Popatbhai Ranchodbhai Bhadani, Surat V. The Income Tax Officer, Ward-3(2)(2), Surat

CO 63/AHD/2016

• Counselvise Citation: [2018] 117 COUNSELVISE.COM (IT) 2428 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 1 month(s) 6 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 22-06-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 16-05-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: J K CHANDNANI
• Assessee Lawyers: RAJESH M UPADHAYAY
• Keywords: Unexplained cash credit; Rejection of books of accounts; Unexplained investment; Income from undisclosed sources; Onus to prove
• Section: 133(6); 131; 68; 69

Judgement Text

ITO 3(2)(2) SURAT V. POPATBHAI RANCHHODBHAI BHADANI /I.T.A. NO.585 & CO-63/AHD/2016/A.Y.:11-12 PAGE 1 OF 19 , , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT . . , . . , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./ I.T.A NO.585/AHD/2016/SRT & CO. NO. 63/AHD/2016/SRT / ASSESSMENT YEAR :2011-12 1. INCOME TAX OFFICER, WARD- 3(2)(2) SURAT 2. SHRI POPATBHAI RANCHHODBHAI BHADANI, HOUSE NO.12, BHUMI ROW HOUSE, VED ROAD SURAT 395008 PAN:ADSPB6681R V S VS 1. SHRI POPATBHAI RANCHHODBHAI BHADANI, HOUSE NO.12, BHUMI ROW HOUSE, VED ROAD SURAT 395008 PAN:ADSPB6681R 2.INCOME TAX OFFICER, WARD- 3(2)(2) SURAT APPELLANT /RESPONDENT /ASSESSEE BY SHRI RAJESH M. UPADHAYAY, A.R. /REVENUE BY SHRI J. K. CHANDNANI, SR. D.R. / DATE OF HEARING: 20.06.2018 /PRONOUNCEMENT ON 22.06.2018 /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER ITO 3(2)(2) SURAT V. POPATBHAI RANCHHODBHAI BHADANI /I.T.A. NO.585 & CO-63/AHD/2016/A.Y.:11-12 PAGE 2 OF 19 OF INCOME TAX (APPEALS)-3, SURAT (IN SHORT THE CIT (A)) DATED 13.12.2105 PERTAINING TO ASSESSMENT YEAR 2011-12, WHICH IN TURN HAS ARISEN FROM THE ASSESSMENT ORDER PASSED UNDER SECTION 143 (3) DTD. 26.03.2014 OF INCOME TAX ACT,1961 (IN SHORT THE ACT) BY THE INCOME TAX OFFICER, WARD- 8(3) SURAT (IN SHORT THE AO). I.T.A. NO. 585/AHD/2016/A.Y. 2011-12, BY REVENUE: 2. GROUND NO. 1 TO 4 STATES THAT LD. CIT (A) ERRED IN RESTRICTING TO RS. 12,00,350/- FROM RS. 47,98,550/- MADE ON ACCOUNT OF UNSECURED LOAN, WITHOUT APPRECIATING THE FACTS THE ASSESSEE COULD NOT PROVE GENUINENESS AND CREDITWORTHINESS OF TRANSACTION AND HOLDING THAT THE ASSESSEE HAS DISCHARGED ONUS BY SIMPLY FILING CONFIRMATION AND COPY OF ITR`S. LD. CIT (A) FURTHER ERRED IN TELESCOPING FOR ESTIMATED ADDITION OF NET PROFIT AGAINST THE ADDITION MADE UNDER SECTION 68 OF THE ACT. 3. SUCCINCT FACTS ARE THAT THE ASSESSEE HAS OBTAINED UNSECURED LOAN FROM VARIOUS PARTIES AS DETAILED BELOW: S.NO NAME PAN AMOUNT MODE 1 RAM BHA BEN P. BHADANI ADUPB6997L 3,00,000 CHQ 2 VARSHABEN V. BHADANI AJOPB5252C 5,00,000 CHQ 3 RANJANABEN B. KALATHIA AJSPK9080D 3,00,000 CHQ 4 JIGNESH R. BHADANI APFPB9995R 3,00,000 CHQ ITO 3(2)(2) SURAT V. POPATBHAI RANCHHODBHAI BHADANI /I.T.A. NO.585 & CO-63/AHD/2016/A.Y.:11-12 PAGE 3 OF 19 5 MANISHBHAI R. BHADANI AOJPD7804A 3,00,000 CHQ 6 LAKHDHIR B HUN ABSPH7446N 5,00,000 CHQ 7 MADHAVJI R. BHADANI AJOPB4843R 5,00,000 CHQ 8 REKHABEN B. SETHA 2,00,000 RTGS 9 AKETA GRAM VIKAS TRUST 6,00,000 CH Q 10 BHARATBHAI R SETHA 10,00,350 RTGS 11 DHIRU RAMJI LATHIYA 2,98,200 TOTAL 47,98,550 4. THE AO HAS ISSUED NOTICE UNDER SECTION 133(6) TO ABOVE PARTIES ASKING EVIDENCE LIKE ACKNOWLEDGEMENT OF RETURN OF INCOME, PAN, COPY OF BALANCE SHEET, CAPITAL ACCOUNT, COPY OF BANK ACCOUNT. IN REPLY THE ASSESSEE FURNISHED AFFIDAVIT FROM FIVE PERSONS AND COPY OF ACKNOWLEDGEMENT OF RETURN OF INCOME, BALANCE SHEET, BANK STATEMENT, COMPUTATION OF INCOME, CAPITAL ACCOUNT, CONFIRMATION OF ACCOUNT, LEDGER ACCOUNT AND PAN AND AFFIDAVIT AS ID PROOF. HOWEVER, THE AO HAS MADE ADDITION, AS THE AO FOUND THAT IN THE CASE OF THREE PERSONS NAMELY RAMBHABEN AND VARSHABEN AND MADHAVJI, THERE WAS CASH DEPOSITS IN THEIR BANK ACCOUNTS BEFORE ISSUE OF CHEQUE TO THE ASSESSEE. IN THE CASE THREE PERSONS, NAMELY -RANJANBEN REKHABEN B SETHA, BHARATBHAI SETHA, CONFIRMATION WAS NOT FILED. IN THE CASE OF THREE PERSONS NAMELY JIGNESH, MANISHBHAI, LAKHDHIR, THESE DEPOSITORS HAVE MADE DEPOSIT IN THEIR BANK ACCOUNT BEFORE ISSUE OF CHEQUES AND IN THE CASE OF AKETA GRAM VIKAS TRUST, DEPOSIT IS DOUBTFUL AS THE ASSESSEE HIMSELF FUNCTIONING OF TRUST. ITO 3(2)(2) SURAT V. POPATBHAI RANCHHODBHAI BHADANI /I.T.A. NO.585 & CO-63/AHD/2016/A.Y.:11-12 PAGE 4 OF 19 5. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD.CIT(A). WHEREIN IT WAS CLAIMED THAT THE ASSESSEE HAS FILED COPIES OF ACKNOWLEDGEMENT OF RETURN OF INCOME, BALANCE SHEET, BANK STATEMENT, COMPUTATION OF INCOME, CAPITAL ACCOUNT, CONFIRMATION OF ACCOUNT, LEDGER ACCOUNT AND PAN AND AFFIDAVIT AS ID PROOF. THEREFORE, THE ASSESSEE HAS DISCHARGED ONUS CAST U/S.68 OF THE ACT BY FILING OF ACKNOWLEDGEMENT OF RETURN OF INCOME, PAN, COPY OF BALANCE SHEET, CAPITAL ACCOUNT, COPY OF BANK ACCOUNTS. THE ASSESSEE HAS ALSO PLACED RELIANCE IN THE CASE OF CIT V. ORISSA CORPORATION (P) LTD. [1986] 159 ITR 78 (SC)/ 25 TAXMAN 80(SC) DCIT V. ROHINI BUILDERS [2002] 256 ITR 360 (GUJ.)/ [2003] 127 TAXMAN 523 (GUJ), CIT V. METACHEM INDUSTRIES [2000] 245 ITR 160 (MP):161 CTR 444 (MP): [2001] 116 TAXMAN 572 (MP), NEMICHAND KOTHARI V. CIT [2004] 264 ITR 254/ 136 TAXMAN 213 (GAUHATI), CIT V. RANCHHOD JIVABHAI NAKHAVA [2012] 81 CCH 193 GUJ-HC DIAMOND PRODUCTS 177 TAXMAN 331(RAJ.) IN SUPPORT OF HIS CONTENTIONS. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, THE CIT (A) HELD THAT AS PER ITO 3(2)(2) SURAT V. POPATBHAI RANCHHODBHAI BHADANI /I.T.A. NO.585 & CO-63/AHD/2016/A.Y.:11-12 PAGE 5 OF 19 RATIO LAID DOWN IN ABOVE DECISIONS, WHEN THE CONFIRMATION OF LENDER IS FILED ALONG WITH BANK ACCOUNTS AND INCOME-TAX DETAILS PROVIDED THE ONUS OF THE ASSESSEE TO PROVE ALL THE THREE ELEMENTS ARE DISCHARGED. IF THERE ARE CASH DEPOSITS IN LENDERS ACCOUNT, THEN THE SAME MAY BE EXAMINED IN THE HANDS OF SAID LENDERS AND IT CANNOT BE AUTOMATICALLY PRESUMED TO BE UNDISCLOSED INCOME OF THE ASSESSEE. THE CIT (A) OBSERVED THAT AS STATED IN ASSESSMENT ORDER EXCEPT TWO CASES OF SHRI BHARATBHAI SETHA AND SMT. REKHABEN SETHA, ALL DETAILS OF LENDERS WERE PRODUCED BEFORE THE AO. IN THE CASE OF TWO LENDERS DETAILS SUCH AS CONFIRMATION, BANK ACCOUNT COPY HAVE BEEN RECEIVED EXCEPT PAN AND INCOME TAX RETURNS AND THEY WERE NOT ASSESSED TO TAX. HENCE, IN THEIR CASES, SOURCE OF DEPOSITS / CREDITS IN BANK ACCOUNT CANNOT BE EXAMINED IN ASSESSMENT PROCEEDINGS, WHEREAS IN RESPECT OF REST OF THE CASES, THE DEPOSITS CAN BE EXAMINED IN ASSESSMENT OF THE LENDERS. THEREFORE, RESPECTFULLY FOLLOWING THE RATIO OF ABOVE, DECISION THE CIT (A) HAS CONFIRMED THE ADDITION OF RS. 2 LAKH IN THE CASE OF SMT. ITO 3(2)(2) SURAT V. POPATBHAI RANCHHODBHAI BHADANI /I.T.A. NO.585 & CO-63/AHD/2016/A.Y.:11-12 PAGE 6 OF 19 REKHABEN SETHA AND RS.10,00,350/- IN THE CASE OF SHRI BHARATBHAI SETHA AND ADDITION IN RESPECT OF 9 PERSON WAS DELETED. LD.CIT (A) FURTHER OBSERVED THAT THE ADDITION ALREADY MADE BY WAY OF ESTIMATION OF INCOME IN THIS CASE. WHEREAS THE ADDITION UNDER SECTION 68 IS THE APPLICATION OF SUCH UNACCOUNTED INCOME. SO TELESCOPING OF FOR THE ESTIMATED ADDITION OF NET PROFIT NEEDS TO BE GIVEN AGAINST THE ADDITION MADE UNDER SECTION 68 OF THE ACT. ACCORDINGLY, LD. CIT (A) CONFIRMED THE ADDITION OF RS.12,00,350/- OUT OF TOTAL ADDITION OF RS.47,98,550/-. LD. CIT (A) FURTHER ALLOWED TELESCOPING OF SAID ADDITION AGAINST OTHER ESTIMATED NET PROFIT ADDITION OF RS.93,73,230/- AND REST BEING RS.81,72,880/- WAS DELETED. 6. BEING AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL AGAINST THE DELETION OF ADDITION OF RS.81,72,880/-. WHEREAS THE ASSESSEE HAS FILED CROSS OBJECTION AGAINST THE SUSTENANCE OF ADDITION OF RS.12,00,350/-. ITO 3(2)(2) SURAT V. POPATBHAI RANCHHODBHAI BHADANI /I.T.A. NO.585 & CO-63/AHD/2016/A.Y.:11-12 PAGE 7 OF 19 7. THE LD. SR. DR CONTENDED THAT THERE IS CASH DEPOSITS IN RESPECT OF THREE PERSON BEFORE ISSUE OF CHEQUES TO THE ASSESSEE. HENCE, GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF THESE PERSONS NOT SATISFIED. FURTHER, THERE IS CASH DEPOSITS IN RESPECT OF THREE PERSONS BANK ACCOUNT BEFORE ISSUE OF CHEQUES TO THE ASSESSEE. THEREFORE, IDENTITY, CREDIT-WORTHINESS AND GENUINENESS OF TRANSACTION IN RESPECT OF LENDERS IS NOT ESTABLISHED. FURTHER, THE