ACIT, New Delhi V. Sh. Sanjeev Gaur, Delhi

ITA 4387/DEL/2012

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3273 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 17-04-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 14-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAUSHALENDRA TIWARI
• Keywords: Business income; Salary income; Deemed dividend
• Section: 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: G , NEW DELHI BEFORE SHRI B.P.JAIN, ACCOUNTANT MEMBER AND SMT. BEENA A PILLAI, JUDICIAL MEMBER ITA NO. 43 87 /DEL/201 2 AY: 20 09 - 10 ACIT, CIRCLE 35 (1) ROOM NO. D - 4 VIKAS BHAWAN NEW DELHI 110 002 VS . SH. SANJEEV GAUR C - 9/11, KRISHNA NAGAR DELHI 110 051 PAN:ADMPG6647G (APPELLANT) (RESPONDENT) APPELLAN T BY SH. KAUSHALENDRA TIWARI, SR.D.R. RESPONDENT BY SH. SALIL AGARWAL, ADV. SH. SHAILESH GUPTA, ADV. SH. MADHUR AGARWAL, ADV. DATE OF HEARING 19.12.2017 DATE OF PRONOUNCEMENT 20.02.2018 ORDER PER BEENA A PILLAI, JUDICIAL MEMBER T HE PRESENT APPEAL HAS BEEN PREFERRED BY REVENUE AGAINST ORDER DATED 2 9 /05/12 PASSED BY LD.CIT(A) - 27, NEW DELHI FOR ASSESSMENT YEAR 2009 - 10 ON THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD.CIT(A) HAD ERRED IN LAW AND ON F ACT S BY OBSERVING THAT SECTION 68 IS NOT APPLICABLE ON THE INSTANT CASE. ITA NO. 4387/DEL/12 ASSESSMENT YEAR 2009 - 10 ACIT VS. SH.SANJEEV GAUR 2 2. THAT THE LD.CIT(A) HAS COMMITTED A GRAVE ERROR IN OBSERVING THAT THE CREDITWORTHINESS OF THE LOAN GIVERS HAS BEEN ADEQUATELY ESTABLISHED BY THE ASSESSEE. 3. THAT THE LD.CIT(A) HAS ERRED IN NOT APPRECIATING THE REAL MOTIVE BEHIND THE LOAN GIVING TRANS ACT ION AND THAT BY TAKING TOO PEDANTIC A VIEW, THE ORDER PASSED BY THE LD.CIT(A) IS ERRONEOUS LEGALLY AND F ACT UALLY. 4. THAT THE LD.CIT(A) HAS NOT TAKEN COGNIZANCE OF THE SURROUNDING F ACT AND CIRCUMSTANCES GOVERNING THE LOAN TRANS ACT ION AND THAT BY FAILING TO DO SO, A SERIOUS INFIRMITY HAS CREPT INTO HIS ORDER WHICH CAN BE SET RIGHT BY THE HON BLE TRIBUNAL. 5. THAT THE LD.CIT(A) HAS ERRONEOUSLY HELD THAT THE TEST OF PRUDENCE AND TEST OF HUMAN PROBABILITIES CANNOT BE APPLIED ON THE F ACT S OF THE INSTANT CASE. 6. WHETHER ON F ACT S OF THE CASE, SHRI MOHIT GAUR AND KANISH SHARMA BE SAID TO HAVE PROVED TH EIR CAPACITY TO LEND TO THE ASSESSEE. 7. THAT THE LD.CIT(A) HAS ERRED IN HOLDING THAT SECTION 2(22)(E) IS NOT ATTR ACT ED ON THE SAID TO HAVE SATISF ACT ORILY PROVED THEIR CAPABILITY TO LEND TO THE ASSESSEE. 8. THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON F ACT S BY TAKING A VIEW THAT SINCE THE ASSESSEE WAS NOT HAVING A DEBIT BALANCE IN THE BOOKS OF ACCOUNTS OF COMPANY, THE APPLICABILITY OF DEEMED DIVIDEND IS NOT WARRANTED. 9. WHETHER PAYMENTS, MADE BY THE COMPANY TO THE ASSESSEE ON A MUTUAL, OPEN AND CURRENT ACCOU NT BE SAID TO BE COVERED BY THE AMBIT OF DEEMED DIVIDENDS. 10. THAT THE LD.CIT(A) HAD COMMITTED A GRAVE ERROR IN NOT PASSING A SPEAKING APPELLATE ORDER AND BY DOING SO, A SERIOUS ERROR HAS BEEN COMMITTED MAKING THE ORDER UNSUSTAINABLE. THE LD.ITAT IS THUS EMPOWERED TO MAKE GOOD THE INFIRMITY. 11. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND ANY/ALL THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. ITA NO. 4387/DEL/12 ASSESSMENT YEAR 2009 - 10 ACIT VS. SH.SANJEEV GAUR 3 2. BRIEF F A CT S OF THE CASE ARE AS UNDER : A SSESSEE FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 30/09/ 20 09 DECLARING TOTAL LOSS OF RS.( - )23,30,639/ - . DURING T HE ASSESSMENT PROCEEDINGS LD.AO OBSERVED THAT ASSESSEE DECLARED SALARY INCOME AT RS.5,90,400/ - RECEIVED FROM M/S TARUNIKA GAUR HOUSING & CONSTRUCTION LTD. , BUSINESS INCOME/LOSS OF RS.( - 41,51,543/ - FROM SHARE TRADING BUSINESS, HOUSE PROPERTY LOSS AT RS.( - )1,62,051/ - , LONG TERM CAPITAL GAIN OF RS.5,25,952/ - AND INCOME FROM OTHER SOURCES AT RS.8,66,603/ - . 2. 1 . THE ISSUE THAT WAS RAISED BY LD. AO , WAS IN RESPEC T OF FRESH UNSECURED LOANS RECEIVED BY ASSESSEE FROM VARIOUS P ERSONS AMOUNTING TO RS.87,51, 548/ - DURING THE YEAR UNDER CONSIDERATION. LD. AO OBSERVED THAT ASSESSEE HAS TAKEN LOANS FROM VARIOUS PEOPLE DURING THE RELEVANT FINANCIAL YEAR AS UNDER: KANISHK SHARMA (BROTHER - IN - LAW) RS.50 LACS; MADHU GAUR (AUNTY) RS.40 LACS; MOHIT GAUR (COUSIN) RS. 34 LACS; MANISHA GAUR (COUSIN SISTER) 20 LACS BULK LOANS RECEIVED FROM EMPLOYEES 2. 2 . LD. AO PROCEEDED TO EXAMIN E THE CREDITORS UNDER SECTION 68 OF THE ACT AN D ACCORDINGLY ASSESSEE WAS ASKED TO FILE THE ITRS, BANK STATEMENTS AND CONFIRMED COPY OF ACCOUNTS OF ALL THE LOANS GIVEN IN RESPECT OF FRESH UNSECURED LOAN RAISED DURING THE YEAR FROM THE LENDERS. HE WAS ALSO DIRECTED TO ESTABLISH THEIR IDENTITY, CREDITWOR THINESS AND GENUINENESS. IN RESPONSE TO THE QUERY RAISED BY LD.AO, ASSESSEE SUBMITTED THE COPY OF ACCOUNTS WITH M/S ITA NO. 4387/DEL/12 ASSESSMENT YEAR 2009 - 10 ACIT VS. SH.SANJEEV GAUR 4 TARUNIKA GAUR HOUSING AND C ONSTRUCTION LTD, I.E. PROFIT AND LOSS ACCOUNT OF SHARE TRADING BUSINESS, BALANCE SHEET AND ITR OF M/S TARUNIKA GAUR HOUSING AND CONSTRUCTION LTD. 2. 3 . A SSESSEE SUBMITTED THAT THE CREDITORS W ERE HIS RELATIVES AND FRIENDS WORKING WITH HIM. IT WAS SUBMITTED THAT SINCE 2004 - 05 , BUSINESS A CT IVITY IN DELHI AND NCR AREA WAS GOING ON VERY FAST, AND INVESTMENT IN BUSINESS WAS ALSO NEEDED TO BE REPLENISHED , F OR WHICH ASSESSEE REQUESTED THE ABOVE REFERRED PEOPLE TO HELP FINANCIALLY. 2. 4 . A SSESSEE WAS FURTHER ASKED TO PROVIDE COP IES OF ITR IN RESPECT OF UNSECURED LOANS RAISED FROM EACH LENDER AND ALSO DIRECTED TO ES TABLISH THEIR CREDITWORTHINESS AND GENUINENESS AS PROPOSED UNDER SECTION 68 OF THE ACT . IN RESPONSE TO THE SAME ASSESSEE V IDE LETTER DATED 02/11/11 FILED COPY OF ITRS, CONFIRMATION AND BANK STATEMENT OF UNSECURED LOANS. STATEMENT OF SH.MOHIT GAUR, SH.KANIS HK GAUR, AS WELL AS ASSESSEE WERE RECORDED UNDER SECTION 131 OF THE ACT . 2. 5 . LD. AO FROM THE DETAILS SUBMITTED IN RESPECT OF SH.MOHIT GAUR AND SH.KANISHK GAUR AND ON THE BASIS OF THEIR STATEMENT S OBSERVED THAT THESE CREDITORS WERE OFFERING MEAGER RETURNED INCOME WHEREAS , HAD ADVANCED LOANS OF RS. 50 LACS EACH WHICH IS DISPROPORTIONATE TO THEIR KNOWN SOURCE OF INCOME. LD. AO RECORDED THAT ASSESSEE COULD NOT SATISF ACT ORILY EXPLAIN THE SOURCE OF VARIOUS CREDIT ENTRIES APPEARING IN THE BANK STATEMENTS OF THE CREDITORS WELL BEFORE THE DATE OF ADVANCING THE LOANS. HE OBSERVED THAT THE LOAN HAS BEEN ADVANCED ON 14/01/09 VIDE CHEQUE NO. 1 2 7151 AND ITA NO. 4387/DEL/12 ASSESSMENT YEAR 2009 - 10 ACIT VS. SH.SANJEEV GAUR 5 127101 RESPECTIVELY BY THESE TWO PARTIES OF AN AMOUNT OF RS. 50 LACS FROM ALLAHABAD BANK. HOWEVER THESE TWO C REDITORS WERE NOT ABLE TO EXPLAIN SATISF ACT ORILY REGARDING THE CASH DEPOSITS APPEARING IN THE BANK STATEMENT OF THE CREDITORS , JUST BEFORE THE DATE OF ADVANCING THE LOANS. 2. 6 . LD. AO OBSERVED THAT MOST OF THE CREDITORS FILED BANK STATEMENT , SUPPORTING T HE F ACT OF GIVING LOANS BUT THE BANK STATEMENTS EXPRESSLY SHOWED THAT , CORRESPONDING CASH DEPOSITS OCCURRED JUST BEFORE THE DATE OF GIVING LOAN , WHICH HAS NOT BEEN EXPLAINED BY ASSESSEE. 2. 7 . LD. AO OBSERVED THAT , HAD ASSESSEE REQUIRED FUNDS FOR EXPANS ION AND REPLENISHMENT OF HIS COMPANY, IT WOULD HAVE DIRECTLY AVAILED LOANS FROM BANKS /FINANCIAL INSTITUTIONS AND WOULD HAVE SHOWN IN THE BALANCE SHEET OF THE COMPANY. FURTHER LD. AO NOTED THAT FUNDS ADVANCED TO ASSESSEE W ERE INTEREST - FREE FUNDS. THUS LD. AO IN THE LIGHT OF VARIOUS CASE LAWS AND ON ANALYSIS OF THE STATEMENTS RECORDED AN OATH , DOUBTED THAT , LOANS ADVANCED BY S.MOHIT GAUR AND SH.KANISHK SHARMA TO ASSESSEE CANNOT BE CONSIDERED AS GENUINE LOAN TRANS ACT ION , AS BOTH THE LOAN LENDERS WE RE NOT CAPABLE OF ADVANCING SUCH HUGE QUANTUM OF LOANS. HE CAME TO THE CONCLUSION ON THE BASIS OF OVERALL SURROUNDING F ACT ORS THAT THE LOAN GIVERS HAVING FIELD OVER DRAFT FACILITY FROM ALLAHABAD BANK HAS IN TURN ADVANCED LOANS TO ASSESSEE IMMEDIATELY AFT ER THE AVAILMENT OF LOAN IS JUST A MAKE - BELIEVE AFFAIR AND ARE PERFECTLY DESIGNED TRANS ACT ION. LD. AO THUS MADE ADDITION IN THE HANDS OF ASSESSEE UNDER S ECTION 68 OF RS.87,51,548/ - . ITA NO. 4387/DEL/12 ASSESSMENT YEAR 2009 - 10 ACIT VS. SH.SANJEEV GAUR 6 2. 8 . LD.AO FURTHER OBSERVED THAT ASSESSEE WAS HAVING 97.54% SHAREHOLDING I N M/S. TARUNI K A GAUR HOUSING & CONSTRUCTION LTD. HE OBSERVED THAT THIS COMPANY HAS MADE NUMEROUS PAYMENTS TO ASSESSEE FOR WHICH AN EXPLANATION WAS SOUGHT IN A PROPOSAL TO INVOKE SECTION 2 (22) (E) OF THE ACT . ASSESSEE IN RESPONSE SUBMITTED THAT ALL THESE PAYMENTS MADE BY THIS COMPANY W ERE REPAYMENT OF LOAN GIVEN BY ASSESSEE TO THE COMPANY. ASSESSEE FILED BOOKS OF THE COMPANIES SHOWING THE DAILY CLOSING BALANCE REFLECTING THAT THERE IS NO DEBIT BALANCE THROUGHOUT THE YEAR IN SUPPORT OF THE SAME. LD. AO HOW EVER REJECTED THE SUBMISSIONS ADVANCED BY ASSESSEE AND MADE ADDITION OF RS.2,35,78,675/ - BY INVOKING PROVISIONS OF SECTION 2(22)(E) OF THE ACT . 3. AGGRIEVED BY THE ORDER OF LD.AO, ASSESSEE PREFERRED APPEAL BEFORE LD.CIT ( A) WHO DELETED THE ADDITION. 3.1. A GGRIEVED BY THE ORDER OF LD.CIT ( A) REVENUE IS IN APPEAL BEFORE US NOW. 4. GROUND NO. 1 - 6 R EVENUE HAS ALLEGED THAT ASSESSEE FAILED TO ESTABLISH THREE INGREDIENTS , AS REQUIRED UNDER SECTION 68 OF THE ACT . LD. DR SUBMITTED THAT NO DOUBT TWO PARTIES APPEARED BEFORE LD. AO AND PROVIDED CONFIRMATION REGARDING AMOUNT GIVEN BY THEM TO ASSESSEE, HOWEVER ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH GENUINENESS OF TRANSACTION AND CR EDITWORTHINESS OF THESE TWO CREDITORS. IN SO FAR AS OTHER CREDITORS ARE CONCERNED, ASSESSEE COULD NOT PRODUCE THE PARTIES BEFORE LD.A.O. ITA NO. 4387/DEL/12 ASSESSMENT YEAR 2009 - 10 ACIT VS. SH.SANJEEV GAUR 7 4.1. LD. DR PLACED RELIANCE UPON VARIOUS DECISIONS IN THE WRITTEN SUBMISSIONS, WHICH HA VE BEEN ATTEMPTED BY LD. C OUNSEL TO BE DISTINGUISHABLE ON F ACT S BY WAY OF A WRITTEN REJOINDER. 4.2 . ON THE CONTRARY, LD.COUNSEL CONTENDED THAT, ASSESSEE RECEIVED THESE FUNDS FROM PERSONS WHO HAVE FILED THEIR RETURN OF INCOME AND HAS PROVIDED CONFIRMATION, AND IT WAS NOT OPEN FOR REVENUE TO NOW CONTEST THEIR CREDIBILITY. HE SUBMITTED THAT DEPARTMENT CANNO T ENQUIRE REGARDING THE SOURCE OF SOURCE OF THE CREDITORS. HE THUS SUPPORTED THE ORDER PASSED BY LD.CIT(A). 4.3 . WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH THE SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. 4.4 . UNDER SECTION 68 OF THE ACT , THE PRIMARY ONUS IS UPON ASSESSEE TO OFFER EXPLANATION IN REGARD S TO ANY SUM CREDITED IN THE BOOKS OF ACCOUNTS . THEREAFTER , LD. AO IS TO ENQUIRE WHETHER , EXPLANATION OFFERED BY ASSESSEE IS SATISF ACT ORY OR NOT . T RUTHFULNESS OF THE ASSERTION BY ASSESSEE RE GARDING THE NATURE AND SOURCE OF CREDIT IN ITS BOOKS OF ACCOUNT CAN BE EXAMINED BY ASSESSING OFFICER SUBSEQUENTLY . WHERE IDENTITY AND CREDITWORTHINESS OF DEPOSITORS ALONG WITH GENUINENESS OF TRANS ACT ION STANDS ESTABLISHED , AND IT IS SHOWN THAT THEY HAD AD VANCED THEIR OWN MONEY TO ASSESSEE, SUCH AMOUNT RECEIVED WOULD NOT BE CHARGED TO TAX . WHERE NO EXPLANATION AT ALL OR EXPLANATION OFFERED IS UNSATISF ACT ORY, PROVISION OF SECTION 68 MAY BE INVOKED AND SUCH DEPOSITS M AY BE TAXED IN THE HANDS OF THE ASSESSEE . IN CASES WHERE IDENTITY OF CREDITORS HAS BEEN ESTABLISHED BY ASSESSEE ALONG WITH EXPLANATION ABOUT CREDIT ENTRIES AND GENUINENESS OF TRANS ACT ION, AS TO THE NATURE OF TRANS ACT ION, ITA NO. 4387/DEL/12 ASSESSMENT YEAR 2009 - 10 ACIT VS. SH.SANJEEV GAUR 8 LEADING TO SUCH CREDIT ENTRIES IN THE BOOKS OF ACCOUNTS, ASSESSEE I S CONSIDERED TO HAVE DISCHARGED ITS INITIAL ONUS AND BURDEN. IN OUR CONSIDERED VIEW THE ONUS IS UPON ASSESSEE TO ESTABLISH THE IDENTITY, CREDIT WORTHINESS AND MOST IMPORTANTLY GENUINENESS OF CREDITORS TO THE SATISFACTION OF LD.A.O. 4.5. ON FURTHER VERIFICATION OF THE PAPER BOOK AND RECORDS, IT IS OBSERVED THAT THE ASSESSEE TRIED TO SUBSTANTIATE BY WAY OF COPIES OF BANK PASS BOOK OF THE CREDITORS TO PROVE CREDIT ENTRIES IN THE BANK ACCOUNT. PERSONAL DEPOSITION BY TWO CREDITORS DOES NOT SHOW ANY EVID ENCE OF THEIR CREDITWORTHINESS AND GENUINENESS OF THE TRANS ACT ION. SPECIFIC REFERENCE IS MADE TO PAGE NOS. 215 268 OF PAPER BOOK OF THE CREDITORS ARE FOR LIMITED PERIOD ONLY SHOWING THE PAYMENT HAVING BEEN DIS BURSED FROM CREDITORS ACCOUNTS TO ASSESSE E WITH A MEAGRE OPENING BALANCE . M OST OF THE PASSBOOKS STATEMENTS REVEALS THAT THE ACCOUNTS WERE OPENED JUST BEFORE THE ALLEGED ADVANCES HAVING BEEN MADE TO ASSESSEE. THEREFORE ACCORDING TO US, ASSESSEE D ID NOT DISCHARGE THE INITIAL ONUS CAST UPON, WITH R ESPECT TO CASH CREDIT BY EMPLOYEES AND OTHER RELATIVES A S PER S.68 SATISFACTORILY . LD.COUNSEL SUBMITTED THAT LENDERS MOHIT GAUR AND KANISHK GAUR APPEARED BEFORE THE LD. AO WHOSE STATEMENTS WERE RECORDED UNDER SECTION 131 OF THE ACT AND THAT THESE LENDE RS HAVE ACCEPTED THE F ACT OF GIVING LOANS TO ASSESSEE. HE ADVOCATED UPON THE F ACT THAT ASSESSEE EXPLAINED THE SOURCE OF GIVING THE SAID LOAN WHICH WAS BY WAY OF OVER DRAFT FACILITY FROM ALLAHABAD BANK. LD.COUNSEL SUBMITTED THAT THESE STATEMENT HAVE TO BE CONSIDERED , OF ASSESSEE HAVING DISCHARGED THE INITIAL ONUS CAST ITA NO. 4387/DEL/12 ASSESSMENT YEAR 2009 - 10 ACIT VS. SH.SANJEEV GAUR 9 UPON THE ASSESSEE TO IDENTIFY THE CREDITORS AND ALSO PROVE CREDITWORTHINESS AND GENUINENESS OF THE TRANS ACT ION . HOWEVER THAT IS NOT THE CASE IN THE PRESENT F ACT S BEFORE US. 4.6 . ON PERUSAL OF THE ORDER PASSED BY LD.CIT(A), IT IS OBSERVED THAT HE HAS MERELY DELETED ADDITIONS BY OBSERVING AS UNDER. 12. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, THE OBSERVATIONS MADE BY THE A.O. IN THE ASSESSMENT ORDER AND THE FACTS OF THE CASE ALONG WITH VARIOUS JUDGMENTS AS DISCUSSED ABOVE. WITH RESPECT TO UNSECURED LOANS RAISED BY THE APPELLANT D URING THE YEAR UNDER CONSIDERATION, THE APPELLANT FILED CONFIRMATION FROM THE LENDERS, COPY OF THEIR BANK ACCOUNT AND COPY OF THEIR INCOME - TAX RETURNS. SH. MOHIT GAUR AND SH.KANISHK SHARMA HAD ADVANCED RS. 50.00 LACS EACH TO THE APPELLANT DURING THE YEAR U NDER CONSIDERATION. SH. MOHIT GAUR RECEIVED BACK AN AMOUNT OF RS. 16.00 LACS FROM THE APPELLANT AND, THEREFORE, OUTSTANDING LOAN FROM SH. MOHIT GAUR TO THE APPELLANT AT THE CLOSE OF THE YEAR AS RS. 34.00 LACS. SH. MOHIT GAUR HAS ALSO FILED A COPY OF ACKNO W LEDGMENT FOR HAVING FILED HIS RETURN OF INCOME FOR THE A.Y. 2009 - 10 AT AN INCOME OF RS. 7,22,250 / - ON 22.9.2009 WITH CIRCLE - 42(1), NEW DELHI. FROM THE COPY OF' HIS BANK ACCOUNT, IT IS SEEN THAT HE HAD ADVANCED AN AMOUNT OF RS. 50.00 LACS TO THE APPELLANT FROM HIS BANK ACCOUNT NO. 50008248680 WITH ALLAHABAD BANK THROUGH CHEQUE. IMMEDIATELY BEFORE ADVANCING THIS AMOUNT TO THE APPELLANT, THE LENDER SH.MOHIT GAUR HAD RECEIVED AN AMOUNT OF RS. 50.00 LACS AS LOAN FROM ALLAHABAD BANK AGAINST MORTGAGE OF HIS PROPE RTY. A CERTIFICATE FROM ITA NO. 4387/DEL/12 ASSESSMENT YEAR 2009 - 10 ACIT VS. SH.SANJEEV GAUR 10 THE ALLAHABAD BANK DATED 13.01.2009 IN SUPPORT OF MORTGAGING THE PROPERTY AND OBTAINING THE LOAN OF RS. 50.00 LACS HAS ALSO BEEN FILED. SIMILARLY, IN THE CASE OF SH. KANISHK SHARMA, A CONFIRMATION FOR HAVING ADVANCED THE LOAN TO THE APPELLANT, A COPY OF HIS BANK ACCOUNT, A COPY OF ACKNOWLEDGMENT OF HIS RETURN OF INCOME AND A COPY OF LOAN SANCTION LETTER FROM ALLAHABAD BANK WAS FILED. SH. KANISHK SHARMA IS ASSESSED TO TAX IN WARD - 35(4), NEW DELHI AND HE HAD FILED HIS INCOME - TAX RETURN FOR THE A.Y. 2009 - 10 SHOWING AN INCOME OF RS.2,70,422/ - . HE HAD ALSO TAKEN A LOAN OF RS. 50.00 LACS FROM ALLAHABAD BANK AGAINST MORTGAGE OF HIS PROPERTY AND THIS AMOUNT OF RS. 50.00 LACS WAS THE SOURCE OF ADVANCING THE UNSECURED LOAN TO THE APPELLANT. 13 . IN SPITE OF ALL THIS DOCUMENTARY EVIDENCE, THE AO HAS TREATED BOTH THESE LOANS AS UNEXPLAINED AND HAS ADDED THEM TO THE INCOME OF THE APPELLANT BY OBSERVING THAT THE CONDUCT OF BOTH THESE LENDERS WAS AGAINST PRUDENCE AND REASONABLENESS. ACCORDING TO THE A.O. NO PRUDENT PERSON WILL FIRST TAKE A LOAN BY MORTGAGING HIS PROPERTY AND THEN ADVANCE THE SAME TO ANOTHER PERSON. THE A.O. CONFRONTED HIS OBSERVATIONS TO BOTH THE LENDERS IN THEIR STATEMENT. SH. MOHIT GAUR IN ANSWER OF THIS QUERY OF THE A.O. STATED THA T S H. SANJEEV GAUR, THE APPELLANT, WAS HIS COUSIN BROTHER AND WAS IN NEED OF MONEY AND HE BEING A FAMILY MEMBER HELPED THE APPELLANT. WHENEVER SH. SANJEEV GAUR W ILL HAVE THE MONEY, HE WILL RETURN IT BACK TO HIM. IN FACT, HE HAD ALREADY RETURNED BACK RS.16. 00 LACS AND RS. 34.00 LACS ONLY WAS DUE TO HIM. THE A.O. FOUND THIS REPLY OF THE LENDER PUZZLING IN RESPONSE TO WHICH SH. MOHIT GAUR STATED THAT IT WAS NOT AT ALL ITA NO. 4387/DEL/12 ASSESSMENT YEAR 2009 - 10 ACIT VS. SH.SANJEEV GAUR 11 PUZZLING AND HE BEING A MEMBER OF THE FAMILY, SH. MOHIT GAUR HELPED THE APPELLANT. WHENEVER H E (MOHIT GAUR) WILL NEED HELP, HE (SANJEEV GAUR) WILL HELP HIM. BEING A MEMBER OF THE FAMILY WHATSOEVER HE FELT JUSTIFIED HE DID SO AT THAT TIME. SIMILARLY, SH.KANISHK SHARMA, IN RESPONSE TO THIS QUERY SUBMITTED BEFORE THE A.O. THAT SH. SANJEEV GAUR, THE A PPELLANT, WAS HIS BROTHER - IN - LAW AND WAS IN NEED OF MONEY AT THAT TIME. HIS (KANISHK'S) LOAN HAD ALREADY BEEN SANCTIONED AND THIS IS WHY BEING A RELATIVES HE HELPED THE APPELLANT. ALREADY THE APPELLANT HAD RETURNED AN AMOUNT OF RS. 25.00 LACS IN THE MONTH OF JAN. 2010 AND THE REMAINING AMOUNT OF RS. 25.00 LACS ONLY WAS DUE FROM HIM. AS HE HELPED THE APPELLANT ON HIS REQUIREMENT, HE (KANISHK) WILL ALSO EXPECT THE SAME AMOUNT OF HELP IN THE FUTURE. ACCORDING TO SH. KANISHK IT (ADVANCING OF LOAN TO THE APPELLA NT OUT OF HIS OVERDRAFT AMOUNT ON MORTGAGING HIS PROPERTY) WAS A RIGHT DECISION. 14. WITH REGARD TO UNSECURED LOANS RAISED BY THE APPELLANT FROM HIS EMPLOYEES, THE AO HAS OBSERVED THAT THESE PERSONS WERE HAVING MEAGER INCOME AND THERE WERE CASH DEPOSITS IN THEIR BANK ACCOUNTS BEFORE THEY ADVANCE LOANS TO THE APPELLANT. THE DETAILS FILED BY THE APPELLANT BEFORE THE A.O. WITH RESPECT TO THESE CREDITORS REGARDING THEIR CONFIRMATION AND COPY OF BANK ACCOUNT WERE EXAMINED AND IT IS SEEN THAT IN ALL THE CASES T HE LOAN AMOUNT HAS BEEN ADVANCED TO THE APPELLANT THROUGH ACCOUNT PAYEE CHEQUE. IMMEDIATELY BEFORE ADVANCING LOAN TO THE APPELLANT THERE WERE CREDIT ENTRIES IN THE ACCOUNTS OF THE CREDITORS BY TRANSFER OR BY CASH. THE CASH DEPOSIT ENTRIES REFERRED TO BY T HE A.O. WERE ONLY IN RESPECT OF SMALL AMOUNT ITA NO. 4387/DEL/12 ASSESSMENT YEAR 2009 - 10 ACIT VS. SH.SANJEEV GAUR 12 OF RS. 15,000 TO RS. 20, 000 / - EACH IN THE CASE OF THESE CREDITORS. FOR EXAMPLE CREDITORS NAMELY ANUJ NAGAR, DHARMVIR NEGI, GOMTI LAL, MITHLESH KUMAR SHARMA, NETRA PAL, NIRARAJAN PAWAR, NONE LAL AND VICKY ARORA HA VE ADVANCED LOANS OF RS. 1,15,000 / - TO RS. 1,20,000 / - EACH TO THE APPELLANT. THESE LOANS WERE ADVANCED IN THE FORM OF TWO CHECKS I.E. A CHECK FOR RS. 1 LAC AND THE OTHER CHECK FOR RS. 15,000 / - OR RS. 20,000 / - . IMMEDIATELY BEFORE THE ADVANCE OF THE AMOUNT O F RS. 1,00,000 / - BY CHECK THERE IS A CREDIT ENTRY IN THE BANK ACCOUNT OF THESE CREDITORS BY TRANSFER. IMMEDIATELY BEFORE THE ADVANCE OF RS. 15,000 / - , RS. 20,000 / - THERE IS CREDIT ENTRY BY CASH OF THE EQUIVALENT AMOUNT. THUS JUST BECAUSE THERE IS CREDIT ENTRY OF RS. 15,000 / - OR RS. 20,000 / - BY CASH IN THE BANK ACCOUNTS OF THESE CREDITORS IMMEDIATELY BEFORE ADVANCING AN EQUIVALENT AMOUNT TO THE APPELLANT, IT CAN BE CONCLUDED THAT THE WHOLE OF THE AMOUNT OF LOAN I.E. RS. 1,15,000 / - OR RS, 1,20,000 / - IS UNEX PLAINED CREDIT IN THE HANDS OF THE APPELLANT. THAT TOO WITHOUT ANY ENQUIRY IN THIS REGARD WHEN THE APPELLANT HAD PROVIDED COMPLETE ADDRESS OF THE CREDITOR, COPY OF HIS BANK ACCOUNT STATEMENT AND IN MANY CASES PAN AND COPY OF ACKNOWLEDGEMENT FOR HAVING FILE D THE RETURN OF INCOME BY THE CREDITOR. MOREOVER THE AO HAS NOT POINTED OUT OR DISCUSSED ANY SPECIFIC INSTANCE OF A PARTICULAR CREDITOR. HE HAS SIMPLY MADE A GENERAL OBSERVATION ABOUT CASH DEPOSIT ENTRIES IN THE BANK ACCOUNTS OF THESE CREDITORS. 15. THE CASE LAWS RELIED UPON BY THE A.O. AND THE APPELLANT ARE NOT BEING DISCUSSED IN DETAIL AS THE LEGAL POSITION IN RESPECT OF CASH CREDITS IS FAIRLY WELL ESTABLISHED BY NOW. WHAT THE ASSESSEE IS REQUIRED TO DO IN SUCH CASES IS TO PRIMA FACIE ESTABLISH THE ID ENTITY ITA NO. 4387/DEL/12 ASSESSMENT YEAR 2009 - 10 ACIT VS. SH.SANJEEV GAUR 13 CREDITORS, THEIR CAPACITY TO ADVANCE THE LOAN TO THE ASSESSEE AND THE GENUINENESS OF THE TRANSACTIONS. IN THE INSTANT CASE, THE APPELLANT HAD DULY DISCHARGED HIS O NUS BY FILING THE DOCUMENTARY EVIDENCE IN THE FORM OF COPY OF CONFIRMATION, COPY OF BANK ACCOUNT OF THE CREDITORS, AND COPY OF ITR OF MOST OF THE CREDITORS. IN THE CASE OF SH. MOHIT GAUR AND SH. KANISHK SHARMA, THE AO HAS RECORDED THEIR STATEMENTS ALSO AS DISCUSSED ABOVE. ON THE BASIS OF COPIES OF ACKNOWLEDGEMENT OF RETURN OF INCOME IT I S SEEN THAT BOTH OF THEM ARE ASSESSED TO TAX. COPY OF THEIR BANK ACCOUNT WAS FILED WHICH SHOWS THAT THE TRANSACTIONS ARE THROUGH BANKING CHANNELS. THE SOURCE OF ADVANCING LOAN AMOUNT TO THE APPELLANT IN BOTH THE CASES IS THE OVERDRAFT FACILITY WHICH THEY H AVE AVAILED AGAINST MORTGAGE OF THEIR PROPERTIES. COPY A LETTER FROM MANAGER, ALLAHABAD BANK DATED 13.01.2009 HAS BEEN FILED IN BOTH THE CASES SHOWING SANCTION OF OVERDRAFT AMOUNT OF RS. 50 LACS TO EACH OF THEM. NO DEFECT OR FALSITY HAS BEEN POINTED OUT BY THE AO IN THE DOCUMENTARY EVIDENCE FILED. THE ONLY REASON FOR DISALLOWANCE OF THE UNSECURED LOANS RAISED BY THE APPELLANT IS THAT THE CONDUCT OF THE CREDITORS IN ADVANCING THE LOANS TO THE APPELLANT HAS BEEN FOUND BY THE AO TO BE AGAINST PRUDENCE AND REAS ONABLENESS. IN THEIR STATEMENTS RECORDED BY THE AO BOTH THE CREDITORS HAVE ADMITTED THE FACT OF ADVANCING LOANS TO THE APPELLANT AND FILED DOCUMENTARY EVIDENCE BEFORE THE AO. IN THEIR STATEMENT BOTH OF THEM SUBMITTED BEFORE THE AO THAT REASON WHY THEY ADVA NCED LOANS TO THE APPELLANT OUT OF THEIR OVERDRAFT FACILITY WAS THAT THE APPELLANT WAS THEIR RELATIVE AND WAS IN NEED OF FUNDS. ITA NO. 4387/DEL/12 ASSESSMENT YEAR 2009 - 10 ACIT VS. SH.SANJEEV GAUR 14 HAVING HELPED THE APPELLANT THEY COULD EXPECT THE SAME HELP FROM THE APPELLANT AS AND WHEN THEY WERE IN DIFFICULTY IN FUTURE. 16. KEEPING IN VIEW THE FACTS OF THE CASE AS DISCUSSED IN DETAILE D AS ABOVE, IT IS HELD THAT ON THE BASIS OF THE DOCUMENTARY EVIDENCE FILED BY THE APPELLANT, HE HAD DULY DISCHARGED HIS ONUS IN ESTABLISHING THE IDENTITY OF THE CREDITORS, THEIR' CAPACITY TO ADVANCE LOANS TO THE APPELLANT AND THE GENUINENESS OF THE TRANSACTIONS. THE AO RECORDED STATEMENT OF THE APPELLANT AND THE TWO OF THE MAIN CREDITORS IN WHICH THEY HAD ADMITTED THE FACT OF ADVANCING THE LOANS TO THE APPELLANT. NOTHING ADVERSE HAS BEEN POINT ED OUT BY THE AO WITH RESPECT TO THE DOCUMENTARY EVIDENCE FILED BY THE APPELLANT. THEREFORE, THE ADDITION OF RS. 87,51,548/ - MADE BY THE A.O. U/S 68 OF THE ACT ON ACCOUNT OF UNSECURED LOANS RAISED DURING THE YEAR IS DELETED. 4.7. WE ARE THUS OF CONSIDERED OPINION THAT LD.AO HA S NOT MADE PROPER ENQUIRIES IN RESPECT OF LOAN CREDITORS OTHER THAN MOHIT GAUR AND KANISHK SHARMA. IN FACT LD.CIT(A) HIMSELF RECORD S THAT IN THE ACCOUNTS OF OTHER LOAN CREDITORS THERE WERE CORRESPONDING C ASH ENTRIES. THUS THE CREDIT WORTHINESS & GENUINENESS OF TRANSACTIONS WITH REMAINING CREDITORS HAVE NOT BEEN ESTABLISHED BY ASSESSEE AS REQUIRED U/S 68 OF THE ACT . THUS, IN OUR VIEW, LD.CIT(A) WAS WRONG IN DELETING THE ENTIRE ADDITION. THEREFORE WE CONFIRM THE ADD ITION TO THE EXTENT OF CREDIT ENTRIES OTHER THAN OF SH.MOHIT GAUR AND SH.KANISHK SHARMA. ACCORDINGLY GROUND NO.1 - 6 OF REVENUE S APPEAL STAND S PARTLY ALLOWED. ITA NO. 4387/DEL/12 ASSESSMENT YEAR 2009 - 10 ACIT VS. SH.SANJEEV GAUR 15 5. GROUND NOS. 7 - 10: - THESE GROUNDS HAVE BEEN RAISED BY REVENUE AS THE ADDITION HAS BEEN DELETED BY LD.CIT(A) MADE BY LD.AO U/S 2(22)(E) OF THE ACT. FACTS OF THE ISSUE ARE THAT ASSESSEE HAD ADVANCED LOAN TO M/S TARUNIKA GAUR HOUSING & CONSTRUCTION LTD. WHERE ASSESSEE WAS A MD AND WAS HAVING 97.54% SHARE HOLDING. LD.A.O. WHILE PERUSING DETAILS FILED BY ASSESSEE OBSERVED THAT M/S TARUNIKA GAUR HOUSING & CONSTRUCTION LTD. HAD MADE NUMEROUS PAYMENTS TO ASSESSEE. ON A QUERY RAISED BY LD.AO, ASSESSEE REPLIED THAT THESE WERE REPAYMENT OF LOANS ADVANCED BY ASSESSEE TO M/S TARUNIKA GAUR HOUSING & CONSTRUCTI ON LTD. AMOUNTING TO RS.2,35,78,675/ - . LD.AO MADE ADDITION OF THE SAID AMOUNT IN THE HANDS OF ASSESSEE U/S 2(22)(E) OF THE ACT. 6 . AGGRIEVED BY THE SAID ADDITION AN APPEAL WAS PREFERRED BEFORE LD.CIT(A). LD.CIT(A) DECIDED AS UNDER. 26. IN THE APPELLANT S CASE, THE AMOUNT OF UNSECURED LOAN ADVANCED BY HIM TO THE COMPANY AT THE BEGINNING OF THE YEAR I.E. AS ON 1.4.2008 WAS RS.1,55,81,210/ - AND AT THE CLOSING OF THE YEAR I.E. 31.3.2009 WAS RS.2,78,10,470/ - . FROM A PERUSAL OF THE LE DGER ACCOUNT OF THE APPELLANT IN THE BOOKS OF THE COMPANY, IT IS SEEN THAT THROUGHOUT THE YEAR THERE WAS CREDIT BALANCE IN THIS ACCOUNT AND THERE WAS NOT EVEN A SINGLE DAY ON WHICH THERE WAS A DEBIT BALANCE. THEREFORE, ALL THE PAYMENTS MADE BY THE COMPANY TO THE APPELLANT WERE IN THE NATURE OF REPAYMENT OF LOAN WHICH THE APPELLANT HAD ADVANCED TO THE COMPANY AND WERE THEREFORE, NOT IN THE NATURE OF ITA NO. 4387/DEL/12 ASSESSMENT YEAR 2009 - 10 ACIT VS. SH.SANJEEV GAUR 16 LOAN OR ADVANCE TO BE COVERED UNDER THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THEREFORE, THE PROVISIONS OF SECTION 2(22)(E) WERE NOT APPLICABLE IN THE APPELLANT S CASE AND THE ADDITION OF RS.2,35,78,675/ - MADE BY THE AO ON THIS ACCOUNT IS DELETED. 6.1. LD.DR PLACED RELIANCE ON ORDER OF LD.AO. 6.2. LD.AR PLACED RELIANCE ON THE ORDER OF LD.CIT(A). 7. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH THE SIDES IN THE LIGHT OF MATERIAL PLACED ON RECORD AND DECISIONS RELIED UPON. IN OUR CONSIDERED OPINION, IT IS NOT DISPUTED THAT ASSESSEE HAD ADVANCED LOANS TO THE COMPANY DURING THE YEAR UNDER CONSIDERATION AND COMPANY HAS RETURNED BACK THIS MONEY TO ASSESSEE. HERE ASSESSEE BEING A SHARE HOLDER HAS ADVANCED LOANS TO THE COMPANY, WHICH DO NOT FALL WITHIN THE AMBIT OF PROVISIONS OF S.2(22)(E) OF THE ACT. WE THEREFORE DO NOT FIND ANY INFIRMITY IN THE OBSERVATIONS OF LD.CIT(A) AND THE SAME IS UPHELD. ACCORDINGLY THESE GROUNDS OF REVENUE STAND DISMISSED. 8 . IN THE RESULT APPEAL FILED BY THE REVENUE STANDS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 2 0 . 0 2 . 2 0 1 8 . S D / - S D / - ( B.P.JAIN ) (BEENA A PILLAI) ACCOUNTANTMEMBER JUDICIAL MEMBER DT. 2 0 T H F E B . , 2018 MV ITA NO. 4387/DEL/12 ASSESSMENT YEAR 2009 - 10 ACIT VS. SH.SANJEEV GAUR 17 C OPY FORWARDED TO: - 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR, ITAT - TRUE COPY - BY ORDER, ASSISTANT REGISTRAR ITAT DELHI BENCHES ITA NO. 4387/DEL/12 ASSESSMENT YEAR 2009 - 10 ACIT VS. SH.SANJEEV GAUR 18 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON DRAGON SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KEPT FOR PRONOUNCEMENT SR. PS/PS 7 FILE SENT TO BENCH CLERK SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER