Asst. Comm. of Income-tax, Circle-2, Aurangabad V. MR. Gokul Haridas Deshmukh, Beed

ITA 1503/PUN/2011

• Counselvise Citation: 150324514 RSA 2011
• Duration Of Justice: 2 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-12-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 19-09-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 28-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S B WALIMBE
• Keywords: Income from undisclosed sources; Onus to prove
• Section: 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. 1503/PN/2011 (ASSESSMENT YEAR 2008-09) ACIT, CIRCLE-2, AURANGABAD .. APPELLANT VS. M/S.GOKUL HARIDAS DESHMUKH, PROP. PRAVIN CONSTRUCTIONS, MASSAJOG, KAIJ, DIST: BEED .. RESPONDENT PAN NO.ABEPD1554D ITA NO. 1555/PN/2011 (ASSESSMENT YEAR 2008-09) M/S.GOKUL HARIDAS DESHMUKH, C/O. S.P. LADDA & CO. VENKATESH, NEAR SHIVAJI STATUE, BEED. .. CROSS OBJECTOR PAN NO.ABEPD1554D VS. ACIT, CIRCLE-2, AURANGABAD .. APPELLANT IN THE APPEAL ASSESSEE BY : SHRI S.N. PURANIK REVENUE BY : SHRI S.B. WALIMBE DATE OF HEARING : 03-12-2013 DATE OF PRONOUNCEMENT : 24-12-2013 ORDER PER R.K. PANDA, AM : THESE ARE CROSS APPEALS. THE FIRST ONE IS FILED BY THE REVENUE AND THE SECOND ONE FILED BY THE ASSESSEE AND ARE DI RECTED AGAINST THE ORDER DATED 21-09-2011 OF THE CIT(A) AURANGABAD REL ATING TO ASSESSMENT YEAR 2008-09. FOR THE SAKE OF CONVENIEN CE, BOTH THE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND DERIVES INCOME FROM CIVIL CONSTRUCTION BUSINESS . HE FILED HIS RETURN OF INCOME ON 29-01-2009 DECLARING TOTAL INCO ME AT RS.10,15,772/-. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS SHOWN UNSECURED LOAN AT RS.36,75,436/- IN THE BALANCE SHEET AS ON 31-03-200 8. AFTER ANALYSING THE DETAILS, HE NOTED THAT OUT OF THE ABOVE AMOUNT AN AMOUNT OF RS.9,62,436/- PERTAINS TO EARLIER YEARS AND THE BAL ANCE AMOUNT OF RS.27,13,000/- WAS ACCEPTED DURING THE YEAR UNDER C ONSIDERATION. FROM THE DETAILS FURNISHED BY THE ASSESSEE, HE NOTE D THAT THE ASSESSEE HAS ACCEPTED UNSECURED LOAN OF RS.18,40,000/- FROM 100 PERSONS AND IN EACH CASE THE LOAN AMOUNT IS BELOW RS.20,000/-. THE NAME AND ADDRESS OF SUCH PERSONS ARE GIVEN BY THE ASSESSING OFFICER AT PAGE 4- 5 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER S IMILARLY NOTED THAT THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS.8,73,000/ - IN CASH FROM THE FOLLOWING PERSONS, THE DETAILS OF WHICH ARE AS UNDE R : (I) SHRI GOKUL HARIDAS DESHMUKH-HUF RS.3,60,000/- (II) SHRI SATISH DESHMUKH, GEVRAI RS.42,000/- (III) SHRI PRAKASH HARIDAS DESHMUKH RS.1,50,000/- (IV) SHRI KIRAN GOKULRAO DESHMUKH RS.42,000/- (V) SHRI DHANAJI ALILAS DHANANJAY DESHMUKH RS.1,50,000 /- (VI) SHRI PRAKASH HARIDAS DESHMUKH-HUF RS.1,48,000/- TOTAL RS.8,92,000/- HE, THEREFORE, ASKED THE ASSESSEE TO SUBSTANTIATE T HE LOAN TAKEN BY GIVING THE IDENTITY AND CREDIT WORTHINESS OF THE LO AN CREDITORS AND THE GENUINENESS OF THE TRANSACTION. THE ASSESSING OFFI CER REQUESTED THE ASSESSEE VIDE LETTER DATED 09-09-2010 TO SUBMIT THE NAMES WITH ABSOLUTE ADDRESSES AND PERMANENT ACCOUNT NUMBERS OF LOAN CREDITORS AND ALSO REQUESTED THE ASSESSEE TO PRODUCE THEM TO VERIFY THE IDENTITY 3 AND CREDIT WORTHINESS OF THESE PERSONS AND THE GENU INENESS OF THESE TRANSACTIONS BEFORE HIM ON 20-09-2010. 2.1 IN RESPONSE TO THE ABOVE, THE ASSESSEE FILED WR ITTEN SUBMISSION ON 16-09-2010 GIVING THE LIST OF LOAN CREDITORS ALO NG WITH ADDRESSES AND CONFIRMATION LETTERS AND COPY OF 7/12 EXTRACTS FOR LAND HOLDINGS. THE ASSESSEE HOWEVER DID NOT PRODUCE THE LOAN CREDI TORS. SINCE THE DETAILS SO FURNISHED BY THE ASSESSEE WAS NOT SUFFIC IENT TO PROVE THE INGREDIENTS OF PROVISIONS OF SECTION 68, THE ASSESS ING OFFICER GAVE ANOTHER OPPORTUNITY TO THE ASSESSEE TO PRODUCE THE LOAN CREDITORS. HOWEVER, THE ASSESSEE DID NOT PRODUCE THE LOAN CRED ITORS DESPITE GIVEN OPPORTUNITY. THE ASSESSING OFFICER THEREAFTER ISSU ED SUMMONS U/S.131 TO THE PERSONS TO ESTABLISH THE IDENTITY AN D CREDIT WORTHINESS OF THE LOAN CREDITORS AND GENUINENESS OF THE TRANSACTI ONS. HOWEVER, NONE APPEARED BEFORE THE ASSESSING OFFICER AND IN CERTAI N CASES THE SUMMONS WERE RETURNED BY THE POSTAL AUTHORITIES DUE TO INCOMPLETE ADDRESS. RELYING ON THE DECISION OF HONBLE CALCUT TA HIGH COURT IN THE CASE OF CIT VS. UNITED COMMERCIAL BANK LTD. REP ORTED IN 187 ITR 596 AND THE DECISION OF HONBLE KERALA HIGH COU RT IN THE CASE OF OCEANIC PRODUCTS EXPORTING CO. VS. CIT REPORTED IN 241 ITR 497 THE ASSESSING OFFICER HELD THAT THE ASSESSEE COULD NOT PROVE THE INGREDIENTS OF SECTION 68 FOR ACCEPTING THE LOANS T AKEN BY HIM BY HOLDING AS UNDER : 5.8 THE SUBMISSION MADE BY THE ASSESSEE IS DULY CONSIDERED AND FOUND UNACCEPTABLE. A. THE ASSESSEE ACCEPTED THE UNSECURED LOAN DURING THE YEAR IN CASH. IN MOST OF THE CASES, THE UNSECURED LOAN AMOUNT ACCEPTED WAS BELOW 20,000/- IN CASH AND IN SOME OF TH E CASES THE LOAN AMOUNT ACCEPTED WAS ABOVE 20,000/- IN CASH. 4 B. THE UNSECURED LOAN AMOUNT WAS ACCEPTED FROM AGRICULTURISTS WHO WERE NEITHER HAVING PAN CARDS NOR F ILING THE RETURN OF INCOME. HENCE, THEY ARE NOT MAINTAINING ANY BOOKS OF ACCOUNT. THEREFORE, TRANSACTIONS COULD NOT TRACE OUT AND GENUINENESS OF THESE TRANSACTIONS COULD NOT BE VERIFIED. C. THE ASSESSEE FURNISHED THE CONFIRMATION LETTERS AND AFFIDAVITS, WHICH PROVE THE IDENTITY OF LOAN CREDITO RS HOWEVER, THE CREDIT WORTHINESS OF LOAN CREDITORS AND GENUINENES S OF TRANSACTION REMAINED TO BE PROVED. FURTHER, THE ASSE SSEE FURNISHED THE AFFIDAVITS IN 81 CASES OUT OF 106 LOAN C REDITORS. HENCE, THE ASSESSEE COULD NOT PROVE EVEN IDENTITY OF TH E BALANCE LOAN CREDITORS. D. IN THE CASES WHERE THE LOAN WAS ACCEPTED ABOVE 20,000/- IN CASH, THE ASSESSEE DID NOT FURNISH ANY AFFID AVITS AND NOT MADE ANY SUBMISSION IN REPLY TO SHOW-CAUSE OR DID N OT PASS ANY REMARK, IT MEAN THAT THE ASSESSEE HAS ACCEPTED TH AT THE LOAN AMOUNT IS NOT GENUINE. E. FINALLY THE AMOUNT OF LOAN, WHICH IS BELOW 20,000 /- IN MOST OF THE CASES, NUMBER OF LOAN CREDITORS, WHICH IS 1 06 PERSONS, THE STATUS OF LOAN CREDITORS, WHO ARE AGRICULT URIST AND THE SUBMISSION OF THE ASSESSEE, IN WHICH COULD DISCHARGE TH E ONES LIES WITH HIM, OUT RIGHTLY PROVE THAT LOAN AMOUN T IS NOT GENUINE. THE ASSESSING OFFICER ACCORDINGLY MADE ADDITION OF RS.26,29,000/- TO THE TOTAL INCOME OF THE ASSESSEE AFTER ACCEPTING TH E LOAN OF RS.42,000/- EACH FROM SATISH DESHMUKH AND KIRAN GOKULDAS DESHMU KH WHICH IS ON ACCOUNT OF SALARY. 3. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE ADDI TION MADE BY THE ASSESSING OFFICER U/S.68 OF THE ACT IS NOT JUST IFIED SINCE THE ASSESSEE HAS PROVED THE IDENTITY AND CREDIT WORTHIN ESS OF THE LENDERS AND THE GENUINENESS OF THE TRANSACTIONS. IT WAS SU BMITTED THAT SINCE THE ASSESSEE COULD NOT RAISE LOAN FROM ANY BANK OR FINANCIAL INSTITUTION TO THE EXTENT OF URGENT REQUIREMENT OF FUNDS FOR CO MPLETING THE WORK ALLOTTED BY PWD, MAHARASHTRA HE WAS COMPELLED TO TA KE LOANS FROM CLOSE RELATIVES AND FRIENDS TO THE EXTENT OF RS.26, 29,000/- FROM 106 DIFFERENT PERSONS. THE ASSESSEE HAS FILED THE CONF IRMATION LETTER OF ALL THE LOAN CREDITORS ALONG WITH THEIR INCOME PROOF IN THE FORM OF 7/12 5 EXTRACTS AS ALL THESE PERSONS ARE AGRICULTURISTS. IT WAS SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS DULY SW ORN IN AFFIDAVITS OF 81 PERSONS ON STAMP PAPERS ALONG WITH PHOTOGRAPH S, IDENTITY PROOF ETC. WERE FILED. REFERRING TO THE VARIOUS DECISION S, IT WAS SUBMITTED THAT THESE AFFIDAVITS WERE MADE BEFORE HONBLE CIVI L COURT AND THE CONTENTS OF THE AFFIDAVITS ARE DEEMED TO BE TRUE UN LESS PROVED FALSE. IT WAS SUBMITTED THAT THE LOAN CREDITORS COULD NOT BE PRODUCED BEFORE THE ASSESSING OFFICER SINCE THEY HAD OBLIGED THE ASSESS EE BY LENDING MONEY WITHOUT INTEREST IN CASE OF NEED AND THEREFOR E IT WAS THOUGHT UNREASONABLE TO FURTHER REQUEST THEM TO APPEAR BEFO RE THE ASSESSING OFFICER WHO IS STATIONED AT AURANGABAD AT A DISTANC E OF ABOUT 200 KMS. IT WAS SUBMITTED THAT LESS EDUCATED AGRICULTU RISTS FROM RURAL AREAS USUALLY ARE RELUCTANT TO ATTEND BEFORE THE GO VERNMENT AUTHORITIES. IN VIEW OF THE ABOVE, THE LOAN CREDIT ORS DID NOT APPEAR BEFORE THE ASSESSING OFFICER IN RESPONSE TO SUMMONS ISSUED U/S.131. IT WAS SUBMITTED THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE ADDITION OF RS.26,29,000/- U/S.68 OF THE I.T. ACT. THE ASSESSEE RELIED ON THE FOLLOWING DECISIONS : 1. CIT VS. DWARKADHISH INVESTMENT PVT. LTD., REPORTED IN 45 DTR 281(DELHI)/330 ITR 298 2. S. HASTIMAL VS. CIT REPORTED IN 49 ITR 273 3. CIT VS. BHAVANI OIL MILLS PVT. LTD., REPORTED IN 49 DTR 212 4. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DELETED AN AMOUNT OF RS.18,21,000/- OUT O F THE ADDITION MADE AT RS.26,29,000/- AND SUSTAINED AN AMOUNT OF R S.8,08,000/- BY HOLDING AS UNDER : 6 8. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND RIVAL CONTENTIONS OF THE A.O. AND THE APPELLANT. ON PERUSAL OF THE SAME, IT HAS BEEN NOTICED THAT THE APPELLANT HAS DECLARED REASO NABLE PROFIT AT 9.92% OF THE TURNOVER OF HIS CIVIL CONSTRUCTION BUSINE SS. THE APPELLANT HAS ACCEPTED TEMPORARY LOANS IN CASH TO THE EXTENT OF RS.26,29,000/- FROM 106 CLOSE RELATIVES AND FRIENDS DUE TO URGENT NE ED OF BUSINESS AND SUBSTANTIAL LOANS HAVE BEEN REPAID IN THE SUBSEQUE NT YEAR WHEN THE FUNDS BECAME AVAILABLE. IN SUPPORT OF THE ABOVE LOANS, THE APPELLANT HAS FILED CONFIRMATION LETTERS AND IDENTITY PROOFS IN RESPECT OF ALL THE LENDERS. FURTHER, THE AFFIDAVITS HAVE ALSO BEEN FILED IN RESPECT OF 81 SMALL LENDERS AND 4 BIG LENDERS MENTIONED ABOVE. TH E APPELLANT HAS ALSO FILED 7/12 EXTRACTS OF MOST OF THE LENDERS WHO ARE AGR ICULTURISTS TO PROVE THEIR CREDITWORTHINESS. THE APPELLANT COULD NOT PRODUCE THE SAID CREDITORS BEFORE THE A.O. MAINLY FOR THE REASON T HAT THE OFFICE OF THE A.O. AT AURANGABAD IS LOCATED AT THE DISTANCE O F ABOUT 200 KMS. FROM VILLAGE MASSAJOG, TQ.KAIJ, DIST.BEED WHERE THE LEND ERS RESIDE. 8.1 IT IS SETTLED LAW THAT IN RESPECT OF THE AMOUN TS CREDITED IN THE BOOKS OF ACCOUNTS, THE ONUS LIES ON THE ASSESSEE TO PROVE THE SAID CREDITS. THE APPELLANT HAS DISCHARGED THE SAID INITIAL ONUS TO PROVE THE CREDITS BY FILING CONFIRMATION LETTERS, AFFIDAVITS O F 85 CREDITORS ALONGWITH IDENTITY PROOFS DULY ATTESTED BY GOVERNMEN T AUTHORITIES AND 7/12 EXTRACTS IN RESPECT OF LANDS OWNED BY THE CRED ITORS. THE ONUS IS, THEREFORE, SHIFTED TO THE A.O. TO PROVE THAT THE CRE DITORS ARE IN FACT UNEXPLAINED. IT IS NOW SETTLED LAW AS PER VARIOUS JU DICIAL RULINGS THAT THE ADDITION U/S 68 CAN BE JUSTIFIED IN THE CASES WHERE THE ASSESSEE FAILS TO PROVE THE IDENTITY OF THE CREDITORS, CREDITWORTHINE SS OF THE CREDITORS AND GENUINENESS OF THE TRANSACTIONS. IN THE CASE UNDER APPEA L, THE APPELLANT HAS PROVED THE IDENTITY OF ALL THE CREDITO RS AND GENUINENESS OF THE TRANSACTIONS IN VIEW OF DULY SWORN AFFIDAVITS FILED IN RESPECT OF 85 CREDITORS. THE APPELLANT HAS ALSO PROVED THE CREDIT WORTHINESS OF THE SAID CREDITORS IN VIEW OF 7/12 EXTRACTS FILED IN SUPPORT OF LAND HOLDINGS AND CROPS GROWN. FURTHER FROM MOST OF THE CREDITORS THE APPELLANT HAS ACCEPTED LOAN OF PALTRY AMOUNT BELOW RS.20,000/-. T HE SAID LOANS HAVE ALSO BEEN SUBSTANTIALLY REPAID IN THE SUBSEQUENT YEAR AS SHOWN IN THE LEDGER EXTRACTS FILED BY THE APPELLANT EXCEPT IN TH E CASES OF 4 BIG LENDERS MENTIONED ABOVE. 8.2 THE DECISIONS RELIED ON BY THE A.O. ARE APPLICABL E IF THE APPELLANT FAILS TO PROVE THE IDENTITY & CREDITWORTH INESS OF THE CREDITORS AND GENUINENESS OF THE TRANSACTIONS. IT HAS BEEN OBSER VED THAT IN RESPECT OF CREDITORS FROM WHOM LOANS NOT EXCEEDING RS. 20,000/-, THE APPELLANT HAS PROVED IDENTITY AND GENUINENESS OF THE T RANSACTIONS AND ALSO CREDITWORTHINESS CONSIDERING THE AMOUNT OF LOAN WH ICH IS MEAGER I.E. NOT EXCEEDING RS.20,000/-. HOWEVER, IN RESPECT OF THE FOLLOWING LENDERS SUBSTANTIAL LOANS HAVE BEEN RECEIVED (I) SHRI GOKUL HARIDAS DESHMUKH-HUF RS.3,60,000/- (II) SHRI PRAKASH HARIDAS DESHMUKH RS.1,50,000/- (III) SHRI DHANAJI DESHMUKH RS.1,50,000/- (IV) SHRI PRAKASH HARIDAS DESHMUKH-HUF RS.1,48,000/- TOTAL RS.8,08,000/- IN THE CASE OF THE ABOVE CREDITORS, THE IDENTITY OF T HE CREDITORS HAS BEEN ESTABLISHED, HOWEVER, CREDITWORTHINESS I.E. CA PACITY TO LEND THE ABOVE LOANS HAS NOT BEEN ESTABLISHED BY THE APPELLANT THOUGH CONFIRMATIONS AND AFFIDAVITS HAVE BEEN FILED. 7 IN RESPECT OF REMAINING CREDITORS, THE APPELLANT HAS C ERTAINLY ESTABLISHED THE IDENTITY & CREDITWORTHINESS OF THE CRE DITORS AND GENUINENESS OF THE TRANSACTIONS. THEREFORE, THE DECISI ONS RELIED ON BY THE A.O. ARE MISPLACED IN RESPECT OF THE LOANS RECEIV ED FROM THE SAID CREDITORS. IT HAS BEEN LAID DOWN IN THE CASE OF CIT V S. BHAVANI OIL MILLS (P) LTD. (2011) 49 DTR 212 (RAJ.) THAT THE CONTENTS OF THE AFFIDAVITS COULD NOT BE TREATED AS OF LESSER IMPORTANCE THAN STAT EMENT GIVEN BY THE CREDITOR BEFORE THE A.O. THEREFORE, THE ADDITIO N U/S 68 CANNOT BE FULLY JUSTIFIED ONLY FOR THE REASON THAT THE APPELLAN T COULD NOT PRODUCE THE LENDERS BEFORE THE A.O. WHO ARE STAYING ABOUT 2 00 KMS. AWAY FROM THE INCOME TAX OFFICE, AURANGABAD. 8.3 IN VIEW OF THE ABOVE FACTS AND DISCUSSION AND R ATIO LAID DOWN BY THE DECISIONS RELIED ON BY THE APPELLANT, I AM OF T HE CONSIDERED VIEW THAT THE A.O. IS NOT JUSTIFIED IN MAKING ADDITION U/ S 68 IN RESPECT OF THE LOANS AMOUNTING TO RS.18,21,000/- RECEIVED FROM VARIO US LENDERS WHO HAVE LEND AMOUNTS NOT EXCEEDING RS.20,000/- AND THE A FFIDAVITS OF MOST OF THE SAID LENDERS HAVE BEEN FILED BY THE APPELL ANT. THE A.O. IS JUSTIFIED IN MAKING ADDITIONS OF RS.8,08,000/- IN RESPE CT OF THE FOUR LENDERS WHO HAVE ADVANCED SUBSTANTIAL AMOUNT WITHOUT P ROVING CREDIT WORTHINESS BEYOND DOUBT. THE ADDITION U/S.68 A MOUNTING TO RS.26,29,000/- IS, THEREFORE, DELETED TO THE EXTENT O F RS.18,21,000/- AND CONFIRMED TO THE EXTENT OF RS.8,08,000/-. GROUN D NOS. 1 & 2 ARE PARTLY ALLOWED. 5. AGGRIEVED WITH SUCH PART RELIEF GIVEN BY THE CIT (A) THE REVENUE AS WELL AS THE ASSESSEE ARE IN APPEAL BEFOR E US WITH THE FOLLOWING GROUNDS: GROUNDS BY REVENUE : I. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (A) ERRED IN APPLY ING THE CASE LAW OF CIT VS. DWARKADHISH INVESTMENT (P) LTD., 330 IT R NO/ 298, AS IN THIS CASE THE LENDERS HAVE PAID THE LOAN BY D.D. OR CROSS CHEQUE, WHEREAS IN THE PRESENT CASE LOAN WAS ACCEPTED IN CASH. II. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE COMMISSIONER OF INCOME TAX (A) WAS CORRECT IN ALLOWING THE CLAIM OF THE ASSESSEE IN 100 CASES THOUGH AFFIDAVITS IN 85 CASES ONLY WERE SUBMITTED BEFORE THE AO. THE CLAIM OF THE ASSESSEE THROU GH AFFIDAVITS IN 85 CASES IS SELF SERVING EVIDENCE FILED BY THE ASSESSEE E SPECIALLY WHEN THERE IS NO REASON FOR ASSESSEE CAUSING FAILURE TO PR ODUCE THE ALLEGED CREDITORS BEFORE THE A.O. III. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE COMMISSIONER OF INCOME TAX (A) ERRED IN ACCEPTING THE FACT THAT THE ASSESSEE HAS SHOWN LOAN BELOW 20,000 FROM 100 PEOPLE S WHICH IS PRACTICALLY IMPOSSIBLE. FURTHER IN THE CASE OF SUMATI DAYAL 214 ITR 801(SC), IT IS HELD BY THE COURT THAT EXPLANATION U/ S. 68 OFFERED BY ASSESSEE CAN BE TESTED ON THE PRINCIPLE OF HUMAN PROBABI LITIES. 8 IV. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE COMMISSIONER OF INCOME TAX (A) FAILED TO APPRECIATE T HE FACT THAT THE CREDITORS FAILED TO APPEAR BEFORE THE AO IN RESPONSE T O SUMMONS ISSUED U/S. 131. V. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF THE COMMISSIONER OF INCOME TAX (A), AURANGABAD MAY BE VACATED AND THE ORDER OF AO MAY BE RESTORED. VI. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE APPELLANT THE CRAVES LEAVE TO ADD, AMEND OR ALTER ANY GROUNDS O F APPEAL. GROUNDS BY ASSESSEE : 1. THE LD.CIT(A) ERRED IN CONFIRMING ADDITION U/S. 68 TO THE EXTENT OF RS.8,08,000/- AND THE SAME ADDITION MAY PLEASE BE D ELETED. 2. THE LD.CIT(A) FAILED TO APPRECIATE THAT NO ADDI TION U/S.68 IS JUSTIFIED IN VIEW OF IDENTITY PROOFS, CONFIRMATION LE TTERS, CREDIT WORTHINESS PROOFS AND DULY SWORN IN AFFIDAVITS FILED BY LOAN CREDITORS. HENCE, IT MAY PLEASE BE HELD THAT ADDITION U/S.68 IS U NJUSTIFIED AND SAME MAY PLEAS BE DELETED. 3. APPELLANT CRAVES LEAVE TO ADD, ALTER, MODIFY, EXP AND, DROP ANY OR ALL GROUNDS TAKEN ABOVE. 6. THE LD. DEPARTMENTAL REPRESENTATIVE WHILE ARGUIN G FOR BOTH THE APPEALS STRONGLY CHALLENGED THE ORDER OF THE CIT(A) . HE SUBMITTED THAT THE ASSESSEE HAS ACCEPTED THE CASH LOAN FROM 1 06 PERSONS AMOUNTING TO RS.26,29,000/-. IN CASE OF 100 PERSON S THE LOAN AMOUNT IN EACH CASE IS BELOW RS.20,000/- AND IN THE REMAIN ING 6 CASES THE CASH LOAN HAS BEEN OBTAINED AMOUNTING TO RS.8,73,00 0/-. HE SUBMITTED THAT NONE OF THE LOAN CREDITORS WAS PRODU CED BEFORE THE ASSESSING OFFICER FOR HIS EXAMINATION DESPITE SUMMO NS BEING ISSUED AND DESPITE BEING ASKED BY THE ASSESSING OFFICER TO THE ASSESSEE. THE AFFIDAVITS FILED BY THE ASSESSEE ARE MERELY SELF SE RVING DOCUMENTS AND CANNOT BE TAKEN AS EVIDENCE. FURTHER, IN THE 100 C ASES THE LOANS HAVE BEEN REPAID IN CASH AND NOT BY CHEQUE. THE ASSESSE E HAS MERELY FILED 7/12 EXTRACTS BUT NOT GIVEN ANY DETAILS REGARDING T HE AGRICULTURAL INCOME OF THE CREDITORS. THEREFORE, MERE FILING OF THE 7/12 EXTRACTS 9 DOES NOT PROVE THE CAPACITY OF THE CONCERNED PERSON S TO ADVANCE LOAN TO THE ASSESSEE. THE ARGUMENT OF THE ASSESSEE BEFO RE THE LOWER AUTHORITIES THAT ASSESSEE HAS SHOWN HIGHER INCOME F ROM CONTRACT BUSINESS HAS GOT NO RELEVANCE FOR ADDITION U/S.68. HE SUBMITTED THAT THE LD.CIT(A) WITHOUT ANY COGENT REASON HAS DELETED THE ADDITION OF RS.18,21,000/- WHICH IS NOT PROPER UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. HE ACCORDINGLY SUBMITTED THAT THE ORD ER OF CIT(A) BE SET- ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 7. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND WHILE SUPPORTING THE ORDER OF THE LD.CIT(A) TO THE EXTENT OF RELIEF GIVEN SUBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN SUST AINING AN AMOUNT OF RS.8,08,000/-. HE SUBMITTED THAT AFTER FILING VARIO US DETAILS BEFORE THE ASSESSING OFFICER IN THE FORM OF CONFIRMATIONS, AFF IDAVITS AND 7/12 EXTRACTS THE BURDEN WAS DEFINITELY SHIFTED TO THE D EPARTMENT. THE DEPARTMENT HAS NOT PROVED ANY OTHER SOURCE OF INCOM E OF THE ASSESSEE THAT HIS UNACCOUNTED INCOME HAS BEEN ROUTED THROUGH IN SOME OTHER MANNER. THEREFORE, NO ADDITION UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE IS WARRANTED. 7.1 REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ORIENT TRADING CO. LTD. VS. CIT REPORTE D IN 49 ITR 723 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAI D DECISION HAS HELD THAT WHEN THE ENTRY STANDS IN THE NAME OF THIRD PAR TY AND THE ASSESSEE SATISFIED THE ITO AS TO THE IDENTITY OF THE THIRD P ARTY AND ALSO SUPPLIED SUCH OTHER EVIDENCE WHICH WILL SHOW PRIMA-FACIE THA T THE ENTRY IS NOT FICTITIOUS, THE INITIAL BURDEN WHICH LIES ON THE AS SESSEE CAN BE SAID TO HAVE BEEN DISCHARGED BY HIM AND IT WILL NOT, THEREA FTER, BE FOR THE 10 ASSESSEE TO EXPLAIN FURTHER HOW OR IN WHAT CIRCUMST ANCES THE THIRD PARTY OBTAINED MONEY AND HOW OR WHY HE CAME TO MAKE A DEPOSIT OF THE SAME WITH THE ASSESSEE. THE BURDEN THEREAFTER SHIFTS ON THE REVENUE TO SHOW THAT THE ENTRY REPRESENTED ASSESSEE S SUPPRESSED INCOME. THE DEPARTMENT HAS TO BE IN POSSESSION OF SUFFICIENT AND ADEQUATE MATERIAL IN ORDER TO REACH TO SUCH CONCLUS ION. HE SUBMITTED THAT IN THE INSTANT CASE SINCE THE ASSESSEE HAS DIS CHARGED THE INITIAL BURDEN CAST ON HIM AND THE REVENUE HAS NOT PROVED T HAT THE ENTRY REPRESENTS ASSESSEES SUPPRESSED INCOME, THEREFORE, IN VIEW OF THE DECISION CITED ABOVE, THE ENTIRE ADDITION MADE BY T HE ASSESSING OFFICER SHOULD BE DELETED. 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAV E ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE HAS TAKEN LOAN OF RS.26,29,000/- FROM 106 PERSONS OUT OF WHICH AMOUNT OF LOAN LESS THAN RS.20,000/- I N EACH CASE HAS BEEN TAKEN FROM 100 PERSONS AMOUNTING TO RS.18,21,0 00/- AND LOAN OF RS.8,08,000/- HAS BEEN TAKEN FROM 6 PERSONS. WE FI ND DESPITE SUMMONS ISSUED BY THE ASSESSING OFFICER NONE APPEAR ED BEFORE HIM FOR HIS EXAMINATION NOR THE ASSESSEE COULD PRODUCE ANY OF THE LOAN CREDITORS BEFORE THE ASSESSING OFFICER FOR HIS EXAM INATION. WE FIND THE ASSESSEE FILED ONLY AFFIDAVITS, CONFIRMATIONS A ND 7/12 EXTRACTS OF THE LOAN CREDITORS FOR WHICH THE ASSESSING OFFICER DISBELIEVED THE CREDIT WORTHINESS OF THE PERSONS AND THE GENUINENES S OF THE TRANSACTION AND MADE ADDITION U/S.68 WHICH WAS PARTLY SUSTAINED BY THE CIT(A) TO 11 THE EXTENT OF RS.8,08,000/-. HE HOWEVER HAS DELETE D AN AMOUNT OF RS.18,21,000/- BEING LOAN TAKEN BY THE ASSESSEE FRO M 100 PERSONS ON THE GROUND THAT THE ASSESSEE HAS DISCHARGED THE BUR DEN CAST ON HIM BY ESTABLISHING THE IDENTITY AND CREDIT WORTHINESS OF THE CREDITORS AND THE GENUINENESS OF THE TRANSACTIONS. 8.1 IT IS THE CASE OF THE REVENUE THAT MERE FILING OF 7/12 EXTRACTS DOES NOT PROVE THE CREDIT WORTHINESS OF THE LOAN CR EDITORS ESPECIALLY WHEN NOT A SINGLE LOAN CREDITOR WAS PRODUCED BEFORE THE ASSESSING OFFICER ON THE PRETEXT THAT THEY ARE HAVING AGRICUL TURAL INCOME, LESS EDUCATED PERSONS AND ARE STATIONED AT 200 KMS AWAY FROM THE OFFICE OF THE ASSESSING OFFICER. IT IS THE CASE OF THE LD. C OUNSEL FOR THE ASSESSEE THAT BY PRODUCING THE AFFIDAVITS, CONFIRMA TIONS AND 7/12 EXTRACTS THE ASSESSEE HAS DISCHARGED THE INITIAL BU RDEN CAST ON HIM AND THE REVENUE HAS NO OTHER MATERIAL TO PROVE THAT THE ASSESSEE HAS ANY OTHER SOURCE OF INCOME AND THEREFORE THE BURDEN WAS DEFINITELY SHIFTED TO THE DEPARTMENT. 8.2 WE FIND IN THE INSTANT CASE NONE OF THE LOAN CR EDITOR IS AN INCOME-TAX ASSESSEE. THEIR EXACT INCOME FROM AGRIC ULTURE IS NOT GIVEN BY THE ASSESSEE. MERE FILING OF 7/12 EXTRACTS, IN OUR OPINION, DOES NOT PROVE THE INCOME OF THE CONCERNED PERSON. FURTHER, SHOWING PROFIT OF MORE THAN 8% DOES NOT HAVE ANY RELEVANCE FOR DETERM INING THE ADDITION U/S.68. IN THE INSTANT CASE, THE ASSESSEE HAS NOT DISCHARGED THE BURDEN CAST ON HIM BY PRODUCING THE LOAN CREDIT ORS AND PRODUCING ENOUGH MATERIAL TO SUBSTANTIATE THE CREDIT WORTHINE SS OF THE PERSONS. MERE FILING OF 7/12 EXTRACTS IN OUR OPINION DOES NO T ABSOLVE THE ASSESSEE FROM THE BURDEN CAST ON HIM. HE HAS TO PR OVE WITH SOME 12 EVIDENCE THAT THE LENDER HAS EARNED AGRICULTURAL IN COME OUT OF SUCH LAND OR HAS GOT ANY OTHER SOURCE TO ADVANCE THE MON EY. ACCEPTING LOAN FROM 100 PERSONS WHO ARE NOT INCOME TAX ASSESS EES, WHO NEVER APPEARED BEFORE THE ASSESSING OFFICER DESPITE SUMMO NS ISSUED AND EACH LOAN BEING LESS THAN RS.20,000/- CREATES A DOU BT IN MIND. SIMILARLY WITH OTHER LOANS WHERE HUGE AMOUNT HAS BE EN ACCEPTED IN CASH HAS ALSO NOT BEEN EXPLAINED PROPERLY. THE SUR ROUNDING CIRCUMSTANCES AND THE TEST OF HUMAN PROBABILITIES G O AGAINST THE ASSESSEE FOR ACCEPTING THE LOANS AS GENUINE. THE H ONBLE SUPREME COURT IN THE CASE OF CIT VS. DURGA PRASAD MORE REPO RTED IN 82 ITR 540 HAS HELD THAT THOUGH AN APPARENT STATEMENT MUST BE CONSIDERED REAL UNTIL IT WAS SHOWN THAT THERE WERE REASONS TO BELIEVE THAT THE APPARENT WAS NOT THE REAL, IN A CASE WHERE A PARTY RELIED ON SELF SERVING RECITALS IN DOCUMENT, IT WAS FOR THAT PARTY TO ESTA BLISH THE TRUTH OF THOSE RECITALS. THE TAXING AUTHORITIES ARE ENTITLED TO L OOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY O F SUCH RECITALS. THE ABOVE VIEW HAS BEEN FOLLOWED BY THE HONBLE SUPREME COURT IN THE CASE OF SUMATI DAYAL VS. CIT REPORTED IN 214 ITR 80 1 WHEREIN IT HAS BEEN HELD AS UNDER : IT IS NO DOUBT TRUE THAT IN ALL CASES IN WHICH A RECE IPT IS SOUGHT TO BE TAXED AS INCOME, THE BURDEN LIES UPON THE DEPARTMENT TO PROVE THAT IT IS WITHIN THE TAXING PROVISION AND IF A RECEIPT IS IN THE NATURE OF INCOME, THE BURDEN OF PROVING THAT IT IS NOT TAXABLE BECAUSE IT FALLS WITHIN AN EXEMPTION PROVIDED BY THE ACT LIES UPON TH E ASSESSEE. (SEE PARIMISETTI SEETHARAMAMMA [1965] 57 ITR 532 AT PAGE 536). BUT, IN VIEW OF SECTION 68 OF THE ACT, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF THE ASSESSEE FOR ANY PREVIOUS YEAR, THE SAME MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT PRE VIOUS YEAR IF THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATURE A ND SOURCE THEREOF IS, IN THE OPINION OF THE ASSESSING OFFICER, NOT SATISFACTORY. IN SUCH A CASE THERE IS, PRIMA FACIE, EVIDENCE AGAINST THE ASSESSEE, VIZ., THE RECEIPT OF MONEY, AND IF HE FAILS TO REBUT IT THE SAI D EVIDENCE BEING UNREBUTTED, CAN BE USED AGAINST HIM BY HOLDING THAT I T WAS A RECEIPT OF AN INCOME NATURE. WHILE CONSIDERING THE EXPLANATION OF THE ASSESSEE THE DEPARTMENT CANNOT, HOWEVER, ACT UNREASONABLY. (S EE SREELEKHA BANERJEE'S CASE [1963] 49 ITR (SC) 112 AT PAGE 120). 13 IN THE INSTANT CASE, THE AMOUNT IS CREDITED IN THE CAP ITAL ACCOUNT IN THE BOOKS OF THE APPELLANT. THE APPELLANT HAS OFFERED HE R EXPLANATION ABOUT THE SAID RECEIPTS BEING HER WINNINGS FROM RACES. THE SAID EXPLANATION HAS BEEN CONSIDERED IN THE LIGHT OF THE SW ORN STATEMENT OF THE APPELLANT DATED JANUARY 6, 1973, AND OTHER MATE RIAL ON RECORD. THE INCOME TAX OFFICER AND THE APPELLATE ASSISTANT COMMISSIO NER HAVE NOT ACCEPTED THE EXPLANATION OFFERED BY THE APPELLANT. THE TWO MEMBERS CONSTITUTING THE MAJORITY IN THE SETTLEMENT COMMISSION HAVE ALSO TAKEN THE SAME VIEW. THERE IS NO DISPUTE THAT THE AMOUNTS WERE RECEIVED BY THE APPELLANT FROM VARIOUS RACE CLUBS ON THE BASIS OF WINNING TICKETS PRESENTED BY HER. WHAT IS DISPUTED IS THAT WERE THEY REALLY THE WI NNINGS OF THE APPELLANT FROM THE RACES. THIS RAISES THE QUESTION WHETH ER THE APPARENT CAN BE CONSIDERED AS THE REAL. AS LAID DOWN B Y THIS COURT THE APPARENT MUST BE CONSIDERED THE REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS NOT THE REAL A ND THAT THE TAXING AUTHORITIES ARE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTER HAS TO BE CONSIDE RED BY APPLYING THE TEST OF HUMAN PROBABILITIES. (SEE : CIT V. DURGA PRASAD MORE [1971] 82 ITR 540 (SC), AT PAGES 545, 547). 8.3 SO FAR AS THE DECISION OF HONBLE BOMBAY HIGH C OURT IN THE CASE OF ORIENT TRADING CO. LTD. (SUPRA) RELIED ON B Y THE LD. COUNSEL FOR THE ASSESSEE IS CONCERNED THE SAME WAS PRIOR TO THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF SUMATI DAYAL ( SUPRA) AND DURGA PRASAD MORE (SUPRA) AND VARIOUS OTHER DECISIO NS. FURTHER, IN THAT CASE THE ASSESSEE PRIMA-FACIE HAD FURNISHED EV IDENCE BEFORE THE ASSESSING OFFICER REGARDING THE CAPACITY OF THE LOA N CREDITOR. HOWEVER, IN THE INSTANT CASE ONLY SELF SERVING DOCU MENTS IN SHAPE OF CONFIRMATION, 7/12 EXTRACTS WITHOUT SHOWING EXACT A MOUNT OF AGRICULTURAL INCOME AND AFFIDAVITS WERE FILED. WE, THEREFORE, HOLD THAT THE DECISION RELIED ON BY LD. COUNSEL FOR THE ASSES SEE DOES NOT HELP IN ANY WAY. 8.4 IN VIEW OF THE ABOVE DISCUSSION WE HOLD THAT TH E LD.CIT(A) WAS NOT AT ALL JUSTIFIED IN DELETING THE AMOUNT OF RS.1 8,21,000/-. WE THEREFORE SET-ASIDE THE ORDER OF LD.CIT(A) ON THIS ISSUE AND RESTORE THE ORDER OF THE ASSESSING OFFICER. THE GROUNDS RAISED BY THE REVENUE 14 ARE ACCORDINGLY ALLOWED AND THE GROUNDS RAISED BY T HE ASSESSEE ARE DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED AND THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 24-12-2013. SD/- SD/- (R.S. PADVEKAR) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED : 24 TH DECEMBER, 2013 SATISH COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A), AURANGABAD 4. THE CIT, AURANGABAD 5. D.R. B BENCH, PUNE 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE