Sri. H.C. Mahadevaiah, Mysore V. Assistant Commissioner of Income tax, Circle-1(1), Mysore

ITA 1845/BANG/2018

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 7153 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 29-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR NISCHAL B
• Keywords: Proportionate interest; Question of law
• Section: 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-C BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 1845 /BANG/201 8 ASSESSMENT YEAR : 20 1 2 - 1 3 SHRI H.C. MAHADEVAIAH, PROP: M/S. SRI SIDDALINGESHWARA TRADERS, NO. 169, RAMAVILASA ROAD, MYSURU 560 024. PAN: ACMPM7684C VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1 [1], MYSURU. APPELLANT RESPONDENT ASSESSEE BY : SHRI NARENDRA SHARMA, ADVOCATE RE VENUE BY : DR. NISCHAL .B, ADDL. CIT (DR) DATE OF HEARING : 1 1 . 0 9 .2018 DATE OF PRONOUNCEMENT : 28 . 0 9 .2018 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME I S DIRECTED AGAINST THE ORDER OF LD. CIT(A), MYSURU DATED 29.12.2017 FOR ASSESSMENT YEAR 2012-13. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1. THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS], MYSURU DATED 29/12/2017, IN SO FAR AS IT IS AGAINST THE APPELLANT, IS OPPOSED TO THE LAW, WEIGHT OF EVIDENC E, PROBABILITIES, FACTS AND CIRCUMSTANCES IN THE APPELLANT'S CASE. 2. THE APPELLANT DENIES HIMSELF LIABLE TO BE TAXED ON TOTAL INCOME DETERMINED BY THE LEARNED AUTHORITIES BELOW AMOUNTI NG TO RS. 43,98,413/- AS AGAINST THE INCOME REPORTED BY THE A PPELLANT OF RS. 15,79,030/-, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS] IS NOT JUSTIFIED IN CONFIRMING THE ADDITIONS MADE BY THE LEARNED ASS ESSING OFFICER AMOUNTING TO RS. 24,61,000/- ON ACCOUNT OF UNEXPLAI NED UNSECURED LOANS, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE LEARNED AUTHORITIES ARE NOT JUSTIFIED IN LAW IN REJECTING THE ITA NO. 1845/BANG/2018 PAGE 2 OF 11 CLAIM OF THE APPELLANT UNREASONABLY WITHOUT PROPER APPRECIATION OF THE PROOFS ESTABLISHED AS NO PROOF, ON THE FACTS AN D CIRCUMSTANCES OF THE CASE. 5. THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS] FAILED TO APPRECIATE THAT THE LEARNED ASSESSING OFFICER HAVIN G SUMMONED THE LOAN CREDITORS AND RECORDED THE STATEMENT UNDER SEC TION 131 OF THE ACT AND THE SAID LOAN CREDITORS HAVING CONFIRMED THE TR ANSACTION OF LOAN WITH THE APPELLANT AND OUGHT NOT TO HAVE ADDED THE LOAN AMOUNTS AS INCOME OF THE APPELLANT AS UNEXPLAINED UNSECURED LO ANS ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS] FAILED TO APPRECIATE THAT ONCE THE EXISTENCE OF THE LOAN CRED ITOR IS PROVED AND SUCH PERSONS OWN THE CREDITS WHICH ARE FOUND IN THE BOOKS OF THE APPELLANT, THE APPELLANT'S ONUS STANDS DISCHARGED A ND THE APPELLANT IS NOT FURTHER REQUIRED TO PROVE THE SOURCE FROM WHICH THE CREDITORS COULD HAVE ACQUIRED THE MONEY ADVANCED TO HIM AND C ONSEQUENTLY NO ADDITION CAN BE MADE IN THE HANDS OF THE APPELLANT ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS] FAILED TO APPRECIATE THAT THE PROPORTIONATE DISALLOWANCE OF I NTEREST MADE BY THE LEARNED ASSESSING OFFICER AMOUNTING TO RS. 3,07,625 /- IS NOT PERTAINING TO THE ALLEGED UNEXPLAINED UNSECURED LOANS AND OUGH T TO HAVE DELETED THE SAID DISALLOWANCE WHICH WAS MADE ON A WRONG PRE SUMPTION AND WITHOUT APPLICATION OF MIND, ON THE FACTS AND CIRCU MSTANCES OF THE CASE. 8. THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS] IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF INTEREST BY THE L EARNED ASSESSING OFFICER AMOUNTING TO RS. 43,088/- BY INVOKING THE P ROVISIONS OF SECTION 40[A][IA] OF THE ACT IS NOT WARRANTED AS THE SAID A MOUNTS HAVE BEEN RECEIVED BY THE APPELLANT FROM THE COMPANIES AND TH E APPELLANT HAS NOT PAID THE INTEREST AND CLAIMED AS AN EXPENDITURE TO WARRANT DISALLOWANCE UNDER SECTION 40[A][IA] OF THE ACT ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 9. THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS] IS NOT JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE LEARNED ASSE SSING OFFICER ON ACCOUNT OF INTEREST ON TDS AMOUNTING TO RS. 7,670/- WITHOUT CONSIDERING THE CORRECT POSITION, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 10. THE ADDITION MADE BY THE LEARNED ASSESSING OFFI CER AND CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS] ARE ARBITRARY, ON SUSPICION AND SURMISES AND ALSO WITHOUT ANY APPL ICATION OF MIND AND CONSEQUENTLY THE ENTIRE ADDITIONS AND DISALLOWA NCE MADE BY THE AUTHORITIES BELOW REQUIRES TO BE CANCELLED, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO. 1845/BANG/2018 PAGE 3 OF 11 11. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER A S PER THE PARITY OF REASONING OF THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF KARANVIR SINGH 349 ITR 692, THE APPELLANT DENIES HI MSELF LIABLE TO BE CHARGED TO INTEREST UNDER SECTION 234 B & 234 C OF THE INCOME TAX ACT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. FURTHER THE LEVY OF INTEREST UNDER SECTION 234 B & 234 C OF THE ACT IS ALSO BAD IN LAW AS THE PERIOD, RATE, QUANTUM AND METHOD OF CALCULATION ADOPTED ON WHICH INTEREST IS LEVIED ARE ALL NOT DISCERNIBLE AND ARE WRONG ON THE FACTS OF THE CASE. 12. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, SUBST ITUTE AND DELETE ANY OR ALL GROUNDS OF APPEAL URGED ABOVE. 13. FOR THE ABOVE AND OTHER GROUNDS TO BE URGED DUR ING THE HEARING OF THE APPEAL, THE APPELLANT PRAYS THAT THE APPEAL BE ALLOWED IN THE INTEREST OF EQUITY AND JUSTICE. 3. IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT GROU ND NOS. 1 AND 2 ARE GENERAL FOR WHICH NO SEPARATE ADJUDICATION IS CALLED FOR. THER EAFTER, HE SUBMITTED THAT GROUND NOS. 3 TO 6 ARE REGARDING ONLY ONE ISSUE I.E . ADDITION OF RS. 24.61 LAKHS MADE BY THE AO AND CONFIRMED BY CIT(A) U/S. 68 OF I T ACT. IN THIS REGARD, HE DRAWN MY ATTENTION TO PAGES 12 TO 16 OF PAPER BOOK AND POINTED OUT THAT ON PAGE NO. 12 OF THE PAPER BOOK IS THE CONFIRMATION O F LOAN GIVEN BY MR. AVINASH K.J FOR A LOAN OF RS. 5 LAKHS GIVEN BY HIM ON 13.12 .2011 TO THE ASSESSEE ALONG WITH THE SOURCE OF HIS FUNDS BEING SALARY. HE FURT HER SUBMITTED THAT ON PAGES 13 TO 14 IS THE COPY OF EMAIL CORRESPONDENCE BETWEE N THE AO AND MR. AVINASH K.J AS PER WHICH IT IS SUBMITTED BY THAT PERSON TO THE AO THAT HE HAS ALREADY PROVIDED COPY OF BANK STATEMENT TO THE AO FOR THE P ERIOD FROM 01.04.2011 TO 31.03.2012 AND HENCE, IT SHOULD BE ACCEPTED THAT PR OPER COMPLIANCE WAS MADE BY THE ASSESSEE AND THE SAID LOAN CREDITOR IN RESPECT OF LOAN OF RS. 5 LAKHS GIVEN BY HIM TO THE ASSESSEE THROUGH RTGS ON 13.12.2011. HE ALSO POINTED OUT THAT THIS WAS ALSO INTIMATED BY THAT PE RSON TO THE AO THAT HE IS WORKING IN USA AND THEREFORE, HE CANNOT APPEAR BEFO RE THE AO. 4. HE FURTHER SUBMITTED THAT ON PAGES 15 TO 16 OF P APER BOOK IS THE LOAN CONFIRMATION GIVEN BY SHRI SANDEEP .H.M IN RESPECT OF THE LOAN OF RS. 4 LAKHS GIVEN BY HIM TO THE ASSESSEE ON 21/22.12.2011. HE ALSO SUBMITTED BEFORE THE AO THAT HE IS THE SON OF THE PRESENT ASSESSEE SHRI H.C. MAHADEVAIAH. THIS IS ALSO POINTED OUT BY THAT LOAN CREDITOR THAT HE IS W ORKING AS SOFTWARE CONSULTANT WITH SONY AND HE IS FILING RETURN OF INCOME IN BANG ALORE AND THE SAID LOAN WAS ITA NO. 1845/BANG/2018 PAGE 4 OF 11 GIVEN OUT OF SALARY SAVINGS. HE ALSO DRAWN MY ATTE NTION TO VARIOUS LETTERS DATED 14.05.2018, 18.05.2018, 23.05.2018 ETC. AVAILABLE O N PAGES 110 TO 113 OF PAPER BOOK AND IT WAS POINTED OUT BY HIM THAT AS PE R THESE LETTERS, IT WAS POINTED OUT BY THE ASSESSEE TO THE AO THAT OUT OF T HE VARIOUS LOAN CREDITORS, THREE LOAN CREDITORS I.E. 1) SANTHOSH H.M, 2) SHEET AL G MOHITHE AND 3) POORNIMA B.C. HAVE APPEARED BEFORE THE AO AND THE A O HAS RECORDED THEIR SWORN STATEMENT U/S. 131 OF IT ACT BEFORE AND THE A SSESSEE REQUESTED THE AO TO PROVIDE THE COPY OF STATEMENT RECORDED FROM THEM . BUT SUCH COPY OF STATEMENT WAS NOT PROVIDED BY THE AO TO THE ASSESSE E IN SPITE OFF VARIOUS REQUESTS AND AS PER LETTER DATED 30.05.2018, COPY A VAILABLE ON PAGE NO. 113 OF PAPER BOOK, IT HAS BEEN STATED BY THE AO THAT THE S TATEMENT RECORDED U/S. 131 OF IT ACT CAN BE RECORDED ONLY WHEN PROCEEDINGS ARE PENDING BEFORE THE AO AND STATEMENT FROM THESE THREE PERSONS WERE RECORDE D WHEN ASSESSMENT PROCEEDINGS WERE IN PROGRESS. BUT SINCE THERE ARE NO PROCEEDINGS PENDING BEFORE THE PRESENT AO, THE ASSESSEES REQUEST FOR P ROVIDING COPIES OF SUCH STATEMENTS CANNOT BE ACCEDED TO. HE SUBMITTED THAT IN THE ABSENCE OF COPY OF THE STATEMENTS OF THESE THREE LOAN CREDITORS, THE A SSESSEE CANNOT MEET THE OBJECTIONS OF THE AO IF ANY IN RESPECT OF THEIR STA TEMENTS. RELIANCE WAS PLACED BY HIM ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS ALO NG WITH THE SUBMISSION THAT ALL THE LOANS WERE RECEIVED BY WAY OF ACCOUNT PAYEE CHEQUES. A) LABH CHAND BOHRA VS. ITO ([2008] 219 CTR 571) (R AJASTHAN) B) CIT VS. JAI KUMAR BAKLIWAL ([2014] 366 ITR 217) (RAJASTHAN) C) CIT VS. DEENDAYAL CHOUDHARY ([2017] 293 CTR 468) (RAJASTHAN) D) ACIT VS. SHRI ABHISHEK AGARWAL IN ITA NO. 835/LK W/2014 HE SUBMITTED COPY OF ALL THESE JUDGEMENTS. AS AGAI NST THIS, LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 5. THEREAFTER THE LEARNED. AR OF ASSESSEE SUBMITTED THAT THE NEXT ISSUE INVOLVED IN THIS APPEAL IS REGARDING DISALLOWANCE OF RS. 3,0 7,625/- OUT OF INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE AND THIS ISSUE IS RAISED BY THE ASSESSEE AS PER GROUND NO. 7 AND THE NEXT ISSUE RAISED BY TH E ASSESSEE IS AS PER GROUND NO. 8 IN RESPECT OF DISALLOWANCE OF RS. 43,088/- OU T OF INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF IT ACT. HE SUBMITTED THAT THE AMOUNT OF INTEREST DISA LLOWED BY THE AO OF RS. 3,07,625/- IS NOT JUSTIFIED BECAUSE THE BASIS OF TH IS DISALLOWANCE IS THIS THAT THE ITA NO. 1845/BANG/2018 PAGE 5 OF 11 INTEREST PAID BY THE ASSESSEE ON THOSE LOANS WHICH ARE NOT ACCEPTED AS EXPLAINED BUT IN FACT, THIS INTEREST PAYMENT IS NOT ON THOSE LOANS. REGARDING DISALLOWANCE OF RS. 43,088/- U/S. 40(A)(IA), IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT IN FACT, THIS IS NOT INTEREST EXPENDI TURE BUT THIS IS INTEREST RECEIPT AND IN THIS REGARD, HE DRAWN MY ATTENTION TO PAGES 82 AND 83 OF PAPER BOOK IN RESPECT OF INTEREST EXPENDITURE AND IT WAS POINTED OUT THAT OUT OF TOTAL INTEREST EXPENDITURE OF RS. 4,29,727.41/-, AN AMOUNT OF RS. 4,18,539/- IS INTEREST ON CASH CREDIT FROM BANK AND THE BALANCE AMOUNT OF INT EREST EXPENDITURE OF RS. 11,188.41 IS IN RESPECT OF INTEREST ON CAR LOAN. R EGARDING DISALLOWANCE U/S. 40(A)(IA), HE DRAWN MY ATTENTION TO PAGES 100 AND 1 05 OF PAPER BOOK AND POINTED OUT THAT THESE ARE LEDGER ACCOUNTS OF M/S. MANGALORE CHEMICALS AND FERTILIZERS LTD. ON PAGE 100 AND M/S. ZAURI INDUSTR IES LTD. ON PAGE NO. 105 AND AS PER THESE TWO PAGES, IT CAN BE SEEN THAT AN AMOU NT OF RS. 22,860/- ON PAGE 100 AND RS. 15,918.68 ON PAGE 105 IS IN FACT, INTER EST INCOME AND NOT INTEREST EXPENDITURE AND THEREFORE, THE AO HAS WRONGLY PROCE EDED BY TREATING THESE TWO AMOUNTS AS INTEREST EXPENDITURE AND MADE DISALLOWAN CE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF IT ACT. HE SUBM ITTED THAT THIS DISALLOWANCE SHOULD BE DELETED. 6. REGARDING GROUND NO. 9 HE DID NOT MAKE ANY ARGUM ENT. THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW IN RESPEC T OF ALL ISSUES. 7. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST OF ALL, I EXAMINE AND DECIDE THE ISSUE RAISED BY ASSESSEE IN RESPECT OF ADDITION OF RS. 24.61 LAKHS U/S. 68 OF IT ACT WHICH HAS BEEN RAISED BY ASSESSEE AS PER GROUND NOS. 3 TO 6 OF THIS APPEAL. IN THIS REGARD, I FIND THAT THIS DISALLOWA NCE WAS MADE BY THE AO IN RESPECT OF LOAN FROM 5 LOAN CREDITORS I.E. 1. POORNIMA BC RS. 2 LAKHS 2. SANTOSH HM RS. 7.65 LAKHS 3. SHEETAL G MOHITE RS. 3 LAKHS 4. SANDEEP RS. 5.96 LAKHS 5. AVINASH KJ RS. 6 LAKHS -------------------------- TOTAL - RS. 24.61 LAKHS -------------------------- OUT OF THESE FIVE LOAN CREDITORS, THE ASSESSEE HAS SUBMITTED THAT THE LOAN CONFIRMATION OF TWO LOAN CREDITORS I.E. MR. AVINASH .K.J 6 LAKHS AND MR. SANDEEP .H.M RS. 5.96 LAKHS IS AVAILABLE ON PAGES 12 TO 16 OF THE PAPER ITA NO. 1845/BANG/2018 PAGE 6 OF 11 BOOK. ON THESE PAGES, THE LOAN CONFIRMATIONS OF TH ESE TWO PERSONS ARE AVAILABLE ALONG WITH THIS SUBMISSION THAT THEY ARE EMPLOYED OUTSIDE INDIA AND THEY ARE FLING THEIR RETURN OF INCOME IN INDIA AND THEY HAVE GIVEN THIS LOAN TO PRESENT ASSESSEE OUT OF SALARY SAVINGS AND IT IS ALSO STATED THAT THE PRESENT ASSESSEE SHRI H.C. MAHADEVAIAH IS THEIR REL ATIVE AND AS PER THE EMAIL OF SHRI AVINASH .K.J. TO THE AO, IT HAS BEEN POINTED OUT THAT HIS BANK STATEMENT FOR THE YEAR 01.04.2011 TO 31.03.2012 WAS ALSO SENT BY HIM TO THE AO. THE AO IN THE ASSESSMENT ORDER STATED THAT THE ASSESSEE WAS REQUESTED TO FURNISH THE DETAILS OF OUTSTANDING LIA BILITY OF RS. 6 LAKHS SHOWN IN THE CASE OF SHRI AVINASH KJ ALONG WITH THE MODE OF PAYMENT, DATE OF RECEIPT, BANK STATEMENTS ETC. AS PER AOS LETTER DA TED 21.01.2015. BUT ON 04.03.2015, AN EMAIL HAS BEEN SENT BY SHRI AVINASH TO THE AO AND IN THE SAID EMAIL, IT WAS STATED THAT THIS IS SECOND TIME HE IS PROVIDING THE BANK STATEMENTS ON THE REQUEST OF THE AO FOR THE PERIOD FROM 01.04.2011 TO 31.03.2012 AND AS PER EARLIER EMAIL DATED 03.01.201 5, IT WAS STATED BY THIS LOAN CREDITOR SHRI AVINASH THAT HE HAS SENT BANK ST ATEMENT TO THE AO. REGARDING THE DATE OF GIVING OF THE LOAN, IT IS SEE N THAT IN THE EMAIL DATED 18.11.2014, IT HAS BEEN STATED THAT THIS AMOUNT WAS GIVEN BY HIM OF RS. 5 LAKHS BY RTGS FROM HIS SAVING ACCOUNT ON 13.12.2011 . HENCE IT IS SEEN THAT THE OBJECTIONS OF THE AO THAT THE REQUIRED INF ORMATION WAS NOT FURNISHED IS NOT CORRECT. SIMILARLY IN RESPECT OF LOAN FROM MR. SANDEEP, THE AO STATED IN THE ASSESSMENT ORDER IN PARA 3.4 THAT THE SUMMON S IN THE CASE OF SHRI SANDEEP HAS BEEN DULY SERVED, NO COMMUNICATION HAS BEEN RECEIVED FROM SHRI SANDEEP IN THE OFFICE OF THE AO. BUT AS PER T HE EMAIL DATED 23.12.2014 AVAILABLE ON PAGE NO. 16 OF THE PAPER BOOK, IT HAS BEEN STATED BY SHRI SANDEEP TO THE AO THAT HE HAS GIVEN UNSECURED LOAN TO HIS FATHER MR. H.C. MAHADEVAIAH AND SINCE, HE IS WORKING ABROAD IN USA, HE IS UNABLE TO APPEAR BEFORE THE AO AND ON PAGE NO. 15 OF PAPER BO OK IS THE LOAN CONFIRMATION FROM MR. SANDEEP .H.M. HENCE IT IS SE EN THAT THIS ALLEGATION OF THE AO IS ALSO NOT CORRECT THAT THERE IS NO COMPLIA NCE FROM MR. SANDEEP. IN RESPECT OF THE REMAINING THREE LOAN CREDITORS I.E. SANTOSH HM, POORNIMA BC AND SHEETAL G MOHITE, IT IS NOTED BY AO ON PAGE NO. 3 OF THE ASSESSMENT ORDER THAT THESE THREE PERSONS APPEARED BEFORE HIM AND THEIR STATEMENTS ITA NO. 1845/BANG/2018 PAGE 7 OF 11 WERE RECORDED AND IN PARA NO. 3.2, THE OBJECTION OF THE AO IS THIS THAT AS PER BANK STATEMENTS GIVEN BY THESE LOAN CREDITORS, IT W AS NOTICED THAT THERE WAS CASH DEPOSIT ON THE DAY ON WHICH THE LOAN AMOUNT HA S BEEN TRANSFERRED TO THE ASSESSEE AND THE REASON FOR SUCH CASH DEPOSIT M ADE HAVE NOT BEEN SATISFACTORILY EXPLAINED BY THESE PERSONS. THERE I S ONE MORE OBJECTION OF THE AO IN RESPECT OF LOAN FROM SHRI SANTOSH HM THAT THIS PERSON IS ALSO HAVING TAXABLE INCOME, NO RETURN OF INCOME HAVE BEE N FILED BY HIM TILL THE DATE OF RECORDING STATEMENT U/S. 131 ON 24.09.2014 AND HE HAS FILED RETURN OF INCOME ONLY ON 10.10.2014 AND I FAIL TO UNDERSTA ND THAT HOW IT CAN BE SAID THAT THE LOAN GIVEN BY THESE PERSONS TO THE PRESENT ASSESSEE IS THE INCOME OF THE PRESENT ASSESSEE. REGARDING SMT. SHE ETHAL G. MOHITE,THIS IS THE OBJECTION OF THE AO THAT THIS PERSON CLAIMED TH AT THE SOURCE FOR THE LOAN GIVEN WAS THE SALARY EARNED BY HER IN THE EARLIER Y EARS BUT SHE HAS NOT FURNISHED ANY SUBSTANTIATING PROOF IN SUPPORT OF TH E SAME. REGARDING SMT. POORNIMA B.C, THE AO HAS STATED ON PAGE NO. 3 OF TH E ASSESSMENT ORDER THAT SHE HAS FURNISHED COPY OF BANK ACCOUNT IN SUPP ORT OF THE LOAN GIVEN BUT HER CLAIM THAT THE CASH DEPOSIT WAS DUE TO THE REAS ON THAT SHE IS IN THE HABIT OF NOT DEPOSITING CASH TO THE BANK REGULARLY IS NOT ACCEPTABLE. HENCE IT IS SEEN THAT IN RESPECT OF THESE THREE PERSONS, WHO HA D APPEARED BEFORE THE AO AND RECORDED THEIR SWORN STATEMENT AND IN THE ST ATEMENT RECORDED U/S. 13,1 THESE PERSONS HAVE ACCEPTED THAT THEY HAVE GIV EN LOAN TO THE PRESENT ASSESSEE. NOW IN THE LIGHT OF THESE FACTS, I EXAMI NE THE APPLICABILITY OF VARIOUS JUDGEMENTS CITED BY LD. AR OF ASSESSEE BEFO RE ME. FIRST I EXAMINE THE APPLICABILITY OF THE JUDGMENT OF HONBLE RAJAST HAN HIGH COURT RENDERED IN THE CASE OF CIT VS. JAI KUMAR BAKLIWAL (SUPRA). PARA NOS. 17 TO 21 OF THIS JUDGEMENT ARE RELEVANT AND HENCE, THE SAME ARE REPR ODUCED HEREINBELOW FOR READY REFERENCE. 17. AS OBSERVED HEREIN ABOVE, THOUGH U/S 68, AO IS FREE TO SHOW WITH THE HELP OF THE ENQUIRY CONDUCTED BY HIM INTO THE TRANSACTION WHICH HAS TAKEN PLACE BETWEEN THE CREDITOR AND THE SUB-CREDITOR THAT THE TRANSACTION BETWEEN TWO WERE NOT GENUINE A ND THAT THE SUB- CREDITOR HAD NO CREDITWORTHINESS, IT WILL NOT NECES SARILY MEAN THAT LOAN ADVANCED BY THE SUB-CREDITOR TO THE CREDITORS WAS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES UNLESS THERE IS EVIDENCE DIRECT OR CIRCUMSTANTIAL, TO SHOW THAT THE AMOUNT W HICH HAD BEEN ITA NO. 1845/BANG/2018 PAGE 8 OF 11 ADVANCED BY THE SUB-CREDITOR TO THE CREDITOR HAD AC TUALLY BEEN RECEIVED BY THE SUB-CREDITOR FROM THE ASSESSEEE. 18. THE LOGICAL INTERPRETATION WILL BE THAT WHILE T HE ASSESSEE HAS TO PROVE AS SPECIAL KNOWLEDGE I.E. FROM WHERE HE HAS R ECEIVED THE CREDIT AND ONCE HE DISCLOSED THE SOURCE FROM WHICH HE HAS RECEIVED MONEY, HE MUST ALSO ESTABLISH THAT SO FAR AS HIS TR ANSACTION WITH HIS CREDITOR IS CONCERNED, THE SAME IS GENUINE AND HIS CREDITOR HAD THE CREDITWORTHINESS TO ADVANCE THE LOAN WHICH THE ASSE SSEE HAD RECEIVED. WHEN THE ASSESSEE DISCHARGES THE BURDEN S O PLACED ON HIM, ONUS THEN SHIFTS TO THE AO, IF THE AO ASSESSES THE SAID LOAN AS THE INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCE HE HAS TO PROVE EITHER BY DIRECT EVIDENCE OR INDIRECT/ CIRCUMSTANTI AL EVIDENCE THAT THE MONEY WHICH THE ASSESSEE RECEIVED FROM THE CRED ITOR ACTUALLY BELONG TO AND WAS OWNED BY THE ASSESSEE HIMSELF. 19. IF THERE IS DIRECT EVIDENCE TO SHOW THAT THE LO AN RECEIVED BY THE ASSESSEE ACTUALLY BELONG TO THE ASSESSEE, THERE WIL L BE NO DIFFICULTY IN ASSESSING SUCH AMOUNT AS THE INCOME OF THE ASSES SEE FROM UNDISCLOSED SOURCE BUT IF THERE IS NO DIRECT EVIDEN CE IN THIS REGARD, THEN THE INDIRECT OR CIRCUMSTANTIAL EVIDENCE HAS TO BE CONCLUSIVE IN NATURE AND SHOULD POINT TO THE ASSESSEE AS THE PERS ON FROM WHOM THE MONEY HAS ACTUALLY FLOWN TO THE HANDS OF THE CR EDITOR AND THEN FROM THE HANDS OF THE CREDITOR TO THE HANDS OF THE CREDITOR. 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 ASS ESSEE FROM THEIR OWN RESPECTIVE BANK ACCOUNTS. THEREFORE, WHEN THERE IS CATEGORICAL FINDING EVEN BY THE AO THAT THE MONEY C AME FROM THE RESPECTIVE BANK ACCOUNTS OF THE CREDITORS, WHICH DI D NOT FLOW IN THE SHAPE OF THE MONEY, THEN, IN OUR VIEW, SUCH AN ADDI TION 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 ACTUAL LY BELONGED TO NONE BUT THE ASSESSEE HIMSELF. THE ACTION OF THE AO APPEARS TO BE BASED ON MERE SUSPICION. 21. ACCORDINGLY, IN OUR VIEW, THE ITAT, AFTER APPRE CIATION OF EVIDENCE HAS RIGHTLY COME TO THE AFORESAID CONCLUSI ON AND WHEN THERE IS APPRECIATION OF EVIDENCE, THEN IT IS PUREL Y A FINDING OF FACT AND NO QUESTION MUCH LESS SUBSTANTIAL QUESTION OF L AW CAN BE SAID TO EMERGE OUT OF THE SAID ORDER OF THE TRIBUNAL AND WE DO NOT FIND ANY INFIRMITY OR PERVERSITY IN THE ORDER OF THE ITA T SO AS TO CALL FOR ANY INTERFERENCE OF THIS COURT. IN OUR VIEW, NO SUB STANTIAL QUESTION OF LAW ARISES OUT OF THE ORDER PASSED BY THE ITAT. ITA NO. 1845/BANG/2018 PAGE 9 OF 11 8. FROM THE ABOVE PARAS OF THIS JUDGEMENT OF HONBL E RAJASTHAN HIGH COURT , IT IS SEEN THAT WHEN ALL THE CASH CREDITORS HAVEAFFIRMED IN THEIR EXAMINATION THAT THEY HAD ADVANCED MONEY TO THE ASSESSEE FROM THEIR OWN RESPECTIVE BANK ACCOUNTS, THEN IT IS BURDEN ON THE AO TO PROVE THAT THE MONEY ACTUALLY BELONGED TO NONE BUT ASSESSEE HIMSELF AND WITHOUT T HIS, THE ADDITION MADE BY THE AO U/S. 68 IN THE HANDS OF THE ASSESSEE IS NOT JUSTIFIED. IN THE PRESENT CASE ALSO, ALL THE FIVE LOAN CREDITORS HAVE ADMITTED IN THEIR STATEMENTS RECORDED IN CASE OF THREE PERSONS AND IN THEIR EMAIL IN RESPECT OF REMAINING TWO PERSONS THAT THEY HAVE ADVANCED MONEY TO ASSESSEE BY WAY OF LOAN AND THE AO HAD NOT BEEN ABLE TO PROVE THAT THE MONEY ACTUALLY BELO NGED TO THE PRESENT ASSESSEE AND HENCE, RESPECTFULLY FOLLOWING THIS JU DGEMENT OF HONBLE RAJASTHAN HIGH COURT, I HOLD THAT IN THE FACTS OF P RESENT CASE AS DISCUSSED ABOVE, THE ADDITION MADE BY THE AO U/S. 68 IS NOT J USTIFIED AND HENCE, I DELETE THE SAME. ACCORDINGLY GROUND NOS. 3 TO 6 ARE ALLOW ED. 9. REGARDING GROUND NO. 7, I FIND THAT THE BASIS OF THIS DISALLOWANCE IS THIS THAT AS PER PARA 4 OF ASSESSMENT ORDER WHERE THE AO STATES THAT THE ASSESSEE HAS PAID AMOUNT OF RS. 3,77,150/- TOWARDS INTEREST DURI NG THE PRESENT YEAR AND SINCE UNSECURED LOAN OF RS. 24.61 LAKHS IS UNEXPLAI NED, PROPORTIONATE INTEREST PAID IS ALSO DISALLOWED. THIS DISALLOWANCE IS NOT SUSTAINABLE FOR TWO REASONS. FIRST REASON IS THIS THAT I HAVE ALREADY DELETED TH E ADDITION MADE BY THE AO OF RS. 24.61 LAKHS MADE BY HIM THAT THIS LOAN IS UNEXP LAINED AND HENCE, THE CONSEQUENT DISALLOWANCE OF INTEREST ON SUCH LOAN IS NOT SUSTAINABLE. THE SECOND REASON IS THIS THAT OUT OF TOTAL INTEREST PA YMENT OF RS. 3,77,150/-, THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS INCURR ED INTEREST EXPENDITURE OF RS. 4,18,539/- AS INTEREST ON CASH CREDIT AND RS. 1 1,188.41 AS INTEREST ON CAR LOAN TOTAL OF RS. 4,29,727.41. AS PER THE P&L ACCO UNT AVAILABLE ON PAGE NO. 4 OF THE PAPER BOOK, THE TOTAL AMOUNT OF INTEREST DEB ITED IN P&L ACCOUNT IS RS. 4,29,727.41 AND I DO NOT KNOW FROM WHERE THE AO HAS TAKEN THIS FIGURE OF INTEREST EXPENDITURE OF RS. 3,77,150/- AS STATED BY HIM IN PARA 4 OF THE ASSESSMENT ORDER. HENCE IN VIEW OF THIS FACT THAT THE ENTIRE INTEREST EXPENDITURE DEBITED IN P&L ACCOUNT IS IN RESPECT OF CASH CREDIT AND CAR LOAN, DISALLOWANCE MADE BY THE AO IS NOT JUSTIFIED EVEN I F THE ADDITION OF RS. 24.61 ITA NO. 1845/BANG/2018 PAGE 10 OF 11 LAKHS MADE BY THE AO U/S. 68 IS CONFIRMED AT ANY ST AGE. HENCE THIS DISALLOWANCE IS ALSO DELETED AND ACCORDINGLY GROUND NO. 7 IS ALLOWED. 10. NOW I DECIDE THE GROUND NO. 8. IN THIS REGARD, I FIND THAT AS PER PARA 5 OF THE ASSESSMENT ORDER, THE AO SAYS THAT THE ASSESSEE HAS PAID INTEREST OF RS. 43,088/- BUT AS PER PAGE NO. 4 OF PAPER BOOK ON WHI CH P&L ACCOUNT IS APPEARING, I DO NOT FIND ANY SUCH DEBIT OF INTEREST PAYMENT OF RS. 43,088/-. THERE IS DEBIT OF RS. 4,29,727.41/- ON ACCOUNT OF I NTEREST PAID AND THERE IS ALSO ONE MORE DEBIT OF RS. 46,125.62/- AS INTEREST PAID TO OTHERS. MOREOVER AS PER THE COPY OF LEDGER ACCOUNT OF M/S. MANGALORE CHEMIC ALS & FERTILIZERS LTD. AVAILABLE ON PAGE NO. 100 OF PAPER BOOK, INTEREST R ECEIPT OF RS. 22,860/-IS SEEN AND AS PER COPY OF LEDGER ACCOUNT OF M/S. ZUARI IND USTRIES LTD., THERE IS CREDIT OF RS. 15,918.68/- ON ACCOUNT OF INTEREST. UNDER THES E FACTS, I FEEL IT PROPER TO RESTORE THE MATTER BACK TO THE FILE OF AO FOR FRESH DECISION FOR EXAMINING THIS FACTUAL ASPECT AS TO WHETHER THERE IS ANY PAYMENT O F INTEREST BY THE ASSESSEE TO M/S. MANGALORE CHEMICALS & FERTILIZERS LTD. OF R S. 25,400/- AND M/S. ZUARI INDUSTRIES LTD. OF RS. 17,688/- AS STATED BY THE AO IN PARA 5 OF THE ASSESSMENT ORDER AFTER PROVIDING ADEQUATE OPPORTUNITY TO ASSES SEE BECAUSE THIS IS THE CLAIM OF THE ASSESSEE THAT THERE IS NO SUCH PAYMENT OF INTEREST TO THESE TWO PARTIES BUT IN FACT THERE IS RECEIPT OF INTEREST FR OM THESE TWO PARTIES OF RS. 22,860/- FROM M/S. MANGALORE CHEMICALS & FERTILIZER S LTD. AND RS. 15,918.68/- FROM M/S. ZUARI INDUSTRIES LTD. ACCORDINGLY GROUND NO. 8 IS ALLOWED FOR STATISTICAL PURPOSES. GROUND NO. 9 IS REJECTED AS NOT PRESSED BECAUSE NO ARGUMENT HAS BEEN MADE BY LD. AR OF ASSESSEE IN RES PECT OF GROUND NO. 9. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (ARUN KUMAR GARODIA) ACCOUNTANT MEMBER BANGALORE, DATED, THE 28 TH SEPTEMBER, 2018. /MS/ ITA NO. 1845/BANG/2018 PAGE 11 OF 11 COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.