The DCIT, Central Circle-1, Baroda V. Shri Gaurang Manibhai Patel,HUF, Anand

ITA 322/AHD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9860 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-01-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 04-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: B T THAKKAR
• Keywords: Unexplained cash credit; Gift; Income from undisclosed sources; Peak credit; Assessment record
• Section: 143(3); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH (BEFORE SHRI S.K. YADAV, JUDICIAL MEMBER & SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER) ITA NO: 322/AHD/2013 (ASSESSMENT YEAR: 2009-10) DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, BARODA V/S SHRI GAURANG MANIBHAI PATEL (HUF) 44-45, 1 ST FLOOR, JANTA BAZAR, BORSAD, DISTT. ANAND-388540 (APPELLANT) (RESPONDENT) PAN: AACHP 3287N APPELLANT BY : SHRI DINESH SINGH, D.R. RESPONDENT BY : SHRI B.T. THAKKAR, A.R. ( )/ ORDER DATE OF HEARING : 06-01-201 6 DATE OF PRONOUNCEMENT : 13 -01-2016 PER ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF CIT(A)-IV, AHMEDABAD DATED 19.11.2012 FOR A.Y. 2009-10. ITA NO. 322/ AHD/2013 . A.Y. 2009-2 010 2 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS AN HUF AND STATED TO BE ENGAGED IN THE BUSINESS OF SHROFF IN THE NAME AND STYLE OF SHREE AMBICA SHROFF. ASSESSEE ELE CTRONICALLY FILED ITS RETURN OF INCOME FOR A.Y. 2009-10 ON 30-03-2009 DEC LARING TOTAL INCOME AT RS. 1,62,360. THE CASE WAS SELECTED FOR SCRUTINY A ND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORD ER DATED 29.12.2011 AND THE TOTAL INCOME WAS DETERMINED AT RS. 3,27,48, 040/-. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE L D. CIT(A) WHO VIDE ORDER DATED 19.11.2012 GRANTED SUBSTANTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), REVENUE IS NOW IN A PPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUND:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS. 3,25,85,682/- MADE U/S. 68 OF THE I.T. ACT. 4. DURING THE YEAR, A.O NOTICED THAT ASSESSEE HAS RECE IVED LOANS/DEPOSITS FROM 27 PERSONS (THE DETAILS OF WHICH ARE LISTED AT PAGE 3 TO 13 OF THE ASSESSMENT ORDER) AND THE AGGREGATE AMOUNT RECEIVED WAS RS. 3, 04,47,991/-. THE ASSESSEE WAS ASKED TO PROVE THE IDENTITY, GENUINENE SS AND CREDITWORTHINESS OF THE DEPOSITORS. ON ANALYZING THE DETAILS FURNISH ED BY THE ASSESSEE, A.O CONCLUDED THAT NONE OF THE DEPOSITORS WAS FINANCIAL LY CAPABLE TO GIVE LOAN TO ASSESSEE, MOST OF THE RETURNED FILED BY THE DEPOSIT ORS WAS FOR CLAIMING RETURN OF TDS, THE DEPOSITORS HAD INTEREST INCOME T HAT TOO RECEIVED FROM THE ASSESSEE AND MOST OF THE RETURNS OF INCOME OF THE D EPOSITORS WERE PREPARED BY ONE C.A. FIRM AND FURTHER THE SUBMISSION OF THE ASSESSEE OF HAVING OBTAINED THE LOAN THROUGH BANKING CHANNELS AND THE DEPOSITORS BEING INCOME TAX PAYEES WAS NOT FOUND ACCEPTABLE TO THE A.O. A. O WAS OF THE VIEW THAT ITA NO. 322/ AHD/2013 . A.Y. 2009-2 010 3 ASSESSEE HAS NOT DISCHARGED THE ONUS OF PROVING THE IDENTITY, GENUINENESS AND CREDITWORTHINESS AND ACCORDINGLY THE LOAN RECEI VED WERE CONSIDERING BY HIM TO BE NOT GENUINE AND HE ACCORDINGLY MADE ADDIT ION OF RS. 3,25,85,682/- (COMPRISING OF RS. 3,04,47,991 BEING DEPOSITS AND R S. 21,37,691/- BEING INTEREST PAID ON THE AFORESAID DEPOSITS TO THE 27 P ARTIES) AS NON GENUINE LOANS AND ACCORDINGLY MADE ADDITION OF THE AGGREGATE AMOU NT U/S. 68 OF THE ACT. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED TH E MATTER BEFORE LD. CIT(A) WHO DELETED THE ADDITION BY HOLDING AS UNDER :- 6. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND HAVE GONE THROUGH THE VARIOUS JUDICIAL DECISIONS RELIED UPON BY THE APPELLANT. I HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER PASSED BY THE ASSESSIN G OFFICER. 6.1 IT IS AN UNDISPUTED FACT THAT IN ALL THE CASES OF THE CREDITORS, THE APPELLANT HAS SUBMITTED THE DOCUMENTS RELATING TO P.A. NO., COPY OF LEDGER ACCOUNT AND COPY OF CONFIRMATION. OUT OF 27 CREDITORS, IN THE CASES OF 20 CREDITORS, THE COPY OF RETURN ACKNOWLEDGEMENT AND COMPUTATION OF TOTAL INCOME HAV E ALSO BEEN FURNISHED. THESE DETAILS HAVE ALREADY BEEN GIVEN IN THE ASSESSMENT O RDER BY THE AO IN A TABULAR FORM. THIS CLEARLY ESTABLISHES THE FACT THAT ALL THE CREDITORS ARE ASSESSED TO TAX. FURTHER, ON PERUSAL OF THE LEDGER ACCOUNT, IT IS EVIDENT THAT ALL THE D EPOSITS AND WITHDRAWALS HAVE BEEN RECEIVED BY WAY OF ACCOUNT PAYEE CHEQUES ONLY. THE DETAILS OF CHEQUE NO. AND THE BANK ARE CLEARLY RECORDED IN THE COPY OF LEDGER ACCOUNT IN RESPECT OF EACH OF THE DEPOSITORS. SINCE THE APPELLANT IS A SHROFFS, IT OBTAINS LOAN D EPOSITS FROM VARIOUS PARTIES. ON PERUSAL OF ACCOUNTS OF ALL THESE CREDITORS, IT CLEARLY SHOW S THAT THEY ALL HAVE CURRENT ACCOUNTS WITH THE APPELLANT WHEREIN THE DEPOSITS AND WITHDRAWALS ARE MADE ON REGULAR BASIS. ALL THE CREDITORS, EXCEPT ONE CREDITOR I.E. S. C. PATEL & C O. WHICH IS AT ST. NO.23 IN THE TABIE GIVEN IN THE ASSESSMENT ORDER, HAVE OPENING BALANCE AS ON 01-04-2008 WITH THE APPELLANT COMPANY. HOWEVER, IN THE CASE OF S C, PATEL & CO., THERE ARE HUGE DEPOSITS AVAILABLE IN ITS BANK ACCOUNT ESTABLISHING ITS FINANCIAL CAPACIT Y. DURING THE YEAR UNDER CONSIDERATION, DEPOSITS AS WELL AS WITHDRAWALS HAVE BEEN MADE FROM THE SAID ACCOUNT. THE TAX HAS BEEN DEDUCTED AT SOURCE ON PAYMENT OF INTEREST ON THESE DEPOSITS TO THE VARIOUS CREDITORS. THE AO HAS MADE THE ADDITION IN RESPECT OF THE DEPOSITS RECEIVED FROM EACH OF THE 27 ITA NO. 322/ AHD/2013 . A.Y. 2009-2 010 4 CREDITORS DURING THE YEAR UNDER CONSIDERATION WITHO UT TAKING INTO CONSIDERATION THE AMOUNT OF WITHDRAWALS MADE FROM EACH OF THE ACCOUNT S DURING THE YEAR UNDER CONSIDERATION. EVEN IF CREDITS RECEIVED DURING THE YEAR ARE HELD TO BE UNEXPLAINED, THE ADDITION U/S 68 CAN BE MADE OF THE HIGHEST CLOSING BALANCE AS REDUCED BY THE OPENING BALANCE OF THE DEPOSIT IN THE ACCOUNTS OF EACH OF T HE CREDITORS IN THE BOOKS OF THE APPELLANT SO AS TO ENSURE THAT ADDITION IS MADE OF ONLY THE PEAK CREDITS RECEIVED DURING THE YEAR. FURTHER, THE ENTIRE INTEREST PAYMENT MADE BY THE APPELLANT TO EACH OF THE CREDITORS HAS BEEN ADDED TO THE TOTAL INCOME OF THE APPELLANT APART FROM THE DEPOSITS RECEIVED DURING THE YEAR U/S 68 OF THE ACT EVEN THO UGH SUCH INTEREST AMOUNT RELATES TO ENTIRE DEPOSITS INCLUDING OPENING DEPOSIT WITH THE APPELLANT ON DAY TO DAY PRODUCT BASIS AND SUCH INTEREST IS NOT RELATABLE ONLY TO DEPOSITS RECEIVED DURING THE YEAR. IT IS FURTHER NOTED THAT IN THE ASSESSMENT ORDER PASSED U/S 143(3 ) OF THE ACT FOR ASSESSMENT YEAR I.E. AY 2007-08, THE SAME DEPOSITORS HAVE BEEN TREATED A S GENUINE AND NO ADDITION HAS BEEN MADE U/S 68 OF THE ACT. MAJORITY OF THESE DEPOSITOR S ARE MAINTAINING THEIR CURRENT ACCOUNTS WITH THE APPELLANT FOR MORE THAN 2 YEARS. THE COPIES OF THE ACCOUNTS OF DEPOSITORS IN RESPECT OF AY 2008-09 ARE ALSO PLACED ON RECORD. 6;2 IN VIEW OF THE ABOVE FACTS, IT IS THE CONT ENTION OF THE APPELLANT THAT THE APPELLANT HAS DULY DISCHARGED ITS INITIAL BURDEN BY FURNISHIN G COPY OF ACCOUNT WITH CONFIRMATION, FULL ADDRESS, INCOME-TAX RETURN ACKNOWLEDGEMENT REC EIPT WITH STATEMENT OF INCOME AND COPY OF PASSBOOK WHEREVER CALLED FOR. ALL THE DEPOS ITS HAVE BEEN RECEIVED BY A/C PAYEE CHEQUES FOR WHICH CHEQUE NO. AND BANK NAME ARE DULY RECORDED IN THE COPY OF ACCOUNT DULY SUBMITTED. 6.3 SECTION 68 ITSELF PROVIDES THAT WHERE ANY SUM I S FOUND CREDITED IN THE BOOKS OF THE ASSESSEES FOR ANY PREVIOUS YEAR, THE SAME MAY BE CH ARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEES OF THE PREVIOUS YEAR, IF THE EXPLANAT ION OFFERED BY THE ASSESSEES, ABOUT THE NATURE AND SOURCE OF SUCH SUMS FOUND CREDITED IN TH E BOOKS OF THE ASSESSEES, IS IN THE OPINION OF THE ASSESSING OFFICER NOT SATISFACTORY. IT HAS BEEN HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. MOHANAKALA [2007] 291 ITR 278 (SC) AS UNDER: 'A BARE READING OF SECTION 68 SUGGESTS THAT THERE H AS TO BE CREDIT OF AMOUNTS IN THE BOOKS MAINTAINED BY ASSESSEES; THAT SUCH CREDIT HAS TO BE OF A SUM DURING THE PREVIOUS YEAR; AND THAT THE ASSESSEES OFFER NO EXPLANATION ABOUT T HE NATURE AND SOURCE OF SUCH CREDIT ITA NO. 322/ AHD/2013 . A.Y. 2009-2 010 5 FOUND IN THE BOOKS OR THE EXPLANATION OFFERED BY TH E ASSESSEES IN THE OPINION OF THE ASSESSING OFFICER IS NOT SATISFACTORY. IT IS ONLY T HEN THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEES OF THAT P REVIOUS YEAR THE EXPRESSION 'THE ASSESSEES OFFER NO EXPLANATION' MEANS WHERE THE ASS ESSEES OFFER NO PROPER, REASONABLE AND ACCEPTABLE EXPLANATION AS REGARDS THE SUMS FOUN D CREDITED IN THE BOOKS MAINTAINED BY THE ASSESSEES. IT IS TRUE THAT THE OPINION OF TH E ASSESSING OFFICER FOR NOT ACCEPTING THE EXPLANATION OFFERED BY THE ASSESSEES AS NOT SATISFA CTORY IS REQUIRED TO BE BASED ON PROPER APPRECIATION OF MATERIAL AND OTHER ATTENDING CIRCUM STANCES AVAILABLE ON RECORD. THE OPINION OF THE ASSESSING OFFICER IS REQUIRED TO BE FORMED OBJECTIVELY WITH REFERENCE TO THE MATERIAL AVAILABLE ON RECORD. APPLICATION OF MIND I S THE SINE QUA NON FOR FORMING THE OPINION.' 6.4 IT IS A SETTLED PROPOSITION IN LAW THAT UNEXPLA INED CREDIT IF FOUND IN THE BOOKS OF ACCOUNTS OF AN ASSESSEE, THE INITIAL ONUS IS PLACED ON THE ASSESSEE. IN ORDER TO DISCHARGE THE INITIAL ONUS U/S 68 OF THE IT ACT, THE ASSESSEE SHOULD PRIMA FACIE PROVE ; (I) THE IDENTITY OF THE CREDITOR; (II) THE CAPACITY OF THE CREDITOR TO ADVANCE MONEY; AND (III) THE GENUINENESS OF THE TRANSACTIONS THE ASSESSEE IS REQUIRED TO DISCHARGE THIS INITIAL ONUS. THE LAW IS EQUALLY SETTLED THAT IF THE INITIAL BURDEN IS DISCHARGED BY THE ASSESSEE BY PRODUCING SUFFICIENT MATERIAL IN SUPPORT OF THE LOAN TRANSACTIONS, THE ONUS SHIFTS U PON THE AO. HOWEVER, AFTER MAKING NECESSARY INQUIRY AND VERIFICATION, THE AO CAN CALL FOR FURTHER EXPLANATION FROM THE ASSESSEE AND IN THE PROCESS THE ONUS MAY AGAIN SHIF T FROM THE AO TO THE ASSESSEE. 6.5 IN THE LIGHT OF THE ABOVE LEGAL POSITION, IT IS TO BE CONSIDERED AS TO WHETHER BY SUBMITTING THE NECESSARY DOCUMENTS BEFORE THE AO, T HE APPELLANT HAS DISCHARGED ITS INITIAL ONUS SO FAR AS SECTION 68 OF THE ACT IS CON CERNED. IN THE PRESENT CASE, THE APPELLANT HAS DULY SUBMITTED THE COPY OF LEDGER ACCOUNT WITH CONFIRMATION, FULL ADDRESS, COPY OF P.A. NO., / INCOME TAX ACKNOWLEDGEMENT RECEIPT ETC. AND THE DETAILS OF CHEQUE NO. NAME OF BANKS ETC. HAVE ALSO BEEN INDICATED IN THE COPI ES OF ACCOUNTS. IT IS A MATTER OF RECORD THAT NO FURTHER INQUIRY HAS BEEN MADE BY THE AO. JU ST ON THE BASIS OF DOCUMENTS SUBMITTED BY THE APPELLANT, THE AO HAS COME TO CONC LUSION THAT THE CREDITORS HAVE NO FINANCIAL CAPACITY TO MAKE DEPOSITS WITH THE APPELL ANT WITHOUT CONSIDERING THE FACT THAT ITA NO. 322/ AHD/2013 . A.Y. 2009-2 010 6 CURRENT ACCOUNTS MAINTAINED; WITH THE APPELLANT BY THE CREDITORS HAVE HUGE OPENING DEPOSIT / BALANCE IN RESPECT OF EACH OF THE CREDITO RS AND SUCH OPENING BALANCE OF DEPOSIT IS HELD TO BE GENUINE IN THE ASSESSMENT ORDER PASSE D U/S 143(3) OF THE ACT IN THE EARLIER ASSESSMENT YEAR. IF THE AO HAD ANY DOUBT REGARDING THE MATERIAL PLACED ON RECORD BY THE APPELLANT INCLUDING THEIR RETURNS OF INCOME, COPIES OF ACCOUNT ETC THE AO SHOULD HAVE MADE FURTHER INQUIRY FROM THE AO OF THE CONCERNED CREDITORS OR COULD HAVE CALLED THOSE CREDITORS FOR FURTHER VERIFICATION OF THE TRANSACTI ONS OF THE APPELLANT. NO SUCH EXERCISE HAS BEEN CONDUCTED BY THE AO AS IS EVIDENT FROM THE RECORDS. THE AO COULD HAVE ISSUED SUMMONS U/S. 131 OF THE I.T. ACT TO THE CREDITORS O R INQUIRIES COULD HAVE BEEN MADE FROM THE ASSESSMENT RECORDS OF THESE CREDITORS AS WELL A S SPOT INQUIRIES COULD HAVE BEEN MADE ON THE GIVEN ADDRESSES OF THE CREDITORS. ONCE THE A PPELLANT HAS FURNISHED ALL THE NECESSARY DETAILS AND DOCUMENTS, AS IN THE PRESENT CASE, IT HAS DISCHARGED THE INITIAL BURDEN WHICH LAY ON HIM U/S 68 OF THE ACT. ONCE THE APPELLANT PRODUCES THE BASIC RECORDS OF THE CREDITORS WHICH SHOW THE IDENTITY OF THE CRE DITORS, COPY OF ACCOUNTS OF THE CREDITORS, DETAILS OF CHEQUE NOS., BANK ACCOUNTS THROUGH WHICH MONEY WAS TRANSFERRED TO THE APPELLANT AND EVIDENCE THAT ALL OF THEM ARE INCOME TAX ASSESSEES, IT CANNOT BE SAID THAT ASSESSEE HAS STILL TO DISCHARGE THE ONUS. ONCE THE ASSESSEE HAS DISCHARGED THE PRIMARY ONUS, ADDITION U/S 68 CANNOT BE MADE UNLESS EXPLANA TION AND EVIDENCE FURNISHED BY THE APPELLANT ARE FOUND TO BE UNTRUE. FROM THE MATERIAL S AVAILABLE ON RECORD, IT IS CLEARLY ESTABLISHED THAT THE APPELLANT HAS PROVED ALL THE I NGREDIENTS SUCH AS GENUINENESS OF THE TRANSACTIONS, IDENTITY OF THE DEPOSITORS, CREDITWOR THINESS AND CAPACITY OF THE DEPOSITORS BY PROVIDING THE COPY OF P.A. NO. AND COMPLETE INCO ME TAX DETAILS COUPLED WITH THE FACT THAT ALL THE TRANSACTIONS WERE THROUGH A/C PAYEE CH EQUES. THE ONUS NOW SHIFTS TO THE AO FOR DISPUTING THE APPELLANT'S CLAIM, EXPLANATION AN D EVIDENCES. ONCE THE AO FAILS TO DISCHARGE THE ONUS LYING ON HIM, THE ADDITION MADE U/S 68 CANNOT BE JUSTIFIED. IN ORDER TO SUBSTANTIATE THE ISSUE UNDER CONSIDERATION, IT WOUL D BE RELEVANT TO REFER TO A FEW JUDICIAL DECISIONS IN THE MATTER: (I) IN THE CASE OF CIT VS. ORISSA CORPN (P) LTD. [1 986] 159 ITR 78 (SC), IT HAS BEEN HELD BY THE HON'BLE SUPREME COURT AS UNDER: 'IN THIS CASE THE ASSESSEE HAD GIVEN THE NAMES AND ADDRESSES OF THE ALLEGED CREDITORS. IT WAS IN THE KNOWLEDGE OF THE REVENUE THAT THE SAID C REDITORS WERE THE INCOME-TAX ITA NO. 322/ AHD/2013 . A.Y. 2009-2 010 7 ASSESSEES. THEIR INDEX NUMBER WAS IN THE FILE OF TH E REVENUE. THE REVENUE, APART FROM ISSUING NOTICES UNDER SECTION 131 AT THE INSTANCE O F THE ASSESSEE, DID NOT PURSUE THE MATTER FURTHER. THE REVENUE DID NOT EXAMINE THE SOU RCE OF INCOME OF THE SAID ALLEGED CREDITORS TO FIND OUT WHETHER THEY WERE CREDIT-WORT HY OR WERE SUCH WHO COULD ADVANCE THE ALLEGED LOANS. THERE WAS NO EFFORT MADE TO PURS UE THE SO-CALLED ALLEGED CREDITORS. IN THOSE CIRCUMSTANCES, THE ASSESSEE COULD NOT DO ANY FURTHER. IN THE PREMISES, IF THE TRIBUNAL CAME TO THE CONCLUSION THAT THE ASSESSEE H AD DISCHARGED THE BURDEN THAT LAY ON HIM, THEN IT COULD NOT BE SAID THAT SUCH A CONCLUSI ON WAS UNREASONABLE OR PERVERSE OR BASED ON NO EVIDENCE.' (II) IN THE CASE OF DCIT VS. ROHINI BUILDERS [2002] 256 ITR 360 (GUJ) THE HON'BLE HIGH COURT OF GUJARAT HAS HELD THAT THE ASSESSEE FURNISH ED COMPLETE ADDRESSES OF ALL THE CREDITORS ALONG WITH GIR NUMBERS / PAN AS WELL AS C ONFIRMATIONS ALONG WITH COPIES OF ASSESSMENT ORDERS PASSED IN THE CASES OF INDIVIDUAL CREDITORS, WHEREVER AVAILABLE, AND COPIES OF RETURNS FILED BY THE CREDITORS IN THE REM AINING CASES. ALL LOANS WERE RECEIVED AND REPAID BY ASSESSEE BY ACCOUNT PAYEE CHEQUES ALO NG WITH INTEREST. THUS, ASSESSEE HAS DISCHARGED THE INITIAL ONUS WHICH LAY ON IT IN TERM S OF SEC. 68. ASSESSEE IS NOT FURTHER EXPECTED TO PROVE THE GENUINENESS OF CASH DEPOSITED IN THE BANK ACCOUNTS OF THE CREDITORS. MERELY BECAUSE SUMMONS ISSUED TO SOME OF THE CREDIT ORS COULD NOT BE SERVED OR THEY FAILED TO APPEAR BEFORE THE AO, THE LOANS TAKEN FRO M THOSE CREDITORS COULD NOT BE TREATED AS NON GENUINE. IN THE CASE OF PRAGATI CO-OPERATIVE BANK LTD. [2005 ] 278 ITR 170 (GUJ.) THE HON'BLE HIGH COURT OF GUJARAT HAS HELD THAT 'ASSESSING OFFICER MADE ADDITION IN ASSESSEE'S HAND AS INCOME FROM UNDISCLOSED SOURCES ON GROUND THAT THERE WERE VARIOUS DISCREPANCIES IN RECORDS MAINTAINED BY ASSESSEE, REGARDING ISSUANCE OF VARIOUS FIXED DEPOSIT RECEIPT S. SINCE ASSESSEE HAD DISCHARGED PRIMARY ONUS WHICH WAS ON IT BY OFFERING EXPLANATIO N THAT DEPOSITS WERE MADE BY THIRD PARTIES, VIZ., CUSTOMERS OF BANK, AND SAID EXPLANAT ION HAD NOT BEEN FOUND TO BE INCORRECT OR FALSE IN ANY MANNER, ADDITION WAS TO BE DELETED. ' (IV) IN THE CASE OF CIT VS. RANCHOD JIVABHAI NAKHAV A IN TAX APPEAL NO.50 OF 2011THE HON'BLE HIGH COURT OF GUJARAT HAS HELD AS UNDER: ITA NO. 322/ AHD/2013 . A.Y. 2009-2 010 8 'ONCE THE ASSESSEE HAS ESTABLISHED THAT HE HAS TAKE N MONEY BY WAY OF ACCOUNTS PAYEE CHEQUES FROM THE LENDERS WHO ARE ALL INCOME TAX ASS ESSEES WHOSE PAN HAVE BEEN DISCLOSED, THE INITIAL BURDEN UNDER SECTION 68 OF T HE ACT WAS DISCHARGED. IT FURTHER APPEARS THAT THE ASSESSEE HAD ALSO PRODUCED CONFIRM ATION LETTERS GIVEN BY THOSE ORDERS. ONCE THE ASSESSING OFFICER GETS HOLD OF THE PAN OF THE LENDERS, IT WAS HIS DUTY TO ASCERTAIN FROM THE ASSESSING OFFICER OF THOSE LENDE RS, WHETHER IN THEIR RESPECTIVE RETURN THEY HAD SHOWN EXISTENCE OF SUCH AMOUNT OF MONEY AN D HAD FURTHER SHOWN THAT THOSE AMOUNT OF MONEY HAD BEEN LENT TO THE ASSESSEE. IF B EFORE VERIFYING OF SUCH FACT FROM THE ASSESSING OFFICER OF THE LENDERS OF THE ASSESSEE, T HE ASSESSING OFFICER DECIDES TO EXAMINE THE LENDERS AND ASKS THE ASSESSEE TO FURTHER PROVE THE GENUINENESS AND CREDITWORTHINESS OF THE TRANSACTION, IN OUR OPINION, THE ASSESSING O FFICER DID NOT FOLLOW THE PRINCIPLE LAID DOWN UNDER SECTION 68 OF THE INCOME TAX ACT.' 6.6 SO FAR AS THE ASSERTION OF THE AO THAT THE CRED ITORS ARE NOT FINANCIALLY CAPABLE FOR MAKING DEPOSITS WITH THE APPELLANT IS CONCERNED, IT IS TO BE NOTED THAT THE OPENING BALANCE / DEPOSIT IN RESPECT OF THE SAME CREDITORS HAS ALREADY BEEN ACCEPTED AS GENUINE IN EARLIER YEARS. FURTHER, THE AMOUNT OF INCOME DIS CLOSED BY THE CREDITORS AS PER THEIR INCOME TAX RETURNS DURING THE YEAR UNDER CONSIDERAT ION IS NOT THE EXHAUSTIVE YARDSTICK TO CONCLUDE THAT CREDITORS HAVE NO FINANCIAL CAPACI TY TO MAKE DEPOSITS SINCE DEPOSITS CAN BE MADE NOT NECESSARILY OUT OF THE INCOME OF THE YE AR UNDER CONSIDERATION BUT OUT OF THE ACCUMULATED CAPITAL OF THE CREDITORS OR LOAN TAKEN FROM SUB-CREDITORS. IN RESPECT OF MAJORITY OF THE CREDITORS, IT IS NOTED THAT THEY HA VE RECEIVED HUGE FUNDS BY ACCOUNT PAYEE CHEQUES FROM THE FIRM M/S R. M. TOBACCO CO. DURING THE YEAR UNDER CONSIDERATION. ONCE A CREDITOR IS A REGULAR INCOME-TAX ASSESSEE SINCE L ONG, IT CANNOT BE SAID THAT HE IS NOT A MAN OF MEANS. MOREOVER, THE FACT THAT ALL THE CREDI TORS ARE FILING THEIR RETURNS OF INCOME THROUGH ONE CA FIRM ONLY, ALSO DOES NOT PROVE THE N ON-GENUINENESS OF TRANSACTIONS UNLESS ADVERSE EVIDENCE IS BROUGHT ON RECORD. 6.7 SO FAR AS THE RELIANCE OF THE AO ON A FEW JUDIC IAL DECISIONS IS CONCERNED, I HAVE CAREFULLY GONE THROUGH THE JUDICIAL DECISIONS RELIE D UPON BY THE AO AND I AM OF THE OPINION THAT THE FACTS OF THE CASES RELIED UPON BY THE APPELLANT ARE DISTINCTLY DIFFERENT FROM THE FACTS OF THE PRESENT CASE. ITA NO. 322/ AHD/2013 . A.Y. 2009-2 010 9 (I) IN THE CASE OF CIT VS. MOHANAKALA [2007] 291 IT R 278 (SC), THE ISSUE RELATES TO SO CALLED GIFTS WHICH WERE NOT REAL AND GENUINE. THE A O HAVE FOUND THAT THE GIFTS WERE NOT REAL IN NATURE IN VIEW OF THE SURROUNDING CIRCUMSTA NCES WHICH WERE BASED ON THE MATERIAL AVAILABLE ON RECORD AND NOT ON ANY CONJECT URES AND SURMISES. (II) SO FAR AS THE RELIANCE ON THE CASE OF ITO VS. DIZA HOLDINGS (P.) LTD. [2002] 255 ITR 573 (KER.) IS CONCERNED, THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER FOUND THAT DEPOSITS FOR VARIOUS AMOUNTS IN NAME OF 11 PERSONS WERE CREDITED IN BOOKS OF ASSESSEE. NOT SATISFIED WITH THE ASSESSEE'S EXPLANATION AND S OURCE OF THESE CREDIT ENTRIES OR DEPOSITS, THE ASSESSING OFFICER CONDUCTED ENQUIRY A ND POINTED OUT INFIRMITIES AND IMPROBABILITIES SURROUNDING TRANSACTIONS IN DETAILS ALONG WITH PROPER EVIDENCES IN SUPPORT OF HIS CONCLUSION. HE CONCLUDED THAT THESE AMOUNTS WERE NEVER BEEN ADVANCED AND THE CREDITORS HAD NO CONNECTION WITH THE MONEY. THEREFORE, THE ADDITION MADE BY THE AO WAS JUSTIFIED AS HELD BY THE COURT. (III) SO FAR AS THE CASE OF MANGILAL JAIN VS. ITO [ 2009] 315 ITR 105 (MAD.) IS CONCERNED, IT IS HELD BY THE COURT THAT 'EVEN THE BANK TRANSACTIONS CLEARLY INDICATED THAT THE TRANSACTIONS WERE DONE AFTER DEPOSITS WERE MADE ONLY ON THE PREVIOUS DATES AND O N THE NEXT DATE IT WAS GIVEN AS BEARER CHEQUE AND IT WAS ALSO NOT EXPLAINED WHY A N EW ACCOUNT WAS OPENED WHEN ALREADY THERE EXISTED ANOTHER ACCOUNT. MERELY BECAU SE THE LOAN TRANSACTION WAS SOUGHT TO BE RELIED UPON BY THE ASSESSEE ON \ THE GROUND T HAT THE TRANSACTION WAS GIVEN BY CHEQUE, THAT BY ITSELF WILL NOT PROVE THE GENUINENE SS OF THE TRANSACTION. THE ASSESSEE HAD MISERABLY FAILED IN PROVING SUCH A TRANSACTION, ESP ECIALLY IN VIEW OF THE CONTRARY STATEMENT AND WITHDRAWAL OF THE STATEMENT BY THE AL LEGED LENDER R. THUS, THE ADDITION UNDER SECTION 68 WAS JUSTIFIED.' (IV) THE FACTS OF THE CASE IN THE CASE OF CIT V. UN ITED COMMERICAL AND INDUSTRIAL CO. (P.) LTD. [1991] 187 ITR 596 (CAL.) ARE THAT ON BEING CA LLED UPON BY THE ITO TO PROVE THE GENUINENESS OF THE SAID LOANS THE ASSESSEE PRODUCED CONFIRMATORY LETTERS AND DISCHARGED HUNDIS. HE ALSO FILED COPIES OF ACCOUNTS TO SHOW TH AT RECEIPTS AND PAYMENTS WERE MADE BY CHEQUES. THE ITO, HOWEVER, CALLED UPON THE ASSES SEE TO PRODUCE THE PARTIES BUT THE ASSESSEE DID NOT DO THAT. THE ITO ISSUED NOTICES UN DER SECTION 131 TO THE HUNDI CREDITORS BUT THE SAME WERE RECEIVED BACK UNSERVED. EVEN THOS E ON WHOM NOTICES COULD BE SERVED ITA NO. 322/ AHD/2013 . A.Y. 2009-2 010 10 DID NOT APPEAR IN RESPONSE TO THE SAID NOTICES. THE ITO HELD THAT ALL THOSE PARTIES BEING BOGUS HUNDIWALLAS, THE SAID LOANS WERE NOT GENUINE. THE ITO, ACCORDINGLY, ADDED CERTAIN SUMS TO THE ASSESSEE'S INCOME AS INCOME FROM UNDISC LOSED SOURCES. THE ADDITIONS MADE BY THE ITO WERE JUSTIFIED BY THE COURT. (V) IT HAS BEEN HELD IN THE CASE OF SHANKAR INDUSTR IES VS. CIT [1978] 114 ITR 689(CAL.) THAT WHERE CASH CREDITS ENTRIES IN NAME OF THIRD PA RTIES WERE APPEARING IN BOOKS OF ACCOUNT OF ASSESSES, AND IN RESPECT OF SUCH ENTRIES ASSESSEES ESTABLISHED ONLY IDENTITY OF CREDITOR AND NOTHING MORE, TRIBUNAL WAS JUSTIFIED I N TREATING CASH CREDITS AS ASSESSEE'S INCOME FROM UNDISCLOSED SOURCES. (VI) SIMILARLY IN THE CASE OF BLOWELL AUTO PVT. LTD . VS. ACIT, FARIDABAD [2009] 177 TAXMAN 261 (PUN. & HAR.) IT HAS BEEN HELD THAT WHER E ASSESSEE HAD ESTABLISHED IDENTITY OF CREDITORS BY PRODUCING THEIR AFFIDAVITS, BUT HAD FAILED TO PROVE THEIR CAPACITY AND GENUINENESS OF TRANSACTIONS, ADDITION MADE BY ASSES SING OFFICER AS UNEXPLAINED CASH CREDIT WAS JUSTIFIED. 6.8 IN VIEW OF THE ABOVE, IT IS QUITE OBVIOUS THAT THE FACTS OF ALL THE JUDICIAL DECISIONS RELIED UPON BY THE APPELLANT ARE DISTINCTLY DIFFERE NT FROM THE FACTS OF THE PRESENT CASE AND, THEREFORE, THESE DECISIONS ARE NOT RELEVANT FOR THE PRESENT CASE. IN THE PRESENT CASE, THE APPELLANT HAS DISCHARGED ITS INITIAL ONUS BY PRODUC ING THE RELEVANT DOCUMENTS IN RESPECT OF ALL THE CREDITORS WHO ARE MAINTAINING CURRENT AC COUNTS WITH THE APPELLANT. THE AO HAS NOT MADE ANY FURTHER INQUIRY OR VERIFICATION SUBSEQ UENT TO THE DISCHARGE OF INITIAL ONUS BY THE APPELLANT. THE OPENING DEPOSIT AVAILABLE WITH T HE APPELLANT IN RESPECT OF THE CREDITORS IS DULY ACCEPTED AS GENUINE IN EARLIER YEARS. 6.9 CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE CONSIDERED OPINION THAT THERE IS NO JUSTIFICATION FOR MAKING A NY ADDITION U/S 68 OF THE ACT IN RESPECT OF ANY OF THE CREDITORS. ACCORDINGLY, THE ADDITION MADE BY THE AO OF RS.3,25,85,682/- IS. HEREBY DELETED. 5. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS N OW IN APPEAL BEFORE US. 6. BEFORE US, LD. D.R. POINTED TO THE VARIOUS OBSERVAT IONS OF A.O AND FURTHER POINTED TO THE TABLE OF DEPOSITORS AT PAGE 7 TO 13 AND FROM THAT HE POINTED ITA NO. 322/ AHD/2013 . A.Y. 2009-2 010 11 OUT VARIOUS INSTANCES WHICH HAVE BEEN ANALYZED BY T HE A.O TO DEMONSTRATE THE INCOME OF THE DEPOSITORS TO BE FAR LESS THAN TH E AMOUNT THAT HAS BEEN CLAIMED TO HAVE BEEN GIVEN BY THEM TO THE ASSESSEE WHICH PROVES THAT THE DEPOSITORS HAVE NO CAPACITY TO LEND THE MONEY TO AS SESSEE. HE FURTHER SUBMITTED THAT THE MOST OF THE RETURNS OF INCOME OF VARIOUS DEPOSITORS HAVE BEEN FILED BY THE SAME C.A. AND CONSIDERING THE DET AILED ANALYSIS MADE BY A.O THE ADDITION MADE BY A.O NEEDS TO BE UPHELD. H E ALSO RELIED ON THE DECISIONS IN THE CASE OF BLESSING CONSTRUCTION VS. ITO (2013) 32 TAXMAN.COM 366 (GUJ), GAYATHRI ASSOCIATES VS. ITO ( 2014) 41 TAXMANN.COM 526 (ANDHRA PRADESH) AND IN THE CASE OF CIT VS. JANSAMPARK ADVERTISING & MARKETING (P.) LTD. (2015) 56 TAXMANN .COM 286 (DEL). IN THE ALTERNATE THE LD. D.R. SUBMITTED THAT THE MATTER MA Y BE SET ASIDE TO THE FILE OF A.O TO MAKE THE NECESSARY INQUIRIES. LD. A.R ON TH E OTHER HAND REITERATED THE SUBMISSIONS MADE BEFORE A.O AND LD. CIT(A) AND FURTHER SUBMITTED THAT IN MOST OF THE CASES THE DEPOSITORS HAD ALSO GIVEN LOANS IN EARLIER YEARS AND IN THOSE YEARS THE LOANS HAVE BEEN ACCEPTED TO BE G ENUINE AND NO ADDITION HAS BEEN MADE WHILE FRAMING THE ASSESSMENTS. AS FAR AS THE LOANS RECEIVED DURING THE YEAR ARE CONCERNED ASSESSEE HAS DISCHARG ED THE ONUS BY FURNISHING THE PAN NUMBER, THE COPY OF RETURN AND T HE CONFIRMATION OF THEIR ACCOUNTS. HE FURTHER SUBMITTED THAT SINCE THE ASSES SEE HAD DISCHARGED THE PRIMARY ONUS AND UNLESS THE EXPLANATION AND EVIDENC ES FURNISHED BY THE ASSESSEE ARE FOUND TO BE UNTRUE, NO ADDITION COULD BE MADE U/S. 68. HE THUS SUPPORTED THE ORDER OF LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS ABOUT ADDITION MADE U/ S. 68 OF THE ACT. THE PRIMARY REASON FOR MAKING THE ADDITION BY THE A.O U /S. 68 WAS THAT THE ITA NO. 322/ AHD/2013 . A.Y. 2009-2 010 12 DEPOSITORS WERE NOT FINANCIALLY CAPABLE TO GIVE LOA NS/DEPOSITS, MOST OF THE DEPOSITORS HAD INTEREST INCOME THAT TOO RECEIVED FR OM THE ASSESSEE AND THEY DID NOT HAVE ANY OTHER SOURCE OF INCOME OR THEIR IN COME WAS VERY SMALL AND THUS ACCORDING TO THE A.O MERE RECEIPT OF LOANS BY ACCOUNT PAYEE CHEQUES DID NOT MAKE THE LOANS AS GENUINE. LD CIT(A) WHILE GRANTING THE RELIEF HAS GIVEN A FINDING THAT MOST OF THE CREDITORS HAD CURR ENT ACCOUNT WITH THE ASSESSEE WHEREIN DEPOSITS AND WITHDRAWALS WERE MADE ON REGULAR BASIS, MAJORITY OF THE DEPOSITORS WERE MAINTAINING THE CUR RENT ACCOUNT WITH THE ASSESSEE FOR MORE THAN 2 YEARS AND IN THE ASSESSMEN T ORDER PASSED U/S. 143(3) FOR A.Y. 2007-08, THE SAME DEPOSITORS HAVE B EEN TREATED AS GENUINE. LD. CIT(A) HAS FURTHER GIVEN A FINDING THAT ASSESSE E HAD FURNISHED THE COPY OF LEDGER ACCOUNT WITH CONFIRMATION, FULL ADDRESS, COPY OF PAN NUMBER, INCOME TAX ACKNOWLEDGEMENT RECEIPT ETC. BEFORE THE A.O BUT A.O DID NOT MADE ANY FURTHER INQUIRY OF THE CONCERNED CREDITOR NOR HAD ISSUED SUMMONS U/S. 131 OF THE ACT, NOR MADE ANY SPOT INQUIRIES ON THE ADDRESSES OF THE CREDITORS. HE THUS HELD THAT ASSESSEE HAD DISCHARGE D THE INITIAL ONUS CAST UPON IT AND THE EVIDENCES AND EXPLANATIONS FURNISHE D BY THE ASSESSEE HAVE NOT BEEN FOUND TO BE UNTRUE AND WHILE DELETING THE ADDITION HE ALSO PLACED RELIANCE ON THE VARIOUS DECISIONS CITED IN THE ORDE R. BEFORE US, REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT TH E FINDINGS OF LD. CIT(A) NOR HAS POINTED ANY FALLACY IN HIS FINDINGS. BEFORE US, REVENUE HAS RELIED ON THE DECISION CITED HEREINABOVE BUT WE FIND THAT THE RATIO OF THOSE DECISIONS ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE . IN VIEW OF THE OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WIT H THE ORDER OF LD. CIT(A) AND THUS THE GROUND OF REVENUE IS DISMISSED. ITA NO. 322/ AHD/2013 . A.Y. 2009-2 010 13 8. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 13- 01 - 2016. SD/- SD/- (S.K. YADAV) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AH MEDABAD