B.V. Textiles, Surat V. The Income Tax Officer,Ward-6(1), Surat

ITA 1405/AHD/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 1953 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 18-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL DHAKA
• Keywords: Unexplained cash credit; Income from undisclosed sources; Assessment record
• Section: 131; 68; 271(1)(c); 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH SMC, SURAT , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER . / ITA NOS.1405 & 1406/AHD/2015/SRT / ASSESSMENT YEAR: 2006-07 B.V. TEXTILES, 6/472, MANCHARPURA, KHARADI SHERI, SURAT 395 002. [PAN: AACFB 6365K] VS. INCOME TAX OFFICER, WARD-6(1), SURAT. ( / APPELLANT) ( ! /RESPONDENT) / ASSESSEE BY : SHRI MEHUL SHAH, A.R /REVENUE BY : SHRI ANIL DHAKA, SR. D.R /DATE OF HEARING : 20-09-2018 / DATE OF PRONOUNCEMENT : 24-10-2018 / ORDER PER C.M.GARG, JUDICIAL MEMBER: THESE TWO APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-1, SU RAT (CIT(A) FOR SHORT) DATED 04.03.2015 & 05.03.2015 RESPECTIVELY F OR THE ASSESSMENT YEAR (A.Y) 2006-07. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN ITA NO.1405/AHD/2015/SRT READ AS FOLLOWS: 2 ITA NOS.1405 & 1406/AHD/2015/SRT (A.Y: 2006-07) M/S. B.V. TEXTILES 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFF ICER IN MAKING ADDITION OF RS. 27,75,000/- ON ACCOUNT OF UN EXPLAINED CASH CREDIT U/S. 68 OF THE I.T. ACT. 2. IT IS THEREFORE PRAYED THAT ABOVE ADDITION MADE BY ASSESSING OFFICER AND CONFIRMED BY LD. CIT(A) MAY PLEASE BE D ELETED. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND CA REFULLY PERUSED THE RELEVANT MATERIAL PLACED ON THE RECORD OF THE T RIBUNAL. THE LD. ASSESSEES REPRESENTATIVE (AR) SUBMITTED THAT THE L D. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN MAKIN G ADDITION OF RS. 27,75,000/- ON ACCOUNT OF UNEXPLAINED CASH CREDIT U /S. 68 OF THE I.T. ACT. THE LD. AR SUBMITTED THAT IT IS THE SECOND ROUND OF PROCEEDINGS AS THE EARLIER FIRST APPELLATE ORDER DATED 26.11.2009 FOR AY 2006-07 WAS SET ASIDE BY THE ITAT D BENCH, AHMEDABAD ORDER DATED 27.04.2012. DURING FIRST APPELLATE PROCEEDINGS IN PURSUANT TO T RIBUNAL ORDER, THE ASSESSEE FURNISHED COPIES OF CONFIRMATION OF ACCOUN T, ACKNOWLEDGEMENT OF RETURN OF INCOME, BALANCE SHEET AS ON 31.03.2006 , P & L A/C. AS ON 31.03.2006 AND BANK STATEMENT RELATING TO ALL FOUR CREDITORS AND THE LD. CIT(A) CALLED REMAND REPORT FROM THE ASSESSING OFFI CER (AO) WHICH WAS SUBMITTED ON 07.04.2014. THE ASSESSEE SUBMITTED RE PLY VIDE WRITTEN SUBMISSION DATED 04.08.2014 AND ANOTHER REJOINDER/S UBMISSION VIDE DATED 19.09.2014 AND THEREAFTER, THE LD. CIT(A) DIS MISSED FIRST APPEAL OF ASSESSEE CONFIRMING THE ADDITION BY CONSIDERING THE IRRELEVANT FACTS AND CIRCUMSTANCES AND ON WRONG AND INCORRECT APPRECIATI ON FACTS THEREFORE, 3 ITA NOS.1405 & 1406/AHD/2015/SRT (A.Y: 2006-07) M/S. B.V. TEXTILES THE IMPUGNED ORDERS MAY KINDLY BE SET ASIDE BY DELE TING THE BASELESS ADDITION MADE U/S. 68 OF THE INCOME TAX ACT, 1961 ( IN SHORT 'THE ACT'). 4. THE LD. AR SUBMITTED THAT DURING ASSESSMENT AND FIRST APPELLATE PROCEEDINGS, THE ASSESSEE SUBMITTED COPIES OF CONFI RMATION OF ACCOUNT, ACKNOWLEDGEMENT OF RETURN OF INCOME, BALANCE SHEET AS ON 31.03.2006, P & L A/C. AS ON 31.03.2006 AND BANK STATEMENT RELATI NG TO ALL FOUR CREDITORS AND THE LD. CIT(A) CALLED REMAND REPORT FROM THE AS SESSING OFFICER (AO) WHICH WAS SUBMITTED ON 07.04.2014 AND ASSESSEE ALSO SUBMITTED REPLY/REJOINDER ON 04.08.2014 & 19.09.2014. THE LD . AR ALSO SUBMITTED THAT IT IS NOT CASE OF THE AO THAT THE ASSESSEE ROU TED HIS UNACCOUNTED INCOME BY GIVING CASH TO THE CREDITORS AND THE ASSE SSEES OWN MONEY/FUNDS WERE RECEIVED BACK BY THE ASSESSEE IN T HE GARB OF UNSECURED LOAN THROUGH BANKING CHANNEL. THE LD. AR VEHEMENTLY POINTED OUT THAT DESPITE THE UNDISPUTED FACT THAT THE ASSES SEE SUBMITTED PAN NUMBER, ADDRESSES, COPIES OF INCOME TAX RETURN, BAN K ACCOUNT, BALANCE SHEET ETC. SHOWING AND ESTABLISHING THE EXISTENCE A ND IDENTITY OF CREDITORS ALONG WITH THEIR CAPACITY AND CREDITWORTHINESS TO P ROVIDE UNSECURED LOAN TO THE ASSESSEE AND ALSO ESTABLISHED GENUINENESS OF TRANSACTION AND THUS, THE ASSESSEE DISCHARGED ONUS LAY ON IT BY WAY OF SUBMITTING THE SAID DOCUMENTARY EVIDENCE BUT THE AO KEEPING ASIDE ALL THESE RELEVANT DOCUMENTARY EVIDENCE AND EXPLANATION OF THE ASSESSE E PROCEEDED TO MADE ADDITION WITHOUT ANY FURTHER INQUIRY OR EXAMIN ATION OF THE SAID 4 ITA NOS.1405 & 1406/AHD/2015/SRT (A.Y: 2006-07) M/S. B.V. TEXTILES DOCUMENTARY EVIDENCE AND EXPLANATION OF THE ASSESSE E THEREFORE, ADDITION MADE BY THE AO AND UPHELD BY THE LD. CIT(A ) IS NOT CORRECT AND SUSTAINABLE THEREFORE, THE SAME MAY KINDLY BE DEMOL ISHED AND THE AO MAY KINDLY BE DIRECTED TO DELETE THE ADDITION. 5. THE LD. AR HAS PLACED RELIANCE ON THE RATIO OF F OLLOWING DECISION OF HONBLE JURISDICTIONAL HIGH COURT OF GUJARAT & HON' BLE GUWAHATI HIGH COURT IN SUPPORT OF ABOVE NOTED CONTENTIONS: I) DCIT VS. ROHINI BUILDERS 127 TAXMAN 523 (GUJ.) II) CIT VS. RANCHHODJIVABHAI NAKHAVA 21 TAXMANN.COM 159 (GUJ.) III) CIT VS. AYACHI CHANDRASHEKHAR NARSANGJI 42 TAX MAN.COM 251 (GUJ.) IV) CIT VS. APEX THERM PACKAGING P. LTD. 42 TXAMANN .COM 473 (GUJ.) V) NEMICHAND KOTHARI VS. CIT 136 TAXMAN 123 (GUH.) 6. REPLYING TO THE ABOVE, THE LD. DEPARTMENTAL REPR ESENTATIVE (DR) SUBMITTED THAT THE AUTHENTICITY OF DOCUMENTARY EVID ENCE FILED BY THE ASSESSEE WAS DOUBTFUL AND THEREFORE, THE AO IN THE ASSESSMENT ORDER AS WELL AS IN THE REMAND REPORT CONTROVERTED THE SAME AND THEREFORE, THE AO DISCHARGED ONUS WHICH WAS SHIFTED ON HIM BY WAY OF DETAILED ADJUDICATION IN THE ASSESSMENT ORDER AND THE LD. CIT(A) WAS THUS , RIGHT AND JUSTIFIED IN UPHOLDING THE ADDITION. 7. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISSI ONS, FIRST OF ALL, WE MAY POINT OUT THAT FROM PAGES 15-60 OF THE ASSESSEE S PAPER BOOK (FOR SHORT APB), IT IS CLEARLY DISCERNABLE THAT THE AS SESSEE FILED COPIES OF 5 ITA NOS.1405 & 1406/AHD/2015/SRT (A.Y: 2006-07) M/S. B.V. TEXTILES CONFIRMATION OF ACCOUNT, ACKNOWLEDGEMENT OF RETURN OF INCOME, BALANCE SHEET AS ON 31.03.2006, P & L A/C. AS ON 31.03.2006 AND BANK STATEMENT RELATING TO ALL FOUR CREDITORS DURING ASSESSMENT PR OCEEDINGS BEFORE THE AO AND THE FIRST APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A). IN THE SECOND ROUND OF FIRST APPELLATE PROCEEDINGS, IN PURSUANT T O TRIBUNAL ORDER (SUPRA), THE LD. CIT(A) CALLED REMAND REPORT FROM THE AO, WH ICH WAS SUBMITTED ON 07.04.2014 AND THE ASSESSEE ALSO SUBMITTED REPLY/RE JOINDER ON 04.08.2014 & 19.09.2014. FROM PARA 4.1 OF IMPUGNED ORDER, WE OBSERVE THAT THE LD. CIT(A) HAS NOTED THAT THE AO IN PARA 5 OF THE REMAND REPORTED MENTIONED THAT THE ASSESSEE FAILED TO PRODUCE ALL T HE FOUR CREDITORS AND EXPRESSED HIS INABILITY TO THEM FOR VERIFICATION ON THE GROUND THAT THE ASSESSEE IS NOT KEEPING GOOD RELATION WITH THEM. I N THE SAME PARA LAST PART THE LD. CIT(A) NOTED THAT THE REMAND REPORT PA RA 5.2 REVEALS THAT THE SUMMONS U/S. 131 OF THE ACT WERE ISSUED TO TWO MAJO R PARTIES/CREDITORS VIZ. M/S. RV TEXTILES AND NV TEXTILES WHICH WERE SE RVED ON THEM BUT NONE OF THEM ATTENDED PROCEEDINGS ON A STIPULATED D ATED NOR ANY DETAILS WERE FURNISHED BY THEM. WITH THESE OBSERVATIONS, T HE LD. CIT(A) JUMP TO A CONCLUSION THAT THE FAILURE TO PRODUCE THE PARTIE S BECOME EVEN MORE SERIOUS DEFICIENCY ESPECIALLY WHEN THE THREE OF THE CREDITORS ARE RELATIVES OF THE PARTNERS OF THE ASSESSEES FIRM. 8. ON THE THESE OBSERVATIONS, WE TAKE RESPECTFUL CO GNIZANCE OF THE DECISION OF HON'BLE HIGH COURT OF GUJARAT IN THE CA SE OF ROHINI BUILDERS 6 ITA NOS.1405 & 1406/AHD/2015/SRT (A.Y: 2006-07) M/S. B.V. TEXTILES (SUPRA) AS RELIED BY THE LD. AR, WHEREIN IT WAS HEL D THAT WHEN THE ASSESSEE HAS DISCHARGED INITIAL ONUS BY PROVIDING I DENTITY OF ALL CREDITORS BY GIVING THEIR COMPLETE ADDRESS GIR NUMBERS/PERMAN ENT ACCOUNT NUMBERS AND COPIES OF THE CONFIRMATIONS, BALANCE SH EETS, STATEMENT OF ACCOUNTS AND INCOME TAX RETURN ETC. OF ALL FOUR CRE DITORS. IN THIS JUDGMENT THEIR LORDSHIP SPEAKING FOR THE JURISDICTIONAL HIGH COURT HELD THAT WHEN THE ASSESSEE HAD ALSO PROVED CAPACITY OF CREDITORS BY S HOWING THAT AMOUNTS WERE RECEIVED BY ACCOUNT PAYEE CHEQUES THEN, THE AS SESSEE WAS NOT EXPECTED TO PROVE GENUINENESS OF THE CASH DEPOSITED IN THE BANK ACCOUNTS OF THE CREDITORS, BECAUSE UNDER THE LAW, T HE ASSESSEE CAN BE ASKED TO PROVE SOURCE OF CREDITS IN THE BOOKS OF AC COUNTS OF THE CREDITORS BUT NOT THE SOURCE OF SOURCE. THEIR LORDSHIP FURTHE R HELD THAT MERELY BECAUSE SUMMONS ISSUED TO SOME CREDITORS COULD NOT BE SERVED OR THEY FAILED TO APPEAR BEFORE THE AO COULD NOT BE A GROUN D TO TREAT THOSE CREDITS AS NONE GENUINE ESPECIALLY WHEN THE AO HAD NOT DISA LLOWED INTEREST CLAIMED/PAID BY THE ASSESSEE IN RELATION TO THOSE C REDITS IN THE AY UNDER CONSIDERATION OR EVEN IN THE SUBSEQUENT AYS. 9. WE ARE IN AGREEMENT WITH THE CONTENTION OF THE L D. AR, WHEREIN HE VEHEMENTLY POINTED OUT THAT THE ASSESSEE HAS DISCHA RGED INITIAL ONUS LAY ON HIS SHOULDERS AS PER MANDATE OF S. 68 OF THE ACT AND THE PRESENT CASE IS ON BETTER PEDESTAL AS THERE IS NO CASH DEPOSIT T O ANY OF THE BANK ACCOUNT OF CREDITORS AND IT IS ALSO NOT A CASE OF T HE AO. FROM THE COPY OF 7 ITA NOS.1405 & 1406/AHD/2015/SRT (A.Y: 2006-07) M/S. B.V. TEXTILES ASSESSMENT ORDER PASSED U/S. 143(3) OF THE ACT DATE D 22.12.2008 FOR AY 2006-07, IT IS VIVID THAT THE AO HAS NOT DISALLOWED INTEREST CLAIMED/PAID IN RELATION TO ALLEGED CREDITORS DURING PERIOD UNDER C ONSIDERATION. IN THESE CIRCUMSTANCES, RATIO OF THE DECISION OF ROHINI BUIL DERS (SUPRA) SUPPORTS THE CONTENTION OF LD. AR. 10. IT WOULD BE ALSO APPROPRIATE AND NECESSARY TO C ONSIDER RATIO OF THE DECISION OF HON'BLE HIGH COURT OF GUJARAT IN THE CA SE OF CIT VS. RANCHHOD JIVABHAI NAKHAVA (SUPRA), WHEREIN THEIR LORDSHIP SP EAKING FOR THE HONBLE JURISDICTIONAL HIGH COURT HELD THAT WHERE LENDERS O F ASSESSEE ARE INCOME- TAX ASSESSEES WHOSE PAN HAVE BEEN DISCLOSED, AO CAN NOT ASK ASSESSEE TO FURTHER PROVE GENUINENESS OF TRANSACTIO NS WITHOUT FIRST VERIFYING SUCH FACT FROM INCOME-TAX RETURN OF LENDE RS. FURTHER, AS PER RATIO OF THE DECISION OF HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF APEX THERM PACKAGING (P.) LTD . (SUPRA), WHEREIN IT WAS HELD THAT WHERE NAME, ADDRESS, PAN, COPY OF I.T RETURNS, BALANCE SHEET, P ROFIT AND LOSS ACCOUNT OF ALL CREDITORS/LENDERS AS WELL AS THEIR CONFIRMAT ION HAD BEEN FURNISHED, AO COULD OF THE ACT MAKE ADDITION ON ACCOUNT OF UNS ECURED LOAN AND INTEREST THEREON. ON THE SAME LINE AS PER RATIO OF THE DECISION OF HON'BLE HIGH COURT OF GAUHATI IN THE CASE OF NEMI CHAND KOT HARI (SUPRA), WHEREIN IT WAS HELD THAT S. 68 OF THE ACT CREDITORS CREDIT WORTHINESS HAS TO BE JUDGED VIS--VIS TRANSACTIONS, WITH HAVE TAKEN PLAC E BETWEEN ASSESSEE AND CREDITOR, AND IT IS NOT BUSINESS OF ASSESSEE TO FIND OUT SOURCE OF 8 ITA NOS.1405 & 1406/AHD/2015/SRT (A.Y: 2006-07) M/S. B.V. TEXTILES MONEY OF HIS CREDITOR OR GENUINENESS OF TRANSACTION S, WHICH TOOK PLACE BETWEEN CREDITOR AND SUB-CREDITOR AND/OR CREDITWORT HINESS OF SUB-CREDITORS FOR THESE ASPECTS MAY NOT BE WITHIN SPECIAL KNOWLED GE OF ASSESSEE. 11. ALL THESE PROPOSITIONS SUPPORTS THE STAND OF TH E ASSESSEE IN THE EXTANT APPEAL PERTAINING TO AY 2006-07 AS THE ASSES SEE HAS PROVIDED COPIES OF THE CONFIRMATIONS, BANK STATEMENT, BALANC E SHEET, ACKNOWLEDGEMENT OF RETURN OF INCOME ALONG WITH PAN NUMBERS OF THE CREDITORS TO THE AO DURING ASSESSMENT PROCEEDINGS A ND TO THE LD. CIT(A) DURING SECOND ROUND OF FIRST APPELLATE PROCEEDINGS AND AO WAS ALSO CONFRONTED BY THIS MATERIAL DURING REMAND PROCEEDIN GS BUT THE AUTHORITIES BELOW DID NOT UNDERTAKEN ANY EXERCISE TO VERIFY THE ALLEGED CREDITS FROM THE ASSESSMENT RECORDS OF THE RESPECTIVE CREDITORS/ LENDERS. FROM THE RELEVANT OPERATIVE PART PARA 3.7 OF THE ASSESSMENT ORDER, WE OBSERVE THAT THE AO ALLEGES THAT THE ASSESSEE FURNISHED ONLY CON FIRMATION OF ACCOUNT WITHOUT ADDRESS BUT HAS NOT STATED ANY WORD REGARDI NG OTHER DOCUMENTS SUCH AS ACKNOWLEDGEMENT OF RETURN OF INCOME, BALANC E SHEET AND PROFIT AND LOSS ACCOUNT AS ON 31.03.2006 REFLECTING THE TR ANSACTION OF UNSECURED LOAN TO THE ASSESSEE AND BANK STATEMENT THROUGH WHI CH THE AMOUNT WAS TRANSFERRED TO THE ASSESSEE. THEREAFTER, THE AO OBS ERVED THAT THE ASSESSEE HAS FAILED TO PROVE THREE NECESSARY INGRED IENTS SUCH AS IDENTITY OF PERSON, CAPABILITY OF PERSON AND GENUINENESS OF TRANSACTION DESPITE THE 9 ITA NOS.1405 & 1406/AHD/2015/SRT (A.Y: 2006-07) M/S. B.V. TEXTILES FACT THAT OTHER SAID DOCUMENTS WERE ALSO FILED BEFO RE HIM BY THE ASSESSEE DURING ASSESSMENT PROCEEDINGS. 12. FROM THE RELEVANT PARAS 4.1 & 4.2 OF THE FIRST APPELLATE ORDER, WE OBSERVE THAT THE ASSESSEE EXPRESSED HIS INABILITY T O PRODUCE CREDITORS DUE TO STRANGE RELATIONS AND NOTED THAT THOSE SUMMO NS DULY SERVED UPON THE CREDITORS NONE OF THEM ATTENDED ON STIPULATED D ATE NOR ANY DETAILS WERE FURNISHED BY THEM. THEREAFTER, THE LD. CIT(A) NOTED THAT FAILURE ON THE PART OF THE ASSESSEE TO PRODUCE THE CREDITORS B EFORE THE AO PUT A HUGE QUESTION MARK ON THE IDENTITY OF THE CREDITORS . THESE OBSERVATIONS ARE NOT REASONABLE AND CORRECT AS WHEN THE ASSESSEE HAS FURNISHED COPIES OF THE ACKNOWLEDGEMENT OF RETURN OF INCOME, BALANCE SHEET & PROFIT AND LOSS ACCOUNT SHOWING AMOUNT OF UNSECURED LOAN GIVEN TO THE ASSESSEE AND HAS ALSO FURNISHED COPY OF THE BANK ST ATEMENT SHOWING THAT THERE WAS NO CASH DEPOSIT PRIOR TO ISSUANCE OF CHEQ UES TO THE ASSESSEE AND THE MONEY WAS ROUTED THROUGH BANKING CHANNEL TH EN, WITHOUT ANY FURTHER VERIFICATION AND EXAMINATION OF ASSESSMENT RECORDS OF ALLEGED CREDITORS, WHICH WAS ALSO AVAILABLE IN THE INCOME T AX DEPARTMENT OF SURAT, IT CANNOT BE ALLEGED THAT AS THE ASSESSEE FA ILED TO PRODUCE CREDITORS THEN, IT HAS TO BE PRESUMED THAT THE ASSE SSEE COULD NOT ESTABLISH IDENTITY AND EXISTENCE OF CREDITORS ALONG WITH THEIR CAPACITY AND CREDITWORTHINESS TO PROVE UNSECURED LOAN TO THE ASS ESSEE AND GENUINENESS OF TRANSACTION. OBSERVATIONS OF THE AU THORITIES BELOW AS 10 ITA NOS.1405 & 1406/AHD/2015/SRT (A.Y: 2006-07) M/S. B.V. TEXTILES NOTED ABOVE ARE NOT CORRECT AND SUSTAINABLE AND FIN DINGS RECORDED ON THE BASIS OF THESE INCORRECT OBSERVATIONS CANNOT BE HEL D AS PROPER VALID AND SUSTAINABLE HENCE, WE DEMOLISH THE SAME BY RESPECTF ULLY FOLLOWING THE RATIO OF THE DECISION OF HONBLE JURISDICTIONAL HIG H COURT IN THE CASE OF RANCHOOD JIVABHAI NAKHAVA AND IN THE CASE OF APEX T HERM PACKAGING (P.) LTD. (SUPRA). 13. ON THE BASIS OF FOREGOING DISCUSSION AND THE F ACTUAL POSITION EMERGED FROM THE RECORD AND RIVAL ARGUMENTS THE ADD ITION U/S. 68 OF THE ACT CANNOT BE MADE IN THE HANDS OF THE ASSESSEE. T HUS, WE REACH TO A LOGICAL CONCLUSION THAT THE ASSESSEE DISCHARGED ITS INITIAL ONUS AS PER MANDATE OF S. 68 OF THE ACT BY FURNISHING ALL RELEV ANT DOCUMENTARY EVIDENCE ESTABLISHING THE EXISTENCE AND IDENTITY OF CREDITORS ALONG WITH THEIR CAPACITY AND CREDITWORTHINESS TO PROVIDE UNSE CURED LOAN TO THE ASSESSEE, WHICH WAS SHOWN IN THEIR BALANCE SHEET AN D INCOME-TAX RETURNS WHICH AGAIN SUPPORTS THE FACTUM OF GENUINEN ESS OF TRANSACTIONS WHICH WAS ROUTED THROUGH BANKING CHANNELS. IT IS N OT THE CASE OF THE AO THAT THE ASSESSEE ROUTED HIS CASH AMOUNT OF UNACCOU NTED OR UNDISCLOSED INCOME IN THE GARB OF CASH CREDITS BY WAY OF GIVING CASH TO THE CREDITOR/LENDERS AND IN TURN RECEIVING THE SAME AMO UNT BACK IN THE COVER OF UNSECURED LOAN THROUGH BANKING CHANNELS. THEREF ORE, WE ARE INCLINED TO HOLD THAT THE AO WAS NOT CORRECT AND JUSTIFIED I N MAKING ADDITION U/S. 68 OF THE ACT AND THE LD. CIT(A) WAS ALSO NOT RIGHT IN UPHOLDING THE SAME 11 ITA NOS.1405 & 1406/AHD/2015/SRT (A.Y: 2006-07) M/S. B.V. TEXTILES KEEPING ASIDE THE FACTS OF THE CASE AND MANDATE OF S. 68 OF THE ACT THUS, ADDITION MADE BY THE AO AND CONFIRMED BY THE LD. FI RST APPELLATE AUTHORITY IS NOT SUSTAINABLE AND HENCE, WE DEMOLISH THE SAME. ACCORDINGLY, SOLE GROUND OF THE ASSESSEE IS ALLOWED AND AO IS DIRECTE D TO DELETE PENALTY. ITA NO.1406/AHD/2015/SRT: 14. THE ASSESSEE HAS RAISED THE SOLE GROUND IN THIS APPEAL AS FOLLOWS: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN LEVYI NG PENALTY U/S. 271(1)(C) OF THE ACT OF RS. 9,34,065/- ON THE ADDITION MADE O N ACCOUNT OF UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. 15. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND C AREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON THE RECORD OF THE T RIBUNAL. THE LD. AR SUBMITTED THAT AS PER DECISIONS OF HON'BLE HIGH COU RT OF GUJARAT IN THE CASE OF NATIONAL TEXTILES VS. CIT REPORTED IN 249 ITR 125 ( GUJ.) AND IN THE CASE OF CIT VS. JALARAM OIL MILLS 253 ITR 192 (GUJ. ), WHEREIN IT WAS HELD THAT MERELY BECAUSE THE EXPLANATION OFFERED BY THE ASSES SEE ABOUT THE NATURE AND SOURCE OF CREDITS WAS NOT FOUND TO BE SA TISFACTORY AND ASSESSEE CONCEDED ADDITION U/S. 68 OF THE ACT, PENA LTY U/S. 271(1)(C) OF THE ACT COULD NOT BE LEVIED VIS--VIS THE ADDITION. 16. REPLYING TO THE ABOVE, THE LD. DR SUPPORTED THE PENALTY AND FIRST APPELLATE ORDER AND SUBMITTED THAT WHEN THE ADDITIO N HAS BEEN MADE IN THE HANDS OF THE ASSESSEE U/S. 68 OF THE ACT ON ACC OUNT OF UNSECURED 12 ITA NOS.1405 & 1406/AHD/2015/SRT (A.Y: 2006-07) M/S. B.V. TEXTILES LOAN/CREDITORS THEN THE PENALTY U/S. 271(1)(C) OF T HE ACT HAS TO BE LEVIED AND THE LD. CIT(A) WAS RIGHT IN CONFIRMING THE PENA LTY. 17. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISS IONS, FIRST OF ALL, WE MAY POINT OUT THAT SINCE BY THE EARLIER PART OF THI S ORDER, WE HAVE DELETED THE ADDITION MADE BY THE AO AND CONFIRMED BY THE LD . CIT(A) U/S. 68 OF THE ACT THEREFORE, WHEN THE ADDITION MADE BY THE AO IS NOT FOUND TO BE SUSTAINABLE THEN, THE PENALTY, ON THE STRENGTH OF S UCH ADDITION WHICH IS NOT IN EXISTENCE NOW, CANNOT BE HELD AS SUSTAINABLE AND THUS, WE DEMOLISH THE SAME. ACCORDINGLY, THE SOLE GROUND OF THE ASSE SSEE IS ALLOWED AND THE AO IS DIRECTED TO DELETE THE PENALTY. 18. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 4 TH OCTOBER, 2018 / SURAT; DATED : 24 TH OCTOBER, 2018 / EDN # / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT ; 3. $ ( ) / THE CONCERNED CIT(A); 4. THE CONCERNED PRL. CIT; 5. , , , / DR, ITAT, SURAT; 6. / GUARD FILE . / BY ORDER , * / ASSISTANT REGISTRAR , / ITAT, SURAT SD/- ( ) (C.M.GARG) /JUDICIAL MEMBER