M/s Kumar Brothers (Chemists) Pvt. Ltd., Chandigarh V. DCIT, C-1(1), , Chandigarh

ITA 1076/CHANDI/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2939 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-05-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 27-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POONAM SHARMA SR DR
• Keywords: Income from undisclosed sources; Source of fund
• Section: 208

Judgement Text

1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH A, CHANDIGARH !, ' # . %.., & , '( # BEFORE: MS. DIVA SINGH, JM & DR. B.R.R. KUMAR, AM ITA NO. 1076/CHD/2017 ASSESSMENT YEAR : 2013-14 M/S KUMAR BROTHERS (CHEMISTS) PVT. LTD. SCO, 7-8, SECTOR 11-D CHANDIGARH DCIT, C-3(1) CHANDIGARH PAN NO: AABCK0659D APPELLANT RESPONDENT !' ASSESSEE BY : SH. PARIKSHIT AGGARWAL, CA #!' REVENUE BY :SMT. POONAM SHARMA, SR. DR $ %! & DATE OF HEARING : 09/05/2019 '()*! & DATE OF PRONOUNCEMENT : 06/08/2019 ')/ ORDER PER DR. B.R.R. KUMAR, A.M THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF THE LD. CIT(A)-1, CHANDIGARH DT. 07/03/2017. 2. IN THE PRESENT APPEAL ASSESSEE HAS RAISED THE FO LLOWING GROUNDS: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE WORTHY CIT(A) IN APPEAL NO. 307/15-16 DATED 15.02.2 016 HAS ERRED IN PASSING THAT ORDER IN CONTRAVENTION OF THE PROVISIONS OF SECTION 250(6) OF THE INCOME TAX ACT, 1961. 2. THAT ON FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, THE WORTHY CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LD. AO WHEREIN HE MADE ADDITION OF RS. 3,35,000/-U/S 68 BY ERRONEOUSLY HOLDING THAT TH E ASSESSE COMPANY HAS NOT PROVED THE GENUINENESS OF THE TRANSACTION AND SOURC E OF CREDITOR IS ALSO NOT PROVED. HOWEVER, THE ASSESSEE COMPANY HAS RECEIVED UNSECURED LOAN FROM SH. SONU GARG OF RS.6.00 LACS THROUGH PROPER BANKING CH ANNEL. THE SAID CREDITOR SH. SONU GARG HAD WITHDRAWN INCOME BY WAY OF SALARY. DU RING THE ASSESSMENT PROCEEDINGS AND APPELLATE PROCEEDINGS ALSO, COPY OF ITR ALONG WITH BANK 2 ACCOUNT, SALARY ACCOUNT AND CONFIRMATION IN THE FOR M OF AFFIDAVIT OF THE SAID CREDITOR WAS FILED. THE RESP/ECTIVE SOURCES OF THE SOURCES OF THE CREDIT OF RS. 6.00 LACS WERE DULY FURNISHED/EXPLAINED. MOREOVER THE AS SESSE COMPANY HAS REFUNDED THE LOAN RECEIVED TO THE CREDITOR IN THE IMMEDIATE SUCCEEDING YEAR THROUGH PROPER BANKING CHANNEL. 3. THAT THE APPELLANT CRAVES LEAVE FOR ANY ADDITION , DELETION OR AMENDMENT IN THE GROUNDS OF APPEAL ON OR BEFORE THE DISPOSAL OF THE SAME. 3. THE FACTS AS TAKEN FROM THE RECORDS OF THE CIT(A ) ARE AS UNDER: 4. DURING THE YEAR THE ASSESSEE HAS RECEIVED UNSECU RED LOANS OF RS. 6,00,000/- FROM ONE SH SONU GARG. THE ASSESSING OFF ICER OBSERVED THAT SHRI. SONU GARG HAD CASH DEPOSITS BEFORE ISSUE OF LOAN IN CHEQ UE AND THAT SH. SONU GARG DID NOT HAVE THE CAPACITY TO EXTEND THEN LOAN. THE OBSERVATION OF THE ASSESSING OFFICER IS AS UNDER:- '4.1 ON PERUSAL OF THE BALANCE SHEET IT WAS FOUND TH AT THE ASSESSEE HAS RECEIVED UNSECURED LOANS FROM VARIOUS PERSONS. THE ASSESSEE WAS ASKED TO PRODUCE THE DETAILS OF UNSECURED LOANS RECEIVED ALONGWITH CONFI RMATION FROM THE PARTIES AND THE SOURCE OF UNSECURED LOAN GIVEN TO THE ASSESSEE GIVEN. 4.2 ON VERIFICATION IT WAS FOUND THAT THE LOAN TAKEN FRO M ONE SH. SONU GARG AMOUNTING TO RS. 6,00,000/- INCLUDES CASH RECE IPTS. THE ASSESSEE VIDE ORDER SHEET ENTRY DATED 25. 01.2016 WAS THEREFORE ASKED TO PRODUCE THE COPY OF ITR ALONGWITH. THE SOURCE OF CASH TO PROVE THE GENUINEN ESS OF THE TRANSACTION. ON PERUSAL OF THE !TR OF SH. SONU GARG FOR A. Y. 2012- 13 IT WAS FOUND THAT SH. SONU GARG HAS DECLARED TOTAL INCOME OF RS. 2,41,150/- ON LY. ON PERUSAL OF THE BANK ACCOUNT STATEMENT OF SH. SONU GARG IT WAS FOUND THA T BEFORE GIVING UNSECURED LOANS TO ASSESSEE COMPANY, THERE WERE CASH DEPOSIT OF RS. 2,15,000/-. APART FROM THIS THE LEDGER OF LOAN ACCOUNT OF SH. SONU GARG RE VEALED THAT THERE IS ANOTHER CASH DEPOSIT OF RS. 1.20,000/ DURING THE YEAR. THE ASSESSEE WAS THEREFORE ASKED TO EXPLAIN THE SOURCE OF THIS CASH OF RS. 3,35,000/ - (2,15,000 + 1,20,000} RECEIVED AS UNSECURED LOAN DURING THE YEAR. HOWEVER THE ASSESSE E FAILED TO EXPLAIN ANYTHING IN THIS REGARD. 4.3 SINCE THE ASSESSEE COULD, NOT PROVE THE GENUINENESS OF THE TRANSACTION AND CREDIT WORTHINESS OF SH. SONU GARG, THE ASSESSE E WAS SHOW CAUSED VIDE ORDER SHEET ENTRY DATED 28.01.2016 TO EXPLAIN AS TO WHY N OT THE AMOUNT OF RS. 3,35,000/ HE TREATED AS INCOME U/S 68. THE ASSESSEE HOWEVER O NCE AGAIN EXPRESSED HIS INABILITY TO EXPLAIN THE SOURCE OF CASH RECEIVED AM OUNTING TO RS. 3,35,000/ AS UNSECURED LOAN. THUS THE ASSESSEE HAS FAILED TO DIS CHARGE HIS ONUS TO EXPLAIN THE SOURCE OF CASH DEPOSITED DESPITE OF REPEATED OPPORT UNITIES GIVEN. ACCORDINGLY THE AMOUNT OF RS. 3,35.000/- IS TREATED, AS INCOME AS PER PROVISION OF SECTION 68 AND THE AMOUNT IS ADDED TO THE INCOME OF THE ASSESS EE.' 5. BEFORE THE LD. CIT(A) THE ASSESSEE HAS GIVEN FOL LOWING SUBMISSION:- 3 'ACCORDING TO SECTION 68 OF THE INCOME TAX ACT, 196 1, WHERE ANY SUM IS FOUND CREDITED IN THE HOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF THE SAME OR THE EXPLANATION OFFERED BY HIM IS NOT SATISFACTORY IN T HE OPINION OF A.O., THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. THE BASIC PRECONDITION FOR THE SECTION 68 IS THAT T HE ASSESSEE SHOULD FILE A VALID CONFIRMATION. VALID CONFIRMATION HAS NO SPECIFIC FO RMAT BUT. IT MUST CONTAIN NAME, COMPLETE ADDRESS OF THE LENDER. IT IS BETTER IF PAN OF THE TENDER IS ALSO OBTAINED AS, IF NO PAN GIVEN THEN AMBIT OF DOUBT IS FAR MORE FOR THE AO WITH THE CONFIRMATION, THE AO MUST INSIST ON SOME IDENTITY PR OOF LIKE COPY OF DRIVING LICENSE, COPY OF PASSPORT, COPY OF RADON CARD OR ELECTION ID CURD ETC. THE CONFIRMATION SO FILED MUST INDICATE COMPLETE DE TAILS OF TRANSACTIONS (LIKE MODE-CASH OR CHEQUE, WITH NUMBER DATE OF CHEQUE WITH BANK DETAILS}. THE AO HAVE RIGHT TO DEMAND THE COPY OF BANK ACCOUNT OF TH E LENDER EVIDENCING SUCH TRANSACTIONS AND THE SAME NEEDS TO BE FILED, IN CAS E TRANSACTION IS IN CASH THEN AO MUST DEMAND CASH FLOW STATEMENT OF THE LENDER, PR EFERABLY CONTAINING DETAILS OF OPENING BALANCE, AND ITS SOURCE THEREOF. AS FAR AS THE CREDITWORTHINESS OR FINANCIAL STRENGT H OF THE CREDITORS/ SUBSCRIBER IS CONCERNED, THAT CAN BE PROVE BY PRODUCING THE BANK STATEMENT OF THE CREDITORS/ SUBSCRIBERS IS CONCERNED, THAT CAN BE PROVED BY PRO DUCING THE BANK STATEMENT OF THE CREDITORS/ SUBSCRIBERS SHOWING THAT IT HAD S UFFICIENT BALANCE IN ITS ACCOUNTS TO ENABLE IT TO SUBSCRIBE TO THE SHORT- <.-UPITUL ON CE THESE DOCUMENTS ARE PRODUCED, THE ASSESSEE WOULD HAVE SATISFACTORILY DI SCHARGED THE ONUS CAST UPON HIM. THEREAFTER, IT IS FOR THE ASSESSING OFFICER TO SCRUTINIZE THE SAME AND IN CASE HE NURTURES ANY DOUBT ABOUT THE VERACITY OF THESE DOCU MENTS, TO PROBE THE MAILER FURTHER. HOWEVER, TO DISCREDIT THE DOCUMENTS PRODUC ED BY THE ASSESSEE ON THE AFORESAID ASPECTS, THERE HAS TO HE SOME COGENT REAS ONS AND MATERIALS FOR THE ASSESSING OFFICER AND HE CANNOT GO INTO THE REALM OF SUSPICION. THUS ELEMENT OF CREDIT WORTHINESS AND SATISFACTION OF AO THEREAFTER IS SUBJECTIVE AND REQUIRES MORE EFFORTS/ INQUIRY ON THE PART OF THE AO TO GIVE A FIN DING IN THE ORDER THAT LENDER IS NOT CREDIT WORTHY. IF THE ASSESSING OFFICER OBSERVE SOME CASH DEPOSIT B EFORE ISSUE OF CHEQUE THEN SOME 'NEXUS' MUST BE ESTABLISHED BETWEEN THE CASH D EPOSIT AND THE LENDEE. A MERE OBSERVATION THAT CHEQUE IS ISSUED AFTER FEW DA YS OF CASH DEPOSIT AND ADDITIONS MADE ON THIS COUNT WILL NOT SUSTAIN IN TH E APPELLATE STAGE. HON'BLE GUJARAT HC HAS EVEN HELD IN 208 TAXMAN 35 THAT EVEN IF THERE IS CASH DEPOSIT BEFORE THE CHEQUE IS ISSUED SAME CANNOT BE HELD HAS INCOME OF LENDEE IF LENDER IS INCOME TAX ASSESSEE. IN THE LIGHT OF THE ABOVE SUBMISSION AND ALSO THE D OCUMENTS SUBMITTED DURING THE ASSESSMENT PROCEEDINGS I.E. BANK STATEMENT, ITR, PA N CARD & AADHAR CARD ALONG WITH CONFIRMATION IN THE FORM OF AFFIDAVIT AND SOUR CE OF INCOME OF CREDITOR, NO ROOM IS LEFT FOR MAKING ADDITION U/S 68 OF THE IT A CT AND SAME IS LIABLE TO BE DELETED.' 6. THE LD. CIT(A) SUPPORTED THE OBSERVATIONS OF THE ASSESSING OFFICER WHILE CONFIRMING THE ADDITION THE LD. CIT(A) HAS OBSERVED AS UNDER: 4 I HAVE EXAMINED THE ISSUE IN DETAIL. IN ORDER TO MA KE ADDITION U/S 68, THE FOLLOWING THREE THINGS HAVE TO BE PROVE D. EVEN ONE OF THESE CONDITIONS IS NOT PROVED THEN THE AMOUNT CAN BE ADD ED U/S 68 VIZ. IDENTITY OF CREDITOR, SOURCE OF FUNDS, GENUINENESS OF TRANSACTI ON IN THIS CASE THE IDENTITY OF THE CREDITOR IS PROVED AS THE CREDITOR IS AN INCOME TAX ASSESSEE. HOWEVER, GENUINENESS OF TRA NSACTION COULD NOT BE PROVED DURING ASSESSMENT OR IN APPEAL. THE PAYMENT WAS MADE IN CASH AND THERE IS NO DOCUMENT PRODUCED BY THE APPELLANT TO S HOW THE HAPPENING OF THIS TRANSACTION. THE SOURCE OF CREDITOR IS ALSO NOT PRO VED. SH. SONU GARG DID NOT HAVE ADEQUATE SOURCES TO JUSTIFY THE PAYMENT. HENCE, THE ADDITION OF 3,35,000/- IS CONFIRMED. 7. DURING THE ARGUMENTS BEFORE US, THE LD. AR RELIE D ON THE ARGUMENTS TAKEN BEFORE THE REVENUE AUTHORITIES WHILE LD. DR SUPPORT ED THE ORDER OF THE LD. CIT(A). 8. WE HAVE GONE THROUGH THE ARGUMENTS AND RECORD BE FORE US, WE FIND THAT THE TOTAL LOAN GIVEN BY SHRI SONU GARG IS OF RS. 6, 00,000/-. THE REVENUE AUTHORITIES HAVE MADE ADDITION OF RS. 3,35,000/- OU T OF THE LOAN OF RS. 6,00,000/- EXTENDED ON THE GROUNDS THAT THERE WERE CASH DEPOSI TS TO THE TUNE OF RS. 3,35,000/-. THE LD. CIT(A) ALSO HELD THAT THOUGH TH E IDENTITY AND SOURCE OF FUNDS HAS BEEN PROVED THE GENUINENESS OF THE TRANSACTION COULD NOT BE PROVED. THE REVENUE HAS NOT BROUGHT ANYTHING ON RECORD TO PROVE OR TO LEAD HOW THIS TRANSACTION IS NOT GENUINE EVEN IN THE NORMAL PARLA NCE. REVENUE HAS NOT DISPUTED THE EVIDENCES FILED BY THE ASSESSEE TO PRO VE THAT THE LOAN IS NOT GENUINE. IN THE CASE, WHERE THE NEXUS OF THE ASSESS EE AND THE LOAN PARTY CANNOT BE PROVED REGARDING THE INTRODUCTION OF THE ASSESSEES UNACCOUNTED INCOME BEING BROUGHT INTO THE BOOKS OF ACCOUNT IN T HE FORM OF LOAN, THE REVENUE CANNOT MAKE ADDITION IN THE HANDS OF THE AS SESSEE. IN THE CASE THE CASH DEPOSITS IN THE BANK ACCOUNT OF THE LOAN PARTY HAVE NOT BEEN DULY EXPLAINED TO THE SATISFACTION, THEN THE ADDITION IS TO BE MADE IN THE HANDS OF THE LOAN PARTY FOR HAVING UNEXPLAINED CASH DEPOSITS IN HIS ACCOUNT BUT NOT IN THE HANDS OF THE LOAN RECEIVING PARTY SPECIALLY WHEN TH E LOAN PARTY IS AN INCOME TAX 5 ASSESSEE AND ALL THE DETAILS ABOUT THAT PARTY ARE A VAILABLE WITH THE REVENUE. HENCE, KEEPING IN VIEW THE ENTIRETY OF THE FACTS SP ECIFIC TO THIS CASE, WE HEREBY HOLD THAT THE ACTION OF THE LD. CIT(A) IN CONFIRMIN G THE PART LOAN CANNOT BE UPHELD. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- ! . %.., & , (DIVA SINGH ) ( DR. B.R.R. KUMA R, AM) ' #/ JUDICIAL MEMBER '( #/ ACCOUNTANT MEMBER AG DATE: 06/08/2019 (+! ,-.- COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. $ / CIT 4. $ / 01 THE CIT(A) 5. -2 45&456789 DR, ITAT, CHANDIGARH 6. 8:% GUARD FILE (+ $ BY ORDER, ; # ASSISTANT REGISTRAR