Income Tax Officer, Ward 3(3), Guwahati V. Prag Raj Singla, Guwahati

ITA 160/GTY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6305 (ITAT-GUWAHATI)
• Duration Of Justice: 1 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 05-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Depreciation; Salary income; Source of fund; Additional evidence; Set aside
• Section: 143(3); 133(6); 131; 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL GAUHATI ECOURT, AT KOLKATA BEFORE SHRI A. T. VARKEY, JM &DR. A.L.SAINI, AM ./ITA NO.160/GAU/2018 ( / ASSESSMENT YEAR:2013-14) ITO, WARD-3(3), GUWAHATI VS. PRAG RAJ SINGLA HOUSE NO. 31, SHIVA NIWAS, 1 ST BYELANE, AJANTA PATH, SURVEY, BELTALA, GUWAHATI-781028. ./ ./PAN/GIR NO.: AOGPS 3670 G (ASSESSEE) .. (REVENUE) ASSESSEEBY : SHRI SANDIP SENGUPTA, JCIT DR RESPONDENT BY : SHRI B. L. PUROHIT FCA & SHRI SUBAS H PUROHIT, FCA / DATE OF HEARING : 15/05/2019 /DATE OF PRONOUNCEMENT : 02/08/2019 / O R D E R PER DR. A. L. SAINI: THE CAPTIONED APPEAL FILED BY THE REVENUE, PERT AINING TO ASSESSMENT YEAR 2013-14, IS DIRECTED AGAINST THE ORDER PASSED BY TH E COMMISSIONER OF INCOME TAX (APPEAL)-2, GUWAHATI, WHICH IN TURN ARISES OUT OF A N ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 07/03/2016. 2. GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS FOLLOWS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN FACTS AND IN LAW AND IS ALSO NOT JUSTIFIED IN DELETING THE AMOUNT OF RS.80,00,000/- ADDED AS UNEXPLAINED CREDITS UNDER S ECTION 68 OF THE INCOME TAX ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN FACTS AND IN LAW BY HOLDING THAT THE AMOUN T OF RS.80,00,000/- WAS PRAG RAJ SINGLA ITA NO.160/GAU/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 2 22 2 UNSECURED LOAN RECEIVED BY THE ASSESSEE ON THE BASI S OF ADDITIONAL EVIDENCE THOUGH OBJECTION WAS RAISED IN THE REMAND REPORT AS TO ITS ADMISSIBILITY. 3. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE UR GED AT THE TIME OF HEARINGS, THE HONBLE ITAT MAY PLEASE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE ORDER OF THE ASSESSING OFFICER. 3. BRIEF FACTS QUA THE ISSUE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING CAPS AND CLOSURES, PET BOTTLES, JARS ETC. IN THE NAME AND STYLE OF HIS MANUFACTURING UNIT M/S SHIVA CAPS & CLOSURES, PATHA RKUCHI, SONAPUR, KAMRUP. THE ASSESSEE HAS SHOWN NET LOSS OF RS. 58,17,677/- FROM HIS MANUFACTURING UNIT. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE EXP LAINED TO AO THAT THE MANUFACTURING UNIT SUFFERED LOSS DUE TO HIGH INTERE ST PAYMENT,SLUGGISH DEMAND, COMPETITION, HIGH MATERIAL COST, DEPRECIATION,ELECT RICITY CHARGES ETC. THE ASSESSEE IS A DIRECTOR IN M/S SHIVA BOTTLES PVT. LTD ANDEARN S SALARY INCOME. THE ASSESSEE ALSO EARNS INTEREST INCOME.THE ASSESSING OFFICER,ON PERUSAL OF BALANCE SHEET AND OTHER DETAILS, NOTICED THAT THE ASSESSEE HAS TAKEN FRESH UNSECURED LOAN OF RS. 80,00,000/- FROM MS. JENITA WALLANG DURING THE RELE VANT PREVIOUS YEAR. THE ASSESSEE WAS ASKED TO FURNISH PROOF OF IDENTITY, GE NUINENESS AND CREDITWORTHINESS OF THE UNSECURED LOAN. DURING THE COURSE OF HEARING ON 07/10/2015, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE WAS ONCE AGAIN ASKED TO PROVIDE THE SAME DETAILS. IN RESPONSE, THE CONFIRMATION OF ACCOUNTS IN RESPEC T OF MS. JENITA WALLANG WAS SUBMITTED ON 30/06/2015. AS PER THE CONFIRMATION OF ACCOUNT, THE LOAN OF RS. 80,00,000/- WAS FOUND TO BE GIVEN BY MS. WALLANG TO THE ASSESSEE BY WAY OF FOUR CHEQUES AS FOLLOWS: ON 12/10/2015, THE AUTHORIZED REPRESENTATIVE STATED THAT MS WALLANG HAS A FOREIGN LIQUOR PLANT AT RIBHOI, MEGHALAYA AND SUBMI TTED COPIES OFFOLLOWING PRAG RAJ SINGLA ITA NO.160/GAU/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 3 33 3 LICENSES (TRANSFERRED IN THE NAME OF MS. JENITA WAL LANG ON 15/12/2010 FROM SHRI P. WALLANG): (I). LICENSE FOR COMPOUNDING AND BLENDING OF FOREIG N LIQUOR. (II). LICENSE FOR BOTTLING OF POTABLE FOREIGN LIQUO R. (III). LICENSE TO CONSTRUCT AND WORK A BONDED WAREH OUSE FOR DEPOSIT AND STORAGE OFFOREIGN LIQUOR AND SPIRIT. APART FROM CONFIRMATION OF ACCOUNTS AND ABOVEMENTIO NED COPIES OF LICENSES, NO OTHER DETAILS VIZ BANK STATEMENT OF MS. JENITA WALL ANG, SOURCE OF FUNDS WITH MS. WALLANG, STATEMENT OF AFFAIRS OF MS. WALLANG ETC. W ERE SUBMITTED IN SUPPORT OF CREDITWORTHINESS OF MS. WALLANG AND GENUINENESS OF TRANSACTION. THEREUPON, A REQUISITION UNDER SECTION 133(6) OF THE ACT WAS SEN T ON 20/10/2015 BY POST TO MS. WALLANG ON THE ADDRESS 'I, JAIAW SHYIAP, SHILLONG ( MEGHALAYA)' AS MENTIONED IN THE CONFIRMATION OF ACCOUNTS REQUIRING MS. WALLANG TO FURNISH FOLLOWING DETAILS: (I) THE AMOUNT OF LOAN ADVANCED TO M/S SHIVA CAPS A ND CLOSURES DURING F. Y. 2012-2013 AND THE OUTSTANDING BALANCE AS ON 31/03/2 013. (II) YOUR RELEVANT BANK STATEMENT FOR THE PERIOD 01 /04/2012 TO 31/03/2013. (III) COPY OF YOUR BALANCE SHEET AS ON 31/03/2013, IF MAINTAINED BY THE ASSESSEE. (IV) WHY HAVE YOU ADVANCED INTEREST FREE LOANS TO M /S SHIVA CAPS AND CLOSURES, PATHARKUCHI, SONAPUR, KAMRUP? (V) WHETHER THE SAME HAS BEEN REPAID TO YOU TILL DA TE? IF YES, PLEASE PROVIDE DATE WISE DETAILS OF SUCH REPAYMENTS. THE LETTER RETURNED UNDELIVERED WITH REMARKS 'INCOM PLETE ADDRESSRETURN TO SENDER'. THE ASSESSEE WAS INFORMED BY WAY OF LETTER DATED 02 /11/2015 AND ASKED TO PROVE IDENTITY & CREDITWORTHINESS OF MS. WALLANG AND GENU INENESS OF TRANSACTION ON 10/11/2015. THE ASSESSEE WAS FURTHER INFORMED THAT IN CASE OF NON-COMPLIANCE, PART COMPLIANCE, INCOMPLETE COMPLIANCE OR UNSATISFA CTORY EXPLANATION, THE SUM OF RS. 80,00,000/- CREDITED TO ASSESSEES ACCOUNT SHAL L BE CHARGED TO INCOME-TAX UNDER SECTION 68 OF THE ACT. 4. IN RESPONSE, THE ASSESSEE FILED A WRITTEN REPLY BEFORE AO ON 10/11/2015, WHICH IS REPRODUCED AS FOLLOWS: '1) THE CREDITOR JENITA WALLANG IS NOT NEW CREDITOR . THERE AS OPENING BALANCE OF RS. 29,50,000/- OF HER LOAN WHICH WAS TAKEN IN EARLIER YEARS. MY ASSESSMENTS FOR LAST TWO- PRAG RAJ SINGLA ITA NO.160/GAU/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 4 44 4 THREE YEARS WERE REGULARLY COMPLETED UNDER SECTION 143(3) DURING WHICH THE LOAN TRANSACTION WITH THIS CREDITOR WAS DULY SCRUTINIZED . 2) FOR THIS YEAR ALSO, I HAVE ALREADY SUBMITTED CON FIRMATION LETTER FROM THE CREDITOR. THE NEW LOAN WAS ALSO TAKEN BY ACCOUNT PAYEE CHEQUES. T HIS FACT IS DULY SUPPORTED BY THE CONFIRMATION LETTER WHERE THE RESPECTIVE CHEQUE NUM BERS BY WHICH THE NEW LOAN WAS TAKEN HAVE BEEN DULY GIVEN. THE LOAN CHEQUES WERE D EPOSITED IN MY FIRM'S A/C WITH SBI, AMERIGOG. 3) FOR YOUR VERIFICATION, I AM SUBMITTING HEREWITH COPY OF MY FIRM'S ABOVE BANK ACCOUNT. THE FOUR LOAN CHEQUES HAVE BEEN DULY REFLECTED IN T HIS ACCOUNT. 4) IN THE CONFIRMATION LETTER, THE CREDITOR'S PAN H AS BEEN GIVEN. 5) FURTHER, TO PROVE THE CREDITWORTHINESS OF THE CR EDITOR, I HAD SUBMITTED COPIES OF TWO DOCUMENTS VIZ. PROOF BY WAY OF LICENSES GRANTED BY THE COMPETENT GOVT. AUTHORITIES TO THE CREDITOR AS OWNER OF A BONDED WAREHOUSE AND A BOTTL ING PLANT. THESE DOCUMENTS DULY SHOW THAT THE CREDITOR IS A PERSON WHO OWN LARGE BU SINESS OF BOTTLING PLANT (NORTH EAST BOTTLING) AND BONDED WAREHOUSES. THE AO AGAIN SENT NOTICE UNDER SECTION 133 (6) OF T HE ACT TO MS. JENITAWALLANG ON 10.11.2015 ON HER OFFICE ADDRESS. MS. JENITA WAL LANG REPLIED AO ON 30.11.2015 ALONG WITH HER ACCOUNT STATEMENT ( SBI, AMERIGOG: A/C NO.10072685349) FOR 1 ST MARCH, 2013 TO 31 ST MARCH 2013 AND CONFIRMATION OF ACCOUNTS ALSO. THE ASSESSING OFFICER ALSO TOOK THE STATEMENT UNDER SECTION 131 OF THE ACT. TAKING INTO ACCOUNT THE ENTIRETY OF THE FA CTS AND CIRCUMSTANCES, THE AO CAME ON CONCLUSION THAT ASSESSEE COULD NOT PROVE TH E CREDITWORTHINESS OF MS. JENITAWALLANG AND GENUINENESS OF THE TRANSACTION IN RESPECT OF UNSECURED LOAN OF RS. 80 LAKH, THEREFORE, HE MADE ADDITION UNDER SECT ION 68 OF THE ACT AT RS. 80 LAKH. 5. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS DELETED THE ADDITION MADE BY AO. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE NOTE THAT THE LD. ASSESSING OFFICER HAS OBSERVED IN THE REMAND REPORT THAT THE ASSESSEE HAD ADMITTED IN HIS STATEMENT UNDER SECTIO N 131 THAT THE ASSESSEE HAD CARRIED THE CASH AND HAD DEPOSITED THE SAME INTO T HE BANK ACCOUNT OF THE LOAN CREDITOR ON HER BEHALF. IT IS ALSO PERTINENT TO MEN TION HERE THAT THE SAID LOAN PRAG RAJ SINGLA ITA NO.160/GAU/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 5 55 5 CREDITOR IN HER CONFIRMATION, AS WELL AS AFFIDAVIT, HAS DULY OWNED UP THE SAID CASH DEPOSITED INTO HER BANK ACCOUNT, WAS DEPOSITED ON H ER BEHALF BY THE ASSESSEE AND HAD ALSO CONFIRMED THAT THE CASH PERTAINED TO HER. THIS POSITION HAS ALSO BEEN STATED BY THE LD. AO IN THE REMAND REPORT. THE SAID LOAN CREDITOR HAD ALSO EXPLAINED THE SOURCE OF THE SAID CASH IN HER HAND A ND HAD FILED A COPY OF HER VAT RETURNS SHOWING SIGNIFICANT TURNOVER FROM THE BUSIN ESS OF MANUFACTURING OF LIQUOR AS WELL AS THE SALE DEED EXECUTED BY HER WHEREIN TH E ENTIRE CONSIDERATION ON ACCOUNT OF SALE OF HER CO-OWNED PROPERTY WAS RECEIV ED BY HER IN CASH FROM THE PURCHASER AND A COPY OF THE CORRESPONDING SALE DEED OF THE LOAN CREDITOR WAS ALSO FILED BY THE ASSESSEE AS ADDITIONAL EVIDENCE. WE NO TE THAT THE LOAN CREDITOR HAD CLAIMED, IN HER AFFIDAVIT, THAT SHE IS A TRIBAL AND NOT REQUIRED TO FURNISH THE INCOME TAX RETURN. 7. BASED ON THE FACTUAL POSITION NARRATED BY US IN PARA 6 ABOVE, AND IN THE SEQUENCE OF THE EVENTS AS NOTICED ABOVE, WE FIND NO HESITATION IN HOLDING OUT THAT SUSPICION, HOWEVER STRONG, CANNOT BE SUBSTITUTED FO R MATERIAL PROOF IN SUPPORT OF THE FINDINGS FROM THE AO. THE AO SHOULD ACT IN A JU DICIAL MANNER, PROCEED WITH A JUDICIAL SPIRIT AND COME TO A JUDICIAL CONCLUSION. THE AO IS REQUIRED TO ACT FAIRLY AS A REASONABLE PERSON AND NOT IN AN ARBITRARY OR CAPR ICIOUS MANNER. THE ASSESSMENT MADE SHOULD HAVE ENOUGH MATERIAL AND IT SHOULD STAN D ON ITS OWN LEGS. THE BASIS FOR ADDITION CANNOT ONLY BE THE SUSPICION THAT THE CASH BELONGING TO THE LOAN CREDITOR HAS BEEN DEPOSITED ON HER BEHALF BY THE AS SESSEE HIMSELF IN THE BANK ACCOUNT OF THE LOAN CREDITOR. THE IMPUGNED ADDITION CANNOT BE SUSTAINED MERELY ON THE BASIS OF SUCH SUSPICION AND CERTAIN ASSUMED PRO BABILITIES. IT IS A CLEAR CASE WHERE THE ASSESSEE HAD DULY DISCHARGED HIS PRIMARY ONUS AS CASTED UNDER SECTION 68 OF THE ACT. AS REGARDS THE OBSERVATION THAT SUSP ICION, HOWEVER STRONG, CANNOT TAKE PLACE OF MATERIAL PROOF IN SUPPORT OF ANY FIND INGS OF THE AO, WE FIND SUPPORT FROM THE RATIO OF THE JUDGMENT OF THE HON'BLE SUPRE ME COURT OF INDIA IN THE CASE OF HANUMANT AND ANOTHER VS. THE STATE OF MADHYA PRA DESH [(1952) SCR 1090], WHEREIN IT WAS HELD, AS FOLLOWS: 'IN DEALING WITH CIRCUMSTANTIAL EVIDENCE THERE IS A LWAYS THE DANGER THAT CONJECTURE OR SUSPICION MAY TAKE THE PLACE OF LEGAL PROOF. IT IS THEREFORE RIGHT TO REMEMBER THAT IN CASES WHERE THE EVIDENCE IS OF A CIRCUMSTANTIAL NATURE, T HE CIRCUMSTANCES FROM WHICH THE PRAG RAJ SINGLA ITA NO.160/GAU/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 6 66 6 CONCLUSION OF GUILT IS TO BE DRAWN SHOULD IN THE FI RST INSTANCE BE FULLY ESTABLISHED AND ALL THE FACTS SO ESTABLISHED SHOULD BE CONSISTENT ONLY WITH THE HYPOTHESIS OF THE GUILT OF THE ACCUSED. AGAIN, THE CIRCUMSTANCES SHOULD BE OF A CO NCLUSIVE NATURE AND TENDENCY, AND THEY SHOULD BE SUCH AS TO EXCLUDE EVERY HYPOTHESIS BUT THE ONE PROPOSED TO BE PROVED. IN OTHER WORDS, THERE MUST BE A CHAIN OF EVIDENCE SO F AR COMPLETE AS NOT LEAVE ANY REASONABLE GROUND FOR A CONCLUSION CONSISTENT WITH THE INNOCENCE OF THE ACCUSED AND IT MUST BE SUCH AS TO SHOW THAT WITHIN ALL HUMAN PROBA BILITY THE ACT MUST HAVE BEEN DONE BY THE ACCUSED. ' IN: JAHARLAL DAS VS STATE OF ORISSA [1991 AIR 1388; 1991 SCR (2) 298]: IT MAY NOT BE NECESSARY TO REFER TO OTHER DECISION S OF THIS COURT EXCEPT TO BEAR IN MIND A CAUTION THAT IN CASES DEPENDING LARGELY UPON CIRCUMSTANTIAL EVIDENCE THERE IS ALWAYS A DANGER THAT THE CONJECTURE OR SUSPICION MAY TAKE THE PLACE OF LEGAL PROOF AND SUCH SUSPICION HOWEVER SO STRONG CANNOT B E ALLOWED TO TAKE THE PLACE OF PROOF. THE COURT HAS TO BE WATCHFUL AND ENSURE THAT CONJECTURES AND SUSPICIONS DO NOT TAKE THE PLACE OF LEGAL PROOF. THE COURT MUST S ATISFY THAT THE VARIOUS CIRCUMSTANCES IN THE CHAIN OF EVIDENCE SHOULD BE ES TABLISHED CLEARLY AND THAT THE COMPLETED CHAIN MUST BE SUCH AS TO RULE OUT A REASO NABLE LIKELIHOOD OF THE INNOCENCE OF THE ACCUSED.' 8. THE LD COUNSEL SUBMITTED THAT FROM A PERUSAL OF THE MATERIAL PLACED ON RECORD, THE FOLLOWING FACTS EMERGE: (I).THAT THE ASSESSEE HAD RECEIVED THE IMPUGNED LOA N OF RS. 80,00,000/- BY WAY OF ACCOUNT PAYEE CHEQUES IN HIS BANK ACCOUNT. (II).THAT THE ASSESSEE HAD DULY DISCHARGED HIS PRIM ARY ONUS QUA THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE FRESH LOAN OF RS. 80,00,000/- RECEIVED BY THE ASSESSEE FROM ONE OF HIS EXISTING LOAN CREDITOR S. (III). THAT THE SAID LOAN CREDITOR WAS NOT A NEW LO AN CREDITOR, IN-FACT, THE LOANS TAKEN BY THE ASSESSEE FROM THE SAID LOAN CREDITOR H AVE BEEN CONSIDERED IN THE PRECEDING ASSESSMENT YEARS, THE ASSESSMENT WHEREOF HAD BEEN COMPLETED UNDER SECTION 143(3) OF THE ACT. THERE IS NO DENIAL OR NE GATION OF THE SAID CONTENTION OF THE ASSESSEE BY THE LD. AO EITHER IN THE ORDER IMPU GNED OR EVEN IN THE REMAND REPORT. (IV) THAT THE NOTICE UNDER SECTION 133(6) WAS ISSUE D BY THE LD. AO DIRECTLY TO THE LOAN CREDITOR. PRAG RAJ SINGLA ITA NO.160/GAU/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 7 77 7 (V).THAT, IN RESPONSE TO HIS NOTICE UNDER SECTION 1 33(6) OF THE ACT, THE SAID LOAN CREDITOR HAD DIRECTLY DULY CONFIRMED TO THE LD. ASS ESSING OFFICER THE FRESH LOAN GIVEN BY HER TO THE ASSESSEE. (VI).THAT THE LD. AO, ON ACCOUNT OF BEING DISSATISF IED ON THE ACCOUNT OF PURPORTED OBSERVATIONS QUA THE DISCREPANCY IN THE BANK STATEM ENT OF THE LOAN CREDITOR OR OF THE FACTUM OF THE CASH BELONGING TO THE LOAN CREDIT OR HAVING BEEN DEPOSITED BY THE ASSESSEE HIMSELF IN THE BANK ACCOUNT OF THE LOAN CR EDITOR, ON HER BEHALF, HAD CHOSEN NOT TO EXAMINE THE SAID LOAN CREDITOR. (VII).THAT EVEN DURING THE REMAND PROCEEDINGS, THER E IS NO FINDING FROM THE LD. AO THAT THE SAID LOAN CREDITOR WAS NOT A BONAFIDE T RIBAL PERSON OF MEGHALAYA OR THAT THE SAID LOAN CREDITOR WAS NOT THE PROPRIETOR OF M/S NORTH EAST BOTTLING, A CONCERN ENGAGED IN THE BUSINESS OF 'BOTTING PLANT F OR BOTTLING OF 'INDIAN MADE FOREIGN LIQUOR' OR THAT THE INCOME OF THE LOAN CRED ITOR WAS NOT EXEMPT UNDER SECTION 10(26) OF THE INCOME TAX ACT, 1961 OR THAT THE COPIES OF THE VAT RETURNS OF THE PROPRIETARY CONCERN OF THE LOAN CREDITOR WAS INCORRECT OR EVEN THAT THE LOAN CREDITOR HAD NOT GIVEN THE LOAN TO THE ASSESSEE. IN -FACT, A DETAILED AFFIDAVIT HAS BEEN FILED BY THE LOAN CREDITOR, AS ADDITIONAL EVID ENCE, WHEREIN THE SAID LOAN CREDITOR HAS NOT ONLY AFFIRMED THE EARLIER CONTENTS BUT HAD ALSO AFFIRMED THAT SHE HAD GIVEN THE CASH TO THE ASSESSEE FOR BEING DEPOSI TED ON HER BEHALF IN HER BANK ACCOUNT. (VIII) ALONG-WITH THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE WAS AN AFFIDAVIT OF THE LOAN CREDITOR, MS. JANITA WALLANG, WHICH WAS NO T NEGATED BY THE LD. AO. 9. SECTION 68 OF THE ACT, UNDER WHICH THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER, READS AS UNDER: '68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS O F AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATI ON ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OP INION OF THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. ' THE PHRASEOLOGY OF SECTION 68 IS CLEAR. THE LEGISLA TURE HAS LAID DOWN THAT IN THE ABSENCE OF A SATISFACTORY EXPLANATION, THE UNEXPLAI NED CASH CREDIT MAY BE CHARGED PRAG RAJ SINGLA ITA NO.160/GAU/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 8 88 8 TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. IN THIS CASE THE LEGISLATIVE MANDATE IS NOT IN TERMS OF THE WORDS S HALL BECHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR'. THE SUPREME COURT WHILE INTERPRETING SIMILAR PHRASEOLOGY USED IN SECTION 69 HAS HELD THAT IN CREATING THE LEGAL FICTION THE PHRASEOLOGY EMPLOYS THE WORD 'MAY ' AND NOT 'SHALL'. THUS THE UN-SATISFACTORINESS OF THE EXPLANATION DOES NOT AND NEED NOT AUTOMATICALLY RESULT IN DEEMING THE AMOUNT CREDITED IN THE BOOKS AS THE INC OME OF THE ASSESSEE AS HELD BY THE SUPREME COURT IN THE CASE OF CIT V. SMT. P. K. NOORJAHAN [1999] 237 ITR 570. WE NOTE THAT AGAINST THE SAID DECISION OF HON' BLE GUJARAT HIGH COURT THE SPECIAL LEAVE PETITION FILED BY THE REVENUE HAS ALS O BEEN DISMISSED BY THE HON'BLE APEX COURT. 10. WE NOTE THAT THE ADDITION HAS BEEN MADE ONLY ON THE BASIS OF SUSPICION WITHOUT LOOKING INTO THE TOTALITY OF THE FACTS AND SURROUND ING CIRCUMSTANCES AND WITHOUT THE BASIS OF ANY EVIDENCE. AS RIGHTLY MENTIONED IN HIS ASSESSMENT ORDER BY THE LD. AO, THREE THINGS VIZ. IDENTITY OF THE CREDITOR, CRE DITWORTHINESS OF THE CREDITOR AND GENUINENESS OF THE TRANSACTION HAVE TO BE PROVED TO TREAT A LOAN AS GENUINE. THE LOAN TAKEN BY THE ASSESSEE FROM SMT. JENITA WALLANG , WHICH HAS BEEN TREATED AS HIS INCOME UNDER SECTION 68 BY THE AO, IS EXAMINED IN THE LIGHT OF THE ABOVE INGREDIENTS AS FOLLOWS: FIRST, THE IDENTITY: IT IS AN UNCONTROVERTED FACT THAT SMT. JENITA WALLA NG WAS NOT A NEW CREDITOR. THE ASSESSEE HAD TAKEN LOANS FROM HER IN EARLIER YEARS AND OUTSTANDING BALANCE OF SUCH LOANS, AS ON 01/04/2012 , WAS RS. 29,50,000/-. IN THE EARLIER YEARS FOR WHICH ASSESSMENT UNDER SECTION 14 3(3) HAD BEEN MADE, NO ADVERSE FINDING HAD BEEN GIVEN IN RESPECT OF THE SA ID LOAN. FURTHER, THE REQUISITION LETTER UNDER SECTION 133 (6), SENT BY THE AO, BY SP EED POST, WAS DULY DELIVERED TO THE CREDITOR AND SHE HAD DULY SENT THE REPLY TO THE SAID LETTER BY POST. THE LOAN CREDITOR ALSO HOLDS A PAN WHICH WAS DULY QUOTED BY HER IN HER LOAN CONFIRMATION LETTER. THUS, THE IDENTITY OF THE LOAN CREDITOR WAS FULLY ESTABLISHED. SECOND, THE CREDITWORTHINESS OF THE LOAN CREDITOR: THE LD. AO HAS CONCLUDED IN HIS ASSESSMENT ORDER, AS REPRODUCED ABOVE, THAT THE ASSESSEE COULD NOT ESTABLISH PRAG RAJ SINGLA ITA NO.160/GAU/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 9 99 9 THE CREDITWORTHINESS OF THE LOAN CREDITOR. IN THIS REGARD IT IS APPARENT FROM THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE LD. COU NSEL THAT IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD SUBMITTED THE COPIES OF THE LICENSES OF THE BOTTLING PLANT AND THE BONDED WAREHOUSE BUSINES SES OF SMT. JENITA WALLANG, THE LOAN CREDITOR. ACCORDING TO THE LD. COUNSEL OF THE ASSESSEE, THESE TWO DOCUMENTS ISSUED BY THE STATE GOVERNMENT OF MEGHALA YA WERE VALID DOCUMENTS TO PROVE THAT THE CREDITOR OWNED THESE LUCRATIVE BUSI NESSES. THE COUNSEL FURTHER SUBMITTED THAT AFTER THE SUBMISSION OF THE ABOVE DO CUMENTS THE AO HAD DIRECTLY ISSUED A REQUISITION UNDER SECTION 133(6) TO THE CR EDITOR AND IN THAT REQUISITION HE COULD HAVE ASKED FOR COPIES OF SALES-TAX/VAT RETURN S OF THESE BUSINESSES AND ALSO THE COPIES OF THE BANK ACCOUNTS OF THESE BUSINESSES , WHICH WOULD HAVE SHOWN THAT THE LOAN CREDITOR HAD A HUGE TURNOVER IN THESE BUSI NESSES. THE COUNSEL FURTHER SUBMITTED THAT THE AO HAD DEPUTED HIS INSPECTOR FOR AN INQUIRY IN THE BANK THROUGH WHICH THE TRANSACTION OF LOAN WAS CARRIED OUT AND S O IF THE AO WAS NOT SATISFIED ABOUT THE PROOF SUBMITTED BY THE ASSESSEE, HE COULD INSTRUCT HIS INSPECTOR TO ASCERTAIN THE FINANCIAL POSITION OF THE LOAN CREDIT OR THROUGH LOCAL INQUIRY BEFORE CONCLUDING THAT THE CREDITOR HAS NO CREDITWORTHINES S. TO PROVE THIS CONTENTION, THE COUNSEL SUBMITTED THE COPIES OF VAT RETURNS OF THE PROPRIETARY FIRM OF THE LOAN CREDITOR M/S. NORTH EAST BOTTLING FOR THE FINANCIAL YEAR 2012-13 AND ALSO THE COPIES OF THE BANK ACCOUNTS OF THE SAID FIRM. FROM THESE DOCUMENTS, IT IS CLEAR THAT, DURING THE FINANCIAL YEAR 2012-13, THE FIRM NORTH E AST BOTTLING HAD A TURNOVER OF RS.76,32,98,531/- AND IN ITS TWO BANK ACCOUNTS, THE RE WERE HUGE TRANSACTIONS OF SIGNIFICANT AMOUNTS. THE DETAILED QUARTER-WISE TURN OVER OF THE LOAN CREDITOR, AS PER THE VAT RETURNS, IS AS HEREUNDER: PERIOD , FROM PERIOD TO TURNOVER 01/04/2012 30/06/2012 188139473 01/07/2012 30/09/2012 151682370 01/10/2012 31/12/2012 204840384 01/01/2013 31.03.2013 218636304 TOTAL TURNOVER 763298531 PRAG RAJ SINGLA ITA NO.160/GAU/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 1 11 10 00 0 FROM THE RECORDS, IT IS SEEN THAT IN COURSE OF HEAR ING NO EFFORTS WERE MADE TO ASSESS THE FINANCIAL POSITION OF THESE BUSINESSES ON WHICH ASSESSEE HAD RELIED ON TO PROVE THE CREDITWORTHINESS OF THE LOAN CREDITOR. EVEN IN THE REQUISITION SENT BY THE AOUNDER SECTION 133 (6), NO DETAILS WERE ASKED ABOU T THESE BUSINESSES. AS THE ASSESSEE HAD SUBMITTED, AS PROOF, COPIES OF THE LIC ENSES OF THE CREDITOR'S BUSINESSES, THE AO SHOULD HAVE ASCERTAINED THE FINA NCIAL POSITION OF THESE BUSINESSES TO ACCEPT OR OF NOT ACCEPT THE PROOF SUB MITTED BY THE ASSESSEE.ON PERUSAL OF THESE DOCUMENTS, WE HOLD THAT THE LOAN C REDITOR, SMT. JENITA WALLANG, WAS A PERSON OF MEANS AND HAD CREDITWORTHINESS TO A DVANCE THE LOAN IN QUESTION TO THE ASSESSEE . THIRD, THE GENUINENESS OF THE TRANSACTION: THE LD. AO HAS HELD IN HIS ASSESSMENT ORDER THAT THE LOAN TRANSACTION WAS NOT GENUINE AND HE HAD STRONG REASONS FOR DOING SO. THE REASONS WHICH CITED BY TH E AO FOR ARRIVING AT THIS CONCLUSION, AS PER THE ASSESSMENT ORDER, ARE HEREUN DER: I. THE BANK STATEMENT OF THE BANK ACCOUNT THROUGH W HICH THE LOAN TRANSACTION WAS CARRIED ON, AND WHICH WAS SUBMITTED TO THE AO WAS FOUND WRONG WHEN COMPARED WITH THE BANK STATEMENT OF THE SAID ACCOUNT, AS OBTAINED BY THE AO FROM THE BANK, AND II. THERE WAS A BALANCE OF ONLY RS. 5.59 LAKHS IN T HE SAID ACCOUNT AND, FOR CLEARANCE OF THE LOAN CHEQUES, THE CASH DEPOSITED I N THE SAID ACCOUNT WAS DEPOSITED BY THE ASSESSEE HIMSELF. REGARDING THESE REASONS CITED BY THE AO, THE LD. CO UNSEL SUBMITTED AS HEREUNDER: (1) THE ACTION OF THE A.O. IN TREATING THE GENUINE LOAN OF RS.80 LAKHS TAKEN BY THE ASSESSEE FROM SMT. JENITA WALLANG IS BASED M ERELY ON SUSPICION, SURMISES AND CONJECTURES. (2) AS RECORDED IN THE FACTS OF THE CASE ABOVE, IT WAS FOR BUSINESS EXIGENCY THAT THE ASSESSEE HAD TAKEN THIS LOAN. FOR YOUR KIN D PERUSAL COPY OF SHIVA CAPS BALANCE SHEET AS AT 31-03-2012 AND NEDFI'S ACC OUNT STATEMENT IS PRAG RAJ SINGLA ITA NO.160/GAU/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 1 11 11 11 1 ENCLOSED HEREWITH WHICH SHOW THAT THE ASSESSEE HAD HUGE LOAN OF NEDFI WHICH HAD BECOME OVERDUE. IT WAS TO RUN HIS BUSINES S AND REPAY INSTALLMENT OF NEDFI, THAT THE ASSESSEE HAD TAKEN THIS PRIVATE LOAN BECAUSE NO FURTHER LOAN COULD BE AVAILED FROM NEDFI OR ANY OTHER BANK. THE A.O'S PRESUMPTION THAT THE LOAN AMOUNT WAS OF ASSESSEE HI MSELF IS TOTALLY ABSURD BECAUSE HAD THE ASSESSEE MONEY WITH HIM HE WOULD NO T HAVE TAKEN SUCH HUGE LOAN FROM NEDFI AND BEAR THE BURDEN OF PENAL I NTEREST FOR DEFAULT IN PAYMENT OF INSTALLMENTS. (3) ON THE BASIS OF THE MATERIALS SUBMITTED TO THE A.O. IN COURSE OF HEARING AND THE REPLY OF THE CREDITOR ACCEPTING THE FACT OF GIVING THE LOAN, THE A.O. SHOULD HAVE ACCEPTED THE CREDIT WORTHINESS OF THE C REDITOR AND THE GENUINENESS OF THE LOAN TRANSACTION. HOWEVER, THE A .O. IGNORED THE ABOVE MENTIONED RELEVANT MATERIAL AND WAS INFLUENCED BY E XTRANEOUS AND IRRELEVANT MATERIAL IN ARRIVING AT HIS CONCLUSION. 11. WE NOTE THAT THE IRRELEVANT MATERIAL, REFERRED TO AND WHICH INFLUENCED THE DECISION OF THE AO, AS RECORDED BY THE A.O. IN HIS ASSESSMENT ORDER, WAS AS FOLLOWS: (A) AN ALLEGED WRONG BANK STATEMENT ALLEGEDLY SUBMI TTED BY THE LOAN CREDITORALONG-WITH HER REPLY TO REQUISITION UNDER S ECTION 133(6), AND (B) THE FACT THAT CASH, IN THE ACCOUNT OF THE LOAN CREDITORS BANK ACCOUNT, WAS DEPOSITED BY THE ASSESSEE HIMSELF. AS FAR AS THE ALLEGED WRONG BANK STATEMENT IS CONCE RNED, THE ASSESSEE COULD NOT HAVE ANY KNOWLEDGE ABOUT THE SAME. STATEMENTS ARE O BTAINED BY THE STAFF OF THE CREDITORS. THE ALLEGED WRONG BANK STATEMENT MIGHT H AVE BEEN A MIX UP AT THE BANK LEVEL WHICH THE STAFF DID NOT NOTICE. HOWEVER, WHEN THE LOAN CHEQUES CLEARANCE IS DULY REFLECTED IN THE CREDITOR'S AND THE ASSESSEE'S RESPECTIVE BANK ACCOUNTS, ANY MISTAKE IN THE BANK STATEMENT CANNOT BE A REASON TO CONCLUDE THAT THE LOAN WAS NOT GENUINE. REGARDING THE DEPOSIT OF CASH BY THE ASSESSEE IN TH E LOAN CREDITOR'S ACCOUNT, THE ASSESSEE HAD STATED ON OATH, BEFORE THE AO, THAT HE WAS GIVEN CASH BY THE LOAN PRAG RAJ SINGLA ITA NO.160/GAU/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 1 11 12 22 2 CREDITOR SMT. JENITAWALLANG FOR DEPOSITING THE SAME IN HER BANK ACCOUNT AS THERE WAS NO BALANCE IN HER ACCOUNT TO HONOUR THE LOAN CH EQUES. THE AO, IN HIS ASSESSMENT ORDER, HAS SURMISED THAT THIS COULD NOT HAVE HAPPENED BECAUSE, ACCORDING TO HIM, THE CASH COULD HAVE WELL BEEN DEP OSITED AT SHILLONG IN THIS AGE OF CORE BANKING. HOWEVER, IN SURMISING THIS, HE FOR GOT THAT IN BUSINESS DEALINGS IN REAL LIFE THIS IS QUITE USUAL AND NOT AT ALL ABNORM AL. THE ASSESSEE WAS IN URGENT NEED OF FUNDS TO SALVAGE HIS CREDIT WITH NEDFI, SIN CE HE WAS UNABLE TO REPAY THE INSTALLMENTS OF HIS NEDFI LOAN DUE TO LOSSES IN HIS INDUSTRIAL UNDERTAKING. HE HAD, THEREFORE, APPROACHED HIS LONG-TIME FAMILY FRIEND A ND BUSINESS ASSOCIATE SMT. JENITAWALLANG FOR THE SAID LOAN. SINCE THE LOAN COU LD NOT HAVE BEEN TAKEN IN CASH, AS PER I.T. PROVISIONS, THE ASSESSEE TOOK CHEQUES F ROM SMT. WALLANG AND TO CONCLUDE THE TRANSACTION URGENTLY, HE SPECIFICALLY TOOK CHEQUES OF HER SB ACCOUNT AT AMERIGOG WHERE HE HIMSELF HAS HIS ACCOUNT. SINCE THERE WAS NO BALANCE IN THE SAID ACCOUNT AND SINCE THE BANKS DO NOT ACCEPT CASH DEPOSITS EXCEEDING RS.50,000/- IN OUTSIDE BRANCHES ESPECIALLY IN SB AC COUNTS, THE ASSESSEE TOOK CASH FROM SMT. WALLANG AND DEPOSITED THE SAME IN HER SAI D SB ACCOUNT.THE ABOVE FACT WAS DULY EXPLAINED BY THE ASSESSEE TO THE AO DURING HIS PERSONALAPPEARANCE. THE AO COULD HAVE CONFIRMED THIS FACT FURTHER FROM SMT. JENITA WALLANG. BUT HE DID NOT DO SO AND SIMPLY ON HIS GUESSWORK, SUSPICION, S URMISES AND CONJECTURES TREATED THE GENUINE LOAN AS THE INCOME OF THE ASSES SEE UNDER SECTION 68 OF THE I.T. ACT. 12. WE NOTE THAT THE ACTION OF THE AO, BEING BASED ON EXTRANEOUS AND IRRELEVANT MATERIAL,TOTALLY IGNORING THE RELEVANT MATERIAL CAN NOT BE SUSTAINED AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT (CENTRAL) CALCUTTA VS. DAULATRAM RAWATMULL [(1973) 87 ITR 349). THUS, FROM THE ABOVE JUDGMENT OF THE HONBLE APEX COURT IT IS CLEAR THAT (I) CONCLUSIONS DRAWN O N THE BASIS OF IRRELEVANT MATERIAL CANNOT BE THE BASIS OF TREATING A LOAN AS INCOME OF THE ASSESSEE UNDER SECTION 68 AND (II) MERELY BECAUSE THERE WAS SOME ALLEGED MIST AKE FOUND IN THE BANK STATEMENT OF THE CREDITOR, IT CANNOT AND SHOULD NOT BE CONCLUDED THAT THE MONEY IN QUESTION BELONGED TO THE ASSESSEE. PRAG RAJ SINGLA ITA NO.160/GAU/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 1 11 13 33 3 WE NOTE THAT INSTEAD OF ACTING MERELY ON GUESS WORK AND DOUBT, THE AO COULD HAVE FURTHER CONFIRMED THE FACT OF CASH BEING GIVEN BY SMT. JENITA WALLANG TO THE ASSESSEE FOR DEPOSITING IN HER ACCOUNT FOR HER. SIN CE, THE AO HAD NOT DONE THIS AND MERELY ACTING ON SUSPICION AND SURMISES, HAD TREATE D THE LOAN GIVEN BY HER AS NOT GENUINE IN SPITE OF HER FILING THE CONFIRMATION LET TER AND THE REPLY UNDER SECTION 133(6) CONFIRMING THE LOAN TRANSACTION. THE LOAN CR EDITOR HAS FURNISHED A SWORN AFFIDAVIT AND AGAIN GIVEN THE SAME TO THE ASSESSEE TO FURTHER AFFIRM HER REPLY GIVEN VIDE THE AFORESAID LETTER TO PROVE THE GENUINENESS OF THE LOAN TRANSACTION AND CONFIRMING THE FACT THAT SHE HAD GIVEN THE CASH TO THE ASSESSEE FOR DEPOSITING IN HER ACCOUNT. IT IS CLEAR THAT THE ASSESSEE HAD FILE D, BEFORE THE AO, CREDITOR'S LOAN CONFIRMATION LETTER AND SUBSEQUENTLY ON REQUISITION UNDER SECTION 133(6), THE CREDITOR HAD CLEARLY ACCEPTED THAT SHE HAD GIVEN TH E LOAN OF RS. 80 LAKHS TO THE ASSESSEE. REGARDING DEPOSIT OF CASH IN HER ACCOUNT, THE ASSES SEE IN HIS STATEMENT ON OATH HAD STATED THAT SINCE HE WAS IN URGENT NEED OF FUND HE HAD TAKEN THE LOAN CHEQUES OF THE CREDITOR'S ACCOUNT AT BANK BRANCH WHERE HE H IMSELF HAD AN ACCOUNT AND SINCE THERE WAS NO SUFFICIENT FUND IN THE SAID ACCOUNT TH E CREDITOR GAVE HIM CASH TO DEPOSIT IN THE SAID ACCOUNT WHICH HE DID AND DEPOSI TED THE CHEQUES IN HIS ACCOUNT WHICH WERE CLEARED AND CREDITED IN HIS ACCOUNT.TO V ERIFY WHETHER THE ASSESSEE'S ACCOUNT WITH NEDFI WAS OVERDUE THE SAME HAVE BEEN E XAMINED BY LD CIT(A).ALL THE ACCOUNTS OF THE ASSESSEE WITH NEDFI WERE ACTUAL LY OVERDUE AND THE ASSESSEE HAD DEPOSITED FUNDS IN THESE ACCOUNTS ONLY AFTER CL EARANCE OF THE CHEQUES FROM SMT. JENITAWALLANG'S IN HIS ACCOUNT. SMT. JENITA WA LLANG HAD ACCEPTED IN HER REPLY, SENT BY POST IN RESPONSE TO REQUISITION UNDE R SECTION 133 (6), TO THE AO, THAT SHE HAD GIVEN THE LOAN OF RS. 80 LAKHS TO THE ASSES SEE FREE OF INTEREST. 13. WE NOTE THAT LD AO HAD DOUBTS ABOUT THE GENUINE NESS OF THE LOAN, DESPITE THE AFORESAID REPLY OF THE LOAN CREDITOR, THE AO SHOULD HAVE SUMMONED THE CREDITOR UNDER SECTION 131 FOR FURTHER VERIFICATION AS HELD BY THE HON'BLE PATNA HIGH COURT IN THE CASE OF ADDITIONAL CIT VS. HANUMAN AGARWAL [ (1985) 151 ITR 150 (PATNA)]. IN THIS REGARD THE FOLLOWING OBSERVATIONS OF THE HO N'BLE PATNA HIGH COURT ARE QUITE RELEVANT: PRAG RAJ SINGLA ITA NO.160/GAU/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 1 11 14 44 4 'THE REVENUE ON ITS PART DID NOT SUMMON THE CREDITO R UNDER SECTION 131 OF THE ACT. IT TOOK NO STEPS TO VERIFY THE STATEMENT O F THE ASSESSEE. THUS AFTER THE ASSESSE FILED THE CONFIRMATORY LETTER WITH THE CORRECT NAME AND ADDRESS OF THE CREDITOR AND THE GIR NUMBER AS WELL, IN MY O PINION THE ONUS IMMEDIATELY SHIFTED ON THE DEPARTMENT WHICH WAS NOT DISCHARGED BY THE DEPARTMENT.THEASSESSEE IS NOT SUPPOSED TO KNOW THE CAPACITY OF THE MONEY - LENDER OR THE CASH CREDITOR. IT IS WITHIN THE EXC LUSIVE DOMAIN OR THE DARK TRUSSES OF THE MINDS OF THE CREDITORS TO KNOW AS TO WHETHER AND HOW THEIR SOURCES OF INCOME ARE ARRIVED. IT IS FOR THAT SPECI FIC PURPOSE THAT SECTION 131 OF THE ACT HAS BEEN INTRODUCED SO THAT IN CASE OF ANY SUSPICION, THE ITO OR THE AUTHORITIES CONCERN MAY EXERCISE THE POWERS OF A CIVIL COURT UNDER SECTION 131 AND CALL UPON THE CREDITOR CONCERNED TO PROVE HIS CAPACITY TO PAY AND THE GENUINENESS OF THE TRANSACTION' SINCE THE AO HAD NOT EXAMINED THE CREDITOR UNDER SE CTION 131 OF THE ACT, THE AFFIDAVIT OF THE LOAN CREDITOR FILED BY THE ASSESSE E HAS TO BE ACCEPTED AS AN AFFIRMATION OF HER LETTER SENT UNDER SECTION 133(6) OF THE ACT. IN THIS AFFIDAVIT, THE LOAN CREDITOR HAS CLEARLY STATED, ON OATH, THAT THE CASH DEPOSITED IN HER AFORESAID ACCOUNT WAS GIVEN BY HER TO THE ASSESSEE FOR CLEARA NCE OF THE LOAN CHEQUES. THE FINDING OF MISTAKE IN THE BANK STATEMENT SENT BY TH E LOAN CREDITOR TO THE AO COULD ALSO NOT BE A REASON FOR NOT ACCEPTING THE GENUINEN ESS OF THE TRANSACTION WHEN THE CREDITOR HERSELF HAD ACCEPTED THAT SHE HAD GIVEN TH E LOAN, AS HELD BY THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF ARAVALI TRADING CO. VS. ITO [(2008) 220 CTR 622 (RAJ)]. IN THIS CASE, THE HON'BLE RAJASTHAN HIG H COURT HELD AS UNDER: 'NEITHER THE PROVISIONS OF SECTION 68 OF THE IT ACT NOR ON GENERAL PRINCIPLE, IT CAN BE SAID THAT ONCE THE EXISTENCE OF THE PERSONS IN W HOSE NAMES CREDITS ARE FOUND IN THE BOOKS OF THE ASSESSEE IS PROVED AND SUCH PERSON S OWN SUCH CREDITS WITH THE ASSESSEE STILL THE ASSESSEE IS TO FURTHER PROVE THE SOURCE FROM WHICH THE CREDITORS COULD HAVE ACQUIRED MONEY TO BE DEPOSITED WITH HIM. THE FACT THAT THE DEPOSITORS EXPLANATION ABOUT THE SOURCES WHERE FROM THEY ACQUI RED THE MONEY IS NOT ACCEPTABLE TO THE A.O., IT CANNOT BE PRESUMED THAT THE DEPOSITS MADE BY SUCH CREDITORS IS THE MONEY OF THE ASSESSEE HIMSELF. THE RE IS NO WARRANT FOR SUCH PRESUMPTION.' 14.BEFORE US, LD. DR FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER WHICH WE HAVE ALREADY NOTED I N OUR EARLIER PARA AND THE SAME IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. WE NOTE THAT IN THE ASSESSMENT ORDER NO DOUBT HAS BEEN EXPRESSED REGARDING THE ASS ESSEE'S BOOKS OF ACCOUNT WHICH WERE REGULARLY MAINTAINED AND AUDITED BOOKS. IT IS APPARENT THAT EXCEPT THIS PRAG RAJ SINGLA ITA NO.160/GAU/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 1 11 15 55 5 LOAN TRANSACTION, THE BOOKS OF ACCOUNT OF THE ASSES SEE HAVE BEEN ACCEPTED IN TO-TO AND WHEN THIS HAS BEEN DONE, THE LD. COUNSEL RELIED ON THE JURISDICTIONAL HIGH COURT'S JUDGEMENT IN THE CASE OF TOLARAM DAGA VS. C IT (1965) 59 ITR 632 (GAUHATI) IS QUITE RELEVANT AND APPLICABLE. IN THIS JUDGMENT THE HONBLE COURT HAS HELD AS UNDER:- 'IT WOULD APPEAR THAT THE ACCOUNTS OF THE FIRM WHIC H HAD BEEN PRODUCED IN THE CASE HAD BEEN ACCEPTED AND ACTED UPON BY THE DEPART MENT AND NO SERIOUS CHALLENGE HAD BEEN MADE TO THEIR GENUINENESS OR THA T THEY WERE KEPT REGULARLY IN THE COURSE OF BUSINESS. THAT BEING THE CASE, THE AC COUNTS ARE RELEVANT AND AFFORD PRIMA FACIE PROOF OF THE ENTRIES AND THE CORRECTNES S THEREOF UNDER SECTION 34 OF THE EVIDENCE ACT, SO THAT WHERE A DEPOSIT IS FOUND TO HAVE BEEN MADE BY A THIRD PARTY IN THE ACCOUNTS OF THE FIRM, THAT ENTRY IS PR IMA FACIE PROOF THAT AMOUNT IN QUESTION WAS DEPOSITED BY THE PERSON IN WHOSE NAME THE DEPOSIT STANDS. TO REQUIRE THE FIRM OF THE INDIVIDUAL PARTNERS TO GO F URTHER AND ADDUCE PROOF OF THE SOURCES FROM WHICH THE DEPOSITS IN QUESTION APPEARI NG IN THE ACCOUNTS IN THE NAME OF THIRD PARTIES WERE DERIVED BY THEM, WOULD B E PLACING A BURDEN ON THE FIRM AS WELL AS THE PARTNERS, WHICH IS NOT REQUIRED OR JUSTIFIED BY LAW. 15. TO CONCLUDE, WE NOTE THAT THE LOAN CREDITOR HAD EXPLAINED THE SOURCE OF THE SAID CASH IN HER HAND AND HAD FILED A COPY OF HER V AT RETURNS SHOWING SIGNIFICANT TURNOVER FROM THE BUSINESS OF MANUFACTURING OF LIQU OR AS WELL AS THE SALE DEED EXECUTED BY HER WHEREIN THE ENTIRE CONSIDERATION ON ACCOUNT OF SALE OF HER CO- OWNED PROPERTY WAS RECEIVED BY HER IN CASH FROM THE PURCHASER AND A COPY OF THE CORRESPONDING SALE DEED OF THE LOAN CREDITOR WAS AL SO FILED BY THE ASSESSEE AS ADDITIONAL EVIDENCE. WE NOTE THAT LD. ASSESSING OFF ICER HAD NOT NEGATED THE VERACITY OF GENUINENESS OF THE SALE DEED. WE NOTE T HAT THE LD. ASSESSING OFFICER HAS NOT DIRECTLY VERIFIED THE LOAN CREDITOR OR THE OTHER DOCUMENTARY EVIDENCES, SUCH AS THE COPIES OF THE VAT RETURNS OF THE PROPRIETARY CONCERN OF THE LOAN CREDITOR, DETAILS OF DEPOSITS IN THE BANK STATEMENT OF THE LO AN CREDITOR, FACTUM OF THE LOAN CREDITOR BEING A BONA FIDE TRIBAL PERSON, GENUINENE SS OF THE SALE DEED ETC. DESPITE BEING GIVEN AN OPPORTUNITY TO DO SO.TO PROVE THE CR EDITWORTHINESS OF SMT. JENITA WALLANG THE ASSESSEE HAD FURNISHED COPIES OF THE LI CENSES OF HER BOTTLING PLANT AND BONDED WAREHOUSE BUSINESS ISSUED BY THE GOVT. O F MEGHALAYA. THE FACT OF GIVING OF THE ABOVE LOAN WAS ALSO CONFIRMED BY SMT. WALLANG DIRECTLY TO THE ITO IN RESPONSE TO ITO'S LETTER SENT TO HER FOR THIS PU RPOSE.SMT. WALLANG HAS PAN PRAG RAJ SINGLA ITA NO.160/GAU/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 1 11 16 66 6 NUMBER AND LOAN HAS BEEN GIVEN BY ACCOUNT PAYEE CHE QUE. THUS, THE ASSESSEE HAD DULY PROVED THE IDENTITY OF SMT. JENITA WALLANG, HE R CREDITWORTHINESS AND THE GENUINENESS OF THE LOAN TRANSACTION.IT IS AN UNCONT ROVERTED FACT THAT SMT. JENITAWALLANG WAS NOT A NEW CREDITOR. THE ASSESSEE HAD TAKEN LOANS FROM HER IN EARLIER YEARS AND OUTSTANDING BALANCE OF SUCH LOANS , AS ON 01/04/2012, WAS RS. 29,50,000/-. IN THE EARLIER YEARS FOR WHICH ASSESSM ENT UNDER SECTION 143(3) HAD BEEN MADE, NO ADVERSE FINDING HAD BEEN GIVEN IN RES PECT OF THE SAID LOAN. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENTS AND CONS IDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE NOTE THAT ASSESSEE HA S PROVED ALL THE THREE INGREDIENTS VIZ: IDENTITY, CREDITWORTHINESS AND GEN UINENESS OF THE LOAN TRANSACTION OF RS.80,00,000/- GIVEN BY THE LOAN CREDITOR, SMT. JENITA WALLANG TO THE ASSESSEE. HENCE, ASSESSEE HAS DISCHARGED HIS PRIMARY ONUS UND ER SECTION 68 OF THE ACT.THAT BEING SO, WE DECLINE TO INTERFERE WITH THE ORDER OF ID. C.I T.(A) IN DELETING THE AFORESAID ADDITION. HIS ORDER ON THIS ADDITION IS T HEREFORE, UPHELD AND THE GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. 16. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 02.08.2019 SD/- ( A.T. VARKEY ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / DATE: 02/08/2019 ( SB, SR.PS ) COPY OF THE ORDER FORWARDED TO: 1. ITO, WARD-3(3), GUWAHATI 2. PRAG RAJ SINGLA 3. C.I.T(A)- 4. C.I.T.- GUWAHATI. 5. CIT(DR), GAUHATI BENCH, GUWAHATI. 6. GUARD FILE. TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY / DDO / H.O.O ITAT, GAUHA TI BENCH PRAG RAJ SINGLA ITA NO.160/GAU/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 1 11 17 77 7