The ACIT, Circle-2, Surat V. M/s. Kothi Ship Breaking Industries, Surat

ITA 2018/AHD/2008

• Counselvise Citation: 201820514 RSA 2008
• Duration Of Justice: 3 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 18-01-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 29-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S PARIDA
• Assessee Lawyers: SAPNESH SHETH
• Keywords: Unexplained cash credit; Business income; Question of law; Onus to prove; TDS
• Section: 142(1)

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, D BENCH , , , , ! ! ! ! . .. . . .. .#$%& #$%& #$%& #$%&, , , , ' ' ' ' , ( ( ( ( BEFORE S/SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND A.K. GARODIA, ACCOUNTANT MEMBER) ITA NO.2018/AHD/2008 [ASSTT.YEAR : 2004-2005] AC(IT), CIR.2 SURAT. /VS. M/S.KOTHI SHIP BREAKIGN INDUSTRIES DHAMANWALA COMPLEX UDHNA DARWAJA RING ROAD, SURAT. ( (( (*+ *+ *+ *+ / APPELLANT) ( (( (,-*+ ,-*+ ,-*+ ,-*+ / RESPONDENT) . / 0 / REVENUE BY : SHRI S.S.PARIDA 23 / 0 / ASSESSEE BY : SHRI SAPNESH SHETH 45 / 36'/ DATE OF HEARING : 18 TH JANUARY, 2012 7$8 / 36'/ DATE OF PRONOUNCEMENT : 21.03.2012 / O R D E R PER A.K. GARODIA, ACCOUNTANT MEMBER: THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS-II, SURAT DATED 28.2.2008 FOR T HE ASSESSMENT YEAR 2004-2005. 2. THE ONLY GROUND RAISED BY THE REVENUE READS AS U NDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACC OUNT OF UNEXPLAINED CASH CREDIT U/S.68 OF RS.2,35,75,000/- INTRODUCED IN THE BOOKS AS UNSECURED LOANS. ITA NO.2018/AHD/2008 -2- 3. THE BRIEF FACTS TILL THE ASSESSMENT STAGE ARE NO TED BY THE LEARNED CIT(A) IN HIS ORDER. THE RELEVANT PARAS 4 TO 4.1 O F HIS ORDER ARE REPRODUCED HEREINBELOW. 4. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, TH E AO FOUND THAT THE ASSESSEE HAD SHOWN LOANS/DEPOSITS FROM 68 ENTITIES, TOTALING TO RS.5,23,57,546/-. OUT OF THESE, THREE WERE SIST ER CONCERNS. FROM THE REMAINING 65 PERSONS, MOSTLY INDIVIDUALS, THE A SSESSEE HAD SHOWN LOANS AND DEPOSITS WORTH RS.2,35,75,000. ALL LOANS WERE UNSECURED. IN RESPONSE TO THE DIRECTION OF THE AO, THE ASSESSEE FURNISHED LOAN CONFIRMATIONS, COPIES OF ACKNOWLEDGE MENTS OF RETURNS OF INCOME FILED, AS ALSO COPIES OF BANK STATEMENTS (IN A FEW CASES) FROM THE ALLEGED CREDITORS. IN A DETAILED CHART AT PARA-9 (PAGES 4-7 OF THE ASSESSMENT ORDER), THE AO LISTED SOME OF THE CREDITORS ALONG WITH THE AMOUNTS GIVEN AS LOANS/DEPOSITS, THE TOTAL INCOME DECLARED BY THEM IN THE RETURNS OF INCOME BY THE SAME CREDIT ORS AS ALSO HIS REMARKS. THE AO NOTED THAT COPIES OF BANK STATEMENT S HAD NOT BEEN FILED IN RESPECT OF SEVERAL CREDITORS, WHILE THE BA LANCE SHEETS OF NONE OF THE CREDITORS HAD BEEN FILED. THE INFERENCES DRA WN BY THE AO HAVE BEEN LISTED BY HIM IN PARAS 10 & 11 OF THE ASSESSME NT ORDER. 4.1 IT WAS THUS OBSERVED BY THE A.O THAT WHEREVER B ANK STATEMENTS WERE FURNISHED, IT WAS SEEN THAT SUBSTANTIAL DEPOSI TS HAD BEEN MADE IN CASH IN SUCH ACCOUNTS, JUST BEFORE THE UNSECURED LOANS WERE ADVANCED TO THE ASSESSEE. ALL THE CREDITORS WERE OF VERY SMALL MEANS, AND IN NONE OF THE CASES, THE RETURNED INCOM E WAS IN EXCESS OF RS. 1 LAC. THE AO FURTHER OBSERVED THAT THE ASSE SSEE HAD DELIBERATELY STALLED THE PROGRESS OF THE ASSESSMENT PROCEEDINGS BY DELAYING IN FURNISHING THE REQUISITE MATERIALS AND EVIDENCES. THE ASSESSEE HAD NOT BEEN ABLE TO ESTABLISH THE IDENTIT Y OF THE CREDITORS, THEIR CREDITWORTHINESS, AS ALSO THE GENUINENESS OF THE TRANSACTIONS. ON THE BASIS OF SUCH FACTS, THE AO TOOK THE VIEW TH AT THE MONIES THAT WERE CREDITED TO THE BANK ACCOUNT OF CREDITORS, AND SUBSEQUENTLY GIVEN AS LOANS/DEPOSITS TO THE ASSESSEE, WERE BASIC ALLY THE ASSESSEE'S OWN FUNDS WHICH HAD BEEN CREDITED TO THE ACCOUNTS O F SUCH BOGUS CREDITORS. THERE WAS NO AGREEMENT BETWEEN THE ASSES SEE OR ANY OF THE ALLEGED CREDITORS. THIS WAS BECAUSE SUCH PERSON S OF SMALL MEANS WOULD NOT HAVE DEMANDED/INSISTED ON ANY AGREEMENT E SPECIALLY WHEN, IT WAS ONLY THE ASSESSEE'S MONEY WHICH HAD BE EN ROUTED THROUGH THEIR BANK ACCOUNTS. CONSEQUENTLY, THE UNSE CURED LOANS CREDITED TO THE ASSESSEE'S BALANCE SHEET WERE ALL B OGUS, AND THE ASSESSEE'S DELAYING TACTICS ADOPTED IN COURSE OF TH E ASSESSMENT PROCEEDINGS, WAS MERELY AN ATTEMPT TO COVER UP THE CIRCULATION OF ITA NO.2018/AHD/2008 -3- THE ASSESSEE'S OWN FUNDS. VIDE ORDER SHEET ENTRY 29 .11.2006, THE AO ISSUED A SHOW-CAUSE NOTICE TO THE ASSESSEE ASKING F OR AN EXPLANATION AS TO WHY SUCH CREDITS SHOULD NOT BE TREATED AS UNE XPLAINED CASH CREDITS. THE ASSESSEE HAD FURNISHED CONFIRMATIONS A ND POSTAL ADDRESSES OF THE PARTIES ONLY AT THE FAG END OF THE YEAR, AND THEREFORE, IT HAD NOT BEEN POSSIBLE FOR REVENUE TO UNDERTAKE COMPLETE VERIFICATION OF THE TRANSACTIONS. MOREOVER , AS PER THE DETAILS FURNISHED BY THE AR, THE ALLEGED CREDITORS HAD FILED THEIR RETURNS OF INCOME EITHER IN MUMBAI OR THANE, EVEN T HOUGH MOST OF THEM BELONGED TO SURAT. 4.2 THUS, ACCORDING TO THE AO, THE ASSESSEE FAILED TO FURNISH ANY CREDIBLE EXPLANATION REGARDING THE GENUINENESS OF T HE TRANSACTIONS AND/OR THE CREDITWORTHINESS AND IDENTITY OF THE CRE DITORS. PLACING RELIANCE ON CERTAIN CASELAWS (PARAS 25,26, & 27) HE PROCEEDED TO TREAT THE CASH CREDITS TOTALLING RS.2,35,75,000 AS UNEXPLAINED, IN TERMS OF SEC. 68 OF THE IT ACT. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT(A). BEFORE THE LEARNED CIT(A), IT WAS SUBMITTE D BY THE ASSESSEE THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESS EE HAS DISCHARGED ITS INITIAL BURDEN OF PROVING THE IDENTITY OF THE CRED ITORS, THEIR CREDITWORTHINESS, AS ALSO THE GENUINENESS OF THE TR ANSACTIONS. HE ALSO STATED THAT FOR ESTABLISHING THE IDENTITY, THE ASSESSEE HA D FURNISHED COMPLETE NAMES AND ADDRESSES, PAN, ACKNOWLEDGEMENTS OF RETUR NS OF INCOME FILED BY THEM, AS ALSO ACCOUNT CONFIRMATIONS. REGARDING CREDIT-WORTHINESS AND GENUINENESS OF THE TRANSACTIONS, THE ASSESSEE HAD F URNISHED COPIES OF THEIR BANK ACCOUNTS IN ADDITION TO THE ACKNOWLEDGEMENTS O F RETURN OF INCOME. IN THE COURSE OF THE APPELLATE PROCEEDINGS, THE AR HAS ALSO FURNISHED THE BALANCE SHEETS OF THE ALLEGED CREDITORS AS ALSO AFF IDAVITS FROM THEM AND EVIDENCE OF DEDUCTION OF TDS. IT WAS SUBMITTED THA T THE AO HAD FAILED TO EXAMINE AND VERIFY ALL SUCH DOCUMENTARY EVIDENCES F URNISHED BEFORE HIM. THE LEARNED CIT(A) OBTAINED REMAND REPORT FROM THE AO AND AFTER CONSIDERING THE REMAND REPORT AND SUBMISSION OF THE ASSESSEE AND THE MATERIAL AVAILABLE ON RECORD, HE DELETED ENTIRE ADD ITION MADE BY THE AO AND NOW, THE REVENUE IS IN APPEAL BEFORE US. ITA NO.2018/AHD/2008 -4- 5. IT WAS SUBMITTED BY THE LEARNED DR THAT THERE IS A IMMEDIATE CREDIT ENTRIES IN THE BANK ACCOUNT OF THE CREDITORS AND SU CH CREDITS ARE ON ACCOUNT OF CONTINUOUS CHEQUE NUMBERS. OUR ATTENTION WAS DR AWN TO PAGE NOS.168, 204, 225, 173 AND 140 OF THE PAPER BOOK IN SUPPORT OF THE CONTENTION THAT THE CHEQUE NUMBER OF IMMEDIATE CREDIT IS BY WAY OF CONSECUTIVE CHEQUE NUMBERS. OUR ATTENTION WAS DRAWN TO THE PAGE NO.10 7 OF THE PB AND IT WAS CONTENDED THAT THERE IS A CASH DEPOSIT IN THE BANK ACCOUNT OF THE CREDITOR BEFORE GIVING CHEQUE OF RS.2.50 LAKHS ON 18-9-2003. IT WAS ALSO SUBMITTED THAT RETURN OF INCOMES OF ALL THE CREDITORS WERE AL SO VERY LOW AND IN THESE FACTS OF THE CASE ALSO, THEIR CREDIT-WORTHINESS IS IN DOUBT. THE RELIANCE WAS PLACED ON TWO JUDGMENTS OF THE HONBLE APEX COURT I N THE CASE OF COMMISSIONER OF INCOME-TAX VS DURGA PRASAD MORE, 8 2 ITR 540 AND IN THE CASE OF SUMATI DAYAL VS COMMISSIONER OF INCOME- TAX , 214 ITR 801. 6. AS AGAINST THESE CONTENTIONS OF THE LEARNED DR, THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED THAT COMPLETE CHART OF ALL 65 LOAN CREDITORS GIVING FULL DETAILS OF DOCUMENTS FILED IN RESPECT OF EACH LOAN CREDITOR ALONG WITH SOURCE OF DEPOSITS IN THE BANK ACCOUNT OF LOAN CREDITORS IS AVAILABLE ON RECORD AN D SUBMITTED THAT ONLY IN THE CASE OF SIX LOAN CREDITORS, THERE WAS SMALL AMO UNT OF CASH DEPOSITS BEING RS.50,000/- IN THE CASE OF SAROJDEVI N. BANG, RS.5,000/-, IN THE CASE OF SHRI BABULAL SHARMA, RS.5,000/- IN THE CASE OF M ADANLAL SATYANARAYAN, HUF, RS.8,000/- IN THE CASE OF SHRI PURSHOPTTAM BAN G AND RS.50,000/- IN THE CASE OF JAGDISH PRASAD. HE SUBMITTED THAT ALL O THER DEPOSITS IN THE BANK ACCOUNT OF THE CREDITORS WERE EITHER OLD BALANCES O R BY WAY OF TRANSFER OR BY WAY OF CLEARING. FOR ALL THESE LOAN CREDITORS, ACKN OWLEDGEMENT OF RETURN OF INCOME, COMPUTATION OF INCOME AND BALANCE SHEET, BA NK STATEMENT ALONG WITH AFFIDAVIT AND CONFIRMATIONS HAVE BEEN FILED AN D NO DEFECT HAS BEEN POINTED BY THE AO IN THESE DOCUMENTS. HE ALSO SUBM ITTED THAT THE ONUS HAS BEEN ITA NO.2018/AHD/2008 -5- DISCHARGED BY THE ASSESSEE, AND THEREFORE ORDER OF THE LEARNED CIT(A) SHOULD BE CONFIRMED. THE RELIANCE WAS PLACED BY HI M ON THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF DEPUT Y COMMISSIONER OF INCOME-TAX VS ROHINI BUILDERS , 256 ITR 360. 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW AND THE JUDGMENTS CITED BY BOTH THE PARTIES. FIRST OF ALL, WE REPRODUCE BELOW THE FINDINGS OF THE LEARNED CIT(A). 7. I HAVE CAREFULLY CONSIDERED THE FINDINGS AND CO NCLUSION OF THE AO AS CONTAINED IN THE ASSESSMENT ORDER AND THE DET AILED REMAND REPORTS. I HAVE ALSO PERUSED THE WRITTEN SUBMISSION S OF THE AR FURNISHED FROM TIME TO TIME ALONG WITH ACCOMPANYING DOCUMENTARY EVIDENCES. I HAVE ALSO GONE THROUGH THE CASE-LAWS R ELIED UPON BY EITHER SIDE. AS HAS BEEN MENTIONED BY THE AO AT PAR A-24 OF THE ASSESSMENT ORDER, THE ONUS WAS ON THE ASSESSEE TO P ROVE THE GENUINENESS OF THE LOANS/DEPOSITS. FOR THIS PURPOSE , AS HAS BEEN REPEATEDLY HELD BY VARIOUS COURTS, IT WAS NECESSARY TO ESTABLISH THE IDENTITY OF THE CREDITORS AND THEIR CREDITWORTHINES S, I.E., THEIR ABILITY TO GIVE THE LOANS, AND FINALLY, THE GENUINENESS OF THE TRANSACTIONS. IN COURSE OF THE ASSESSMENT PROCEEDINGS, AS NOTED BY T HE AO (PARA-8), THE ASSESSEE HAD FURNISHED LOAN CONFIRMATIONS AS AL SO COPIES OF ACKNOWLEDGEMENTS OF RETURNS OF INCOME FROM ALL THE CREDITORS. COPIES OF BANK STATEMENTS OF SOME OF THE CREDITORS WERE FURNISHED. THE AO LISTED OUT THE DETAILS PERTAINING TO 42 CRED ITORS. HIS FIRST OBJECTION WAS THAT, IN THE CASES OF CREDITORS WHOSE BANK STATEMENTS WERE FURNISHED, IT WAS SEEN THAT CASH HAD BEEN DEPO SITED ONLY A FEW DAYS BEFORE THE LOANS WERE ADVANCED TO THE ASSESSEE . THE SECOND OBSERVATION WAS THAT ALL THE CREDITORS WERE PERSONS OF SMALL MEANS, BECAUSE ALL OF THEM HAD FILED THEIR RETURNS OF INCO ME DECLARING TOTAL INCOME BELOW RS.1 LAC, AND THIRDLY, THE BALANCE SHE ETS OF THE SAME CREDITORS HAD NOT BEEN FURNISHED. 7.1 WITH REGARD TO THE FIRST OBSERVATION OF THE AO , I FIND THAT THE AO LISTED OUT ONLY 42 CREDITORS EVEN THOUGH THERE W ERE 65 OF THEM. ON AN EXAMINATION OF THE BANK STATEMENTS OF THE CRE DITORS, WHERE ACCORDING TO THE AO, CASH HAD BEEN DEPOSITED EITHER ON THE SAME DAY OR A FEW DAYS PRIOR TO GIVING THE LOAN TO THE A SSESSEE, I FIND THAT THERE WERE NO CASH DEPOSITS AT ALL IN ANY OF THE AC COUNTS. ALL THE DEPOSITS WERE BY CHEQUES. THIS HAS BEEN CLARIFIED T O SOME EXTENT BY T ITA NO.2018/AHD/2008 -6- E AO IN HIS REMAND REPORT DATED 4.6.2007 WHICH WAS FURNISHED AFTER MAKING FURTHER ENQUIRIES WITH THE BANKS. SECONDLY, ACCORDING TO THE AO ALL THE CREDITORS WERE PERSONS OF VERY SMALL MEA NS. WHAT HE OVERLOOKED WAS THE FACT THAT IN THE CASE OF KAMAL M OTORS(SUPRA) WHICH HAS BEEN REFERRED TOM HIM IN PARA-27 OF THE O RDER, THE RAJKOT BENCH OF THE ITAT HAS OBSERVED THAT, WHEN THE CASH CREDITOR IS AN INCOME-TAX ASSESSEE, IT CANNOT BE SAID THAT HE IS A MAN OF SMALL MEANS. THIRDLY, HIS OBJECTION WAS THAT THE BALANCE SHEETS HAD NOT BEEN FURNISHED. I DO NOT THINK THERE WAS ANY MERIT IN SUCH AN OBSERVATION, ESPECIALLY WHEN, THE ASSESSEE HAD FURN ISHED OTHER COMPLETE DETAILS AND EVIDENCES WHICH WERE NOT ACTED UPON BY THE AO IN COURSE OF THE ASSESSMENT PROCEEDINGS. 7.2 AS MENTIONED EARLIER, IN THE INTEREST OF EQUITY AND FAIR PLAY, THE MATTER WAS REMANDED TO THE AO FOR FURTHER INQUI RIES. IN THE SECOND REMAND REPORT, HE HAS RAISED CERTAIN ADDITIO NAL OBJECTIONS WHICH, ACCORDING TO ME, DO NOT CARRY MUCH WEIGHT, G IVEN THE FACTS OF THE CASE. THUS, HIS OBSERVATION THAT ALL THE CREDIT ORS HELD SAVING BANK ACCOUNT AND THEIR SOURCE OF INCOME WAS COMMISS ION, INTEREST, AND RENT ( THERE BEING NO BUSINESS INCOME) AND THAT , THE ADDRESSES GIVEN WERE ALL RESIDENTIAL ADDRESSES, (THERE BEING NO BUSINESS ADDRESS) WERE OBVIOUSLY WAS OF NO CONSEQUENCE. HIS SECOND OBSERVATION THAT THE MAJOR ENTRIES IN THE BANK ACCO UNTS WERE ONLY THOSE WHICH RELATED TO THE LOAN TRANSACTIONS, AND T HAT THE LENDER IN MOST CASES HAD NO BALANCE OR HAD MINIMUM BALANCE AT THE BEGINNING OF THE YEAR, AND THAT THERE WAS VERY LITTLE TIME DI FFERENCE IN THE CREDIT AND DEBIT ENTRIES, WHICH INDICATED THAT THE LOAN TR ANSACTIONS WERE MAKE-BELIEF, ARE ALSO OF NOT MUCH RELEVANCE AS FAR AS THE ISSUE OF THE GENUINENESS OF THE LOANS/DEPOSITS WAS CONCERNED. SI MILARLY, HIS OBSERVATION THAT THE ACCOUNTS OF THE CREDITORS WERE CLUSTERED WITH SOME OF THE BANKS SO THAT 44 CREDITORS RESIDING IN PLACES LIKE BORIVALI, KANDIVALI, GOREGAON, VILLE PARLE, MALAD E TC. HAD BANK ACCOUNTS ONLY IN 9 BANK BRANCHES INCLUDING THE KALB ADEVI AND GHATKOPAR BRANCHES OF CORPORATION BANK, WAS OF NO S IGNIFICANCE TO THE ISSUE AT HAND. THE POINT TO NOTE HERE IS THAT, ALL THE PLACES MENTIONED BY THE AO ARE CLOSE TO EACH OTHER AND FAL L CONSECUTIVELY ON THE WESTERN LINE OF THE MUMBAI RAILWAY SYSTEM. I T WAS THEREFORE NOT UNUSUAL FOR PEOPLE RESIDING IN THESE AREAS TO H AVE OPENED BANK ACCOUNTS IN MULUND AND GHATKOPER ETC. IT HAS BEEN F URTHER OBSERVED THAT THE CREDITORS DID NOT HAVE THE CAPACITY TO LEN D FOR MORE THAN FEW DAYS, AND THIS SHOWED THAT THEY DID NOT HAVE THE RE QUISITE CREDITWORTHINESS. THE AO ALSO OBSERVED THAT THE BAL ANCE SHEETS OF SOME OF THE CREDITORS HAVE BEEN MANIPULATED, BUT HE HAS NOT SHOWN HOW THEY HAD BEEN MANIPULATED. THAT THE ASSESSEE HA D NOT FURNISHED THE COMPUTATION OF INCOME OF THE CREDITORS, ALSO A GROUND TAKEN BY ITA NO.2018/AHD/2008 -7- HIM. THE AO HAS THEN GONE INTO A DETAILED ARGUMENT REGARDING THE CREDITWORTHINESS OF THE CREDITORS ON THE BASIS OF T HE COMPUTATION OF INCOME WHICH HE APPARENTLY OBTAINED FROM THE CONCER NED AOS OF THE CREDITORS. THE BASIC POINT IS WHETHER THE CREDITORS WERE GENUINE AND IDENTIFIABLE PEOPLE. YES THEY WERE. THIS WAS NOT DO UBTED BY THE AO. SECONDLY, WHETHER THE TRANSACTIONS WERE GENUINE? Y ES THEY WERE, SINCE ALL THE LOANS/DEPOSITS WERE TAKEN THROUGH THE BANKING CHANNELS. THIRDLY, WHETHER THE CREDITORS HAD THE RE QUISITE CREDITWORTHINESS? FROM THE EVIDENCES FURNISHED BY T HE ASSESSEE AND THE AR, TO ME IT APPEARS THAT THEY INDEED HAD THE C REDITWORTHINESS. FIRSTLY THEY WERE ASSESSED TO TAX. SECONDLY, THE DE POSITS IN THE BANK ACCOUNTS WERE ALL MADE BY CHEQUES BY TRANSFERS AND CLEARING. INSTEAD OF FURTHER IDENTIFYING THE SOURCE OF SUCH D EPOSITS IN THE HANDS OF CREDITORS, THE AO ONLY TRIED TO GATHER CERTAIN C IRCUMSTANTIAL EVIDENCE, WHICH WERE NOT REALLY STRONG ENOUGH TO RE BUT THE EVIDENCES OTHERWISE PRESENTED BY THE ASSESSEE. 7.3 THE POINT IS THAT, AFTER THE AR HAD REBUTTED T HE REMAND REPORT OF THE AO DATED 4.6.2007 BY HIS SUBMISSIONS DATED 1 7.7.2007, THE AO WAS GIVEN FURTHER OPPORTUNITY TO COMMENT ON THE REBUTTALS OF THE AR, WHICH WAS NOT REALLY REQUIRED, AND TO SOME EXTE NT WAS NOT PERMISSIBLE AND HENCE UNFAIR ON THE ASSESSEE. INSPI TE OF HAVING BEEN GIVEN FURTHER OPPORTUNITY AND A LENGTHY SECOND AND THIRD INNINGS, WHEN THE AO WAS GIVEN AN OPPORTUNITY TO VERIFY THE CLAIM OF THE AR THAT ALL THE LOANS HAD BEEN REPAID, THE AO WAS NOT ABLE TO MAKE MUCH HEADWAY APART FROM REPEATING AND REITERATING H IS EARLIER ARGUMENTS. 7.4 BY FURNISHING THE LOAN CONFIRMATION, THE ACCOU NT CONFIRMATIONS, THE BANK STATEMENTS AND THE COPIES O F ACKNOWLEDGEMENTS OF RETURNS FILED BY THE CREDITORS, THE ASSESSEE HAD MORE THAN DISCHARGED ITS BURDEN OF PROOF. ON THE OT HER HAND, THE AO WAS GIVEN MORE THAN SUFFICIENT OPPORTUNITIES TO BRI NG ON RECORD EVIDENCE TO SHOW THAT THE ASSESSEE'S CLAIM WAS NOT BONAFIDE AND THE EVIDENCE MARSHALLED BY THE ASSESSEE WERE NOT CONCLU SIVE. THIS, THE AO FAILED TO DO. ON HIS PART, THE AR HAS FURNISHED COMPLETE DETAILS OF THE REPAYMENT OF THE LOANS. HE HAS FIRST FURNISH ED COPIES OF THE ASSESSEE'S ACCOUNTS WITH THE CANARA BANK, SURAT, PU NJAB NATIONAL BANK (PNB) MUMBAI, (A/C.NO 21135567) & PNB BHAVNAGA R (OD A/C. NO.50258). COPIES OF THESE ACCOUNTS HAVE BEEN FURNISHED TO SHOW THE OUTFLOW OF FUNDS TO THE CREDITORS. THE AR WAS THEN ASKED TO PRODUCE CONFIRMATIONS FROM THE BANKS REGARDING THE DESTINATION OF THE CHEQUES ISSUED BY THE ASSESSEE. THUS, THE PNB, FORT, MUMBAI HAS FURNISHED CONFIRMATION REGARDING PAYMENTS MADE TO 20 ITA NO.2018/AHD/2008 -8- CREDITORS. THE DETAILS FURNISHED INCLUDE THE DATE O F ISSUE, THE CHEQUE NOS., NAME OF THE PARTY TO WHOM ISSUED, THE NAME OF THE PRESENTING BANK I.E. THE BANKS AND BRANCHES TO WHICH SUCH CHEQ UES WERE CREDITED AND THE AMOUNTS. SIMILARLY, THE PNB, BHAVN AGAR BRANCH HAS FURNISHED DETAILS OF 16 CREDITORS. THE CANARA B ANK, SURAT HAS FURNISHED DETAILS OF PAYMENT MADE TO 4 CREDITORS, W HEREAS, THE ASSESSEE HAS FURNISHED COPIES OF BANK STATEMENTS OF THE REMAINING 24 CREDITORS. THE BANK STATEMENTS OF THE 24 CREDITO RS CLEARLY SHOW THE DEPOSITS OF THE SUMS REPAID BY THE ASSESSEE. ON LY IN THE CASE OF ONE CREDITOR, BEING GHEVERCHAND MUKUNDCHAND, TO WHO M THE ASSESSEE CLAIMED TO HAVE REPAID A SUM OF RS.3,81,34 1 ON 6.7.2005 THROUGH PNB, SURAT, NO CORROBORATIVE EVIDENCE HAS B EEN FILED. 7.5 ONCE THE ASSESSEE HAS ESTABLISHED WITH CLEAR EV IDENCE THAT ALL THE CREDITORS WERE REPAID, THERE CANNOT BE ANY FURT HER DISCUSSION REGARDING THE GENUINENESS OF THE CREDITORS SHOWN DU RING THE YEAR UNDER CONSIDERATION. THE MOST IMPORTANT POINT IS TH AT, THE 20 CREDITORS WHO WERE PAID FROM OUT OF THE ASSESSEE'S ACCOUNT WITH PNB, MUMBAI, CHEQUES WERE ISSUED TO THEM BETWEEN 31 .3.2005 AND 30.11.2005. THE 16 CREDITORS TO WHOM CHEQUES WERE I SSUED THROUGH PNB BHAVNAGAR WERE ALL PAID DURING THE MONTH OF JAN UARY 2006, WHEREAS, 4 CREDITORS WERE REPAID DURING THE MONTH O F MARCH, 2006 THROUGH CANARA BANK, SURAT. AS REGARDS THE REMAININ G 24 CREDITORS WHOSE BANK STATEMENTS HAVE BEEN FURNISHED AS EVIDEN CE OF REPAYMENT, IT IS SEEN THAT MOST OF THEM WERE REPAID BY MARCH, 2006 EXCEPT FOUR OF THEM WHO WERE REPAID IN FEBRUARY, 20 07. THESE FACTS WHICH I HAVE PERSONALLY VERIFIED FROM THE CERTIFICA TES ISSUED BY THE BANKS CLEARLY SHOW THAT, APART FROM THE FOUR CREDIT ORS WHO WERE REPAID IN FEBRUARY,2007 ALL OTHER CREDITORS WERE RE PAID BEFORE THE ASSESSMENT WAS COMPLETED ON 28.12.2006. IN FACT, TH EY WERE ALL REPAID BEFORE THE FIRST NOTICE U/S. 142(1) WAS ISSU ED BY THE AO ON 8.6.2006. 7.6 TAKING INTO ACCOUNT THE FACTS AND CIRCUMSTANCE S OF THE CASE AS DISCUSSED ABOVE, THERE CANNOT REMAIN ANY DOUBT R EGARDING THE GENUINENESS OF THE LOAN/DEPOSITS TOTALLING RS.2,35, 75,000. NOT ONLY HAD THE ASSESSEE DISCHARGED ITS INITIAL BURDEN OF P ROVING THE GENUINENESS OF SUCH LOANS/DEPOSITS IN COURSE OF THE ASSESSMENT PROCEEDINGS ITSELF, THE AO WAS UNABLE TO REBUT OR D ISPROVE THE EVIDENCES FURNISHED BY THE ASSESSEE. HE THUS FAILED TO DISCHARGE HIS ONUS. THE ASSESSEE HAS BEEN ABLE TO FURNISH FURTHER AND CONCLUSIVE EVIDENCE REGARDING THE REPAYMENT OF ALL THE LOANS/D EPOSITS, IN COURSE OF THE APPELLATE PROCEEDINGS. THE AO HAS BEEN GIVEN SUFFICIENT OPPORTUNITY TO FURTHER STRENGTHEN HIS FINDINGS AND CONCLUSION THROUGH REMAND PROCEEDINGS, INFACT HE WAS GIVEN AN EXTRA ITA NO.2018/AHD/2008 -9- OPPORTUNITY TO COUNTER REBUTTING THE REBUTTAL OF TH E AR OF HIS FINDINGS IN THE REMAND REPORT. EVEN THOUGH THE AO M ADE A VALIANT EFFORT TO PROVE THE CREDITS AS BOGUS, FOR WHICH PUR POSE HE GATHERED SEVERAL CIRCUMSTANTIAL EVIDENCES AND PLACED RELIANC E ON NUMEROUS CASE-LAWS YET, ONCE THE AR HAS BEEN ABLE TO PROVE W ITH EVIDENCE, IN THE FORM OF CERTIFICATES FROM THE BANKS TO SHOW THA T ALL THE LOANS/DEPOSITS HAD BEEN REPAID AND MOST OF THEM, EX CEPT FOUR, HAD BEEN REPAID BEFORE THE ASSESSMENT ORDER WAS FINALIS ED, THERE REMAINS NO OTHER OPTION BUT TO ACCEPT THE GENUINENE SS OF ALL THE CREDITS WHICH TOTALLED RS.2,35,75,000. THE ADDITION OF THE SAID SUM U/S.68 OF THE IT ACT, WILL THEREFORE, STAND DELETED . 8. WE WOULD ALSO LIKE TO POINT THAT AS PER THE CHAR T GIVEN BY THE LEARNED COUNSEL, OUT OF THE TOTAL LOAN CREDIT OF RS.2,26,70 ,000/- TAKEN BY THE ASSESSEE FROM 65 LOAN CREDITORS, THE ASSESSEE HAD M ADE PAYMENT OF INTEREST OF RS.15,76,789/-. IN THE ASSESSMENT ORDER, THERE WAS NO DISALLOWANCE OF INTEREST MADE BY THE AO BECAUSE ONLY ADDITION MADE BY THE AO IS REGARDING UNSECURED LOAN TAKEN BY THE ASSESSEE UNDE R SECTION 68 OF RS.2,35,75,000/- AND RS.19,50,000/- REGARDING CRANE RENT DISALLOWED BY HIM. IN THE CASE OF ROHINI BUILDERS (SUPRA), IT WA S NOTED BY THE TRIBUNAL THAT THE AO HAS NOT DISALLOWED THE INTEREST PAID IN RELATION TO THESE CREDITS IN THE ASSESSMENT YEAR UNDER CONSIDERATION, AND THE REFORE, THE REVENUE WAS NOT JUSTIFIED IN MAKING THE ADDITION OF THE LOAN AM OUNT. THIS ORDER OF THE TRIBUNAL WAS UPHELD BY THE HONBLE GUJARAT HIGH COU RT BY HOLDING THAT THERE WAS NO SUBSTANTIAL QUESTION OF LAW IN THE APP EAL OF THE REVENUE. IN THE PRESENT CASE ALSO, THERE IS NO DISALLOWANCE OF INTEREST OUT OF THE INTEREST PAYMENT MADE BY THE ASSESSEE FOR THE LOAN AMOUNT IN QUESTION. FOR THIS REASONING ALONE, NO ADDITION IS JUSTIFIED UNDER SEC TION 68 OF THE ACT AS PER THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN T HE CASE OF ROHINI BUILDERS (SUPRA). MOREOVER, WE ALSO FIND THAT THE ASSESSEE HAS DISCHARGED ITS ONUS BY ESTABLISHING THE IDENTITY, CREDIT-WORTH INESS OF THE LOAN CREDITORS AS WELL AS THE GENUINENESS OF THE TRANSACTIONS BY F URNISHING VARIOUS DOCUMENTS, SUCH AS ACKNOWLEDGEMENT OF RETURNS OF IN COME, COMPUTATION OF INCOME, BALANCE SHEETS, BANK STATEMENTS, AFFIDAVITS AND CONFIRMATIONS OF ALL ITA NO.2018/AHD/2008 -10- THE SIXTY-FIVE LOAN CREDITORS AND NO DEFECT HAS BEE N POINTED OUT BY THE REVENUE IN THESE DOCUMENTS. ONLY CONTENTION RAISED BEFORE US IS THAT THERE IS IMMEDIATE CREDIT BY WAY OF CONSECUTIVE CHEQUE NU MBERS IN SOME CASES. IF THE LOAN CREDITORS HAVE RECEIVED FUNDS BY WAY OF REPAYMENT OF EARLIER LOAN GIVEN TO SAME PARTY, SUCH RECEIPT OF FUNDS BY THESE VARIOUS LOAN CREDITORS CAN BE BY WAY OF CONSECUTIVE CHEQUE NUMBE RS AND FOR THIS REASON ALONE, CREDIT-WORTHINESS OF THE LOAN CREDITORS OR T HE GENUINENESS OF THE TRANSACTIONS CANNOT BE DOUBTED. THE SECOND CONTENT ION RAISED IS THAT THERE ARE CASH DEPOSITS IN SOME BANK ACCOUNTS OF SOME LOA N CREDITORS. IN THIS REGARD, WE HAVE NOTED THAT THERE IS A VERY SMALL AM OUNT OF CASH DEPOSIT IN SIX CASES OF THESE LOAN CREDITORS OUT OF 65 LOANS A ND THE TOTAL AMOUNT OF SUCH DEPOSITS IS NOT MORE THAN RS.1.63 LAKHS OUT OF TOTAL LOAN TAKEN BY THE ASSESSEE OF RS.2,26,70,000/-. FOR SUCH SMALL AMOUN TS OF CASH DEPOSITS IN SIX BANK ACCOUNTS OF THE LOAN CREDITORS, OUT OF TOT AL 65 LOAN CREDITORS, NO ADVERSE INFERENCE CAN BE DRAWN. ANOTHER CONTENTION RAISED IS THAT RETURNED OF INCOME OF THE CREDITORS ARE VERY SMALL ABOUT RS. 60,000/- TO RS.70,000/- PER CREDITOR. IT IS NOT THE CASE OF THE ASSESSEE T HAT ONLY THE PRESENT YEARS INCOME WAS ADVANCED BY THE LOAN CREDITORS. THERE C AN BE ACCUMULATION IN THE HANDS OF THE LOAN CREDITORS OVER THE YEARS AND IF THAT AMOUNT IS ADVANCED, WHICH IS AS PER THE BALANCE SHEET AND THE RETURN OF INCOME FILED BY THEM, THIS FACTOR ALONE THAT INCOME IS LOW, CANN OT LEAD TO THE CONCLUSION THAT LOAN CREDITORS HAVE NO CREDIT-WORTHINESS. RE GARDING THE JUDGMENTS RELIED ON BY THE LEARNED DR OF THE HONBLE APEX COU RT IN THE CASE OF DURGA PRASAD MORE (SUPRA) AND IN THE CASE OF SUMATI DAYAL (SUPRA), WE WOULD LIKE TO OBSERVE THAT THESE JUDGMENTS ARE NOT APPLICABLE TO THE PRESENT CASE BECAUSE IN THE PRESENT CASE, ONUS HAS BEEN DIS CHARGED BY THE ASSESSEE AND AS PER THE DOCUMENTS SUBMITTED BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW AND BEFORE US, IT IS SEEN THAT THE LOAN IS GI VEN BY THEM TO THE ASSESSEE BY WAY OF ACCOUNT PAYEE CHEQUES AND ALL OF THEM WER E FILING RETURNS OF INCOME AND HAVE SHOWN THE ADVANCES TO THE ASSESSEE IN THEIR BALANCE SHEETS ITA NO.2018/AHD/2008 -11- AND NO DEFECT HAS BEEN POINTED OUT IN THESE DOCUMEN TS, AND THEREFORE, THESE TWO JUDGMENTS ARE OF NO HELP TO THE REVENUE IN THE PRESENT CASE. AS PER THE ABOVE DISCUSSIONS, WE FIND THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE LEARNED CIT(A) IN THE FACTS AND CIRCUMSTANCES O F THE CASE, AND THEREFORE WE DECLINE TO INTERFERE IN HIS ORDER, WHICH IS UPHE LD. 9. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD./- SD./- ( /BHAVNESH SAINI) /JUDICIAL MEMBER ( . .. . . .. .#$%& #$%& #$%& #$%& /A.K. GARODIA) ' ' ' ' /ACCOUNTANT MEMBER ORDER PRONOUNCED: SD./- (KB)JM SD./-(AKG)AM C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD 1. DATE OF DICTATION : 06-03-2012 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER. : 12-03-2012 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P.S./P.S : 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT. : 5. DATE ON WHICH FAIR ORDER PLACED BEFORE OTHER MEMBER : 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P.S./P.S. : 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK. : 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK. : 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER. : 10. DATE OF DESPATCH OF THE ORDER :