Mahendra Kumar Agarwal, Secunderabad V. DCIT., Circle-2(3), Hyderabad, Hyderabad

ITA 1831/HYD/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87287 (ITAT-HYDERABAD)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 31-03-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 04-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Keywords: Unexplained cash credit; Application of stay; Additional evidence; Corroborative evidences
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.1831/HYD/2014 ALONG WITH S.A.NO.104/HYD/2014 ASSESSMENT YEAR 2010-2011 MR. MAHENDRA KUMAR AGARWAL, SECUNDERABAD. ABLPA4518K VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 2(3) HYDERABAD. (APPLICANT) (RESPONDENT) FOR ASSESSEE : MR. Y. RATNAKAR FOR REVENUE : MR. D. SUDHAKAR RAO DATE OF HEARING : 29.01.2015 DATE OF PRONOUNCEMENT : 06.02.2015 ORDER PER SAKTIJIT DEY, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD. CIT(A)-III, HYDERABAD DATED 13.10. 2014 FOR THE A.Y. 2010-2011. 2. THOUGH, THE ASSESSEE HAS RAISED AS MANY AS 20 GROUNDS BUT THE SOLITARY ISSUE ARISING FOR CONSIDER ATION IS IN RESPECT OF ADDITION OF AMOUNT OF RS.24,51,59,200 AS UNEXPLAINED CREDIT UNDER SECTION 68 OF THE ACT. 3. BRIEFLY, THE FACTS RELATING TO THE ISSUE IN DIS PUTE ARE, ASSESSEE IS AN INDIVIDUAL. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, ASSESSEE FILED HIS RETURN OF INCOME ON 30.07.2010 DECLARING TOTAL INCOME OF RS.1,01,13,840 . DURING THE ASSESSMENT PROCEEDINGS, A.O. NOTICED THAT ASSES SEE DURING THE RELEVANT PREVIOUS YEAR HAS RECEIVED UNSECURED L OAN OF 2 ITA.NO.1831/HYD/2014 MR. MAHENDRA KUMAR AGARWAL, SECUNDERABAD. RS.47,05,04,082 FROM VARIOUS PERSONS. ASSESSING OFF ICER, THEREFORE, CALLED UPON ASSESSEE TO FURNISH THE DETA ILS OF ALL LOAN CREDITORS ALONG WITH THEIR CREDITWORTHINESS. IN RES PONSE TO THE QUERY MADE, AS NOTED BY THE A.O. IN THE ASSESSMENT ORDER, ASSESSEE FURNISHED CONFIRMATION LETTERS AND COPIES OF THE BANK ACCOUNT STATEMENTS EVIDENCING RECEIPT OF THE AMOUNT S FROM THE LOAN CREDITORS. HOWEVER, FOR VERIFYING THE GENUINEN ESS OF THE LOAN TRANSACTIONS, THE A.O. IN COURSE OF HEARING ON 12.02.2013 CALLED UPON THE ASSESSEE TO PRODUCE THE LOAN CREDIT ORS BASED AT KOLKATA FOR EXAMINATION BETWEEN 25.02.2013 AND 27.02.2013 AT INCOME TAX OFFICE, KOLKATA. IT IS NOT ED BY THE A.O., FEW OF THE LOAN CREDITORS BASED AT KOLKATA RE SPONDED TO THE SUMMONS ISSUED AND THEY WERE EXAMINED. HE OBSER VED THAT MANY OF THE LOAN CREDITORS DID NOT APPEAR AND SOME OF THEM WERE REPRESENTED BY THEIR AUTHORISED REPRESENT ATIVES. A.O. OBSERVED THAT OUT OF THE TOTAL 78 CREDITORS TO WHOM SUMMONS WERE ISSUED, 20 PERSONS APPEARED EITHER BEF ORE HIM AT KOLKATA OR BEFORE THE CONCERNED A.O. IN BOMBAY. 24 CREDITORS DID NOT APPEAR IN PERSON BUT WERE REPRESE NTED THROUGH THEIR AUTHORISED REPRESENTATIVES WHEREAS, R EST OF THE CREDITORS NEVER APPEARED. A.O. OBSERVED, THE CREDIT ORS WHO APPEARED BEFORE HIM CONFIRMED OF HAVING ADVANCED TH E LOANS TO THE ASSESSEE. HOWEVER, WHEN ASKED TO PROVE THEIR CREDITWORTHINESS, THEY STATED THAT THE LOANS ADVANC ED WERE OUT OF LOAN TAKEN FROM OTHERS, REFUND OF LOANS GIVEN EA RLIER AND SALE OF SHARES. SIMILARLY, WHEN AUTHORISED REPRESEN TATIVES WHO APPEARED ON BEHALF OF SOME OF THE CREDITORS WERE AS KED ABOUT THE CREDITWORTHINESS OF THE CREDITORS ALSO ADVANCED SIMILAR EXPLANATION. AS FAR AS OTHER LOAN CREDITORS WHO DID NOT APPEAR IN RESPONSE TO THE SUMMONS ISSUED BUT SEND LETTERS TO THE A.O. WITH THEIR CONFIRMATION AND INCOME TAX ASSESSMENT D ETAILS, 3 ITA.NO.1831/HYD/2014 MR. MAHENDRA KUMAR AGARWAL, SECUNDERABAD. BALANCE SHEET ETC., THE A.O. OBSERVED THAT THE PART ICULARS GIVEN BY THEM DOES NOT PROVE THEIR CREDITWORTHINESS TO AD VANCE THE LOANS. IN RESPECT OF ONE OF THE CREDITOR, NAMELY MR . PRADEEP NAG OF KOLKATA, IT WAS OBSERVED BY THE A.O. THAT TH E SAID PERSON APPEARED BEFORE THE A.O. IN RESPONSE TO SUMM ONS AND WHEN EXAMINED CATEGORICALLY STATED THAT NEITHER HE KNEW THE ASSESSEE NOR HE AT ANY TIME ADVANCED ANY LOAN TO TH E ASSESSEE. FURTHER, HE STATED THAT HIS MONTHLY INCOME IS RS.20 00 ONLY. ASSESSING OFFICER, THEREFORE, OBSERVED THAT IN CASE OF ALMOST ALL THE LOAN CREDITORS CREDITWORTHINESS IS NOT PROVED. ACCORDINGLY, HE TREATED THE LOAN TRANSACTION AMOUNTING TO RS.24, 51,59,299 REPRESENTING 78 LOAN CREDITORS AS UNEXPLAINED CREDI T UNDER SECTION 68 OF THE ACT AND ADDED IT TO THE INCOME OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR. BEING AG GRIEVED OF THE ASSESSMENT ORDER, ASSESSEE PREFERRED APPEAL BEF ORE THE LD. CIT(A). IN COURSE OF HEARING OF APPEAL BEFORE THE L D. CIT(A), ASSESSEE FURNISHED VOLUMINOUS DOCUMENTS TO PROVE LO AN TRANSACTIONS AS GENUINE. LD. CIT(A), HOWEVER, REJEC TED THE SUBMISSIONS OF THE ASSESSEE AND CONFIRMED THE ADDIT ION MADE BY THE A.O. BEING AGGRIEVED, ASSESSEE IS BEFORE US. 4. LEARNED A.R. REFERRING TO THE VOLUMINOUS DOCUMENTARY EVIDENCES IN THE FORM OF PAPER BOOK SUB MITTED BEFORE US THAT THE A.O. EFFECTIVELY COMMENCED HIS E NQUIRY RELATING TO THE LOAN TRANSACTIONS FROM 18.02.2013 W HEN HE ASKED THE ASSESSEE TO APPEAR BEFORE HIM. SUBSEQUENT LY, THE A.O. MADE SOME ENQUIRES AT KOLKATA FROM 25.02.2013 TO 27.02.2013. IT WAS SUBMITTED, THE ENQUIRY MADE BY T HE A.O. WAS BY HIMSELF ALONE WITHOUT INFORMING THE ASSESSEE . HE SUBMITTED, ON 02.12.2013 A LETTER WAS ADDRESSED ON BEHALF OF THE ASSESSEE TO THE A.O. THAT AS THE ASSESSEE IS AT SINGAPORE, 4 ITA.NO.1831/HYD/2014 MR. MAHENDRA KUMAR AGARWAL, SECUNDERABAD. THE ACCOUNTANT OF THE COMPANY WHERE THE ASSESSEE IS WORKING AS A MANAGING DIRECTOR WILL BE APPEARING BEFORE THE A.O. AS AND WHEN REQUIRED. THE LEARNED A.R. SUBMITTED THAT AFTER ENQUIRES WERE COMPLETED AT KOLKATA, THE ASSESSEE PE RSONALLY ATTENDED BEFORE THE A.O. AT HYDERABAD ON 08.03.2013 AND STATEMENT WAS RECORDED FROM HIM. IT WAS SUBMITTED T HOUGH, THE ASSESSEE MADE REPEATED REQUESTS TO FURNISH COPY OF THE STATEMENT RECORDED BUT TILL DATE A COPY OF THE STAT EMENT WAS NOT MADE AVAILABLE TO THE ASSESSEE. EVEN IN RESPECT OF ENQUIRY CONDUCTED AT KOLKATA ALSO, THOUGH, THE ASSESSEE REQ UESTED FOR COPIES OF THE INFORMATION/MATERIAL GATHERED BY THE A.O. WHICH HE INTENDED TO USE AGAINST THE ASSESSEE BUT NO SUBS TANTIVE INFORMATION WAS MADE AVAILABLE TO THE ASSESSEE EXCE PT COPIES OF SOME BANK ACCOUNTS OF CERTAIN LOAN CREDITORS AND SOME COPIES OF THE STATEMENTS RECORDED FROM THEM. LEARNE D A.R. SUBMITTED THAT THE INFORMATION GIVEN TO THE ASSESSE E BY THE A.O. IN RESPECT OF THE ENQUIRY CONDUCTED BY HIM IS INCOMPLETE AS IT DOES NOT COVER ALL THE ENQUIRES MADE. LEARNED A.R. SUBMITTED THAT AT THE FAG END OF MARCH, 2013 SOME M ORE ENQUIRES WERE MADE AT JAIPUR, MUMBAI AND DELHI THRO UGH LOCAL INVESTIGATION WING AND THE A.O. ON 22.03.2013 FURNISHING SOME OF THE COPIES OF THE ENQUIRES MADE PROPOSED TO ADD BACK THE LOANS AS UNEXPLAINED CREDIT UNDER SECTION 68. 5. LEARNED A.R. SUBMITTED, IN REPLY DATED 25.03.2013, THOUGH, THE ASSESSEE MADE AN ATTEMPT TO EXPLAIN TO THE EXTENT POSSIBLE ON THE OBJECTIONS RAISED BY THE A.O. BUT WITHOUT CONSIDERING THE SAME OR GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE TO EXPLAIN, THE ASSESSMENT WAS COMP LETED ON 31.03.2013 BY MAKING ADDITION OF THE UNSECURED LOAN OF RS.24,51,59,299. LEARNED A.R. SUBMITTED THAT THE FA CTS ON 5 ITA.NO.1831/HYD/2014 MR. MAHENDRA KUMAR AGARWAL, SECUNDERABAD. RECORD WILL REVEAL (A) ALL THE INFORMATION GATHERED BY THE A.O. HAS NOT BEEN MADE AVAILABLE TO THE ASSESSEE (B) THE ENQUIRIES WERE MADE ONLY AT THE FAG END AND (C) TIME AVAILABL E TO THE ASSESSEE WAS TOO SHORT FOR ADEQUATE RESPONSE. IN TH IS CONTEXT, THE LEARNED A.R. REFERRED TO ASSESSEES LETTER DATE D 18.03.2013 WHEREIN IT WAS STATED THAT AS THE CREDITORS ARE NOT PERSONALLY KNOWN TO THE ASSESSEE AND THEY ARE NOT UNDER HIS CO NTROL AND IT IS HIS COMPANYS EXECUTIVES AND PERSONS WHO ARRA NGED LOANS, ADEQUATE OPPORTUNITY HAS TO BE GIVEN TO REMO VE THE DOUBT AS MAY BE THERE WITH RESPECT TO LOAN TRANSACT IONS. LEARNED A.R. SUBMITTED THAT THE ENTIRE ENQUIRY WAS MADE AT THE FAG END OF FEBRUARY, 2013, THE CREDITORS ARE OU T OF STATION CREDITORS AND ARE NOT EASILY ACCESSIBLE TO CONTACT THEM AT SHORT NOTICE. FURTHER, DURING THE RELEVANT PERIOD ASSESSE E WAS AWAY FROM INDIA BOTH ON PERSONAL AND COMPANYS WORK. THE REFORE, EVEN IF THERE WAS ANY DEFICIENCY IN THE INFORMATION AVAILABLE OR ANY FURTHER CLARIFICATIONS WERE REQUIRED, IT COULD NOT BE SECURED FOR WANT OF TIME. LEARNED A.R. SUBMITTED, THE MAIN REASON FOR DISBELIEVING THE LOAN TRANSACTIONS BY THE A.O. IS F OR THE REASON THAT NONE OF THE LOAN CREDITORS HAVE ADVANCED THE L OANS TO THE ASSESSEE FROM THEIR TAXED INCOME. HOWEVER, SUCH ASS UMPTION OF THE A.O. IS ERRONEOUS BECAUSE A LOAN CAN ALSO BE GIVEN OUT OF THE AVAILABLE FUNDS OF THE CREDITORS AND NEED NOT N ECESSARILY FROM THE TAXABLE INCOME ONLY. LEARNED A.R. SUBMITTE D, THE VOLUMINOUS DOCUMENTARY EVIDENCE SUBMITTED BEFORE TH E A.O. AS WELL AS FIRST APPELLATE AUTHORITY WOULD REVEAL T HAT NOT ONLY THE ASSESSEE HAS FURNISHED THE IDENTITY OF THE LOAN CREDITORS BY FURNISHING THEIR NAME, ADDRESS, INCOME TAX PARTICUL ARS ETC., BUT THE BANK STATEMENTS, INCOME TAX RETURNS, FINANC IAL STATEMENTS LIKE BALANCE SHEETS ETC., CLEARLY ESTABL ISH THAT ALL THE LOAN CREDITORS HAVE AVAILABLE FUND TO ADVANCE T HE LOAN. 6 ITA.NO.1831/HYD/2014 MR. MAHENDRA KUMAR AGARWAL, SECUNDERABAD. FURTHER, THE LEARNED A.R. SUBMITTED, THE ENTIRE LOA N TRANSACTION WAS THROUGH REGULAR BANKING CHANNEL AND THE REPAYMENT BY THE ASSESSEE IS ALSO THROUGH BANKING C HANNEL. IT IS ALSO A FACT THAT ASSESSEE HAS PAID INTEREST ON T HE CREDITS TO THE CONCERNED CREDITORS THROUGH BANKING CHANNEL. UN DER THESE CIRCUMSTANCES, THE GENUINENESS OF THE LOAN TRANSACT ION ALSO CANNOT BE DOUBTED. 6. LEARNED A.R. SUBMITTED THAT THE ASSUMPTION OF T HE A.O. THAT NOT A SINGLE LOAN TRANSACTION FROM ANY OF THE 78 CREDITORS IS GENUINE IS TOTALLY ABSURD ASSUMPTION. LEARNED A.R. SUBMITTED, THE A.O. SUPPLIED TO THE ASSESSEE COPIES OF SOME OF THE CREDITORS STATEMENTS BUT ALL STATEMENTS RELIED UPON BY HIM TO TREAT THE LOAN TRANSACTIONS AS UNEXPLAINED WERE NOT GIVEN TO THE ASSESSEE. THEREFORE, ASSESSEE COULD NOT EFFECTI VELY OFFER HIS EXPLANATION IN RESPECT OF THE MATERIALS COLLECTED B Y THE A.O. LEARNED A.R. SUBMITTED, THOUGH IN THE ASSESSMENT OR DER, A.O. OBSERVED THAT IN NUMBER OF CASES ENQUIRIES REVEAL T HAT NO SUCH COMPANY OR PERSON WERE IN EXISTENCE BUT THE ASSESSE E COULD NOT FURNISH ANY EXPLANATION AS HE HAD NO KNOWLEDGE OF THE ENQUIRY MADE BY THE A.O. LEARNED A.R. SUBMITTED, AL L THE CREDITORS ARE AVAILABLE AT THE ADDRESSES AND THE CORRESPONDENCE ON RECORD INCLUDING THE LETTERS ADDR ESSED TO THE A.O. BY THE CREDITORS IN THE MONTH OF MARCH, 20 13 ALSO ESTABLISH THE FACT THAT THEY WERE AT THE GIVEN ADDR ESSES. THE BANK ACCOUNTS PRODUCED AS WELL AS THE INCOME TAX RE TURNS ALSO HAVE THEIR ADDRESSES. SUMMONS ISSUED WERE ALSO RECE IVED BY THE CREDITORS. UNDER THESE CIRCUMSTANCES, IT CANNOT BE SAID THAT THE CREDITORS DO NOT EXIST. LEARNED A.R. SUBMI TTED, SEVERAL CREDITORS COULD NOT APPEAR BEFORE A.O. AT K OLKATA ON THE DATE FIXED MAY BE BECAUSE THEY DID NOT RECEIVE ANY NOTICE 7 ITA.NO.1831/HYD/2014 MR. MAHENDRA KUMAR AGARWAL, SECUNDERABAD. FOR APPEARANCE OR MAY BE BECAUSE THEY WERE OUT OF S TATION ON THE DATE FIXED BUT SUBSEQUENTLY, ONCE THEY CAME TO KNOW THAT THEY WERE REQUIRED TO APPEAR, THEY IMMEDIATELY OFFE RED TO APPEAR BEFORE THE A.O. OR ANY INCOME TAX AUTHORITY AT ANY TIME CONVENIENT TO THE A.O. LEARNED A.R. SUBMITTED, THOU GH OUT OF 78 CREDITORS 65 CREDITORS APPEARED BEFORE THE A.O. WHEREAS, A.O. IN THE ASSESSMENT ORDER HAS STATED THAT ONLY 4 4 CREDITORS HAVE