DCIT, Circle - 10(1), Kolkata , Kolkata V. M/s. A.A. Infraproperties Pvt. Ltd., , Kolkata

ITA 54/KOL/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 4814 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 10-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Assessee Lawyers: S K TULSIYAN
• Keywords: Unexplained cash credit; Unexplained investment; Source of fund; Onus to prove; Bogus loan; TDS; Set aside
• Section: 133(6); 37(1); 131; 68; 69

Judgement Text

1 ITA NO. 54/KOL/2018 M/S. AA INFRAPROPERTIES PVT. LTD. AY 2012-13 , C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA ( ) . . , . ' # $% % , '( ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 54/KOL/2018 ASSESSMENT YEAR: 2012-13 DCIT, CENTRAL CIRCLE 10(1), KOLKATA VS. M/S. A.A. INFRAPROPERTIES PVT. LTD. [PAN: AAHCA 8145 L] APPELLANT RESPONDENT DATE OF HEARING 24.06.2019 DATE OF PRONOUNCEMENT 09.08.2019 FOR THE APPELLANT DR. P.K. SRIHARI, CIT, DR, FOR THE RESPONDENT SHRI S.K. TULSIYAN, ADVOCATE ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL PREFERRED BY THE REVENUE IS AGAIN ST THE ORDER OF LD. CIT(A) - 4, KOLKATA DATED 17.10.2017 FOR AY 2012-13. 2. THE GROUNDS OF APPEAL OF THE REVENUE IS AS UNDER : 1. THE LD. CIT(A) HAS ERRED IN DELETING THE ADITIO N OF RS. 9,00,00,000/- AS UNEXPLAINED CREDIT U/S 68 OF I.T. ACT, 1961 BY HOLDING THAT THE ASSESS EE HAS ESTABLISHED THE IDENTITY, CAPACITY AND GENUINENESS OF TRANSACTION MERELY BY RELYING ON MER E PAPER SUBMISSIONS AND CONFIRMATIONS PRODUCED BY THE ASSESSEE TO SUPPORT ITS SHAM TRANSA CTIONS AND IGNORING THE FINDING OF THE AO. 2. THE LD. CIT(A) HAS ERRED IN HOLDING THAT MERE SE RVICE OF THE SUMMONS AT THE ADDRESS AMOUNTS TO PROOF OF EXISTENCE AND IDENTITY OF THE CREDITOR, NOT CONSIDERING THE FACT THAT THE ASSESSEE COMPANY COULD NOT PRODUCE THE PRINCIPAL OFFICER OF SILVER CROSS MARKETING PVT. LTD. BEFORE THE AO AND MERELY RESORTED TO EVASIVE TACTICS LIKE SUBM ITTING PAPER SUBMISSIONS. 3. THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLO WANCE OF RS. 54,66,393/- ON ACCOUNT OF INTEREST PAID ON THE LOAN OF RS. 9 CRORE. 2 ITA NO. 54/KOL/2018 M/S. AA INFRAPROPERTIES PVT. LTD. AY 2012-13 3. GROUND NO. 1, 2 AND 3 IS AGAINST THE ACTION OF T HE LD. CIT(A) IN DELETING THE ADDITION OF RS. 9 CRORES AS UNEXPLAINED CREDIT U/S 68 OF THE INCOME TAX ACT (HEREIN AFTER REFERRED TO AS THE ACT). 4. BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE-COM PANY HAS FILED ITS RETURN OF INCOME REFLECTING RS. 3,04,83,860/-. LATER THE CASE WAS TA KEN FOR SCRUTINY. THE AO NOTED THAT THE ASSESSEE HAS SHOWN CREDIT ENTRY OF RS. 7 CRORES ON 04.08.2011 AND RS. 2 CRORES ON 09.09.2011 IN ITS BOOKS OF ACCOUNT AND THE ASSESSEE CLAIMED THE SAID TOTAL AMOUNT OF RS. 9 CRORES AS LOAN RECEIVED DURING THIS YEAR FROM M/S. SILVER CROSS MARKETING PVT. LTD. (HEREIN AFTER REFERRED TO M/S. SCMPL) AND THE INTEREST OF R S. 54,66,393/- HAS BEEN CREDITED BY THE ASSESSEE TO THEM AND THE ASSESSEE HAS SHOWN TO HAVE DEDUCTED TAX AT SOURCE (TDS) OF RS. 5,43,639/- ON THE INTEREST EXPENSE. THE AO ACKNOWLE DGES THAT THE DEPOSITS OR CREDITS HAVE BEEN MADE THROUGH BANKING CHANNEL AND FROM A COMPAN Y WHICH ACCORDING TO HIM EXISTS ONLY ON PAPER. IN ORDER TO VERIFY THE CREDITWORTHIN ESS OF THE LOAN CREDITORS, A NOTICE U/S 131 WAS ISSUED TO THE PR. OFFICER TO M/S. SCMPL ON 15.0 1.2015 WHICH WAS SERVED UPON IT. ACCORDING TO THE AO, NO ONE APPEARED BEFORE HIM ON THE DATE GIVEN I.E. 28.01.2015 TO GIVE THE STATEMENT SO AS TO SUBSTANTIATE THE CREDITWORTH INESS OF ADVANCING THE TOTAL AMOUNT OF RS. 9 CRORES. THE AO NOTED THAT THE COMMON DIRECTOR OF ASSESSEE-COMPANY AND M/S. SCMPL IS SHRI JAIDEEP HALWASIYA. SINCE NONE APPEARED ON 28.0 1.2015 FROM M/S. SCMPL, A SHOW CAUSE NOTICE WAS ISSUED ON 03.03.2015 TO THE ASSESS EE ASKING WHY THE CREDIT OF RS. 9 CRORES FROM M/S. SCMPL SHOULD NOT BE TREATED AS UNEXPLAINE D CREDIT U/S 68 OF THE ACT AND INTEREST DEBITED AGAINST SUCH LOAN TO THE EXTENT OF RS. 54,6 6,393/- SHOULD NOT BE DISALLOWED U/S 37(1) OF THE ACT. THE AO ACKNOWLEDGES THAT THE ASSESSEE, PURSUANT TO THE SHOW CAUSE NOTICE HAD FILED WRITTEN SUBMISSION DATED 12.03.2015 BEFORE HI M. THE AO REPRODUCES THE RELEVANT PORTION OF THE LETTER OF THE ASSESSEE WHEREIN THE A SSESSEE HAD UNDERTAKEN TO PRODUCE THE DIRECTOR OF M/S. SILVER CROSS MARKETING PVT. LTD. A ND ALSO HAS STATED THAT THE LD. AR OF M/S. SCMPL HAD APPEARED BEFORE THE AO AND HAD SUBMITTED VARIOUS DOCUMENTS AND EVIDENCES ASKED FOR BY THE AO VIDE EARLIER NOTICE DATED 15.01 .2015. HOWEVER THE AO DID NOT ACCEPT THE SUBMISSION OF THE ASSESSEE THAT THE AR OF M/S. SILVER CROSS MARKETING PVT. LTD. APPEARED BEFORE HIM AND FILED THE DOCUMENTS. THE AO ALSO DISPUTED THE AVERMENTS BY THE 3 ITA NO. 54/KOL/2018 M/S. AA INFRAPROPERTIES PVT. LTD. AY 2012-13 ASSESSEE THAT ITS OWN AR APPEARED BEFORE HIM ON 11. 03.2015. THEREAFTER, THE AO ASKED THE ASSESSEE TO PRODUCE THE PR. OFFICER OF M/S. SILVER CROSS MARKETING PVT. LTD. ALONG WITH ALL NECESSARY EVIDENCES TO ANSWER THE QUERIES RAISED IN THE NOTICE U/S 131 DATED 15.01.2015. HOWEVER, ACCORDING TO THE AO THE ASSESSEE DID NOT R ESPOND RATHER REITERATED THAT IT HAS ALREADY COMPLIED WITH THE QUERIES RAISED BY SUBMITT ING THE DOCUMENTS SOUGHT FOR BY THE AO ON 13.03.2015. IN SUCH A SCENARIO THE AO WAS OF THE OPINION THAT THE ASSESSEE FAILED TO FULFILL ITS COMMITMENT TO PRODUCE THE DIRECTOR OF M /S. SCMPL OF THE SO-CALLED CREDITORS (M/S. SILVER CROSS MARKETING PVT. LTD.) AND BEING A CLOSELY RELATED COMPANY WHICH IS HAVING COMMON DIRECTOR IS NOTHING BUT A COMPANY WHI CH EXISTS ONLY ON PAPERS AND ITS CREDITWORTHINESS HAS NOT BEEN PROVED. THUS HE CONCL UDED THAT THE ASSESSEE HAS USED M/S. SILVER CROSS MARKETING PVT. LTD. AS A MASK FOR INTR ODUCING ITS OWN UNDISCLOSED INCOME WITHOUT PAYING ANY TAX IN THE GUISE OF LOAN. THEREF ORE, HE ADDED RS. 9 CRORES AS UNEXPLAINED CREDIT AND ADDED BACK U/S 68 OF THE ACT, THEREAFTER , DISALLOWED THE INTEREST EXPENDITURE OF RS. 54,66,393/-. AGGRIEVED THE ASSESSEE PREFERRED A N APPEAL BEFORE THE LD. CIT(A) WHO WAS PLEASED TO ALLOW THE APPEAL OF THE ASSESSEE. AGGRIE VED THE REVENUE IS BEFORE US. 5. THE LD. CIT, DR ASSAILING THE DECISION OF THE LD . CIT(A) CONTENDED THAT THOUGH THE ASSESSEE-COMPANY CLAIMS TO HAVE TAKEN THIS LOAN FRO M A SISTER CONCERN OF M/S. SCMPL, THE ASSESSEE FAILED TO PRODUCE THE PR. OFFICER OF THAT LENDER COMPANY. IT WAS POINTED OUT BY THE LD. CIT, DR THAT EVEN THOUGH THE ASSESSEE ITSELF HA S UNDERTAKEN VIDE LETTER DATED 03.03.2015 TO PRODUCE THE PR. OFFICER OF M/S. SCMPL IT DID NOT DO SO WHICH CLEARLY GOES ON TO SHOW THAT M/S. SCMPL EXIST ONLY ON PAPER AND THEREFORE, THE AO RIGHTLY ADDED THE BOGUS LOAN U/S 68 AND DISALLOWED THE INTEREST EXPENDITURE BECAUSE THE ASSESSEE HAD INTRODUCED ITS OWN MONEY AS LOAN WITHOUT PAYING TAX AND HAS RIGHTLY DI SALLOWED THE INTEREST EXPENDITURE CLAIMED TO HAVE BEEN PAID BY THE ASSESSEE-COMPANY T O M/S. SCMPL. THEREFORE, HE WANTS US TO REVERSE THE ORDER OF THE LD. CIT(A) AND UPHOLD T HE ORDER OF THE AO. 6. PER CONTRA THE LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT(A) AND CONTENDED THAT THE LD. CIT(A) HAS RIGHTLY TAKEN NOT E THAT M/S. SILVER CROSS MARKETING PVT. LTD. IS A SISTER CONCERN AND THE AO / CIT(A) HAS GO NE THROUGH THE DOCUMENTS FILED BEFORE THEM WHICH CLEARLY SHOWS THE IDENTITY, CREDITWORTHI NESS OF THE LENDER AND GENUINENESS OF THE 4 ITA NO. 54/KOL/2018 M/S. AA INFRAPROPERTIES PVT. LTD. AY 2012-13 TRANSACTION. THEREFORE, THE LD. CIT(A) HAS DELETED THE ADDITION AND HE DOES NOT WANT US TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. WE NOTE THAT THE ASSESSEE- COMPANY IS ENGAGED IN THE BUSINESS OF DEVELOPMENT O F RESIDENTIAL AND COMMERCIAL COMPLEX. ITS RETURN OF INCOME FOR THIS ASSESSMENT YEAR IS TO THE TUNE OF RS. 3,04,83,860/-. DURING SCRUTINY ASSESSMENT, THE AO ISSUED NOTICES U/S 142( 1) WHEREIN THE DETAILS OF THE LOAN CREDITORS WERE SOUGHT FROM THE ASSESSEE; PURSUANT T O WHICH THE DETAILS WERE FURNISHED BY THE ASSESSEE BEFORE THE AO. THEREAFTER, THE AO ISSUED N OTICE U/S 131 TO THE LOAN CREDITORS DIRECTING THE PR. OFFICER TO BE PRESENT BEFORE HIM. SINCE NO ONE APPEARED ON BEHALF OF THE LENDER COMPANY, A SHOW CAUSE NOTICE WAS ISSUED BY T HE AO TO THE ASSESSEE PURSUANT TO WHICH THE ASSESSEE REPLIED VIDE ITS LETTER DATED 12 .03.2015 WHEREIN IT WAS BROUGHT TO THE NOTICE OF THE AO THAT IT HAD ALREADY FILED DOCUMENT S TO PROVE THE IDENTITY OF THE CREDITORS, CREDITWORTHINESS OF THE CREDITORS AND GENUINENESS O F THE TRANSACTION. WE NOTE THAT THE FOLLOWING DETAILS WERE FURNISHED BY THE LOAN CREDIT OR WHICH ARE AS UNDER: I. BALANCE SHEET, INCOME EXPENDITURE TOGETHER WITH IT RETURN OF ITS DIRECTORS FOR AY 2010-11, 2011-12 & 2012-13. II. COPIES OF VOTER ID CARD AND PAN CARD OF ITS DIR ECTORS. III. COPY OF ANNUAL RETURN FILED BY THE CREDITOR CO MPANY. IV. AUDITED ACCOUNTS OF THE CREDITOR COMPANY FOR TH E RELEVANT FY TOGETHER WITH ITS IT RETURN. V. COPY OF LOAN CONFIRMATION. VI. RELEVANT EXTRACTS OF BANK STATEMENT SHOWING THE DISBURSEMENT OF LOAN. VII. SOURCES OF FUNDS FOR ADVANCING LOAN TO THE ASS ESSEE COMPANY TOGETHER WITH SUPPORTING DOCUMENTS (STATEMENT FROM BIRLA MUTUAL FUND, DSP MU TUAL FUND EVIDENCING REDEMPTION, CONTRACT NOTES EVIDENCING SALE OF SHARES ETC.). 8. DURING THE APPELLATE PROCEEDINGS, IT WAS BROUGHT TO THE NOTICE OF THE LD. CIT(A) THAT THE AFORESAID DOCUMENT WERE DULY FILED BEFORE THE A O I.E. THE ANNUAL RETURN, IT RETURN OF THE CREDITOR COMPANY, VOTER ID CARD AND PAN CARD OF ITS DIRECTORS WHICH ESTABLISHES THE IDENTITY OF THE LENDER; AND THE FACT THAT AO HIMSELF HAS ACC EPTED THAT THE ENTIRE LOAN AMOUNT HAS COME THROUGH BANKING CHANNEL WHICH FACT ESTABLISHES GENUINENESS OF THE LOAN TRANSACTION 5 ITA NO. 54/KOL/2018 M/S. AA INFRAPROPERTIES PVT. LTD. AY 2012-13 BETWEEN M/S. SCMPL AND THE ASSESSEE. IN ORDER TO PR OVE THE GENUINENESS OF THE LENDER COMPANY M/S. SCMPL, THE LD. AR DREW OUR ATTENTION T O THE AUDITED ACCOUNTS OF M/S. SILVER CROSS MARKETING PVT. LTD. FOR THE RELEVANT FY. A PE RUSAL OF THE SAME SHOWS THAT THE NET WORTH OF THE COMPANY AS ON 31.03.2011 WAS RS. 40.55 CRORES WHICH INCREASED TO RS. 42.63 BY 31.03.2012. OUR ATTENTION WAS DRAWN TO NOTE NO. 27 IN WHICH IS THE RELATED PARTY DISCLOSURE SHOWS THE FACT OF LOAN OF RS. 9 CRORES A DVANCED TO THE ASSESSEE-COMPANY. OUR ATTENTION WAS ALSO DRAWN TO THE FACT THAT THE LOAN CREDITOR / M/S. SCMPL HAS A STRONG ASSET BASE. WE NOTE THAT IT HAS INVESTMENTS IN TANGIBLE A SSETS ARE LISTED BELOW: PARTICULARS AMOUNT(RS.) FLAT AT SILVER SPRING 49,06,261/- IMMOVABLE PROPERTIES 1,69,40,190/- QUOTED INVESTMENTS 10,01,15,157/- CASH IN HAND 3,02,281/- CASH AT BANK 18,56,119/- STOCK IN TRADE 87,07,508/- TOTAL 13,28,27,516/- 9. THUS IT WAS POINTED OUT TO US THAT FUNDS WORTH RS. 13.28 CRORES WAS INVESTED IN TANGIBLE ASSETS LIKE REAL ESTATE, QUOTED INVESTMENT , CASH ETC. IT WAS ALSO POINTED OUT TO US THAT THE LENDER COMPANY M/S. (SCMPL )HAS GIVEN LONG TERM LOANS AND ADVANCES TO THE TUNE OF RS. 39,27,34,037/- ON WHICH IT EARNED INTEREST I NCOME OF RS. 3,92,79,888/- WHICH HAS DULY CREDITED TO ITS P&L A/C. WE ALSO NOTE FROM THE PERUSAL OF THE BALANCE SHEET WHICH SHOWS THAT THE CREDITOR COMPANY HAS OWN FUNDS TO TH E TUNE OF RS. 42.63 CRORES WHICH INCLUDES ACCUMULATED PROFITS TO THE TUNE OF RS. 37. 64 CRORES AND IT WAS POINTED OUT THAT EVEN IN THIS RELEVANT AY 2012-13, THE CREDITOR HAS RETUR NED AN INCOME OF RS. 2,66,67,990/- TO TAX. WE NOTE THAT ALL THE DIRECTORS OF M/S. SILVER CROSS MARKETING PVT. LTD. ARE ALL INCOME-TAX ASSESSEES HAVING PAN CARD AND THEY HAVE OFFERED CON SIDERABLE INCOME IN THEIR RETURNS. WE NOTE THAT THE CREDITOR COMPANY IS A SISTER COMPANY OF THE ASSESSEE AND HAS A COMMON DIRECTOR SHRI JAIDEEP HALWASIYA ALSO. WE NOTE FROM THE STATEMENT SHOWING IMMEDIATE SOURCE OF FUNDS INVESTED BY THE CREDITOR IN THE ASS ESSEE COMPANY (AS PER BANK STATEMENT) IS ENCLOSED AT PAPER BOOK. A PERUSAL OF WHICH REVEALS THAT M/S. SILVER CROSS MARKETING PVT. 6 ITA NO. 54/KOL/2018 M/S. AA INFRAPROPERTIES PVT. LTD. AY 2012-13 LTD. THE LOAN LENDER / CREDITOR DURING THE YEAR HAS RECEIVED FUNDS FROM REDEMPTION OF MUTUAL FUND UNITS, SALE OF SHARES, REPAYMENT OF LOAN ETC. THE BANK STATEMENT OF THE CREDITOR REVEALS THIS FACT. WE NOTE THAT THE STATEMENT OF BIRLA MUTU AL FUND, DSP MUTUAL FUND, LOAN CONFIRMATION FROM M/S. PILOT CONSULTANTS PVT. LTD. (EVIDENCING LOAN REPAYMENT) AND THE CONTRACT NOTES (EVIDENCING SALE OF SHARES) WERE ALL PRODUCED BEFORE THE AO AND THE SAME WAS PRODUCED BEFORE THE LD. CIT(A) AS WELL AS BEFOR E US. THUS WE NOTE THAT THE LOAN CREDITOR HAS STRONG ASSET BASE WHICH HAS BEEN FUNDE D FROM IDENTIFIABLE & TRACEABLE SOURCES AND ALSO FROM PROFITS FROM OPERATIONS (ACCUMULATED PROFITS ASSESSED TO TAX). THUS THE CREDITWORTHINESS OF THE LOAN CREDITOR CANNOT BE DOU BTED AT ALL AND WE AGREE WITH THE LD. CIT(A) THAT THE LOAN CREDITOR WAS FINANCIALLY SOUND AND CAPABLE ENOUGH TO ADVANCE A SUM OF RS. 9 CRORES TO THE ASSESSEE COMPANY WHICH IS A SIS TER CONCERN. THUS WE NOTE THAT DOCUMENTS REFERRED IN PARA 7 TO 9 ARE PLACED IN THE PAPER BOO K INCLUDING COPY OF BOARD RESOLUTION PASSED BY THE BOARD OF DIRECTORS OF M/S. SILVER CRO SS MARKETING PVT. LTD. ARE FOUND PLACED FROM PAGE 13 TO 77 OF THE PAPER BOOK. 10. TAKING NOTE OF THE AFORESAID DOCUMENTS, THE LD. CIT(A) WAS OF THE OPINION THAT THE ASSESSEE HAD DISCHARGED ITS ONUS TO PROVE THE IDENT ITY, CREDITWORTHINESS AND GENUINENESS OF THE LOAN CREDITOR (M/S. SCMPL) AND DELETED THE ADDI TION MADE U/S 68 OF THE ACT. BEFORE WE ADJUDICATE AS TO WHETHER THE LD. CIT(A)S ACTION IS RIGHT OR ERRONEOUS, LET US LOOK AT SECTION 68 OF THE ACT AND THE JUDICIAL PRECEDENTS ON THE IS SUE AT HAND. 11. SECTION 68 UNDER WHICH THE ADDITION HAS BEEN MA DE BY THE ASSESSING OFFICER READS AS UNDER: '68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS O F AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NA TURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESS ING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. ' THE PHRASEOLOGY OF SECTION 68 IS CLEAR. THE LEGISLA TURE HAS LAID DOWN THAT IN THE ABSENCE OF A SATISFACTORY EXPLANATION, THE UNEXPLAINED CASH CR EDIT MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. IN TH IS CASE THE LEGISLATIVE MANDATE IS NOT IN TERMS OF THE WORDS SHALL BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT 7 ITA NO. 54/KOL/2018 M/S. AA INFRAPROPERTIES PVT. LTD. AY 2012-13 PREVIOUS YEAR'. THE SUPREME COURT WHILE INTERPRETIN G SIMILAR PHRASEOLOGY USED IN SECTION 69 HAS HELD THAT IN CREATING THE LEGAL FICTION THE PHRASEOLOGY EMPLOYS THE WORD 'MAY' AND NOT 'SHALL'. THUS THE UN-SATISFACTORINESS OF THE EX PLANATION DOES NOT AND NEED NOT AUTOMATICALLY RESULT IN DEEMING THE AMOUNT CREDITED IN THE BOOKS AS THE INCOME OF THE ASSESSEE AS HELD BY THE SUPREME COURT IN THE CASE O F CIT V. SMT. P. K. NOORJAHAN [1999] 237 ITR 570. WE NOTE THAT AGAINST THE SAID DECISION OF HON'BLE GUJARAT HIGH COURT THE SPECIAL LEAVE PETITION FILED BY THE REVENUE HAS ALS O BEEN DISMISSED BY THE HON'BLE APEX COURT. 12. THE MAIN PLANK ON WHICH THE AO MADE THE ADDITIO N WAS BECAUSE THE PRINCIPAL OFFICER OF THE LENDER COMPANY (M/S. SILVER CROSS MA RKETING PVT. LTD.) DID NOT TURN UP BEFORE HIM. IN SUCH A CASE THE HON'BLE APEX COURT IN THE CASE OF ORISSA CORPN. (P) LTD. (SUPRA) 159 ITR 78 AND THE HON'BLE GUJARAT HIGH COU RT, IN THE CASE OF DY. CIT V. ROHINI BUILDERS [2002] 256 ITR 360 /[2003] 127 TAXMAN 523 , HAS HELD THAT ONUS OF THE ASSESSEE (IN WHOSE BOOKS OF ACCOUNT CREDIT APPEARS) STANDS F ULLY DISCHARGED IF THE IDENTITY OF THE CREDITOR IS ESTABLISHED AND ACTUAL RECEIPT OF MONEY FROM SUCH CREDITOR IS PROVED. IN CASE, THE ASSESSING OFFICER IS DISSATISFIED ABOUT THE SOURCE OF CASH DEPOSITED IN THE BANK ACCOUNTS OF THE CREDITORS, THE PROPER COURSE WOULD BE TO ASSESS SUCH CREDIT IN THE HANDS OF THE CREDITOR (AFTER MAKING DUE ENQUIRIES FROM SUCH CREDITOR). IN ARRIVING AT THIS CONCLUSION, THE HON'BLE COURT HAS FURTHER STRESSED THE PRESENCE OF WORD 'MA Y' IN SECTION 68. RELEVANT OBSERVATIONS AT PAGES 369 AND 370 OF THIS REPORT ARE REPRODUCED HEREUNDER:- 'MERELY BECAUSE SUMMONS ISSUED TO SOME OF THE CREDI TORS COULD NOT BE SERVED OR THEY FAILED TO ATTEND BEFORE THE ASSESSING OFFICER, CANNOT BE A GR OUND TO TREAT THE LOANS TAKEN BY THE ASSESSEE FROM THOSE CREDITORS AS NON-GENUINE IN VIE W OF THE PRINCIPLES LAID DOWN BY THE SUPREME COURT IN THE CASE OF ORISSA CORPORATION [19 86] 159 ITR 78. IN THE SAID DECISION THE SUPREME COURT HAS OBSERVED THAT WHEN THE ASSESSEE F URNISHES NAMES AND ADDRESSES OF THE ALLEGED CREDITORS AND THE GIR NUMBERS, THE BURDEN S HIFTS TO THE DEPARTMENT TO ESTABLISH THE REVENUE'S CASE AND IN ORDER TO SUSTAIN THE ADDITION THE REVENUE HAS TO PURSUE THE ENQUIRY AND TO ESTABLISH THE LACK OF CREDITWORTHINESS AND MERE NON-COMPLIANCE OF SUMMONS ISSUED BY THE ASSESSING OFFICER UNDER SECTION 131, BY THE ALLEGED CREDITORS WILL NOT BE SUFFICIENT TO DRAW AND ADVERSE INFERENCE AGAINST THE ASSESSEE. IN THE CASE OF SIX CREDITORS WHO APPEARED BEFORE THE ASSESSING OFFICER AND WHOSE STATEMENTS WERE RECORDE D BY THE ASSESSING OFFICER, THEY HAVE ADMITTED HAVING ADVANCED LOANS TO THE ASSESSEE BY A CCOUNT PAYEE CHEQUES AND IN CASE THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE CASH A MOUNT DEPOSITED BY THOSE CREDITORS IN THEIR BANK ACCOUNTS, THE PROPER COURSE WOULD HAVE BEEN TO MAKE ASSESSMENTS IN THE CASES OF THOSE 8 ITA NO. 54/KOL/2018 M/S. AA INFRAPROPERTIES PVT. LTD. AY 2012-13 CREDITORS BY' TREATING THE CASH DEPOSITS IN THEIR B ANK ACCOUNTS AS UNEXPLAINED INVESTMENTS OF THOSE CREDITORS UNDER SECTION 69. 13. IN THE CASE OF NEMI CHAND KOTHARI 136 TAXMAN 21 3, (SUPRA), THE HON'BLE GUAHATI HIGH COURT HAS THROWN LIGHT ON ANOTHER ASPECT TOUCH ING THE ISSUE OF ONUS ON ASSESSEE UNDER SECTION 68, BY HOLDING THAT THE SAME SHOULD BE DECI DED BY TAKING INTO CONSIDERATION THE PROVISION OF SECTION 106 OF THE EVIDENCE ACT WHICH SAYS THAT A PERSON CAN BE REQUIRED TO PROVE ONLY SUCH FACTS WHICH ARE IN HIS KNOWLEDGE. T HE HON'BLE COURT IN THE SAID CASE HELD THAT, ONCE IT IS FOUND THAT AN ASSESSEE HAS ACTUALL Y TAKEN MONEY FROM DEPOSITOR/LENDER WHO HAS BEEN FULLY IDENTIFIED, THE ASSESSEE/BORROWER CA NNOT BE CALLED UPON TO EXPLAIN, MUCH LESS PROVE THE AFFAIRS OF SUCH THIRD PARTY, WHICH HE IS NOT EVEN SUPPOSED TO KNOW OR ABOUT WHICH HE CANNOT BE HELD TO BE ACCREDITED WITH ANY KNOWLED GE. IN THIS VIEW, THE HON'BLE COURT HAS LAID DOWN THAT SECTION 68 OF INCOME-TAX ACT, SHOULD BE READ ALONG WITH SECTION 106 OF EVIDENCE ACT. THE RELEVANT OBSERVATIONS AT PAGE 260 TO 262, 264 AND 265 OF THE REPORT ARE REPRODUCED HEREIN BELOW:- 'WHILE INTERPRETING THE MEANING AND SCOPE OF SECTIO N 68, ONE HAS TO BEAR IN MIND THAT NORMALLY, INTERPRETATION OF A STATUTE SHALL BE GENE RAL, IN NATURE, SUBJECT ONLY TO SUCH EXCEPTIONS AS MAY BE LOGICALLY PERMITTED BY THE STA TUTE ITSELF OR BY SOME OTHER LAW CONNECTED THEREWITH OR RELEVANT THERETO. KEEPING IN VIEW THESE FUNDAMENTALS OF INTERPRETATION OF STATUTES, WHEN WE READ CAREFULLY THE PROVISIONS OF SECTION 68, WE NOTICE NOTHING IN SECTION 68 TO SHOW THAT THE SCOPE OF THE INQUIRY UNDER SECTION 68 BY THE REVENUE DEPARTMENT SHALL REMAIN CONFINED TO THE TRANSACTIONS, WHICH HAVE TAKEN PLACE BETWEEN THE ASSESSEE AND THE CREDITOR NOR DOE S THE WORDING OF SECTION 68 INDICATE THAT SECTION 68 DOES NOT AUTHORIZE THE REV ENUE DEPARTMENT TO MAKE INQUIRY INTO THE SOURCE(S) OF THE CREDIT AND/OR SUB-CREDITO R. THE LANGUAGE EMPLOYED BY SECTION 68 CANNOT BE READ TO IMPOSE SUCH LIMITATIONS ON THE POWERS OF THE ASSESSING OFFICER. THE LOGICAL CONCLUSION, THEREFORE, HAS TO BE, AND W E HOLD THAT AN INQUIRY UNDER SECTION 68 NEED NOT NECESSARILY BE KEPT CONFINED BY THE ASS ESSING OFFICER WITHIN THE TRANSACTIONS, WHICH TOOK PLACE BETWEEN THE ASSESSEE AND HIS CREDITOR, BUT THAT THE SAME MAY BE EXTENDED TO THE TRANSACTIONS, WHICH HAV E TAKEN PLACE BETWEEN THE CREDITOR AND HIS SUB-CREDITOR. THUS, WHILE THE ASSE SSING OFFICER IS UNDER SECTION 68, FREE TO LOOK INTO THE SOURCE(S) OF THE CREDITOR AND /OR OF THE SUB-CREDITOR, THE BURDEN ON THE ASSESSEE UNDER SECTION 68 IS DEFINITELY LIMITED . THIS LIMIT HAS BEEN IMPOSED BY SECTION 106 OF THE EVIDENCE ACT WHICH READS AS FOLL OWS: 'BURDEN OF PROVING FACT ESPECIALLY WITHIN KNOWLEDGE .-WHEN ANY FACT IS ESPECIALLY WITHIN THE KNOWLEDGE OF ANY PERSON, THE BURDEN) OF PROVING THAT FACT IS UPON HIM. ' ******** WHAT, THUS, TRANSPIRES FROM THE ABOVE DISCUSSION IS THAT WHITE SECTION 106 OF THE EVIDENCE ACT LIMITS THE ONUS OF THE ASSESSEE TO THE EXTENT OF HIS PROVING THE SOURCE 9 ITA NO. 54/KOL/2018 M/S. AA INFRAPROPERTIES PVT. LTD. AY 2012-13 FROM WHICH HE HAS RECEIVED THE CASH CREDIT, SECTION 68 GIVES AMPLE FREEDOM TO THE ASSESSING OFFICER TO MAKE INQUIRY NOT ONLY INTO THE SOURCE(S)OF THE CREDITOR BUT ALSO OF HIS (CREDITOR'S) SUB-CREDITORS AND PROVE, AS A RESU LT, OF SUCH INQUIRY, THAT THE MONEY RECEIVED BY THE ASSESSEE, IN THE FORM OF LOAN FROM THE CREDITOR, THOUGH ROUTED THROUGH THE SUB-CREDITORS, ACTUALLY BELONGS TO, OR WAS OF, THE ASSESSEE HIMSELF. IN OTHER WORDS, WHILE SECTION 68 GIVES THE LIBERTY TO THE ASSESSING OFFICER TO ENQUIRE INTO THE SOURCE/SOURCE FROM WHERE THE CREDITOR HAS RECEIVED THE MONEY, SECTION 106 MAKES THE ASSESSEE LIABLE TO DISCLOSE ONLY THE SOURCE(S) FROM WHERE HE HAS HIMSELF RECEIVED THE CREDIT AND IT IS NOT THE BURDEN OF THE ASSESSEE TO PROVE THE CREDITWORTHINESS OF THE SOURCE(S) OF THE SUB-CREDITORS. IF SECTION 106 AND SECTION 68 ARE TO STAND TOGETHER, WHICH THEY MUST, THEN, THE INTERPRETATION OF SECTIO N 68 ARE TO STAND TOGETHER, WHICH THEY MUST, THEN THE INTERPRETATION OF SECTION 68 HA S TO BE IN SUCH A WAY THAT IT DOES NOT MAKE SECTION 106 REDUNDANT. HENCE, THE HARMONIOUS C ONSTRUCTION OF SECTION 106 OF THE EVIDENCE ACT AND SECTION 68 OF THE INCOME- TAX ACT WILL BE THAT THOUGH APART FROM ESTABLISHING THE IDENTITY OF THE CREDITOR, THE ASSE SSEE MUST ESTABLISH THE GENUINENESS OF THE TRANSACTION AS WELL AS THE CREDITWORTHINESS OF HIS CREDITOR, THE BURDEN OF THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTIO NS AS WELL AS THE CREDITWORTHINESS OF THE CREDITOR MUST REMAIN CONFINED TO THE TRANSAC TIONS, WHICH HAVE TAKEN PLACE BETWEEN THE ASSESSEE AND THE CREDITOR. WHAT FOLLOWS , AS A COROLLARY, IS THAT IT IS NOT THE BURDEN OF THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTIONS BETWEEN HIS CREDITOR AND SUB-CREDITORS NOR IS IT THE BURDEN OF THE ASSESSEE TO PROVE THAT THE SUB- CREDITOR HAD THE CREDITWORTHINESS TO ADVANCE THE CA SH CREDIT TO THE CREDITOR FROM WHOM THE CASH CREDIT HAS BEEN. EVENTUALLY, RECEIVED BY THE ASSESSEE. IT, THEREFORE, FURTHER LOGICALLY FOLLOWS THAT THE CREDITOR'S CREDI TWORTHINESS HAS TO BE JUDGED VIS-A-VIS THE TRANSACTIONS, WHICH HAVE TAKEN PLACE BETWEEN TH E ASSESSEE AND THE CREDITOR, AND IT IS NOT THE BUSINESS OF THE ASSESSEE TO FIND OUT THE SOURCE OF MONEY OF HIS CREDITOR OR OF THE GENUINENESS OF THE TRANSACTIONS, WHICH TOOK BET WEEN THE CREDITOR AND SUB-CREDITOR AND/OR CREDITWORTHINESS OF THE SUB- CREDITORS, FOR, THESE ASPECTS MAY NOT BE WITHIN THE SPECIAL KNOWLEDGE OF THE ASSESSEE. ' ********** ' ... IF A CREDITOR HAS, BY ANY UNDISCLOSED SOURCE, A PARTICULAR AMOUNT OF MONEY IN THE BANK, THERE IS NO LIMITATION UNDER THE LAW ON THE P ART OF THE ASSESSEE TO OBTAIN SUCH AMOUNT OF MONEY OR PART THEREOF FROM THE CREDITOR, BY WAY OF CHEQUE IN THE FORM OF LOAN AND IN SUCH A CASE, IF THE CREDITOR FAILS TO S ATISFY AS TO HOW HE HAD ACTUALLY RECEIVED THE SAID AMOUNT AND HAPPENED TO KEEP THE S AME IN THE BANK, THE SAID AMOUNT CANNOT BE TREATED AS INCOME OF THE ASSESSEE FROM UN DISCLOSED SOURCE. IN OTHER WORDS, THE GENUINENESS AS WELL AS THE CREDITWORTHINESS OF A CREDITOR HAVE TO BE ADJUDGED VIS-A-VIS THE TRANSACTIONS, WHICH HE HAS WITH THE A SSESSEE. THE REASON WHY WE HAVE FORMED THE OPINION THAT IT IS NOT THE BUSINESS OF T HE ASSESSEE TO FIND OUT THE ACTUAL SOURCE OR SOURCES FROM WHERE THE CREDITOR HAS ACCUM ULATED THE AMOUNT, WHICH HE ADVANCES, AS LOAN, TO THE ASSESSEE IS THAT SO FAR A S AN ASSESSEE IS CONCERNED, HE HAS TO PROVE THE GENUINENESS OF THE TRANSACTION AND THE CR EDITWORTHINESS OF THE CREDITOR VIS-A-VIS THE TRANSACTIONS WHICH HAD TAKEN PLACE BE TWEEN THE ASSESSEE AND THE CREDITOR AND NOT BETWEEN THE CREDITOR AND THE SUB-CREDITORS, FOR, IT IS NOT EVEN REQUIRED UNDER THE LAW FOR THE ASSESSEE TO TRY TO FIND OUT AS TO W HAT SOURCES FROM WHERE THE CREDITOR HAD RECEIVED THE AMOUNT, HIS SPECIAL KNOWLEDGE UNDE R SECTION 106 OF THE EVIDENCE ACT MAY VERY WELL REMAIN CONFINED ONLY TO THE TRANSACTI ONS, WHICH HE HAD' WITH THE CREDITOR AND HE MAY NOT KNOW WHAT TRANSACTION(S) HA D TAKEN PLACE BETWEEN HIS CREDITOR AND THE SUB-CREDITOR ' 10 ITA NO. 54/KOL/2018 M/S. AA INFRAPROPERTIES PVT. LTD. AY 2012-13 ********** 'IN OTHER WORDS, THOUGH UNDER SECTION 68 AN ASSESSI NG OFFICER IS FREE TO SHOW, WITH THE HELP OF THE INQUIRY CONDUCTED BY HIM INTO THE T RANSACTIONS, WHICH HAVE TAKEN PLACE BETWEEN THE CREDITOR AND THE SUB-CREDITOR, THAT THE TRANSACTION BETWEEN THE TWO WERE NOT GENUINE AND THAT THE SUB-CREDITOR HAD NO CREDIT WORTHINESS, IT WILL NOT NECESSARILY MEAN THAT THE LOAN ADVANCED BY THE SUB-CREDITOR TO THE CREDITOR WAS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCE UNLESS THERE IS EV IDENCE, DIRECT OR CIRCUMSTANTIAL, TO SHOW THAT THE AMOUNT WHICH HAS BEEN ADVANCED BY THE SUB-CREDITOR TO THE CREDITOR, HAD ACTUALLY BEEN RECEIVED BY THE SUB-CREDITOR FROM THE ASSESSEE .' ********** 'KEEPING IN VIEW THE ABOVE POSITION OF LAW, WHEN WE TURN TO THE FACTUAL MATRIX OF THE PRESENT CASE, WE FIND THAT SO FAR AS THE APPELLANT IS CONCERNED, HE HAS ESTABLISHED THE IDENTITY OF THE CREDITORS, NAMELY, NEMICHAND NAHATA AND SONS (HUF) AND PAWAN KUMAR AGARWALLA. THE APPELLANT HAD ALSO SHOWN, IN A CCORDANCE WITH THE BURDEN, WHICH RESTED ON HIM UNDER SECTION 106 OF THE EVIDEN CE ACT, THAT THE SAID AMOUNTS HAD BEEN RECEIVED BY HIM BY WAY OF CHEQUES FROM THE CRE DITORS AFOREMENTIONED. IN FACT THE FACT THAT THE ASSESSEE HAD RECEIVED THE SAID AMOUNT S BY WAY OF CHEQUES WAS NOT IN DISPUTE. ONCE THE ASSESSEE HAD ESTABLISHED THAT HE HAD RECEIVED THE SAID AMOUNTS FROM THE CREDITORS AFOREMENTIONED BY WAY OF CHEQUES, THE ASSESSEE MUST BE TAKEN TO HAVE PROVED THAT THE CREDITOR HAD THE CREDITWORTHINESS T O ADVANCE THE LOANS. THEREAFTER THE BURDEN HAD SHIFTED TO THE ASSESSING OFFICER TO PROV E THE CONTRARY. ON MERE FAILURE ON THE PART OF THE CREDITORS TO SHOW THAT THEIR SUB-CR EDITORS HAD CREDITWORTHINESS TO ADVANCE THE SAID LOAN AMOUNTS TO THE ASSESSEE, SUCH FAILURE, AS A COROLLARY, COULD NOT HAVE BEEN AND OUGHT NOT TO HAVE BEEN, UNDER THE LAW , TREATED AS THE INCOME FROM THE UNDISCLOSED SOURCES OF THE ASSESSEE HIMSELF, WHEN T HERE WAS NEITHER DIRECT NOR CIRCUMSTANTIAL EVIDENCE ON RECORD THAT THE SAID LOA N AMOUNTS ACTUALLY BELONGED TO, OR WERE OWNED BY, THE ASSESSEE. VIEWED FROM THIS ANGLE , WE HAVE NO HESITATION IN HOLDING THAT IN THE CASE AT HAND, THE ASSESSING OFFICER HAD FAILED TO SHOW THAT THE AMOUNTS, WHICH HAD COME TO THE HANDS OF THE CREDITORS FROM T HE HANDS OF THE SUB-CREDITORS, HAD ACTUALLY BEEN RECEIVED BY THE SUB-CREDITORS FROM TH E ASSESSEE. IN THE ABSENCE OF ANY SUCH EVIDENCE ON RECORD, THE ASSESSING OFFICER COUL D NOT HAVE TREATED THE SAID AMOUNTS AS INCOME DERIVED BY THE APPELLANT FROM UND ISCLOSED SOURCES. THE LEARNED TRIBUNAL SERIOUSLY FELL INTO ERROR IN TREATING THE SAID AMOUNTS AS INCOME DERIVED BY THE APPELLANT FROM. UNDISCLOSED SOURCES MERELY ON T HE FAILURE OF THE SUB-CREDITORS TO PROVE THEIR CREDITWORTHINESS. 14. FURTHER, IN THE CASE OF CIT V. S. KAMALJEET SIN GH [2005] 147 TAXMAN 18(ALL.) THEIR LORDSHIPS, ON THE ISSUE OF DISCHARGE OF ASSESSEE'S ONUS IN RELATION TO A CASH CREDIT APPEARING IN HIS BOOKS OF ACCOUNT, HAS OBSERVED AND HELD AS U NDER:- '4. THE TRIBUNAL HAS RECORDED A FINDING THAT THE AS SESSEE HAS DISCHARGED THE ONUS WHICH WAS ON HIM TO EXPLAIN THE NATURE AND SOURCE OF CASH CRE DIT IN QUESTION. THE ASSESSEE DISCHARGED THE ONUS BY PLACING (I) CONFIRMATION LETTERS OF THE CASH CREDITORS; (II) THEIR AFFIDAVITS; (III) THEIR FULL ADDRESSES AND GIR NUMBERS AND PERMANENT ACCOUN T NUMBERS. IT HAS FOUND THAT THE ASSESSEE'S BURDEN STOOD DISCHARGED AND SO, NO ADDIT ION TO HIS TOTAL INCOME ON ACCOUNT OF CASH 11 ITA NO. 54/KOL/2018 M/S. AA INFRAPROPERTIES PVT. LTD. AY 2012-13 CREDIT WAS CALLED FOR. IN VIEW OF THIS FINDING, WE FIND THAT THE TRIBUNAL WAS RIGHT IN REVERSING THE ORDER OF THE AA C, SETTING ASIDE THE ASSESSMENT ORDER. 15. WE ALSO TAKE NOTE OF THE DECISION OF THE HON' BLE HIGH COURT, CALCUTTA IN THE CASE OF S.K. BOTHRA & SONS, HUF V. INCOME-TAX OFFICER, WARD - 46(3), KOLKATA 347 ITR 347 WHEREIN THE COURT HELD AS FOLLOWS: 15. IT IS NOW A SETTLED LAW THAT WHILE CONSIDERING THE QUESTION WHETHER THE ALLEGED LOAN TAKEN BY THE ASSESSEE WAS A GENUINE TRANSACTION, THE INIT IAL ONUS IS ALWAYS UPON THE ASSESSEE AND IF NO EXPLANATION IS GIVEN OR THE EXPLANATION GIVEN BY THE APPELLANT IS NOT SATISFACTORY, THE ASSESSING OFFICER CAN DISBELIEVE THE ALLEGED TRANSA CTION OF LOAN. BUT THE LAW IS EQUALLY SETTLED THAT IF THE INITIAL BURDEN IS DISCHARGED BY THE ASS ESSEE BY PRODUCING SUFFICIENT MATERIALS IN SUPPORT OF THE LOAN TRANSACTION, THE ONUS SHIFTS UP ON THE ASSESSING OFFICER AND AFTER VERIFICATION, HE CAN CALL FOR FURTHER EXPLANATION F ROM THE ASSESSEE AND IN THE PROCESS, THE ONUS MAY AGAIN SHIFT FROM THE ASSESSING OFFICER TO ASSES SEE. 16. IN THE CASE BEFORE US, THE APPELLANT BY PRODUCI NG THE LOAN-CONFIRMATION-CERTIFICATES SIGNED BY THE CREDITORS, DISCLOSING THEIR PERMANENT ACCOUN T NUMBERS AND ADDRESS AND FURTHER INDICATING THAT THE LOAN WAS TAKEN BY ACCOUNT PAYEE CHEQUES, NO DOUBT, PRIMA FACIE, DISCHARGED THE INITIAL BURDEN AND THOSE MATERIALS D ISCLOSED BY THE ASSESSEE PROMPTED THE ASSESSING OFFICER TO ENQUIRE THROUGH THE INSPECTOR TO VERIFY THE STATEMENTS. 16. IN A CASE WHERE THE ISSUE WAS WHETHER THE ASSE SSEE AVAILED CASH CREDIT AS AGAINST FUTURE SALE OF PRODUCT, THE AO ISSUED SUMMONS TO TH E CREDITORS WHO DID NOT TURN UP BEFORE HIM, SO AO DISBELIEVED THE EXISTENCE OF CREDITORS A ND SADDLED THE ADDITION, WHICH WAS OVERTURNED BY LD. CIT(A). HOWEVER, THE TRIBUNAL RE VERSED THE DECISION OF THE LD. CIT(A) AND UPHELD THE AOS DECISION, WHICH ACTION OF TRIBU NAL WAS CHALLENGED BY THE HON'BLE HIGH COURT, CALCUTTA IN THE CASE OF CRYSTAL NETWORKS (P. ) LTD. V. COMMISSIONER OF INCOME-TAX 353 ITR 171 WHEREIN THE TRIBUNALS DECISION WAS OVE RTURNED AND DECISION OF LD. CIT(A) UPHELD AND THE HONBLE HIGH COURT HAS HELD THAT WH EN THE BASIC EVIDENCES ARE ON RECORD THE MERE FAILURE OF THE CREDITOR TO APPEAR CANNOT B E BASIS TO MAKE ADDITION. THE COURT HELD AS FOLLOWS: 8. ASSAILING THE SAID JUDGMENT OF THE LEARNED TRIBU NAL LEARNED COUNSEL FOR THE APPELLANT SUBMITS THAT INCOME-TAX OFFICER DID NOT CONSIDER TH E MATERIAL EVIDENCE SHOWING THE CREDITWORTHINESS AND ALSO OTHER DOCUMENTS, VIZ., CO NFIRMATORY STATEMENTS OF THE PERSONS, OF HAVING ADVANCED CASH AMOUNT AS AGAINST THE SUPPLY O F BIDIS. THESE EVIDENCE WERE DULY CONSIDERED BY THE COMMISSIONER OF INCOME-TAX (APPEA LS). THEREFORE, THE FAILURE OF THE PERSON TO TURN UP PURSUANT TO THE SUMMONS ISSUED TO ANY WI TNESS IS IMMATERIAL WHEN THE MATERIAL DOCUMENTS MADE AVAILABLE, SHOULD HAVE BEEN ACCEPTED AND INDEED IN SUBSEQUENT YEAR THE SAME EXPLANATION WAS ACCEPTED BY THE INCOME-TAX OFF ICER. HE FURTHER CONTENDED THAT WHEN THE TRIBUNAL HAS RELIED ON THE ENTIRE JUDGMENT OF THE C OMMISSIONER OF INCOME-TAX (APPEALS), 12 ITA NO. 54/KOL/2018 M/S. AA INFRAPROPERTIES PVT. LTD. AY 2012-13 THEREFORE, IT WAS NOT PROPER TO TAKE UP SOME PORTIO N OF THE JUDGMENT OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AND TO IGNORE THE OTHER PORTIO N OF THE SAME. THE JUDICIAL PROPRIETY AND FAIRNESS DEMANDS THAT THE ENTIRE JUDGMENT BOTH FAVO URABLE AND UNFAVOURABLE SHOULD HAVE BEEN CONSIDERED. BY NOT DOING SO THE TRIBUNAL COMMITTED GRAVE ERROR IN LAW IN UPSETTING THE JUDGMENT IN THE ORDER OF THE COMMISSIONER OF INCOME -TAX (APPEALS). 9. IN THIS CONNECTION HE HAS DRAWN OUR ATTENTION TO A DECISION OF THE SUPREME COURT IN THE CASE OF UDHAVDAS KEWALRAM V. CIT [19671 66 ITR 462. IN THIS JUDGMENT IT IS NOTICED THAT THE SUPREME COURT AS PROPOSITION OF LAW HELD THAT THE T RIBUNAL MUST IN DECIDING AN APPEAL, CONSIDER WITH DUE CARE, ALL THE MATERIAL FACTS AND RECORD ITS FINDING ON ALL THE CONTENTIONS RAISED BY THE ASSESSEE AND THE COMMISSIONER IN THE LIGHT OF THE EVIDENCE AND THE RELEVANT LAW. 10. WE FIND CONSIDERABLE FORCE OF THE SUBMISSIONS O F THE LEARNED COUNSEL FOR THE APPELLANT THAT THE TRIBUNAL HAS MERELY NOTICED THAT SINCE THE SUMM ONS ISSUED BEFORE ASSESSMENT RETURNED UNSERVED AND NO ONE CAME FORWARD TO PROVE. THEREFOR E, IT SHALL BE ASSUMED THAT THE ASSESSEE FAILED TO PROVE THE EXISTENCE OF THE CREDITORS OR F OR THAT MATTER THE CREDITWORTHINESS. AS RIGHTLY POINTED OUT BY THE LEARNED COUNSEL THAT THE COMMISS IONER OF INCOME-TAX (APPEALS) HAS TAKEN THE TROUBLE OF EXAMINING OF ALL OTHER MATERIALS AND DOCUMENTS, VIZ., CONFIRMATORY STATEMENTS, INVOICES, CHALLANS AND VOUCHERS SHOWING SUPPLY OF B IDIS AS AGAINST THE ADVANCE. THEREFORE, THE ATTENDANCE OF THE WITNESSES PURSUANT TO THE SUM MONS ISSUED, IN OUR VIEW, IS NOT IMPORTANT. THE IMPORTANT IS TO PROVE AS TO WHETHER THE SAID CA SH CREDIT WAS RECEIVED AS AGAINST THE FUTURE SALE OF THE PRODUCT OF THE ASSESSEE OR NOT. WHEN IT WAS FOUND BY THE COMMISSIONER OF INCOME- TAX (APPEALS) ON FACTS HAVING EXAMINED THE DOCUMENT S THAT THE ADVANCE GIVEN BY THE CREDITORS HAVE BEEN ESTABLISHED THE TRIBUNAL SHOULD NOT HAVE IGNORED THIS -FACT FINDING. INDEED THE TRIBUNAL DID NOT REALLY TOUCH THE AFORESAID FACT FI NDING OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AS RIGHTLY POINTED OUT BY THE LEARNED COU NSEL. THE SUPREME COURT HAS ALREADY STATED AS TO WHAT SHOULD BE THE DUTY OF THE LEARNED TRIBUN AL TO DECIDE IN THIS SITUATION. IN THE SAID JUDGMENT NOTED BY US AT PAGE 464, THE SUPREME COURT HAS OBSERVED AS FOLLOWS: 'THE INCOME-TAX APPELLATE TRIBUNAL PERFORMS A JUDIC IAL FUNCTION UNDER THE INDIAN INCOME-TAX ACT; IT IS INVESTED WITH AUTHORITY TO DE TERMINE FINALLY ALL QUESTIONS OF FACT. THE TRIBUNAL MUST, IN DECIDING AN APPEAL, CONSIDER WITH DUE CARE ALL THE MATERIAL FACTS AND RECORD ITS FINDING ON ALL THE CONTENTIONS RAISED BY THE ASSESSEE AND THE COMMISSIONER, IN THE LIGHT OF THE EVIDENCE AND THE RELEVANT LAW. ' 11. THE TRIBUNAL MUST, IN DECIDING AN APPEAL, CONSI DER WITH DUE CARE ALL THE MATERIAL FACTS AND RECORD ITS FINDING ON ALL CONTENTIONS RAISED BY THE ASSESSEE AND THE COMMISSIONER, IN THE LIGHT OF THE EVIDENCE AND THE RELEVANT LAW. IT IS A LSO RULED IN THE SAID JUDGMENT AT PAGE 465 THAT IF THE TRIBUNAL DOES NOT DISCHARGE THE DUTY IN THE MANNER AS ABOVE THEN IT SHALL BE ASSUMED THE JUDGMENT OF THE TRIBUNAL SUFFERS FROM M ANIFEST INFIRMITY. 12. TAKING INSPIRATION FROM THE SUPREME COURT OBSER VATIONS WE ARE CONSTRAINED TO HOLD IN THIS MATTER THAT THE TRIBUNAL HAS NOT ADJUDICATED UPON T HE CASE OF THE ASSESSEE IN THE LIGHT OF THE EVIDENCE AS FOUND BY THE COMMISSIONER OF INCOME-TAX (APPEALS). WE ALSO FOUND NO SINGLE WORD HAS BEEN SPARED TO UP SET THE FACT FINDING OF THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT THERE ARE MATERIALS TO SHOW THE CASH CREDIT WA S RECEIVED FROM VARIOUS PERSONS AND SUPPLY AS AGAINST CASH CREDIT ALSO MADE. 13. HENCE, THE JUDGMENT AND ORDER OF THE TRIBUNAL I S NOT SUSTAINABLE. ACCORDINGLY, THE SAME IS SET ASIDE. WE RESTORE THE JUDGMENT AND ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS). THE APPEAL IS ALLOWED. 13 ITA NO. 54/KOL/2018 M/S. AA INFRAPROPERTIES PVT. LTD. AY 2012-13 17. WHEN A QUESTION AS TO THE CREDITWORTHINESS OF A CREDITOR IS TO BE ADJUDICATED AND IF THE CREDITOR IS AN INCOME TAX ASSESSEE, IT IS NOW W ELL SETTLED BY THE DECISION OF THE CALCUTTA HIGH COURT THAT THE CREDITWORTHINESS OF THE CREDITO R CANNOT BE DISPUTED BY THE AO OF THE ASSESSEE BUT THE AO OF THE CREDITOR. IN THIS REGARD S OUR ATTENTION WAS DRAWN TO THE DECISION OF THE HON'BLE HIGH COURT, CALCUTTA IN THE COMMISSI ONER OF INCOME TAX, KOLKA TA-ILL VERSUS DATAWARE PRIVATE LIMITED ITAT NO. 263 OF 2011 DATE: 21ST SEPTEMBER, 2011 WHEREIN THE COURT HELD AS FOLLOWS: IN OUR OPINION, IN SUCH CIRCUMSTANCES, THE ASSESSI NG OFFICER OF THE ASSESSEE CANNOT TAKE THE BURDEN OF ASSESSING THE PROFIT AND LOSS ACCOUNT OF THE CREDITOR WHEN ADMITTEDLY THE CREDITOR HIMSELF IS AN INCOME TAX ASSESSEE. AFTER GETTING TH E PAN NUMBER AND GETTING THE INFORMATION THAT THE CREDITOR IS ASSESSED UNDER THE ACT, THE AS SESSING OFFICER SHOULD ENQUIRE FROM THE ASSESSING OFFICER OF THE CREDITOR AS TO THE GENUINE NESS' OF THE TRANSACTION AND WHETHER SUCH TRANSACTION HAS BEEN ACCEPTED BY THE ASSESSING OFFI CER OF THE CREDITOR BUT INSTEAD OF ADOPTING SUCH COURSE, THE ASSESSING OFFICER HIMSELF COULD NO T ENTER INTO THE RETURN OF THE CREDITOR AND BRAND THE SAME AS UNWORTHY OF CREDENCE. SO LONG IT IS NOT ESTABLISHED THAT THE RETURN SUBMI TTED BY THE CREDITOR HAS BEEN REJECTED BY ITS ASSESSING OFFICER, THE ASSESSING OFFICER OF THE ASS ESSEE IS BOUND TO ACCEPT THE SAME AS GENUINE WHEN THE IDENTITY OF THE CREDITOR AND THE GENUINENE SS' OF TRANSACTION THROUGH ACCOUNT PAYEE CHEQUE HAS BEEN ESTABLISHED. WE FIND THAT BOTH THE COMMISSIONER OF INCOME TAX (A PPEAL) AND THE TRIBUNAL BELOW FOLLOWED THE WELL-ACCEPTED PRINCIPLE WHICH ARE REQUIRED TO B E FOLLOWED IN CONSIDERING THE EFFECT OF SECTION 68 OF THE ACT AND WE THUS FIND NO REASON TO INTERFERE WITH THE CONCURRENT FINDINGS OF FACT RECORDED BY BOTH THE AUTHORITIES. 18. FROM THE DETAILS AS AFORESAID WHICH EMERGES FRO M THE PAPER BOOK FILED BEFORE US AS WELL AS BEFORE THE LOWER AUTHORITIES, IT IS VIVID T HAT THE LENDER COMPANY IS (I) INCOME TAX ASSESSEE, (II) IT IS FILING ITS RETURN OF INCOME, ( III) THE COPY OF BOARD RESOLUTION PASSED BY THE BOARD OF DIRECTORS OF THE LENDER COMPANY IS AVAILAB LE AT PAGE 13 OF THE PAPER BOOK (IV) THE LOAN AMOUNT WAS MADE THROUGH BANKING CHANNEL (V) TH E DETAILS OF THE BANK ACCOUNT BELONGING TO M/S. SILVER CROSS MARKETING PVT. LTD. AND THEIR BANK STATEMENT IS FOUND PLACED AT PAGE NO 19 TO 20 OF PAPER BOOK (VI) IN NONE OF T HE TRANSACTIONS THE AO FOUND DEPOSIT IN CASH BEFORE ISSUING CHEQUES/RTGS TO THE ASSESSEE CO MPANY, (VII) THE LENDER COMPANY WAS HAVING SUBSTANTIAL CREDITWORTHINESS (VIII) THE DIRE CTORS OF M/S. SCMPL ARE REGULAR INCOME TAX RETURNEES (IX) THE DIRECTORS PAN, ITR, HAS BEE N FILED AS NOTED ABOVE. 14 ITA NO. 54/KOL/2018 M/S. AA INFRAPROPERTIES PVT. LTD. AY 2012-13 19. AS NOTED FROM THE JUDICIAL PRECEDENTS CITED ABO VE, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE THEN THERE IS A DUTY CA STED UPON THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF CREDIT FOUND IN HIS BOOKS. IN THE INSTANT CASE, THE CREDIT IS IN THE FORM OF RECEIPT OF LOAN TO THE TUNE OF RS. 9 CRORES FROM LO AN / LENDER COMPANY M/S. SCMPL. THE NATURE OF RECEIPT TOWARDS LOAN IS SEEN FROM THE ENT RIES PASSED IN THE RESPECTIVE BALANCE SHEETS OF THE COMPANIES AS LOAN. IN RESPECT OF SOU RCE OF CREDIT, THE ASSESSEE HAS TO PROVE THE THREE NECESSARY INGREDIENTS I.E. IDENTITY OF LENDER / CREDITOR, GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF LENDER / CREDITOR. FOR PROVING THE IDENTITY OF LENDER / CREDITOR OF LOAN, THE ASSESSEE HAS DULY FURNISHED THE NAME, ADDRESS, PAN OF LENDER / CREDITOR TOGETHER WITH THE COPIES OF BALANCE SHEETS AND INCOME TAX RETURNS. WI TH REGARD TO THE CREDITWORTHINESS OF LENDER / CREDITOR, AS WE NOTED SUPRA, THIS COMPANY WAS HAVING CAPITAL IN SEVERAL CRORES OF RUPEES AND THE INVESTMENT MADE IN THE ASSESSEE COMP ANY IS ONLY A SMALL PART OF THEIR CAPITAL. THESE TRANSACTIONS ARE ALSO DULY REFLECTED IN THE B ALANCE SHEETS OF THE LENDER / CREDITOR, SO CREDITWORTHINESS IS PROVED. EVEN IF THERE WAS ANY D OUBT IF ANY REGARDING THE CREDITWORTHINESS OF THE LENDER / LOAN CREDITOR WAS STILL SUBSISTING, THEN AO SHOULD HAVE MADE ENQUIRIES FROM THE AO OF THE LENDER / LOAN CREDITOR AS HELD BY HONBLE JURISDICTIONAL HIGH COURT IN CIT VS DATAWARE (SUPRA) WHICH HAS NOT BEEN DONE, SO NO ADVERSE VIEW COULD HAVE BEEN DRAWN. THIRD INGREDIENT IS GENUINENESS OF THE TRANSACTIONS, FOR WHICH WE NOTE THAT THE MONIES HAVE BEEN DIRECTLY PAID TO THE ASSESSEE COMPANY BY ACCOUNT PAYEE CHEQUES OUT OF SUFFICIENT BANK BALANCES AVAILABLE IN THEIR BANK ACCOUNTS ON BEHALF OF THE LOAN CREDITOR. IT WILL BE EVIDENT FROM THE PAPER BOOK THAT THE LENDER / CREDITOR HAS EVEN DEMONSTRATED THE SOURCE OF MONEY DEPOSITED INTO THEIR BANK ACCOUNTS WHICH IN TURN HAS BEEN USED BY THEM TO LEND MONEY TO THE ASSESSEE COMPANY AS LOAN. HENCE T HE SOURCE OF SOURCE OF SOURCE IS PROVED BY THE ASSESSEE IN THE INSTANT CASE THOUGH THE SAME IS NOT REQUIRED TO BE DONE BY THE ASSESSEE AS PER LAW AS IT STOOD/ APPLICABLE IN THIS ASSESSME NT YEAR. THE LENDER / CREDITOR HAVE CONFIRMED THE LOAN GIVEN TO ASSESSEE COMPANY IN RES PONSE TO THE NOTICE U/S 133(6) OF THE ACT AND HAVE ALSO CONFIRMED THE PAYMENTS WHICH ARE DULY CORROBORATED WITH THEIR RESPECTIVE BANK STATEMENTS AND ALL THE PAYMENTS ARE BY ACCOUNT PAYEE CHEQUES AND THE INTEREST RECEIVED FROM ASSESSEE COMPANY ON THE LOAN HAS BEEN OFFERED BY THE LENDER [M/S. SILVER CROSS MARKETING PVT. LTD]. IN ITS RETURN AND OFFERED TO T AX. 15 ITA NO. 54/KOL/2018 M/S. AA INFRAPROPERTIES PVT. LTD. AY 2012-13 20. THUS IN THIS CASE ON HAND, THE ASSESSEE HAD DI SCHARGED ITS ONUS TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE LENDER / LO AN CREDITOR, THEREAFTER THE ONUS SHIFTED TO AO TO DISPROVE THE DOCUMENTS FURNISHED BY ASSESSEE AND THE SAME CANNOT BE BRUSHED ASIDE BY THE AO ON THE BASIS OF SUSPICION, CONJECTURE ETC . TO DRAW ADVERSE VIEW WHICH ACTION OF AO CANNOT BE COUNTENANCED. IN THE ABSENCE OF ANY IN VESTIGATION, MUCH LESS GATHERING OF EVIDENCE BY THE ASSESSING OFFICER, WE HOLD THAT ADD ITION OF SUCH NATURE CANNOT BE SUSTAINED MERELY BASED ON INFERENCES DRAWN BY CIRCUMSTANCE. A PPLYING THE PROPOSITIONS LAID DOWN IN THESE CASE LAWS TO THE FACTS OF THIS CASE, WE ARE I NCLINED TO UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 21. TO SUM UP SECTION 68 OF THE ACT PROVIDES THAT IF ANY SUM FOUND CREDITED IN THE YEAR IN RESPECT OF WHICH THE ASSESSEE FAILS TO EXPLAIN T HE NATURE AND SOURCE SHALL BE ASSESSED AS ITS UNDISCLOSED INCOME. IN THE FACTS OF THE PRESENT CAS E, BOTH THE NATURE & SOURCE OF THE LOAN RECEIVED WAS FULLY EXPLAINED BY THE ASSESSEE. THE A SSESSEE HAD DISCHARGED ITS ONUS TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF T HE LENDER / LOAN CREDITOR. THE PAN DETAILS, BANK ACCOUNT STATEMENTS, AUDITED FINANCIAL STATEMEN TS AND INCOME TAX ACKNOWLEDGMENTS WERE PLACED ON AO'S RECORD. ACCORDINGLY ALL THE THR EE CONDITIONS AS REQUIRED U/S. 68 OF THE ACT I.E. THE IDENTITY, CREDITWORTHINESS AND GENUINE NESS OF THE TRANSACTION WAS PLACED BEFORE THE AO AND THE ONUS SHIFTED TO AO TO DISPROVE THE M ATERIALS PLACED BEFORE HIM. WITHOUT DOING SO, THE ADDITION MADE BY THE AO IS BASED ON C ONJECTURES AND SURMISES CANNOT BE JUSTIFIED. IN THE FACTS AND CIRCUMSTANCES OF THE C ASE AS DISCUSSED ABOVE, NO ADDITION WAS WARRANTED UNDER SECTION 68 OF THE ACT. THEREFORE, W E DO NOT WANT TO INTERFERE IN THE IMPUGNED ORDER OF LD. CIT(A) WHICH IS CONFIRMED AND CONSEQUENTLY THE APPEAL OF REVENUE IS DISMISSED. 22. SINCE WE HAVE FOUND THE LOAN AMOUNT GIVEN TO TH E ASSESSEE TO THE TUNE OF RS. 9 CRORES BY M/S. SILVER CROSS MARKETING PVT. LTD. AS GENUINE , THE INTEREST EXPENDITURE BOOKED BY THE ASSESSEE TO THE TUNE OF RS. 54,66,393/- IS AN ALLOW ABLE EXPENDITURE AND WE NOTE THAT THE INTEREST RECEIVED FROM ASSESSEE COMPANY ON THE LOAN HAS BEEN OFFERED BY THE LENDER [M/S. SILVER CROSS MARKETING PVT. LTD]. IN ITS RETURN AND OFFERED TO TAX. THEREFORE, THE ADDITION MADE BY AO DISALLOWING THE INTEREST CLAIM ALSO HAS BEEN RIGHTLY DELETED BY THE LD. CIT(A) 16 ITA NO. 54/KOL/2018 M/S. AA INFRAPROPERTIES PVT. LTD. AY 2012-13 WHICH ACTION OF THE LD. CIT(A) DOES NOT DESERVE TO BE INTERFERED WITH. THEREFORE WE CONFIRM THE SAME. 23. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 9TH AUGUST , 2019 SD/- SD/- (DR. A. L. SAINI) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 9TH AUGUST, 2019 BISWAJIT, SR. PS COPY OF THE ORDER FORWARDED TO: 1 APPELLANT DCIT, CIRCLE 10(1), KOLKATA. 2 RESPONDENT M/S. AA INFRAPROPERTIES PVT. LTD. 375 PRINCE ANWAR SHAH ROAD, KOLKATA 700 068. 3 4 5 CIT(A) 4, KOLKATA (SENT THROUGH E-MAIL) CIT DR ( SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR/H.O.O ITAT KOLKATA