ASSESSEE HIMSELF IS RUNNING THE AKETA GRAM VIKAS TRUST AND HENCE, LOAN TAKEN FROM SAID TRUST IS DOUBTFUL. THEREFORE, CIT (A) WAS NOT JUSTIFIED IN RESTRICTING THE ADDITION TO RS. 12,00,350 ONLY. FURTHER, THE CIT (A) HAS WRONGLY ALLOWED TELESCOPING OF ADDITION UNDER SECTION 68 AGAINST NET PROFIT AND UNACCOUNTED INCOME ESTIMATED BY THE AO. THEREFORE, IT WAS VEHEMENTLY ARGUED THAT THE AO WAS RIGHT IN MAKING THE ADDITION UNDER DISPUTES. 8. AU CONTRAIRE , THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT (A) WAS NOT JUSTIFIED IN RETAINING ADDITION OF RS. 12,00,350 AS SMT. REKHABEN AND SHRI BHARATBHAI HAVE PAID THE ITO 3(2)(2) SURAT V. POPATBHAI RANCHHODBHAI BHADANI /I.T.A. NO.585 & CO-63/AHD/2016/A.Y.:11-12 PAGE 8 OF 19 UNSECURED LOAN BY RTGS THROUGH BANKING CHANNEL AND THEIR IDENTITY WAS PROVED. THEREFORE, IF THE AO WAS NOT SATISFIED IN THEIR CASES THEN NECESSARY ACTION SHOULD HAVE BEEN TAKEN IN THE HANDS OF RESPECTIVE PERSONS AND NOT IN THE CASE OF THE ASSESSEE. WITH REGARD TO DELETION OF ADDITION, THE LEARNED COUNSEL, SUPPORTED THE ORDER OF LD. CIT (A). LEARNED COUNSEL CONTENDED THAT THE LD. CIT (A) HAS RIGHTLY ALLOWED TELESCOPING AGAINST THE ADDITION SUSTAINED UNDER SECTION 68 AS THE SAID ADDITION IS APPLICATION OF INCOME AGAINST THE NET PROFIT AND UNACCOUNTED INCOME. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO PLACED RELIANCE ON VARIOUS CASE LAWS AS RELIED DURING THE APPELLATE PROCEEDINGS AND ALSO RELIED IN THE CASE OF DCIT V. ROHINI BUILDERS [2002] 256 ITR 360 (GUJ.)/ [2003] 127 TAXMAN 523 (GUJ) AND CIT V. METACHEM INDUSTRIES [2000] 245 ITR 160 (MP):161 CTR 444 (MP): [2001] 116 TAXMAN 572 (MP) IN SUPPORT OF HIS ARGUMENTS. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT IN RESPECT OF ALL NINE ITO 3(2)(2) SURAT V. POPATBHAI RANCHHODBHAI BHADANI /I.T.A. NO.585 & CO-63/AHD/2016/A.Y.:11-12 PAGE 9 OF 19 CREDITORS THE ASSESSEE HAD FURNISHED THEIR COMPLETE ADDRESSES ALONG WITH PERMANENT ACCOUNT NUMBERS AS WELL AS CONFIRMATION ALONG WITH COPIES OF ACKNOWLEDGEMENTS OF INCOME-TAX RETURNS, BALANCE SHEET, BANK STATEMENT, AND COMPUTATION OF INCOME, CAPITAL ACCOUNT, CONFIRMATION OF ACCOUNT, LEDGER ACCOUNT AND AFFIDAVIT AS ID PROOF. THE ASSESSEE RECEIVED ALL THE LOANS BY ACCOUNT PAYEE CHEQUES AND ACCOUNT PAYEE CHEQUES ALONG WITH THE INTEREST IN RELATION TO THOSE LOANS AND HAD MADE THE REPAYMENTS OF LOANS. THUS, THE ASSESSEE HAD DISCHARGED THE INITIAL ONUS, WHICH LAY ON IT IN TERMS OF SECTION 68 BY PROVING THE IDENTITY OF THE CREDITORS BY GIVING THEIR COMPLETE ADDRESSES, PERMANENT ACCOUNT NUMBERS AND THE COPIES OF INCOME-TAX RETURNS WHEREVER READILY AVAILABLE. IT HAD ALSO PROVED THE CAPACITY OF THE CREDITORS BY SHOWING THAT THE AMOUNTS WERE RECEIVED BY THE ASSESSEE BY ACCOUNT PAYEE CHEQUES DRAWN FROM BANK ACCOUNTS OF THE CREDITORS AND THE ASSESSEE WAS NOT EXPECTED TO PROVE THE GENUINENESS OF THE CASH DEPOSITED IN THE BANK ACCOUNTS OF THOSE CREDITORS BECAUSE ITO 3(2)(2) SURAT V. POPATBHAI RANCHHODBHAI BHADANI /I.T.A. NO.585 & CO-63/AHD/2016/A.Y.:11-12 PAGE 10 OF 19 UNDER LAW THE ASSESSEE CAN BE ASKED TO PROVE THE SOURCE OF THE CREDITS IN ITS BOOKS OF ACCOUNT BUT NOT THE SOURCE OF THE SOURCE AS HELD BY THE BOMBAY HIGH COURT IN THE CASE OF ORIENT TRADING CO. LTD. V. CIT [1963] 49 ITR 723 (BOM). THE GENUINENESS OF THE TRANSACTION WAS PROVED BY THE FACT THAT PAYMENT WAS MADE BY ACCOUNT PAYEE CHEQUES TO THE ASSESSEE AS WELL AS REPAYMENT OF THE LOAN BY THE ASSESSEE TO THE DEPOSITORS AND THE INTEREST WAS PAID BY THE ASSESSEE TO THE CREDITORS BY ACCOUNT PAYEE CHEQUES. IN THE CASE OF CIT V. ORISSA CORPORATION (P) LTD. [1986] 159 ITR 78 (SC)/ 25 TAXMAN 80 (SC), THE HON`BLE SUPREME COURT HAS OBSERVED THAT WHEN THE ASSESSEE FURNISHES NAMES AND ADDRESSES OF THE ALLEGED CREDITORS AND THE GIR NUMBERS, THE BURDEN SHIFTS TO THE DEPARTMENT TO ESTABLISH THE REVENUES CASE AND IN ORDER TO SUSTAIN THE ADDITION THE REVENUE HAS TO PURSUE THE ENQUIRY AND TO ESTABLISH THE LACK OF CREDITWORTHINESS AND MERE NON-COMPLIANCE OF SUMMONS ISSUED BY THE ASSESSING OFFICER UNDER SECTION 131 BY THE ALLEGED CREDITORS WILL NOT BE SUFFICIENT TO DRAW AN ADVERSE ITO 3(2)(2) SURAT V. POPATBHAI RANCHHODBHAI BHADANI /I.T.A. NO.585 & CO-63/AHD/2016/A.Y.:11-12 PAGE 11 OF 19 INFERENCE AGAINST THE ASSESSEE. IN CASE OF SIX CREDITORS WHO APPEARED BEFORE THE ASSESSING OFFICER AND WHOSE STATEMENTS WERE RECORDED BY THE ASSESSING OFFICER, THEY HAD ADMITTED HAVING ADVANCED LOANS TO THE ASSESSEE BY ACCOUNT PAYEE CHEQUES AND IN CASE THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE CASH AMOUNT DEPOSITED BY THOSE CREDITORS IN THEIR BANK ACCOUNTS, THE PROPER COURSE WOULD HAVE BEEN TO MAKE ASSESSMENTS IN THE CASES OF THOSE CREDITORS BY TREATING CASH DEPOSITS IN THEIR BANK ACCOUNTS AS UNEXPLAINED INVESTMENTS OF THOSE CREDITORS UNDER SECTION 69. THE HON`BLE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT V. METACHEM INDUSTRIES [2000] 245 ITR 160 (MP):161 CTR 444 (MP) : [2001] 116 TAXMAN 572 (MP) CIT V. HELD: ONCE IT IS ESTABLISHED THAT THE AMOUNT HAS BEEN INVESTED BY A PARTICULAR PERSON, BE HE A PARTNER OR AN INDIVIDUAL, THEN THE RESPONSIBILITY OF THE ASSESSEE-FIRM IS OVER. THE ASSESSEE-FIRM CANNOT ASK THAT PERSON WHO MAKES INVESTMENT, WHETHER THE MONEY INVESTED IS PROPERLY TAXED OR NOT. THE ASSESSEE IS ONLY TO EXPLAIN THAT THE ITO 3(2)(2) SURAT V. POPATBHAI RANCHHODBHAI BHADANI /I.T.A. NO.585 & CO-63/AHD/2016/A.Y.:11-12 PAGE 12 OF 19 INVESTMENT HAS BEEN MADE BY THE PARTICULAR INDIVIDUAL AND IT IS THE RESPONSIBILITY OF THAT INDIVIDUAL TO ACCOUNT FOR THE INVESTMENT MADE BY HIM. IF THAT PERSON OWNS THAT ENTRY, THEN THE BURDEN OF THE ASSESSEE-FIRM IS DISCHARGED. IT IS OPEN FOR THE ASSESSING OFFICER TO UNDERTAKE FURTHER INVESTIGATION WITH REGARD TO THAT INDIVIDUAL WHO HAS DEPOSITED THIS AMOUNT. SO FAR AS THE RESPONSIBILITY OF THE ASSESSEE IS CONCERNED, IT IS SATISFACTORILY DISCHARGED. WHETHER THAT PERSON IS AN INCOME- TAX PAYER OR NOT OR FROM WHERE HE HAD BROUGHT THIS MONEY, IS NOT THE RESPONSIBILITY OF THE FIRM. THE MOMENT THE FIRM HAS GIVEN A SATISFACTORY EXPLANATION AND PRODUCED THE PERSON WHO HAS DEPOSITED THE AMOUNT, THEN THE BURDEN OF THE FIRM IS DISCHARGED AND IN THAT CASE, THAT CREDIT ENTRY CANNOT BE TREATED TO BE THE INCOME OF THE FIRM FOR THE PURPOSES OF INCOME TAX. IT IS OPEN FOR THE ASSESSING OFFICER TO TAKE APPROPRIATE ACTION UNDER SECTION 69 AGAINST THE PERSON WHO HAS NOT BEEN ABLE TO EXPLAIN THE INVESTMENT. THE ABOVE DECISION CLEARLY SUPPORTS OUR VIEW. ITO 3(2)(2) SURAT V. POPATBHAI RANCHHODBHAI BHADANI /I.T.A. NO.585 & CO-63/AHD/2016/A.Y.:11-12 PAGE 13 OF 19 10. WE MY NOTE THAT THE PHRASEOLOGY OF SECTION 68 IS CLEAR. THE LEGISLATURE HAS LAID DOWN THAT IN THE ABSENCE OF A SATISFACTORY EXPLANATION, THE UNEXPLAINED CASH CREDIT 'MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR'. THE LEGISLATIVE MANDATE IS NOT IN TERMS OF THE WORDS 'SHALL BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR'. THE SUPREME COURT WHILE INTERPRETING SIMILAR PHRASEOLOGY USED IN SECTION 69 HAS HELD THAT IN CREATING LEGAL FICTION THE PHRASEOLOGY EMPLOYS THE WORD MAY AND NOT SHALL. THUS, UNSATISFACTORINESS OF THE EXPLANATION DOES NOT AND NEED NOT AUTOMATICALLY RESULT IN DEEMING THE AMOUNT CREDITED IN THE BOOKS AS THE INCOME OF THE ASSESSEE AS HELD BY THE HON`BLE SUPREME COURT IN THE CASE OF CIT V. SMT. P.K. NOORJEHAN [1997] 11 SCC 198. THE HON`BLE JURISDICTIONAL HIGH COURT OF GUJARAT IN THE CASE OF CIT V. RANCHHOD JIVABHAI NAKHAVA [2012] 81 CCH 193 GUJ-HC HELD THAT WHERE LENDERS OF ASSESSEE ARE INCOME-TAX ASSESSEES WHOSE PAN HAVE BEEN DISCLOSED, ASSESSING OFFICER CANNOT ASK ASSESSEE TO ITO 3(2)(2) SURAT V. POPATBHAI RANCHHODBHAI BHADANI /I.T.A. NO.585 & CO-63/AHD/2016/A.Y.:11-12 PAGE 14 OF 19 FURTHER PROVE GENUINENESS OF TRANSACTIONS WITHOUT FIRST VERIFYING SUCH FACT FROM INCOME-TAX RETURNS OF LENDERS. 11. THE LEARNED COUNSEL FOR THE ASSESSEE PLACED RELIANCE IN THE CASE OF NEMICHAND KOTHARI V. CIT [2003] 264 ITR 254 (GAUHATI) WHICH LAID DOWN THAT WHERE INITIAL ONUS PLACED ON THE ASSESSEE IS DISCHARGED BY THE ASSESSEE, THEN ONUS TO PROVE THE AMOUNT CREDITED IN BOOKS OF ACCOUNTS IS UNDISCLOSED INCOME OF THE ASSESSEE IS ON REVENUE. SINCE IN THIS CASE THE ASSESSEE HAS DISCHARGED ITS INITIAL, HENCE, NO ADDITION UNDER SECTION 68 COULD BE MADE IN THE CASE OF THE ASSESSEE. 12. THUS, TAKING INTO CONSIDERATION THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) WAS JUSTIFIED IN DELETING THE ADDITION MADE ON ACCOUNT OF UNSECURED LOAN IN RESPECT OF NINE PERSON AMOUNTING RS. 35,98,200 AND CONFIRMING ADDITION OF RS. 12,00,350. IN VIEW OF ABOVE DISCUSSION, FACTS AND CASE LAWS OF VARIOUS HIGH COURTS AND HON`BLE SUPREME COURT DISCUSSED ABOVE AND RELIED BY THE ASSESSEE, THE LD. CIT (A) WAS JUSTIFIED IN DELETION ITO 3(2)(2) SURAT V. POPATBHAI RANCHHODBHAI BHADANI /I.T.A. NO.585 & CO-63/AHD/2016/A.Y.:11-12 PAGE 15 OF 19 OF ADDITION OF RS. 35,98,200 AND RESTRICTED THE ADDITION TO RS. 12,00,350. WE FURTHER HOLD THAT THE CIT (A) WAS ALSO RIGHT IN ALLOWING TELESCOPING OF THE ADDITION MADE UNDER SECTION 68 AS AGAINST UNACCOUNTED INCOME AS UNACCOUNTED INCOME HAS BEEN GENERATED BY ROTATING THE UNACCOUNTED LOAN TAKEN AT RS.12,00,000/-. THEREFORE, GROUND NO. 1 TO 4 OF REVENUE ARE DISMISSED. SINCE WE HAVE UPHELD THE ADDITION SUSTAINED BY THE LD. CIT (A). THEREFORE, THE CROSS OBJECTION CHALLENGING THE SUSTENANCE OF ADDITION OF RS. 12,00,350 BY THE LD. CIT (A) IS ALSO DISMISSED. CROSS OBJECTION NO. 63/AHD/2016/A.Y.11-12: BY ASSESSEE: 13. GROUND NO. 1 IS AGAINST THE SUSTENANCE OF ADDITION OF RS.12,00,350/-. IN VIEW OF ABOVE FACTS AS DISCUSSED IN GROUNDS NO. 1 TO 4 OF APPEAL OF REVENUE, THIS GROUND IS DISMISSED IS COVERED BY FINDING AND REASONS RECORDED THEREIN. IN VIEW OF THIS MATTER, THIS GROUND IS ACCORDINGLY, DISMISSED. ITO 3(2)(2) SURAT V. POPATBHAI RANCHHODBHAI BHADANI /I.T.A. NO.585 & CO-63/AHD/2016/A.Y.:11-12 PAGE 16 OF 19 14. GROUND NO. 2 RELATED TO REJECTION OF BOOKS OF ACCOUNTS UNDER SECTION 145(3) OF THE ACT. 15. WE FIND THAT BOOKS OF ACCOUNTS ARE NOT MAINTAINED PROPERLY AS DISCUSSED BY THE AO IN IMPUGNED ASSESSMENT ORDER AND SAME WERE UPHELD BY LD. CIT (A). WE ALSO CONCUR, THE VIEW TAKEN BY LOWER AUTHORITIES. NEVERTHELESS BE, THIS GROUNDS OF APPEAL IS THEREFORE, DISMISSED. 16. GROUND NO. 3 RELATES TO UPHOLDING ADDITION OF RS. 4, 80,217 ON ACCOUNT OF NET PROFIT ADDITION WITH A VIEW TO BRING NP AT 3.39% WHICH IS ACCORDING TO HIM COMPARABLE WITH EARLIER YEARS NP. 17. FACTS APROPOS OF THIS GROUND ARE THAT THE AO FOUND THAT THE LABOUR PAYMENTS MADE IN CASH WITHOUT PREPARING VOUCHERS HENCE, THE AO PROPOSED TO DISALLOW 20% OF SUCH EXPENSES. IT WAS EXPLAINED THAT THE ASSESSEE HAS INCURRED SUCH EXPENDITURE IN CONNECTION WITH CHECK DAM AND CONSTRUCTION ACTIVITY FROM WHICH THE ASSESSEE HAS EARNED GROSS INCOME AT RS. 3,86,97,407 ON WHICH NET PROFIT DECLARED IS AT RS. 8,42,902 WHICH COMES TO 2.16%. HOWEVER, THE ITO 3(2)(2) SURAT V. POPATBHAI RANCHHODBHAI BHADANI /I.T.A. NO.585 & CO-63/AHD/2016/A.Y.:11-12 PAGE 17 OF 19 AO NOTICED THAT NET PROFIT IN PRECEDING YEAR WAS AT 3.21% AND VERIFICATION OF BOOKS OF ACCOUNTS SHOWED THAT MOST OF EXPENSES ARE IN CASH AND DEBITED EITHER AT FAG END OF THE YEAR WITHOUT OBTAINING ANY BILLS AND PREPARING VOUCHERS. IN VIEW OF THIS MATTER, THE AO DISALLOWED 3% OF RS. 1,60,07,220, WHICH WORKED OUT TO RS. 4,80,217. 18. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT (A). LD. CIT (A) OBSERVED THAT BY DISALLOWANCE OF EXPENSES OF RS. 4,80,217 THE NET PROFIT ARRIVED AT 3.39% WHICH IS AT COMPARABLE WITH PRECEDING YEAR AT 3.21% AND DISALLOWANCE WERE MADE AFTER REJECTION OF BOOKS OF ACCOUNTS. HENCE, THIS ADDITION WAS FOUND REASONABLE. 19. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT LD. CIT (A) HAS CONSIDERED THAT THE FALL IN NET PROFIT RATE OF PRECEDING YEAR. HOWEVER, THE EXPENSES WERE INCURRED IN CONNECTION WITH CHECK DAM ACTIVITY IN REMOTE AREA. HENCE, EXPENSES HAVE TO BE INCURRED ITO 3(2)(2) SURAT V. POPATBHAI RANCHHODBHAI BHADANI /I.T.A. NO.585 & CO-63/AHD/2016/A.Y.:11-12 PAGE 18 OF 19 IN CASH BUT THESE ARE DEBITED ON DAY-TO-DAY BASIS IN CASHBOOK. HENCE, LD. CIT (A) WAS NOT JUSTIFIED IN CONFIRMING THE SAME ON THE GROUND THAT IT MAKES NET PROFIT RATE TO APPEAR WITH LAST YEAR. 20. PER CONTRA, LD.SENIOR DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF AO/CIT-A. 21. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE BOOKS OF ACCOUNTS WERE NOT FOUND RELIABLE BY THE AO, HENCE; SAME WERE REJECTED BY THE AO BY INVOKING PROVISIONS OF SECTION 145(3) OF THE ACT. LD. CIT (A) ALSO UPHELD THE REJECTION OF BOOKS OF ACCOUNTS. WE FURTHER FIND THAT THE EXPENSES WERE INCURRED IN CASH AND DEBITED IN BOOKS OF ACCOUNTS AT THE FAG END OF THE ACCOUNTING YEAR WITHOUT MAKING PROPER BILLS AND VOUCHERS AND THERE IS FALL IN NET PROFIT RATE, WHICH IS AT 2.16% AS COMPARE TO PRECEDING YEAR OF 3.21%. THEREFORE, THE CIT (A) HAS RIGHTLY CONFIRMED THE SAME SO THAT IT COULD GIVE NET PROFIT RATE 3.39%, WHICH IS COMPARABLE TO PRECEDING YEAR. ITO 3(2)(2) SURAT V. POPATBHAI RANCHHODBHAI BHADANI /I.T.A. NO.585 & CO-63/AHD/2016/A.Y.:11-12 PAGE 19 OF 19 THEREFORE, WE DO NOT FIND ANY FAULT IN THE ORDER OF LD. CIT (A). IN VIEW OF THIS MATTER, THIS GROUND OF APPEAL IS DISMISSED. 22. IN THE RESULT, THE APPEAL OF THE REVENUE AS WELL AS CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. 23. THE ORDER PRONOUNCED IN THE OPEN COURT ON 22.06.2018. SD/- SD/- ( . . /C.M. GARG) ( . . /O.P.MEENA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER DATED: 22 ND JUNE, 2018 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) THE CIT(A), 4. . /PR. CIT 5. , / D.R.-ITAT; 6. / GUARD FILE ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT