M/s. Adhar Technologies Pvt. Ltd., Bhubaneswar V. DCIT, Circle-1(1), Bhubaneswar

ITA 228/CTK/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7189 (ITAT-CUTTACK)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 08-03-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 15-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: MANOJ KUMAR PATRA
• Keywords: Unexplained cash credit; Deemed to accrue or arise in india; Onus to prove
• Section: 131; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK SMC BENCH, CUTTACK BEFORE SHRI N.S SAINI, ACCOUNTANT MEMBER ITA NO. 228 /CTK/2016 ASSESSMENT YEAR : 2011 - 12 M/S. ADHAR TECHNOLOGIES (P) LTD., PLOT NO.6, 2 ND FLOOR, KHARVEL NAGAR, UNIT - III, BHUBANESWAR. VS. DCIT, CIRCLE 1(1), BHUBANESWAR. PAN/GIR NO. AAGCA 9820 K (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI MANOJ KUMAR PATRA, AR REVENUE BY : SHRI D.K.PRADHAN , DR DATE OF HEARING : 08 /03 / 2017 DATE OF PRONOUNCEMENT : 08 /03 / 2017 O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 3, BHUBANESWAR. D ATED 24.2.2016, FOR THE ASSESSMENT YEAR 2011 - 12. 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL IS THAT THE LD CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.14,00,000/ - MADE BY THE ASSESSING OFFICER AS UNEXPLAINED CASH CREDIT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS RECEIVED UNSECURED LOAN OF RS.14,00,000/ - ON 7.10.2010 FROM TWO PERSONS NAMELY 2 ITA NO. 228/CTK/2016 ASSESSMENT YEAR :2011 - 12 SHRI HARISH CHANDRA MOHANTY OF RS. 7 LAKHS AND SMT. NIKITA SUBODHI OF RS.7 LAKHS. HE OBSERVED FROM THE BANK ACCOUNT OF THE LOAN CREDITORS THAT THEY DEPOSITED CASH OF RS.7 LAKHS ON 7.10.2010 IN THE BANK ACCOUNTS AND IMMEDIATELY ON THE VERY SAME DATE, THEY ISSUED CHEQUES TO THE ASSESSEE AND THE SAME WAS CREDITED IN THE ACCOUNT OF THE ASSESSEE COMPANY ON THE VERY SAME DAY I.E. ON 7.10.2010. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE COULD NOT PROVE THE CREDITWORTHINESS OF THE LOAN CREDITORS TO ADVANCE LOAN OF RS.7 LAKHS EACH TO THE ASSE SSEE COMPANY AS THEY HAD DEPOSITED CASH IN THEIR BANK ACCOUNTS BEFORE ISSUE OF CHEQUE TO THE ASSESSEE ON THE VERY SAME DATE AND THE AMOUNT WAS CREDITED IN THE ACCOUNT OF THE ASSESSEE COMPANY ON THE VERY SAME DATE . 4. ON APPEAL BEFORE THE CIT(A), IT WAS SUB MITTED THAT SMT. NIKHITA SUB U DHI, IS THE WIFE OF TAPENDRA N SENAPATHI, WHO IS THE C.E.O. OF TATWA TECHNOLOGIES, A GROUP OF COMPANIES HAVING TURNOVER OF RS.12 CRORES AND ABOVE, THAT SHE IS THE DAUGHTER - IN - LAW OF A HIGHLY ESTABLISHED FAMILY OF RABINDRA GROUP OF BHUBANESWAR, THAT SHE HAD INVESTED MONEY IN OTHER COMPANIES DURING THE YEAR AND THAT, WHEN THE ASSESSEE COMPANY REQUIRED MONEY, SHE ARRANGED MONEY FROM DIFFERENT SOURCES AS LOAN AND DEPOSITED THE MONEY IN HER PERSONAL ACCOUNT AND ISSUED THE CHEQUE TO T HE ASSESSEE COMPANY. SIMILARLY , SHRI HARISH CHANDRA MOHANTY IS AN ENGINEER AND HE IS FATHER OF AYASKANTA MOHANTY WHO IS THE MANAGING DIRECTOR OF TATWA TECHNOLIGIES LTD., HAVING A TURNOVER OF RS.12 CRORES. IT WAS STATED THAT BOTH THE LOAN CREDITORS WERE HA VING CREDITWORTHINESS, REPUTED PERSONALITY 3 ITA NO. 228/CTK/2016 ASSESSMENT YEAR :2011 - 12 AND ARE DIRECTORS OF THE ASSESSEE COMPANY. THE CIT(A) DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND HELD THAT THE DEPOSIT OF RS.14 LAKHS ON 7.10.2010 IN THE BANK ACCOUNT OF THE ASSESSEE COMPANY IS THE FUND O F RS.7,00,000/ - EACH TRANSFERRED FROM BANK ACCOUNT OF SHRI HARISH CHANDRA MOHANTY AND SMT. NIKITA SUBUDHI ON THE SAME DATE AND CASH DEPOSIT OF RS.7,00,000/ - EACH BY THE CREDITORS IN THEIR RESPECTIVE BANK ACCOUNTS ON SAME DATE AND IMMEDIATELY BEFORE ISSUANC E OF CHEQUE IN FAVOUR OF THE ASSESSEE COMPANY IS NOT IN DISPUTE. IN THE CIRCUMSTANCES, THE ASSESSEE COULD NOT PROVE THE SOURCE OF CASH DEPOSIT IN EACH CREDITOR BANK ACCOUNT AND FOR FAILURE, THE SAME IS ASSESSED AS DEEMED INCOME OF THE ASSESSEE U/S.68 OF TH E ACT. IN SUPPORT OF HIS CONTENTION, THE CIT(A) RELIED ON THE FOLLOWING DECISIONS: 1) SETHI COTTON TRADERS VS ITO, 286 ITR 548. 2) SHRI KHUSHAL PRASAD MANHAR VS CIT, 236 CTR 192. 3) ITO VS. BLESSING CONSTRUCTION, 32 TAXMANN.366. 5. BEFORE, LD AUTHORISED REPRESENTATIVE OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND SUBMITTED THAT THE ASSESSEE WAS REQUIRED TO PROVE THE SOURCE OF CREDIT IN HIS BOOKS OF ACCOUNT AND NOT THE SOURCE OF SOURCE. HE SUBMITTED THAT THE SOURCE OF DEPOSIT OF RS.14 LAKHS IN THE BANK ACCOUNT OF THE ASSESSEE WAS THE LOAN GIVEN BY SMT. NIKITA SUBUDHI OF RS.7 LAKHS AND SHRI HARISH CHANDRA MOHANTY OF RS.7 LAKHS WHICH WAS RECEIVED BY THE ASSESSEE COMPANY THROUGH BANKING CHANNEL. HE 4 ITA NO. 228/CTK/2016 ASSESSMENT YEAR :2011 - 12 RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. ORISSA CORPORATION PVT.LTD., 159 ITR 78 (SC), WHEREIN, IT WAS HELD THAT IF THE ASSESSEE HAD GIVEN NAMES AND ADDRESS OF THE ALLEGED CREDITORS, AND IT WAS IN THE KNOWLEDGE OF THE REVENUE THAT THE SAID CRED ITORS WERE INCOME - TAX ASSESSEES, T HEIR INDEX NUMBER WAS IN THE FILE OF THE REVENUE, T HE REVENUE, APART FROM ISSUING NOTICES UNDER S. 131 AT THE INSTANCE OF THE ASSESSEE, DID NOT PURSUE THE MATTER FURTHER AND DID NOT EXAMINE THE SOURCE OF INCOME OF THE SAID ALLEGED CREDITORS TO FIND OUT WHETHER THEY WERE CREDIT - WORTHY , THE ADDITION CANNOT BE MADE IN THE HANDS OF THE ASSESSEE ON THE GROUND THAT THE LOAN CREDITORS WERE NOT CREDITWORTHY TO ADVANCE THE SAME TO THE ASSESSEE. 6. LD DEPARTMENTAL REPRESENTATIV E RELIED ON THE ORDERS OF LOWER AUTHORITIES. 7. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEE RECEIVED UNSECURED LOAN OF RS.14,00,000 / - FROM TWO PERSONS FROM SHRI HARISH CHANDRA MOHANTY AND SMT. NIKITA SUBUDHI OF RS.7 LAKHS EACH. THE ASSESSING OFFICER OBSERVED FROM THE BANK STATEMENT OF THE LOAN CREDITORS THAT BEFORE ISSUE OF CHEQUE TO THE ASSESSEE, THEY HAD DEPOSITED CASH OF RS.7 LAK HS EACH IN THEIR BANK ACCOUNT AND ON THE VERY SAME DATE OF DEPOSIT OF CASH, THE CHEQUES WERE CLEARED AND THE SAME WAS CREDITED IN THE BANK ACCOUNT OF THE ASSESSEE COMPANY. FROM THIS, THE ASSESSING OFFICER INFERRED THAT THE LOAN CREDITORS DID NOT HAVE THE CREDITWORTHINESS TO 5 ITA NO. 228/CTK/2016 ASSESSMENT YEAR :2011 - 12 ADVANCE THE SUM OF RS.14 LAKHS TO THE ASSESSEE COMPANY AND MADE ADDITION OF RS.14 LAKHS U/S.68 OF THE ACT IN THE HANDS OF THE ASSESSEE COMPANY. 8. ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER FOR THE VERY SAME REA SON. 9. THE CONTENTION OF LD AUTHORISED REPRESENTATIVE IS THAT THE UNSECURED LOAN OF RS.7 LAKHS EACH WAS RECEIVED FROM TWO PERSONS NAMELY SHRI HARISH CHANDRA MOHANTY AND SMT. NIKITA SUBUDHI, WHO ARE THE DIRECTORS OF THE ASSESSEE COMPANY. HE FURTHER SUBMIT TED THAT THE AMOUNT OF LOAN WAS RECEIVED THROUGH BANKING CHANNEL. HE SUBMITTED THAT THE LOAN CONFIRMATIONS TOGETHER WITH PAN OF THE LOAN CREDITORS WAS FILED BEFORE THE ASSESSING OFFICER AND THE CIT(A). THUS, THE ASSESSEE DISCHARGED HIS INITIAL BURDEN TO PROVE THE IDENTITY OF THE LOAN CREDITORS, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE LOAN CREDITORS FROM WHOM UNSECURED LOAN WAS RECEIVED BY THE ASSESSEE. IT WAS HIS CONTENTION THAT THE DEPARTMENT THEREAFTER DID NOT MAKE ANY EFFORT TO VERI FY WHETHER THE LOAN CREDITORS HAD THE CREDITWORTHINESS OF ADVANCING THE LOAN TO THE ASSESSEE COMPANY OR NOT AND WITHOUT DOING SO, IT CANNOT BE HELD THAT THE LOAN CREDITORS WERE NOT HAVING THE CAPACITY TO ADVANCE THE UNSECURED LOAN TO THE ASSESSEE AND MAKE ADDITION U/S.68 OF THE ACT IN THE HANDS OF THE ASSESSEE COMPANY. FOR THIS, HE RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ORISSA CORPORATION PVT LTD (SUPRA). LD D.R. HAS RELIED ON THE ORDERS OF LOWER AUTHORITIES. HE COULD NOT CONT ROVERT THE 6 ITA NO. 228/CTK/2016 ASSESSMENT YEAR :2011 - 12 SUBMISSIONS MADE BY LD AUTHORISED REPRESENTATIVE OF THE ASSESSEE. THE ASSESSEE HAS DISCHARGED ITS INITIAL BURDEN THAT LAY UPON IT BY GIVING THE NAME AND ADDRESS OF THE LOAN CREDITORS AND THEIR PAN NOS. THEREAFTER, THE ASSESSING OFFICER AFTER ENQUIRY HAS BROUGHT NO MATERIAL ON RECORD TO SHOW THAT THE LOAN CREDITORS DID NOT HAVE CREDITWORTHINESS TO ADVANE THE LOAN TO THE ASSESSEE COMPANY. MERELY FROM THE FACT THAT THERE WAS CASH DEPOSIT IN THE ACCOUNT OF THE LOAN CREDITORS BEFORE ISSUE OF CHEQ UE OF EQUAL AMOUNT, IT CANNOT BE SAID THAT THEY DID NOT HAVE THE CAPACITY TO ADVANCE THE LOAN TO THE ASSESSEE. IN LAW, THE ASSESSEE IS NOT REQUIRED TO EXPLAIN THE SOURCE OF THE SOURCE OF CREDIT IN HIS BOOKS OF ACCOUNT. THE SOURCE OF CASH DEPOSIT IS REQUIRED TO BE ASCERTAINED FROM THE LOAN CREDITORS AND IF ON ENQUIRY NO SATISFACTORY EXPLANATION IS GIVEN BY THE LOAN CREDITORS ABOUT THE SAME, THE ASSESSING OFFICER CAN MAKE ADDITION IN THEIR HANDS UNDER SECTION 69 OF THE ACT. NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT IT IS ASSESSEES OWN MONEY WHICH HAS FLOWN IN THE BANK ACCOUNT OF THE LOAN CREDITORS AND THEY ISS UED CHEQUES TO THE ASSESSEE FOR SAME AMOUNT. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF TH E CONSIDERED VIEW THAT THE ASSESSEE HAS DISCHARGED ITS INITIAL BURDEN U/S.68 OF THE ACT. HENCE, I SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND DELETE THE ADDITION OF RS.14 LAKHS MADE U/S.68 OF THE ACT AND ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. 7 ITA NO. 228/CTK/2016 ASSESSMENT YEAR :2011 - 12 10 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRO NOUNCED IN THE OPEN COURT ON 08 /03 /2017 IN THE PRESENCE OF PARTIES. SD/ - ( N.S SAINI) A CCOUNTANT MEMBER CUTTACK; DATED 08 /03 /2017 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT : M/S. ADHAR TECHNOLOGIES (P) LTD., PLOT NO.6, 2 ND FLOOR, KHARVEL NAGAR, UNIT - III, BHUBANESWAR. 2. THE RESPONDENT : DCIT, CIRCLE 1(1), BHUBANESWAR. 3. THE CIT(A) - 3, BHUBANESWAR . 4. PR.CIT - 1, BHUBANESWAR. 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//