GHISULAL S JAIN (HUF), MUMBAI V. ITO 14(2)(3), MUMBAI

ITA 3229/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75495 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 23-01-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 09-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R K SAHU
• Section: 143(3); 142(1); 133(6); 68; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI . . , . . , , BEFORE SHRI B.R.MITTAL, JM AND SHRI N.K. BILLAIYA, AM ./ I.T.A. NO. 3229/MUM/2012 ( / ASSESSMENT YEAR :2004-05) GHISULAL S. JAIN(HUF) PROP. M/S RAJ SALES 6/8, KHANDERRAO WADI, 1 ST FLOOR, SHOP NO.17, D.S. AGIARY LANE, KALBADEVI, MUMBAI-400002 / VS. THE COMMISSIONER OF INCOME-TAX(A)-25 MUMBAI ./ PAN : AAAHG0043F ( / APPELLANT ) .. ( ! / RESPONDENT ) ' / APPELLANT BY : SHRI VIMAL PUNMIYA ! ' / RESPONDENT BY : SHRI R.K.SAHU ' ' / DATE OF HEARING : 23-01-2014 ' ' / DATE OF PRONOUNCEMENT : 05-02-2014 / O R D E R PER B.R.MITTAL, J.M. THE ASSESSEE HAS FILED THIS APPEAL FOR A.Y. 2004-05 AGAINST ORDER OF THE LD. CIT(A) DATED 30/03/2012. 2. IN GROUND NO.1OF THE APPEAL, THE ASSESSEE HAS DI SPUTED THE CONFIRMATION OF THE ADDITION U/S 68 ON ACCOUNT OF C LAIM OF LOAN FROM THE FOLLOWING PERSONS. A) DAMYANTI S JAIN RS.1,00,000/- B) SHRI NALINBHAI A SHAH RS.2,50,000/- C) KIRTIBHAI C SHAH RS.2,50,000/- D) RENUDEVI MAKHARIA RS.4,00,000/- RS.10,00,000/- 3. THE RELEVANT FACTS ARE THAT THE ASSESSEE IS PROP RIETOR OF M/S RAJ SALES AND DEALS IN PURCHASING YARN AND SENDS THE SA ME FOR JOB WORK 2 ITA NO.3229/MUM/2012 GHISULAL S. JAIN (HUF) FOR PROCESS OF GREY FABRICS. THE SAME IS THEREAFTE R SENT FOR CHECKING AND THEN SOLD IN LOCAL MARKET AND OTHER PARTS OF TH E COUNTRY. IT IS STATED THAT THE SALES AND PURCHASES ARE THROUGH BRO KERS. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE FI LED RETURN OF INCOME OF RS.3,67,140/- ON 01/11/2004. THE ASSESSI NG OFFICER MADE ASSESSMENT U/S 143(3) OF THE INCOME-TAX ACT ON 29/1 2/2006 ASSESSING TOTAL INCOME OF RS.15,91,520/-, WHICH INTERALIA INCLUDES A SUM OF RS.10,00,000/- BEING LOANS TREATED U/S 68 AS INCOME OF THE ASSESSEE. 4. THE ASSESSING OFFICER HAS STATED THAT IN ORDER T O VERIFY THE GENUINENESS OF THE LOANS, THE ASSESSEE FILED CONFIR MATIONS AND THE SAME HAVE BEEN OBTAINED AND PLACED ON RECORD. HE H AS STATED THAT NOTICE U/S 133(6) WAS ISSUED AND STATED HIS FINDING S AS UNDER: A) IN RESPECT OF LOAN FROM SMT. DAMYANTI S. JAIN , HE H AS STATED THAT SHE ADVANCED LOANS OF RS.1,00,000/-(WRONGLY STATED BY T HE ASSESSING OFFICER RS.2,50,000/-) TO THE ASSESSEE. THAT ON PE RUSAL OF BANK STATEMENT, IT IS SEEN THAT SHE DEPOSITED IN CASH OF RS.1,00,000/- PRIOR TO ISSUE OF CHEQUE IN FAVOUR OF M/S RAJ SALES, PROP RIETORSHIP FIRM OF THE ASSESSEE. HE HAS STATED THAT IN THE ABSENCE OF DETAILS OF CASH DEPOSITED, THE SAME IS TREATED AS INCOME OF THE ASS ESSEE U/S 68 OF THE INCOME-TAX ACT. B) IN RESPECT OF LOAN FROM SMT. RENUDEVI MAKHARIA, THE ASSESSING OFFICER HAS STATED THAT SHE ADVANCED LOAN OF RS.4,00,000/-. SINCE NO DOCUMENTARY EVIDENCE IN RESPECT OF PAYMENT OF LOAN OF RS.4,00,000/- IS FILED, HE TREATED IT AS INCOME OF THE ASSESSEE U/S 68 OF THE INCOME- TAX ACT. C) IN RESPECT OF LOAN FROM SHRI NALINBHAI AMRUTLAL SHAH , THE ASSESSING OFFICER HAS STATED THAT HE ADVANCED LOAN OF RS.2,50 ,000/- TO THE ASSESSEE. HOWEVER, PRIOR TO ISSUE OF CHEQUES IN FA VOUR OF THE ASSESSEE I.E. M/S RAJ SALES, CASH OF RS.1,50,000/- WAS DEPOS ITED INTO THE ACCOUNT ON 27/03/2004 (FOUR ENTRIES) AND RS.1,00,00 0/- WAS SHOWN AS TRANSFER FROM THE ACCOUNT OF FAMILY MEMBERS, WHO HAVE DEPOSITED 3 ITA NO.3229/MUM/2012 GHISULAL S. JAIN (HUF) CASH IN THEIR ACCOUNTS AND THE SAME WAS TRANSFERRED TO THE ACCOUNT OF THE LOAN CREDITOR AND THEREAFTER CHEQUES WERE ISSUE D IN FAVOUR OF THE ASSESSEES FIRM. IN VIEW OF ABOVE HE TREATED LOAN OF RS.2,50,000/- AS INCOME OF THE ASSESSEE U/S 68 OF THE INCOME-TAX ACT . D) IN RESPECT OF LOAN FROM SHRI KIRTIBHAI CHANDULAL SHA H, THE ASSESSING OFFICER HAS STATED THAT HE ADVANCED LOAN OF RS.2,50 ,000/- TO THE ASSESSEE. HOWEVER, PRIOR TO ISSUE OF CHEQUES IN FA VOUR OF THE ASSESSEE I.E. PROPRIETARY CONCERN M/S RAJ SALES, RS.1,00,000 /- AND RS.1,50,000/- WERE TRANSFERRED TO THE ACCOUNT FROM THE ACCOUNTS OF FAMILY MEMBERS OF THE CREDITORS, WHO DEPOSITED CASH IN THEIR ACCOUNTS AND THE SAME WERE TRANSFERRED TO THE ACCOUNT TO THE LOAN CREDITORS AND THEREAFTER CHEQUES WERE ISSUED IN FAVOUR OF M/S RAJ SALES. THEREFORE, THE AO TREATED THE SAID LOAN OF RS.2,50, 000/-AS INCOME OF THE ASSESSEE U/S 68 OF THE INCOME-TAX ACT. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER CONSIDE RED THE AGGREGATE LOANS OF RS.10,00,000/- AS INCOME OF THE ASSESSEE U/S 68 OF THE INCOME TAX ACT. BEING AGGRIEVED, ASSESSEE FILED APP EAL BEFORE THE FIRST APPELLATE AUTHORITY. 5. THE LD. CIT(A) HAS STATED THAT THE ASSESSEE FILE D A PAPER BOOK AND CONTENDED THAT NECESSARY CONFIRMATIONS FROM THE LOAN CREDITORS WERE FURNISHED BEFORE THE ASSESSING OFFICER. THAT A LL THE CREDITORS ARE FILING RETURNS OF INCOME AND THEY CONFIRMED THE LOA NS GIVEN TO THE ASSESSEE. IT WAS ARGUED THAT ASSESSEE WAS NOT SUPPO SED TO KNOW SOURCE OF SOURCE. THE LD. CIT(A) HAS STATED THAT T HE ASSESSEE SUBMITTED NECESSARY PARTICULARS IN THE PAPER BOOK, AND THE SAID PAPER BOOK WAS FORWARDED TO THE ASSESSING OFFICER. THAT THE ASSESSING OFFICER SUBMITTED HIS REMAND REPORT. IN THE REMAND REPORT, THE ASSESSING OFFICER STATED THAT LOANS WERE NOT SATISF ACTORILY EXPLAINED BY THE ASSESSEE. THE LD. CIT(A) HAS STATED THE EXTRACT OF REMAND REPORT IN THE IMPUGNED ORDER WHICH IS AS UNDER:- 4 ITA NO.3229/MUM/2012 GHISULAL S. JAIN (HUF) (I) IN RESPECT OF CLAIM OF LOAN FROM DAMYANTI S. JAIN, IT IS STATED THAT THE CASH OF RS.1,00,000/-WAS DEPOSITED IN HER BANK ACCOUNT ON 08/05/2003 AND OUT OF THE CASH DEPOSIT AMOUNT OF RS .1,00,000/- CHEQUES WERE ISSUED TO ASSESSEES PROPRIETARY CONCE RN M/S RAJ SALES ON 09.05.2003. THEREFORE, THE GENUINENESS OF THE S AID TRANSACTION IS NOT PROVED. THAT THE TOTAL INCOME OF SMT. DAMYANTI S. JAIN FOR A.Y. 2004-05 IS RS.32,210/-. HENCE HER CREDITWORTHINESS IS ALSO NOT PROVED. (II) IN RESPECT OF CLAIM OF LOAN OF RS.2,50,000/- F ROM SHRI NALINBHAI A. SHAH, IT IS STATED THAT AN AMOUNT OF RS.1,50,000 /- WAS DEPOSITED IN CASH ON 27/03/2004 IN BANK ACCOUNT OF LOAN CREDI TOR SHRI NALINBHAI A. SHAH AND ON THE SAME DAY CHEQUE WAS IS SUED TO THE ASSESSEE. FURTHER DEPOSIT OF RS.1,00,000/- IS SHOWN AS TRANSFERRED FROM THE ACCOUNT OF FAMILY MEMBERS BEING SAVING BAN K ACCOUNT NOS. 8264 AND 8297, WHO DEPOSITED CASH IN THEIR ACCOUNTS ON 29/03/2004 AND TRANSFERRED THAT AMOUNT TO THE ACCOUNT OF THE L OAN CREDITOR. THEREAFTER THE CHEQUE WAS ISSUED IN FAVOUR OF THE A SSESSEES PROPRIETARY CONCERN M/S RAJ SALES ON THE SAME DAY I .E. 29.03.2004. IT IS FURTHER STATED IN THE REMAND REPORT THAT SHRI NALINBHAI A. SHAH FILED A RETURN OF INCOME FOR A.Y. 2004-05 DECLARING INCOME OF RS.52,560/- AND HIS CAPITAL IS OF RS.2,58,742/-. H ENCE, GENUINENESS OF THE SAID LOAN AND CREDITWORTHINESS OF SHRI NALIN BHAI A. SHAH COULD NOT BE PROVED. (III). IN RESPECT OF CLAIM OF LOAN OF RS.2,50,000/- FROM SHRI KIRTIBHAI C. SHAH, IT IS STATED THAT PRIOR TO THE ISSUE OF C HEQUES IN FAVOUR OF ASSESSEES PROPRIETARY CONCERN M/S RAJ SALES, RS. 1,00,000/- AND RS.1,50,000/- WERE TRANSFERRED TO THE ACCOUNT OF TH E LOAN CREDITOR FROM HIS FAMILY MEMBERS ACCOUNTS AND EARLIER THEY D EPOSITED CASH IN THEIR ACCOUNTS BEFORE TRANSFERRED TO THE ACCOUNT OF THE LOAN CREDITORS. THEREAFTER THE LOAN CREDITOR ISSUED CHEQUES TO M/S RAJ SALES. IT IS FURTHER STATED THAT THE TOTAL INCOME OF THE SHRI KI RTIBHAI C. SHAH FOR A.Y. 2004-05 IS RS.53,650/-. HENCE THE GENUINENESS AND CREDITWORTHINESS OF THE LOAN CREDITOR IS NOT PROVED . 5 ITA NO.3229/MUM/2012 GHISULAL S. JAIN (HUF) (IV). IN RESPECT OF CLAIM OF LOAN OF RS.4,00,000/- FROM SMT. RENUDEVI MAKHARIA, IT IS STATED THAT A COPY OF BANK STATEMEN T WAS FURNISHED WHICH SHOWS THAT AMOUNT OF RS.4,00,000/- WAS RECEIV ED BY SMT. RENUDEVI MAKHARIA ON THE SAME DAY ON WHICH SHE ISSU ED CHEQUE IN FAVOUR OF M/S RAJ SALES OF RS.4,00,000/-. IT IS ST ATED THAT SHE FILED RETURN OF INCOME FOR. A.Y. 2004-05 DECLARING TOTAL INCOME OF RS.36,230/-. HENCE, GENUINENESS OF THE LOAN AND CR EDITWORTHINESS OF LOAN CREDITOR IS NOT PROVED. 6. THE LD. CIT(A) HAS STATED THAT COPY OF THE SA ID REMAND REPORT WAS COMMUNICATED TO THE ASSESSEE AND THE ASSESSEE R EITERATED THAT HE HAD FILED REQUISITE CONFIRMATIONS OF THE LOANS GIVE N TO THE ASSESSEE AND ALL THE LOAN CREDITORS ARE FILING RETURNS OF IN COME. IT WAS ALSO REITERATED THAT ASSESSEE IS NOT SUPPOSED TO EXPLAIN THE SOURCE OF CREDITORS SOURCE. HENCE, THE ASSESSEE HAS EXPLAIN ED THE GENUINENESS OF THE LOANS AND NO ADDITION IS TO BE MADE. 7. THE LD. CIT(A) DID NOT AGREE WITH THE CONTENTION OF THE ASSESSEE. HE HAS STATED THAT THE CLAIM OF THE ASSESSEE LACKS CREDENCE. HE HAS STATED THAT IN CASES OF TWO CREDITORS THERE WERE CA SH DEPOSITS OF EQUIVALENT AMOUNT PRIOR TO ISSUANCE OF THE LOAN CHE QUE. IN ANOTHER CASE OF A CREDITOR (KIRTIBHAI C. SHAH) EQUIVALENT A MOUNTS WERE TRANSFERRED FROM FAMILY MEMBERS BANK ACCOUNT, WHO DEPOSITED CASH IN THEIR ACCOUNTS AND IN THE CASE OF ANOTHER CREDIT OR (SMT RENUDEVI MAKHARIA) EQUIVALENT AMOUNT WAS TRANSFERRED FROM OT HER ACCOUNT IMMEDIATELY PRECEDING TO ISSUANCE OF CHEQUE OF EQUI VALENT AMOUNT TO THE ASSESSEE. THE LD. CIT(A) HAS STATED THAT CRED ITWORTHINESS OF THE LOAN CREDITORS IS NOT PROVED AND ACCORDINGLY HE HAS CONFIRMED THE ACTION OF THE ASSESSING OFFICER. HENCE, ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 8. DURING THE COURSE OF HEARING, THE LD. AR REITERA TED THE ABOVE FACTS. IN CONNECTION WITH THE CLAIM OF LOAN FROM SM T. DAMYANTI S 6 ITA NO.3229/MUM/2012 GHISULAL S. JAIN (HUF) JAIN, LD. AR REFERRED PAGE 41 OF THE PAPER BOOK WHI CH IS A COPY OF THE CONFIRMATION LETTER GIVEN BY HER DIRECTLY TO THE AS SESSING OFFICER, AS IS EVIDENT FROM THE STAMP APPEARING ON THE SAID LETTER . HE SUBMITTED THAT PAGE NO. 43 TO 44 IS THE COPY OF BANK STATEMEN T EVIDENCING THAT THE SAID LOAN WAS TAKEN BY THE ASSESSEE BY AN ACCOU NT PAYEE CHEQUE. IN RESPECT OF LOAN FROM SMT. RENUDEVI MAKHARIA OF RS.4,00,000/-, THE LD. AR SUBMITTED THAT SHE ALSO GAVE CONFIRMATION TO THE ASSESSING OFFICER VIDE LETTER DATED 29.12.2006 PURSUANT TO NO TICE U/S 133(6) OF THE ACT AND A COPY OF THE SAME IS PLACED AT PAGE 45 OF THE PAPER BOOK. HE FURTHER REFERRED PAGE 52 OF THE PAPER BOOK CONFI RMING THE LOAN TO THE ASSESSEE OF RS.4,00,000/- WITH THE BANK DETAILS AND ALSO THE PAYMENT OF INTEREST TO HER IN RESPECT OF THE SAID L OAN. HE FURTHER SUBMITTED THAT SHE RECEIVED THE SAID AMOUNT FROM AN ACCOUNT PAYEE CHEQUE FROM HER DEBTOR AND THE SAID CHEQUE WAS DEPO SITED IN HER ACCOUNT AND THEREAFTER THE CHEQUE WAS ISSUED TO THE ASSESSEE AND REFERRED PAGE 49 OF THE PAPER BOOK WHICH IS A COPY OF THE BANK SLIP FOR DEPOSITING THE CHEQUE OF RS.4,00,000/- IN THE ACCOU NT OF SMT RENUDEVI MAKHARIA. THE LD. AR SUBMITTED A COPY OF THE BANK STATEMENT WHICH IS PLACED AT PAGE 48 OF THE PAPER B OOK. HE FURTHER SUBMITTED THAT THE COPY OF CAPITAL ACCOUNT OF SMT. RENUDEVI IS ALSO PALCED AT PAGE 50 OF THE PAPER BOOK EVIDENCING THAT SHE RECEIVED RS.4,00,000/-FROM RAJKUMAR SAJJANKUMAR BY AN ACCOUN T PAYEE CHEQUE WHICH WAS DEPOSITED IN HER ACCOUNT ON 27/02/ 2004 AND THEREAFTER THE CHEQUE WAS ISSUED TO THE ASSESSEE. IN RESPECT OF LOAN FROM SHRI NALINBHAI A SHAH, LD. AR REFERRED PAGE 53 OF THE PAPER BOOK WHICH IS A COPY OF THE CONFIRMATION LETTER DATED 29 /12/2006, ADDRESSED TO THE ASSESSING OFFICER PURSUANT TO NOTI CE ISSUED U/S 133(6) OF THE ACT CONFIRMING GIVING LOAN OF RS.2,50 ,000/- TO THE ASSESSEE. THE LD. AR SUBMITTED THAT IN REPLY OF A ENQUIRY RAISED BY THE ASSESSING OFFICER, THE SAID LOAN CREDITOR ALSO FILED HIS REPLY EXPLAINING THE SOURCE OF THE AMOUNT GIVEN TO THE AS SESSEE AND A COPY OF THE SAID LETTER IS PLACED AT PAGE 54 TO 55 OF TH E PAPER BOOK. THE LD. 7 ITA NO.3229/MUM/2012 GHISULAL S. JAIN (HUF) AR REFERRED PAGE 58 OF THE PAPER BOOK WHICH IS A CO PY OF THE BANK STATEMENT AND SUBMITTED THAT THE SAID LOAN WAS GIVE N BY ACCOUNT PAYEE CHEQUE. HE FURTHER SUBMITTED THAT A COPY OF THE BALANCE SHEET OF THE LOAN CREDITOR (NALIBHAI A. SHAH) IS ALSO PLA CED AT PAGE 57 OF THE PAPER BOOK AND AT PAGE 59 OF THE PAPER BOOK CONFIRM ATION LETTER, CONFIRMING THE LOAN TO THE ASSESSEE AS WELL AS RECE IPT OF INTEREST THEREON IS PLACED. IN RESPECT OF LOAN FROM SHRI KI RTIBHAI C SHAH, THE LD. AR REFERRED PAGE 60 OF THE PAPER BOOK AND SUBMI TTED THAT HE ALSO CONFIRMED TO THE ASSESSING OFFICER VIDE LETTER DATE D 29/12/2006 PURSUANT TO THE NOTICE U/S 133(6) OF THE ACT OF GIV ING LOAN TO THE ASSESSEE. HE FURTHER SUBMITTED THAT HE ALSO EXPLAI NED THE SOURCE OF THE SAID LOAN TO THE AO VIDE HIS LETTER DATED 27/12 /2006 COPY PLACED AT PAGES 61-62 OF THE PAPER BOOK. HE FURTHER SUBMI TTED THAT THE COPY OF THE STATEMENT OF BANK SUMMARY WAS ALSO FILED BEF ORE THE ASSESSING OFFICER ALONG WITH BALANCE SHEET GIVING THE DETAILS OF THE LOANS OF THE LOAN CREDITORS, COPIES PLACED AT PAGES 63-64 OF THE PAPER BOOK RESPECTIVELY. HE SUBMITTED THAT THE BANK STATEMENT WAS ALSO FILED AND COPY IS PLACED AT PAGE 65 OF THE PAPER BOOK. HE FU RTHER SUBMITTED THAT THE LOAN CREDITOR ALSO CONFIRMED THE LOAN AND RECEIPT OF INTEREST, COPY OF IT IS PLACED AT 66 PAGE OF THE PAPER BOOK. 9. THE LD. AR FURTHER SUBMITTED THAT THE SAID LOANS WERE REPAID IN SUBSEQUENT ASSESSMENT YEARS BY ACCOUNT PAYEE CHEQUE S. HE FURTHER SUBMITTED THAT THE ASSESSEE PAID INTEREST ON THE SA ID LOANS AND THE SAID INTEREST WAS ALLOWED BY THE DEPARTMENT IN THE ASSESSMENTS MADE U/S 143(3) OF THE ACT. THE LD. AR SUBMITTED THAT T HE ASSESSEE FILED REQUISITE DETAILS NOT ONLY ESTABLISHING THE IDENTIT Y OF THE LOAN CREDITORS BUT ALSO FILED REQUISITE DOCUMENTS TO EXPLAIN THE G ENUINENESS OF THE TRANSACTIONS THAT THE LOAN WERE TAKEN BY ACCOUNT PA YEE CHEQUES. HE FURTHER SUBMITTED THAT ALL THE LOAN CREDITORS WERE ASSESSED TO TAX, HENCE THEIR CREDITWORTHINESS WAS ESTABLISHED BY THE ASSESSEE. HE FURTHER SUBMITTED THAT THE ASSESSEE IS NOT REQUIRED TO PROVE/TO 8 ITA NO.3229/MUM/2012 GHISULAL S. JAIN (HUF) ESTABLISH SOURCE OF SOURCE OF THE LOAN CREDITORS AN D TO SUBSTANTIATE HIS SUBMISSION CLAIM PLACED RELIANCE ON THE FOLLOWING C ASES. A). DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF ORIENT TRADING COMPANY LTD. VS. CIT 49 ITR 723 . B). DECISIONS OF HONBLE DELHI HIGH COURT IN THE C ASE OF CIT VS. DWARIKADHISH INVESTMENT (P.) LTD. [2010 194 TAX MANN 43] AND CIT VS. DIAMOND PRODUCTS LTD. [2009 177 TAXMANN 331]. C). DECISION OF HONBLE ALLAHABAD HIGH COURT IN TH E CASE OF CIT VS. JAUHARIMAL GOYAL [2005 147 TAXMANN 448]. 10. HE FURTHER SUBMITTED THAT IF THE ASSESSEE RECEI VED THE AMOUNT BY CHEQUES AND THE PAYMENTS WERE ALSO MADE BY CHEQU ES THROUGH ASSESSEES BANKERS, THE CREDITORS HAVE GIVEN CONFIR MATION LETTERS MENTIONING THEIR INCOME TAX FILE NUMBER, THE ASSESS ING OFFICER WAS NOT JUSTIFIED TO TREAT THE SAID LOANS AS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES AND REFERRED THE DECISION OF CI T VS. SAHIBGANJ ELECTRIC CABLES PVT. LTD. 115 ITR 408 . THE LD. AR SUBMITTED THAT ONCE THE ASSESSEE HAS DISCHARGED HIS BURDEN BY PROVING T HE IDENTITY OF THE LOAN CREDITORS, THE GENUINENESS OF THE CREDITORS AN D ALSO THE CAPACITY OF THE CREDITORS TO GIVE LOANS, THE SAID LOANS CANN OT BE TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE. THE LD. AR SUB MITTED THAT THE ADDITION OF AGGREGATE AMOUNT OF RS10,00,000/- MADE U/S 68 OF THE INCOME TAX ACT BE DELETED. 11. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORD ERS OF THE AUTHORITIES BELOW. THE LD. DR SUBMITTED THAT MEREL Y BECAUSE THE TRANSACTION HAD TAKEN PLACE BY ACCOUNT PAYEE CHEQUE S IS NOT SUFFICIENT TO ESTABLISH THAT THE LOANS ARE GENUINE PARTICULARLY WHEN THE CASH WERE DEPOSITED IN THE BANK ACCOUNTS OF THE LOA N CREDITORS JUST BEFORE ISSUING CHEQUE TO THE ASSESSEE. HE RELIED ON THE DECISION OF THE HONBLE KOLKATA HIGH COURT IN THE CASE OF CIT VS. UNITED COMMERCIAL & INDUSTRIAL CO. PVT. LTD. 187 ITR 596. HE FURTHER SUBMITTED THAT THE 9 ITA NO.3229/MUM/2012 GHISULAL S. JAIN (HUF) CREDITORS ARE NOT MEN OF SUFFICIENT MEANS TO ADVANC E LOAN TO THE ASSESSEE AND THEREFORE THEIR CREDITWORTHINESS COULD NOT BE PROVED. HE SUBMITTED THAT THE BURDEN IS ON THE ASSESSEE TO OFF ER A SATISFACTORY EXPLANATION AND THE SOURCE OF CASH DEPOSITED IN THE ACCOUNTS OF THE CREDITORS BEFORE ISSUING TO THE ASSESSEE. THE LD. DR ALSO RELIED ON THE DECISIONS OF THE HONBLE KERALA HIGH COURT IN THE C ASES OF ITO VS. DIZA HOLDING (P) LTD. 255 ITR 573 AND THE CASE OF OCEANI C PRODUCTS EXPORTING CO. VS. CIT 241 ITR 497. THE LD. DR SUBM ITTED THAT ON PERUSAL OF THE BANK STATEMENT IT COULD BE SEEN THAT ALL THE LOAN CREDITORS HAD MEAGER BALANCE BEFORE DEPOSITING THE AMOUNT IN THEIR ACCOUNTS AND OF GIVING LOANS TO THE ASSESSEE. HENCE THEIR CREDITWORTHINESS COULD NOT BE PROVED. HE SUBMITTED THAT THE ORDER OF THE LD.CIT(A) BE CONFIRMED. 12. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW AND THE SUBMISSIONS OF LD. REPRESENTATIVES OF THE P ARTIES. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE IS REQUIRED T O ESTABLISH NOT ONLY THE IDENTITY OF THE LOAN CREDITORS BUT ALSO TO PROV E GENUINENESS OF THE LOAN TRANSACTIONS AS WELL AS CREDITWORTHINESS OF TH E LOAN CREDITORS. WE AGREE WITH THE LD. DR THAT MERELY BECAUSE THE TR ANSACTIONS HAVE TAKEN PLACE THROUGH BANKING CHANNELS, IS NOT SUFFIC IENT TO ESTABLISH THAT THE LOANS TAKEN BY THE ASSESSEE ARE GENUINE. T HE ONUS IS ON THE ASSESSEE TO PROVE THE NATURE AND SOURCE OF THE AMOU NT FOUND CREDITED IN THE BOOKS OF THE ASSESSEE. THE HONBLE KERALA H IGH COURT IN THE CASE OF ITO VS. DIZA HOLDING (P) LTD. (SUPRA) HAS HELD THAT FURNISHING OF PARTICULARS IS NOT ENOUGH AND THE PAYMENT BY WAY OF ACCOUNT PAYEE CHEQUE IS ALSO NOT CONCLUSIVE. IT IS A FACT THAT T HE ASSESSEE IS NOT REQUIRED TO PROVE THE SOURCE OF SOURCE OF THE AMOUN T FOUND CREDITED IN THE ACCOUNTS OF LOAN CREDITORS AS HELD BY THE HONB LE DELHI HIGH COURT IN THE CASE OF DWARIK DWARIKADHISH INVESTMENT (P.) LTD. (SUPRA) AND CIT VS. DIAMOND PRODUCTS LTD. (SUPRA). THE HONBLE ALLAHABAD HIGH COURT HAS ALSO HELD IN THE CASE OF ZAFA AHMAD KHAN & CO. VS. CIT 10 ITA NO.3229/MUM/2012 GHISULAL S. JAIN (HUF) [2013 30 TAXMANN.COM 267] THAT THE ASSESSEE CANNOT BE ASKED TO PROVE THE SOURCE OF SOURCE OR THE ORIGIN OR ORIGIN. 13. CONSIDERING THE CASE OF THE ASSESSEE BEFORE US IN THE LIGHT OF THE DECISIONS CITED BY THE LD. REPRESENTATIVES OF THE P ARTIES AND THE THE DOCUMENTS PLACED ON RECORD, WE DISCUSS AS TO WHETHE R THE LOANS ARE GENUINE OR NOT AS UNDER: I). IN RESPECT OF CLAIM OF LOAN FROM SMT. DAMYANTI S. JAIN, THERE IS NO DISPUTE TO THE FACT THAT SHE ISSUED CHEQUE TO TH E ASSESSEE AND ALSO CONFIRMED OF GIVING LOAN TO THE ASSESSEE. HOWEVER O N PERUSAL OF THE BANK STATEMENT PLACED AT PAGES 42-44 OF THE PAPER B OOK, WE OBSERVE THAT SHE DEPOSITED CASH ON 08/05/2003 AND ISSUED CH EQUE TO THE ISSUE ON 09/05/2003. NO DETAILS OF THE SOURCE OF C ASH AVAILABLE WITH THE ASSESSEE HAVE BEEN PLACED ON RECORD. IT IS ALS O NOT IN DISPUTE THAT HER INCOME WAS ONLY RS.32,210/-. CONSIDERING THE AB OVE FACTS WE AGREE WITH THE LD. DR THAT MERELY BECAUSE THE TRANS ACTION HAS TAKEN PLACE BY WAY OF AN ACCOUNT PAYEE CHEQUE, DOES NOT E STABLISH THE CREDITWORTHINESS OF THE LOAN CREDITOR SMT. DAMYANTI S. JAIN. ON THE FACTS AND IN THE CIRCUMSTANCES, WE AGREE WITH LD. C IT(A) THAT ASSESSEE HAS NOT BEEN ABLE TO PROVE HER CREDITWORTHINESS. T HEREFORE, WE UPHOLD THE ORDER OF THE LD. CIT(A) IN CONSIDERING T HE SAID CLAIM OF LOAN OF RS.1,00,000/- AS NOT GENUINE AND SAME HAS RIGHTL Y BEEN CONSIDERED AS INCOME OF THE ASSESSEE FROM UNDISCLOS ED SOURCES BY THE AUTHORITIES BELOW. II). IN RESPECT OF CLAIM OF LOAN FROM SHRI NALINBHA I A. SHAH OF RS.2,50,000/-, WE OBSERVE THAT ON PERUSAL OF THE BA NK STATEMENT PLACED AT PAGE 58 OF THE PAPER BOOK THAT THREE AMOU NTS OF RS.49,000/- EACH WERE DEPOSITED IN THE BANK ACCOUNT OF THE LOAN CREDITOR ON 27/03/2004 AND ON THE SAME DAY, CHEQUE OF RS.1,50,000/-WAS ISSUED TO THE ASSESSEE. WE OBSERV E THAT PRIOR TO THE SAID DEPOSIT, THERE WAS ONLY A BALANCE OF RS.3, 500/- IN THE SAID ACCOUNT AND THEREAFTER ALSO THERE IS NO TRANSACTION OF DEPOSIT/WITHDRAWAL SAVE AND EXCEPT THE TRANSFER OF TWO AMOUNTS OF RS. 50,000/- EACH ON 29/03/2004 AND WITHDRAWAL OF R S.1,00,000/- 11 ITA NO.3229/MUM/2012 GHISULAL S. JAIN (HUF) ON THE SAME DAY BY WAY OF GIVING LOAN TO THE ASSESS EE. IN SO FAR AS DEPOSIT OF CASH OF RS.49,000/- ON THREE OCCASIONS O N THE SAME DAY, WE OBSERVE THAT THE SAID LOAN CREDITOR HAS NOT BEEN ABLE TO GIVE ANY EXPLANATION SAVE AND EXCEPT FURNISHING EXTRACT OF BANK SUMMARY. IT IS STATED THAT SAME WERE MISCELLANEOUS LOANS WHICH WERE TAKEN FROM RELATIVES AND FAMILY MEMBERS BUT THERE IS NO DETAIL S PLACED ON RECORD. FOR THE REASONS MENTIONED IN RESPECT OF THE LOAN OF SMT. DAMYANTI S. JAIN, WE ARE OF THE CONSIDERED VIEW THAT THE LOAN O F RS.1,50,000/- WHICH WAS GIVEN OUT OF CASH DEPOSIT IN THE BANK ACC OUNT OF THE LOAN CREDITOR CANNOT BE CONSIDERED AS GENUINE LOAN AS TH E ASSESSEE HAS NOT PLACED ANY DOCUMENT ON RECORD TO PROVE THE CREDITWO RTHINESS OF THE LOAN CREDITOR IN RESPECT THEREOF. HOWEVER, IN RESPE CT OF LOAN OF RS.1,00,000/- WHICH WAS GIVEN TO THE ASSESSEE ON 29 /03/2004, WE OBSERVE THAT THE SAID LOAN WAS GIVEN BY SHRI NALINB AHI A. SHAH TO THE ASSESSEE AFTER TRANSFERRING OF TWO AMOUNTS OF RS.50 ,000/- FROM ANOTHER ACCOUNT AND THEREFORE THE ASSESSEE CANNOT B E EXPECTED TO GO INTO THE ORIGIN OF ORIGIN OF THE TRANSFER OF THE SA ID AMOUNT IN THE ACCOUNT OF THE LOAN CREDITOR FROM ANOTHER ACCOUNT T O ESTABLISH THE GENUINENESS OF THE LOAN TRANSACTION. SUCH LOAN OF RS.1,00,000/- HAS NOT BEEN GIVEN TO THE ASSESSEE OUT OF CASH DEPOSIT BY THE LOAN CREDITOR. WE ARE OF THE CONSIDERED VIEW THAT IN RE SPECT OF SAID LOAN OF RS.1,00,000/- GIVEN BY SHRI NALINBHAI A.SHAH THE CA SES RELIED UPON BY LD. DR ARE NOT APPLICABLE. ON THE OTHER HAND TH E RATIO OF THE DECISIONS OF THE DELHI HIGH COURT AND THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN CASES (CITED SUPRA) APPLY. THAT THE ASSESSEE HAS ESTABLISHED THAT THE TRANSACTION IS GENUINE AND HAS ESTABLISHED THE CREDITWORTHINESS OF THE LOAN CREDITOR, IN RESP ECT OF GIVING LOAN OF RS.1,00,000/- TO THE ASSESSEE AS THERE WAS A SUFFIC IENT CREDIT BALANCE IN THE BANK ACCOUNT OF THE LOAN CREDITOR TO GIVE LO AN TO THE ASSESSEE. IN VIEW OF ABOVE WE CONFIRM THE ADDITION OF RS.1,50 ,000/- OUT OF THE LOAN OF RS.2,50,000/- GIVEN BY SHRI NALINBHAI A. SH AH TO THE ASSESSEE AND DELETE THE BALANCE AMOUNT OF RS.1,00,000/-. III). IN RESPECT OF CLAIM OF LOAN FROM SHRI KANTIBH AI C. SHAH OF RS.2,50,000/-, WE OBSERVE THAT THE SAID LOAN WAS GI VEN TO THE ASSESSEE NOTE OUT OF THE CHEQUE DEPOSITED IN HIS BA NK ACCOUNT BY HIS 12 ITA NO.3229/MUM/2012 GHISULAL S. JAIN (HUF) LOAN DEBTORS, AS IS OBSERVED FROM THE BANK STATEMEN T PLACED AT PAGE 63-65 OF THE PAPER BOOK. SINCE, THE ASSESSEE HAS E STABLISHED THAT THERE WAS SUFFICIENT BALANCE IN THE ACCOUNT OF SHRI KIRTIBHAI C.SHAH TO GIVE LOAN OF RS.2,50,000/- TO THE ASSESSEE, THE ASSESSEE HAS ESTABLISHED NOT ONLY THE IDENTITY OF THE LOAN CREDI TOR BUT ALSO THE GENUINENESS OF THE TRANSACTIONS. THE FACT THAT THE SAID AMOUNT WAS RECEIVED IN THE ACCOUNT OF THE LOAN CREDITOR FROM T HE ACCOUNT OF FAMILY MEMBER OF THE LOAN CREDITORS WHO DEPOSITED CASH IN THEIR ACCOUNTS AND FROM WHERE THE FAMILY MEMBERS OF THE LOAN CREDI TORS RECEIVED THE CASH IS NOT TO BE ESTABLISHED BY THE ASSESSEE TO PR OVE THE CREDITWORTHINESS OF THE LOAN CREDITOR. IF THE ASSES SING OFFICER IS NOT SATISFIED ABOUT THE CREDITWORTHINESS OF THE FAMILY MEMBERS OF LOAN CREDITOR OF THE ASSESSEE, HE COULD MAKE ADDITION IN THE HANDS OF THE LOAN CREDITOR AND/OR THE FAMILY MEMBERS WHO DEPOSIT ED THE SAID AMOUNT IN CASH IN THEIR ACCOUNT BUT THE SAME COULD NOT BE ADDED IN THE HAND OF THE ASSESSEE. HENCE, THE SAID ADDITION OF RS.2,50,000/- IS DELETED AS THE ASSESSEE HAS GIVEN REQUISITE EXPL ANATION WITH DOCUMENTARY EVIDENCE TO ESTABLISH NOT ONLY THE CRED ITWORTHINESS AND IDENTITY OF THE LOAN CREDITOR BUT HAS ALSO ESTABLIS HED THE GENUINENESS OF THE TRANSACTION. IV). IN RESPECT OF CLAIM OF LOAN OF 4,00,000/- FROM SMT. RENUDEVI MAKHARIA, WE OBSERVE FROM THE BANK STATEMENT THAT S HE RECEIVED THE CHEQUE AND IT WAS DEPOSITED IN HER ACCOUNT AND THER EAFTER LOAN WAS GIVEN TO THE ASSESSEE BY ACCOUNT PAYEE CHEQUE. THE ASSESSING OFFICER HAS NOT DISPUTED THE ABOVE FACTS NOR THE ASSESSING OFFICER HAS BROUGHT ANY MATERIAL ON RECORD THAT THE SAID CHEQUE OF RS.4,00,000/- RECEIVED BY HER AND DEPOSITED IN HER ACCOUNT WAS NO T GENUINE CHEQUE. FURTHER SHE HAS ALSO CONFIRMED OF GIVING LOAN TO TH E ASSESSEE AND THE SAID LOAN WAS STATED TO BE RETURNED BY THE ASSESSEE BY ACCOUNT PAYEE CHEQUE; AS CONTENDED BEFORE US. CONSIDERING THE AB OVE FACTS AND MATERIAL ON RECORD, WE HOLD THAT THE ASSESSEE HAS E STABLISHED NOT ONLY THE CREDITWORTHINESS AND IDENTITY OF THE SAID LOAN CREDITOR SMT. RENUDEVI MAKHARIA BUT HAS ALSO ESTABLISHED GENUINEN ESS OF THE TRANSACTION. HENCE, WE DELETE THE SAID ADDITION OF RS. 4,00,000/- AS 13 ITA NO.3229/MUM/2012 GHISULAL S. JAIN (HUF) THE SAID LOAN IS GENUINE LOAN AND THE ASSESSEE HAS FURNISHED THE REQUISITE DOCUMENTS IN REGARD THERETO. 14. IN VIEW OF ABOVE, WE HOLD THAT THE ASSESSEE HAS BEEN ABLE TO ESTABLISH WITH DOCUMENTARY EVIDENCE THE GENUINENESS OF THE LO AN AGGREGATING TO RS.7,50,000/-(RS.1,00,000 IN RESPECT OF NALINBHAI S HAH, RS.2,50,000/- IN RESPECT OF KIRTIBHAI C.SHAH AND RS.4,00,000/- IN RE SPECT OF SMT. RENU DEVI MAKHARIA) AND THEREFORE WE DELETE THE ADDITION OF R S. 7,50,000/- OUT OF THE TOTAL ADDITION OF RS.10,00,000/- BY ALLOWING GROUND NO.1 OF THE APPEAL TAKEN BY THE ASSESSEE IN PART. 15. GROUN NO. 2 OF THE APPEAL IS AS UNDER:- THE LD. CIT(A) ERRED IN DISALLOWING 20% OF THE CAS H EXPENSES AMOUNTING TO RS.2,24,374/- ON ADHOC BASIS UNDER THE HEADS OF CHECKING CHARGES, HAMALI AND MUKADAMI CHARGES, TRAV ELLING EXPENSES AND OFFICE EXPENSES NOT APPRECIATING THE BUSINESS C ARRIED ON BY THE ASSESSEE . 16. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND HAVE PERUSED THE DETAILS PLACED ON RECORD. WE OBSERVE T HAT THE AO MADE DISALLOWANCE OF RS.2,24,374/- ON ADHOC BASIS BY OBSERVING AS UNDER. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE WA S AKED TO SUBMIT IT DETAILS OF CASH EXPENSES (AS PER ANNEXURE TO THE NOTICE U/S 142(1) DATED 16/08/2005 VIZ. CEHCKING CHARGES OF RS.5,35,6 54/- HAMALI & MUKADAMI CHARGES OF RS.1,49,419/- (PURCHASE) & RS. 3,08,770/- (SALES), TRAVELLING EXPENSES OF RS.50,305/-, OFFICE EXPENSES OF RS.77,724/-. THE ASSESSEE HAS NOT FILED ANY DOCUME NTAY EVIDENCE IN SUPPORT OF THESE EXPENSES AND HAS ONLY FILED COPY O F ACCOUNTS OF THESE EXPENSES. UNDER THE CIRCUMSTANCES, I AM LEFT WITH NO ALTERNATIVE AND ACCORDINGLY DISALLOW 20% OF THESE EXPENSES. THUS R S.1,07,131/- OUT OF CHECKING EXPENSES, RS.91,637/- OUT OF HAMALI & M UKADAMI EXPENSES, RS.10,061/-OUT OF TRAVELING EXPENSES AND RS.15,545/- OUT OF OFFICE EXPENSES ARE DISALLOWED AND ADDED TO THE TOT AL INCOME. 17. THE LD. CIT(A) ALSO CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 14 ITA NO.3229/MUM/2012 GHISULAL S. JAIN (HUF) 18. DURING THE COURSE OF HEARING, LD. AR SUBMITTED THAT THE SAID EXPENSES INCURRED WERE PETTY AMOUNTS AND THEREFORE SAVE AND EXCEPT THE SELF MADE VOUCHERS, THERE COULD BE NO VOUCHERS FROM THIRD PARTIES. THE LD. AR ALSO FILED DETAILS BY WAY OF A SUPPLEMEN TARY PAPER BOOK COMPRISING OF 35 PAGE I.E. 82-115 OF PAPER BOOK VOL UME II. DURING THE COURSE OF THE HEARING THE LD. DR SUBMITTED THAT THE DISALLOWANCE IS JUSTIFIED AND WHEREAS THE LD. AR SUBMITTED THAT THE TOTAL TURNOVER OF THE ASSESSEE WAS RS.9 CRORES AND THEREFORE THE SAID PETTY AMOUNT OF EXPENSES WERE INCURRED IN CASH ON A DAY TO DAY BASI S . HE FURTHER SUBMITTED THAT THE DISALLOWANCE OF 20% IS EXCESSIVE AND EVEN IF ADHOC DISALLOWANCE IS TO BE MADE IT SHOULD BE REASONABLE. WE AGREE THAT THE SAID EXPENSES HAVE BEEN INCURRED BY THE ASSESSEE IN CASH AND THERE IS NO INDEPENDENT VOUCHERS TO ENABLE THE ASSESSING OFF ICER TO VERIFY THAT ALL THE EXPENSES WERE INCURRED BY THE ASSESSEE WHOL LY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 18.1. HOWEVER, CONSIDERING THE DETAILS OF THE EXPE NSES AND THE FACTS OF THE CASE, WE ARE OF THE CONSIDERED VIEW TH AT IT WILL BE REASONABLE TO MAKE AN ADHOC DISALLOWANCE OF RS.50,000/- AS AGAINST RS.2,24,3740/- CONFIRMED BY THE LD. CIT(A). HENCE, GROUND NO.2 OF THE APPEAL TAKEN BY THE ASSESSEE IS ALLOWED IN PART BY RESTRICTING THE DISALLOWANCE OF RS.50,000/-. 19. IN THE GROUND NO.3 IS IN RESPECT OF CHARGING OF INT EREST U/S 234B, 234C AND 234D OF THE ACT. 19.1. SINCE, CHARGING OF INTEREST IS CONSEQUENTIAL , NO SPECIFIC ADJUDICATION IS CALLED FOR. 20. IN RESPECT OF GROUND NO.4 OF INITIATION OF PENA LTY PROCEEDINGS U/S 271(1)(C) OF THE INCOME-TAX ACT, THE SAID GROUND IS PREMATURE AND THE SAME IS REJECTED. WE MAY STATE THAT IF ANY PENALTY IS IMPOSED ON THE 15 ITA NO.3229/MUM/2012 GHISULAL S. JAIN (HUF) ASSESSEE, HE WILL BE AT LIBERTY TO AGITATE THE ISSU E AS PER PROVISIONS OF THE LAW. 21. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH FEBRUARY, 2014. ' - . 5 TH FEBRUARY, 2014 ' SD/- SD/- ( N.K.BILLAIYA ) ( B.R.MITTAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; . /DATED. 05/02/2014 F{X~{T? P.S./ . . # $&' (' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. ! / THE RESPONDENT. 3. 1 ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. 1 / CIT CONCERNED, MUMBAI 5. 2 !4 , ' 4 , / DR, ITAT, MUMBAI BENCH 6. 7 / GUARD FILE. / BY ORDER, 2 ! //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI