGED BY THE APPELLANT-ASSESSEE, THE AO DID NO T ACCEPT THE APPLICATION TO SUMMON THE CREDITORS AND PROCEEDED T O EXAMINE THE RECORDS NAMELY THE BANK ACCOUNTS TO FIND OUT WHETHE R THE UNSECURED LOAN TRANSACTIONS WERE GENUINE. HE CONSIDERED EACH AND EVERY LOAN TRANSACTION AND FOUND THAT NONE OF THE INDIVIDUAL U NSECURED CREDITORS COULD BE SAID TO BE CREDITWORTHY TO ADVANCE LOANS F OR SUCH AMOUNTS. 37 THE OBSERVATIONS MADE BY THE AO DISCUSSED BY THE IT AT ARE RE- PRODUCED AS FOLLOWS:- '9.1 THE AO DISCUSSED EACH AND EVERY CREDITOR IN TH E ASSESSMENT ORDER AND THE CRUX OF THE FINDINGS OF TH E AO HAD BEEN THAT THERE WERE VERY SMALL BANK BALANCES I N THE BANK ACCOUNTS OF THE CREDITORS AND THEY WERE HAVING MEAGER INCOME AND AS SUCH, THEY WERE NOT MEN OF MEA NS TO ADVANCE ANY LOAN TO THE ASSESSEE. IN THE CASE OF ABHAY MAHESHWARI, THERE WAS VERY SMALL BALANCE OF RS. 352 8/- IN HIS BANK ACCOUNT. HE WAS EXAMINED ON OATH AND HE WAS NOT ABLE TO GIVE SOURCE OF CASH DEPOSIT TO THE SATI SFACTION OF THE AO. HE WAS EARNING HARDLY ONE LAC RUPEES AND SPENT 40,000/- TO 50, 000/- FOR HOUSEHOLD PURPOSES. DURING HIS EXAMINATION ON OATH, HE WAS NOT ABLE TO SATISFACTORILY EXPLAIN THE AVAILABILITY OF FUNDS WI TH HIM FOR GIVING LOAN TO THE ASSESSEE. IN HIS CASE, HE HA S FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER APPE AL AT RS. 1, 02, 850/- (PB-60). IN THE CASE OF SHRI AMIT MAHESHWARI, HE WAS ALSO HAVING SMALL BANK BALANCE O F RS. 2429/- BEFORE ISSUE OF CHEQUE TO THE ASSESSEE A ND EQUAL AMOUNT OF THE CASH CREDIT WAS DEPOSITED IN TH E BANK ACCOUNT. HE HAS FILED RETURN OF INCOME FOR THE ASSE SSMENT YEAR UNDER APPEAL AT RS. 44972/- (PB-71). IN THE CA SE OF SMT. KEERTI MAHESHWARI, IN HER BANK ACCOUNT, THERE WAS BALANCE OF RS. 4688/- ONLY PRIOR TO ISSUE OF CHEQUE TO THE ASSESSEE AND EQUIVALENT AMOUNT OF CASH CREDIT WAS DEPOSITED FOR THE PURPOSE OF ISSUE OF CHEQUE IN FAV OUR OF THE ASSESSEE. FOR THE ASSESSMENT YEAR UNDER APPEAL, SHE HAS FILED RETURN OF INCOME AT RS. 1, 01,000/- ONLY. IN THE CASE OF SMT. MITHLESH MAHESHWARI, THE BANK BALANCE BEFORE ISSUE OF CHEQUE WAS RS. 10, 794/- AND EQUIVA LENT AMOUNT OF CASH CREDIT WAS DEPOSITED IN HER BANK ACC OUNT FOR ISSUE OF CHEQUE IN FAVOUR OF ASSESSEE. FOR ASSE SSMENT YEAR UNDER APPEAL, SHE FILED RETURN OF INCOME AT RS . 1, 02, 476/- ONLY. IN THE CASE OF SH. RAMPAL SINGH, IT IS ALREADY NOTED ABOVE THAT THE DEPOSIT ENTRY IN HIS CASE IS N OT EXPLAINED AND PRIOR TO ISSUE OF CHEQUE, THERE WAS B ANK BALANCE OF RS. 3708/- ONLY. HE HAS FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER APPEAL AT LOSS WITH AGRICULTURAL INCOME (PB-102). IN THE CASE OF SHRI S HARIQ ALI KHAN, THE BANK BALANCE IN HIS ACCOUNT WAS RS. 1 055/- PRIOR TO ISSUE OF CHEQUE AND EQUIVALENT CASH AMOUNT WAS DEPOSITED FOR ISSUING CHEQUE IN FAVOUR OF THE ASSES SEE. HE HAS FILED RETURN OF INCOME AT RS. 70,373/- PLUS AGRICULTURAL INCOME (PB-116). THESE DETAILS NOTED I N THE ASSESSMENT ORDER AND THE DETAILS VERIFIED FROM THE PAPER BOOK WOULD CLEARLY SUPPORT THE FINDINGS OF THE AO T HAT NONE OF THE CREDITORS WERE PERSONS OF SUFFICIENT ME ANS TO ADVANCE ANY LOAN TO THE ASSESSEE. FILING OF BALANCE 38 SHEETS, CASH FLOW STATEMENTS, CASH BOOKS ETC. HAVE NO EVIDENTIARY VALUE BECAUSE ACCORDING TO THE REMAND R EPORT FILED BY THE AO, THOSE DOCUMENTS WERE NOT FILED WIT H THE RETURN OF INCOME. MOREOVER, NO REGULAR BOOKS OF ACC OUNT HAVE BEEN MAINTAINED BY ANY OF THE CREDITORS AND MA JORITY OF THEM HAVE SHOWN ESTIMATED INCOME IN THEIR RETURN S OF INCOME. THEREFORE, SUCH BALANCE SHEET, CASH FLOW STATEMENTS ETC. WOULD NOT SUPPORT THE CONTENTION OF THE ASSESSEE THAT GENINE CREDITS HAVE BEEN RECEIVED. TH E ORDER SHEET NOTED BY THE AO WOULD ALSO SHOW THAT TH E ASSESSEE HAS MADE NO EFFORTS TO PRODUCE THE REMAINI NG CREDITORS BEFORE THE AO. EVEN IN THE STATEMENT OF O NE OF THE CREDITORS RECORDED BY THE AO, SHRI AMBHAY MAHESHWARI, HE WAS NOT ABLE TO EXPLAIN HIS SOURCE O F DEPOSIT OR ADVANCING LOAN TO THE ASSESSEE THROUGH G ENUINE SOURCE. IT IS WELL SETTLED LAW THAT BURDEN IS UPON THE ASSESSEE TO PROVE INGREDIENTS OF SECTION 68 OF THE ACT BY PROVING IDENTITY AND CREDITWORTHINESS OF THE CREDIT ORS AND GENUINENESS OF THE TRANSACTIONS. THE ASSESSEE HAS, HOWEVER, FAILED TO PROVE THE CREDITWORTHINESS OF TH E CREDITORS WHO WERE HAVING ONLY MEAGER INCOME. NO DETAILS OF THEIR SAVINGS HAVE BEEN FILED. THE ASSES SEE HAS NEVER SHOWN HIS WILLINGNESS TO PRODUCE THE REMAININ G CREDITORS FOR EXAMINATION BEFORE THE AO. THEREFORE, THE GENUINENESS OF THE TRANSACTION COULD NOT HAVE BEEN EXAMINED BY THE AO. THE SMALLNESS OF THE BANK BALAN CE IN THE BANK ACCOUNTS OF THE CREDITORS PRIOR TO ISSUE O F CHEQUES WOULD CLEARLY REVEAL THAT THEY WERE NOT HAV ING ANY SOURCE AND IT WAS THE MONEY OF THE ASSESSEE WHI CH WAS ROUTED THROUGH THE BANK ACCOUNTS OF THE CREDITO RS FOR THE PURPOSE OF GIVING CREDITS TO THE ASSESSEE. THES E WERE, THEREFORE, ACCOMMODATION ENTRIES ONLY AND AS SUCH, COULD NOT BE CONSIDERED AS GENUINE TRANSACTIONS. MERELY BECAUSE THE LOANS HAVE BEEN RECEIVED THROUGH BANKIN G CHANNEL, IS NOT SACROSANCT TO MAKE A NON-GENUINE TRANSACTION AS GENUINE TRANSACTION.' 7. WE DO NOT FIND THAT THE AO FAILED TO EXERCISE HI S JURISDICTION IN REFUSING TO SUMMON THE FILE OF UNSECURED CREDITO RS OTHER THAN SHRI ABHAY MAHESHWARI, WHO HAD APPEARED AND WAS EXA MINED. WE ALSO DO NOT FIND THAT THE AO HAS COMMITTED ANY E RROR IN EXAMINING THE ACCOUNT BOOKS. NONE OF THE CREDITORS UNDER EXAMINATION COULD PROVE THEIR CREDITWORTHINESS. EAC H ONE OF THEM HAD A VERY SMALL BANK BALANCE OF A FEW THOUSAN D RUPEES ONLY AND THAT IN ALL THE CASES THE ENTIRE SUM GIVEN AS UNSECURED LOAN WAS DEPOSITED ON THE SAME DAY, WHEN IT WAS ADV ANCED TO THE ASSESSEE-APPELLANT. 8. WE DO NOT FIND THAT ANY OF THE SUBSTANTIAL QUEST IONS OF LAW 39 FRAMED BY THE APPELLANT ARISES FOR CONSIDERATION OF THE COURT. THE FINDINGS RECORDED BY THE AO ABOUT THE CREDITWOR THINESS OF THE UNSECURED LOANS OF RS. 13, 00, 000/- AS AGAINST THE TOTAL UNSECURED LOANS OF RS. 78, 75, 249/-, DOES NOT SUFF ER FROM ANY ERROR OF LAW. 9. THE INCOME TAX APPEAL IS DISMISSED. THEREFORE, ONUS WAS ON THE ASSESSEE TO PROVE THE CR EDITWORTHINESS OF THE DEPOSITOR WHICH HAS NOT BEEN DISCHARGED. THE ASSESS ING OFFICER AFTER HAVING POINTED OUT THAT CASH WAS DEPOSITED BEFORE GIVING L OANS TO THE ASSESSEE BY ALMOST ALL DEPOSITORS, STILL THE LD. CIT(A) DID NOT SCRUTI NIZE THE BANK ACCOUNT OR BOTHERED TO ASK THE ASSESSEE TO PRESENT THESE CREDI TORS AND ALLOWED THE RELIEF WHICH, IN OUR OPINION, IS NOT CORRECT. AS WE HAVE D ISCUSSED ONLY FEW ACCOUNTS ABOVE, WHILE GIVING EXAMPLE BUT WE HAVE PERUSED THE BANK ACCOUNT OF ALL THE PARTIES AND WE FIND MERIT IN ONE CASE I.E IN THE CA SE OF JATINDER SHAH FROM WHOM LOAN OF RS. 1 LAKH WAS TAKEN. IN THAT CASE A SUM O F RS. 68,645/- IS STATED TO HAVE BEEN RECEIVED FROM M/S D.K BROTHERS, DHURI AND ONL Y AN AMOUNT OF RS. 31,500/- WAS DEPOSITED, THEREFORE, CREDITWORTHINESS IN THIS CASE CAN BE SAID TO HAVE BEEN PROVED. IN THE LIGHT OF THE ABOVE DISCUSSION WE CO NFIRM THE ORDER OF LD. CIT(A) FOR DELETING THE ADDITION ONLY IN THE CASE OF SHRI JITENDER SHAH FOR RS. 1 LAKH. HIS ORDER FOR DELETING CREDITS IN THE NAME OF OTHER NINE PARTIES TO THE EXTENT OF RS. 24 LAKHS IS SET ASIDE AND THE ORDER OF THE ASSE SSING OFFICER IS RESTORED TO THIS EXTENT. 40. GROUND NO. 4: AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICE D THAT SINCE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF UNSECURED LOANS, THEREFORE, INTEREST DEPOSITED AGAINST THOSE PARTIES IS ALSO NOT ALLOWABLE AND ACC ORDINGLY HE DISALLOWED A SUM OF RS. 1,75,910/- AS PER THE FOLLOWING DETAILS:- 40 SR.N O. NAME & ADDRESS INTEREST DEBITED IN THE P&L ACCOUNT 1. SH. KHEM SINGH S/O SH GURDIAI SINGH, DHURI 23,200/- 2. SMT. KAMLESH RANI W/O SH. LAI CHAND, DHURI 23.200/- 3. SH. HARCLEV SINGH C/O M/S SHIV KUMAR PRATHAM RICKSH AW WORKS, DHURI. 11,570/- 4. SH. JATINDER SHAH C/O M/S VIJAY KUMA R BHARAT BHUSHAN ELECTRICIANS, DHURI. 11.570/- 5. SMT DEVANTI W/O SH JATINDER SHAH C/O SHIV RICKSHA W WORKS, DHURI. 21.900/- 6. SMT. KUSHAL RANI W/O SH. PAWAN KUMAR C/O M/S M.S.G RICKSHAW WORKS, DHURI 2,800/- 7. SH. SURINDER SHARMA C/O M/S RAJ KUMAR DEEPAK KUMAR, DHURI. 1.870/- 8. SMT. RANJIT KAUR W/O SH. MUNSHI SINGH C/O M/S SUSHI L KUMAR DEEPAK KUMAR, DHURI. 21.900/- 9. SMT. RAKSHA DEVI W/O SH. KULDIP KUMAR C/O M/S SUSHI L KUMAR BHARAT BHUSHAN, DHURI. 34,700/- 10. SMT. RENU W/O SH. ASHOK KUMAR, DHURI. 23.200/- TOTAL RS. 1,75,910/- 41. ON APPEAL, SINCE THE LD. CIT(A) HELD THE LOANS TO BE GENUINE, THEREFORE, THIS DISALLOWANCE WAS DELETED. 42. BOTH THE PARTIES WERE HEARD WHO SUBMITTED THAT THIS GROUND WOULD BE CONSEQUENTIAL TO GROUND NO.3. 43. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT GROUND NO.3 HAS BEEN ADJUDICATED BY US WHEREBY LOAN OF RS. 1 LAKH HAS BE EN ACCEPTED BY US FROM SHRI JATINDER SHAH AND OTHER LOANS HAVE BEEN FOUND TO BE NON-GENUINE. THE INTEREST ON ACCOUNT OF LOAN OF SHRI JATINDER SHAH IS OF RS. 11, 570/- ONLY, THEREFORE, WE SET ASIDE THE ORDER OF LD. CIT(A) AND CONFIRM THE DISAL LOWANCE OF INTEREST AMOUNTING 41 TO RS. 1,64,340/- (RS. 1,75,910 RS. 11,570 ), THE REFORE, THIS GROUND IS PARTLY ALLOWED. 44. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. 45. CROSS OBJECTION NO. 34/CHD/2010: IN THIS CROSS OBJECTION, FOLLOWING GROUNDS HAVE BEEN RAISED:- 1. THAT THE ORDER OF CIT(A) LUDHIANA AND DCIT LUDHIANA IS AGAINST THE LAW AND FACTS. 2. THAT THE CIT(A) LUDHIANA WAS NOT JUSTIFIED TO RE JECT THE GROUND ON PRELIMINARY OBJECTION OF SELECTION OF CASE TO SECURITY AGAINST THE SPECIFIC GUIDELINES IS SUED BY CBDT, NEW DELHI. 3. THAT THE LD. CIT(A) WAS NOT JUSTIFIED TO SUSTAIN THE ADDITION OF RS. 50,570/- ON ACCOUNT OF INTEREST ON DEBIT BALANCE OF THE PARTNERS. 4. THAT THE LD. CIT(A) WAS NOT JUSTIFIED TO SUSTAIN THE ADDITION OF RS. 21,397/- ON ACCOUNT OF INTEREST CALCULATED ON ADVANCE MONEY WHICH WERE MADE TO SISTER CONCERN M/S EKTA COLONIZER, DHURI. 46. OUT OF ABOVE, GROUNDS NOS. 1 TO 2 WERE NOT PRES SED AND, THEREFORE, THE SAME ARE DISMISSED AS NOT PRESSED. 47. GROUND NO.3. THIS ISSUE PERTAINS TO DISALLOWANC E OF PROPORTIONATE INTEREST. THE REVENUE HAS FILED THE APPEAL ON THIS ISSUE. THE ASSESSING OFFICER HAD DISALLOWED INTEREST AMOUNTING TO RS. 10,96,280/- BY OBSERVING THAT ASSESSEE HAS BORROWED THE FUNDS AND GIVEN THE SAME TO DIFFERENT PARTNERS WITHOUT INTEREST WHICH WAS NOT FOR BUSINESS PURPOSE. 42 48. THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE TO RS. 50,570/- BY OBSERVING THAT CALCULATION HAS TO BE MADE NOT ON TH E BASIS OF PARTICULAR ENTRY BUT ON THE BASIS OF NET BALANCE. THIS ISSUE HAS ALREADY BEEN ADJUDICATED BY US WHILE ADJUDICATING THE REVENUE APPEAL VIDE PARA 18, WHERE BY WE HAVE ALREADY CONFIRMED THE DELETION OF PART OF THE ADDITION BY L D. CIT(A) BY CONFIRMING THE ORDER OF CIT(A). THUS, THIS GROUND HAS NOW BECOME I NFRUCTUOUS BECAUSE WE HAVE ALREADY CONFIRMED THE ORDER OF LD. CIT(A) AND ACCORDINGLY THIS GROUND IS DISMISSED. 49. GROUND NO.4: AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT ASSE SSEE HAS ADVANCED A SUM OF RS. 18,74,610/- TO M/S EKTA CONSTRUCTION CO,. DHURI WHICH IS ASSESSEES SISTER CONCERN. ON THIS AMOUNT NO INTEREST WAS CHARGED. S INCE THE ASSESSEE HAS BORROWED INTEREST BEARING FUNDS, THEREFORE, PROPORT IONATE INTEREST WAS DISALLOWED. 50. ON APPEAL, LD. CIT(A) CONFIRMED THE ADDITION BY FOLLOWING THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T V ABHISHEK INDUSTRIES (SUPRA). 51. BOTH THE PARTIES WERE HEARD. 52. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT A QUERY WAS RAISED BY THE ASSESSING OFFICER, THE ASSESSEE ITSELF WORKED O UT THE PROPORTIONATE INTEREST AT RS. 21,397/- IN WHICH ONE CREDIT ENTRY OF RS. 14,13 3/- IS ALSO THERE. THE DETAILS ARE INCORPORATED BY ASSESSING OFFICER AT PAGE 15 OF THE ORDER. IN OUR OPINION, THE ADDITION HAS BEEN RIGHTLY MADE BECAUSE INTEREST BEA RING FUNDS HAVE BEEN DIVERTED TO THE SISTER CONCERN AND NO BUSINESS EXPEDIENCY HA S BEEN PROVED, THEREFORE, WE FIND NOTHING WRONG WITH THE ORDER OF LD. CIT(A) AND WE CONFIRM THE SAME. 43 53. RESULTANTLY, CROSS OBJECTIONS ARE DISMISSED. 54. IN THE RESULT APPEAL OF THE REVENUE IS PARTLY A LLOWED AND CROSS OBJECTIONS RAISED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/06/2015. SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 23 RD JUNE, 2015 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR 44