The Income Tax Officer, Jalandhar V. Sh. Gurdeep Singh, Jalandhar

ITA 329/ASR/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8699 (ITAT-AMRITSAR)
• Duration Of Justice: 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 19-01-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 01-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHAWANI SHANKER
• Assessee Lawyers: J S BHASIN
• Keywords: Income from undisclosed sources; Transactions in derivatives
• Section: 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH: (CIRCUIT BENCH AT JALANDHAR) BEFORE SHRI A. D. JAIN, JUDICIAL MEMBER, AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A NO. 329/ASR/2016 (ASSESSMENT YEAR-2011-12) ITO, WARD-II(1), JALANDHAR. (REVENUE) VS.. SHRI GURDEEP SINGH, M/S NIPPON STEEL, 31B, NEW SODAL ROAD, JALANDHAR. PAN NO.ABQPS3847N (ASSESSEE) REVENUE BY SHRI. BHAWANI SHANKER, DR. ASSESSEE BY SHRI . J.S. BHASIN, & SH. ANIL MIGLANI, AR. ORDER PER, A. D. JAIN, JUDICIAL MEMBER: THIS IS DEPARTMENTS APPEAL FOR ASSESSMENT YEAR 201 1-12, TAKING THE FOLLOWING GROUNDS: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN DELETING THE ADDITION OF RS.42,32,000/- MADE BY THE A.O. BY INVO KING PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT AND IGNORING THE DATE OF HEARING 19.01.2017 DATE OF PRONOUNCEMENT 27.03.2017 I.T.A NO. 329/ASR/2016 2 FACT THAT ASSESSEE FAILED TO PROVE THE GENUINENESS OF TRANSACTION. 2. THAT LD. CIT(A) RELIED ON THE CASE OF M/S AMAR C HAND & SONS, FACTS OF WHICH ARE DISTINGUISHABLE FROM THE F ACTS OF THE PRESENT CASE. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN DELETING THE ADDITION OF RS.3,09,710/- MADE BY THE A.O. BY DISAL LOWING INTEREST PAID CORRESPONDING TO UNSECURED LOANS OF R S. 42,32,000/- AND IN THE PROCESS IGNORED THE FACT OF NON- GENUINENESS OF THE, TRANSACTION MADE WITH THE STOCK 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN DELETING THE ADDITION OF RS.37,066/- MADE BY THE A.O. BY DISALLO WING EXPENSES CLAIMED ON COMMODITY TRANSACTIONS. WHILE D ELETING THIS ADDITION LD.CIT(A) HAS IGNORED THE FACT THAT T HE SAME WAS RIGHTLY MADE BY ESTABLISHING THAT THE COMMODITY TRA NSACTIONS ON WHICH THE ABOVE EXPENSES WERE CLAIMED WERE HELD TO BE INGENUINE. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN DELETING THE ADDITION OF RS.4,01,200/- MADE BY THE AO BY HOLDIN G THE ADDITION IN CAPITAL ACCOUNT AS UNEXPLAINED U/S 68 O F THE ACT. WHILE DELETING THIS ADDITION LD.CIT(A) HAS IGNORED THE FACT THAT I.T.A NO. 329/ASR/2016 3 IDENTICAL MODUS OPERANDI WAS INVOLVED AS IN THE COM MODITY TRANSACTIONS WHICH HAS BEEN HELD TO BE INGENUINE. 2. THE FACTS ARE THAT DURING THE YEAR, ASSESSEE WAS DEALING IN IRON & STEEL SHEETS. IT FILED RETURN OF INCOME, DECLARING AN INC OME OF RS.8,36,850/-. THE AO NOTICED THAT 12 PERSONS HAD ADVANCED INTEREST BEARI NG UNSECURED LOANS TO ASSESSEE AMOUNT TO RS.42,32,000/-. ALL THE LENDERS WERE REGU LAR FILING THEIR RETURN OF INCOME. THE ACKNOWLEDGMENT COPIES OF THEIR RETURNS FILED. ALL THE LENDERS HAD ADVANCED THE RESPECTIVE AMOUNTS, THROUGH CHEQUES. C OPIES OF THEIR BANK ACCOUNTS WERE ALSO FURNISHED BY THE ASSESSEE. ALL THE LENDER S WERE RELATED TO ASSESSEE IN ONE WAY OR OTHER. THE ASSESSEE HAD FILED THEIR CONFIRMA TIONS ALONGWITH THEIR RESPECTIVE PANS. THREE OF THE TWELVE LENDERS WERE PRODUCED AND THE AO RECORDED THEIR STATEMENTS. FROM THESE STATEMENTS, THE AO OBSERVED THE EACH OF THE LENDERS WAS A CLOSE RELATIVE OF ASSESSEE; THAT DURING F.Y. 2010-1 1RELEVANT TO A.Y. 2011-12, I.E., THE YEAR UNDER CONSIDERED, ALL OF THEM HAD ADVANCED UNSECURED LOANS OF M/S NIPPON STEELS BY ISSUING CHEQUES FROM THEIR RESPECT IVE SAVINGS BANK ACCOUNTS, THAT ALL OF THEM HAD TRANSACTED IN COMMODITIES THROUGH T HE COMMODITY BROKER, M/S RUPICA COMMODITIES SERVICE, LUDHIANA, OWNED BY ONE SHRI GURINDER SINGH; THAT EACH OF THESE THREE LENDERS ADMITTED TO HAVE ADVANC ED RS.25,000/- ON 21.6.2010, FAVOURING M/S RUPICA COMMODITIES SERVICES, LUDHIANA , THROUGH CHEQUE, FROM HIS I.T.A NO. 329/ASR/2016 4 RESPECTIVE SAVINGS BANK ACCOUNT, THAT IN RETURN OF RS.25,000/- ADVANCED ON 21.6.2010, EACH PERSON CLAIMED HAVING GARNERED A HE FTY PROFIT FROM THE COMMODITY TRADING TRANSACTIONS, I.E., SHRI TEJINDER SINGH REC EIVED CHEQUE OF RS.3,90,423/- ON 02.08.2010, SHRI PARAMJIT SINGH RECEIVED CHEQUE OF RS.3,98,975/- ON 29.08.2010 AND SHRI SUKHPREET SINGH RECEIVED CHEQUE OF RS.4,01 ,138/- ON 11.08.2010; THAT ALL OF THEM DECLARED THE RESPECTIVE COMMODITY TRADING P ROFITS SO EARNED, IN THEIR RESPECTIVE ITRS FOR AY 2011-12 AND PAID DUE TAXES T HEREON; THAT THE IMMEDIATE SOURCE OF ADVANCING THE UNSECURED LOAN AMOUNT TO M/ S NIPPON STEEL, JALANDHAR HAD BEEN THE COMMODITY TRADING PROFIT EARNED DURING FY 2010-11; THAT THE ASSESSEE ADMITTED THE INITIAL ADVANCE OF RS.25,000/- ON 21. 06.2010, THE COMMODITY TRADING TRANSACTION THROUGH M/S RUPICA COMMODITIES SERVICES , LUDHIANA, GETTING HEFTY PROFITS IN A VERY SHORT DURATION OF 1 TO 3 MONTHS, FUNDING THE UNSECURED LOANS FAVOURING M/S NIPPON STEELS, JALANDHAR, FROM THE PR OCEEDS OF THE COMMODITY TRADING AND DECLARING THE COMMODITY PROFIT EARNED I N THE ITRS AND PAYING DUE TAXES THEREON BY THE TWELVE CONCERNED PERSONS; THAT THERE WERE RETURNS TO THE TUNE OF 1000% TO 1500% BY THE CREDITORS OF THE ASSESSEE IN A SHORT SPAN OF 22 TO 70 DAYS; THAT A MAJOR PART OF THE INCOME OF THESE CRED ITORS COMPRISED OF PROFITS IN COMMODITY TRADING AND INTEREST FROM THE ASSESSEE; T HAT IN QUERIES MADE FROM THE MULTI COMMODITY EXCHANGE OF INDIA LTD. (MCX) AND TH E NATIONAL COMMODITY AND DERIVATIVES EXCHANGE LTD. (NCDEX), IT HAD EMERG ED THAT M/S RUPICA I.T.A NO. 329/ASR/2016 5 COMMODITIES SERVICES, LUDHIANA, WAS NEITHER A MEMBE R, NOR A CLIENT OF THESE EXCHANGES; THAT THE BILLS ISSUED BY M/S RUPICA WERE NOT IN THE FORMAT OF GENUINE BILLS ISSUED USUALLY IN RESPECT OF COMMODITY TRADIN G; THAT SERVICE CHARGE DID ALSO NOT STAND MENTIONED IN THE BILLS; THAT IN THE BANK ACCOUNT OF M/S RUPICA, THERE WERE CASH DEPOSITS AND IN TURN CHEQUES HAD BEEN ISSUED N OT ONLY TO THE CREDITORS INVOLVED IN THIS CASE, BUT ALSO TO OTHERS; THAT SHR I GURINDER SINGH, WHO OPERATED M/S RUPICA, HAD BEEN TRIED TO BE CONTACTED, BUT THE LETTERS ISSUED TO HIM HAD RETURNED UNSERVED; AND THAT THUS, COMMODITY TRANSAC TIONS INVOLVED WERE NOT GENUINE. 3. THE LD. CIT(A) HELD AS FOLLOWS: 06. FURTHER, THERE WAS AN ADDITION OF RS.4,01, 200/- TO THE CAPITAL OF ASSESSES AND THE STALED SOURCE WAS THE AMOUNT TRANSFERRED FROM THE ACCOUNT OF SH. MOHINDER SINGH HUP. SH. MOHINDER SINGH IS THE BROTHER OF THE WIFE OF THE AS SESSEE. SH. MOHINCLCR SINGH HUP ALSO TRANSACTED WITH M/S RUPICA COMMODITIES SERVICE IN THE SAME MANNER AS IN CASE O F 12 CREDITORS AS DISCUSSED IN EARLIER PARAGRAPHS. DURIN G THE ASSESSMENT THE ASSESSEE PUT FORWARD ANOTHER ARGUMEN T THAT THE AMOUNT ADVANCED BY SH. MOHINDER SINGH HUF WAS IN PURSUANCE OF AN AGREEMENT TO PURCHASE A PIECE OF PR OPERTY FROM ASSESSEE BUT THE DEAL DID NOT MATERIALISE. T HE AO FOR THE DETAILED REASONS AS PER ASSESSMENT ORDER NEGATED TH E I.T.A NO. 329/ASR/2016 6 CONTENTIONS OF ASSESSEE AND ADDED THE AMOUNT OF RS. 4,01,200/- ALSO TO THE INCOME OF ASSESSEE. 07. THE A.O. FURTHER ADDED AN AMOUNT OF RS. 37, 066/- BY WAY OF DISALLOWANCE OF EXPENSES CLAIMED ON COMMODITY TRANSACTIONS. 4. THUS, BY VIRTUE OF THE IMPUGNED ORDER, THE LD. C IT(A) DELETED THE ADDITIONS MADE BY THE AO. 5. THE LD. DR HAS CONTENDED THAT IN THE FACTS AND C IRCUMSTANCES OF THE CASE, THE ID. ITO HAS FALLEN INTO GRAVE ERROR IN BRINGING TO TAX UNSECURED LOANS OF RS.42,32,000/- BY INVOKING PROVISIONS OF SECTION 68 , THAT LIKEWISE, THE LD. ITO ALSO MISDIRECTED HIMSELF IN LAW AND ON FACTS, TO TREAT A DDITION IN CAPITAL ACCOUNT OF RS.4,01,200/- AS UNEXPLAINED U/S 68, THAT WHILE MAK ING THE ABOVE ADDITIONS, THE LD. ITO MISCONSTRUED THE PROVISIONS OF SECTION 68 QUA T HE FACTS AS ALSO THE MATERIAL EVIDENCE BROUGHT ON RECORD, IN ASSESSMENT, THAT THE LD. ITO WAS NOT JUSTIFIED IN HIS ACT OF MAKING DISALLOWANCE OUT OF INTEREST PAID TO THE EXTENT OF RS.3,09,710/- CORRESPONDING TO UNSECURED LOANS OF RS.42,32,000/- ADDED U/S 68 AND THAT FURTHER ADDITION OF RS.37,066/- BY WAY OF DISALLOWANCE OF E XPENSES CLAIMED ON COMMODITY TRANSACTIONS, HAS BEEN WRONGLY MADE BY THE LD. ITO. 6. THE LD. COUNSEL FOR THE ASSESSEE RELIED THE ORDE R OF THE LD. CIT(A). I.T.A NO. 329/ASR/2016 7 7. IT IS SEEN THAT THE LD. CIT(A) RELIED ON ORDER D ATED 08.10.2010 PASSED BY THE ITAT, CHANDIGARH BENCH, IN ITA NO.983/CHD/2010, FOR A.Y. 2007-08, IN THE CASE OF M/S AMAR CHAND & SONS, HAS APPROVED BY THE HON BLE HIGH COURT IN ORDER DATED 25.11.2011, PASSED IN ITA NO.243 OF 2011. 8. THE ITAT OBSERVED AS FOLLOWS: 7. IN THIS CASE THE IDENTITY OF THE CREDITORS HAS NOT BEEN DOUBLED BY THE ASSESSING OFFICER. THE OTHER TWO ING REDIENTS NAMELY, CREDIT WORTHINESS OF THE CREDITORS AND THE GENUINENESS OF THE TRANSACTIONS HAVE BEEN DOUBTED BY THE ASSESS ING OFFICER, IN ORDER TO APPLY THE PROVISION OF SECTION 68 OF TH E ACT. NOTABLY, THE LATTER TWO INGREDIENTS HAVE BEEN DOUBLED FOR A VERY SPECIFIC REASON THE CREDITORS HAD CONFIRMED ADVANCING OF LOA NS TO THE ASSESSEE AND THE SAME WAS EVIDENCED BY THE RESPECTI VE BANK ACCOUNTS PRODUCED BEFORE THE ASSESSING OFFICER ON E XAMINING THE SOURCES OF FUNDS AVAILABLE WITH SUCH CREDITORS TO ADVANCE LOANS TO THE ASSESSES, IT WAS FOUND BY THE ASSESSIN G OFFICER THAT THE CREDITORS HAD EARNED PROFITS BY WAY OF TRADING IN COMMODITIES. THE TRANSACTIONS OF COMMODITY TRADING UNDERTAKEN BY THE CREDITORS WITH THEIR RESPECTIVE B ROKERS WERE EXAMINED BY THE ASSESSING OFFICER. A DETAILED EXERC ISE IN THIS REGARD HAS BEEN CARRIED OUT, AS NARRATED IN THE ASS ESSMENT ORDER. ON THE BASIS OF SUCH A DETAILED EXERCISE, TH E ASSESSING OFFICER WAS NOT SATISFIED WITH THE GENUINENESS OF T HE TRANSACTIONS BETWEEN THE CREDITORS AND THEIR BROKER S. THE INGENUINENESS OF SUCH TRANSACTIONS PREVAILED WITH T HE ASSESSING I.T.A NO. 329/ASR/2016 8 OFFICER FOR NOT BEING SATISFIED WITH THE CREDIT-WOR THINESS OF THE CREDITORS AND THE GENUINENESS OF THE LOAN TRANSACTI ONS WITH THE ASSESSEE. THE MOOT QUESTION AS TO WHETHER IN THE IN CONTEXT OF SECTION 68 OF THE ACT, THE ASSESSING OFFICER WAS CO MPETENT TO DRAW ADVERSE CONCLUSION VIS-A-VIS THE LOAN TRANSACT IONS WITH THE ASSESSEE. MERELY BECAUSE HE WAS NOT SATISFIED W ITH THE TRANSACTION CARRIED OUT BY THE CREDITORS WITH, THEI R BROKERS FOR EARNING PROFIT ON COMMODITY TRADING. THE LD. DR HAS SUBMITTED THAT IT WAS PERMISSIBLE FOR THE ASSESSING OFFICER T O ENQUIRE INTO THE SOURCE OF THE CREDITORS FROM WHERE THE MONEY HA S BEEN ADVANCED TO THE ASSESSEE AND IN THIS CONNECTION HE HAS RELIED UPON THE JUDGMENT OF THE HONORABLE SUPREME COURT IN THE CASE OF BIJU PATNAIK (SUPRA). IN OUR CONSIDERED OPINION THE COMPETENCE OF THE ASSESSING OFFICER TO VERIFY AND E XAMINE THE SOURCE OF THE CREDITORS CANNOT BE DENIED. SO, HOWEV ER, WHAT IS IMPORTANT IN THE CONTEXT OF SECTION 68 OF THE ACT I S THE BURDEN CAST ON THE ASSESSEE AND ITS DISCHARGE THEREOF. IT MAY BE WORTHWHILE TO SAY THAT IT IS NOT THE HARDEN OF THE ASSESSES TO SHOW THE SOURCE OF HIS CREDITOR OR TO PROVE THE CRE DITWORTHINESS OF THE SOURCE OF THE CREDITOR. IN FACT IT IS QUITE WELL-SETTLED THAT THE SOURCE, OF THE CREDITOR CANNOT BE EXPECTED TO B E PROVED BY THE ASSESSEE WHEREAS THE HARDEN ON THE ASSESSEE IS LIMITED TO EXPLAINING THE NATURE AND SOURCE OF THE CREDIT APPE ARING IN ITS BOOKS OF ACCOUNT SUCH A PROPOSITION STANDS ACCEPTED BY THE HONORABLE PUNJAB & HARYANA HIGH COURT IN THE CASE O F CIT VS LAUL TRANSPORT CORPORATION 214 TAXATION 329 (P & H) . I.T.A NO. 329/ASR/2016 9 THEREFORE. WHILE THE COMPETENCE OF THE ASSESSING OF FICER TO EXAMINE THE SOURCE OF THE CREDITOR CANNOT HE DOUBLE D AS CONTENDED BY THE LD. DR BUT THE ASSESSEE CANNOT BE CALLED UPON TO PROVE THE SOURCES OF THE CREDITORS. IN THIS CONT EXT THE JUDGMENT OF' THE HONORABLE GAUHATI HIGH COURT IN TH E CASE OF 'NEMI CHAND KOTHAI (SUPRA) IS WORTHY OF NOTICE. AS PER THE HONORABLE HIGH COURT THE DUTY OF THE ASSESSEE TO PR OVE THE GENUINENESS OF THE TRANSACTIONS AS WELL AS THE CRED ITWORTHINESS OF THE CREDITORS IS CONFINED TO THE TRANSACTIONS WH ICH HAVE TAKEN PLACE BETWEEN THE ASSESSEE AND THE CREDITORS AND IT IS NOT THE BURDEN OF THE ASSESSEE LO PROVE THE SOURCES OF HIS CREDITORS OR TO PROVE THE CREDITWORTHINESS OF THE SOURCES OF SU B-CREDITORS. IN THE BACKGROUND OF THE AFORESAID LEGAL POSITION, WE MAY NOW EVALUATE THE FINDINGS OF THE CIT(APPEALS) WHICH ARE REPRODUCED HEREINAFTER - I HAVE CAREFULLY CONSIDERED THE CONTENTION OF THE LD. COUNSEL FOR THE APPELLANT THE REPORT OF THE A.O., AND PERUS ED THE RELEVANT RECORD THE A.O HAS MADE DETAILED INQUIRES IN RESIDED OF THE COMMODITY PROFIT CLAIMED TO BE EARNED THE CR EDITORS FROM M/S GLOBE COMMODITIES AND M/S MAYANK FINANCIAL SERV ICES (P) LTD. FROM THE INQUIRIES MADE BY THE A.O AND WHICH H AVE ALSO BEEN DISCUSSED IN THE PRECEDING PARAGRAPHS. I AGREE THAT SOME QUESTION VERY WELL COULD HE RAISED WITH RESPECT TO THE GENUINENESS OF THE COMMODITY PROFIT SHOWN TO BE EAR NED BY THESE CREDITORS FROM THESE TWO PARTIES. HOWEVER, TH E QUESTION HERE IS WHETHER IN THAT ACCOUNT ADDITION IN RESPECT OF THESE I.T.A NO. 329/ASR/2016 10 CREDITS COULD HE MADE IN THE HAND OF THE APPELLANT UNDER SECTION 68 OF THE ACT. THE A.O. HAS HIMSELF OBSERVE D ON THAT BASIS OF VARIOUS DECISIONS BROUGHT OUT IN THE ASSES SMENT ORDER THAT FOR PROVIDING CERTAIN CREDIT FOR THE PURPOSES OF THE PROVISIONS OF SECTION 68 OF THE ACT AN ASSESSEE IS REQUIRED TO PROVE. A) IDENTITY OF THE CREDITOR B) GREDITWORTHINESS OF THE CREDITOR C) GENUINENESS OF THE TRANSACTION ON THE BASIS OF INQUIRIES MADE BY THE A. O. LIE IS OF HE IS OF THE VIEW THAT IN THE CASE OF THE APPELLANT IN RESPECT O F THESE CREDITORS WHEREAS IDENTITY OF THESE CREDITORS HAD B EEN PROVED, THEIR CREDITWORTHINESS AND THE GENUINENESS OF THE T RANSACTIONS HAD NOT BEEN PROVED. HOWEVER, AS EXPLAINED BY THE L D. COUNSEL DURING THE APPEAL PROCEEDINGS, ALL THE ISSUES RAISE D BY THE AO AND WHICH HAVE BEEN DISCUSSED IN THE PRECEDING PARA GRAPHS, RELATED TO THE TRANSACTIONS WHICH TOOK PLACE BETWEE N THE BROKERS AND THE CREDITORS. THE ISSUES RAISED BY THE A. O. CANNOT BE TAKEN TO BE RELATING TO THE APPELLANT FIRM UNLES S THEN WAS SOME EVIDENCE TO SHOW THAT THE CASH DEPOSITED IN TH E BANK ACCOUNTS OF THE BROKERS, BEFORE ISSUING OF CHEQUES OF COMMODITY PROFITS TO THE SAID CREDITORS ACTUALLY CAME FROM TH E APPELLANT ADMITTEDLY THERE IS NO EVIDENCE IN THIS REGARD. THE DECISION OF THE HONORABLE DELHI HIGH COURT IN THE CASE OF CIT VS. REAL TIME MARKING PVT. LTD. 221 CTR 716, WHICH HAS BEEN RELIED I.T.A NO. 329/ASR/2016 11 UPON BY THE ID. COUNSEL, SQUARELY COVERS THE CASE O F THE APPELLANT IN ITS FAVOUR. THOUGH THIS DECISION WHICH HAS BEEN RELIED UPON BY THE LD. COUNSEL IS SOUGHT LO BE DIST INGUISHED BY THE A.O. IN HIS REPORT DATED 30.03.2001. I DO NOT AGREE WITH HIM THAT HIS INQUIRIES HAD PROVED THE ALLEGED DESIG NS OF THE APPELLANT FIRM TO INTRODUCE ITS UNACCOUNTED INCOME MONEY IN THE GUISE OF THESE UNSECURED LOANS ETC. IT IS ADMIT TED FACT THAT ALL THE CREDITORS ARE EXISTING INCOME TAX ASSESSES. THEREFORE, THEIR IDENTITY IS TO BE TAKEN TO HAVE BEEN PROVED A S ALSO ADMITTED BY THE A.O. FURTHER THE AMOUNTS IN QUESTIO N HAVE COME FROM THE BANK ACCOUNTS OF THESE CREDITORS. COP IES OF THESE BANK ACCOUNTS AND THE COMPUTATION CHARTS OF INCOME IN RESPECT OF THESE CREDITORS HAD BEEN FURNISHED EVEN DURING T HE ASSESSMENT PROCEEDINGS THE SO CALLED COMMODITY PROF IT CLAIMED TO BE EARNED BY THESE CREDITORS HAS FURTHER BEEN SH OWN IN THEIR RESPECTIVE RETURNS OF INCOME AND AS PER THE LD. COU NSEL FOR THE A.O. THIS HAS BEEN DULY ACCEPTED IN THOSE RESPECTIV E CASES. IN THE FACE OF THIS EVIDENCE, RATHER THE ABOVE MENTION ED THREE INGREDIENTS ARE PROVED WITH RESPECT TO TRANSACTIONS BETWEEN THE APPELLANT AND THE CREDITORS. IN THE ASSESSMENT ORDER THE A.O HAS TAKEN ADVERSE V IEW OF THE FACT THAT THE SUMMONS ISSUED BY HIM TO THE BROKERS REMAINED NON-COMPLIED WITH. AS PER THE A.O. THIS PROVED THAT BILLS ISSUED WITH RESPECT TO COMMODITY PROFIT AND RESULTANT CHEQ UES ISSUED THEREOF 'WERE NOT GENUINE. HOWEVER, AS RIGHTLY CONT ENTED BY THE LD. COUNSEL THE VIEW TAKEN BY THE AO CANNOT BE SAID TO BE I.T.A NO. 329/ASR/2016 12 JUSTIFIED. IT IS NOT THE CASE OF THE A.O. THAT THE BROKER WERE FOUND TO BE NON-EXISTING AT THE ADDRESSES GIVEN BY THE APPELLANT. THE ONLY CASE OF THE A O WAS THAT THE SU MMONS ISSUED WERE NOT COMPLIED WITH. I AGREE WITH THE LD. COUNSEL THAT SETTLED POSITION OF LAW IS THAT ONLY SUCH NON COMPL IANCE COULD NOT BE ADVERSELY VIEWED FOR MAKING ANY ADJUDICATION UNDER THE PROVISION OF SECTION 68 OF THE ACT. IT IS FURTHER SEEN THAT THOUGH THE A.O. HAS ALSO PL ACED RELIANCE UPON CERTAIN DECISIONS DISCUSSED IN THE ASSESSMENT ORDER AND THE LD. COUNSEL HAS ALSO REFERRED TO CERTAIN DECISI ONS IN THE WRITTEN SUBMISSIONS REPRODUCED ABOVE, THE ADMITTED POSITION IN THIS CASE IS THAT ALL THE CREDITOR ARC EXISTING INC OME TAX ASSESSES. IT IS SETTLED POSITION OF LAW THAT IF THE SOURCES FUNDS IN THE HANDS OF SUCH CREDITORS ARE FOUND TO BE NOT EXP LAINED SATISFACTORILY, UNLESS IT IS PROVED THAT IT WAS THE INCOME OF THE ASSESSEE RECEIVED THROUGH SUCH CREDITORS, ADDITION UNDER SECTION 68 OF THE ACT. IF ANY COULD ONLY BE MADE I N THE HANDS OF SUCH CREDITOR AND THAT HOWEVER THIS AMOUNT COULD NO T BE ADDED IN THE HANDS OF RECIPIENTS OF THE CREDIT UNDER THE PROVISIONS OF SECTION 68 OF THE ACT. AS ALREADY MENTIONED, THESE AMOUNTS COULD HOWEVER BE EXAMINED FOR MAKING ADDITION UNDER SECTION 68 OF UNDER SECTION 69 OF THIS WAS CONTENTED BEFORE THE A.O. ALSO BY THE LD. COUNSEL, SOMEHOW IN THE REPORT OF T HE A.O. IT HAS NOT BEEN EXPLAINED AS TO IN THE FACE OF THIS LEGAL POSITION HOW THE ADDITION MADE COULD BE TAKEN TO BE JUSTIFIED. I.T.A NO. 329/ASR/2016 13 ANOTHER IMPORTANT ASPECT OF THE CASE IS THAT THOUGH THE STATEMENT OF SOME OF THE CREDITORS WERE RECORDED BY THE A.O AND FROM THESE STATEMENTS HE BROUGHT OUT CERTAIN AL LEGED DISCREPANCIES WHAT-SO-EVER, IN NONE OF THESE STATEM ENTS HE IS SHOWN TO HAVE PROVED IF THE CASH DEPOSITED IN BANK ACCOUNT OF THE BROKERS COULD BE TAKEN TO BE OUT OF THE UNDISCL OSED INCOME OF THE APPELLANT. I AGREE WITH THE A.O THAT DEPOSIT ING OF THE CASH IN THIS BANK ACCOUNTS BEFORE ISSUING OF' THE C HEQUES TO THESE CREDITORS COULD RAISE VALID DOUBTS IN RESPECT OF THE GENUINENESS OF THE CLAIM OF THE CREDITORS. HOWEVER, IN THE ABSENCE OF ANYTHING BROUGHT OUT IN THE STATEMENTS O F THE CREDITORS OR THE STATEMENT OF THE BROKERS (WHICH CO ULD NOT BE RECORDED DUE TO NON-COMPLIANCE OF SUMMONS ISSUED TO THEM), THERE IS NO MATERIAL ON THE BASIS OF WHICH THE CASH DEPOSITED COULD BE TAKEN TO BE OUT OF THE UNACCOUNTED INCOME OF THE APPELLANT AS HELD BY LD. A.O. SOURCES OF THE CREDIT S IN THE HANDS OF THE CREDITORS IF AT ALL UN-SATISFACTORY, THE SAM E CANNOT BE MADE THE BASIS OF ADDITION UNDER SECTION 68 OF THE ACT CAN BE MADE IN THE HANDS OF THE APPELLANT FOR SUCH CREDITS . 8. ON THE. BASIS OF AFORESAID, IT CLEARLY EMERGES T HAT SO FAR AS THE ASSESSEE IS CONCERNED, THE IDENTITY OF THE CRED ITORS STANDS ESTABLISHED SECONDLY IN ACCORDANCE WITH THE BURDEN CAST ON IT, THE ASSESSEE HAS SHOWN THAT THE LOANS HAVE BEEN REC EIVED BY THE ASSESSEE FROM THE CREDITORS THROUGH MAKING CHANNELS . IN FACT THE FACTUM OF THE ASSESSEES HAVING RECEIVED THE SAI D AMOUNTS BY WAY OF BANKING CHANNELS IS NOT IN DISPUTE. FURTHER THE CREDITORS I.T.A NO. 329/ASR/2016 14 HAVE ALSO EXPLAINED BY WAY OF CONTINUATIONS/PERSONA L DEPOSITIONS BEFORE THE ASSESSING OFFICER THAT THE I MPUGNED AMOUNTS HAVE BEEN PAID TO THE ASSESSEE THROUGH THEI R BANK ACCOUNTS. IT IS ALSO NOT CONTROVERTED THAT ALL THE CREDITORS ARE INCOME-TAX ASSESSES. IN THIS MANNER IT MUST BE TAKE N THAT THE CREDITORS HAD THE CREDITWORTHINESS TO ADVANCE THE L OANS. MOREOVER AT THIS POINT THE BURDEN HAD SHIFTED TO TH E ASSESSING OFFICER TO PROVE TO THE CONTRARY. ON A MERE FAILURE ON THE PART OF THE CREDITORS TO PROVE TO THE SATISFACTION OF TH E ASSESSING OFFICER THAT THEIR EARNINGS FROM THE COMMODITY TRAD ING WAS FULL PROOF COULD NOT HAVE ENABLED THE ASSESSING OFFICER TO TREAT THE AMOUNT OF SUCH PROFITS AS INCOME OF THE ASSESSEE FR OM UNDISCLOSED SOURCES, SPECIALLY WHEN THERE IS NO EVI DENCE ON RECORD TO INDICATE THAT THE IMPUGNED AMOUNT ACTUALL Y BELONGED TO THE ASSESSEE IN FACT THE AFORESAID DISCUSSION OF THE CIT(A) CLEARLY SHOWS THAT THE ASSESSING OFFICER HAD FAILED TO SHOW THAT THE ASSESSING OFFICER HAD FAILED TO SHOW THAT THE A MOUNTS OF COMMODITY PROFITS EARNED BY THE CREDITORS FROM THEI R SUB- BROKERS, HAD ACTUALLY BEEN RECEIVED THE BROKERS FRO NT THE ASSESSEE. IN THE ABSENCE OF ANY SUCH EVIDENCE ON RE CORD, THE ASSESSING OFFICER COULD NOT HAVE TREATED THE SAID A MOUNT AS INCOME BELONGING TO THE ASSESSEE FROM UNDISCLOSED S OURCES. IN CONCLUSION. WE HOLD THAT IN THIS CASE THE BURDEN ON THE ASSESSE E TO PROVE THE GENUINENESS OF THE TRANSACTIONS AS WELL AS THE CRED ITWORTHINESS OF THE CREDITORS AND THE IMPUGNED LOAN TRANSACTIONS WHICH THE I.T.A NO. 329/ASR/2016 15 ASSESSEE STANDS ESTABLISHED AND THE ASSESSING OFFIC ER ERRED IN EXTENDING THE BURDEN OF THE ASSESSEE TO PROVE THE G ENUINENESS OF THE COMMODITY PROFITS EARNED BY THE CREDITORS FR OM THEIR BROKERS. THE IMPUGNED LOANS COULD NOT BE CRECITED A S UNEXPLAINED UNDER SECTION 68 OF THE ACT FOR THE REA SONS SET OUT BY THE ASSESSING OFFICER. HENCE, THE ORDER OF THE C IT(APPEALS) IS HEREBY AFFIRMED. 9. THE HONBLE HIGH COURT HAS HELD AS UNDER: WE FEEL THAT THE SUBMISSION IS ABSOLUTELY UNTENAB LE AS THE ASSESSEE CANNOT BE ASKED TO SHOW CREDIT WORTHINESS OF HIS CREDITORS AND THE ASSESSING OFFICER OF THAT CREDITO R CAN ADD THE SAID AMOUNT TO THE INCOME OF THAT CREDITOR IF HE IS NOT SATISFIED BY THE EXPLANATION GIVEN AND IT IS NOT POSSIBLE FOR THE ASSESSEE TO PROVE THE SOURCES OF THE CREDITORS. IT HAS ALSO BEEN RECORDED AS A MATTER OF FACT THAT THE AMOUNTS HAVE BEEN RECE IVED BY WAY OF BANKING CHANNEL AND THEREFORE, IT WAS FOR THE AS SESSING OFFICERS OF THE SAID CREDITORS TO QUESTION THE SAID CREDITORS, WHO WERE INCOME LAX ASSESSEE AND IN THE ABSENCE OF ANY EVIDENCE THE ASSESSING OFFICER COULD NOT HAVE TREATED THE SA ID AMOUNT AS BELONGING TO THE ASSESSES FROM HIS UNDISCLOSED SOUR CES. ' 10. THOUGH THE DEPARTMENT SAYS THAT THE FACTS OF M /S AMAR CHAND & SONS, (SUPRA) ARE DIFFERENT FROM THOSE AT HAND IT IS FOUN D OTHERWISE. IN THE SAID CASE, SIMILAR DEPOSITS RECEIVED BY THE ASSESSEE FROM AS MANY AS 18 CREDITORS AND ALL HAVING GENERAT ED THEIR I.T.A NO. 329/ASR/2016 16 INCOME FROM PROFITS EARNED ON COMMODITY TRADING THR OUGH LUDHIANA BASED BROKERS, WERE DISPUTED BY THE AO BUT THE CIT(A) DELETED THE ENTIRE ADDITION AND HIS ORDER WA S ALSO ECHOED BY THE TRIBUNAL. IN FURTHER APPEAL FILED BY THE REVENUE THE HONBLE P & H HIGH COURT VIDE ORDER DATED 25.11 .2011 DISMISSED THE DEPARTMENTAL APPEAL. 11. THEREFORE, THE LD. CIT(A) HAS CORRECTLY FOLLOWE D; M/S AMAR CHAND & SONS (SUPRA) TO DELETE THE ADDITION MADE. ACCORDIN GLY, FINDING NO ERROR THEREIN, THE ORDER UNDER APPEAL IS CONFIRMED. THE GROUNDS RA ISED BY THE DEPARTMENT HAD NO MERIT. HENCE, REJECTED. 12. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27/03/2017. SD/- SD/- (T. S. KAPOOR) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 27/03/2017 *AKV* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT BY ORDER AR/SR.P.S./P.S.