Shri Ramgopal Banarasilal Agrawal, Bilimora V. The Income tax Officer,Ward-3, Navsari

ITA 192/AHD/2011

• Counselvise Citation: 19220514 RSA 2011
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 02-09-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 25-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K GUPTA
• Keywords: Income from undisclosed sources; Opportunity of being heard
• Section: 40A(3); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND A. N. PAHUJA, AM) ITA NO.192/AHD/2011 A. Y.: 2007-08 SHRI RAMGOPAL BANARASILAL AGRAWAL, PROP. M/S. BHARAT SPRING MANUFACTURING CO., SHUBHAM, 6-HARI LAXMI NARAYAN SOCIETY, ANAND CINEMA ROAD, BILIMORA 396 321 VS THE INCOME TAX OFFICER, WARD -3, NAVSARI PA NO. AAVPA 9616 M (APPELLANT) (RESPONDENT) APPELLANT BY SHRI RAJESH UPADHYAY, AR RESPONDENT BY SHRI S. K. GUPTA, SR. DR DATE OF HEARING: 02-09-2011 DATE OF PRONOUNCEMENT: 09-09-2011 O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A), V ALSAD DATED 18 TH OCTOBER, 2010, FOR ASSESSMENT YEAR 2007-08. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES AND PERUSED THE FINDINGS OF THE AUTHORITIES BELOW. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO PLACED ON RECORD COPY OF THE SUBMISSIONS MADE BEFORE THE LEARNED CIT(A). 3. ON GROUND NO.1, THE ASSESSEE CHALLENGED THE ADDI TION OF RS.50,000/- TOWARDS GROSS PROFIT ADDITION. THE AO M ADE LUMP SUM ITA NO.192/AHD/2011 SHRI RAMGOPAL BANARASILAL AGRAWAL VS ITO, WARD 3, N AVSARI 2 ADDITION OF RS.50,000/- ON ACCOUNT OF FALL IN GROSS PROFIT OF 2.2% AS COMPARED TO PREVIOUS YEARS. IN FACT, IN ASSESSMENT YEAR 2005-06, GROSS PROFIT WAS 14.5% OF THE GROSS RECEIPTS OF RS. 99.92 LACS. IN ASSESSMENT YEAR 2006-07, THE GROSS PROFIT RAISED TO 20.35% OF GROSS PROFIT OF RS.74.96 LACS AND FOR ASSESSMENT YEAR 200 7-08 UNDER APPEAL THE GROSS PROFIT DROPPED TO 18.14% OF THE GR OSS RECEIPTS OF RS.84.45 LACS. THE MAIN REASON EXPLAINED BY THE ASS ESSEE WAS THAT THERE WAS INCREASE IN LABOUR WAGES. THE LEARNED CIT (A) NOTED THAT LABOUR CHARGES FOR ASSESSMENT YEAR 2005-06 WAS 2.2% , IN ASSESSMENT YEAR 2006-07 IT WAS 4.4% AND IN ASSESSME NT YEAR 2007- 08 IT IS 4.0%. THE EXPLANATION OF THE ASSESSEE WAS NOT FOUND TENABLE BECAUSE THERE WAS FALL IN WAGES BY 0.4% COMPARED TO THE PRECEDING ASSESSMENT YEAR. ADDITION WAS ACCORDINGLY CONFIRMED . 4. ON CONSIDERATION OF RIVAL SUBMISSIONS, WE ARE O F THE VIEW THE ADDITION IS CLEARLY UNJUSTIFIED BEING AD HOC IN NAT URE. IT IS SETTLED LAW THAT MERE FALL IN GROSS PROFIT RATE WOULD NOT BE A VALID GROUND TO MAKE LUMP SUM ADDITION IN THE GROSS PROFIT. THE AO EXCEP T FALL IN GROSS PROFIT HAS NOT POINTED OUT ANY SPECIFIC DEFECT IN T HE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. THE AO ALSO NOTED THAT PURCHASES, SALES, LABOUR CHARGES AND OTHER EXPENSES ARE SUPPOR TED WITH BILLS AND VOUCHERS AND REFLECTED IN THE BOOKS OF ACCOUNTS . BUT THE METHOD OF LABOUR CHARGES COULD NOT BE FULLY VERIFIED. THE AO HAS NOT POINTED OUT AS TO WHICH OF THE LABOUR CHARGES WERE NOT SUBJ ECT TO VERIFICATION. NO DETAILS HAVE BEEN GIVEN IN THE ASSESSMENT ORDER. SINCE THE PURCHASES, SALES AND EXPENSES ARE SUPPORTED BY BILL S AND VOUCHERS AND NO SPECIFIC DEFECT HAS BEEN POINTED OUT IN THE BOOKS OF ACCOUNTS, ITA NO.192/AHD/2011 SHRI RAMGOPAL BANARASILAL AGRAWAL VS ITO, WARD 3, N AVSARI 3 THEREFORE ON MERE COMPARISON OF THE GROSS PROFIT WI TH ONLY ONE PRECEDING ASSESSMENT YEAR WOULD NOT BE VALID GROUND FOR MAKING THE ADDITION. IT MAY ALSO BE NOTED HERE THAT THE AO HAS NOT REJECTED THE BOOK RESULTS OF THE ASSESSEE. NOTHING IS POINTED OU T AS TO HOW LUMP SUM ADDITION OF RS.50,000/- WAS MADE ON THIS ISSUE. CONSIDERING THE HISTORY OF THE ASSESSEE IN WHICH IN ASSESSMENT YEAR 2005-06 THE GROSS PROFIT WAS LESSER AS COMPARED TO THE ASSESSME NT YEAR UNDER APPEAL AND CONSIDERING THE TOTALITY OF THE FACTS AN D CIRCUMSTANCES AS DISCUSSED IN THIS PARA, WE DO NOT FIND ANY JUSTIFIC ATION TO SUSTAIN THE ADDITION. WE ACCORDINGLY SET ASIDE THE ORDERS OF TH E AUTHORITIES BELOW AND DELETE THE ADDITION OF RS.50,000/-. IN THE RESU LT, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 5. ON GROUND NO.2, THE ASSESSEE CHALLENGED THE ADDI TION OF RS.4,30,000/- U/S 68 OF THE IT ACT. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, THE AO HAS DISCUSSED THIS ISSUE BY STATING THAT THE ASSESSEE HAS INTRODUCED FRESH UNSECURED LOANS STATE D TO BE RECEIVED FROM THE VARIOUS PERSONS MENTIONED IN THE ASSESSMEN T ORDER. THE ASSESSEE WAS ASKED TO PROVE THE GENUINENESS OF ALLE GED UNSECURED LOANS BY FURNISHING THE DETAILS OF DEPOSITOR VIZ. I DENTITY, CREDITWORTHINESS OF THE DEPOSITORS AND GENUINENESS OF TRANSACTION WITH SUPPORTING DOCUMENTARY EVIDENCE. THE ASSESSEE PRODUCED CONFIRMATIONS OF THE DEPOSITORS AND COPY OF LOAN ACCOUNTS AS REFLECTED I N HIS BOOKS OF ACCOUNT. ON GOING THROUGH THE LOAN CONFIRMATIONS OF THE DEPOSITORS, IT WAS SEEN THAT ALMOST ALL THE LOANS WERE INTRODUCED BY CASH, EXCEPT DEPOSITOR MENTIONED AT SR. NO. 21. THIS RAISES DOUB T ABOUT THE CREDITWORTHINESS AND GENUINENESS OF TRANSACTION. AC CORDINGLY, THE ITA NO.192/AHD/2011 SHRI RAMGOPAL BANARASILAL AGRAWAL VS ITO, WARD 3, N AVSARI 4 ASSESSEE WAS ASKED TO FURNISH COMPLETE POSTAL ADDRE SSES OF THE ABOVE DEPOSITORS. HOWEVER, THE ASSESSEE COULD NOT PRODUCE THE DETAILED ADDRESSES OF THE DEPOSITORS. IN ABSENCE OF COMPLETE DETAILS, THE IDENTITY, GENUINENESS OF LOAN TRANSACTIONS AND CREDITWORTHINESS OF THE CREDITORS BY MAKING DISCREET INQUIRY REMAINED T O BE UNVERIFIABLE. THEREFORE, THE AO HAD PROCEEDED TO ADD UNSECURED LO ANS AGGREGATING TO RS. 4,30,000/- INTRODUCED DURING THE YEAR. THE AO HAS DEALT ELABORATELY IN THE ASSESSMENT ORDER WHY THE A DDITION WAS MADE IN THIS GROUND. ON THE OTHER HAND THE ASSESSEE 'S CONTENTION WAS TWO FOLDS. WITH REGARDS TO THE ADDITION OF RS.1 ,00,000/- FROM SUKETUBHAI, THE LEARNED COUNSEL FOR THE ASSESSEE CO NTENDED THAT THE TRANSACTION WAS ROUTED THROUGH THE BANKING CHANNEL BY WAY OF DEMAND DRAFTS RECEIVED FROM HIM AND CAN NOT BE TERM ED AS UNEXPLAINED INCOME OF THE ASSESSEE. WITH REGARDS TO THE OTHER ADDITION OF RS.3,30,OOO/- RECEIVED FROM 20 PARTIES IN CASH, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THO SE CREDITORS WERE THE EMPLOYEES OF THE SISTER CONCERN DURING THE ACCO UNTING YEAR 2006- 07. THE ASSESSEE COULD NOT PRODUCE THOSE PARTIES BE FORE THE AO AS THEY HAVE LEFT THE PLACE AND THEIR WHEREABOUTS IS N OT KNOWN TO THE ASSESSEE. HOWEVER, THE ASSESSEE FILED COPIES OF THE CONFIRMATIONS LETTERS FROM THOSE CREDITORS BEFORE THE AO AND BEFO RE THE LEARNED CIT(A) AS WELL. WHAT THE AO WANTED TO SATISFY HIM W AS THAT OF CREDIT WORTHINESS OF THOSE PERSONS AND GENUINENESS OF THE TRANSACTIONS. THE AO WANTED THE ASSESSEE TO PRODUCE THOSE PARTIES FOR EXAMINATION TO WHICH THE ASSESSEE EXPRESSED HELPLES S BECAUSE THOSE PARTIES HAVE LEFT THE JOB AND THEIR WHEREABOU TS IS NOT KNOWN TO THE ASSESSEE. SINCE THE ASSESSEE FAILED PRODUCE THE M BEFORE THE ITA NO.192/AHD/2011 SHRI RAMGOPAL BANARASILAL AGRAWAL VS ITO, WARD 3, N AVSARI 5 AO, IT WAS REASONABLY CONCLUDED THAT THE TRANSACTIO NS WERE NOT GENUINE AND THE PROVISIONS U/S 68 IS SQUARELY APPLI CABLE. BEFORE THE LEARNED CIT(A) THE ASSESSEE TOOK SIMILAR DEFENSE. T HE LEARNED COUNSEL FOR THE ASSESSEE ALSO RELIED UPON THOSE CAS E LAWS WHICH WERE DISCUSSED BY THE AO IN THE ASSESSMENT ORDER. T HE MAIN POINT HERE IS WHETHER THE ASSESSEE DISCHARGED THE ONUS ON HIM TO SUBSTANTIATE THE TRANSACTIONS BEING GENUINE AND THE CREDITORS HAVE THE CREDITWORTHINESS TO THE SATISFACTION OF THE AO. 7. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION O F THE ASSESSEE AND MATERIAL ON RECORD CONFIRMED THE ADDIT ION AND DISMISSED THE APPEAL OF THE ASSESSEE. HIS FINDINGS IN PARA 6.2 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER: 6.2 FINDINGS: I HAVE PERUSED THE ASSESSMENT ORDER AND THE EXPLANATION OF THE AR CAREFULLY. THE SUBMIS SIONS BEFORE ME WAS SIMILAR TO WHAT WAS MADE BEFORE THE A O DURING THE ASSESSMENT PROCEEDING. I HAVE PERUSED TH E CONFIRMATION LETTERS FILED BY THE APPELLANT. THE AR SUBMITTED THAT THE CREDITORS WERE THE EMPLOYEES OF THE SISTER CONCERNS. IF THE CREDITORS ARE THE EMPLOYEES AND GIVEN LOAN TO THE RELATIVE OF THE EMPLOYERS, THEN T HEY WILL DEFINITELY CHARGED INTEREST ON SUCH LOANS. IN THE CONFIRMATION NO SUCH INTEREST ENTRY HAS MENTIONED. ALL THOSE CREDITORS, HAVE NO PAN. ALL OF THEM LEFT JOB AND THEIR WHEREABOUTS NOT KNOWN TO THE APPELLANT. THIS SITUAT IONS TO ME LOOK TOO MUCH OF COINCIDENCE. IN THIS CIRCUMS TANCES THE MANDATORY REQUIREMENT OF THE PROVISIONS I.E. TH E SATISFACTION OF THE AO IS NOT FULFILLED. IN MY OPIN ION THE AO HAS FORMED OPINION OBJECTIVELY WITH REFERENCE TO TH E MATERIALS ON RECORD AND ON THE BASIS OF THE EXPLANA TIONS GIVEN BY THE APPELLANT. THUS, IN VIEW OF THIS, NO INTERFERENCE IS CALLED FOR IN THE FINDING OF THE AO . THE APPELLANT'S GROUND OF APPEAL IS DISMISSED. ITA NO.192/AHD/2011 SHRI RAMGOPAL BANARASILAL AGRAWAL VS ITO, WARD 3, N AVSARI 6 8. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UBMITTED THAT IN ONE CASE AMOUNT WAS RECEIVED THROUGH DEMAND DRAFT A ND IN OTHER CASES THE AMOUNTS WERE RECEIVED IN CASH FROM THE CR EDITORS WHO WERE EMPLOYEES OF THE SISTER CONCERN. THE CREDITORS COULD NOT BE PRODUCED BECAUSE THEY LEFT THE JOB. HOWEVER, THE AS SESSEE FILED CONFIRMATION FROM THE CREDITORS AND SATISFIED THE R EQUIREMENT OF THE LAW. HE HAS SUBMITTED THAT THE AO SHOULD HAVE SUMMO NED THE CREDITORS BEFORE MAKING THE ADDITION. THEREFORE, TH E ADDITION IS UNJUSTIFIED. HE HAS SUBMITTED THAT REQUEST WAS MADE BEFORE THE LEARNED CIT(A) TO DIRECT THE AO TO SUMMON THE CREDI TORS FOR THEIR EXAMINATION. THE LEARNED COUNSEL FOR THE ASSESSEE, THEREFORE, SUBMITTED THAT THE ADDITION IS CLEARLY UNJUSTIFIED IN THE MATTER. 9. ON THE OTHER HAND, THE LEARNED DR RELIED UPON TH E ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT IT IS ADMITTED FACT THAT EXCEPT IN ONE CASE, THE OTHER CREDITS FROM 20 PERSONS WERE RE CEIVED IN CASH FOR WHICH NO EVIDENCE OF THEIR CREDITWORTHINESS HAS BEE N FILED. THE LEARNED DR SUBMITTED THAT MERE FILING OF THE CONFIR MATION HAVING NO COMPLETE ADDRESS AND PARTICULARS OF THE CREDITORS I S NOT ENOUGH TO PROVE GENUINE CREDITS IN THE MATTER. THE LEARNED DR SUBMITTED THAT THE ASSESSEE DID NOT PRODUCE ANY OF THE CREDITORS B EFORE THE AO FOR EXAMINATION. SINCE, THE ASSESSEE HAS SHOWN INABILIT Y TO FURNISH COMPLETE ADDRESS AND ALSO FAILED TO PRODUCE THE CRE DITORS BEFORE THE AO, THERE WAS NO REASON FOR THE AO TO SUMMON THE CR EDITORS FOR EXAMINATION. THE LEARNED DR SUBMITTED THAT PREPONDE RANCE OF PROBABILITIES CLEARLY PROVE THAT THE ASSESSEE FAILE D TO PROVE THE ITA NO.192/AHD/2011 SHRI RAMGOPAL BANARASILAL AGRAWAL VS ITO, WARD 3, N AVSARI 7 IDENTITY OF THE CREDITOR, THEIR CREDITWORTHINESS AN D GENUINENESS OF THE TRANSACTION IN THE MATTER. THEREFORE, THE LEARNED C IT(A) WAS JUSTIFIED IN CONFIRMING THE ADDITION. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. EXCEP T THE CONFIRMATIONS FROM THE CREDITORS, THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE TO PROVE THE IDENTITY OF THE CREDITORS, TH EIR CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION IN THE MATTER. T HE ASSESSEE INTRODUCED UNSECURED LOANS FROM 21 PERSONS OUT OF W HICH LOANS FROM 20 PERSONS WERE RECEIVED IN CASH. THE ASSESSEE DID NOT FURNISH COMPLETE POSTAL ADDRESS OF THE CREDITORS AND NO FUR THER DETAILS CALLED FOR BY THE AO WERE PRODUCED. THE ASSESSEE ALSO FAIL ED TO PRODUCE ANY OF THE CREDITORS BEFORE THE AO FOR EXAMINATION ON OATH. THE CREDITORS ARE STATED TO BE EMPLOYEES OF THE SISTER CONCERN OF THE ASSESSEE AND THE ASSESSEE HIMSELF WAS UNABLE TO CON TACT THEM FOR EXAMINATION BEFORE THE AO. SINCE THE WHEREABOUTS OF THE CREDITORS WAS NOT KNOWN TO THE ASSESSEE, THEREFORE, THERE WAS NO REASON FOR THE AO TO ISSUE SUMMONS AGAINST SUCH CREDITORS FOR THEIR EXAMINATION. EVEN, THE LEARNED CIT(A) WOULD BE JUST IFIED IN NOT ISSUING ANY DIRECTION TO THE AO IN THIS REGARD BECA USE OF INCOMPLETE ADDRESS, THERE IS NO QUESTION OF ENFORCING ATTENDAN CE OF THE CREDITORS EVEN AT THE APPELLATE STAGE. SINCE, THE ASSESSEE HI MSELF WAS NOT ABLE TO PROVIDE ANY DETAILS OF THE CREDITORS AND COULD N OT TRACE OUT THEIR WHEREABOUTS, THEREFORE, THE AO CANNOT BE ASKED TO D O IMPOSSIBLE ACT TO ENFORCE THEIR ATTENDANCE AND THAT TOO WHEN NO RE QUEST IS MADE TO THE AO FOR SUMMONING OF THE CREDITORS AT THE ASSESS MENT STAGE. THUS, THE ASSESSEE FAILED TO PROVE IDENTITY OF THE CREDITORS, THEIR ITA NO.192/AHD/2011 SHRI RAMGOPAL BANARASILAL AGRAWAL VS ITO, WARD 3, N AVSARI 8 CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION IN THE MATTER. MERE FILING OF THE CONFIRMATIONS, THAT TOO WITH INC OMPLETE DETAILS WOULD NOT BE SUFFICIENT TO DISCHARGE THE ONUS UPON THE AS SESSEE TO PROVE GENUINE CREDITS IN THE MATTER. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF BHARATI PVT. LTD. VS CIT, 111 ITR 951 HELD AS UNDER: IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE INCOME-TAX OFFICER FOUND THAT THE ASSESSEE HAD SHOWN RS.20,000 AS LOAN IN ITS BOOKS TAKEN FROM TWO PARTIES. THE ASSESSEE PRODUCED THE ALLEGED CONFIRMATORY LETTERS FROM THOSE PARTIES BEFORE THE INCOME-TAX OFFICER IN SUPPORT OF THE TWO LOANS. THE INCOME-TAX OFFICER SERVED NOTICES UNDER SECTION 131 OF THE INCOME TAX ACT, 1961, ON THE ALLEGED CREDIT ORS AND SINCE THOSE NOTICES CAME BACK UNSERVED, THE INCOME-TAX OFFICER TREATED THE LOAN AS ASSESSEES INCOME FROM UNDISCLOSED SOURCES. THE APPELLATE ASSISTANT COMMISSIONER DISMISSED THE ASSESSEES APPEAL ON THE GROUND THAT THE ASSESSEE COULD NOT EVEN ESTABLISH THE IDENTITY OF THE PARTIES. ON FURT HER APPEAL BY THE ASSESSEE, THE APPELLATE TRIBUNAL HELD THAT MERE FILING OF CONFIRMATORY LETTERS DID NOT DISCHARGE THE ONUS THAT LAY ON THE ASSESSEE AND THERE WAS NO MATERIAL ON THE RECORD TO ESTABLISH TH E IDENTITY OF THE CREDITORS: HELD, THAT THE TRIBUNAL HAD TAKEN ALL THE RELEVANT FACTS INTO CONSIDERATION AND THE CONCLUSION ARRIVED AT BY THE TRIBUNAL THAT THE LOANS REPRESENTED THE ASSESSEES INCOME FROM UNDISCLOSED SOURCES WAS NOT PERVERSE OR UNREASONABLE. 10.1 THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS UNITED COMMERCIAL AND INDUSTRIAL CO. (P) LTD., 187 ITR 596 HELD AS UNDER: ITA NO.192/AHD/2011 SHRI RAMGOPAL BANARASILAL AGRAWAL VS ITO, WARD 3, N AVSARI 9 THE PRIMARY ONUS LIES ON THE ASSESSEE TO PROVE THE NATURE AND SOURCE OF CREDITS IN ITS ACCOUNT. IT IS NECESSARY FOR THE ASSESSEE TO PROVE PRIMA FACIE THE IDENTITY OF HIS CREDITORS, THE CAPACITY OF SUCH CREDITORS TO ADVANCE THE MONEY AND LASTLY THE GENUINENESS OF THE TRANSACTIONS. ONLY WHEN THESE THINGS ARE PROVED BY THE ASSESSEE PRIMA FACIE AND ONLY AFTER THE ASSESSEE HAS ADDUCED EVIDENCE TO ESTABLISH THE AFORESAID FACTS DOES THE ONUS SHIFT O N TO THE DEPARTMENT. IT IS NOT ENOUGH TO ESTABLISH THE IDENTITY OF THE CREDITORS. MERE PRODUCTION OF THE CONFIRMATION LETTERS BEFORE THE INCOME-TAX OFFICER WOULD NOT BY ITSELF PROVE THAT THE LOANS HAVE BEEN OBTAINED FROM THOSE LOAN CREDITORS OR THAT THEY HAV E CREDIT-WORTHINESS. HELD, THAT, IN THE INSTANT CASE, THE TRIBUNAL MISDIRECTED ITSELF IN HOLDING THAT THE TRANSACTIONS WERE GENUINE SIMPLY BECAUSE SOME OF THE TRANSACTIONS WERE MADE BY CHEQUES. THE ASSESSEE HAD FAILED TO PROVE THE CREDIT-WORTHINESS OF THE ALLEGED LENDERS. A NUMBER OF OTHER ASSESSEES HAD ALSO ADMITTED THAT LOANS OBTAINED FROM THESE BANKER S AGAINST HUNDIS WERE NOT GENUINE AND SUCH HUNDI LOANS REALLY REPRESENTED THEIR OWN CONCEALED INCOME . THE ASSESSEE HAD NOT DISCHARGED ITS BURDEN OF PROVING THAT THE LOANS IN QUESTION WERE GENUINE. 10.2 THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF M/S. PRECISION FINANCE PVT. LTD., 208 ITR 465 RELIED UPON BY THE A O IN THE ASSESSMENT ORDER HELD THAT EVEN THE LOAN THROUGH BANK CANNOT BE ACCEPTED AS GENUINE UNLESS THE IDENTITY AND CRED ITWORTHINESS OF THE CREDITORS ARE PROVED. MERE PAYMENT OF ACCOUN T PAYEE CHEQUE IS NOT SACROSANCT NOR CAN IT MAKE A NON-GENU INE TRANSACTION GENUINE. ITA NO.192/AHD/2011 SHRI RAMGOPAL BANARASILAL AGRAWAL VS ITO, WARD 3, N AVSARI 10 10.3 THE HONBLE SUPREME COURT IN THE CASE OF DURGA PRASAD MORE, 82 ITR 540 AND SUMATI DAYAL, 214 ITR 801 HELD THAT THE COURTS AND TRIBUNAL HAVE TO JUDGE THE EVIDENCES BEFORE THE M BY APPLYING THE TEST OF HUMAN PROBABILITIES AFTER CONS IDERING THE SURROUNDING CIRCUMSTANCES. WHEN THE AFORESAID TEST IS APPLIED TO THE FACTS OF THE CASE, IT IS CLEAR THAT THE LEARNED CIT(A) WAS JUSTIFIED IN CONFIRMING THE ADDITION. IN THE PRESENT CASE, THE A SSESSEE HAS NOT PRODUCED ANY SUFFICIENT EVIDENCE BEFORE THE AUTHORI TIES BELOW TO PROVE THE IDENTITY OF THE DEPOSITORS, THEIR CREDITW ORTHINESS AND GENUINENESS OF THE TRANSACTION IN THE MATTER. SINCE MOST OF THE TRANSACTIONS ARE IN CASH AND THE CREDITORS ARE NOT ASSESSED TO TAX, THEREFORE, BURDEN IS VERY HEAVY UPON THE ASSESSEE T O PROVE ALL THE INGREDIENTS OF GENUINE CREDITS IN THE MATTER. HOWEV ER, THE ASSESSEE HAS FAILED TO DO SO. THEREFORE, THE ASSESSEE FAILED TO DISCHARGE ONUS UPON HIM TO PROVE GENUINE CREDITS IN THE MATTER. CO NSIDERING THE ABOVE DISCUSSION, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDERS OF THE AUTHORITIES BELOW. THE FINDINGS OF TH E LEARNED CIT(A) ARE CONFIRMED. THIS GROUND OF APPEAL OF THE ASSESSEE HA S NO MERIT AND IS ACCORDINGLY DISMISSED. 11. ON GROUND NO.3, THE ASSESSEE CHALLENGED THE ADD ITION OF RS.15,616/- U/S 40A (3) OF THE IT ACT. THE AO DISCU SSED THIS ISSUE IN THE ASSESSMENT ORDER AND ON GOING THROUGH THE CASH BOOK PRODUCED AT THE ASSESSMENT STAGE VIS--VIS LEDGER ACCOUNT OF M/S. DISHA ENTERPRISES, IT WAS FOUND THAT THE ASSESSEE HAS MAD E CASH PAYMENT TO THE SAID PARTY AGGREGATING TO 1,00,538/- TOWARDS PURCHASE OF RAW MATERIAL, IN CONTRAVENTION OF PROVISIONS OF SECTION 40A(3) OF THE IT ACT. ITA NO.192/AHD/2011 SHRI RAMGOPAL BANARASILAL AGRAWAL VS ITO, WARD 3, N AVSARI 11 SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE AS TO WHY 20% OF THE CASE PAYMENT AMOUNTING TO RS.78,079/- SHOULD NOT BE DISALLOWED. THE ASSESSEE DID NOT OFFER ANY EXPLANATION ON THIS ISSUE. THE AO ACCORDINGLY, DISALLOWED 20% OF RS.78,079/- BECAUSE THE ASSESSEE FAILED TO PROVE EXISTENCE OF ANY MITIGATING CIRCUMS TANCES LAID DOWN IN RULE 6DD OF THE IT RULES. IT WAS SUBMITTED BEFORE T HE LEARNED CIT(A) THAT PAYMENTS WERE MADE THROUGH ANGADIA, THEREFORE, NO ADDITION SHOULD BE MADE. THE LEARNED CIT(A) NOTED THAT THE A BOVE PROVISION BARS IN MAKING PAYMENT IN EXCESS OF RS.20,000/- IN CASH EXCEPT IN EXCEPTIONAL CASES. IT WAS NOTED THAT THE ASSESSEE F AILED TO PROVE ANY SUCH EXCEPTION. IT WAS ALSO NOTED THAT MOST OF THE PAYMENTS ARE MADE FROM NAVSARI IN THE MONTH OF JULY, 2006 WHICH IS ABOUT 20 KMS. ADDITION WAS ACCORDINGLY CONFIRMED. 12. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT PAYMENT IS MADE THROUGH ANGADIA WHO IS AGENT OF THE ASSESSE E, THEREFORE, CASE IS COVERED BY RULE 6 DD OF THE IT RULES AND AD DITION IS UNJUSTIFIED. ON THE OTHER HAND, THE LEARNED DR RELI ED UPON THE ORDERS OF THE AUTHORITIES BELOW. 13. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE A RE OF THE VIEW THE MATTER REQUIRES RECONSIDERATION AT THE LEVEL OF THE AO. RULE 6 DD (K) OF THE IT RULES PROVIDED THAT NO DISALLOWANCE U NDER SUB-SECTION (3) OF SECTION 40A OF THE IT ACT SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS O R PROFESSION U/S 40A (3A) OF THE IT ACT WHERE PAYMENT IS MADE BY ANY PERSON TO HIS AGENT WHO IS REQUIRED TO MAKE PAYMENT IN CASH FOR G OODS OR SERVICES ITA NO.192/AHD/2011 SHRI RAMGOPAL BANARASILAL AGRAWAL VS ITO, WARD 3, N AVSARI 12 ON BEHALF OF SUCH PERSON. THE ASSESSEE DID NOT MAKE ANY EXPLANATION BEFORE THE AO AT THE ASSESSMENT STAGE T O PROVE THAT PAYMENT WAS MADE TO THE PARTY THROUGH ANGADIA WHO W AS AGENT OF THE ASSESSEE. THE ASSESSEE FOR THE FIRST TIME CONTE NDED BEFORE THE LEARNED CIT(A) THAT SUCH PAYMENT WAS MADE THROUGH A NGADIA BUT IT WAS NOT EXPLAINED THAT ANGDAIA WAS AGENT WHO WAS RE QUIRED TO MAKE PAYMENT TO OTHERS ON BEHALF OF THE ASSESSEE. HOWEVE R, THE EXPLANATION MADE BEFORE THE LEARNED CIT(A) WAS ALSO NOT CONSIDERED BY THE LEARNED CIT(A) IN PROPER PERSPECTIVE. SINCE THE PAYMENT THROUGH AGENT ON BEHALF OF THE PRINCIPAL IS ONE OF THE EXCEPTIONAL CIRCUMSTANCES IN WHICH THE PAYMENT COULD HAVE BEEN MADE, THEREFORE, IT WOULD BE REASONABLE AND PROPER TO GIV E ONE MORE OPPORTUNITY TO THE ASSESSEE TO PROVE HIS CASE IN AC CORDANCE WITH THE ABOVE RULE. WE ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND RESTORE THIS ISSUE TO THE FILE OF THE AO WITH DIRECTION TO THE ASSESSEE TO ADDUCE SUFFICIENT EVIDENCE BEFORE THE A O AS PER REQUIREMENT OF ABOVE RULE 6 DD (K) OF THE IT RULES AND THE AO SHALL PASS REASONED ORDER IN ACCORDANCE WITH LAW BY GIVIN G REASONABLE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. IN THE RESULT, GROUND NO.3 OF THE APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. 14. ON OTHER POINT IS ARGUED OR PRESSED. ITA NO.192/AHD/2011 SHRI RAMGOPAL BANARASILAL AGRAWAL VS ITO, WARD 3, N AVSARI 13 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A. N. PAHUJA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD