Appeal Details
Counselvise Citation
[2024] 130 COUNSELVISE.COM (IT) 4823 (ITAT-JODHPUR)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 month(s) 20 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
28-02-2024
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
SMC
Next Hearing Date
28-01-2024
Assessment Year
2017-2018
Appeal Filed On
07-01-2024
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR. BEFORE: DR. S. SEETHALAKSHMI, JJUDICIAL MEMBER & SHRI RATHOD KAMLESH JAYANTBHAI, ACCOUNTANT MEMBER I.T.A. No. 17/Jodh/2024 Assessment Year: 2017-18 Hement Trading Company Shop No. 110, New Dhan Mandi, Suratgarh, Sriganganagar [PAN: AAEFH 0408 B] (Appellant) Vs. Income Tax Officer, Ward-Suratgarh Sriganganagar (Respondent) Appellant by Sh. Suresh Ojha & Sh. Shashank Khatri (Adv.) Respondent by Ms Nidhi Nair, Sr. DR Date of Hearing 29.01.2024 Date of Pronouncement 29.02.2024 ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal filed by assessee is arising out of the order of the National Faceless Appeal Centre, Delhi dated 13/11/2023 [here in after ‘NFAC’ ] for assessment year 2017-18 which in turn arise from the order dated 27.05.2019 passed under section 143(3) of the Income Tax Act, by ITO, Ward, Suratgarh. I.T.A. No. 17/Jodh/2024 Assessment Year: 2017-18 2 2. In this appeal, the assessee has raised following grounds: - “1. The order passed by the Income Tax Officer and sustained by the Commissioner of Income Tax (Appeals) is illegal against the law and without any application of a mind, therefore, is liable for quash u/s 143(3) with 115 BBE. 2. The Commissioner of Income Tax you should not have sustained the addition of amount received and repaired by account payee cheque which was stated in affidavit and also admitted in the statement given by the creditors in view of judgment of Rajasthan High Court in case of 20 Tax World page 142. 4. With due respect, the case on which the lower authority relies has a different fact not identical to the ASSESSEE as such no adverse inference can be made BY avoiding the binding nature judgment of the Hon'ble Supreme Court or/and Rajasthan High Court 5. Without rejection of books of account no addition can be made in view of judgment of the Supreme Court of 76 ITR Page 719. 6. That A.O. should not have made the addition and CITA should not sustain the addition because the assessee discharge the burden casted upon him by the statue. 7. The addition is illegal in the light of judgment of Lalchand Bohra vs Income Tax Officer 189 Taxman 141 Rajasthan High Court Capacity of creditor is not a matter FOLLOWING S.C.. "So far as capacity of the lender is concerned, in our view, on the face of the judgment of Hon'ble Supreme Court, in Daulat Ram's case (supra), and other judgments, capacity of the lender to advance money to the assessee, was not a matter which could be required of the assessee to be established," 8. That the charging of interest is illegal and against the law.” 3. Succinctly, the fact as culled out from the records is that the taxpayer filed its return of income for the A.Y 2017-18 on 31.10.2017 declaring total income at Rs. 78,040/-. The case of the assessee wass selected for limited scrutiny. Notices were issued u/s. 143(2) and 142(1) to the assessee. The details were called for by issuing questionnaire to I.T.A. No. 17/Jodh/2024 Assessment Year: 2017-18 3 the assessee. The assessee is engaged in the business of Grain Merchant and Commission agent (Kachha Aadat). 3.1 During the assessment proceeding the ld. AO noted that the assessee has accepted a sum of Rs. 5,00,000/- as unsecured loan from Shri Mangal Chand Proprietor of M/s. Royal Rose Industries, Suratgrarh. The ld. AO from the bank statement of that creditor found that the said Shri Mangal Chand has deposited cash of Rs. 4,00,000/- in his bank account on 28.03.2017 and Rs. 3,84,000/- on 27.03.2017. Based on these facts the ld. AO doubted the capacity of that party. Shri Mangal Chand has in his statement submitted that he is engaged in the business of sale of Sarbat (cold drink) and he has not taken any licence for undertaking this business nor he is regularly filling his return of income. The ld. AO further noted that the said party Shri Mangal Chand vide his statement recorded on 15.05.2019 vide question no. 5 stated that he is doing the business for 3-4 months only. He has also stated that he has no idea of the amount received from this business per month. He has also confirmed that he is not maintaining any records for this business. The assessee before the ld. AO submitted that the assessee has received the money by an account payee cheque and also given back by account payee cheque. But the ld. AO stated that he is not satisfied I.T.A. No. 17/Jodh/2024 Assessment Year: 2017-18 4 with the reply of the assessee and therefore, ld. AO noted that there is no creditworthiness of Shri Mangal Chand and has added the said amount in the hands of the assessee as unexplained cash credit as per provision of section 68 of the Act. 4. Aggrieved from the order of the assessment, the assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below: “6. Decision 6.1 I have carefully considered the material facts on record and grounds of appeal raised by the appellant. 6.2 In this regard, it is pertinent to note the decision of the Hon’ble Supreme Court in the case of B. N. Bhattacharjee and Another (118 ITR 461) wherein it has been held that appeal does not mean merely filing of memo of appeal but also pursuing it effectively. In cases where the appellant does not want to pursue the appeal, appellate authorities have inherent power to dismiss the appeal for non-prosecution as held by the Hon’ble Bombay High Court in the case of M/s Chemipol vs. Union of India in Excise Appeal No. 62 of 2009. While deciding the issue, the Hon’ble High Court of Bombay has referred to the observations of Hidayatullah, Chief Justice (as His Lordship then was) in Sunderlal Mannalal Vs. Nandramdas Dwarkadas AIR 1958 MP 260 wherein it was observed: - "Now the Act does not give any power of dismissal. But it is axiomatic that no court or tribunal is supposed to continue a proceeding before it when the party who has moved it has not appeared nor cared to remain present. The dismissal, therefore, is an inherent power which every tribunal possesses..." 6.3 There is a well known dictum of law "VIGILANTIBUS, NO DORMENTIBUS, JURA SUBVENIUNT" which means law will help only those who are vigilant. Law will not assist those who are careless of his/her right. In order to claim one's right, s/he must be watchful of his/her right. Only those persons, who are watchful and careful of using his/her rights, are entitled to the benefits of law. Law confers rights on persons who are vigilant of their rights. I.T.A. No. 17/Jodh/2024 Assessment Year: 2017-18 5 Hon'ble Madhya Pradesh High Court in the case of Estate of Late TukojiraoHolkar vs. CWT (223 ITR 480) has held as under: "if the party, at whose instance the reference is made, fails to appear at the hearing, or fails in taking steps for preparation of the paper books so as to enable hearing of the reference, the court is not bound to answer the reference." Similarly, Hon'ble Punjab & Haryana High Court in the case of New Diwan Oil Mills vs. CIT (2008) 296 ITR 495) returned the reference unanswered, since the assessee remained absent and there was no assistance from the assessee. It is pertinent to note that in the decision of the Hon'ble SC in the case of HM Esufali H.M Abduli (1993) 90 ITR 271, it is held that the appellate authority cannot substitute its own judgement in place of judgement of the AO unless it is shown that the judgment of the AO was biased, irrational, vindictive or capricious. 6.4 This appeal has been filed by the appellant claiming that the action of the Assessing Officer is not supported by facts and laws and that it is unjust. In such a situation, it is for the appellant to furnish submissions with relevant evidence(s), case laws, if any, to support the claim. The 'burden of proof is always on the person who makes the claim. In this case, it is the appellant who has made the claim by filing the appeal. Thus, in cases where a particular receipt is sought to be taxed as income, the initial onus is on the Assessing Officer to prove that it is taxable. Where. however, the assessee claims exemption, the burden is on the assessee to prove it to be exempt. Same is the position in case of all the credits. receipts, allowances, deductions, claims or loss, etc. Since an appeal is nothing but the claim of the appellant that he has been unduly unjustifiably taxed, it is for the appellant to prove its case. The appellant has not availed any opportunity to do so. 6.5 On the basis of material available on records, it is seen that the AO has made the impugned addition relying on decisions given in the following cases: 1. Mangilal Jain Vs ITO (Mad) 315 ITR 105 2. CIT Vs. Precision Finance P.Ltd (cal) 208 ITR 465. Wherein the conclusion from the above cases is as follows" Assessee failed to prove the genuineness of the credit- Mere proof of identity of the creditor or that transaction was by cheque, is not sufficient- Addition u/s 68 upheld" In addition to above, reference has also been made to the decision given by the Honorable High Court, Rajastan in case of Kamal Motors Vs. CIT(2003) 131 Taxmann 155(Raj), wherein decision was given as In order to allow cash credit, apart from identification of creditor, assessee is required to prove that the creditor is a person of means". I.T.A. No. 17/Jodh/2024 Assessment Year: 2017-18 6 Further, reference has also been made to the decision given by the Honorable High Court, Calcutta in case of C. Kant & CO. Vs. CIT [1980] 126 ITR 63 (cal), wherein decision was given as " In case of cash credit entry it is necessary for the assessee to prove not only the identity of the creditors but also to prove the capacity of the creditors to advance the money and genuiness of the transaction". Since the assessee had taken an unsecured loan of amount Rs. 5,00,000/- and failed to prove the genuineness of the transaction and credit worthiness of the creditor, the whole amount of cash credit made in his bank account to the tune of Rs. 5,00,000/- was treated as unexplained cash credit in his bank account and the said cash deposit of Rs. 5,00,000/- was held to be unexplained cash credit u/s 68 of IT. Act, 1961. Further, during the course of present appellate proceedings, the assessee has failed to rebut the findings of the AO regarding genuineness of cash credit u/s 68 of IT. Act, 1961 which leads to penalty u/s 271AAC of the Act. In the appellants proceeding, the appellant also failed to offer any explanation with regard to its genuineness and credit worthiness of the creditor with any documentary evidence in support of the same. 6.6 From the conduct of the appellant as per the facts noted above, it is clear that the appellant does not wish to pursue the appeal. Even otherwise on the merits of it also, I do not see any reason to differ with the findings of the AO since no attempt has been made by the appellant to discharge its onus during the appellate proceedings. Hence, respectfully following the above-mentioned judicial pronouncements and in view of the facts of the case, the appeal is hereby dismissed. 6.7 Under such circumstances, in the absence of any explanations, details or documentary evidence forthcoming from the appellant, I am of the considered opinion that the AO rightly made the impugned addition of Rs.5,00,000/-u/s. 68 r.w.s 115BBE and correctly worked out the income of Rs.5,78,040/-. Hence no interference of the appellate authority is warranted in this case. 7. Thus, appeal filed by the assessee stands Dismissed.” 5. As the assessee did not find any favour from the order of the ld. CIT(A), the assessee has preferred the present appeal before this Tribunal on the ground as reproduced hereinabove. To support the I.T.A. No. 17/Jodh/2024 Assessment Year: 2017-18 7 various grounds so raised by the ld. AR of the assessee, he has filed the written submissions and the same is reproduced herein below: “Brief fact is that there is a credit in the name of Mangal Chand Rs. 5,00,000/- the amount in question was advance to THE ASSESSEE BY BANK CHANNEL AND ALSO RECEIVED BACK BY BANK CHANNEL. The assessee SUBMITTED AN AFFIDAVIT IN SUPPORT OF STATEMENT ALSO IN REPLY WHICH IS AT PAGE 2 OF THE PAPER BOOK. The assessing officer directed the assessee so as to produce the creditor. The assessee following the direction produces the creditors. The creditor appeared; in the course of the assessment proceeding came forward with all evidence so as to prove the genuineness of the credit by way of bank channel the statement of creditor is at PAGE 3 OF THE PAPER BOOK. I further want to submit that the assessee successfully discharged his burden by filing affidavit in support of notice given by AO as and when he produced creditor so as to verify the correctness. As soon as the creditor is produced and that the creditor has admitted the advancement of the amount the burden of the assessee deemed to be shifted. The creditor explained and also accepted the advance of money. The condition of advancement is fulfilled. IN VIEW OF ABOVE SUBMISSION OF AFFIDAVIT AND PRODUCING FOR STATEMENT YOUR HONOR WILL OBSERVE THAT THE ASSESSEE DISCHARGE HIS BURDEN AND ON US HAS BEEN SHIFTED ON THE DEPARTMENT. In case of this creditor the assessing officer also not raised any further query. As regards ground no 1, The order passed by the Income Tax Officer and sustained by the Commissioner of Income Tax (Appeals) is illegal against the law and without any application of a mind, therefore, is liable for quash u/s 143 (3) with 115 BBE. The creditor came forward with the fact from where the amount was brought by him for depositing in the bank account which was advanced to the assessee. The Income Tax Officer, however, took different view and not appreciated the explanation of the assessee. The assessee is not under compulsion so as to show the sources of source of creditor in view of judgment reported in 224 ITR page 180 Ram Narain Goyal vs CIT (P&H) is at page 1 of the Case law paper book. Without prejudice to above, it is further submitted that the Income Tax Officer, at the time of finalizing the assessment, no where observed or held that the amount so deposited by the assessee in the bank account represent as the income of the assessee and that Toto belongs to the assessee. Therefore, in absence of establishment that the amount of creditor, deposited by creditor, actually belongs to assessee, the addition made is illegal and against the law. The order sustained by the Commissioner of Income Tax Appeals is illegal and against the law. From the perusal of the order of CIT (A), you will observe that the Commissioner of Income Tax appeals even sustains the I.T.A. No. 17/Jodh/2024 Assessment Year: 2017-18 8 addition without application of mind and without going through the full fact mentioned in the statement of the fact as well as without applying the judgment of honorable Supreme Court. It is supposed that Appellate Authority is supposed to know about the basic fundamental themes of cash credit and provisions of 68 of the IT Act. The Commissioner of Income Tax appeals fails to follow the judgment therefore the addition sustain is illegal and against the law. THE AMOUNT OF LOAN HAS BEEN REPAID BY MEANS OF ACCOUNT PAYEE CHEQUE. The provisions of section 115 BBE is not applicable. Section 115bbe is applicable when the following conditions are met: The taxpayer has earned income from an undisclosed source. The income has not been disclosed in the books of accounts, returns, or other documents furnished under the Income Tax Act. The taxpayer has not paid tax on such income In case of the assessee none of the above condition is fulfill. As regards ground no 2, The Commissioner of Income Tax you should not have sustained the addition of amount received and repaired by account payee cheque which was stated in affidavit and also admitted in the statement given by the creditors in view of judgment of Rajasthan High Court in case of 20 Tax World page 142 . The addition sustained by the CIT(A) is illegal. Your kind attention is invited towards the judgment of Hon’ble Rajasthan High Court delivered in the case - 219 ITR page 571, 31 Tax World page 67 is at page 2-4 of the Case law paper book.. Hon’ble Rajasthan High Court observed in the clear words that addition cannot be made where the creditor appeared and accepted advancement of the credit. The head not is being reproduced here under: Income –cash –credit-burden of proof-Identity of creditors D and V has been established and they have confirmed the credits by making statements on oath- This also satisfies the requirement of discharge of burden on the part of the assessee to prove the genuineness of the transactions- CAPACITY OF THE LENDER TO ADVANCE MONEY TO THE ASSESSEE WAS NOT A MATTER WHICH THE ASSESSEE COULD BE REQUIRED TO ESTABLISH AS THAT WOULD AMOUNT TO CALLING UPON HIM TO ESTABLISH THE SOURCE OF THE SOURCE –Therefre addition in respect of entries in the names of said creditors cannot be sustained. Furthermore the Hon’ble ITAT, Jodhpur Bench observe as under: Bansilal Malhotra vs. DCIT ITAT, Jodhpur Bench ITA No-1902/JP/1994) Whether assessee can be treated to have discharged the onus of explaining the cash credit as soon as creditor is produced before the AO and the creditor has also satisfactorily explained the source thereof – Held Yes I.T.A. No. 17/Jodh/2024 Assessment Year: 2017-18 9 Further held that affidavit/statement of creditor has to be believed unless the AO refutes the same. The judgment is judgment of jurisdictional High Court and also covered of the this Hon’ble Bench. you are requested to kindly delete the addition illegal and arbitrarily sustained. As regards ground no 3, with due respect, the case on which the lower authority relies has a different fact not identical to the ASSESSEE as such no adverse inference can be made BY avoiding the binding nature judgment of the Hon'ble Supreme Court or/ and Rajasthan High Court . Your kind attention is further invited towards another judgment of the Hon'ble Gujrat High Court in the case of Deputy Commissioner of Income Tax V/s. Rohini Builders dated 21st March 2001. In this case, also it was held that it is not for the assessee to explain how the cash was deposited in the bank account of the creditor as a loan given to the assessee. In the case of the assessee, the Assessing Officer made an addition that is arbitrary and illegal. Therefore, it is requested to delete the addition made by the Assessing Officer. As regards ground no 4, without rejection of books of account no addition can be made in view of judgment of the Supreme Court of 76 ITR Page 719. That without rejecting the books of account any addition can be made. In this connection it is stated that the Hon’ble Income-tax Appellate Tribunal, Jaipur Bench, Jaipur in case of the Income-tax Officer V/s Mewar Textile Mill reported in 64 TTJ page 502 is at page 5-6 of the Case law paper book have held as under. The relevant portion is being reproduced here under: On the above observations, the Hon’ble High Court has allowed the appeal of the assessee. 6.2. In case of CIT vs. Maharaja Shree Umaid Mills Ltd. (1991) 96 CTR (Raj) 72 : (1991) 192 ITR 565 (Raj), the Hon’ble Rajasthan High Court has held that the Tribunal was justified in holding that since books of accounts had not been rejected, the mere fact that there had been a fall in the G.P. rate would not lead to the inference that the expenditure had been inflated. 6.3. In case of CIT vs. Padamchand Ram Gopal (1970) 76 ITR 719 (SC), the Hon’ble Supreme Court has held that no addition is justified if the books of accounts are not rejected. 6.4. We have also seen the other case law relied upon by the learned authorised representative and we find that the book results cannot be ignored if the books of accounts are not rejected or any defect were not pointed out by the AO. Therefore, we do not see any infirmity in the order of the CIT(A). On the reasons given by CIT (A) and on the reasons given here by us, the order of the CIT (A) is confirmed here by us. The judgment of Hon’ble Supreme Court reported in 76 ITR Page 719 held that without rejection of the books of account no addition whatsoever can be made. The relevant portion is being reproduced here under: 76 ITR Page 719 Commissioner Of Income-Tax, West Bengal. I.T.A. No. 17/Jodh/2024 Assessment Year: 2017-18 10 vs Padamchand Ramgopal. Facts The assessee, a HUF carrying on business in various items including money- lending produced his account books. The ITO rejected those accounts as unreliable and assessed the assessee on the basis of best judgment by adding to the income returned by him various sums ranging from Rs. 17,951 for the asst. yr. 1956-57 to Rs. 21,536 for the asst. yr. 1954-55. The five assessments years are 1953-54, 1954-55, 1955-56, 1956-57 and 1957-58. The ITO in his order did not give any reason for not relying on the accounts submitted. Issue Whether the Tribunal was justified in holding that the ITO had rightly added income in the subsequent assessment years. Findings Appeal dismissed. Reasoning It was not justified in holding that the additions made by the ITO were in accordance with law. Those additions were arbitrarily made. No reasons were given to reject the accounts relating to the asst. yrs. 1954-55, 1955-56, 1956- 57, and 1957-58. Further, the method adopted for determining the escaped income appears to be highly capricious. From the perusal of entire order you will observe that books of accounts have not been rejected therefore in absence of rejection of books of accounts the addition made by the Income-Tax Officer is illegal and against the law. The judgment of Supreme Court and order of Tribunal is having the character of binding nature therefore requested that the entire addition made may kindly be deleted and order passed by the Assessing Officer may kindly be declared as illegal. As regards ground no 5, that A.O. should not have made the addition and CITA should not sustain the addition because the assessee discharge the burden casted upon him by the statue Further Hon’ble High Court of Rajasthan in the case of Jai Kumar Bakliwal vs CIT reported in 267 CTR page 396 is at page 7-9 of the Case law paper book also held that when transaction in question is there through bank channel in that case no addition whatsoever can be made. For your ready reference relevant para of 267 CTR page 396 is being reproduced here under: When we peruse the facts herein above, it is an admitted position that all the cash creditors have affirmed in their examination that they had advanced money to the assessee from their own respective bank accounts. Therefore, when there is categorical finding even by the AO that the money came from the respective bank accounts of the creditors, which did not flow in the shape of the money, then, in our view, such an addition cannot be sustained and has been rightly deleted by both the two appellate authorities. There is no clinching evidence in the present case nor the AO has been able to prove that the money actually belonged to none but the assessee himself. The action of the AO appears to be based on mere suspicion. I.T.A. No. 17/Jodh/2024 Assessment Year: 2017-18 11 The above judgment is applicable in toto. As regards ground no 6, the addition is illegal in the light of judgment of Lalchand Bohra vs Income Tax Officer 189 Taxman 141 Rajasthan High Court Capacity of creditor is not a matter FOLLOWING S.C..“So far as capacity of the lender is concerned, in our view, on the face of the judgment of Hon’ble Supreme Court, in Daulat Ram’s case (supra), and other judgments, capacity of the lender to advance money to the assessee, was not a matter which could be required of the assessee to be established,’’ First of all want to submit that there is a typing error in the name of judgment, in the ground typed as Lalchand Bohra instead of Labh Chand Bohra. Therefore the name may kindly be treated as Labh chand Bohra . The ratio of judgment is applicable in case of the assessee. You are therefore requested that the addition made may kindly be deleted. THE AO AND CIT RELIED ON RAJASTHAN HIGH COURT BUT SUBSEQUENT DESCISION ARE IN FAVOR OF THE ASSESSEE REFERRED IN THE CASE LAW CHART THEREFORE SAME ARE APPLICABLE IN VIEW OF JUDGMENT OF 144 ITR 62 COPIES IS AT PAGE NO 13 OF THE CASE LAW PAPER BOOK. AS PER GOLDEN RULE THE SUPREME COURT THE JUDGMENT IN THE FAVOR OF THE ASSESSEE HAS TO BE ACCEPTED . IN VIEW OF 192 ITR 252 IS AT PAGE NO 14-15 OF THE CASE LAW PAPER BOOK. In view of above submission you are requested to kindly accept the appeal by declaring the order as illegal, against the law and against judicial decorum and discipline.” 6. In addition to the above written submission the ld. AR of the assessee also placed reliance to the following judicial precedent cited in support of the grounds so taken by the assessee: S. No . Case law Observation Page No. The payments were made by account-payee cheques. The money was returned by the assessee to Ishwar Chand with interest amounting. I.T.A. No. 17/Jodh/2024 Assessment Year: 2017-18 12 1 Ram Narain Goel Vs CIT (P&H) 224 ITR page 180 The Tribunal, however, noticed that the confirmation letter had been duly filed and Ishwar Chandwas also subsequently examined by the Commissioner during the appellate proceedingswherein Ishwar Chand confirmed the loan to the assessee. A sum of Rs. 37,000 had beenadvanced by Ishwar Chand to the assessee on 14- 3-1986 and the second amount of Rs.30,000 was given on 19-3-1986. Both the payments were made by account-payee cheques.The money was returned by the assessee to Ishwar Chand with interest amounting t The Tribunal correctly took the view that the assessee was not supposed to prove the sourceof the loans. Suspicion, howsoever strong, cannot take the place of evidence or proof. Onthese facts, the question as sought to be referred is declined. 1 %., Assessee can be treated to have discharged the onus of explaining the cash credit as soon as creditor is produced. 2 Bansilal Malhotra vs. DCIT ITAT, Jodhpur Bench ITA No-1902/JP/1994) Whether assessee can be treated to have discharged the onus of explaining the cash credit as soon as creditor is produced before the AO and the creditor has also satisfactorily explained the source thereof — Held Yes Further held that affidavit/statement of creditor has to be believed unless the AO refutes the same. 2-4 Without rejection of books no addition can be made I.T.A. No. 17/Jodh/2024 Assessment Year: 2017-18 13 3. Income-tax Officer V/s Mewar Textile Mill (ITAT, JPR) reported in 64 TTJ page 502 On the above observations, the Hon'ble High Court has allowed the appeal of the assessee. 6.2. In case of CIT vs. Maharaja Shree Umaid Mills Ltd. (1991) 96 CTR (Raj) 72 : (1991) 192 ITR 565 (Raj), the Hon'ble Rajasthan High Court has held that the Tribunal was justified in holding that since books of accounts had not been rejected, the mere fact that there had been a fall in the G.P. rate would not lead to the inference that the expenditure had been inflated. 6.3. In case of CIT vs. Padamchand Ram Gopal (1970) 76 ITR 719 (SC), the Hon'ble Supreme Court has held that no addition is justified if the books of accounts are not rejected. 6.4. We have also seen the other case law relied upon by the learned authorized representative and we find that the book results cannot be ignored if the books of accounts are not rejected or any defect were not pointed out by the AO. Therefore, we do not see any infirmity in the order of the CIT(A). On the reasons given by CIT (A) and on the reasons given here by us, the order of the CIT (A) is confirmed here by us. 5-6 Creditors have affirmed in their examination, no addition. 4 CIT Vs Jai Kumar Bakiwal (RAJ High Court) DB IT APPEAL NO 269 OF 2011 When we peruse the facts herein above, it is an admitted position that all the cash creditors have affirmed in 7-9 I.T.A. No. 17/Jodh/2024 Assessment Year: 2017-18 14 their examination that they had advanced money to the assessee from their own respective bank accounts. Therefore, when there is categorical finding even by the AO that the money came from the respective bank accounts of the creditors, which did not flow in the shape of the money, then, in our view, such an addition cannot be sustained and has been rightly deleted by both the two appellate authorities. There is no clinching evidence in the present case nor the AO has been able to prove that the money actually belonged to none but the assessee himself. The action of the AO appears to be based on mere suspicion. Capacity of the lender to advance money to the assessee, was not a matter which could be required of the assessee to be established 5. Labh Chand Bohra "So far as capacity of the lender is Vs ITO, Pali (HC Raj) concerned, in our view, on the face of the judgment of Hon'ble Supreme 10-12 ITA No: 92 of 2005 Court, in Daulat Ram's case (supra), and other judgments, capacity of the lender to advance money to the assessee, was not a matter which could be required of the assessee to be established," v, 6 CIT Vs In that view of the matter and following the principles laid down by the Supreme 13 India Steel And Wire Products Ltd (HC Cal) Court in that judgment, the question is answered in the affirmative and in favour of the assessee. 7 CIT The Bench noticed the earlier decision in 14-15 Vs AL. VR. ST. Veerappa Chettiar vs.CIT B Nagi Reddi (HC Mad) (supra), but were inclined to hold that the decision of the earlier Bench could not be regarded as good in law in view of the subsequent enunciation of law in Sri Ramulu's case (1977) 39 STC 177 (SC Paper Book I.T.A. No. 17/Jodh/2024 Assessment Year: 2017-18 15 Sr. No. Particular Page No. 1 Submission before the Income Tax Officer 1 2 Copy of affidavit of Shri Mangal Chand 2 3 Copy of Statement of creditor Shri Mangal Chand 3 4 Copy of PAN card of Mangal Chand 4 7. The ld. AR of the assessee in addition briefly submitted that the assessee has discharged the initial burden casted upon the assessee and the assessee has produced the Shri Mangal Chand, he has accepted the fact that he has granted loan to the assessee, his statement was recorded by the ld. AO. The assessee has also filed an affidavit dated 25.04.2019 when the said Shri Mangal Chand has confirmed to have given the loan to the assessee on 30.03.2017 and the said money have been given back to him on 06.04.2017. This affidavit has not been challenged by the ld. AO or that of the ld. CIT(A). Thus, the assessee has provided PAN as an identity proof, genuineness of the transaction is already proved by way of affidavit wherein the money given and received back both have been confirmed proves that the short term loan was genuine transaction. So, far as the capacity of Shri Mangal Chand he has already confirmed his source of income being the sale proceeds of the sarbat ( cold drink ) produced by him. 8. The ld DR is heard who has relied on the findings of the lower authorities and submitted that the ld. AO has recorded the statement of I.T.A. No. 17/Jodh/2024 Assessment Year: 2017-18 16 Shri Mangal Chand and the ld. AO has already placed on record that there no capacity of that party to advance the money to the assessee so she relied upon the finding of the lower authority. 9. We have heard the rival contentions and perused the material placed on record and gone through the various judicial precedent cited by both the parties to drive home to their respective contentions. The bench noted that the assessee has received a sum of Rs. 5,00,000/- from Shri Mangal Chand Proprietor of M/s. Royal Rose Industries on 30.03.2017 by an account payee cheque. The assessee has also repaid the said money to Shri Mangal Chand on 06.04.2017 by an account payee cheque. The ld. AO based on the fact that the immediate source of the money advanced to the assessee was deposit of cash disbelieved the loan accepted by the assessee and has considered it as unexplained creditor and has added the same as income u/s. 68 of the Act. In the first appeal the ld. CIT(A) has issued three notices to the assessee and found that the assessee has not rebutted the finding of the ld. AO and therefore, he has dismissed the appeal of the assessee. Before us the ld. AR of the assessee submitted that the as per the provisions of section 68 of the Act when any sum found credited in the books maintained by the assessee, and the assessee offers no explanation I.T.A. No. 17/Jodh/2024 Assessment Year: 2017-18 17 about the nature and source of that sum then it may be treated as unexplained cash credit whereas in this case the assessee has established the identity of the creditor by giving the PAN card, affidavit and his presence was marked before the ld. AO and the same is not doubted. As regards the genuineness of the transaction the assessee has received the money by an account payee cheque and the same has been given back this itself shows that the transaction was short period loan and the same is established by filling the details of the cheque and the bank account number. As regards the capacity he has explained the nature and source of the money advanced to the assessee and the ld. AO has not doubted that the fact that the assessee is engaged in the producing the sarbat and the source of the cash deposit is the amount received as sales proceeds of the sarbat. Thus, based on the various case laws cited by the ld. AR of the assessee wherein it is held that when the identity and genuineness of the transaction is established then capacity of the lender to advance the money to the assessee cannot be a matter which the assessee could be required to established [ Labh Chand Bohra Vs. ITO (Raj HC)]. The jurisdictional high court has also held that when the cash creditor have affirmed in their examination that they have advanced the money to the assessee from their own respective bank account. Therefore, when there is categorical finding I.T.A. No. 17/Jodh/2024 Assessment Year: 2017-18 18 even by the ld. AO that the money came from the respective bank accounts of the creditors, which did not flow in the shape of the money, then such an addition cannot be sustained [ CIT Vs. Jai Kumar Bakiwal 366 ITR 217 ]. The relevant finding of the jurisdictional high court is as under 20. When we peruse the facts herein above, it is an admitted position that all the cash creditors have affirmed in their examination that they had advanced money to the assessee from their own respective bank accounts. Therefore, when there is categorical finding even by the AO that the money came from the respective bank accounts of the creditors, which did not flow in the shape of the money, then, in our view, such an addition cannot be sustained and has been rightly deleted by both the two appellate authorities. There is no clinching evidence in the present case nor the AO has been able to prove that the money actually belonged to none but the assessee himself. The action of the AO appears to be based on mere suspicion. Respectfully following finding of the cited case laws and considering the fact that the case law cited by the assessee are similar to the facts of the present case and therefore, we direct the ld. AO to delete the addition of Rs. 5,00,000/- made in the hands of the assessee. 10. In the result, the appeal of the assessee is allowed. Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board. Sd/- Sd/- (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) Judicial Member Accountant Member I.T.A. No. 17/Jodh/2024 Assessment Year: 2017-18 19 Ganesh Kumar, PS Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order Date Initial 1. Draft dictated on Sr.PS/PS 2. Draft placed before author Sr.PS/PS 3. Draft proposed & placed before the Second Member JM/AM 4. Draft discussed/approved by Second Member JM/AM 5. Approved Draft comes to the Sr. P.S./P.S. Sr.PS/PS 6. Kept for pronouncement on Sr.PS/PS 7. File sent to the Bench Clerk Sr.PS/PS 8. Date on which file goes to the Head Clerk 9. Date on which file goes to the AR 10. Date of dispatch of Order
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