ITO, Ward 1, Ahmednagar V. M/s. Sangam Krushi Audyogic Prakriya Va Gramin Vikas Sahakari Sanstha, Ahmednagar

ITA 1381/PUN/2013

• Counselvise Citation: 138124514 RSA 2013
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 01-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Assessee Lawyers: S N DOSHI
• Keywords: Bogus purchase
• Section: 40A(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.1381/PN/2013 (ASSESSMENT YEAR 2007-08) ITO,WARD-1, AHMEDNAGAR .. APPELLANT VS. M/S.SANGAM KRUSHI AUDYOGIC PRAKRIYA VA GRAMIN VIKAS SAHAKARI SANSTHA MARYADIT, KOKANGAON, TALUK : SANGAMNER, DIST : AHMEDNAGAR .. RESPONDENT PAN NO.AAAAS9540A ASSESSEE BY : SHRI S.N. DOSHI REVENUE BY : SHRI S.P. WALIMBE DATE OF HEARING : 20-05-2014 DATE OF PRONOUNCEMENT : 30-05-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 02-04-2013 OF THE CIT(A)-I, PUNE RELATING TO A.Y. 2007-08. 2. GROUNDS OF APPEAL NO.1 TO 5 BY THE REVENUE RELAT E TO THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS.1,89,22,9 13/- MADE BY THE ASSESSING OFFICER U/S.40A(3) OF THE I.T. ACT. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS ENGAGED IN PURCHASE, SALE AND PROCESSING OF MILK AND ALLIED PR ODUCTS. IT FILED ITS RETURN OF INCOME ON 31-10-2007 DECLARING TOTAL INCO ME OF NIL AFTER CLAIMING CARRY FORWARD LOSS OF RS.29,20,110/-. DUR ING THE COURSE OF 2 ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSER VED THAT THE ASSESSEE HAS PURCHASED MILK OF RS.9,46,14,569/- FROM DIFFERE NT MILK SUPPLIERS AT DIFFERENT CENTRES. FROM THE DETAILS FILED BY THE A SSESSEE, THE ASSESSING OFFICER NOTED THAT THE PAYMENTS TO MILK SUPPLIERS W ERE MADE THROUGH GAGANGIRI MAHARAJ NAGARIK SAHAKARI PATSANSTHA MARYA DIT, (IN SHORT GMNSPM), SANGAMNER. THE ASSESSING OFFICER OBSERV ED THAT THE MILK SUPPLIERS HAVE OPENED ACCOUNTS IN THE SAID SANSTHA AND THE ASSESSEE GIVES INSTRUCTIONS TO GMNSPM TO TRANSFER THE PAY ABLE AMOUNT TO THE MILK SUPPLIERS. ON RECEIPT OF INSTRUCTIONS FROM THE ASSESSEE, THE SAID SANSTHA TRANSFERS THE AMOUNT TO THE CONCERNED SUPPL IERS. HE OBSERVED THAT THESE PAYMENTS PRIMA-FACIE APPEARED TO BE IN V IOLATION OF THE PROVISIONS OF SECTION 40A(3) OF THE I.T. ACT. HE, THEREFORE, ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE PROVISIONS OF SECTION 40A(3) SHALL NOT BE APPLICABLE TO THE CASE OF THE ASSESSEE. 3.1 THE ASSESSEE REPLIED TO THE SAME BY STATING THA T THE PROVISIONS OF SECTION 40A(3) ARE NOT APPLICABLE TO THE FACTS OF T HE PRESENT CASE. HOWEVER, THE ASSESSING OFFICER REJECTED THE SAME ON THE GROUND THAT THE ASSESSEE FAILED TO BRING ON RECORD OR TO ESTABLISH THAT THE TRANSFER OF PAYMENTS TO VARIOUS PARTIES EFFECTED THROUGH GMNSP M ARE COVERED U/S.40A(3) R.W. RULE 6DD(C). HE FURTHER HELD THAT SHRI K.S. SHINDE, CHAIRMAN OF THE ASSESSEE SOCIETY WAS CLOSELY ASSOCI ATED AND A KEY PERSON FOR GMNSPM AND THEREFORE MANIPULATED THE A CCOUNTS IN SUCH A WAY THAT FICTITIOUS PAYMENTS WERE SHOWN BY WAY OF C ASH TRANSFER THROUGH THE PAT SANSTHA. ACCORDINGLY, THE ASSESSING OFFICE R INSTEAD OF APPLYING THE PROVISIONS OF SECTION 40A(3) DISALLOWED 20% OF THE TOTAL PURCHASES AMOUNTING TO RS.1,82,22,913/- TREATING THE SAME AS BOGUS PURCHASES. 3 4. BEFORE CIT(A) THE ASSESSEE FILED EXTRACTS OF MIL K PURCHASE, LEDGER ACCOUNT, PURCHASE BILLS, PAYMENT REGISTERS, SALE ME MOS, SALES REGISTER, MILK SALE LEDGER ETC. IT WAS SUBMITTED THAT BOTH T HE SALES AND PURCHASES ARE SUPPORTED BY NECESSARY DOCUMENTARY EVIDENCES. THE ASSESSING OFFICER HAS NOT DOUBTED THE SALES EFFECTED BY THE A SSESSEE. HE HAS ONLY TREATED A PART OF THE PURCHASES AS BOGUS WITHOUT PI N-POINTING EVEN A SINGLE INSTANCE OF BOGUS PURCHASES AND THE SAME WAS BASED ON SURMISES AND PRESUMPTIONS. IT WAS SUBMITTED THAT THE CHAIRM AN OF THE ASSESSEE SOCIETY SHRI K.S. SHINDE WAS NOT EVEN A MEMBER OF T HE MANAGING COMMITTEE OF THE PAT SANSTHA. THEREFORE, THE REASON ING OF THE ASSESSING OFFICER THAT THE SAID SHRI K.S. SHINDE WAS A KEY PE RSON OF THE SAID PAT SANSTHA AND USED THE SAID POSITION FOR SHOWING PAYM ENTS FOR BOGUS PURCHASES IS FACTUALLY INCORRECT. ACCORDINGLY, IT WAS REQUESTED THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER SHOULD B E DELETED. 5. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFIC ER. AFTER CONSIDERING THE REMAND REPORT THE LD.CIT(A) DELETED THE ADDITIO N. AGGRIEVED WITH SUCH ORDER OF THE CIT THE REVENUE IS IN APPEAL BEF ORE US. 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE LD. CIT(A) DELETED THE ADDITION ON THE BASIS OF THE REMAND REPORT, WHICH H AS BEEN REPRODUCED BY HIM AT PAGE 8 TO 11 OF THE ORDER AND WHICH READS AS UNDER : 4 I) ADDITION ON ACCOUNT OF BOGUS, INFLATED PURCHASE S AMOUNTING RS.1,89,22,913/- BRIEF FACTS: THE ASSESSEE IS A CO-OPERATIVE SOCIETY ENGAGED IN T HE BUSINESS OF PURCHASE, SALE, PROCESSING MILK AND ALLIED PRODUCTS. IT FILED T HE RETURN DECLARING THE INCOME AT RS. NIL AFTER CLAIMING CARRIED FORWARD LOSS OF RS. 29,20,110/-. IN THE COURSE OF SCRUTINY THE ASSESSING OFFICER FOUND THAT ASSESSEE MADE THE PURCHASES OF MILK OF RS.9,46,14,569/- FROM VARI OUS MILK SUPPLIERS AT DIFFERENT CENTERS. IT WAS ALSO FOUND THAT THE PAYME NTS TO MILK SUPPLIERS WERE MADE THROUGH GAGANGIRI MAHARAJ NAGARIK SAHAKARI PA TSANSTHA MARYADIT, SANGAMNER, AS THESE MILK SUPPLIERS HAVE THE IR ACCOUNTS IN THE SAID PATSANSTHA WHICH GIVES CREDIT TO THE MILK SUPP LIERS AS PER THE INSTRUCTIONS GIVEN BY THE ASSESSEE. IT HAS BEEN FOU ND THAT THESE PAYMENTS ARE HIT BY PROVISIONS OF SECTION 40A(3) WHICH CLEAR LY SAY THAT BY AN ACCOUNT PAYMENT EXCEEDING RS.20,000/- OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON BANK OR ACCOUNT PAYEE BANK DRAFT,20 % OF SUCH EXPENDITURE SHALL NOT BE ALLOWED AS DEDUCTION. THEREAFTER THE ASSESSING OFFICER HAS OBSERVED THAT T HE SAID PATSANSTHA AND THE ASSESSEE ARE WORKING UNDER THE CHAIRMANSHIP OF SHRI. K.S. SHINDE AND HE USED HIS POST AND DEVISED A NOBLE AND SOPHISTIC ATED WAY TO CAMOUFLAGE THE BOGUS PAYMENTS MADE ON ACCOUNT OF PU RCHASES AND THEREBY REDUCE THE PROFIT. THE ASSESSING OFFICER THEREFORE HOLDS 20% OF THE TOTA L PAYMENTS MADE FOR PURCHASES ARE FICTITIOUS AND ACCORDINGLY MADE A N ADDITION OF RS.1,89,22,913/. GROUNDS TAKEN BY ASSESSEE BEFORE CIT(A) -1, PUNE 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE ASSESSING OFFICER HAS ERRED IN MAKING THE ADDITION OF RS.1,89,22,913/- ON ACCOUNT BOGUS AND INFLATED PURCHASES WITHOUT POSSESSING ANY COGENT M ATERIAL OR EVIDENCE AND THE SAME IS MADE MERELY ON SUSPICION. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE ASSESSING OFFICER HAS ERRED NOT CONFRONTING THE APPELLANT ABOUT HIS VIE W THAT PURCHASES ARE BOGUS OR INFLATED ADDITION IS MADE UNILATERALLY AND ARBITRARILY. THE ASSESSEE HAS MADE SUBMISSION BEFORE CIT(A) - I, P UNE AS GIVEN BELOW: 1. WRITTEN SUBMISSION DATED 18/10/2010. 2. PURCHASE BILLS - PHOTOSTAT COPIES. 3. PAYMENT REGISTER OF MILK PURCHASE- WITH THE COPI ES OF BANK STATEMENTS OF THE MILK COLLECTING CENTERS AND RELEV ANT DETAILS. 4. MILK PURCHASE LEDGER ACCOUNT-EXTRACT. 5. ACCOUNT OF MILK PURCHASE PAYABLE - EXTRACT. 6. PHOTOSTAT COPY OF CURRENT ACCOUNT, I.E. CASH CREDIT ACCOUNT OF THE APPELLANT FOR A. Y. 2006-07. 7. SALES MEMOS - PHOTOSTAT COPIES FROM JUNE TO MARCH 2007. 8. SALES REGISTER 9. MILK SALES LEDGER ACCOUNT-EXTRACT. 10. MILK SALES RECEIVABLE ACCOUNT LEDGER - EXTRACT, 11. LIST OF MEMBERS OF MANAGING COMMITTEE OF GAGANGIRI MAHARAJ NAGARIK SAHAKARI PATSANSTHA MARYADIT. 5 12. COPIES OF AUTHORITIES OF : A) DCIT VS. ROHINI BUILDERS GUJARAT H.C. 255 ITR 360 B) ARAVALI TRADING CO. VS. ITO RAJASTHAN HC 220 CTR 6 22 C) KANHALAL JANGID VS. ACIT RAJASTHAN HC-217 CTR 254. THE ASSESSEE ALSO SUBMITTED STEP WISE MODUS OF OPER ANDI IN DETAIL REGARDING PROCEDURE OF PURCHASE AND SALE OF MILK AN D DETAIL PROCEDURE OF MAINTAINING ACCOUNTS OF THESE TRANSACT IONS VIDE LETTER DATED 18/12/2012. (COPY ENCLOSED AS PER ANNEXURE 'A '). ON EXAMINATION OF SUBMISSION MADE BY ASSESSEE AND V ERIFICATION OF TRANSACTIONS OF SALE AND PURCHASES AT RANDOM IT IS SEEN THAT ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNTS PROPERLY. BOTH THE PURCHASES AND SALES OR SUPPORTED BY PURCHASE AND SALES BILLS. THE DETAILS OF FOLLOWING 9 CASES OF PURCHASES FOR DIFFERENT PE RIOD AND DIFFERENT SUPPLIERS ARE ENCLOSED AS PER ANNEXURE 'B'. THE DETAILS OF FOLLOWING 20 CASES OF SALES FOR DIFFERENT CUSTOMER S FOR THE MONTH OF OCTOBER ARE ENCLOSED MS PER ANNEXURE 'C'. DATE NAME PARTY NET SALES RS. 05.10.2006 PABARI SALES SURAT 52302/- 20.10.2006 PABARI SALES SURAT 45458/- 15.10.2006 PABARI SALES SURAT 58448/- 15.10.2006 JYOTI SALES SURAT 33893/- 20.10.2006 JYOTI SALES SURAT 23910/- 05.10.2006 JYOTI SALES SURAT 37509/- 03.10.2006 RAJENDRA KOTE SHRDI 5200/- 16.10.2006 RAJENDRA KOTE SHRDI 1950/- PERIOD NAME CENTER IN CHARGE NET PAYMENT RS. 16.05.2006 TO 31.05.2006 YAMAIMATA DUDH SANKALAN KENDRA UMBARI TARACHAND DASHRAT H BHUSAI 101 824 /- 16.04.2006 TO 30.04.2006 GAGACHARAN DUDH SANKALAN KENDRA NADURI MURLIDHAR SAKHRAM KAWADE 70161/- 01. 07. 2006 TO 15.07.2006 DATTAKRUPA DUDH SANKALAN KENDRA GANESHWADI RAJENDRA DAGDU SATPUTE 70932/- 01. 08.2006 TO 15.08.2006 JANARDHAN SWAM/ DUDH SANKALAN KENDRA NIMGAONJALI BABASAHEB SUKDEV VADAK 14446/- 01. 09.2006 TO 15.09.2006 PANCHVATI DUDH SANKALAN KENDRA PRAVARANAGAR BALASAHEB EKNATH THETE 32296/- 16. 10.2006 TO 30.10.2006 YAMAIMATA DUDH SANKALAN KENDRA UMBARI TARACHAND DASHRATH BHUSAI 760701- 01. 11. 2006 TO 15.11.2006 GAHININATH DUDH SANKALAN KENDRA KOTANGAON NANDU PUNJA SHINGOTE 140701/- 01. 12.2006 TO 15. 12.2006 GANESH DUDH SANKALN KENDRA CHANEGAON BALASAHEB JIJABHAU PAVADE 60174/- 01. 01. 2007 TO 15.01.2007 MAULI DUDH SANKALN KENDRA KOLHAR VIKRAM BHANUDAS SATPUTE 14165/- 6 20.10.2006 RAJENDRA KOTE SHRDI 5850/- 04.10,2006 RAMDAS GADEWAR AKOLA 23320/- 15.10.2006 RAMDAS GADEWAR AKOLA 21865/- 20.10.2006 RAMDAS GADEWAR AKOLA 24740/- 20.10.2006 RETESH MILK PUNE 11980/- 04. 10.2006 RETESH MILK PUNE 1 1835/- 16.10.2006 RETESH MILK PUNE 1 1835/- 07.10.2006 DANAMIK DAIRY BARAMATI 117771/- 09.10.2006 DANAMIK DAIRY BARAMATI 1 14472/- 10.10.2006 DANAMIK DAIRY BARAMATI 1 28249/- 06.10.2006 PARAG DAIRY MANCHAR 1 14840/- 21.10.2006 PARAG DAIRY MANCHAR 1 06812/- DURING REMAND PROCEEDING ASSESSEE SUBMITTED DETAILS OF SALE OF MILK AND XEROX COPY OF ALL DAY-TO-DAY ENTRIES AND COPY OF BAN K STATEMENTS (COPY ENCLOSED AS PER ANNEXURE 'D'). THE SUMMARISED POSITIO N OF MILK SALE IS AS UNDER : PARTICULAR CASH BANK JV TOTAL AMOUNT PACK MILK SALE RECEIVED AMOUNT 55925632.00 20343214.00 354668.00 76629818.00 TANKER MILK SALE RECEIVED AMOUNT 130156.00 28945204.00 0.00 29075360.00 BULK COOLER MILK SALE RECEIVED AMOUNT 0.00 12295670.00 0.00 12295670.00 56055788.00 61584088.00 354668.00 1 18000848.00 ON EXAMINATION OF THESE DOCUMENTS IT IS SEEN THAT OUT O F TOTAL MILK SALE OF RS.12,00,13,058/-, PAYMENT RECEIVED BY CHEQUE IS OF R S. 6,15,84,088/-. ASSESSEE HAS SUBMITTED A LETTER OF ELECTION RETURNING OFFICER OF GAGANGIRI MAHARAJ NAGARIK SAHAKARI PATSANSTHA LIMITED. ON GOING TH ROUGH THE CONTENTS OF THIS LETTER IT IS SEEN THAT MR. K.S. SHIND E WAS NOT MEMBER OF IT'S MANAGING COMMITTEE DURING THE PERIOD 2003 TO 2008,' 6.1 WE FIND ON THE BASIS OF THE REMAND REPORT THE L D.CIT(A) DELETED THE ADDITION OF RS.1,89,22,813/- ADDED BY THE ASSES SING OFFICER ON THE GROUND THAT SHRI K.S. SHINDE WAS NOT A MEMBER OF TH E MANAGING COMMITTEE OF THE PATSANSTHA DURING THE IMPUGNED ASS ESSMENT YEAR. FURTHER, THE ASSESSING OFFICER HAS VERIFIED ON A TE ST CHECK BASIS REGARDING THE PURCHASES FROM CERTAIN PARTIES. THE RELEVANT OBSERVATION OF THE LD.CIT(A) AT PARA 3.3 OF THE ORDER READS AS UN DER : 7 3.3. FROM THE REMAND REPORT, IT IS NOTICED THAT THE M ODUS OPERANDI ADOPTED BY THE APPELLANT FOR PURCHASE OF MILK (AS EX PLAINED VIDE THEIR LETTER DATED 18.12.2012 FILED BEFORE THE ASSESSING OF FICER SPECIFICALLY NARRATING THE CASE STUDY OF YAMAIMATA DUDH SANKALAN K ENDRA, UMBAI CENTER) HAS BEEN EXAMINED ALONGWITH THE PURCHASES FRO M CERTAIN OTHER DUDH SANKALAN KENDRAS AT NADURI, GANESHWADI, NIMGAONJA LI, PRAVARANAGAR, /KOKANGAON, CHANEGAON ETC. SIMILARLY, THE SMILES RELATING TO 20 DIFFERENT CUSTOMERS HAS ALSO BEEN EXAMINED. IT IS SEEN THATUHE ASSESSING OFFICER HAS VERIFIED THE TRANSACTIONS OF SALE AND PURCHASE AT RANDOM AND COME TO THE CONCLUSION THAT THE APPELLANT HAS MAINTAINED PROPER BOOKS OF ACCOUNTS AND BOTH THE PURCHASES AND SALES ARE SUPPORTED BY PURCHASE AND SALES BILLS. THE ASSESSING OFFICER HAS ALSO MENTIONED A LETTER OF THE ELECTION RETURNING OFFICER (ERO) OF GAGANGIRI MAHARAJ NAGARIK SAHAKARI PATSANSTHA LTD. SHOWING THE N AMES OF THE MEMBERS OF MANAGING COMMITTEE WHO WERE ON THE BOARD D URING 2003 TO 2008, WHICH SHOWS THAT SHRI K.S. SHINDE, CHAIRMAN OF TH E APPELLANT SOCIETY WAS NOT A MANAGING COMMITTEE MEMBER OF THE PAT SANSTHA DURING THE IMPUGNED PERIOD. IN VIEW OF THE CLEAR FINDINGS OF TH E ASSESSING OFFICER IN THE REMAND REPORT, THE ADDITION MADE TOWARDS BOGUS, INFLATED AND NON GENUINE PURCHASES OF RS.1,89,22,913/- DOES N OT SURVIVE. GROUNDS NO. 1 AND 2 ARE ALLOWED. 6.2 THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT C ONTROVERT ANY OF THE ABOVE FACTUAL FINDINGS GIVEN BY THE LD.CIT(A). SINCE THE LD.CIT(A) AFTER CONSIDERING THE REMAND REPORT OF THE ASSESSIN G OFFICER HAS DELETED THE ADDITION ON ACCOUNT OF BOGUS PURCHASES MADE BY THE ASSESSING OFFICER AND SINCE NOTHING CONTRARY WAS BROUGHT TO O UR NOTICE BY THE LD. DEPARTMENTAL REPRESENTATIVE, THEREFORE, WE FIND NO INFIRMITY IN THE SAME. ACCORDINGLY, THE SAME IS UPHELD. 6.3 SO FAR AS THE NON-APPLICABILITY OF THE PROVISIO NS OF SECTION 40A(3) OF THE I.T. ACT TO THE PURCHASES THROUGH GMNSPM I S CONCERNED WE FIND IT WAS ARGUED BEFORE LD.CIT(A) THAT THE ASSESS ING OFFICER HAS NOT APPLIED THE PROVISIONS OF SECTION 40A(3). IT WAS S TATED THAT PAYMENTS ARE COVERED BY THE EXCEPTIONS LAID DOWN IN RULE 6DD(C)( II) AS WELL AS IN RULE 6DD(E) AND THAT THERE WAS NO CASH PAYMENT DIRE CTLY TO ANY OF THE PARTIES AND ALL THE PAYMENTS WERE MADE BY DIRECTING THE SAID PAT SANSTHA TO TRANSFER THE RELEVANT PURCHASE PRICE TO THE VARI OUS MILK COLLECTING CENTRES FROM WHOM THE MILK HAS BEEN PURCHASED. THE DECISION OF THE 8 PUNE BENCH OF THE TRIBUNAL IN THE CASE OF CHIPLUN T ALUKA NAGARI SAHAKARI PATSANSTHA LTD. WAS ALSO BROUGHT TO THE NO TICE OF THE LD.CIT(A) TO THE PROPOSITION THAT THE PATSANSTHA IS ALSO REGA RDED AS BANK AS ITS ACTIVITIES ARE QUITE AKIN TO THE BANK. SINCE MILK IS A DIARY PRODUCT, THEREFORE, IN VIEW OF THE PROVISIONS OF SECTION RUL E 6DD(C)(II), WHEN PAYMENT IS MADE FOR PURCHASE OF THE PRODUCE OF ANIM AL HUSBANDRY OR DIARY OR POULTRY FARM, PROVISIONS OF SECTION 40A(3 ) ARE NOT APPLICABLE. VARIOUS OTHER DECISIONS WERE ALSO BROUGHT TO THE NO TICE OF THE CIT(A) TO THE PROPOSITION THAT NO ADDITION CAN BE MADE ALSO U /S.40A(3). 6.4 SINCE IN THE INSTANT CASE THE ASSESSING OFFICER HAS NOT APPLIED THE PROVISIONS OF SECTION 40A(3) AND THE ASSESSEE HAS S UCCESSFULLY ARGUED THAT THE PROVISIONS OF SECTION 40A(3) ARE NOT APPLI CABLE TO THE FACTS OF THE PRESENT CASE, THE LD.CIT(A) DID NOT INVOKE THE PROV ISIONS OF SECTION 40A(3). NOTHING CONTRARY WAS BROUGHT TO OUR NOTICE BY THE LD. DEPARTMENTAL REPRESENTATIVE TO TAKE A CONTRARY VIEW THAN THE VIEW TAKEN BY LD.CIT(A). THEREFORE, WE FIND NO INFIRMITY IN T HE ORDER OF THE CIT(A) ON THIS ISSUE. AS REGARDS THE GROUND TAKEN BY THE REVENUE THAT LD.CIT(A) DID NOT ADJUDICATE ON THE ISSUE WHETHER T HE PAYMENTS MADE THROUGH PAT SANSTHA, WHICH IS NOT A BANK, ARE COVER ED U/S.40A(3) R.W. RULE 6DD(C), WE FIND THE ASSESSING OFFICER HAS NOT INVOKED THE PROVISIONS OF SECTION 40(3) FOR THE DISALLOWANCE. THEREFORE, IN OUR OPINION, IT IS NOT NECESSARY FOR THE CIT(A) TO ADJU DICATE AS TO WHETHER THE PAYMENTS MADE THROUGH PATSANSTHA WHICH IS NOT A BAN K, ARE COVERED U/S.40A(3) R.W. RULE 6DD(C). IN THIS VIEW OF THE M ATTER, GROUNDS OF APPEAL NO. 1 TO 5 BY THE REVENUE ARE DISMISSED. 9 7. GROUNDS OF APPEAL NO. 6 TO 8 BY THE REVENUE RELA TE TO DELETION OF RS.26 LAKHS OUT OF ADDITION OF RS.44,47,680/- MADE BY THE ASSESSING OFFICER U/S.68 OF THE I.T. ACT. 7.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, OBSERVED THAT ASSESSEE HAS OBTAINED DEPOSIT OF RS.56,47,680/- FROM VARIOUS DEP OSITORS. AFTER VERIFICATION OF CONFIRMATIONS FILED BY THE ASSESSEE THE ASSESSING OFFICER NOTED THAT NONE OF THE DEPOSITOR IS AN INCOME-TAX P AYEE. NO PAN NO., NO COPY OF BANK STATEMENT CONTAINING THE CORRESPOND ING ENTRY WAS SUBMITTED. HE, THEREFORE, ASKED THE ASSESSEE TO PR ODUCE THE 7 PERSONS WITH NECESSARY EVIDENCE TO ESTABLISH THEIR IDENTITY , CREDIT WORTHINESS AND GENUINENESS AND DISCHARGE THE ONUS CAST UPON THE AS SESSEE IN VIEW OF PROVISIONS OF SECTION 68 OF THE I.T. ACT. 7.2 IN RESPONSE TO THE SAME THE ASSESSEE PRODUCED T HE 8 PERSONS FOR EXAMINATION OF THE ASSESSING OFFICER FROM WHOM THE ASSESSEE HAS TAKEN THE FOLLOWING LOANS : SL.NO. NAME OF THE PERSON LOAN AMOUNT 1 SHRI JANARDHAN BABURAO JADHAV RS.12 LAKHS 2 SHRI LAXMIBAI JANARDHAN JADHAV RS.12 LAKHS 3 SMT. SUNITA B SHINDE, DAUGHTER RS. 1 LAKHS 4 SMT.CHHAYA KRISHNARAO SHINDE RS.1.5 LAKHS 5 SHRI MANGALA SAIRAM SHINDE RS.1.3 LAKHS 6 SMT. SUNITA BHASKAR RS.25,000/- 7 SMT. SUREKA BHASKAR SATPUDE RS.25,000/- 8 SMT. SHUBHANGI RANVINDRA SHINDE RS. 1 LAKH 7.3 AFTER RECORDING THE STATEMENT OF THE ABOVE PART IES THE ASSESSING OFFICER NOTED THAT EXCEPT IN THE CASE OF SHRI JANA RDHAN JADHAV WHO HAS GIVEN THE LOAN OF RS.12 LAKHS, NO OTHER DEPOSITOR W AS CAPABLE OF GIVING THE LOANS IN THEIR NAMES. SINCE THE ASSESSEE, ACCO RDING TO THE ASSESSING 10 OFFICER COULD NOT ESTABLISH THE IDENTITY, CAPACITY AND GENUINENESS OF THE DEPOSITORS IN TERMS OF PROVISIONS OF SECTION 68, TH E ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS.44,47,680/-, I.E. (RS.56 ,47,680/- - RS.12,00,000/-) AS UNEXPLAINED DEPOSITS WITHIN THE MEANING OF SECTION 68 OF THE I.T. ACT. 8. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE ASSE SSEE DURING THE F.Y. 2006-07 RELEVANT TO A.Y. 2007-08 HAS ACCEPTED THE FOLLOWING DEPOSITS : NAME AMOUNT DATE MR. SHARAD SHINDE 1 LAC 29-03-2007 MRS. SUNITA B. SHINDE 2 LACS 29-03-2007 MRS. LAXMIBAI J. JADHAV 12 LACS 29-03-2007 MR. JANARDHAN JADHAV 12 LACS 29-03-2007 SOMNATH R. DHAMAK 1,14,000/- 29-03-2007 SHRI LAXMAN K. BHOSALE 1 LAC 29-03-2007 MR. BHIMRAJ S. SABALE 1 LAC 29-03-2007 MR. VILAS K. SHINDE 1 LAC 29-03-2007 TOTAL 31,14,000/- IT WAS ACCORDINGLY SUBMITTED THAT ONLY AN AMOUNT OF RS.31,14,000/- WAS ACCEPTED DURING THE YEAR AND THE BALANCE DEPOSIT OF RS.25,33,698/- ARE THE OLD AND CARRIED FORWARD BALANCES AND THEREFORE NO ADDITION COULD HAVE BEEN MADE ON ACCOUNT OF THOSE DEPOSITS DURING THE IMPUGNED YEAR. IT WAS SUBMITTED THAT THE ASSESSEE HAS PRODUCED THE VARIOUS LOAN CREDITORS WHOSE STATEMENTS WERE RECORDED U/S.131. IT WAS SUB MITTED THAT SHRI JANARDHAN JADHAV ALONG WITH HIS WIFE AND DAUGHTER H AD GIVEN THE DEPOSIT OF RS.26 LAKHS OUT OF THE SALE OF AGRICULTURAL LAND OF RS.27 LAKHS. HE HAS MADE THE DEPOSIT BY ISSUING A SINGLE CROSSED CHEQUE OF RS.26 LAKHS INSTRUCTING THE ASSESSEE TO CREDIT RS.12 LAKHS IN H IS NAME, RS.12 LAKHS IN THE NAME OF HIS WIFE SMT.LAXMIBAI JADHAV AND RS.2 L AKHS IN THE NAME OF HIS DAUGHTER SMT.SUNITA JADHAV. IT WAS SUBMITTED T HAT THIS ENCASHMENT 11 OF CHEQUE OF RS.26 LAKHS IS PROVED BY THE ENTRIES R ECORDED IN HIS SAVING BANK ACCOUNT WITH GMNSPM AS WELL AS WITH THE CURR ENT ACCOUNT OF THE ASSESSEE HELD IN THE SAID PATSANSTHA. IT WAS F URTHER SUBMITTED THAT THE REFUND OF THESE DEPOSITS IS MADE BY THE ASSESSEE BY CROSSED CHEQUE AND ENCASHMENT OF THESE CHEQUES IN THEIR SAVINGS BANK A CCOUNTS ALSO PROVES THE GENUINENESS OF THE TRANSACTIONS. THEREFORE, OU T OF RS.31,14,000/- THE ASSESSEE HAS EXPLAINED RS.26 LAKHS. 8.1 AS REGARDS THE DEPOSIT OF RS.5,14,000/- TAKEN F ROM 5 OTHER DEPOSITORS THE ASSESSING OFFICER DID NOT FIND IT NE CESSARY TO RECORD THEIR STATEMENTS U/S.131. HOWEVER, THE ASSESSEE HAS PROD UCED THEIR CONFIRMATION LETTERS, PHOTOSTAT COPIES OF THEIR BAN K STATEMENTS SHOWING ENCASHMENT OF THE CHEQUES ISSUED, 7/12 EXTRACTS IN SUPPORT OF THE AGRICULTURAL LAND OWNED BY THEM AND TO SUPPORT THE SOURCE OF THE AGRICULTURAL INCOME WERE FILED BEFORE THE ASSESSING OFFICER. THEREFORE, THERE WAS NO JUSTIFICATION FOR MAKING THE ADDITION OF RS.51,14,000/-. 9. THE LD.CIT(A) CALLED FOR A REMAND REPORT FROM TH E ASSESSING OFFICER WHO STATED THAT THE ASSESSEE HAS ACCEPTED T HE TOTAL DEPOSIT OF RS.31 LAKHS DURING F.Y. 2006-07 AND THE BALANCE DEP OSIT OF RS.25,33,698/- ARE THE OLD AND CARRY FORWARD BALANC ES AND CERTAINLY NO ADDITION CAN BE MADE OF THOSE DEPOSITS FOR THIS ASS ESSMENT YEAR. HE FURTHER CONFIRMED THAT OUT OF THE DEPOSIT OF RS.31 LAKHS ACCEPTED DURING F.Y. 2006-07, THE AMOUNT OF RS.26 LAKHS HAS BEEN AC CEPTED BY SHRI JANARDHAN JADHAV BY A SINGLE CHEQUE BEARING NO.8332 20 OF ADCC BANK, SANGAMNER IN THE NAME OF HIMSELF. 12 10. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER : 4.2. AS CAN BE SEEN FROM THE ABOVE REPORT, THE ASSESSING OFFICER IS ALSO IN AGREEMENT THAT THE OLD AND CARRIED FORWARD BALAN CES OF RS.25,33,698/- CANNOT BE ADDED TO THE INCOME OF THE APPELLANT AS CASH CREDITS U/S 68 OF THE IT. ACT. SHE HAS ALSO CONFIRMED T HAT THE SUM OF RS.26 LAKHS ADVANCED BY SHRI JANARDAN JADHAV BY WAY O F A SINGLE CHEQUE NO. 833220 OF AHMEDNAGAR DISTRICT CENTRAL COOPERATIV E BANK, SANGAMNER ON HIS OWN BEHALF AND ON BEHALF OF HIS WIFE SHRI LAXMIBAI JADHAV AND DAUGHTER MRS. SUNITA SHINDE IS DULY REFLEC TED IN THE BANK STATEMENTS OF THE ASSESSEE AND ALSO THE DEPOSITOR. AS REGAR DS THE REMAINING DEPOSITS OF RS.5,14,000 TAKEN FROM FIVE OTHE R DEPOSITORS THEIR CONFIRMATORY LETTERS WERE ALSO FILED BEFORE THE ASSESSING OFFICER BUT NO COMMENTS IN RESPECT OF THE SAME HAVE BEEN RECEI VED IN THE REMAND REPORT. SINCE THE ASSESSING OFFICER HAD NOT SPECI FICALLY COMMENTED ON THE CREDITWORTHINESS OF THE FIVE REMAINI NG CASH CREDITORS WHOSE DETAILS ARE ENUMERATED BELOW, THE LEAR NED AR OF THE APPELLANT WAS REQUESTED DURING THE COURSE OF HEARING O N 25.3.2013 TO SUBSTANTIATE THE LOANS RECEIVED BY THE APPELLANT FROM THESE CASH CREDITORS : SR.NO. NAME AMOUNT DATE 1 SOMNATH RAMNATH DAMAK 1,14,000 29.3.2007 2 LAXMAN KARBARI BHOSALE 1,00,000 29.3.2007 3 VILAS KARBARI SHINDE 1,00,000 29.3.2007 4 SHARAD CHANDRABHAN SHINDE 1,00,000 (TOTAL AMOUNT RECEIVED DURING THE YEAR RS.2,00,000 OUT OF WHICH RS.1 LAKH REFUNDED DURING THE YEAR) 29.3.2007 5 BHIMRAJ S. SABLE 1,00,000 29.3.2007 4.3. ON 28.3.2013, THE APPELLANT HAS ADMITTED TH AT THE CONFIRMATION OF SHRI BHIMRAJ S. SABLE FOR RS. 1,00,000 HAS NOT BEEN F ILED. FOR THE BALANCE CASH CREDITORS THE APPELLANT HAS FILED THE PHOTOSTAT C OPIES OF CONFIRMATIONS FILED BEFORE ASSESSING OFFICER. THE APPELL ANT HAS MENTIONED THAT THE AMOUNTS WERE RECEIVED ON 29.3.200 7 FOR THE PURPOSES OF REGULARIZING THE LOAN BALANCE IN THE BANK AND TO AVAIL RENEWAL OF LOAN FACILITY. IT IS SEEN THAT THE LOAN CO NFIRMATIONS AS FILED ARE NOT SUPPORTED BY THE BANK STATEMENTS OR 7/12 EXTRACTS IN SUPPORT OF THE AGRICULTURAL LAND OWNED BY THE LOAN CREDITORS SUPPOR TING THE SOURCE OF AGRICULTURAL INCOME OR ADVANCEMENT OF HUGE LOANS BY WAY OF CASH. IN VIEW OF THE FACT THAT THE EVIDENCES RELATING TO THE SOURCE OF SUCH DEPOSITS ARE NOT FURNISHED, AND THESE DEPOSITORS HAVE NOT BEEN E XAMINED ON OATH BY THE ASSESSING OFFICER, IT IS HELD THAT THE APPELLANT HAS NOT DISCHARGE HIS ONUS OF ESTABLISHING THAT THE CASH CREDITS RECORDED IN H IS BOOKS AS ON 29.3.2007 IN RESPECT OF THESE LOAN CREDITORS AMOUNTING TO RS.5,14,000 ARE GENUINE. IN ANY CASE, THE APPELLANT HAS FAIRLY ADMIT TED THAT THE CONFIRMATION OF SHRI BHIMRAJ S. SABLE FOR RS. 1,00,0 00 HAS NOT BEEN FILED. 4.4. IT HAS BEEN HELD BY THE COURTS THAT THE ONUS OF P ROVING THE SOURCE OF MONEY CREDITED TO THE BOOKS OF AN ASSESSEE IS ON HIM. WH EN NO SATISFACTORY EXPLANATION IS FORTHCOMING IT IS NOT FOR THE REVENUE TO PROVE THAT IT IS FROM SOME OTHER SOURCE. THIS HAS BEEN UPHELD BY THE HONBLE SUPREME COURT IN ROSHAN DI HATTI VS CIT (107 ITR 938) , KALE KHAN MOHD. 13 HANIF (50 ITR 1) AND CIT VS BIJU PATNAIK (160 ITR 67 4). IT HAS ALSO BEEN HELD THAT EVEN IF THE TRANSACTION IS BY WAY OF CHEQUE OR THROUGH BANKING CHANNEL THE AMOUNTS IN QUESTION CAN STILL BE ASSESSED AS CASH CREDITS IF THE GENUINENESS AND CREDIT WORTHINESS OF THE CASH CREDIT OR IS NOT PROVED. THIS HAS BEEN HELD BY MADRAS HIGH COURT IN MANGILAL JA IN VS ITO (315 ITR 293) AND CALCUTTA HIGH COURT IN THE CASES OF PRECISION FINANCE P. LTD. (208 ITR 465) AND UNITED COMMERCIAL AND INDUSTRIAL C O. (P) LTD. (187 ITR 596). IN THE PRESENT CASE, THE LOANS IN QUESTION HA VE BEEN RECEIVED BY WAY OF CASH. NEITHER THE ADDRESS OF THE LOAN CREDIT ORS NOR PAN IS AVAILABLE. THE APPELLANT HAS NOT SUBSTANTIATED THE SOUR CES OF INCOME ON THE PART OF THE LOAN CREDITORS. ACCORDINGLY ON ACCOU NT OF THE FAILURE TO PROVE THE CREDIT WORTHINESS OF THE CASH-CREDITORS, THE LOAN AMOUNT OF RS.5,14,000 IS HELD TO BE CORRECTLY ASSESSED UNDER THE HE AD CASH CREDIT U/S 68 OF THE IT. ACT. GROUND NO. 3 IS THUS HELD TO BE PARTLY ALLOWED SUBJECT TO THE ABOVE REMARKS. 10.1 AGGRIEVED WITH SUCH ARGUMENTS OF THE CIT(A) TH E REVENUE IS IN APPEAL BEFORE US. 11. AFTER CONSIDERING THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A). THE ASSESSING OFFICER HIMSELF HAS STATED IN HIS REMAND REPORT THAT AN AMO UNT OF RS.25,33,698/- CANNOT BE ADDED IN THE INCOME OF THE ASSESSEE IN T HIS ASSESSMENT YEAR SINCE THOSE ARE OLD CARRY FORWARD BALANCES. SIMILA RLY, OUT OF THE REMAINING RS.31 LAKHS ACCEPTED DURING THE YEAR, AN AMOUNT OF RS.26 LAKHS HAS BEEN ADVANCED BY SHRI JANARDHAN JADHAV BY WAY OF A SINGLE CHEQUE BEARING NO.8233220 OF AHMEDNAGAR DISTRICT CE NTRAL CO-OP BANK LTD. ON HIS OWN BEHALF AND ON BEHALF OF HIS WIFE SM T.LAXMIBAI JADHAV AND DAUGHTER SMT. SUNITA JADHAV. WHEN THE ASSESSIN G OFFICER HIMSELF IN THE ORIGINAL ASSESSMENT HAS ACCEPTED AN AMOUNT O F RS.12,00,000/- AS GENUINE, WE FAIL TO UNDERSTAND WHY HE DID NOT ALLOW THE BALANCE AMOUNT WHEN A SINGLE CHEQUE OF RS.26,00,000/- WAS ISSUED B Y THE LOAN CREDITOR. SO FAR AS THE REMAINING DEPOSIT OF RS.5,14,000/- TH E ASSESSEE HAS FILED THE CONFIRMATORY LETTERS AND THE ASSESSING OFFICER IN H IS REMAND REPORT IS SILENT ABOUT THE CREDIT WORTHINESS OF THE LOAN CRED ITORS. SINCE THE 14 ASSESSEE HAS NOT FILED THE CONFIRMATION LETTERS OF SHRI BHIMRAJ S. SABLE AMOUNTING TO RS. 1 LAKH, THE LD.CIT(A) SUSTAINED AN ADDITION OF RS.1 LAKHS OUT OF THE ADDITION OF RS.5,14,000/- . HE HA S ACCEPTED CREDIT WORTHINESS OF THE REMAINING LOAN CREDITORS FOR THE BALANCE AMOUNT OF RS.4.14.000/- ON THE BASIS OF BANK STATEMENTS, LOAN CONFIRMATION LETTERS AND 7/12 EXTRACTS. SINCE THE ASSESSEE HAS FILED TH E 7/12 EXTRACTS, BANK STATEMENTS AND CONFIRMATION LETTERS EVIDENCING THEI R CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTIONS, THEREFORE, IN VIEW OF THE VARIOUS DECISIONS RELIED ON BY THE CIT(A), WE FIND NO INFIR MITY IN HIS ORDER. ACCORDINGLY THE SAME IS UPHELD AND THE GROUNDS RAIS ED BY THE REVENUE ARE DISMISSED. 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 30-05-2014. SD/- SD/- (R.S. PADVEKAR) (R.K. PAND A) JUDICIAL MEMBER ACCOUN TANT MEMBER PUNE DATED: 30 TH MAY, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-I, PUNE 4. CIT-I, PUNE 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE