ITO, CHENNAI V. Shri C.V. Ravi, CHENNAI

ITA 2989/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4758 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2017
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 30-01-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 21-10-2016
• Court: TRIBUNAL
• Department Lawyers: R DURAI
• Assessee Lawyers: K G RAGHUNATH
• Keywords: Unexplained cash credit; Capital receipt
• Section: 131; 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , ! ' ! # . $ , % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER . / ITA NO.3051/MDS/2016 / ASSESSMENT YEAR : 2009-10 SHRI C.V.RAVI , FLAT NO.7, SIVAGAMI APARTMENTS, RAJA STREET, T. NAGAR, CHENNAI 600 017. PAN AAAPR5253L ( /APPELLANT) V. THE INCOME-TAX OFFICER, BUSINESS WARD-II(4), CHENNAI-34. (/ RESPONDENT) . / ITA NO. 2989/MDS/2016 / ASSESSMENT YEAR : 2009-10 THE INCOME-TAX OFFICER, NON-CORPORATE WARD-2(3), CHENNAI-34. ( /APPELLANT) V. SHRI C.V.RAVI, BUSINESS WARD-II(4), CHENNAI 600 017. PAN AAAPR5253L (/ RESPONDENT) ASSESSEE BY : SHRI K.G.RAGHUNATH, ADVOCATE DEPARTM ENT BY : SHRI R. DURAIPANDIAN, JCIT ! ' # $%& / DATE OF HEARING : 30.01.2017 '( # $%& / DATE OF PRONOUNCEMENT : 26.04.2017 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A PPEALS) - - ITA 3051 & 2989/M/16 2 DATED 29.7.2016. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD FILED HIS RETURN OF INCOME FOR THE AY 2009-10 RELEVANT TO THE PREVIOUS YEAR ADMITTING A TAXABLE INCOME OF 1,39,200/-. THE ASSESSEE IS THE PROMOTER DIRECTOR OF M/S. SANGUINE MEDIA LIM ITED AND THE COMPANY WENT IN FOR A RIGHTS ISSUE IN JULY 2008 AND THE ASSESSEE WAS ELIGIBLE FOR 16,50,200 EQUITY SHARES A T 23 PER EQUITY SHARE. HOWEVER, THIS REQUIRED THE ASSESSEE TO INVEST A SUM OF 3,79,54,600/- TOWARDS PURCHASE OF THE RIGHTS ISSUE . AS THE ASSESSEE, DID NOT HAVE ENOUGH FINANCIAL RESOURC ES, HE HAD RESORTED TO OUTSIDE BORROWINGS IN THE NATURE OF UNS ECURED LOANS AND RECEIVED A SUM OF 3.80 CRORES, THROUGH CREDIT IN HIS BANK ACCOUNTS, FROM THE FOLLOWING : A) M/S. A.R.COM 3,05,00,000/- CREDIT IN BANK A/C ON 04/09/2008 B) M/S. MSG ASSOCIATES 50,00,000/- CREDIT IN BANK A/C ON 14/08/2008 C) MR.BHARAT CHANDAN 25,00,000/- CREDIT IN BANK A/C ON 02/09/2008 3,80,00.000/- ============= THE ASSESSEE SOUGHT THE ASSISTANCE OF AGENTS AND HI S FRIENDS TO ARRANGE THE ABOVE SUMS AND SUCH AGENTS WERE PAID NE CESSARY CONSULTATION CHARGES FOR THEIR SERVICES. - - ITA 3051 & 2989/M/16 3 2.1 TOWARDS THE ABOVE MENTIONED LOANS AVAILED BY TH E ASSESSEE, HE HAD ALSO PLEDGED 14,50,000 SHARES OUT OF THE 16,50,200 SHARES THAT WERE ACQUIRED HIM IN FAVOUR O F THE ABOVE LENDERS, MR. BHARAT CHANDAN IN OCTOBER 2008, WHICH IS THE SUBSEQUENT MONTH OF AVAILING THE ENTIRE UNSECURED L OANS. THE VALUE OF THE 14,50,000 SHARES AMOUNTED TO 3,20,00,000/- AS ON THAT DATE. THE PLEDGE WAS DONE IN THE NAME OF ONE OF THE LENDER ONLY AS ALL THE THREE LENDERS WERE REFERRED TO HIM BY HIS CLOSED CIRCUIT OF FRIENDS AND AGENTS. MOREOVER, THE ASSES SEE WAS UNDER THE INTENTION OF REPAYING THE LOANS ON OR BEFORE MA RCH 31, 2009, I.E. BEFORE THE CLOSE OF THE FINANCIAL YEAR 2008-09 , RELEVANT TO THE AY 2009-10; BY WAY OF SALE OF THE SHARES PURCHASED BY HIM IN M/S. SANGUINE MEDIA LIMITED IN THE MONTH OF SEPTEMB ER 2008, AND SO, DID NOT ENTER INTO ANY WRITTEN AGREEMENTS W ITH ANY OF HIS LENDERS EITHER FOR THE LOANS BORROWED OR ON THE TER MS OF REPAYMENT, AS THE TENURE OF THE LOAN WAS INTENDED O NLY FOR A SHORT PERIOD OF 7 MONTHS. HOWEVER, THE SHARE MARKE TS CRASHED, THE SHARE PRICES OF M/S. SANGUINE MEDIA LIMITED FEL L DRASTICALLY AND THE ASSESSEE WAS NOT IN A POSITION TO REPAY THE MONEY HE HAD BORROWED. AS THE ASSESSEE HAD CONVEYED TO HIS LENDERS - - ITA 3051 & 2989/M/16 4 THAT HE WOULD REPAY THE LOANS WITHIN A SHORT PERIOD OF TIME, HE HAD TAKEN ASSISTANCE FROM HIS FRIEND, MR. KALYANARA MAN, WHO HAD, THROUGH HIS ASSOCIATE COMPANIES; M/S. AUROBIND O FINANCE & HIRE PURCHASE PVT. LIMITED AND M/S. FORSEE FINANC IAL & CONSULTANCY SERVICES; ARRANGED TO REPAY THE LOANS, BORROWED BY THE ASSESSEE. THUS, THE REPAYMENT OF THE LOANS BY ASSOCIATE COMPANIES OF MR. KALYANARAMAN COMMENCED IN THE MONT H OF OCTOBER 2008, AND THE OUTSTANDING AMOUNTS DUE TO M/ S. MSG ASSOCIATES AND MR. BHARAT CHANDAN AMOUNTING TO A SU M OF 75,00,000/- WAS REPAID BY M/S. AUROBINDO FINANCE & HIRE PURCHASE PVT. LTD. AN ASSOCIATE COMPANY OF MR. KALY ANARAMAN, VIDE AN RTGS TRANSFER ON 13.10.2008 & 15.10.2008. 2.2 THE OUTSTANDING SUM TO M/S. A.R.COM AMOUNTING T O 3.05 CRORES WAS REPAID BY THE ASSESSEE IN THE FOLLO WING MANNER BY ASSOCIATE COMPANIES OF MR. KALYANARAMAN : A) THROUGH CHEQUES DRAWN IN FAVOUR OF AR. COM BY M/S AUROBINDO FINANCE & HIRE PURCHASE 1,20,00,000/- PVT. LTD. IN THE MONTH OF OCTOBER 2008 & NOVEMBER 2008 B) THROUGH CHEQUES DRAWN IN FAVOUR OF AR. COM BY M/S FORSEE FINANCIAL & CONSULTANCY 55,57,000/- SERVICES PVT. LTD. IN THE MONTH OF JAN 2009, AND VARIOUS DATES IN FY 2009-10 - - ITA 3051 & 2989/M/16 5 D) THROUGH SALE OF SHARES OF M/S. SANGUINE MEDIA LIMITED ARRANGED BY M/S. FORSEE 1,19,43,000/- FINANCIAL AND CONSULTANCY SERVICES PVT. LTD., IN FY 2009-10 AND PROCEEDS PAID TO AR.COM E) THROUGH CHEQUES ISSUED BY THE APPELLANT C.V.RAVI, IN THE NAME OF AR.COM IN 10,00,000/- VARIOUS DATES IN APRIL 2011 -------------------- ----- 3,05,00,000/- ============== ACCORDING TO LD.A.R, THE ASSESSEE HAD ONLY WITH THE INTENTION OF KEEPING HIS WORD AND DESPITE HIS SERIOUS FINANCIAL CONSTRAINTS, HAD COMMENCED REPAYMENT OF THE LOANS BORROWED IN T HE MONTH OF SEPTEMBER 2008, IMMEDIATELY IN THE MONTH OF OCTO BER 2008, THROUGH VARIOUS OTHER SOURCES TO ALL OF HIS LENDERS AND HAD ALSO COMPLETED THEM ALL ON 26 TH APRIL, 2011. ALL THE REPAYMENTS WERE MADE BY THE ASSESSEE THROUGH BANKING CHANNELS IN TH E FORM OF CHEQUES, RTGS TRANSFERS AND SALE OF SHARES. 2.3 HOWEVER, THE ASSESSEE WAS SERVED A SUMMON U/S.1 31 ON 01.02.2010 BY THE INCOME-TAX OFFICER (INV.), CHENNA I AND THE ASSESSEE APPEARED AND SWORN STATEMENT WAS RECORDED REGARDING THE DETAILS OF THE ABOVE MENTIONED LOANS AND THEIR REPAYMENTS AND AS THE ASSESSEE WAS IN A DISTURBED F RAME OF MIND DURING THE COURSE OF THE INVESTIGATION, HE HAD LATER ON - - ITA 3051 & 2989/M/16 6 RETRACTED HIS SWORN STATEMENT. THE AO WAS OF THE O PINION THAT THIS TRANSACTION OF AVAILING UNSECURED LOANS WAS NO T REFLECTED IN THE RETURN OF INCOME AND THE ASSESSEE WAS SERVED WI TH NOTICE U/S.148 OF THE ACT ON 18.1.2010 TO REGULARIZE THE I NCOME ESCAPING ASSESSMENT. ACCORDING TO THE ASSESSE, THE CONCEPT OF INCOME DOES NOT ARISE IN A LOAN TRANSACTION AND THE VIEW OF THE AO THAT THIS LOAN TRANSACTION HAD ESCAPED ASSESSMEN T AND IS NOT REFLECTED IN THE RETURN OF INCOME IS ERRONEOUS. TH E ASSESSEE SUBMITTED BEFORE THE AO THAT HE WAS SERVED WITH A N OTICE U/S.148 OF THE ACT, PURELY ON THIS INCORRECT PRESUM PTION ADOPTED BY THE AO THAT THE LOANS ARE INCOMES, MEANT TO BE R EFLECTED IN THE RETURN OF INCOME. THE ASSESSEE FURTHER SUBMIT TED THAT HE HAD ADMITTED ALL THE INCOMES EARNED BY HIM DURING T HE AY 2009- 10 VIDE HIS TAX RETURNS FILED ON 28.7.2009. 2.4 THE ASSESSEE HAD PUT FORTH HIS REPEATED PLEAS D URING THE COURSE OF THE ASSESSMENT PROCEEDINGS U/S.148 OF THE ACT, THAT HE HAD AVAILED GENUINE LOANS, THROUGH HIS TRUSTED AGEN TS AND FRIENDS IN THE MONTHS OF AUGUST 2008 AND SEPTEMBER 2008, ONLY FOR THE PURPOSE OF SUBSCRIBING TO THE RIGHTS ISSUE AND THE VARIOUS DETAILS AND DOCUMENTS REGARDING THE FACT THAT THE L OANS WERE - - ITA 3051 & 2989/M/16 7 FULLY REPAID AS ON 26.04.2011 WERE FURNISHED FOR TH E PERUSAL AND CONSIDERATION OF THE AO. THE ASSESSEE FURTHER REIT ERATES THAT THERE WAS NO INCOME GENERATED BY HIM FROM OUT OF TH E MONEY BORROWED DURING THE AY 2009-10. ACCORDING TO LD.A. R, AO DID NOT CONSIDER THE FACTS IN CONNECTION WITH THE UNSEC URED LOANS AVAILED BY THE ASSESSEE, WHICH ARE AS UNDER : A) THE LOANS WERE AVAILED FROM GENUINE PERSONS B) THE AMOUNT OF LOAN WAS CREDITED INTO THE BANK AC COUNTS OF THE ASSESSEE C)THE ENTIRE LOAN WAS REPAID BY THE APPELLANT AND T HE ASSOCIATES OF THE ASSESSEE INTO THE BANK ACCOUNTS OF THE L ENDERS NAMELY; I) M/S. AR.COM II) MR. BHARAT CHANDAN III) M/S. MSG ASSOCIATES D) THAT LOANS ARE CAPITAL RECEIPTS, AND CANNOT BE S UBJECTED TO INCOME TAX F) THE APPELLANT HAD UTILIZED THE LOANS ONLY FOR T HE PURCHASE OF RIGHTS ISSUE IN M/S. SANGUINE MEDIA LTD. 2.5 ACCORDING TO THE ASSESSEE, THE AO HAD ERRONEOUS LY AND WITHOUT APPRECIATING THE FACTS OF THE INSTANT CASE HAD CONCLUDED THE ASSESSMENT PROCEEDINGS ON 29.12.2011 VIDE THE A SSESSMENT ORDER PASSED U/S.143(3) R.W.S.147 OF THE ACT BY CON SIDERING THE - - ITA 3051 & 2989/M/16 8 ENTIRE LOAN AMOUNT OF 3.80 CRORES AS UNEXPLAINED CASH CREDIT AND HAD PROCEEDED TO MAKE THE ADDITION U/S 68 OF TH E ACT TO THE INCOME OF 1,39,197/- ADMITTED BY THE ASSESSEE, WHICH RESULTE D IN UNJUSTIFIED ADDITIONAL TAXES TO THE TUNE OF 1,70,18,098/-. THE ASSESSEE SUBMITTED THAT THE AO HAD CONCLUDED THE AS SESSMENT SOLELY BASED ON THE REPORT PRESENTED BY HIS OFFICIA LS IN DECEMBER 2011, THAT, ON THE BASIS OF INFORMATION PROVIDED TO THOSE OFFICIALS BY M/S. FEDERAL BANK, ROYAPETTAH, THE PARTNERS OF M /S. AR.COM WERE NOT PRESENT AT THE ADDRESSES PROVIDED BY M/S. FEDERAL BANK, ROYAPETTACH BRANCH AND HENCE THE LOANS WERE N OT TO BE TREATED AS GENUINE BORROWINGS, UNMINDFUL OF THE OTH ER VALID EVIDENCES AVAILABLE REGARDING THE LOANS AVAILED IN SEPT., 2008, ALL OF WHICH PRESENTED BEFORE HIM DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. 2.6 THE ASSESSEE SUBMITTED THAT AS THE ENTIRE LOANS WERE AVAILED BY HIM VIDE HIS BANK ACCOUNTS AND THE SAME WAS REPAID BY HIM DURING THE PERIOD BETWEEN OCTOBER 2008 TO 26 TH OF APRIL 2011, AS PER THE BANK DETAILS PROVIDED BY M/S. AR.C OM FOR REPAYMENT AND REMITTANCE OF MONEY, THE FACT THAT TH E OFFICIALS WERE NOT ABLE TO LOCATE THE ADDRESSES OF M/S AR.COM ION THE - - ITA 3051 & 2989/M/16 9 MONTH OF DECEMBER 2011, SHOULD NOT HAVE ANY IMPACT IN THE ASSESSMENT PROCEEDINGS AND CANNOT FORM THE BASIS FO R THE UNJUSTIFIED ADDITION OF 3.80 CRORES. THEREFORE, THE ASSESSEE SUBMITTED THAT THE ADDITIONS MADE BY THE AO AMOUNTI NG TO 3.80 CRORES WAS UNJUSTIFIED, BIASED AND PREJUDICED AND W AS NOT BASED ON TRUE FACTS OF THE CASE. AGGRIEVED BY THE ORDER PASSED BY THE AO U/S.143(3) R.W.S. 147 OF THE ACT, THE ASSESSEE H AD PREFERRED AN APPEAL BEFORE THE CIT(APPEALS), WHO HAD REMANDED THE FILE TO THE AO. THE AO HAD CONCLUDED THE REPORT BY VERIFYI NG ONLY THE FEDERAL BANK STATEMENT OF ONE OF THE LENDERS, M/S. AR.COM. THE ASSESSEE HAD PROVIDED THE DETAILS OF OTHER BANK STATEMENTS OF M/S. AR.COM, WHICH WERE COMPLETELY IGNORED BY TH E AO. 2.7 FURTHER, THE AO HAD ALSO CONCLUDED IN THE REMAN D REPORT THAT THE BOOKS OF ACCOUNTS OF ALL THE OTHER ENTITIE S WHO HAD AGREED TO REPAY THE LOANS AVAILED BY THE ASSESSEE, WERE NOT REFLECTING THE AMOUNTS OF REPAYMENTS BEING MADE BY THEM. THE ASSESSEE SUBMITTED THAT AS THE ASSESSEE UNDER ASSES SMENT, HE HAS AUTHORITY ONLY OVER THE TRANSACTIONS ENTERED IN TO BY HIM AND THE NECESSARY DETAILS REGARDING HIS ASSESSMENT PROC EEDINGS CAN BE FURNISHED BY HIM TO THE FULLEST SATISFACTION OF THE AO. THE - - ITA 3051 & 2989/M/16 10 ASSESSEE FURTHER SUBMITTED THAT HE WILL HAVE NO KNO WLEDGE OVER THE BOOKS OF ACCOUNT OR THE ENTRIES ADOPTED BY HIS DEBTORS AND CREDITORS AND IT WILL BE UNJUSTIFIED TO MAKE ADDITI ONS TO HIS DECLARED INCOME MERELY ON THE BASIS OF ACCOUNTING E NTRIES ADOPTED BY THIRD PARTIES. 2.8 THE ASSESSEE FURTHER SUBMITTED THAT HE HAS CLEA RLY LAID OUT ALL THE FACTS RELATING TO THE LOANS BORROWED BY HIM AND THE METHOD OF REPAYMENT OF THE SAME. THESE DETAILS WER E IGNORED BY THE AO, WHO HAD CONCLUDED THE REMAND REPORT ON E RRONEOUS ASSUMPTIONS AND BASED ON THE ACCOUNTING ENTRIES AND JOURNALS IN THE BOOKS OF THIRD PARTIES. ON APPEAL, THE CIT(AP PEALS), ONCE AGAIN, PLACED RELIANCE ON THE SWORN STATEMENT, THAT WAS RETRACTED BY THE ASSESSEE AND ON THE REMAND REPORT, WHICH WAS CONCLUDED ON THE BASIS OF THE ERRONEOUS JOURNALS AND ACCOUNTI NG ENTRIES IN THE BOOKS OF THIRD PARTIES; ALSO WAS OF THE OPINION THAT GENUINENESS OF THE LOAN TRANSACTION WAS NOT ESTABLI SHED BY THE ASSESSEE. THEREFORE, THE CIT(APPEALS) DELETED THE ADDITION MADE ON ACCOUNT OF TWO OF THE THREE LENDERS AMOUNTI NG TO 75,00,000/-, BUT HAD CONFIRMED THE ADDITION U/S.68 ON ACCOUNT OF LOAN AVAILED FROM M/S. AR.OM AMOUNTING TO 3.05 CRORES AND - - ITA 3051 & 2989/M/16 11 CONFIRMED THE TAX DEMAND OF 1,36,27,612/-. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US AND ON DELETION OF ADDITION THE DEPARTMENT IS IN APPEAL BEFORE US. 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. THE LD.A.R SUBMITTED THAT THERE WAS A R EPAYMENT OF 3.05 CRORES IN THE SUBSEQUENT ASSESSMENT YEAR AND S USTAINING THE ADDITION OF 3.05 CRORES BY THE LD.CIT(A) IS NOT JUSTIFIED. TH E LD.A.R RELIED ON THE FOLLOWING JUDGEMENTS:- A) IN THE CASE OF CIT V.ORISSA CORPORATION P. LT D. IN [1986] 159 ITR 78 (SC) WHEREIN HELD THAT IN THIS CASE THE RESPONDENT HAD GIVEN THE NAMES AN D ADDRESSES OF THE ALLEGED CREDITORS. IT WAS IN THE K NOWLEDGE OF THE REVENUE THAT THE SAID CREDITORS WERE INCOME- TAX ASSESSEES. THEIR INDEX NUMBERS WERE IN THE FILE OF THE REVENUE. THE REVENUE, APART FROM ISSUING NOTICES UN DER SECTION 131 AT THE INSTANCE OF THE RESPONDENT, DID NOT PURSUE THE MATTER FURTHER. THE REVENUE DID NOT EXAM INE THE SOURCE OF INCOME OF THE SAID ALLEGED CREDITORS TO FIND OUT WHETHER THEY WERE CREDITWORTHY. THERE WAS NO EF FORT MADE TO PURSUE THE SO-CALLED ALLEGED CREDITORS. IN THOSE CIRCUMSTANCES, THE RESPONDENT COULD NOT DO ANYTHING FURTHER. IN THE PREMISES, IF THE TRIBUNAL CAME TO T HE CONCLUSION THAT THE RESPONDENT HAD DISCHARGED THE B URDEN THAT LAY ON IT, THEN IT COULD NOT BE SAID THAT SUCH A CONCLUSION WAS UNREASONABLE OR PERVERSE OR BASED ON NO - - ITA 3051 & 2989/M/16 12 EVIDENCE. IF THE CONCLUSION WAS BASED ON SOME EVIDE NCE ON WHICH THE CONCLUSION COULD BE ARRIVED AT, NO QUE STION OF LAW AS SUCH AROSE. THE HIGH COURT WAS RIGHT IN REFU SING TO STATE A CASE. B) IN THE CASE OF DCIT V. ROHINI BUILDERS IN [2002] 256 ITR 360 (GUJ) THE TRIBUNAL FOUND THAT THE ASSESSEE HAD DISCHARGE D THE INITIAL ONUS WHICH LAY ON IT IN TERMS OF SECTION 68 BY PROVING THE IDENTITY OF THE CREDITORS BY GIVING THEIR COMPLETE ADDRESSES, GIR NUMBERS/PERMANENT ACCOUNT NUMBERS AND THE COPIES OF ASSESSMENT ORDERS WHEREVER READILY AVAILABLE, THAT IT HAD ALSO PROVED THE CAPACITY OF THE CREDITORS BY SHOWING THA T THE AMOUNTS WERE RECEIVED BY THE ASSESSEE BY ACCOUNT PA YEE CHEQUES DRAWN FROM BANK ACCOUNTS OF THE CREDITORS A ND THE ASSESSEE WAS NOT EXPECTED TO PROVE THE GENUINENESS OF THE CASH DEPOSITED IN THE BANK ACCOUNTS OF THOSE CREDIT ORS BECAUSE UNDER LAW THE ASSESSEE CAN BE ASKED TO PROV E THE SOURCE OF THE CREDITS IN ITS BOOKS OF ACCOUNT BUT N OT THE SOURCE OF THE SOURCE. 3.1 ON THE CONTRARY, THE LD.D.R RELIED ON THE JUDG MENT OF CIT VS. P. MOHANAKALA IN [2007] 291 ITR 278 (SC) WHEREI N HELD THAT: REVERSING THE DECISION OF THE HIGH COURT, THAT THE FINDINGS OF THE ASSESSING OFFICER, THE COMMISSIONER (APPEALS) A ND THE TRIBUNAL WERE BASED ON THE MATERIAL ON RECORD AND N OT ON ANY CONJECTURES AND SURMISES. THAT THE MONEY CAME BY WA Y OF BANK CHEQUES AND WAS PAID THROUGH THE PROCESS OF BA NKING TRANSACTION WAS NOT BY ITSELF OF ANY CONSEQUENCE. T HE HIGH COURT MISDIRECTED ITSELF AND ERRED IN DISTURBING TH E CONCURRENT FINDINGS OF FACT. THE LD.D.R SUBMITTED THAT THE ASSESSEE HAS NOT DIS CHARGED THE BURDEN CAST UPON THE ASSESSEE REGARDING IDENTITY OF THE PARTIES, - - ITA 3051 & 2989/M/16 13 GENUINENESS OF THE TRANSACTIONS AND CAPACITY OF THE LENDERS TO ADVANCE THE AMOUNT TO THE ASSESSEE. ACCORDING TO TH E LD.D.R THE ENTIRE ADDITION WAS MADE BY THE AO TO BE SUSTAINED. 3.2. THE LD.A.R DREW OUR ATTENTION TO THE LOAN CON FIRMATION LETTERS FROM M/S. MSG ASSOCIATES FOR ` 50 LAKHS AND MR. BHARAT CHANDAN FOR ` 25 LAKHS PLACED AT PAGE NO.21 & 19 OF PAPER BOOKS RESPECTIVELY. AS SEEN FROM THE ORDERS OF THE LOWER AUTHORITIES, ASSESSEE COULD NOT PROVE THE SOURCE FO R THE LOAN AMOUNT OF 3.05 CRORES RECEIVED FROM M/S. AR.COM. REGARDING THE LOAN RECEIVED FROM MR. BHARAT CHANDAN- FOR ` 25 LAKHS, M/S. MSG ASSOCIATES FOR ` 50 LAKHS, THE ASSESSEE HAD PRODUCED CONFIRMATION LETTERS AND CREDIT WORTHINESS WAS PROV ED BY PROVIDING BANK ACCOUNTS. THE LOAN ACCOUNT WAS SQUA RED OFF IN THE SAME ASSESSMENT YEAR THROUGH PAYMENT BY M/S. FO RSEE FINANCIAL & CONSULTANCY SERVICES AND ITS ASSOCIATED CONCERN THROUGH M/S. AUROBINDO FINANCE & HIRE PURCHASE PVT. LIMITED, WHICH WAS PAID ON BEHALF OF ASSESSEE, NAMELY MR.C.V .RAVI. SIMILAR CONTENTION OF THE LD.A.R WAS THAT LOAN OUTS TANDING FROM M/S. AR.COM WAS REPAID ON BEHALF OF ASSESSEE BY M/S . AUROBINDO FINANCE & SERVICES LIMITED AND M/S. FORSE E FINANCIAL - - ITA 3051 & 2989/M/16 14 & CONSULTANCY SERVICES. THE SAID REPAYMENTS WERE MA DE BY THESE GROUP CONCERNS FOR THE ASSESSEEE ON DIFFERENT DATES DURING THE FINANCIAL YEARS 2008-09, 2009- 10 AND 2010-11 B Y THE FIRM WHICH IS NOT IN EXISTENCE. OUT OF THE SAID AMOUNT O F ` 3.80 CRORES IN TOTAL, A SUM OF ` 2.55 CRORES WAS SETTLED BY THESE ENTITIES TOWARDS LOAN. BUT THE FACT REMAINS THAT ONLY A SUM OF ` 23,93,000 IS SHOWN AS OUTSTANDING AS AGAINST A SUM OF ` 2.55) CRORES PAID BY M/S. FORSEE FINANCIAL SERVICES LTD. THE SAID FIG URE OF ` 23.93 LAKHS IS NOT TALLYING WITH ANY OF THE ENTRIES IN TH E BOOKS OR IN THE BANK STATEMENT. SINCE THE SAID AMOUNT OF ` 2.55 CRORES IS NOT FIGURING IN THE NAME OF SHRI C V RAVI AND IT WAS AL SO OBSERVED THAT MERE BOOK TRANSFERS BY MEANS OF JOURNAL ENTRIE S WERE MADE BETWEEN THE GROUP CONCERNS. FROM THE LEDGER EXTRACT , IT CANNOT BE TREATED AS A GENUINE REPAYMENT ON BEHALF OF SHRI C V RAVI. THE ASSESSMENT YEAR UNDER CONSIDERATION IS ASST YEA R 2009-10. HENCE THE REMAINING PAYMENTS MADE IN THE SUBSEQUENT FINANCIAL YEARS MIGHT HAVE AN IMPACT IN THE RESPECTIVE ASSESS MENT YEARS. AS FAR AS THIS ASSESSMENT YEAR IS CONCERNED, REPAYM ENT OF LOAN TO THE EXTENT OF ` 2.55 CRORES STANDS UNEXPLAINED SINCE RAVI IS NOT FIGURING AS DEBTOR IN THE BOOKS OF FORSEE FINANCIAL SERVICES LTD. - - ITA 3051 & 2989/M/16 15 TO THE EXTENT OF ` 2.55 CRORES. REMAINING AMOUNT OF LOAN I..E, ` 1.25 CRORES WHICH WERE REPAID BY WAY OF SALE OF SHA RES BY THE ASSESSEE WHICH WAS ONLY DURING THE FINANCIAL YEARS RELEVANT TO ASST YEARS 2010-11 AND 2011-12. 3.3 THUS, AS FAR AS THIS YEAR IS CONCERNED, THE R EPAYMENT OF LOAN OF RS.2.55 CRORES STANDS UNEXPLAINED SINCE THE SAID SUM IS STATED TO BE REPAID IN THE SAME YEAR. ON THE REMAIN ING AMOUNT OF ` 1.25 CRORES, THE SAID AMOUNT IS NOT FIGURING AS LOA N IN THE BOOKS OF C V RAVI AS HE HAD STATED THAT HE DID NOT MAINTA IN BOOKS OF ACCOUNTS. FURTHER IT WAS ALSO CLEARLY PROVED THAT T HE ASSESSEE WAS ALSO NOT IN A POSITION TO PROVE THE SOURCE FOR THE SAID LOAN VIZ., M/S. A R. COM. IT IS ALSO PERTINENT TO MENTI ON THAT A SEPARATE OD ACCOUNT WAS OPENED WITH ORIENTAL BANK O F COMMERCE BY M/S. SRI AUROBINDO FINANCE & HIRE PURCH ASE LTD. TO SETTLE THE LOAN AMOUNT OF ` 2. 15 CRORES DURING THE FINANCIAL YEAR 2008-09 AND THE ENTIRE AMOUNT OF ` 2.15 CRORES GIVEN BY ORIENTAL BANK OF COMMERCE WAS SQUARED OFF BY SANGUI NE MEDIA LTD. AND TERM DEPOSIT CLOSURE PROCEEDS OF ` 2 CRORES IN THE SAME YEAR. THE OD ACCOUNT STARTS FROM 12.10.2008 AN D ON 28.10.2008 THERE WAS CLOSURE PROCEEDS OF ` 2 CRORES. OTHER THAN - - ITA 3051 & 2989/M/16 16 THIS CREDIT ENTRY IN THE OD ACCOUNT ALL OTHER CREDI T ENTRIES WERE ONLY FROM N/S. SANGUINE MEDIA LTD., IN WHICH THE AS SESSEE WAS A DIRECTOR. THE PAYMENTS IN THE OD ACCOUNTS WERE, MAD E ONLY TO N/S. AR. CORN AND N/S. FORSEE FINANCIAL SERVICE LTD .. AND NO OTHER TRANSACTIONS ARE FIGURING IN THE OD ACCOUNT. THE OBC (OD) ACCOUNT SHOWS A CLOSING BALANCE OF ` 7920 FOR A PERIOD OF THREE YEARS. BASED ON THIS ELABORATE ANALYSIS, THE ASSESS ING OFFICER HAS COME TO THE CONCLUSION THAT THE LOAN AMOUNT OF ` 3.8 CRORES STANDS UNEXPLAINED, AS ON 31.03.2009. 3.4 IT IS ALSO TO BE NOTED THAT INSPECTOR VIDE HIS REPORT DATED 08.12.2011 AND 09.12.2011 STATED THAT M/S. AR.COM I S BOGUS ENTITY AND THE ADDRESS OF THE TWO PARTNERS ARE ALSO FAKE/BOGUS.THE ASSESSEE HAS COMPLETELY FAILED TO PR ODUCE EVEN A CONFIRMATION LETTER FROM THE SAID M/S. AR.COM TO PROVE HIS IDENTITY. THUS, THE ASSESSEE HAS FAILED TO PROVE TH E GENUINENESS OF THE TRANSACTION EITHER WAY I.E. AT THE STAGE OF LOAN ADVANCED BY M/S. AR.COM TO THE ASSESSEE AND AT THE STAGE OF SO-CALLED REPAYMENT OF THE SAID LOAN, BY THE ASSESSEE TO M/ S. AR.COM. FURTHER, THE ASSESSEE HAS ALSO COMPLETELY FAILED TO SHOW /ESTABLISH THE NEXUS BETWEEN THE LOANS STATED TO BE REPAID BY - - ITA 3051 & 2989/M/16 17 M/S. FORSEE AND M/S. AUROBINDO ON BEHALF OF THE AS SESSEE, AND THE FLOW OF FUNDS, IF ANY, FROM THE HANDS OF THE AS SESSEE HIMSELF TO THE SAID ENTITIES, AS CLEARLY HIGHLIGHTED IN THE REMAND REPORT. 3.5 BEING SO, THE LOAN STANDING IN THE NAME OF M/S . AR.COM CANNOT BE CONSIDERED, AS A GENUINE LOAN. THE ASSESS EE, EVEN FAILED TO PROVE THE IDENTITY OF THE CREDITORS AND G ENUINENESS OF THE TRANSACTIONS. THE BURDEN CAST ON ASSESSEE WOULD SHIFT TO ASSESSEE ONLY WHEN ASSESSEE PROVED THE IDENTITY OF THE CREDITORS. THEN ONLY THE AO COULD PROBE THE MATTER FURTHER AND INVESTIGATE THE MATERIAL AVAILABLE BEFORE HIM TO CO ME TO AN INDEPENDENT CONCLUSION BEFORE REJECTING THE EXPLAN ATION OFFERED BY THE ASSESSEE. IN THE PRESENT CASE, THE ASSESSEE HAS NOT PROVED ALL THE ABOVE INGREDIENTS STATED ABOVE AND T HE ASSESSEE BEING FAILED TO DISCHARGE PRIMARILY BURDEN CAST UPO N IT, THE ASSESSEE CANNOT SAY CATCH ME IF YOU CAN. THE ONL Y CONTENTION OF THE ASSESSEE IS THAT THE AMOUNT WAS BORROWED BY CHEQUE AND PAID BY CHEQUE. HOWEVER, IT IS TO BE NOTED THAT REP AYMENT WAS NOT BY THE ASSESSEE, BUT BY THE THIRD PARTY. BY APP RECIATING ALL THE MATERIAL ON RECORD, THE AO CAME TO THE CONCLUSI ON THAT THE - - ITA 3051 & 2989/M/16 18 ASSESSEES EXPLANATION REGARDING THIS CASH CREDIT C OULD NOT BE ACCEPTED IN THE CASE OF M/S. AR.COM. IN SUCH CIRCU MSTANCES, WE ARE NOT IN A POSITION TO DISTURB THE FINDINGS OF THE LOWER AUTHORITIES IN RESPECT OF CREDIT IN THE NAME OF M/S . AR.COM. ACCORDINGLY, THE ADDITION OF 3.05 CRORES IN THE NAME OF M/S. AR.COM TO BE CONSIDERED AS UNEXPLAINED CREDIT IN TH E HANDS OF THE ASSESSEE, THE ADDITION SUSTAINED BY THE LD.CIT( A) IS JUSTIFIED. HENCE, THIS GROUND RAISED BY THE ASSESSEE STANDS RE JECTED. 3.6 COMING TO THE CREDIT IN THE NAME OF M/S. MSG A SSOCIATES FOR ` 50 LAKHS AND OF MR. BHARAT CHANDAN FOR ` 25 LAKHS, IT WAS STATED BY THE AO IN HIS REMAND REPORT THAT THE IDEN TITY OF THESE TWO PARTIES ARE PROVED BY FILING CONFIRMATION LETTE RS. THE CONTENTION OF THE LD.D.R IS THAT THE ASSESSEE HAS NOT REPAID THE LOAN, BUT REPAYMENT BY THE THIRD PARTY. IN OUR OPIN ION, WHEN THE AO HIMSELF GIVEN IN THE REMAND REPORT THAT ASSESSEE HAD PRODUCED THE CONFIRMATION LETTERS AND CREDIT WORTHI NESS OF THESE PARTIES, WERE ALSO PROVED THROUGH BANK ACCOUNTS, IT IS NOT APPROPRIATE ON THE PART OF THE DEPARTMENTAL REPRESE NTATIVE TO ARGUE CONTRARY TO THE REMAND REPORT SUBMITTED BY TH E AO - - ITA 3051 & 2989/M/16 19 BEFORE THE LD.CIT(A) , WHICH IS PRODUCED BY THE LD. CIT(A) IN PARA 8.2 OF HIS ORDER. BEING SO, WE ARE NOT IN A POSITIO N TO INTERFERE WITH THE ABOVE FINDINGS OF THE LD.CIT(A) IN DELETIN G THESE TWO ADDITIONS. ACCORDINGLY, DELETION IS JUSTIFIED AND C ONFIRMED THE ORDER OF LD.CIT(A) ON THIS ISSUE. 4. IN THE RESULT, THE CROSS APPEALS FILED BY THE A SSESSEE AND THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON 26 TH APRIL, 2017 AT CHENNAI. SD/- SD/- ( ! ) ! * . + ,-. ) ( / 0 1 2% ) ( DUVVURU RL REDDY ) (CHANDRA POOJARI) < => /JUDICIAL MEMBER ,& =>/ACCOUNTANT MEMBER /,< ' /CHENNAI, D= /DATED, THE 26 TH APRIL, 2017. K S SUNDARAM =,E # $FG H,G$ /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ! I$ () /CIT(A) 4. ! I$ /CIT 5. GJK $ L /DR 6. K. M' /GF.