APPEARED. LEARNED A.R. SUBMITTED, ONLY 13 PERS ONS WHO COULD NOT APPEAR DUE TO SOME REASON OR THE OTHER AR E NOW READY TO APPEAR BEFORE THE A.O. LEARNED A.R. SUBMIT TED, EVEN THOUGH BEFORE THE FIRST APPELLATE AUTHORITY THE ASS ESSEE HAS SUBMITTED NECESSARY EVIDENCE TO PROVE THE GENUINENE SS OF EACH OF THE LOAN TRANSACTION BUT LD. CIT(A) WITHOUT APPL YING HIS MIND EVEN TO A SINGLE DOCUMENT HAS PASSED THE ORDER IN A PERFUNCTORY AND MECHANICAL MANNER BY CONFIRMING THE ADDITION. LEARNED A.R. SUBMITTED, AS THE ASSESSEE W AS NOT GIVEN AN ADEQUATE OPPORTUNITY BY THE A.O. TO EXPLAI N AND REMOVE HIS DOUBTS AND FURTHER AS THE A.O. HAS MADE THE ADDITION WITHOUT MAKING PROPER ENQUIRY, THE ENTIRE ISSUE NEEDS TO BE RE-EXAMINED BY HIM. 7. LEARNED D.R. ON THE OTHER HAND, OPPOSING THE REQUEST TO SET ASIDE THE ASSESSMENT TO THE A.O. SUB MITTED THAT THE ASSESSMENT ORDER REVEALS THE FACT THAT THE A.O. HAS MADE NECESSARY ENQUIRY NOT ONLY IN HYDERABAD BUT ALSO BY VISITING KOLKATA AND EXAMINING THE CREDITORS. THEREFORE, SIN CE THE A.O. HAS PASSED THE ASSESSMENT ORDER AFTER MAKING NECESS ARY ENQUIRY AND GIVING DUE OPPORTUNITY TO THE ASSESSEE, THERE IS NO REASON TO REMIT IT TO THE A.O. HOWEVER, LEARNED D.R . SUBMITTED THAT IF THE ASSESSEE FEELS LD. CIT(A) HAS NOT LOOKE D INTO HIS 8 ITA.NO.1831/HYD/2014 MR. MAHENDRA KUMAR AGARWAL, SECUNDERABAD. GRIEVANCE IN A PROPER MANNER, THE MATTER CAN BE REM ITTED BACK TO THE LD. CIT(A) FOR FRESH ADJUDICATION. 8. WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS VO LUMINOUS DOCUMENTS SUBMITTED BEFORE US IN THE FORM OF PAPER BOOKS. AT THE OUTSET, IT IS TO BE BORNE IN MIND, INITIAL BURD EN IS ON ASSESSEE TO PROVE A PARTICULAR LOAN TRANSACTION APP EARING IN HIS BOOKS BY ESTABLISHING (A) IDENTITY OF THE CREDI TOR (B) THEIR CREDITWORTHINESS AND (C) GENUINENESS OF THE TRANSAC TION. AS IS EVIDENT FROM THE FACTS ON RECORD, THE DISPUTE IS WI TH REGARD TO AN AMOUNT OF RS.24,51,59,299 REPRESENTING UNSECURED LOAN FROM 78 CREDITORS. OUT OF THE 78 CREDITORS, 72 CRED ITORS WERE FROM DIFFERENT PLACES OF WEST BENGAL, ONE CREDITOR EACH IS FROM JAIPUR, DELHI AND HYDERABAD AND THREE ARE FROM MUMB AI. WHILE THE A.O. IN THE ASSESSMENT ORDER HAS STATED T HAT IN RESPONSE TO THE SUMMONS ISSUED BY HIM 18 PERSONS AP PEARED BEFORE HIM AT KOLKATA AND 2 CREDITORS APPEARED BEFO RE THE A.O. AT BOMBAY, WHEREAS, 24 PERSONS APPEARED BEFORE HIM AT KOLKATA THROUGH THEIR AUTHORISED REPRESENTATIVE. HO WEVER, LEARNED A.R. HAS SUBMITTED BEFORE US THAT OUT OF 78 CREDITORS, 65 PERSONS APPEARED BEFORE THE A.O. AND FURNISHED N ECESSARY DETAILS/EVIDENCES WITH REGARD TO LOAN TRANSACTIONS. LEARNED A.R. SUBMITTED THAT 13 CREDITORS WHO EARLIER COULD NOT APPEAR BEFORE THE A.O. FOR VARIOUS REASONS ARE ALSO NOW RE ADY TO APPEAR. FROM THE FACTS ON RECORD, ONE MORE THING IS CLEAR THAT THE ASSESSEE HAS FURNISHED THE NAMES, ADDRESSES, IN COME TAX PARTICULARS OF ALL THE LOAN CREDITORS AND HAS OBTAI NED CONFIRMATION LETTERS FROM THE LOAN CREDITORS WHICH ARE FURNISHED BEFORE THE A.O. A MAJORITY OF THE CREDITO RS HAVE ALSO APPEARED EITHER IN PERSON OR THROUGH THEIR AUTHORIS ED 9 ITA.NO.1831/HYD/2014 MR. MAHENDRA KUMAR AGARWAL, SECUNDERABAD. REPRESENTATIVES BEFORE THE A.O. AND HAVE CONFIRMED OF HAVING ADVANCED THE LOAN TO THE ASSESSEE. IT IS ALSO EVIDE NT THAT ALL THE LOAN TRANSACTIONS WERE THROUGH REGULAR BANKING CHAN NEL. MANY OF THE CREDITORS ARE ALSO INCOME TAX ASSESSEE S AND NOT ONLY THEIR INCOME TAX PARTICULARS BUT THE INCOME TA X RETURNS FILED BY THEM ALONG WITH BALANCE SHEETS ETC., WERE ALSO SUBMITTED BEFORE THE A.O. EITHER BY ASSESSEE OR DIR ECTLY BY THOSE PERSONS. IT ALSO APPEARS FROM THE FACTS ON RE CORD THAT IN CASE OF MANY OF THE CREDITORS, THE ASSESSEE HAS SUB SEQUENTLY REPAID THE LOAN, ALSO THROUGH REGULAR BANKING CHANN EL. IT ALSO APPEARS THAT DURING THE CURRENCY OF THE LOANS ASSES SEE ALSO CREDITED INTEREST TO THE CONCERNED LOAN CREDITORS T HROUGH BANKING CHANNEL. 9. AS IT APPEARS FROM THE OBSERVATIONS MADE BY THE A.O. IN THE ASSESSMENT ORDER, HE HAS DISBELIEVED TH E LOAN TRANSACTIONS MAINLY ON THE GROUND OF CREDITWORTHINE SS. ACCORDING TO THE A.O. THE RETURN OF INCOME, BALANC E SHEET ETC., DO NOT ESTABLISH THE FACT THAT THE CREDITORS HAVE M EANS TO ADVANCE THE LOAN TO THE ASSESSEE. HE HAS ALSO OBSER VED, IN MANY OF THE CASES, THE CREDITORS HAVE STATED THAT T HEY HAVE ADVANCED LOAN BY TAKING LOAN FROM OTHERS. APPARENTL Y, THESE FACTS HAVE LED THE A.O. TO BELIEVE THAT THE CREDITO RS DO NOT HAVE THE CREDITWORTHINESS TO ADVANCE THE LOAN TO THE ASS ESSEE. HOWEVER, IT IS TO BE NOTED, THOUGH, THE INITIAL BUR DEN OF PROVING THE LOAN TRANSACTION IS ON THE ASSESSEE BUT ONCE HE DISCHARGES SUCH BURDEN FURNISHING EXPLANATION WITH SUPPORTING EVIDENCE THEN IT IS FOR THE A.O. TO MAKE NECESSARY ENQUIRY A ND BRING MATERIAL ON RECORD TO PROVE THAT THE LOAN TRANSACTI ONS ARE NOT GENUINE. IN THE PRESENT CASE, THERE IS NO DISPUTE T HAT THE ENTIRE LOAN TRANSACTION IS THROUGH REGULAR BANKING CHANNEL . 10 ITA.NO.1831/HYD/2014 MR. MAHENDRA KUMAR AGARWAL, SECUNDERABAD. MOREOVER, ALL THE CREDITORS HAVE ALSO CONFIRMED OF HAVING ADVANCED LOAN TO THE ASSESSEE. FURTHER, MANY OF THE CREDITORS ARE ALSO INCOME TAX ASSESSEES. IT IS ALSO A FACT TH AT ASSESSEE HAS NOT ONLY CREDITED INTEREST TO THE CREDITORS THR OUGH BANKING CHANNEL BUT IN MANY CASES HAS ALSO REPAID THE LOAN TO THE CREDITORS THROUGH BANKING CHANNEL. UNDER THESE CIRCUMSTANCES, WHEN THE ENTIRE TRANSACTION IS THROU GH REGULAR BANKING CHANNEL, THE LOAN RECEIVED BY THE ASSESSEE CANNOT BE TREATED AS UNEXPLAINED CREDIT MERELY ON THE ASSUMPT ION THAT THE CREDITWORTHINESS OF THE CREDITORS ARE NOT PROVE D. WHEN THE LOAN TRANSACTION IS THROUGH BANKING CHANNEL TO PROV E THAT IT IS NOT GENUINE, THE A.O. HAS TO MAKE PROPER ENQUIRY AN D ESTABLISH IT ON RECORD BY BRINGING SUFFICIENT EVIDE NCE THAT IT IS THE ASSESSEES MONEY WHICH HAS BEEN ROUTED BACK TO HIM THROUGH THE CREDITORS. UNLESS THIS FACT IS PROVED T HROUGH PROPER ENQUIRY, IT WILL NOT BE PROPER TO TREAT THE LOAN TRANSACTION AS NOT GENUINE ON CONJECTURE AND SURMIS ES. MOREOVER, WHEN MANY OF THE CREDITORS ARE INCOME TAX ASSESSEES IT HAS TO BE LOOKED INTO AS TO WHETHER TH E LOAN TRANSACTION HAS BEEN REFLECTED IN THEIR BALANCE SHE ET/CAPITAL ACCOUNT AND DISCLOSED TO THE DEPARTMENT. IF THE LOA N TRANSACTION HAS BEEN ACCEPTED IN THEIR HAND BY THE DEPARTMENT, THEN, IT CANNOT BE HELD TO BE OTHERWISE IN CASE OF THE ASSESSEE. ON PERUSAL OF THE ASSESSMENT ORDER I T IS MANIFEST THE A.O. HAS NOT LOOKED INTO ALL THESE ASP ECTS BY MAKING A PROPER ENQUIRY. ONLY ON THE BASIS OF PRESU MPTION AND SURMISES, HE HAS FORMED AN OPINION THAT THE CREDITWORTHINESS OF THE CREDITORS ARE NOT PROVED OR THEIR STATEMENTS THAT THE LOAN WAS ADVANCED OUT OF SALE O F SHARES OR FROM TAKING LOAN FROM OTHERS IS NOT BELIEVABLE. IN OUR VIEW, THE ISSUE COULD HAVE BEEN THRASHED OUT BY THE FIRST APP ELLATE 11 ITA.NO.1831/HYD/2014 MR. MAHENDRA KUMAR AGARWAL, SECUNDERABAD. AUTHORITY HAD HE MADE LITTLE EFFORT AND EXAMINED TH E DOCUMENTARY EVIDENCES PRODUCED BEFORE HIM. HOWEVER, IT IS MANIFEST FROM THE ORDER OF THE LD. CIT(A), HE HAS C ONFIRMED THE VIEW OF THE A.O. IN A MECHANICAL MANNER WITHOUT EXA MINING THE ISSUE PROPERLY. HAD THE LD. CIT(A) PROPERLY APP LIED HIS MIND WHILE DECIDING THE ISSUE THEN THE MATTER COULD HAVE BEEN DIFFERENT. FOR INSTANCE, THE A.O. WHILE EXAMINING O NE OF THE CREDITOR NAMELY MR. PRADEEP NAG, WHO ADVANCED LOAN OF RS. 3 LAKHS, HAS OBSERVED THAT IN COURSE OF EXAMINATION T HE SAID CREDITOR TOTALLY DENIED OF HAVING ADVANCED ANY LOAN TO THE ASSESSEE. HOWEVER, SUBSEQUENTLY, A LETTER SIGNED BY MR. PRADEEP NAG WAS ADDRESSED TO THE A.O. FURNISHING HI S DETAILS LIKE PAN ETC., AND CONFIRMING ADVANCING OF LOAN TO THE ASSESSEE. HE ALSO FURNISHED HIS BANK STATEMENT ETC. , THEREFORE, WITHOUT EXAMINING WHETHER THE PERSON EXAMINED BY TH E A.O. IS THE REAL CREDITOR OR NOT IT CANNOT BE ASSUMED THAT ASSESSEE HAS MANIPULATED THE CREDITOR. THEREFORE, ON OVERALL CON SIDERATION OF FACTS AND MATERIALS ON RECORD, WE ARE OF THE VIEW T HAT THE ENTIRE ISSUE RELATING TO THE LOAN TRANSACTIONS REPRESENTIN G THE 78 CREDITORS REQUIRES RE-EXAMINATION. MORE SO, CONSIDE RING THE SPECIFIC GRIEVANCE OF THE ASSESSEE THAT ADEQUATE OP PORTUNITY TO EXPLAIN WAS NOT GIVEN TO HIM. HAVING HELD THAT ISSU E RELATING TO LOAN TRANSACTIONS REQUIRES RE-EXAMINATION, IT IS NE CESSARY ALSO TO DECIDE WHETHER A.O. OR CIT(A) WILL BE THE APPROP RIATE AUTHORITY TO DECIDE IT AFRESH. IN THIS CONTEXT, IT NEEDS TO BE OBSERVED EACH OF THE LOAN TRANSACTION HAS TO BE EXA MINED INDEPENDENTLY IN THE CONTEXT OF THE EVIDENCES PRODU CED RELATING TO IT ALONG WITH THE EXPLANATION OF THE AS SESSEE FOR DETERMINING THE GENUINENESS. SINCE THE A.O., IN OUR VIEW, HAS NOT UNDERTAKEN SUCH EXERCISE IN RESPECT OF EACH OF THE LOAN TRANSACTION AND RATHER HAS COME TO HIS CONCLUSION B Y MAKING 12 ITA.NO.1831/HYD/2014 MR. MAHENDRA KUMAR AGARWAL, SECUNDERABAD. GENERAL OBSERVATIONS, WE ARE INCLINED TO REMIT THE MATTER BACK TO HIM FOR FRESH EXAMINATION. MOREOVER, IN COURSE O F HEARING BEFORE US, LEARNED A.R. SUBMITTED, THOSE CREDITORS WHO COULD NOT APPEAR BEFORE THE A.O. EARLIER, ARE READY TO OF FER THEMSELVES FOR EXAMINATION. LEARNED A.R. HAS ALSO SUBMITTED BE FORE US FINANCIAL STATEMENTS OF SOME CREDITORS AND REQUESTE D FOR TREATING THEM AS ADDITIONAL EVIDENCE. HOWEVER, WITH OUT GIVING OPPORTUNITY TO A.O. TO VERIFY THEM, WE CANNOT TAKE ANY DECISION ON THE BASIS OF THESE EVIDENCES. THERE IS ALSO DISP UTE AS REGARDS THE NUMBER OF CREDITORS APPEARING IN PURSUA NCE TO SUMMONS ISSUED BY A.O. WHILE THE A.O. HAS STATED TH AT ONLY 44 CREDITORS APPEARED BEFORE HIM, THE LEARNED A.R. HAS SUBMITTED THAT 65 CREDITORS APPEARED BEFORE A.O. CO NSIDERING ALL THESE ASPECTS, WE ARE OF THE VIEW IT WILL BE BE TTER TO REMIT THE ISSUE TO THE A.O. AS IT WILL BE DIFFICULT ON TH E PART OF LD. CIT(A) TO DECIDE IT INDEPENDENTLY, WITHOUT GETTING IT VERIFIED BY A.O. ON REMAND. ACCORDINGLY, WE SET ASIDE THE IMPUG NED ORDER OF LD. CIT(A) AND REMIT THE MATTER BACK TO THE A.O. FOR DECIDING AFRESH. IT IS OPEN FOR THE A.O. TO CONDUCT NECESSAR Y ENQUIRY AS DEEMED NECESSARY. HE MAY CALL UPON THE ASSESSEE TO FURNISH FURTHER INFORMATION AND IF NECESSARY MAY EXAMINE TH E CONCERNED LOAN CREDITORS WHO HAVE NOT APPEARED BEFO RE HIM, AS THE ASSESSEE HAS SUBMITTED THAT THE CREDITORS ARE R EADY TO APPEAR BEFORE THE A.O. THE A.O. MUST MAKE AVAILABLE TO THE ASSESSEE ANY MATERIAL WHICH HE PROPOSES TO USE AGAI NST ASSESSEE AND ALLOW OPPORTUNITY TO ASSESSEE TO EXPLA IN. AT THIS JUNCTURE, WE WANT TO MAKE IT CLEAR THAT WE HAVE NOT EXPRESSED ANY OPINION WITH REGARD TO THE ACCEPTABILITY OR OTH ERWISE OF THE LOAN TRANSACTIONS, WHICH THE A.O. HAS TO DECIDE BY EXAMINING EACH OF THE LOAN TRANSACTIONS ON ITS OWN MERIT BY C ONSIDERING THE EXPLANATION OF THE ASSESSEE AND THE EVIDENCES P RODUCED. 13 ITA.NO.1831/HYD/2014 MR. MAHENDRA KUMAR AGARWAL, SECUNDERABAD. NEEDLESS TO MENTION, A.O. MUST AFFORD REASONABLE OP PORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE TAKING A DECI SION IN THE MATTER. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 10. AS ASSESSEES APPEAL IS DISPOSED OFF, THE STAY APPLICATION REGISTERED AS S.A.NO.104/HYD/2014 HAS B ECOME INFRUCTUOUS, HENCE, DISMISSED. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 06.02.2015. SD/- SD/- (B.RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 06 TH FEBRUARY, 2015 VBP/- COPY TO 1. MR. MAHENDRA KUMAR AGARWAL, 1-7-293, M.G. ROAD, SECUNDERABAD. 2. DY. COMMISSIONER OF INCOME TAX, CIRCLE 2(3), HYDERA BAD. 3. CIT(A)-III, HYDERABAD 4. CIT-II, HYDERABAD. 5. D.R. ITAT B BENCH, HYDERABAD.