HOTEL MARKAZ P. LTD, MUMBAI V. ITO WD 8(2)(4), MUMBAI

ITA 4705/MUM/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3691 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 14-10-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 11-08-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R S SRIVASTAVA
• Assessee Lawyers: DR P DANIEL SHRI M P MAKHIJA
• Keywords: Unexplained cash credit; Income from undisclosed sources; Charitable institution; Principle of natural justice; Source of fund
• Section: 143(3); 68

Judgement Text

1 ITA 4705/MUM/09, M/S HOTEL MARKAZ P. LTD. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H BEFORE SHRI P.M. JAGTAP, A.M. AND SHRI R.S. PADVEKA R, JM ITA NO. 4705/MUM/09 ASSESSMENT YEAR 2005-06 M/S HOTEL MARKAZ PVT. LTD., C-109, FATIMID CO-OP. HSL, BEHRAM BAUG, JOGESHWARI (W), MUMBAI -400102. VS. ITO WARD 8(2)(4), AAYKAR BHAWAN, M.K. ROAD, MUMBAI- 20. APPELLANT RESPONDENT APPELLANT BY SHRI DR. P. DANIEL SHRI M.P. MAKHIJA RESPONDENT BY SHRI R.S. SRIVASTAVA ORDER PER P.M. JAGTAP, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)- VIII, MUMBAI DATED 23.6.09. 2. THE MAIN ISSUE RAISED BY THE ASSESSEE IN THIS AP PEAL AS PER THE REVISED GROUND NO. 1 TO 3 RELATES TO THE ADDITION MADE BY THE A.O. U/S 68 AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF SHARE CAPITAL OF ` 4,70,000/- AND UNSECURED LOANS OF ` 72,07,000/- RECEIVED BY THE ASSESSEE TREATING THE SAME AS UNEXPLAINED CASH CREDIT. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY IN CORPORATED WITH THE MAIN OBJECT TO CARRY ON THE HOTEL BUSINESS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 6.1.07 DECLARING A LOSS OF ` 56,969/. IN THE SAID YEAR, THE ASSESSEE COMPANY HAD ONLY PURCHASED THE HOTEL PREMISES AND THERE WAS NO BUSINESS ACTIVITY CARRIED ON BY IT DURING THAT YEAR. AS PER THE BALANCE SHEET FILED A LONG WITH THE RETURN OF INCOME, THE 2 ITA 4705/MUM/09, M/S HOTEL MARKAZ P. LTD. ASSESSEE COMPANY HAD SHOWN TO HAVE RECEIVED UNSECUR ED LOANS OF ` 72,07,000/- AND SHARE CAPITAL OF ` 4,70,000/- FROM 22 PARTIES DURING THE PERIOD FROM OCTOBER TO DECEMBER, 2005. AS REQUIRED BY THE A.O., CONFIRMATION LETTER S OF ALL THE 22 PARTIES WERE FILED BY THE ASSESSEE ALONG WITH COPIES OF THEIR INCOME TAX RETU RN ACKNOWLEDGMENTS FOR THE RELEVANT YEAR AS WELL AS BALANCE SHEET AND P&L A/C. ON PERU SAL OF THE SAID DOCUMENTS, THE A.O. NOTICED THAT MOST OF THE SAID PERSONS WERE HAVING V ERY NOMINAL INCOME OF AROUND ` 1 LAC AND AFTER HAVING MADE WITHDRAWALS OF ` 40,000/- TO 50,000/-, THEY WERE HARDLY LEFT WITH ANY SURPLUS AMOUNT TO ADVANCE LOANS TO THE ASSESSEE . HE ALSO NOTICED THAT SOME OF THE PERSONS HAD DEPOSITED CASH IN THEIR BANK A/C BEFORE MAKING PAYMENTS TO THE ASSESSEE ON ACCOUNT OF UNSECURED LOANS AND SHARE CAPITAL. HE, THEREFORE, ISSUED A NOTICE TO THE ASSESSEE POINTING OUT THEREIN SUCH INSTANCES AND SE EKING EXPLANATION OF THE ASSESSEE THEREON. ALONG WITH THE SAID NOTICE, ANNEXURE WAS ALSO ATTACHED BY THE A.O. SUMMARIZING ALL THE RELEVANT DETAILS NOTED BY HIM I N RESPECT OF EACH CREDITORS AS UNDER:- ANNEXURE TO THE NOTICE DATED 18.12.2008 DETAILS OF 22 PARTIES IN RESPECT OF CREDITS FOR LOA NS & SHARE CAPITAL. SL NO. NAME OF PERSON NAME OF BANK NATURE TOTAL INCOME WITHDRA WAL LOANS O/S LOAN TO HOTEL MARKAZ CASH DEPOSITS 1 MUSTAKALI HASAN PALSANIA DCB BROKERAGE 99260 64116 250000 400000 90000 2 HABID DAWOOD SUNSARA BOM PARTNER IN FIRMS 116191 48000 100000 340000 - 3 MEHNDIALI HABIB SUNESARA BMC BUSINESS 104580 45000 178000 299000 100000 4 ABBASALI HABIB SUNESARA BMC BUSINESS 105580 45000 178000 299000 100000 5 ABDUL YARMOHAMED KADIWALA CBI SALARY & BUSINESS 135772 58330 - 250000 160000 6 ABIDALI ABDULBHAI KADIWALA DCB - 66436 - 186720 340000 - 7 SAJEED ABDUL SUNSARA BMC BUSINESS 100163 33525 - 109000 195000 8 FIZZA VALIMOHAMMED BOM BUSINESS 101972 30000 178000 360000 115000 3 ITA 4705/MUM/09, M/S HOTEL MARKAZ P. LTD. SUNSARA 9 ABDUL DAWOOD SUNSARA BOM - 95170 30000 100000 360000 90000 10 VALIMOHD DAWOOD SUNSARA BOM - 81200 54000 178000 360000 55000 11 SIRINBEN SABBIRALI SELIYA BOM - 99230 54000 149521 180000 15000 12 SHELIYA HAJARBEN BOM BUSINESS STITCHING 81221 60000 167651 180000 30000 13 MORIYA MIYAJI NASIR SBI - 90790 64000 690000 450000 106000 14 USMAN VALIMOHD LORIYA SBI - 182040 48000 283580 450000 - 15 JUNED USMAN LORIYA BHA RA COMMISSI ON 134496 42000 152000 450000 300000 16 RAISA JUNAID LORIYA MCB STITCHING 144725 45000 57000 450000 378000 17 ZAID USMAN LORIYA MSC BUSINESS LABOUR 126640 57625 215000 450000 131500 18 HAIDERALI DAWOOD KADIWALA BMC TAXI 87102 41150 240000 450000 205000 19 ISMAIL YUSUF SUNASARA DCB LABOUR 134270 36000 200000 400000 262000 20 GULAM HUSAIN YUDUF SUNSARA DCM POLISHING 88466 114000 370000 450000 - 21 AHMED ABBAS GULAM HUSSAIN SUNESARA - LABOUR 105835 50000 100000 220000 N.A. BANK 22 ABIDALI YUSUF SUNESARA - BROKERAGE 105705 50000 278000 420000 N.A. BANK TOTAL 7677000 4. IN REPLY TO THE NOTICE ISSUED BY THE A.O. ALONG WITH THE SAID ANNEXURE, IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE CONFIR MATIONS OF THE CREDITORS HAVING ALREADY BEEN FILED BY IT ALONG WITH OTHER RELEVANT DOCUMENT S SUCH AS INCOME TAX RETURN ACKNOWLEDGMENTS, BALANCE SHEET ETC., IT HAD ALREADY DISCHARGED THE ONUS THAT LAY ON IT TO EXAMINE THE RELEVANT CASH CREDITS U/S 68. THE A.O. DID NOT FIND THIS SUBMISSION OF THE ASSESSEE TO BE ACCEPTABLE. HE ALSO MADE DIRECT ENQ UIRY WITH THE BANKS OF THE CONCERNED CREDITORS WHICH CONFIRMED THE CASH DEPOSITS FOUND T O BE MADE BY THE CREDITORS IN THEIR BANK ACCOUNTS BEFORE ISSUING CHEQUES TO THE ASSESSE E. HE ALSO FOUND THAT ATLEAST IN CASE 4 ITA 4705/MUM/09, M/S HOTEL MARKAZ P. LTD. OF THREE CREDITORS, THE BANK ACCOUNTS WERE OPENED B Y THEM JUST BEFORE ISSUING CHEQUES TO THE ASSESSEE. KEEPING IN VIEW THE SAID INFORMATION RECEIVED BY HIM DIRECTLY FROM THE CONCERNED BANKS AND HAVING REGARD TO ALL OTHER FIND INGS RECORDED BY HIM, THE A.O. TREATED ALL THE UNSECURED LOANS AND SHARE CAPITAL AGGREGATI NG TO ` 76,77,000/- RECEIVED BY THE ASSESSEE COMPANY AS UNEXPLAINED CASH CREDITS ON THE GROUND THAT THE CAPACITY OF THE CONCERNED CREDITORS AS WELL AS GENUINENESS OF THE R ELEVANT TRANSACTIONS WAS NOT SATISFACTORILY ESTABLISHED BY THE ASSESSEE. ACCORDI NGLY, HE ADDED THE SAID AMOUNT OF ` 76,77,000/- TO THE TOTAL INCOME OF THE ASSESSEE U/S 68 IN THE ASSESSMENT COMPLETED U/S 143(3) VIDE AN ORDER DATED 31.12.08. 5. AGAINST THE ORDER PASSED BY THE A.O. U/S 143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) CHALLENGING THEREIN THE ADDITION OF ` 76,77,000/- MADE BY THE A.O. U/S 68. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS BEFORE THE LD. CIT(A), THE FOLLOWING SUBMISSIONS WERE MADE ON BEHALF OF THE AS SESSEE: 2.4THE FACTS OF THE CASE IN BRIEF ARE THAT APPELL ANT A PRIVATE LIMITED COMPANY WAS INCORPORATED ON 06/10/2005 AND FOR THE YEAR UND ER CONSIDERATION WHICH WAS ITS FIRST YEAR FILED ITS RETURN OF INCOME DECLARING LOS S OF RS.56,969/- AFTER DEBITING THE INITIAL ADMINISTRATIVE EXPENSES INCURRED BY IT DURI NG THE YEAR, TO THE PROFIT & LOSS A/C. IT MAY, HOWEVER, BE SUBMITTED THAT DURING THE YEAR, ASSESSEE COMPANY HAS NOT CARRIED ON ANY BUSINESS ACTIVITY AND HAS ONLY PURCH ASED A HOTEL PROPERTY / PREMISES. IN THE COURSE OF ASSESSMENT PROCEEDINGS FROM THE AU DIT REPORT FILED ASSESSING OFFICER NOTICED THAT ASSESSEE COMPANY HAD RECEIVED AN AMOUN T OF RS.76,77,000 FROM 22 PARTIES OUT OF WHICH AN AMOUNT OF RS.4,70,000/- WAS CONVERTED INTO SHARE CAPITAL AND THE BALANCE AMOUNT OF RS.72,07,000/- WAS SHOWN AS UNSECURED LOANS AS ON 31/3/2006 IN THE BALANCE SHEET FILED. THE ASSESSING OFFICER VIDE HIS LETTER DATED 12/6/2008 ASKED THE ASSESSEE TO FURNISH LOAN CONFIR MATIONS CONTAINING NAMES, ADDRESSES, COPIES OF RETURNS OF INCOME FILED BY THE LOAN CREDITORS, COPIES OF THEIR BANK STATEMENTS, EXPLANATION OF SOURCE OF FUNDS FOR ADVANCING LOANS, DETAILS OF INTEREST PAID AND ALSO THE COPIES OF THE LEDGER EXT RACTS OF THE SAID PARTIES AS APPEARING IN THE BOOKS OF THE ASSESSEE COMPANY. IN RESPONSE TO THE SAID LETTER, ASSESSEE COMPANY VIDE ITS LETTER DATED 26/6/2008 RE PLIED TO ALL THE QUERIES RAISED BY THE LD. ASSESSING OFFICER AND ALSO FURNISHED / ENCL OSED ALL THE DETAILS CALLED FOR BY HIM 5 ITA 4705/MUM/09, M/S HOTEL MARKAZ P. LTD. ..1) THE ASSESSEE COMPANY HAS COME INTO EXI STENCE DURING THE YEAR UNDER CONSIDERATION I.E. ON 6/10/2005 AND HENCE THE QUESTION OF THERE BEING ANY UNACCOUNTED INCOME OF ANY PREVIOUS PERIOD WHICH IT WAS TRYING TO ROUTE INTO THE BOOKS OF ACCOUNTS DOES NOT ARISE. 2) THE ASSESSEE COMPANY HAS DULY DISCHARGED THE ONU S CAST UPON IT BY NOT ONLY FILING THE LOAN CONFIRMATIONS, BANK STATEMENTS AND COPIES OF RETURNS OF INCOME OF THE LOAN CREDITORS BUT BY PROVIDING THE SAME IN TIME SO THAT IF AT ALL THE LEARNED ASSESSING OFFICER WANTED TO VERIFY ANYTHING INDEPENDENTLY HE COULD HAVE DONE IN ABSENCE OF WHICH IT CAN BE INFERRED THAT INITIALLY ASSESSING O FFICER WAS SATISFIED WITH THE SUBMISSIONS MADE BY THE ASSESSEE COMPANY BUT SUBSEQ UENTLY CHANGED HIS MIND WITHOUT FOLLOWING THE LAW AND THE PROCEDURE LAID DO WN BY VARIOUS COURTS AND HAS ARBITRARILY MADE THE ADDITION. 3) THE LEARNED ASSESSING OFFICER HAS ASKED ASSESSEE COMPANY TO PROVE THE SOURCE OF SOURCE WHICH IS NOT ONLY BEYOND THE CONTROL OF T HE ASSESSEE BUT IS ALSO AGAINST THE PRINCIPLES OF LAW AS HELD BY VARIOUS JUDICIAL FORUM S. 4) IT IS NOT ONLY THAT THE LEARNED ASSESSING OFFICE R IS ASKING THE ASSESSEE COMPANY TO PROVE WHAT IT HAS NOT DONE I.E. AN ALLEGED NEGATIVE ACT OF NOT COMMITTING THE WRONG BUT HAS NOT EVEN DONE WHAT HE HIMSELF WAS SUPPOSED TO DO UNDER THE LAW. 5) THE LEARNED ASSESSING OFFICER HAS ALSO RELIED UP ON SOME INFORMATION COLLECTED FROM THE BANKS OF LOAN CREDITORS BEHIND ASSESSEES BACK WITHOUT CONFRONTING THE ASSESSEE WITH THE SAID INFORMATION WHICH ALSO BEING AGAINST THE PRINCIPLES OF NATURAL JUSTICE MAKES THE ADDITION UNTENABLE IN THE EYES OF LAW. 6) THE LEARNED ASSESSING OFFICER HAS PLACED RELIANC E UPON SOME JUDGMENTS, FACTS OF WHICH ARE TOTALLY DISTINGUISHABLE FROM THE FACTS OF ASSESSEE COMPANYS CASE. 6. THE LD. CIT(A) DID NOT FIND MERIT IN THE ABOVE S UBMISSIONS MADE ON BEHALF OF THE ASSESSEE BEFORE HIM AND PROCEEDED TO DECIDE THE ISS UE AGAINST THE ASSESSEE FOR THE FOLLOWING REASONS GIVEN IN 2.5 OF HIS IMPUGNED ORDE R: 2.5 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT COMPANY, ORDER OF THE ASSESSING OFFICER AND THE FACTS OF THE CASE CAREFULLY. THE APPELLANT COMPANY HAS PURCHASED A HOTEL DURING THE YEAR AND HAS NOT M ADE ANY BUSINESS ACTIVITY. THE COMPANY HAS SHOWN UNSECURED LOANS OF RS.72,07,000/- AND SHARE CAPITAL OF RS.4,70,000/- RECEIVED FROM 22 PARTIES TOTALLING TO RS.76,77,000/-. ALL THE LOANS AND SHARE CAPITAL MONEY HAS BEEN RECEIVED DURING THE MO NTHS OF OCTOBER 2005 AND DECEMBER 2005. DURING THE ASSESSMENT PROCEEDINGS, T HE ASSESSING OFFICER HAS MADE ENQUIRIES FROM THE BANKS AND ALSO ASKED THE AP PELLANT COMPANY TO SUBMIT THE DETAILS OF 22 PARTIES SPECIFICALLY TO PROVE THE IDE NTITY OF THE PERSONS, GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINESS. IN RESPONSE TO THE SHOW CAUSE NOTICE OF THE ASSESSING OFFICER, THE APPELLANT SUBMITTED CONFIRMA TIONS AND INCOME TAX PARTICULARS 6 ITA 4705/MUM/09, M/S HOTEL MARKAZ P. LTD. OF THE 22 PARTIES. THE PROVISIONS OF SECTION 68 HAV E GIVEN WIDE POWERS TO THE ASSESSING OFFICER TO MAKE ENQUIRY IN ORDER TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE CREDITORS. THE INVESTIGATIO N MADE BY THE ASSESSING OFFICER HAS REVEALED THAT 22 PERSONS WHO HAVE ADVANCED THE LOANS AND INVESTED IN SHARE CAPITAL OF THE COMPANY, WERE MEN OF NO MEANS AS THE Y ARE EARNING ANNUAL INCOME RANGING FROM RS.80,000/- TO RS.1,00,000/-. THEIR HO USEHOLD WITHDRAWALS ARE FROM RS.30,000/- TO RS.1,00,000/- ANNUALLY WHICH MEANS T HEY HAVE NO SAVINGS FOR ADVANCING THE LOANS TO THE COMPANY AND INVESTING IN THE SHARE CAPITAL OF THE COMPANY. THE ABOVE CHART GIVEN SHOWS THE FINANCIAL POSITION OF THESE 22 PARTIES. THESE PEOPLE HAVE NO BANK ACCOUNTS EARLIER. ONLY BE FORE ADVANCING THE LOANS TO THE COMPANY, THEY HAVE OPENED THE BANK ACCOUNTS IN THE YEAR 2005. THERE WAS NO SAVING. THEY HAVE DEPOSITED CASH IN THEIR BANK ACCOUNTS BEF ORE ISSUING CHEQUES TO THE APPELLANT COMPANY. THE AUTHORISED REPRESENTATIVE OF THE COMPANY HAS SUBMITTED CONFIRMATIONS ALONG WITH INCOME TAX PARTICULARS OF THESE PERSONS TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TRANS ACTIONS BUT THE ASSESSING OFFICER HAS REJECTED THE SAME BECAUSE INVESTIGATION HAS PRO VED THAT ALL THESE PARTIES ARE LABOUR CLASS HAVING NO SOURCE OF INCOME AND JUST LI VING HAND TO MOUTH AND MEN OF NO MEANS. IT IS IMPOSSIBLE BY STRETCH OF ANY IMAGIN ATION THAT A PERSON HAVING INCOME OF RS.80,000/- ANNUALLY WILL ADVANCE A LOAN OF RS.4 ,50,000/- TO THE COMPANY. MERELY FILING OF CONFIRMATIONS AND INCOME TAX PARTICULARS WILL NOT PROVE THE CREDITWORTHINESS OF THE CONCERNED PERSON. THE ONUS IS ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTIONS. THE A.O. HAS RIGHT LY INVOKED THE PROVISIONS OF SECTION 68 AND RELIANCE IS PLACED ON THE FOLLOWING DECISIONS OF HONBLE COURTS WHERE IT IS HELD THAT THE ONUS IS ON THE ASSESSEE TO PROV E THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TRANSACTIONS. 7. FOR THE REASONS GIVEN ABOVE AND RELYING ON VARIO US CASE LAWS DISCUSSED IN HIS IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE ADDITI ON OF ` 76,77,000/- MAD BY THE A.O. U/S 68 ON ACCOUNT OF UNSECURED LOANS AND SHARE CAPI TAL RECEIVED BY THE ASSESSEE TREATING THE SAME AS UNEXPLAINED CASH CREDITS. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBU NAL. 8. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE COMPANY WAS INCORPORATED ONLY IN THE YEAR UNDER CONSIDERATION O N 6.10.05 AND IN THE ABSENCE OF ANY BUSINESS ACTIVITY CARRIED ON IN THE SAID YEAR, THER E WAS NO POSSIBILITY OF EARNING ANY INCOME MUCH LESS AN UNDISCLOSED INCOME WHICH COULD BE INTRODUCED IN THE FORM OF UNEXPLAINED CASH CREDITS. HE SUBMITTED THAT ALL TH E AMOUNTS ON ACCOUNT OF UN-SECURED LOANS AND DEPOSITS WERE RECEIVED BY THE ASSESSEE CO MPANY FROM 22 CREDITORS BY A/C PAYEE CHEQUES AND THE SAME WERE DEPOSITED IN ITS BA NK ACCOUNT. HE SUBMITTED THAT ALL 7 ITA 4705/MUM/09, M/S HOTEL MARKAZ P. LTD. THESE CREDITORS WERE DULY ASSESSED TO INCOME TAX AN D THEIR CONFIRMATION LETTERS GIVING ALL THE RELEVANT DETAILS WERE DULY FURNISHED BEFORE THE A.O. HE INVITED OUR ATTENTION TO THE COPIES OF THE SAID CONFIRMATIONS PLACED ON RECORD B EFORE US AND POINTED OUT THAT ALL THE RELEVANT DETAILS INCLUDING THE PERMANENT ACCOUNT NU MBERS OF THE CREDITORS, THEIR NAMES AND COMPLETE ADDRESSES WERE GIVEN THEREIN. HE FURT HER SUBMITTED THAT EVEN THE COPIES OF THEIR RELEVANT INCOME TAX RETURN ACKNOWLEDGEMENTS A LONG WITH BALANCE SHEET AND P& L ACCOUNT AS WELL AS BANK ACCOUNT EXTRACTS FOR THE RE LEVANT PERIOD WERE FURNISHED BY THE ASSESSEE BEFORE THE A.O. HE INVITED OUR ATTENTION TO THE COPIES OF THE SAID DOCUMENTS PLACED IN HIS PAPER BOOK AND CONTENDED THAT THE SAM E WERE SUFFICIENT TO DISCHARGE THE PRIMARY ONUS THAT LAY ON THE ASSESSEE TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS AS WELL AS IDENTITY AND CAPACITY OF THE CONCERNED CRED ITORS. HE SUBMITTED THAT THE A.O., HOWEVER, DOUBTED THE CAPACITY OF THE CONCERNED CRED ITORS MERELY GOING BY THE QUANTUM OF INCOME DISCLOSED BY THEM IN THE RELEVANT YEAR IGNOR ING COMPLETELY THAT THE SAID CREDITORS HAD RAISED THE FUNDS FROM OTHER SOURCES ALSO SUCH A S LOANS ETC. HE CONTENDED THAT EVEN THE OTHER OBJECTIONS OF THE A.O. REGARDING CASH DEP OSITED BY THE CONCERNED CREDITORS IN THEIR BANK ACCOUNTS PRIOR TO THE ISSUE OF CHEQUES T O THE ASSESSEE IS NOT SUSTAINABLE SINCE SUCH CASH DEPOSITS WERE ONLY SMALL AMOUNTS AS COMPA RED TO LOANS GIVEN BY THE CONCERNED CREDITORS TO THE ASSESSEE. IN THIS REGARD, HE POIN TED OUT FROM THE RELEVANT DETAILS GIVEN BY THE A.O. IN THE ANNEXURE THAT SHRI MUSTQALI HASAM P ALSANIA HAD GIVEN A LOAN OF RS. 4 LACS TO THE ASSESSEE WHEREAS CASH DEPOSIT IN HIS BA NK ACCOUNT WAS ONLY TO THE EXTENT OF RS. 90,000/-. HE ALSO POINTED OUT OTHER INSTANCES WHER EIN SIMILAR POSITION WAS THERE. HE CONTENDED THAT ALL THE CREDITORS IN ANY CASE WERE R EGULARLY ASSESSED TO TAX AND THE LOAN AMOUNTS GIVEN TO THE ASSESSEE HAVING BEEN DULY DISC LOSED BY THEM IN THEIR RETURNS, THERE WAS NO REASON FOR THE AUTHORITIES BELOW TO TREAT TH E SAID LOANS AS UNEXPLAINED CASH CREDITS IN THE HANDS OF THE ASSESSEE MERELY BECAUSE THERE W ERE SOME CASH DEPOSITS IN THE ACCOUNTS OF THE CREDITORS. HE FURTHER CONTENDED TH AT WHEN ALL THE RELEVANT DOCUMENTARY EVIDENCE WAS FILED BY THE ASSESSEE TO DISCHARGE THE PRIMARY ONUS THAT LAY ON IT TO ESTABLISH THE IDENTITY AND CAPACITY OF THE CONCERNED CREDITOR S AND THE GENUINENESS OF THE RELEVANT TRANSACTION, THE A.O. SHOULD HAVE MADE ENQUIRIES WI TH THE SAID CREDITORS OR ATLEAST WITH 8 ITA 4705/MUM/09, M/S HOTEL MARKAZ P. LTD. THE INCOME TAX OFFICES WHERE THE SAID CREDITORS WER E REGULARLY ASSESSED TO TAX BEFORE DRAWING ANY ADVERSE INFERENCE AGAINST THE ASSESSEE. HE CONTENDED THAT THE A.O., HOWEVER, HAS NEITHER MADE ANY SUCH ENQUIRY NOR ASKE D THE ASSESSEE TO PRODUCE THE CONCERNED CREDITORS FOR THEIR EXAMINATION. HE CONTE NDED THAT IN THE ABSENCE OF ANY SUCH ENQUIRY MADE BY THE A.O. WITH THE CONCERNED CREDITO RS, THE ADDITION MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) TREATING THE LOANS GIVEN BY THE SAID CREDITORS TO THE ASSESSEE COMPANY AS UNEXPLAINED CASH CREDITS U/S 68 IS NOT SUSTAINABLE. IN SUPPORT OF THIS CONTENTION, HE RELIED, INTER ALIA, ON THE DECISION OF THIRD MEMBER DECISION OF AGRA BENCH OF ITAT IN THE CASE OF KALYAN MEMORIAL AND CHARITAB LE TRUST VS. CIT 121 ITD 525 AND THAT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF OR IENT TRADING COMPANY VS. CIT 49 ITR 723. 9. THE LEARNED D.R., ON THE OTHER HAND, SUBMI TTED THAT SPECIFIC ADVERSE FINDINGS HAVE BEEN RECORDED BY THE A.O. TO JUSTIFY HIS ACTION OF TREATING THE RELEVANT CASH CREDITS AS UNEXPLAINED U/S 68. HE CONTENDED THAT AS POINTED O UT BY THE A.O. IN THIS REGARD, THE FACTUAL POSITION IN CASE OF MOST OF THE CREDITORS I S SIMILAR IN AS MUCH AS THE QUANTUM OF INCOME DECLARED BY THEM IN THE RELEVANT YEAR WAS IN ADEQUATE TO GIVE THE CORRESPONDING AMOUNTS OF LOAN TO THE ASSESSEE. HE SUBMITTED THAT CASH WAS ALSO FOUND TO BE DEPOSITED BY MOST OF THE CREDITORS IN THEIR BANK ACCOUNTS BEF ORE GIVING THE LOANS TO THE ASSESSEE. HE CONTENDED THAT WHEN THE ASSESSEE WAS AWARE OF THE F ACT THAT THE LOANS AND SHARE MONEY RECEIVED BY IT IN THE YEAR UNDER CONSIDERATION WERE BEING EXAMINED BY THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT COULD HAVE PRODUCED THE CONCERNED CREDITORS FOR THE EXAMINATION. HE CONTENDED THAT IF AT ALL SUCH EXAMINATION OF THE CREDITORS IS FOUND TO BE NECESSARY BY THE TRIBUNAL, THE MATTER MAY BE SEN T BACK TO THE A.O. FOR SUCH EXAMINATION. 10. WE HAVE CONSIDERED THE RIVAL CONTENTIONS A ND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE CONFIRMATION LETTE RS IN RESPECT OF ALL THE LOANS AND SHARE CAPITAL RECEIVED BY THE ASSESSEE FROM 22 CREDITORS WERE FURNISHED BEFORE THE A.O. DURING 9 ITA 4705/MUM/09, M/S HOTEL MARKAZ P. LTD. ASSESSMENT PROCEEDINGS AND ALL THE RELEVANT DETAILS SUCH AS THEIR FULL NAMES, COMPLETE ADDRESSES, PERMANENT ACCOUNT NUMBERS AND MODE OF PA YMENT WERE ALSO FURNISHED. EVEN THE COPIES OF INCOME TAX RETURN ACKNOWLEDGEMENTS OF THE SAID CREDITORS WERE FILED BY THE ASSESSEE ALONG WITH COPIES OF BALANCE SHEET AND P&L ACCOUNTS AS WELL AS COPIES OF THEIR BANK PASS BOOK/BANK STATEMENTS. THE PRIMARY ONUS TH AT LAY ON THE ASSESSEE TO EXPLAIN THE CASH CREDITS REPRESENTING LOAN AMOUNTS AND SHARE CA PITAL IN TERMS OF SECTION 68 THUS WAS DULY DISCHARGED BY THE ASSESSEE BY ESTABLISHING THE IDENTITY AND CAPACITY OF THE CONCERNED CREDITORS AS WELL AS GENUINENESS OF THE RELEVANT TR ANSACTION. THE ONUS THEREAFTER WAS SHIFTED TO THE REVENUE AND IT WAS FOR THE A.O. TO B RING ON RECORD TO SHOW WHY THE EXPLANATION OFFERED BY THE ASSESSEE WAS NOT ACCEPTA BLE. IN THIS REGARD, IT IS OBSERVED THAT NOTHING HAS BEEN BROUGHT ON RECORD BY THE A.O. TO D ISCHARGE THIS ONUS AND THE RELEVANT CASH CREDITS WERE TREATED BY HIM AS UNEXPLAINED MER ELY GOING BY THE QUANTUM OF INCOME DECLARED BY THE CONCERNED CREDITORS AND SOME CASH D EPOSITS FOUND TO BE MADE BY THEM IN THEIR BANK ACCOUNTS BEFORE GIVING LOANS TO THE ASSE SSEE. AS RIGHTLY CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE IN THIS REGARD, TH E CAPACITY OF THE CREDITORS TO GIVE THE LOANS TO THE ASSESSEE CANNOT BE ALWAYS ASCERTAINED ONLY ON THE BASIS OF INCOME DECLARED BY THE CONCERNED CREDITORS WHICH IS JUST ONE SOURCE OF INCOME. THE CONCERNED CREDITORS MAY ALSO OTHER SOURCES TO GENERATE FUNDS LIKE THE C REDITORS IN THE PRESENT CASE WHO HAD GENERATED SUBSTANTIAL AMOUNT BY WAY OF LOANS AVAILE D AS IS EVIDENT FROM THE DETAILS GIVEN BY THE A.O. HIMSELF IN THE ANNEXURE WHICH IS REPROD UCED HEREINABOVE. AS REGARDS THE CASH DEPOSITS FOUND TO BE MADE BY THE CONCERNED CRE DITORS BEFORE GIVING LOANS TO THE ASSESSEE, WE FIND MERIT IN THE ARGUMENTS OF THE LEA RNED COUNSEL FOR THE ASSESSEE THAT THE SAID DEPOSITS BEING IN SMALL AMOUNTS AS COMPARED TO THE LOAN AMOUNT GIVEN BY THE CONCERNED CREDITORS TO THE ASSESSEE AND THE SAID LO ANS AS WELL AS THE CONCERNED BANK ACCOUNTS FROM WHICH THE SAID LOANS WERE GIVEN HAVIN G BEEN DULY DECLARED BY THE CONCERNED CREDITORS IN THEIR INCOME TAX RETURNS, NO ADVERSE INFERENCE AGAINST THE ASSESSEE CAN BE DRAWN ON THE ISSUE OF CASH CREDITS IN TERMS OF SECTION 68 ON THE BASIS OF SUCH CASH DEPOSITS. THE REASONS GIVEN BY THE A.O. THUS WERE NOT SUFFICIENT TO DISCHARGE THE ONUS THAT LAY ON THE REVENUE FOR TREATING THE RELEVANT C ASH CREDITS AS UNEXPLAINED WHEN 10 ITA 4705/MUM/09, M/S HOTEL MARKAZ P. LTD. CONFIRMATIONS OF THE CONCERNED CREDITORS AS WELL AS OTHER DOCUMENTARY EVIDENCES WERE FILED BY THE ASSESSEE TO EXPLAIN THE SAID CASH CRED ITS IN TERMS OF SECTION 68. 11. IT IS ALSO OBSERVED THAT NO ENQUIRY WHATSOEVER WAS MADE BY THE A.O. EITHER DIRECTLY WITH THE CONCERNED CREDITORS OR EVEN WITH THE INCOME TAX OFFICES WHERE THEY WERE REGULARLY ASSESSED TO TAX TO ASCERTAIN THE GENUINEN ESS OF CASH CREDITS IN QUESTION. THE ASSESSEE COMPANY WAS ALSO NOT CALLED UPON BY THE A. O. TO PRODUCE THE CONCERNED CREDITORS FOR EXAMINATION. IN THE CASE OF KALYAN M EMORIAL AND CHARITABLE TRUST (SUPRA), EVIDENCE IN THE SHAPE OF CONFIRMATIONS, COPY OF BAN K ACCOUNT AND ACKNOWLEDGEMENTS OF INCOME TAX RETURNS WERE FILED BY THE ASSESSEE IN TH E CASE OF CASH CREDITS. IN ALL THE CONFIRMATIONS, PERMANENT ACCOUNT NUMBERS HAD BEEN M ENTIONED ALONG WITH NAMES ADDRESSES OF THE CONCERNED CREDITORS. ALTHOUGH SUM MONS WERE ISSUED BY THE A.O. TO THE CREDITORS, THE SAME COULD NOT BE SERVED. THE A.O., THEREFORE, TREATED THE RELEVANT CASH CREDITS AS INCOME OF THE ASSESSEE U/S 68 AND ADDED THE AMOUNT OF SUCH CASH CREDITS TO THE TOTAL INCOME OF THE ASSESSEE U/S 68 WHICH WAS UPHEL D BY THE LD. CIT(A). WHEN THE MATTER REACHED TO THE TRIBUNAL, IT WAS HELD BY THE THIRD M EMBER AGREEING WITH THE JUDICIAL MEMBER THAT THE A.O. COULD HAVE VERIFIED EITHER FRO M THE INCOME TAX RECORD OR FROM THE RECORD OF BANK THE IDENTITY OF THE CONCERNED CREDIT ORS. IT WAS ALSO HELD THAT THE A.O. COULD HAVE ASKED THE ASSESSEE TO PRODUCE THE CONCERNED CR EDITORS WHICH HE FAILED TO DO. IT WAS HELD THAT THE ASSESSEE BY FILING EVIDENCE IN THE SH APE OF CONFIRMATIONS COPIES OF BANK ACCOUNTS AND ACKNOWLEDGMENTS OF INCOME TAX RETURNS HAD DISCHARGED THE INITIAL BURDEN TO EXPLAIN THE CASH CREDITS IN TERMS OF SECTION 68 AND THE BURDEN THUS WAS SHIFTED ON THE REVENUE TO SHOW THAT WHAT WAS EXPLAINED BY THE ASSE SSEE WAS NOT A CORRECT STATE OF AFFAIRS. IT WAS HELD THAT THERE WAS, HOWEVER, NO MA TERIAL WHATSOEVER THAT HAD BEEN BROUGHT ON RECORD BY THE DEPARTMENT TO DISCHARGE THE SAID B URDEN AND THE EVIDENCE FILED BY THE ASSESSEE REMAINING UN-REBUTTED, ADDITION U/S 68 COU LD NOT BE MADE. IN THE CASE OF ORIENT TRADING CO. LTD. (SUPRA) IT WAS HELD BY THE HONBLE BOMBAY HIGH COURT THAT IF THE CASH CREDIT ENTRY STANDS IN THE NAME OF THIRD PARTY AND THE ASSESSEE SATISFIES THE INCOME TAX 11 ITA 4705/MUM/09, M/S HOTEL MARKAZ P. LTD. OFFICER AS TO THE IDENTITY OF THE THIRD PARTY AND A LSO SUPPLIES SUCH OTHER EVIDENCE WHICH WILL SHOW, PRIMA FACIE, THAT THE ENTRY IS NOT FICTI TIOUS, THE INITIAL BURDEN WHICH LIES ON HIM CAN BE SAID TO BE DISCHARGED BY HIM. IT WAS HELD T HAT THE BURDEN WILL THEN SHIFT ON TO THE DEPARTMENT TO SHOW WHY THE ASSESSEES CASE CANNOT B E ACCEPTED AND WHY IT MUST BE HELD THAT THE ENTRY THOUGH PURPORTING TO BE IN THE NAME OF A THIRD PARTY STILL REPRESENTS THE INCOME OF THE ASSESSEE FROM A SUPPRESSED SOURCE. I T WAS HELD THAT IN ORDER TO ARRIVE AT SUCH A CONCLUSION, THE DEPARTMENT HAS TO BE IN POSS ESSION OF SUFFICIENT AND ADEQUATE MATERIAL. 12. KEEPING IN VIEW THE PROVISION PROPOUNDED IN THE AFORESAID JUDICIAL PRONOUNCEMENTS AND HAVING REGARD TO ALL THE FACTS O F THE CASE AS DISCUSSED ABOVE, WE ARE OF THE VIEW THAT SUFFICIENT EVIDENCE WAS FILED BY T HE ASSESSEE IN THE FORM OF CONFIRMATIONS, COPIES OF BANK ACCOUNTS, ACKNOWLEDGE MENT OF INCOME TAX RETURNS AND FINANCIAL STATEMENTS OF THE CONCERNED CREDITORS TO DISCHARGE THE INITIAL BURDEN TO EXPLAIN THE CASH CREDITS REPRESENTING THE LOANS AND SHARE C APITAL IN TERMS OF SECTION 68 AND THE SAID EVIDENCE FILED BY THE ASSESSEE REMAINING UN-RE BUTTED BY THE DEPARTMENT, THE ADDITION MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) TR EATING THE LOANS AND SHARE CAPITAL AS UNEXPLAINED CASH CREDITS IS NOT SUSTAINABLE. WE, T HEREFORE, DELETE THE SAID ADDITION AND ALLOW GROUND NO. 2 & 3 OF THE ASSESSEES APPEAL. 13. THE REMAINING GROUNDS RAISED BY THE ASSESSEE IN THIS APPEAL ARE NOT PRESSED BY THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEA RING BEFORE US. THE SAME ARE, THEREFORE, DISMISSED AS NOT PRESSED. 12 ITA 4705/MUM/09, M/S HOTEL MARKAZ P. LTD. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 10 TH DECEMBER, 2010. SD/- SD/- (R.S. PADVEKAR) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTAN T MEMBER MUMBAI, DATED 10 TH DECEMBER , 2010. RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) VIII - MUMBAI 4. THE CIT- 8, MUMBAI 5. THE DR BENCH, H 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI 13 ITA 4705/MUM/09, M/S HOTEL MARKAZ P. LTD. DATE INITIALS 1. DRAFT DICTATED 2.12.10, 8.12.10 SR.P.S./P.S. 2. DRAFT PLACED BEFORE AUTHOR 8.12.10, 9.12.10 SR.P.S./P.S. 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER. - J.M./A.M. 4.DRAFT DISCUSSED/ APPROVED BY SECOND MEMBER. J.M./A.M. 5. APPROVED DRAFT COMES TO THE SR.P.S./P.S. SR.P.S./P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S. 8. DATE OF WHICH FILE GOES TO THE HEAD CLERK. 9. DATE OF DISPATCH OF ORDER.