DCIT, CIR-3(1), Siliguri, Darjeeling V. Sri PBN Construction Pvt. Ltd., Siliguri

ITA 1034/KOL/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2099 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 24-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C J SINGH
• Assessee Lawyers: SOUMITRO CHOUDHURY; JOY
• Keywords: Unexplained cash credit; Retrospective amendment; Onus to prove; Set aside
• Section: 40(a)(ia); 133(6); 131; 68

Judgement Text

1 ITA NO. 1034/KOL/2015 SRI PBN CONSTRUCTION PVT. LTD. AY. 2012-13 , A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOLKATA ( ) . . , . [ , ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, AM] I.T.A NO. 1034/KOL/2015 ASSESSMENT YEAR: 2012-13 DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-3(1), SILIGURI VS. SRI PBN CONSTRUCTION PVT. LTD. (PAN: AAECP4743L) APPELLANT RESPONDENT DATE OF HEARING 09.04.2019 DATE OF PRONOUNCEMENT 19.06.2019 FOR THE APPELLANT SHRI C. J. SINGH, JCIT, SR. DR FOR THE RESPONDENT S/SHRI SOUMITRO CHOUDHURY, ADVOCATE & JOYDEEP CHAKRAVORTY, ADVOCATE ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL PREFERRED BY THE REVENUE IS AGAINST THE ORDER OF LD. CIT(A), SILIGURI DATED 27.05.2015 FOR AY 2012-13. 2. THE FIRST FIVE GROUNDS OF APPEAL OF REVENUE ARE AGAINST THE ACTION OF THE LD. CIT(A) IN GIVING RELIEF TO THE ASSESSEE WHEREIN THE AO HAD MADE DISALLOWANCE U/S. 40(A)(IA) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. IN RESPECT OF DISALLOWANCE MADE BY AO INVOKING SEC. 40(A)(IA) OF THE ACT, WE NOTE THAT THE FINANCE ACT 2012 MADE AN AMENDMENT OF SECTION 201 & 40(A)(IA) OF THE ACT. IN ACCORDANCE WITH THIS AMENDMENT, THE PAYER [ASSESSEE] WOULD NOT BE DEEMED TO BE IN DEFAULT IF THE RECIPIENT OF INCOME (PAYEE), HAS TAKEN INTO ACCOUNT THE AMOUNT RECEIVED FROM THE PAYER IN COMPUTING ITS INCOME AND DECLARED IT IN THE RETURN AND HAS PAID DUE TAX ON THE 2 ITA NO. 1034/KOL/2015 SRI PBN CONSTRUCTION PVT. LTD. AY. 2012-13 RETURNED INCOME. WE NOTE THAT THIS TRIBUNAL HAS ALREADY HELD THAT THE INSERTION OF SECOND PROVISO TO SEC. 40(A)(IA) OF THE ACT AS CURATIVE IN NATURE AND SO HAS RETROSPECTIVE EFFECT W.E.F. 1ST APRIL, 2005, BEING A DATE FROM WHICH SEC. 40(A)(IA) OF THE ACT WAS INSERTED BY THE FINANCE (NO. 2) ACT, 2004. IN VIEW OF THIS, WE ARE OF THE VIEW THAT MATTER NEEDS FRESH ADJUDICATION IN THE LIGHT OF THE DECISIONS OF THE HONBLE DELHI HIGH COURT DECISIONS IN CIT V. ANSAL LAND MARK TOWNSHIP PVT. LIMITED [ITA 160/2015 & 161/2015, DATED 26/08/2015], WHEREIN HON'BLE HIGH COURT UPHELD THE DECISION OF THE TRIBUNAL OF AGRA BENCH IN RAJIV KUMAR AGARWAL V. ACIT THAT THE 2ND PROVISO TO SECTION 40(A)(IA) IS CURATIVE AMENDMENT AND HAS RETROSPECTIVE EFFECT FROM 01/04/2005: 14. THE COURT IS OF THE VIEW THAT THE ABOVE REASONING OF THE AGRA BENCH OF ITAT AS REGARDS THE RATIONALE BEHIND THE INSERTION OF THE SECOND PROVISO TO SECTION 40(A) (IA) OF THE ACT AND ITS CONCLUSION THAT THE SAID PROVISO IS DECLARATORY AND CURATIVE AND HAS RETROSPECTIVE EFFECT FROM 1ST APRIL 2005, MERITS ACCEPTANCE. 15. IN THAT VIEW OF THE MATTER, THE COURT IS UNABLE TO FIND ANY LEGAL INFIRMITY IN THE IMPUGNED ORDER OF THE ITAT IN ADOPTING THE RATIO OF THE DECISION OF THE AGRA BENCH, ITAT IN RAJIV KUMAR AGARWAL V. ACIT.' 4. IN THE PRESENT CASE, THE ASSESSEE HAS MADE PAYMENT TO M/S AJMER VIDYUT VITRAN NIGAM LTD, WHICH IS A STATE GOVERNMENT UNDERTAKING. TAKING INTO CONSIDERATION THE JUDICIAL DECISIONS AS CITED ABOVE, WE SET ASIDE THE IMPUGNED ORDER OF LD CIT(A) AND REMAND THIS ISSUE BACK TO AO AND THE AO IS DIRECTED TO VERIFY THE FACT REGARDING THE FULFILLMENT OF CONDITION AS STATED IN PARA 3 (SUPRA) BY THE RECIPIENT PAYEE AND IF THE AO FINDS THAT THE RECIPIENT/PAYEE HAS INCLUDED THE AMOUNT IN ITS TOTAL INCOME IN ITS RETURN OF INCOME AND PAID TAXES THEREON, THEN THE DISALLOWANCE MADE BY THE AO BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT BE DELETED. THUS WE CONFIRM THE ORDER OF LD. CIT(A) AND DISMISS THESE GROUNDS OF APPEAL OF REVENUE. FOR THE AFORESAID DECISION OF OURS, WE RELY ALSO ON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF PR. CIT VS. M/S. TIRUPATI CONSTRUCTION IN GA 2146 OF 2016 IN ITAT NO.287 OF 2016 PASSED ON 23.08.2016. 5. GROUND NOS. 6 TO 13 OF REVENUES APPEAL IS IN RESPECT OF DELETION OF ADDITION MADE BY THE AO U/S. 68 OF THE ACT OF AN AMOUNT OF RS. 78,00,000/- WHICH CLAIMED TO BE INVESTMENT 3 ITA NO. 1034/KOL/2015 SRI PBN CONSTRUCTION PVT. LTD. AY. 2012-13 MADE BY A GROUP COMPANY M/S. RASHINO VAYAAPAR PVT. LTD. AND THE DIRECTORS WIFE OF AN AMOUNT OF RS.22,00,000/- AS SHARE CAPITAL. 6. AFTER HAVING HEARD BOTH THE PARTIES, WE NOTE THAT THE ASSESSEE HAD BROUGHT IN SHARE CAPITAL TO THE TUNE OF RS.78,00,000/- IN THIS ASSESSMENT YEAR FROM TWO PARTIES. ONE OF THE SHARE SUBSCRIBER WAS THE GROUP COMPANY M/S. RASHINO VAYAAPAR PVT. LTD. AND THE DIRECTORS WIFE SMT. RANJU AGARWAL OF RS.22,00,000/-. WE NOTE THAT THE AO HAD ISSUED NOTICE U/S. 131 OF THE ACT TO BOTH THE SHARE SUBSCRIBERS AND THE DIRECTOR OF THE ASSESSEE COMPANY SHRI RAJA AGARWAL APPEARED BEFORE THE AO AND HAD GIVEN ALL THE DOCUMENTS NECESSARY TO DISCHARGE THE ONUS CASTED UPON HIM IN RESPECT TO SHOW THE IDENTITY, THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION OF SHARE SUBSCRIBERS WITH THE ASSESSEE COMPANY. IT WAS BROUGHT TO OUR NOTICE THAT THE ASSESSEE COMPANY HAS A TURNOVER OF RS.26 CR. AND IN ORDER TO PROVE THE CREDITWORTHINESS OF M/S. RASHINO VAYAAPAR PVT. LTD. WHO SUBSCRIBED RS.56,00,000/- IN THE ASSESSEE COMPANY, IT WAS BROUGHT TO OUR NOTICE THAT THE SAID COMPANY HAD OWN MONEY, CAPITAL AND RESERVE TO THE TUNE OF RS.2.51 CR. WHICH IS SEEN FROM A PERUSAL OF PAGE 35 OF THE PAPER BOOK. IN ORDER TO PROVE THE IDENTITY AND GENUINENESS OF M/S. RASHINO VAYAAPAR PVT. LTD., I. T. ACKNOWLEDGMENT, BANK STATEMENT, BALANCE SHEET, INVESTMENT LIST AND CONFIRMATION OF HAVING RECEIVED SHARE APPLICATIONS HAVE BEEN FILED BEFORE THE AO, WHICH ARE PLACED AT PAGES 26 TO 47 OF THE PAPER BOOK AND THEY HAVE CONFIRMED OF THE INVESTMENT PURSUANT TO THE NOTICE ISSUED BY A.O. THUS THE SHARE SUBSCRIBER M/S. RASHINO VAYAAPAR PVT. LTD. HAS DISCHARGED ITS ONUS TO PROVE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS. IN RESPECT OF OTHER SHARE SUBSCRIBER SMT. RANJU AGARWAL, WE NOTE THAT SHE IS THE WIFE OF THE DIRECTOR OF THE ASSESSEE COMPANY. HER BALANCE SHEET HAS BEEN FOUND PLACED AT PAGE 24 OF THE PAPER BOOK WHICH REVEALS THAT SHE HAD CAPITAL OF RS.17,84,381.61 AND HAD TAKEN LOAN OF RS.16,54,285.39 FROM M/S. ANIL KUMAR AGARWALLA (FIRM) THUS HAD AN AMOUNT OF RS.34,38,666/- WITH HER. SO, FROM THAT RS.22,00,000/- HAS BEEN INVESTED BY HER WHICH EXPLANATION NEEDS TO BE ACCEPTED, SINCE NOTHING WAS BROUGHT TO OUR NOTICE TO NEGATE HER EXPLANATIONS. FURTHER WE NOTE THAT FROM PERUSAL OF THE FOLLOWING DOCUMENT, I.E. HER I. T. ACKNOWLEDGMENT, BANK STATEMENT, BALANCE 4 ITA NO. 1034/KOL/2015 SRI PBN CONSTRUCTION PVT. LTD. AY. 2012-13 SHEET, SHARE APPLICATION RECEIVED HAS BEEN FILED BEFORE THE AO, WHICH ARE PLACED AT PAGES 20 TO 25 OF THE PAPER BOOK. THUS, THE ASSESSEE HAS DISCHARGED THE ONUS CASTED UPON IT U/S. 68 OF THE ACT TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE SHARE SUBSCRIBER, THEREFORE, NO ADDITION WAS WARRANTED AS THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION. 7. COMING TO THE NEXT ADDITION OF RS.58,71,442/-. WE NOTE THAT THE ASSESSEE HAD CLAIMED TOTAL EXPENDITURE OF APPROXIMATELY RS.7.8 CR. AND AO HAS DISALLOWED RS. 58,71,442/- WHICH IS AN AD HOC DISALLOWANCE ON THE GROUND THAT VOUCHERS ARE SELF MADE WHICH ACTION OF THE AO CANNOT BE COUNTENANCED FOR THE SIMPLE REASON THAT BOOKS OF ACCOUNT OF THE ASSESSEE HAS NOT BEEN REJECTED AND THE AD HOC DISALLOWANCE IS PER SE ARBITRARY IN NATURE AND CANNOT BE ACCEPTED. IT HAS TO BE KEPT IN MIND THAT A.O WAS AT LIBERTY TO DISALLOW THE EXPENDITURE ITEM WISE, IF THE ASSESSEE FAILS TO SUBSTANTIATE THE EXPENDITURE WITH PROPER BILLS/VOUCHERS. HOWEVER HE CANNOT RESORT TO AD HOC DISALLOWANCE BY ESTIMATION WITHOUT REJECTING BOOKS OF ACCOUNTS, THEREFORE, THE ACTION OF THE LD. CIT(A) IN DELETING THE AD HOC DISALLOWANCE IS UPHELD AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 8. GROUND NO.4 IS REGARDING THE ACTION OF LD. CIT(A) IN DELETING THE ADDITIONS MADE BY A.O TO THE TUNE OF RS.2,24,94,335/- U/S 68 OF THE ACT WHICH ASSESSEE CLAIMED TO HAVE TAKEN AS LOAN FROM VARIOUS ENTITIES. 9. BRIEF FACTS OF THE CASE AS NOTED BY THE LD. CIT(A) IS THAT A.O FOUND THAT ASSESSEE HAS RECEIVED UNSECURED LOAN FROM FOLLOWING PERSONS: 1. PBN STEEL PVT. LTD. 2. PRABIN KUMAR JAIN 3. PANCHSHEEL BUILD DEV PVT LTD. 4. STRONG CONSTRUCTION PVT. LTD. 5. UMA CARRYING CORPORATION 6. TRIPTI STEEL TRADERS 5 ITA NO. 1034/KOL/2015 SRI PBN CONSTRUCTION PVT. LTD. AY. 2012-13 7. DARJEELING CEMENT COMPANY 10. THE A.O HAD ISSUED NOTICES U/S 133(6) FOR VERIFICATION OF THESE TRANSACTIONS. IN RESPONSE TO NOTICES U/S 133(6), THESE PERSONS CONFIRMED AND PROVIDED THEIR RETURN OF INCOME, AUDITED BALANCE SHEETS AND THEIR BANK STATEMENTS. THE A.O ANALYZED THE CREDITWORTHINESS OF THESE PERSONS AND CONCLUDED THAT THEY DO NOT HAVE CAPACITY TO ADVANCE THESE CREDITS OR MAKE SUCH INVESTMENTS. ACCORDINGLY, THE A.O ADDED RS.2,49,94,335/- AS UNEXPLAINED CREDIT U/S 68 OF THE ACT. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO WAS PLEASED TO DELETE IT. AGGRIEVED THE REVENUE IS BEFORE US. 11. AFTER HAVING HEARD BOTH PARTIES, WE NOTE THAT ADDITION OF UNSECURED LOAN OF RS.69,38,824/- RECEIVED FROM PBN STEEL PVT. LTD. AND ALSO A SUM OF RS.21,05,011/- RECEIVED FROM PRAVIN KR. JAIN AND INTEREST OF RS.14,11,371/- ON UNSECURED LOAN TOTALING RS.1,04,55,206/- WE NOTE THAT ASSESSEE COMPANY HAD RECEIVED THE LOAN FROM ITS SISTER CONCERN, PBN STEEL P LTD THROUGH BANKING CHANNEL; AND ALSO FROM ONE OF RELATIVES OF DIRECTOR, SRI PRABIN KR. JAIN, WHICH WAS ALSO THROUGH BANKING CHANNEL. THE A.O HAD SERVED THEM NOTICES U/S 133(6) AND BOTH THE PERSONS, IN RESPONSE TO THE SAID NOTICES OF THE A.O HAD DULY SUBMITTED ALL DETAILS OF LOANS GIVEN TO ASSESSEE COMPANY. WE NOTE THAT M/S PBN STEEL P LTD HAD FILED COPY OF LEDGER OF ASSESSEE COMPANY IN THEIR BOOKS, COPY OF THEIR I.T. RETURN, BANK STATEMENTS MENTIONING ALL TRANSACTIONS IN DETAILS. THE A.O DID NOT FIND ANY DISCREPANCY THEREIN AS PER HIS ORDER. SRI PRABIN KR. JAIN HAD ALSO FILED BY SPEED POST COPY OF ACCOUNTS LOAN GIVEN TO ASSESSEE COMPANY, BANK STATEMENTS AND COPY OF HIS I.T. RETURN. 12. FURTHER WE NOTE THAT AN ADDITION OF RS.89,55,000/- HAS BEEN MADE BY A.O ON THE ADVANCE RECEIVED FROM M/S PANCHSHEEL BUILD DEV PVT. LTD FOR RS.25,000/-, RS.25,00,000/- FROM M/S STRONG CONSTRUCTION P LTD., RS.15,000/- FROM M/S UMA CARRYING CORPORATION (PROP. SRI RAMANAND GUPTA) AND RS.24,55,000/- FROM M/S TRIPTI STEEL TRADERS, TOTALING TO RS.89,55,000/-. WE NOTE THAT THE A.O ISSUED NOTICES U/S 133(6) WHICH WERE DULY SERVED UPON ALL THE AFORESAID PARTIES PURSUANT TO WHICH THEY CONFIRMED THE TRANSACTIONS TO THE A.O. THEY HAD ALSO FILED THEIR RESPECTIVE I.T. RETURN FILING COPIES DISCLOSING THEIR PAN NUMBERS, THEIR AUDITED BALANCE SHEETS, FILED ALSO CONFIRMATIONS MENTIONING THE AMOUNT GIVEN TO THE 6 ITA NO. 1034/KOL/2015 SRI PBN CONSTRUCTION PVT. LTD. AY. 2012-13 ASSESSEE COMPANY. M/S PANCHASHEEL BUILD DEV P LTD HAD ALSO FILED ITS BANK STATEMENTS BEFORE THE A.O. ALL LOAN CREDITORS RECEIVED THE NOTICES OF THE A.O AT THEIR RESPECTIVE ADDRESSES. 13. FURTHER WE NOTE THAT AN ADDITION OF RS.69,95,500/- HAS BEEN MADE BY AO ON THE MONEY RECEIVED FROM M/S DARJEELING CEMENT COMPANY. IT IS NOTED THAT THE ASSESSEE COMPANY PRODUCED NECESSARY CONFIRMATIONS, BANK STATEMENTS AND COPIES OF AUDITED ACCOUNT OF M/S DARJEELING CEMENTS PVT. LTD AND M/S PBN STEEL PVT. LTD. AND CLARIFIED THE FACTS REGARDING THIS ADDITION. IT WAS BROUGHT TO OUR NOTICE THAT M/S PBN STEEL PVT. LTD. HAD MADE AN ADVANCE OF RS.69,95,500/- THROUGH BANKING CHANNEL TO M/S DARJEELING CEMENT P LTD, WHICH HOWEVER HAD RETURNED A SUM OF RS.60,00,000/- THROUGH BANKING CHANNEL AT THE BANK ACCOUNT OF ASSESSEE COMPANY I.E . PBN CONSTRUCTION P LTD . BY MISTAKE INSTEAD TO M/S PBN STEEL PVT. LTD ., WHICH HAPPENS TO BE THE SISTER CONCERN OF THE ASSESSEE COMPANY. THEREFORE THE ASSESSEE COMPANY HAD CREDITED THE ACCOUNTS OF M/S PBN STEEL P LTD. IN ITS BOOKS ON THE DATE OF RESPECTIVE RECEIPTS FROM M/S DARJEELING CEMENT P LTD FOR A TOTAL SUM OF RS.69,95,500/-. THUS IT WAS BROUGHT TO THE NOTICE OF A.O THAT THERE WAS NO UNEXPLAINED CASH CREDIT AS BOTH THE M/S PBN STEEL AND M/S DARJEELING CEMENTS ARE INCOME TAX ASSESSES HAVING THEIR RESPECTIVE PANS. BOTH OF THEM HAD FILED THEIR BANK STATEMENTS CONTAINING THE DETAILS OF TRANSACTIONS, THEIR I.T RETURNS, FILING ACKNOWLEDGEMENTS ETC. BEFORE THE A.O DULY ACCEPTING THE TRANSACTIONS. BUT THE A.O HAD ADDED BACK THE SAID SUM OF RS.69,95,500/- [ TOTAL RS.2,49,94,335/-] AS UNEXPLAINED CREDIT OF THE ASSESSEE COMPANY U/S 68 WHICH HAD BEEN DELETED BY LD. CIT(A). WE NOTE THAT SECTION 68 CONTEMPLATES THAT THE ASSESSEE HAS TO GIVE SATISFACTORY EXPLANATION ABOUT THE NATURE AND SOURCE OF THE SUM FOUND CREDITED IN THE BOOKS OF ACCOUNT AND THE CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTION. WE NOTE THAT PROOF REGARDING THE SAME HAD BEEN SUBMITTED BY ASSESSEE COMPANY. WE NOTE THAT THE A.O HAD MADE ENQUIRIES BY SENDING NOTICES U/S 133(6) THROUGH POSTAL SERVICE AT THE ADDRESSES OF THE CREDITORS, PURSUANT TO WHICH REPLIES WERE ALSO RECEIVED FROM ALL OF THEM. ALL THE PERSONS HAD ACCEPTED THE FACTS AND GIVING OF LOANS AND ADVANCES TO ASSESSEE COMPANY. THE SAID LOANS/ADVANCES WERE DULY REFLECTED IN THEIR AUDITED ACCOUNTS/BALANCE SHEETS FILED 7 ITA NO. 1034/KOL/2015 SRI PBN CONSTRUCTION PVT. LTD. AY. 2012-13 BEFORE THE A.O/CIT(A) AND BEFORE US AND HAS BEEN CORROBORATED WITH THEIR RESPECTIVE BANK STATEMENTS. WE NOTE THAT ALL THE TRANSACTIONS WERE MADE THROUGH BANKING CHANNELS. THUS ASSESSEE COMPANY HAS DISCHARGED THE ONUS CASTED UPON IT AND HAS PROVED THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS AND ALSO WE NOTE THAT THE ASSESSEE HAS PROVED THE NATURE AND SOURCE OF THE SUM RECEIVED BY IT AND DISCHARGED THE ONUS THAT LIES ON ITS IN TERMS OF SECTION 68 OF THE ACT. SO EVEN IF THE A.O HAD ANY DOUBTS ABOUT THE CREDITWORTHINESS OF THE CREDITORS WHO GAVE LOAN/ADVANCE TO THE ASSESSEE, THEN HE COULD HAVE MADE ENQUIRIES WITH THE A.O OF LENDERS AND THEN ONLY DREW ADVANCE INFERENCE AGAINST ASSESSEE AS HELD BY HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. DATAWARE PVT. LTD. ITAT NO.263 OF 2011, GA NO.2856 OF 2011 DATED 21.09.2011 WHEREIN IT WAS HELD AS UNDER: IN OUR OPINION, IN SUCH CIRCUMSTANCES, THE ASSESSING OFFICER OF THE ASSESSEE CANNOT TAKE THE BURDEN OF ASSESSING THE PROFIT AND LOSS ACCOUNT OF THE CREDITOR WHEN ADMITTEDLY THE CREDITOR HIMSELF IS AN INCOME TAX ASSESSEE. AFTER GETTING THE PAN NUMBER AND GETTING THE INFORMATION THAT THE CREDITOR IS ASSESSED UNDER THE ACT, THE ASSESSING OFFICER SHOULD ENQUIRE FROM THE ASSESSING OFFICER OF THE CREDITOR AS TO THE GENUINENESS OF THE TRANSACTION AND WHETHER SUCH TRANSACTION HAS BEEN ACCEPTED BY THE ASSESSING OFFICER OF THE CREDITOR BUT INSTEAD OF ADOPTING SUCH COURSE, THE ASSESSING OFFICER HIMSELF COULD NOT ENTER INTO THE RETURN OF THE CREDITOR AND BRAND THE SAME AS UNWORTHY OF CREDENCE. SO LONG IT IS NOT ESTABLISHED THAT THE RETURN SUBMITTED BY THE CREDITOR HAS BEEN REJECTED BY ITS ASSESSING OFFICER, THE ASSESSING OFFICER OF THE ASSESSEE IS BOUND TO ACCEPT THE SAME AS GENUINE WHEN THE IDENTITY OF THE CREDITOR AND THE GENUINENESS OF TRANSACTION THROUGH ACCOUNT PAYEE CHEQUE HAS BEEN ESTABLISHED. WE FIND THAT BOTH THE COMMISSIONER OF INCOME TAX(APPEAL) AND THE TRIBUNAL BELOW FOLLOWED THE WELL- ACCEPTED PRINCIPLE WHICH ARE REQUIRED TO BE FOLLOWED IN CONSIDERING THE EFFECT OF SECTION 68 OF THE ACT AND WE THUS FIND NO REASON TO INTERFERE WITH THE CONCURRENT FINDINGS OF FACT RECORDED BY BOTH THE AUTHORITIES. THE APPEAL IS THUS DEVOID OF ANY SUBSTANCE AND IS SUMMARILY DISMISSED. 14. IN THE CASE OF NEMI CHAND KOTHARI 136 TAXMAN 213, (SUPRA), THE HON'BLE GUAHATI HIGH COURT HAS THROWN LIGHT ON ANOTHER ASPECT TOUCHING THE ISSUE OF ONUS ON ASSESSEE UNDER SECTION 68, BY HOLDING THAT THE SAME SHOULD BE DECIDED BY TAKING INTO CONSIDERATION THE 8 ITA NO. 1034/KOL/2015 SRI PBN CONSTRUCTION PVT. LTD. AY. 2012-13 PROVISION OF SECTION 106 OF THE EVIDENCE ACT WHICH SAYS THAT A PERSON CAN BE REQUIRED TO PROVE ONLY SUCH FACTS WHICH ARE IN HIS KNOWLEDGE. THE HON'BLE COURT IN THE SAID CASE HELD THAT, ONCE IT IS FOUND THAT AN ASSESSEE HAS ACTUALLY TAKEN MONEY FROM DEPOSITOR/LENDER WHO HAS BEEN FULLY IDENTIFIED, THE ASSESSEE/BORROWER CANNOT BE CALLED UPON TO EXPLAIN, MUCH LESS PROVE THE AFFAIRS OF SUCH THIRD PARTY, WHICH HE IS NOT EVEN SUPPOSED TO KNOW OR ABOUT WHICH HE CANNOT BE HELD TO BE ACCREDITED WITH ANY KNOWLEDGE. IN THIS VIEW, THE HON'BLE COURT HAS LAID DOWN THAT SECTION 68 OF INCOME-TAX ACT, SHOULD BE READ ALONG WITH SECTION 106 OF EVIDENCE ACT. THE RELEVANT OBSERVATIONS AT PAGE 260 TO 262, 264 AND 265 OF THE REPORT ARE REPRODUCED HEREIN BELOW:- 'WHILE INTERPRETING THE MEANING AND SCOPE OF SECTION 68, ONE HAS TO BEAR IN MIND THAT NORMALLY, INTERPRETATION OF A STATUTE SHALL BE GENERAL, IN NATURE, SUBJECT ONLY TO SUCH EXCEPTIONS AS MAY BE LOGICALLY PERMITTED BY THE STATUTE ITSELF OR BY SOME OTHER LAW CONNECTED THEREWITH OR RELEVANT THERETO. KEEPING IN VIEW THESE FUNDAMENTALS OF INTERPRETATION OF STATUTES, WHEN WE READ CAREFULLY THE PROVISIONS OF SECTION 68, WE NOTICE NOTHING IN SECTION 68 TO SHOW THAT THE SCOPE OF THE INQUIRY UNDER SECTION 68 BY THE REVENUE DEPARTMENT SHALL REMAIN CONFINED TO THE TRANSACTIONS, WHICH HAVE TAKEN PLACE BETWEEN THE ASSESSEE AND THE CREDITOR NOR DOES THE WORDING OF SECTION 68 INDICATE THAT SECTION 68 DOES NOT AUTHORIZE THE REVENUE DEPARTMENT TO MAKE INQUIRY INTO THE SOURCE(S) OF THE CREDIT AND/OR SUB-CREDITOR. THE LANGUAGE EMPLOYED BY SECTION 68 CANNOT BE READ TO IMPOSE SUCH LIMITATIONS ON THE POWERS OF THE ASSESSING OFFICER. THE LOGICAL CONCLUSION, THEREFORE, HAS TO BE, AND WE HOLD THAT AN INQUIRY UNDER SECTION 68 NEED NOT NECESSARILY BE KEPT CONFINED BY THE ASSESSING OFFICER WITHIN THE TRANSACTIONS, WHICH TOOK PLACE BETWEEN THE ASSESSEE AND HIS CREDITOR, BUT THAT THE SAME MAY BE EXTENDED TO THE TRANSACTIONS, WHICH HAVE TAKEN PLACE BETWEEN THE CREDITOR AND HIS SUB-CREDITOR. THUS, WHILE THE ASSESSING OFFICER IS UNDER SECTION 68, FREE TO LOOK INTO THE SOURCE(S) OF THE CREDITOR AND/OR OF THE SUB-CREDITOR, THE BURDEN ON THE ASSESSEE UNDER SECTION 68 IS DEFINITELY LIMITED. THIS LIMIT HAS BEEN IMPOSED BY SECTION 106 OF THE EVIDENCE ACT WHICH READS AS FOLLOWS: 'BURDEN OF PROVING FACT ESPECIALLY WITHIN KNOWLEDGE.-WHEN ANY FACT IS ESPECIALLY WITHIN THE KNOWLEDGE OF ANY PERSON, THE BURDEN) OF PROVING THAT FACT IS UPON HIM. ' ******** WHAT, THUS, TRANSPIRES FROM THE ABOVE DISCUSSION IS THAT WHITE SECTION 106 OF THE EVIDENCE ACT LIMITS THE ONUS OF THE ASSESSEE TO THE EXTENT OF HIS PROVING THE SOURCE FROM WHICH HE HAS RECEIVED THE CASH CREDIT, SECTION 68 GIVES AMPLE FREEDOM TO THE ASSESSING OFFICER TO MAKE INQUIRY NOT ONLY INTO THE SOURCE(S)OF THE CREDITOR BUT ALSO OF HIS (CREDITOR'S) SUB-CREDITORS AND PROVE, AS A RESULT, OF SUCH INQUIRY, THAT THE MONEY RECEIVED BY THE ASSESSEE, IN THE FORM OF LOAN FROM THE CREDITOR, THOUGH ROUTED THROUGH THE SUB-CREDITORS, ACTUALLY BELONGS TO, OR WAS OF, THE ASSESSEE HIMSELF. IN OTHER WORDS, WHILE SECTION 68 GIVES THE LIBERTY TO THE ASSESSING OFFICER TO ENQUIRE INTO THE 9 ITA NO. 1034/KOL/2015 SRI PBN CONSTRUCTION PVT. LTD. AY. 2012-13 SOURCE/SOURCE FROM WHERE THE CREDITOR HAS RECEIVED THE MONEY, SECTION 106 MAKES THE ASSESSEE LIABLE TO DISCLOSE ONLY THE SOURCE(S) FROM WHERE HE HAS HIMSELF RECEIVED THE CREDIT AND IT IS NOT THE BURDEN OF THE ASSESSEE TO PROVE THE CREDITWORTHINESS OF THE SOURCE(S) OF THE SUB-CREDITORS. IF SECTION 106 AND SECTION 68 ARE TO STAND TOGETHER, WHICH THEY MUST, THEN, THE INTERPRETATION OF SECTION 68 ARE TO STAND TOGETHER, WHICH THEY MUST, THEN THE INTERPRETATION OF SECTION 68 HAS TO BE IN SUCH A WAY THAT IT DOES NOT MAKE SECTION 106 REDUNDANT. HENCE, THE HARMONIOUS CONSTRUCTION OF SECTION 106 OF THE EVIDENCE ACT AND SECTION 68 OF THE INCOME- TAX ACT WILL BE THAT THOUGH APART FROM ESTABLISHING THE IDENTITY OF THE CREDITOR, THE ASSESSEE MUST ESTABLISH THE GENUINENESS OF THE TRANSACTION AS WELL AS THE CREDITWORTHINESS OF HIS CREDITOR, THE BURDEN OF THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTIONS AS WELL AS THE CREDITWORTHINESS OF THE CREDITOR MUST REMAIN CONFINED TO THE TRANSACTIONS, WHICH HAVE TAKEN PLACE BETWEEN THE ASSESSEE AND THE CREDITOR. WHAT FOLLOWS, AS A COROLLARY, IS THAT IT IS NOT THE BURDEN OF THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTIONS BETWEEN HIS CREDITOR AND SUB-CREDITORS NOR IS IT THE BURDEN OF THE ASSESSEE TO PROVE THAT THE SUB- CREDITOR HAD THE CREDITWORTHINESS TO ADVANCE THE CASH CREDIT TO THE CREDITOR FROM WHOM THE CASH CREDIT HAS BEEN. EVENTUALLY, RECEIVED BY THE ASSESSEE. IT, THEREFORE, FURTHER LOGICALLY FOLLOWS THAT THE CREDITOR'S CREDITWORTHINESS HAS TO BE JUDGED VIS-A-VIS THE TRANSACTIONS, WHICH HAVE TAKEN PLACE BETWEEN THE ASSESSEE AND THE CREDITOR, AND IT IS NOT THE BUSINESS OF THE ASSESSEE TO FIND OUT THE SOURCE OF MONEY OF HIS CREDITOR OR OF THE GENUINENESS OF THE TRANSACTIONS, WHICH TOOK BETWEEN THE CREDITOR AND SUB-CREDITOR AND/OR CREDITWORTHINESS OF THE SUB- CREDITORS, FOR, THESE ASPECTS MAY NOT BE WITHIN THE SPECIAL KNOWLEDGE OF THE ASSESSEE. ' ********** ' ... IF A CREDITOR HAS, BY ANY UNDISCLOSED SOURCE, A PARTICULAR AMOUNT OF MONEY IN THE BANK, THERE IS NO LIMITATION UNDER THE LAW ON THE PART OF THE ASSESSEE TO OBTAIN SUCH AMOUNT OF MONEY OR PART THEREOF FROM THE CREDITOR, BY WAY OF CHEQUE IN THE FORM OF LOAN AND IN SUCH A CASE, IF THE CREDITOR FAILS TO SATISFY AS TO HOW HE HAD ACTUALLY RECEIVED THE SAID AMOUNT AND HAPPENED TO KEEP THE SAME IN THE BANK, THE SAID AMOUNT CANNOT BE TREATED AS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCE. IN OTHER WORDS, THE GENUINENESS AS WELL AS THE CREDITWORTHINESS OF A CREDITOR HAVE TO BE ADJUDGED VIS-A-VIS THE TRANSACTIONS, WHICH HE HAS WITH THE ASSESSEE. THE REASON WHY WE HAVE FORMED THE OPINION THAT IT IS NOT THE BUSINESS OF THE ASSESSEE TO FIND OUT THE ACTUAL SOURCE OR SOURCES FROM WHERE THE CREDITOR HAS ACCUMULATED THE AMOUNT, WHICH HE ADVANCES, AS LOAN, TO THE ASSESSEE IS THAT SO FAR AS AN ASSESSEE IS CONCERNED, HE HAS TO PROVE THE GENUINENESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF THE CREDITOR VIS-A-VIS THE TRANSACTIONS WHICH HAD TAKEN PLACE BETWEEN THE ASSESSEE AND THE CREDITOR AND NOT BETWEEN THE CREDITOR AND THE SUB-CREDITORS, FOR, IT IS NOT EVEN REQUIRED UNDER THE LAW FOR THE ASSESSEE TO TRY TO FIND OUT AS TO WHAT SOURCES FROM WHERE THE CREDITOR HAD RECEIVED THE AMOUNT, HIS SPECIAL KNOWLEDGE UNDER SECTION 106 OF THE EVIDENCE ACT MAY VERY WELL REMAIN CONFINED ONLY TO THE TRANSACTIONS, WHICH HE HAD' WITH THE CREDITOR AND HE MAY NOT KNOW WHAT TRANSACTION(S) HAD TAKEN PLACE BETWEEN HIS CREDITOR AND THE SUB-CREDITOR ' ********** 10 ITA NO. 1034/KOL/2015 SRI PBN CONSTRUCTION PVT. LTD. AY. 2012-13 'IN OTHER WORDS, THOUGH UNDER SECTION 68 AN ASSESSING OFFICER IS FREE TO SHOW, WITH THE HELP OF THE INQUIRY CONDUCTED BY HIM INTO THE TRANSACTIONS, WHICH HAVE TAKEN PLACE BETWEEN THE CREDITOR AND THE SUB-CREDITOR, THAT THE TRANSACTION BETWEEN THE TWO WERE NOT GENUINE AND THAT THE SUB-CREDITOR HAD NO CREDITWORTHINESS, IT WILL NOT NECESSARILY MEAN THAT THE LOAN ADVANCED BY THE SUB-CREDITOR TO THE CREDITOR WAS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCE UNLESS THERE IS EVIDENCE, DIRECT OR CIRCUMSTANTIAL, TO SHOW THAT THE AMOUNT WHICH HAS BEEN ADVANCED BY THE SUB-CREDITOR TO THE CREDITOR, HAD ACTUALLY BEEN RECEIVED BY THE SUB-CREDITOR FROM THE ASSESSEE .' ********** 'KEEPING IN VIEW THE ABOVE POSITION OF LAW, WHEN WE TURN TO THE FACTUAL MATRIX OF THE PRESENT CASE, WE FIND THAT SO FAR AS THE APPELLANT IS CONCERNED, HE HAS ESTABLISHED THE IDENTITY OF THE CREDITORS, NAMELY, NEMICHAND NAHATA AND SONS (HUF) AND PAWAN KUMAR AGARWALLA. THE APPELLANT HAD ALSO SHOWN, IN ACCORDANCE WITH THE BURDEN, WHICH RESTED ON HIM UNDER SECTION 106 OF THE EVIDENCE ACT, THAT THE SAID AMOUNTS HAD BEEN RECEIVED BY HIM BY WAY OF CHEQUES FROM THE CREDITORS AFOREMENTIONED. IN FACT THE FACT THAT THE ASSESSEE HAD RECEIVED THE SAID AMOUNTS BY WAY OF CHEQUES WAS NOT IN DISPUTE. ONCE THE ASSESSEE HAD ESTABLISHED THAT HE HAD RECEIVED THE SAID AMOUNTS FROM THE CREDITORS AFOREMENTIONED BY WAY OF CHEQUES, THE ASSESSEE MUST BE TAKEN TO HAVE PROVED THAT THE CREDITOR HAD THE CREDITWORTHINESS TO ADVANCE THE LOANS. THEREAFTER THE BURDEN HAD SHIFTED TO THE ASSESSING OFFICER TO PROVE THE CONTRARY. ON MERE FAILURE ON THE PART OF THE CREDITORS TO SHOW THAT THEIR SUB-CREDITORS HAD CREDITWORTHINESS TO ADVANCE THE SAID LOAN AMOUNTS TO THE ASSESSEE, SUCH FAILURE, AS A COROLLARY, COULD NOT HAVE BEEN AND OUGHT NOT TO HAVE BEEN, UNDER THE LAW, TREATED AS THE INCOME FROM THE UNDISCLOSED SOURCES OF THE ASSESSEE HIMSELF, WHEN THERE WAS NEITHER DIRECT NOR CIRCUMSTANTIAL EVIDENCE ON RECORD THAT THE SAID LOAN AMOUNTS ACTUALLY BELONGED TO, OR WERE OWNED BY, THE ASSESSEE. VIEWED FROM THIS ANGLE, WE HAVE NO HESITATION IN HOLDING THAT IN THE CASE AT HAND, THE ASSESSING OFFICER HAD FAILED TO SHOW THAT THE AMOUNTS, WHICH HAD COME TO THE HANDS OF THE CREDITORS FROM THE HANDS OF THE SUB-CREDITORS, HAD ACTUALLY BEEN RECEIVED BY THE SUB-CREDITORS FROM THE ASSESSEE. IN THE ABSENCE OF ANY SUCH EVIDENCE ON RECORD, THE ASSESSING OFFICER COULD NOT HAVE TREATED THE SAID AMOUNTS AS INCOME DERIVED BY THE APPELLANT FROM UNDISCLOSED SOURCES. THE LEARNED TRIBUNAL SERIOUSLY FELL INTO ERROR IN TREATING THE SAID AMOUNTS AS INCOME DERIVED BY THE APPELLANT FROM. UNDISCLOSED SOURCES MERELY ON THE FAILURE OF THE SUB-CREDITORS TO PROVE THEIR CREDITWORTHINESS. 15. WE ALSO TAKE NOTE OF THE DECISION OF THE HON'BLE HIGH COURT, CALCUTTA IN THE CASE OF S.K. BOTHRA & SONS, HUF V. INCOME-TAX OFFICER, WARD- 46(3), KOLKATA 347 ITR 347 WHEREIN THE COURT HELD AS FOLLOWS: 15. IT IS NOW A SETTLED LAW THAT WHILE CONSIDERING THE QUESTION WHETHER THE ALLEGED LOAN TAKEN BY THE ASSESSEE WAS A GENUINE TRANSACTION, THE INITIAL ONUS IS ALWAYS UPON THE ASSESSEE AND IF NO EXPLANATION IS GIVEN OR THE EXPLANATION GIVEN BY THE APPELLANT IS NOT SATISFACTORY, THE ASSESSING OFFICER CAN DISBELIEVE THE ALLEGED TRANSACTION OF LOAN. BUT THE LAW IS EQUALLY SETTLED 11 ITA NO. 1034/KOL/2015 SRI PBN CONSTRUCTION PVT. LTD. AY. 2012-13 THAT IF THE INITIAL BURDEN IS DISCHARGED BY THE ASSESSEE BY PRODUCING SUFFICIENT MATERIALS IN SUPPORT OF THE LOAN TRANSACTION, THE ONUS SHIFTS UPON THE ASSESSING OFFICER AND AFTER VERIFICATION, HE CAN CALL FOR FURTHER EXPLANATION FROM THE ASSESSEE AND IN THE PROCESS, THE ONUS MAY AGAIN SHIFT FROM THE ASSESSING OFFICER TO ASSESSEE. 16. IN THE CASE BEFORE US, THE APPELLANT BY PRODUCING THE LOAN-CONFIRMATION-CERTIFICATES SIGNED BY THE CREDITORS, DISCLOSING THEIR PERMANENT ACCOUNT NUMBERS AND ADDRESS AND FURTHER INDICATING THAT THE LOAN WAS TAKEN BY ACCOUNT PAYEE CHEQUES, NO DOUBT, PRIMA FACIE, DISCHARGED THE INITIAL BURDEN AND THOSE MATERIALS DISCLOSED BY THE ASSESSEE PROMPTED THE ASSESSING OFFICER TO ENQUIRE THROUGH THE INSPECTOR TO VERIFY THE STATEMENTS. 16. TO SUM UP SECTION 68 OF THE ACT PROVIDES THAT IF ANY SUM FOUND CREDITED IN THE YEAR IN RESPECT OF WHICH THE ASSESSEE FAILS TO EXPLAIN THE NATURE AND SOURCE SHALL BE ASSESSED AS ITS UNDISCLOSED INCOME. IN THE FACTS OF THE PRESENT CASE, BOTH THE NATURE & SOURCE OF THE UN- SECURED LOAN/ADVANCE/INTEREST RECEIVED WAS FULLY EXPLAINED BY THE ASSESSEE. THE ASSESSEE HAD DISCHARGED ITS ONUS TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE LENDERS/CREDITORS. THE PAN DETAILS, BANK ACCOUNT STATEMENTS, AUDITED FINANCIAL STATEMENTS AND INCOME TAX ACKNOWLEDGMENTS WERE PLACED ON AO'S RECORD. ACCORDINGLY ALL THE THREE CONDITIONS AS REQUIRED U/S. 68 OF THE ACT I.E. THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION WAS PLACED BEFORE THE AO AND THE ONUS SHIFTED TO AO TO DISPROVE THE MATERIALS PLACED BEFORE HIM. THUS WE NOTE THAT THE ASSESSEE COMPANY HAS BEEN SUCCESSFUL IN DISCHARGING THE ONUS CASTED UP IT TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS AND INCASE HAD HE A.O HAD ANY DOUBTS ABOUT THE CREDITWORTHINESS OF THE CREDITORS WHO GAVE LOAN/ADVANCE TO THE ASSESSEE, THEN HE COULD HAVE MADE ENQUIRIES WITH THE A.O OF LENDERS AND THEN ONLY DREW ADVANCE INFERENCE AGAINST ASSESSEE AS HELD BY HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. DATAWARE PVT. LTD (SUPRA). WITHOUT DOING SO, THE ADDITION MADE BY THE AO IS BASED ON CONJECTURES AND SURMISES CANNOT BE JUSTIFIED. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED ABOVE, NO ADDITION WAS WARRANTED UNDER SECTION 68 OF THE ACT. THEREFORE WE UPHOLD THE ACTION OF LD CIT(A) IN DELETING THE ADDITION TO THE TUNE OF RS.2,24,94,335/- U/S 68 OF THE ACT ON THE REASONS DISCUSSED SUPRA. THEREFORE, WE DO NOT WANT TO INTERFERE IN THE IMPUGNED ORDER OF LD. CIT(A) WHICH IS CONFIRMED AND CONSEQUENTLY THE APPEAL OF REVENUE IS DISMISSED. 12 ITA NO. 1034/KOL/2015 SRI PBN CONSTRUCTION PVT. LTD. AY. 2012-13 17. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 19.06.2019 SD/- SD/- (DR. A. L. SAINI) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 19 JUNE, 2019 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT DCIT, CIRCLE-3(1), SILIGURI. 2 RESPONDENT M/S. PBN CONSTRUCTION PVT. LTD., PLOT NO. 15A/4, 5 INDUSTRIAL AREA, SEVOKE ROAD, SILIGURI-734001. 3 4 5 CIT (A), SILIGURI. CIT , SILIGURI. DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR