The Dy. Commissioner of Income Tax, Central Circle-3, Surat V. M/s. Happy Home Corporation, Surat

ITA 715/AHD/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1904 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 23-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SMITA NAIR
• Assessee Lawyers: RASESH SHAH
• Keywords: Unexplained cash credit; Principle of natural justice; Source of fund; Corroborative evidences; Onus to prove; TDS
• Section: 131; 68; 44AD; 143(3); 133(6); 195

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SURATBENCH, SURAT BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA.NO.1991/AHD/2016 / ASSTT. YEAR: 2012-13 AND ./ ITA.NO.715/AHD/2017 / ASSTT. YEAR: 2013-14 DCIT, CENT.CIR.3 SURAT. VS. M/S.HAPPY HOME CORPORATION T.P.., F.P.NO.39, SHANTIKUNJ NR.SD JAIN SCHOOL U.M. ROAD, VESU CHAR RASTA SURAT. / (APPELLANT) / (RESPONDENT) REVENUE BY : SMT.SMITA NAIR, SR.DR ASSESSEE BY : SHRI RASESH SHAH, CA / DATE OF HEARING : 15/11/2018 / DATE OF PRONOUNCEMENT: 15/01/2019 / O R D E R PER AMARJIT SINGH, ACCOUNTANT MEMBER: THESE ARE TWO REVENUES APPEALS AGAINST THE ORDERS OF LD.CIT(A), SURAT DATED 2.5.2016 AND 30.12.2016 FOR THE ASSTT.YEARS 2 012-13 AND 2013-14. SINCE ASSESSEE IS SAME, WE PROCEED TO DISPOSE OF BO TH THESE APPEALS BY THIS COMMON ORDER. 2. FIRST WE TAKE APPEAL OF THE REVENUE IN THE ASSTT .YEAR 2012-13. 3. IN THE GROUNDS OF APPEAL OF THE REVENUE, THE SOL ITARY ISSUE INVOLVED IS WITH REGARD TO DELETION OF ADDITION MADE UNDER SECT ION 68 OF THE ACT OF ITA NO.1991/AHD/2016 AND 715/AHD/2017 2 RS.1,83,56,149/- MADE BY THE AO ON ACCOUNT OF UNEXP LAINED CASH CREDIT UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. 4. BRIEF FACTS ARE THAT THE ASSESSEE IS A PARTNERSH IP FIRM ENGAGED IN THE BUSINESS OF CONSTRUCTION AND DEVELOPMENT OF REAL ES TATE, PARTICULARLY IN HOUSING PROJECTS. THE ASSESSEE HAS FILED RETURN O F INCOME ON 28.9.2012 SHOWING TOTAL INCOME AT RS.5,69,14,360/- AFTER CLAI MING DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. THE CASE OF THE ASSES SEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE. THE AO HAD NOTICED THAT ASSESSEE HAD ACCEPTED VARIOUS UNSECURED LOAN DURING THE YEAR UNDER CONSID ERATION. ON THE BASIS OF THE DETAILS FURNISHED, THE AO HAS ISSUED NOTICES U/ S.133(6) OF THE ACT AND ALSO SUMMONS U/S.131 OF THE ACT TO VARIOUS DEPOSITORS TO EXAMINE THE GENUINENESS OF THE TRANSACTIONS AND CREDIT-WORTHINESS OF THE DE POSITORS. DURING THE COURSE OF SCRUTINY PROCEEDINGS, THE LD.AO NOTICED THAT THE ASSESSEE FIRM HAS RECEIVED UNSECURED LOAN FROM VARIOUS PARTIES DURING THE YEAR , OUT OF WHICH, A SUM OF RS.1,83,56,149/- RECEIVED FROM THE VARIOUS PARTIES WERE NOT SUBSTANTIATED BY THE ASSESSEE. WHILE RECORDING THE STATEMENT, THE F OLLOWING DEPOSITORS DENIED KNOWING THE ASSESSEE OR HAVING BUSINESS TRANSACTION S WITH THE ASSESSEE. SR. NO. NAME OF THE PERSONS AMOUNT (RS.) 1. MAHENDRA K. SHAH, HUF MAHENDRA K. SHAH 181431 45144 2. PRADIPGIRI B. GOSWAMI 597446 PRADIPGIRI B. GOSWAMI HUF 520466 3. KESHUPARBAT B. GOSWAMI HUF 595925 KESHUPARBAT B.GOSWAMI 76833 4. BINDIYA PATEL, PROP. OF SONI GEMS 16338904 TOTAL 18356149/- 5. ACCORDINGLY, THE LD.AO ISSUED A SHOW CAUSE NOTIC E TO THE ASSESSEE AS TO WHY UNSECURED LOANS GIVEN BY THESE PERSONS COULD NO T BE TREATED AS BOGUS AND ITA NO.1991/AHD/2016 AND 715/AHD/2017 3 UNEXPLAINED. THE ASSESSEE FILED ITS REPLY POINT-WI SE WHICH WERE RECORDED BY THE AO IN PAGE NO.11 TO 18 OF THE ASSESSMENT ORDER . THE ASSESSEE HAS SUBMITTED THAT THE UNSECURED LOANS WERE DULY REFLEC TED IN THE INCOME TAX RETURNS, BALANCE SHEET AND BANK STATEMENT OF THE DE POSITORS WHICH THEY HAD NOT DENIED AND THE STATEMENT GIVEN BEFORE THE AO WE RE NOT FULLY CORRECT. THE ASSESSEE HAS ALSO FILED AFFIDAVITS OF ALL THE SAID DEPOSITORS WHEREIN THEY HAVE CLAIMED THAT THEY HAVE PROVIDED LOAN TO THE ASSESSE E FROM THEIR OWN SOURCES, WHICH THEY COULD NOT EXPLAIN IN THEIR STATEMENT BEC AUSE OF VARIOUS REASONS. AFTER EXAMINING THE REPLY OF THE ASSESSEE, THE AO F OUND THE SAME TO BE NOT CONVINCING. THE AO HAS NOT ACCEPTED THE EXPLANATIO N AND AFFIDAVITS FILED BY THE ASSESSEE ON THE GROUND THAT SAME WERE DONE AFTE R-THOUGHT AT THE INSTANCE OF THE ASSESSEE. THEREFORE, THE AO HAS TREATED THE AFORESAID UNSECURED LOAN AMOUNTING TO RS.1,83,56,149/- AS UNEXPLAINED CREDIT U/S.68 OF THE ACT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 6. AGGRIEVED ASSESSEE, PREFERRED APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESSEE WHILE REITERATING THE SUBMI SSIONS MADE BEFORE THE AO, MADE FURTHER WRITTEN SUBMISSIONS DATED 12.04.20 16. THESE SUBMISSIONS HAVE BEEN REPRODUCED BY THE LD.CIT(A) IN HIS ORDER. THE RELEVANT PART OF THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE LD.CIT( A) READS AS UNDER: IT IS AN UNDISPUTED FACT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE APPELLANT FIRM HAD FURNISHED-THE FOLLOWING DETAILS AND DOCUMENTARY EVIDENCES, IN SUPPORT OF THE UNSECURED LOANS ACCEPTED DURING THE YEAR UNDER CONSIDERATION, SO AS TO DISCHARGE THE ONUS CAST UPON IT U/S. 68 OF TH E ACT, TO PROVE THE IDENTITY OF THE DEPOSITOR, THE GENUINENESS OF THE TRANSACTION' AND THE CREDITWORTHINESS OF THE DEPOSITORS. (I) NAME AND ADDRESS OF THE DEPOSITORS; (II) PAN OF THE DEPOSITORS; (III) CONFIRMATION OF THE DEPOSITORS; (IV) COPY OF IT ACKNOWLEDGEMENT OF THE DEPOSITORS; (V) COPY OF ANNUAL ACCOUNT OF THE DEPOSITORS; AND (VI) COPY OF BANK STATEMENT OF THE DEPOSITORS. THUS, IT CAN BE APPRECIATED IN THE EVENT OF THE APP ELLANT FIRM HAVING FURNISHED COMPLETE DETAILS AND DOCUMENTARY EVIDENCES, TO PROV E THE IDENTITY OF THE DEPOSITORS, THE GENUINENESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF THE DEPOSITORS, BY THE ABOVE DOCUMENTARY EVIDENCES, THE ONUS AS CAST UPON IT U/S. 68 ITA NO.1991/AHD/2016 AND 715/AHD/2017 4 OF THE ACT, STANDS FULLY DISCHARGED AND THEREFORE, AS PER THE WELL ACCEPTED JUDICIAL PRINCIPLES, NO ADDITION COULD BE MADE U/S. 68 OF TH E ACT, IN RESPECT OF THE LOANS ACCEPTED BY THE APPELLANT FIRM. IN SUPPORT OF OUR AFORESAID CONTENTION, WE WOULD LIKE TO PLACE RELIANCE ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS. I) THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. ORISSA CORPORAT ION (P) LTD. (1986) 159 ITR 0076 HAS HELD THAT WHERE THE ASSESSEE HAD FURNISHED THE NAME , ADDRESS AND PAN OF THE DEPOSITORS AND HAD ALSO FURNISHED OTHER DOCUMEN TARY EVIDENCES, THE ONUS CAST U/S. 68 OF THE ACT STOOD D ISCHARGED BY THE ASSESSEE AND THEREFORE, ADDITION CANNOT BE MADE U/S. 68 OF THE A CT. I) THE JURISDICTIONAL HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF CIT V. AMBUJA GINNING PRESSING-& OIL CO. (P) LTD. (2011) 332 ITR 0434 HAS HELD 'THAT ALL THE DEPOSITORS HAD FURNISHED CONFIRMATIONS, COMPLETE PA RTICULARS OF PAYMENTS, EXTRACT OF BANK, PASS BOOKS AND EVIDENCES OF INCOME AND ACC ORDINGLY, THE ASSESSEE HAS DISCHARGED ITS BURDEN U/S. 68 OF THE ACT AND THEREF ORE, ADDITION CANNOT BE MADE, U/S, 68 OF THE ACT. I I) THE JURISDICTIONAL HON'BLE HIGH COURT OF GUJA RAT IN THE CASE OF DCIT V. ROHINI BUILDERS (2002) 256 ITR 0360 HAS HELD THAT WHERE TH E LOANS WERE RECEIVED AND REPAID BY ASSESSEE BY ACCOUNT PAYEE CHEQUES AND THE ASSESSEE HAVING ESTABLISHED THE IDENTITY OF THE CREDITORS BY GIVING THEIR COMPLETE ADDRESSES, PAN, AS WELL AS CONFIRMATION, ALONG WITH COPY OF RETURNS FILED BY THE CREDITORS, ADDITION U/S. 68 OF THE ACT STOOD RIGHTLY DELETED BY THE -TR IBUNAL. (IV) THE JURISDICTIONAL HON'BLE I TAT, AHMEDABAD, IN THE CASE OF DC/T V. VKA FINANCE & INVESTMENT CO.(2015) 45 CCH 0014 (AHD TRI B) HAS HELD THAT ONCE AN ASSESSEE SUBMITS ALL ASSESSMENT DETAILS OF ITS CRED ITORS, THEN THE PRIMARY ONUS OF PROVING IDENTITY, GENUINENESS AND CREDITWORTHINESS STANDS DISCHARGED AND NO ADDITION U/S. 68 IS WARRANTED. (V) THE JURISDICTIONAL HON'BLE ITAT, AHMEDABAD, I N THE CASE OF DCIT V. GAURANG MANIBHAI PATE! (2016) 46 CCH 0036 (AHDTRIB) HAS HEL D THAT ONCE THE ASSESSEE DISCHARGED INITIAL ONUS CAST UPON IT AND EVIDENCES AND EXPLANATION HAVE BEEN FURNISHED, NO ADDITION U/S. 68 CAN BE MADE TO THE I NCOME OF THE ASSESSEE. (VI) THE JURISDICTIONAL HON'BLE ITAT, AHMEDABAD, IN THE CASE OF ITO V. BABULAL RAMPRASAD AGAIYSAL HUF (2014) 40 CCH 0307 (AHDTRIB) HAS HELD THAT THE ASSESSEE FURNISHED DETAILS OF PAN OF THE CREDITORS AND EXPLAINED THAT THE TRANSACTIONS WERE, MADE THROUGH BANKING CHANNEL AND THAT ALL DEPOSITORS WERE EXISTING TAX PAYERS AND INTEREST WAS ALSO PAID TO T HE DEPOSITORS AFTER DEDUCTING TDS AND LOANS WERE REPAID IN SUBSEQUENT YEARS THROUGH ACCOUNT PAYEE CH EQUES, ADDITION, U/S. 68 O THE ACT CANNOT BE MADE. (VII) THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF MOD CREATIONS (P ) LTD. V. ITO (2013) 354 ITR 0282 HAS HELD THAT THE ASSESSEE HAD FILED COPIES OF RETURNS, STATEMENT OF INCOME, BALANCE SHEET, P&L A/C. AND BA NK STATEMENTS, ETC. OF THE DEPOSITORS AND AFFIDAVITS OF SOME OF THE DEPOSI TORS WERE ALSO FILED. HENCE, THE ASSESSEE HAD DISCHARGED THE ONUS PLACED ON IT U/S. 68 OF THE ACT AND THEREFORE, ADDITION IN THE HANDS OF THE ASSESSEE IS NOT SUSTAINABLE. (VIII) THE HON'BLE HIGH COURT OF CALCUTTA IN THE CASE OF CIT V. SAHIBGANJ BEETLE CABLES (P) LTD. (1978) 115 ITR 0408 HAS HELD THAT W HERE THE AMOUNTS OF LOAN WERE RECEIVED BY; CHEQUE AND REPAYMENT WAS ALSO MADE BY CHEQUE THROUGH ASSESSEE'S BANTERS AND CONFIRMATION OF CREDITORS ALONG WITH THEIR INCOME TAX FILE NUMBERS WERE FURNISHED, THE ASSESSEE DISCHARGED ITS BURDEN OND ITO WAS NOT JUSTIFIED TO REJECT THE EVIDENCE AND MAKE ADDITION U/S. 68 OF THE ACT. ITA NO.1991/AHD/2016 AND 715/AHD/2017 5 (IX)THE HON'BLE ITAT, DELHI IN THE CASE OF DR. RAJESH SARDANA V. ITO (200 4) 56 TTJ 0776 HAS HELD THAT WHEN THE IDENTITY OF THE LENDERS AND THEI R CAPABILITIES WERE DOUBT, THE LOANS WERE GIVEN BY CHEQUES AND THE A SSESSEE HAD DISCHARGED THE INITIAL ONUS CAST UPON HIM BY FURNISHING NECESSARY PARTICULARS, THE ADDITION U/S. 68 IS LIABLE TO BE DELETED. A COPY OF THE AFORESAID JUDICIAL PRONOUNCEMENTS IS ENCLOSED HEREWITH IN ANNEXURE- 10 FOR THE IMMEDIATE REFERENCE OF YOUR HONOUR. IN VIEW OF THE AFORESAID FACTS AND THE JUDICIAL PRO NOUNCEMENTS IN SUPPORT THEREOF, WE MOST HUMBLY SUBMIT THAT EVEN IN THE-PRESENT CASE , THE APPELLANT FIRM HAS DULY DISCHARGED THE ONUS CAST UPON IT BY FURNISHING ALL DETAILS AND DOCUMENTARY EVIDENCES TO JUSTIFY THE UNSECURED LOANS AND HENCE, THE SAME CANNOT BE TREATED AS UNEXPLAINED CASH CREDITS AND THEREFORE, THE ADDITION U/S. 68 OF THE ACT AS MADE BY THE LEARNED AO, NEEDS TO BE DELETED IN THE INTER EST OF NATURAL JUSTICE AND EQUITY. 2. OTHER SUPPORTING FACTS AND DETAILS TO JUSTIFY THAT THE GENUINENESS OF THE LOAN S DURING THE COURSE OF PERSONAL HEARING WE HAD WITH Y OUR HONOUR IN THE SUBJECT MATTER, YOUR HONOUR HAD ASKED US TO FURNISH VARIOUS FURTHER INFORMATION, IN RESPECT OF THE SAID LOONS AND IN '- THIS REGARD, WE SUBMIT AS FOLLOWS. (I) LOANS HAVE BEEN ACCEPTED AS WELL AS REP AID THROUGH BANKING CHANNEL IT MAY BE NOTED THAT ALL THE LOANS UNDER CONSIDERAT ION HAVE BEEN ACCEPTED VIDE ACCOUNT PAYEE CHEQUES. FURTHER, MOST OF THE LOANS WHICH HAVE BEEN ADDED U/ S. 68 OF THE ACT, HAVE EVEN BEEN REPAID IN T HE SUBSEQUENT YEARS, VIDE ACCOUNT PAYEE CHEQUES. THE DETAIL OF ADDITION MADE U/S. 68 OF THE ACT AND THE REPAYMENT OF THESE LOANS IN THE SUBSEQUENT YEARS IS GIVEN IN THE FOLLOWING TABL E. SR. NO. NOME OF THE PERSON ADDITION U/S. 68 IN AY 2072-73 VEAR OF REPAYMENT ] MAHENDRA K. SHAH-HUF MAHENDRA K. SHAH PRADIPGIRI B. GOSWAMI PRADIPGIRI B. GOSWAMI-HUF KESHUPARBAT B GOSWAMI KESHUPARBAT B. GOSWAMI-HUF BINDIYA P. PATEL (PRP. OF SONI GEMS) 18 1431 A.Y. 2015-16 2 45, 144 A.Y. 2015-16 3 5,97,446 A.Y. 2016-17 4 5,20,466 A.Y. 2015-16 5 6. 7. 76,533 5,95,925 1,63,38,904 - A.Y.2015-16 (PARTLY) A.Y.2014-15 1,83,56,149 THE LEDGER ACCOUNT OF THE AFORESAID UNSECURED LOANS FROM THE BEGINNING UPTO TILL DATE ALONG WITH A COPY OF OUR BANK STATEMENT, HIGHL IGHTING ALL THE RELEVANT TRANSACTIONS OF ACCEPTANCE AS WELL AS REPAYMENT IS ENCLOSED HEREWITH IN ANNEXURE-11 FOR THE IMMEDIATE REFERENCE OF YOUR HONOUR. ITA NO.1991/AHD/2016 AND 715/AHD/2017 6 THUS, IN THE EVENT BANKING CHANNEL, SAID LOANS. SOU RCE OF SOURCE OF THE UNSECURED LOANS BEING ACCEPTED AND REPAID THROUGH HERE REMAIN S NO POINT OF DOUBTING THE GENUINENESS OF THE SAID LOANS. (II) SOURCE OF SOURCE 'AS REGARDS THE SOURCE OF RECEIPT IN THE HANDS OF T HE RESPECTIVE DEPOSITORS (I.E. SOURCE OF SOURCE, AT THE VERY OUTSET, WE WOULD ONCE AGAIN LIKE TO DRAW T HE KIND ATTENTION OF YOUR HONOUR TO THE FACT THAT UNSECURED LOAN OF RS. 7,63,38,904/- HAS BEEN RECEIVED BY THE APPELLANT FIRM FROM A. SINGLE DEPOS ITOR VIZ. SMT. BINDYA P. PATEL, PROP, OF SONI GEMS. IT MAY BE NOTED THAT IN THE CASE OF THE SAID DEPOSITOR, SCRUTINY ASSESSMENT U/S. 143(3) HAS BEEN COMPLETED BY THE /TO, WARD 2(3)(L),.SURAT, FOR THE YEAR UNDER CONSIDERATION ITSELF, ON 27-03-2015, WHEREIN HER-CREDITWORTHINESS A S A/SO THE SOURCE OF FUNDS IN PER HANDS STAND DULY ACCEPTED. A COPY OF THE ASSESSMENT ORDER U/S. 143(3) OF THE ACT AS PASSED IN THE CASE OF THE AFORESAID DEPOSITOR VIZ. SMT. BINDYA P. PATEL PROP, OF SONI GEMS HAS ALREADY BEEN FURNISHED IN ANNEXURE- 1 OF OUR EARLIER SUBMISSIONS. FURTHER, THE DEPOSITORS WHOSE NEW LOANS RECEIVED DURING THE YEAR HAVE BEEN ADDED U/S. 68 OF THE ACT HAVE FURNISHED A DECLARATI ON EXPLAINING THE SOURCE IN THEIR HANDS AND A COPY OF THE SAME IS ENCLOSED HEREWITH I N ANNEXURE-12 FOR THE IMMEDIATE REFERENCE OF YOUR HONOUR. ON GOING THROUGH THE SAME, IT CAN BE SEEN THAT THE SOURCE IN THE HANDS OF THE DEPOSITORS FOR GRANTING LOAN TO THE APPELLANT FIRM, A/SO STAND DULY FURNISHED. HENCE, THE ABOVE DETAILS AND DOCUMENTARY EVIDENCES, DEARLY SHOW THAT THE GENUINENESS OF THE TRANSACTION STAND EXPLAINED AND ESTABLISHED BEYOND DOUBT AND THEREFORE, THE ADDITION U/S. 68 OF THE ACT AS\MADE BY THE LEARNED AO NEEDS TO BE DELETED.' 7. THE LD.CIT(A) AFTER CONSIDERING THE DETAILS AND THE EXPLANATION OF THE ASSESSEE AND CONSIDERING THE ORDER OF THE LD.AO, DE LETED THE IMPUGNED ADDITION MADE BY THE AO UNDER SECTION 68 OF THE ACT . THE DISCUSSION AND FINDING OF THE LD.CIT(A) CONTAINED IN THE ORDER ARE RELEVANT FOR THE ADJUDICATION OF THIS ISSUE, AND THEREFORE, WE REPRO DUCE THEM AS UNDER: 7. I HAVE CONSIDERED THE FACTS OF THE CASE INTER-A LIA, THE FINDINGS OF THE AO, THE CONTENTIONS OF THE ASSESSEE AND THE JUDICIA L PRONOUNCEMENTS RELIED UPON. THE BRIEF FACTS OF THE CASE ARE THAT THE APPE LLANT HAD ACCEPTED UNSECURED LOANS DURING THE YEAR, FOR WHICH DURING T HE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSES FURNISHED DETA ILS RELATING TO DEPOSITORS LIKE THEIR NAME, ADDRESS, PAN AND OTHER DOCUMENTARY EVIDENCES LIKE CONFIRMATION, ACKNOWLEDGEMENT OF RETURN OF INC OME, BALANCE SHEET, P&L A/C., CAPITAL ACCOUNT AND BANK STATEMENT OF THE DEPOSITORS. ACCORDINGLY, THE APPELLANT HAS CLAIMED THAT IT HAS SATISFACTORILY DISCHARGED THE PRIMARY ONUS CAST UPON IT U/S. 68 OF THE ACT TO PROVE THE IDENTITY OF THE DEPOSITORS, THE GENUINENESS OF THE TRANSACTIONS AND THE CREDITWORTHINESS OF THE DEPOSITORS. ITA NO.1991/AHD/2016 AND 715/AHD/2017 7 ON THE BASIS OF THE DETAILS AND DOCUMENTARY EVIDENC ES FURNISHED BY THE ASSESSEE, THE AO HAD ISSUED NOTICE U/S. 133(6).AS W ELL AS SUMMONS U/S.131, TO VARIOUS DEPOSITORS AND DUE COMPLIANCE WAS MADE B Y ALL SUCH DEPOSITORS BEFORE THE AO. HOWEVER, WHILE RECORDING THE STATEME NT U/S. 131 OF THE ACT, CERTAIN DEPOSITORS AS LISTED IN PARA 4.1 OF THIS O RDER, DENIED KNOWING THE ASSESSEE OR SIGNING THE CONFIRMATION OR HAVING BUSI NESS TRANSACTIONS WITH THE ASSESSEE AND THEREFORE, IN THE OPINION OF THE AO GENUINENESS AND CREDITWORTHINESS OF THESE LOANS STOOD DISPROVED.. AS A MATTER OF FACT, THE ASSESSEE WAS NEVER GIVEN THE OPPORTUNITY TO CROSS-E XAMINE THESE WITNESSES (DEPOSITORS) AND EVEN COPIES OF STATEMENTS WERE ALS O PROVIDED VERY LATE ALONGWITH SHOW CAUSE NOTICE. ACCORDINGLY, THE ASSES SEE WAS ASKED TO SHOW- CAUSE AS TO WHY THE LOANS TOTALING TO RS.1,83,56,14 9/- AS RECEIVED FROM THESE DEPOSITORS SHOULD NOT BE TREATED AS UNEXPLAINED, CA SH CREDITS U/S. 68 OF THE ACT. IN RESPONSE TO THE SHOW-CAUSE NOTICE, THE ASSE SSEE FURNISHED AFFIDAVITS DULY NOTARIZED OF THE SAID DEPOSITORS, WHEREIN, THE Y FURNISHED CLARIFICATIONS ON THE CONTENTS OF THEIR STATEMENTS RECORDED BEFORE TH E AO AND ALSO CONFIRMED THEIR LOANS GIVEN TO THE ASSESSEE. HOWEVER, THE AO CONSIDERED THE SAME AS AN AFTERTHOUGHT AND HELD THE SAID LOANS AS UNEXPLAI NED CASH CREDITS U/S. 68 OF THE ACT AND MADE AN ADDITION OF RS.1,83,56,149/- TO THE TOTAL INCOME OF THE ASSESSEE. THE LAW IS WELL-SETTLED THAT PRIMARY ONUS OF PROVIN G THE NATURE AND SOURCE OF MONEY FOUND TO HAVE BEEN DEPOSITED IN BOOKS BY AN A SSESSEE IS ON HIM. WHERE NATURE & SOURCE OF A RECEIPT CANNOT BE SATISF ACTORILY EXPLAINED BY THE ASSESSEE, IT IS OPEN TO THE REVENUE TO HOLD THAT IT IS INCOME OF THE ASSESSEE AND NO FURTHER BURDEN LIES ON THE REVENUE TO SHOW T HAT INCOME IS FROM ANY PARTICULAR SOURCE [ROSHANDI HAITI 107 ITR 938 (SC) & KAIEKHAN MOHAMMA HANIF 50 ITR 11(SC)] IT IS A WELL ACCEPTED LAW THAT SECTION 68 PROVIDES FOR FULFILLMENT OF 3 BASIC CONDITIONS VIZ. (I) IDENTITY OF THE DEP OSITOR; (II) GENUINENESS OF THE TRANSACTION; AND (III) CREDITWORTHINESS OF THE DEPO SITOR. FURTHER, THE PRIMARY ONUS TO PROVE THE FULFILLMENT OF THESE 3 CONDITIONS LIES ON THE ASSESSEE. IN THE PRESENT CASE, IT IS AN UNDISPUTED FACT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS FURNISHED THE COMPLET E DETAILS OF THE DEPOSITORS LIKE THEIR NAME, ADDRESS AND PAN AND ALSO FURNISHED DOCUMENTARY EVIDENCES LIKE CONFIRMATION, ACKNOWLEDGEMENT OF RETURN OF INC OME, BALANCE SHEET, P&L A/C., CAPITAL ACCOUNT AND BANK STATEMENT OF THE DEP OSITORS. THUS, BY FURNISHING THESE DETAILS AND DOCUMENTARY EVIDENCES, THE ASSESS EE HAS DISCHARGED THE PRIMARY ONUS CAST UPON IF TO FULFILL THE 3 VITAL CO NDITIONS AS PRESCRIBED U/S. 68 OF THE ACT. THEREFORE, ON A CURSORY LOOK, I AM OF THE CONSIDERED VIEW THAT SINCE, THE PRIMARY ONUS U/S. 68 HAS BEEN DISCHARGED BY THE ASSESSEE, THE LOAN RECEIVED BY IT CANNOT BE HELD AS UNEXPLAINED CASH C REDITS U/S. 68 OF THE ACT. THIS VIEW IS WELL SUPPORTED BY THE FOLLOWING DECISI ONS OF THE SUPREME COURT, JURISDICTIONAL HIGH COURT OF GUJARAT, JURISDICTIONA L TRIBUNAL AND OTHER COURTS:- (I) CIT V. ORISSA CORPORATION (P) LTD. 159 ITR 0078 (SC) (II) CIT V. AMBUJA GINNING PRESSING & OIL CO. (P) LTD. 332 ITR 0434 (GUJ) ITA NO.1991/AHD/2016 AND 715/AHD/2017 8 (III) DCIT V. ROHINI BUILDERS 256 ITR 0360 (GUJ) (IV) DC1T V. VKA FINANCE & INVESTMENT CO. 45 CCH 0 014 (AND TRIB) (V) DCIT V. GAURANG MANIBHAI PATEL 46 CCH 0036 (AN D TRIB) (VI) ITO V. BABULAL RAMPRASAD AGARWAL HUF 40 CCH 0 307 (AHD1YITR)~ (VII) MOD CREATIONS (P) LTD. V. ITO 354 ITR 0282 ( DEL) (VIII) CIT V. SAHIBGANJ ELECTRIC CABLES (P) LTD. 1 15 ITR 0408 (CAL) (IX) DR. RAJESH SQRDANA V. ITO 86 TTJ OIL 6 (DEL) 7.2 NOW, AFTER DISCHARGING BF THE PRIMARY ONUS BY THE ASSESSEE, THE AO NEEDS TO VERIFY THE FULFILLMENT; OF THE 3 CONDITIONS OF S ECTION 68 AND THE 1 ST CONDITION THEREIN IS THE IDENTITY OF THE DEPOSITORS . IN THE PRESENT CASE, IT IS A FACT ON RECORD THAT ALL THE SAID DEPOSITORS ARE HAVING PAN AND ARE ALSO FILING INCOME TAX RETURNS. FURTHER, IT IS ALSO A FACT THAT THE SUMMONS U/S. 131 OF THE ACT ISSUED BY THE AO TO THESE DEPOSITORS WERE DULY SERV ED AND THESE DEPOSITORS ALSO APPEARED BEFORE THE AO IN RESPONSE THERETO. MO REOVER, IT IS ALSO SEEN THAT IN CASE OF ONE OF THE DEPOSITOR VIZ. SMT. BINDYA P. PATEL (PROP. OF SONI GEMS) FROM WHOM LOAN OF RS. 1,63,38,904/-HAS BEEN RECEIVE D WAS ASSESSED UNDER SCRUTINY U/S. 143(3) FOR THE YEAR UNDER CONSIDERATI ON ITSELF I.E. A.Y. 2012-13. THUS, I AM OF THE OPINION THAT CONSIDERING ALL THES E FACTS, THE IDENTITY OF THE DEPOSITORS STANDS PROVED BEYOND DOUBT BY THE ASSESS EE AND THE SAME HAS NOT EVEN BEEN DISPUTED BY THE AO. THUS, IT COULD BE SAI D THAT FIRST HURDLE HAS BEEN CROSSED SUCCESSFULLY BY THE APPELLANT. 7.3 IN THE PRESENT CASE, THE AO HAS HELD THAT THE 2 ND CONDITION I.E. THE GENUINENESS OF THE TRANSACTIONS, HAS NOT BEEN PROVE D BY THE ASSESSEE SINCE, THE DEPOSITORS IN THEIR STATEMENT RECORDED U /S. 131 OF THE ACT, HAVE DENIED TO HAVE KNOWN THE ASSESSEE HAVING GIVEN ANY LOAN TO ASSESSEE AND HAVE ALSO DENIED TO HAVE SIGNED THE CONFIRMATIONS F ILED BY THE ASSESSEE. AS AGAINST THIS, THE ASSESSEE HAS CONTENDED THAT THE V ARIOUS DOCUMENTARY EVIDENCES SUBMITTED BEFORE THE AO CLEARLY PROVE THE GENUINENESS OF THE TRANSACTIONS. IN THIS REGARD, I HAVE CONSIDERED ALL THE DOCUMENTARY EVIDENCES WHICH WERE EVEN FURNISHED BEFORE THE AO D URING THE COURSE OF ASSESSMENT PROCEEDINGS. ON VERIFICATION OF THESE DO CUMENTARY EVIDENCES, THE FOLLOWING FACTS HAVE EMERGED:- (I) FIRST OF ALL, IT IS SEEN THAT THE LOAN GIVEN B Y THE DEPOSITORS TO THE ASSESSEE ARE DULY REFLECTED IN THEIR RESPECTIVE BAL ANCE SHEET AND THE DEPOSITORS HAVE NOT DENIED THE CORRECTNESS OF THE B ALANCE SHEETS SUBMITTED BEFORE THE AO. NEITHER AO DOUBTED THE AUTHENTICITY OF THESE B/SHEETS. (II) SECONDLY, IT IS SEEN THAT THE LOANS WERE RECEIVED BY ACCOUNT PAYEE CHEQUES THROUGH BANKING CHANNEL AND THE R ESPECTIVE AMOUNTS ARE CLEARLY REFLECTED IN THE BANK STATEMENT OF THE DEPO SITORS ACCEPTED TO BE CORRECT BY THEM AND EVEN THE AO HAS NOT MADE ANY ADVERSE CO MMENT REGARDING THEIR AUTHENTICITY. ITA NO.1991/AHD/2016 AND 715/AHD/2017 9 (III) THIRDLY, IT IS : SEEN THAT THE ASSESSEE HAS PAID INTEREST ON THESE LOANS AND HAS ALSO DEDUCTED TDS THEREON AND THIS INTEREST INCOME AND TDS IS DULY REFLECTED IN THE INCOME-TAX RETURNS OF THE RESPECTI VE DEPOSITORS. (IV) FOURTHLY, IT IS SEEN THAT MOST OF THE LO ANS HAVE BEEN REPAID ALONG WITH INTEREST, IN THE SUBSEQUENT YEARS AND THESE REPAYME NTS ARE ALSO THROUGH ACCOUNT PAYEE CHEQUES AND THROUGH BANKING CHANNEL. (V) FIFTHLY, DURING OF APPELLATE PROCE EDINGS ON MY DIRECTION, EVIDENCES EXPLAINING THE 'SOURCE OF SOURCE' OF IM PUGNED DEPOSITS WERE FILED AND IT HAS BEEN SEEN THAT BEFORE ISSUE OF CHE QUES TO ASSESSEE, NO CASH WAS DEPOSITED AND SOURCE WAS EITHER SALE ' PROCEEDS OR LOANS'. THUS, THE ABOVE FACTS AS ARE EVIDENT ENOUGH FROM TH E DOCUMENTARY EVIDENCES TO DERIVE A CONCLUSION THAT LOAN TRANSACTIONS HAD B EEN ENTERED BETWEEN THE ASSESSEE AND THE DEPOSITORS WERE GENUINE. THEREFORE IT IS VERY MUCH INTRIGUING AS TO UNDER WHAT CIRCUMSTANCES THE DEPOS ITORS DENIED TO HAVE KNOWN THE ASSESSEE AND DISOWNED THE TRANSACTIONS WITH THEM DESPITE THE FACT, THAT THESE TRANSACTIONS DULY REFLECTED IN THEIR BALANCE SHEET, BANK STATEMENTS AND INCOME TAX RETURNS. THIS ASPECT RELA TING TO RECORDING OF THE STATEMENT-OF LENDERS VIS-A-VIS DOCUMENTARY EVID ENCE HAVE BEEN DISCUSSED AT LENGTH IN SUBSEQUENT PARAS. FURTHER, I AM OF A CONSIDERED VIEW THAT THE FACT TH AT THE LOANS AS WELL AS THE INTEREST INCOME AND TDS THEREON BEING REFLECTED IN THE INCOME TAX RETURNS, BALANCE SHEET AND BANK STATEMENT OF THE DE POSITORS, CLEARLY SUPPORT THE ASSESSEE'S CONTENTION THAT THE TRANSACT IONS ARE GENUINE. AS O MATTER OF FACT, EXCEPT 'ORAL TESTIMONY' OF LENDE RS BEFORE AO IN THEIR STATEMENTS THERE IS NOTHING POSITIVE OR DIRECT E VIDENCE TO SUPPORT THE FINDING OF THE AO THAT DEPOSITS WERE BOGUS/INGENUINE. NEVERTHELESS, THEIR SUBSEQUENT 'AFFIDAVITS' THESE LENDERS HAVE MA DE A 'U TURN' AND ACCEPTED THESE LOAN TRANSACTION AS GENUINE. THUS, T HE ADVERSE ORAL TESTIMONY IS NO MORE SUBSISTING. HAD THESE TRANSACT IONS BEEN BOGUS, THE SAME WOULD NOT HAVE BEEN REFLECTED IN THESE DOCUMEN TS BELONGING TO THE DEPOSITORS AND THE DEPOSITORS WOULD NOT HAVE SHOWN INTEREST INCOME ON THESE LOANS AND PAID INCOME TAX THEREON AND MOREOVE R, THE LOANS WOULD NOT HAVE BEEN REPAID TO THEM BY THE ASSESSEE. MOST IMPORTANTLY THERE IS NO ALLEGATION AGAINST THE ASSESSEE OF GIVING CASH FOR OBTAINING CHEQUE. THEREFORE, CONSIDERING THE FACTS AND DOCUMENTARY EV IDENCES, I AM OF THE CONSIDERED VIEW THAT THE GENUINENESS OF THE TRANSAC TIONS CLEARLY STAND PROVED BY THE ASSESSEE WITH SUPPORTING DOCUMENTARY EVIDENCES, IF APPEARS TO ME THAT EITHER THE DEPOSITORS COULD NOT PROPERLY UNDERSTOOD THE QUESTIONS RAISED BY THE AO OR STATED WRONG-FACTS FOR REASONS BEST KNOWN TO THEM OR AO HAS MISINTERPRETED THE FACTS STATED BY THE DEPOS ITORS. ON FACE OF IT, I HAVE NOTICED THAT ID. AO (MAY BE DELIBERATELY) DID NOT QUESTION ABOUT CHEQUE PAYMENTS, RETURN SHOWING INTEREST INCOME & R EPAYMENT OF LOAN REFLECTED IN THEIR BOOKS. AO ALSO STOP SHORT IN EXA MINING THE BOOKS OF A/CS ITA NO.1991/AHD/2016 AND 715/AHD/2017 10 OF THESE LENDERS AND HARPED ON 'KNOWING THE ASSESSE E'. IN TODAY'S WORLD IT IS QUITE POSSIBLE NOT TO KNOW THE LOANEE IF MY FINA NCES ARE HANDLED BY-- SOME OTHER PERSON WHICH IS THE EXACT CASE HERE. IN THIS REGARD, IT IS SEEN THAT IN REPLY TO THE SHOW-CAUSE NOTICE ISSUED BY TH E AO, THE APPELLANT HAS FURNISHED CLARIFICATIONS ON THE CONFUSING CONTENT S OF THE STATEMENT OF THE DEPOSITORS AND ALSO FURNISHED (SWORN) AFFIDAVITS (D ULY NOTARIZED) IN SUPPORT THEREOF. IT IS IMPORTANT TO MENTION HERE THAT EVEN THOUGH AFFIDAVITS WERE FILED BEFORE ID. AO ON 23.03.2015, SHE NEITHER CROSS-EXAM INED ANY OF THE DEPONENTS NOR BROUGHT ANY POSITIVE EVIDENCE TO DISP ROVE THE AVERMENTS MADE IN THE AFFIDAVITS. IT IS SETTLED LAW AS HELD B Y HON'BLE APEX COURT IN THE CASE OF MEHTA PARIKH VS. CIT (1956) 30 ITR 181 (SC) THAT CONTENTS OF AFFIDAVITS CANNOT BE REJECTED WITHOUT CROSS-EXAMIN ING THE DEPONENTS. OBVIOUSLY, ID. AO HAS CONSCIOUSLY NOT CR OSS-EXAMINED THE DEPONENTS TO AVOID AVERMENTS MADE IN AFFIDAVITS BEC OMING FINAL & UNDISPUTED. I HAVE CAREFULLY CONSIDERED THE STATEMENTS OF THE D EPOSITORS, THEIR AFFIDAVITS AND CLARIFICATIONS AS FURNISHED BY THE ASSESSEE DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS AND THESE ASPECTS ARE DISCUS SED AND ANALYZED HEREIN AFTER SO AS TO ARRIVE AT CORRECT CONCLUSIONS IN THE MATTER:- (A) MAHENDRA K. SHAH : IT IS EVIDENT FROM THE LEDGER A/C COPIES THAT DURIN G THE YEAR, ASSESSEE HAS PAID INTEREST OF RS.81,431/- TO MAHENDRA K. SHA H (HUF) AND INTEREST OF RS.45,144/- TO MAHENDRA K. SHAH, INDIVIDUAL IN RESP ECT OF UNSECURED LOANS AVAILED IN THE PAST. IN SUPPORT OF EXPLANATION, THE ASSESSEE HAS FURNISHED THE FOLLOWING DOCUMENTARY EVIDENCES FOR BOTH THE EN TITIES:- (I) ACCOUNT CONFIRMATION. (II) BALANCE SHEET & PROFIT & LOSS A/C. (III) COPY ; OF INCOME TAX RETURN. (IV) RESPECTIVE BANK STATEMENT. (V) NAME, ADDRESS & PAN OF DEPOSITOR. THE AO RECORDED HIS STATEMENT U/S.131 WHE REIN SHE HAS OBSERVED THAT THIS DEPOSITOR IS ENGAGED IN THE BUSINESS OF CHEQUE DISCOUNTING WHEREIN HE TAKES BEARER CHEQUES FROM CUSTOMERS AND MAKES PAYMENT TO THEM IN CASH OR THROUGH CHEQUE OR RTGS, AFTER DEDUC TING HIS COMMISSION AND ACCORDINGLY; THE AO HAS ALLEGED THAT THE LOAN G IVEN BY THIS DEPOSITOR IS MERELY A CHEQUE DISCOUNTING TRANSACTION. IN THIS REGARD, IT SEEMS THAT ID. AO HAS MISCONSTRUED THE CHEQUE DISCOUNTING ACTIVITY' AND LIKEN IT TO SOME ILLEGAL OR UNSCRUPULOUS ACTIVITY. IN FACT, THIS TYPE OF ACTIVI TY IS A GENERAL BUSINESS PRACTICE BY WHICH BUSINESSMAN REALIZED FUNDS EARLY BY PAYING SOME DISCOUNTING CHARGES TO THE PERSON ENGAGED IN 'CHEQU E DISCOUNTING BUSINESS. THIS SYSTEM WORKS ON THE PRINCIPAL OF EAR LY REALIZATION OF FUNDS AS AGAINST THE TIME TAKEN BY BANKING CHANNEL. THERE IS NOTHING ILLEGAL OR OBJECTIONABLE ABOUT THIS ACTIVITY. NONETHELESS, ID. AO HAS NOT EXAMINED THE ISSUE IN DETAILED MANNER BY ASKING HIM THE QUESTION ABOUT WHETHER ASSESSEE OBTAINED LOAN BY THIS MODUS OPERENDI AND A BOUT THE MONEY REFLECTED IN THE BALANCE SHEET OF LENDER, INC OME REFLECTED IN HIS RETURN & TDS CREDIT CLAIMED BY HIM AGAINST HIS TAXABILITY. NEVERTHELESS, I AGREE WITH THE APPELLANT THAT THE NATURE OF BUSINESS OF THE DE POSITOR CANNOT BE MADE A ITA NO.1991/AHD/2016 AND 715/AHD/2017 11 BASIS TO ALLEGE THAT THE LOAN GIVEN BY HIM IS NOT G ENUINE, ESPECIALLY, WHEN THE DOCUMENTARY EVIDENCES PROVE THE GENUINENESS OF THE TRANSACTIONS. THE AO HAS MISERABLY FAILED TO PROVE HERE ALLEGATION AS TO WHETHER ASSESSEE USED THE ROUTE OF 'CHEQUE DISCOUNTING' FOR OBTAININ G LOAN. THUS, IN MY VIEW THE AO HAS DRAWN ERRONEOUS CONCLUSION AND ALLEGED T HE LOAN TO BE NON- GENUINE WITHOUT HAVING ANY SUPPORTING EVIDENCE TO B ACK UP HER ALLEGATION. FURTHER, THIS DEPOSITOR HAD IN HIS STATEMENT HAS SA ID THAT HE HAS NO BUSINESS OR PERSONAL RELATION WITH THE ASSESSEE AND DOES NOT KNOW THE ASSESSEE AND ALSO DENIED THE SIGNATURE ON THE CONFIRMATION. CONSIDERING THIS STATEMENT, THE AO HELD THE LOAN TO BE NON-GENUINE. IN THIS REGARD, THE SAID DEPOSITOR IN HIS AFFIDAVIT HAS CLA RIFIED THAT IN THE F.Y. HE HAD BOOKED FLATS IN THE I PROJECT NANDINI-III AS DEVELO PED BY THE ASSESSEE FOR WHICH HE HAD GIVEN BOOKING ADVANCE AND AS THIS B OOKING WAS CANCELLED, THE SAID ADVANCE WAS CONVERTED TO A LOAN. THE DEPOS ITOR HAS ADMITTED THAT HE IS LOWLY EDUCATED, ONLY 7 TH PASS DOES NOT HAVE ANY TECHNICAL KNOWLEDGE REGARDING ACCOUNTS AND TAXATION AND THAT HIS BROTHE R, SHRI CHETAN SHAH, LOOKS AFTER HIS ACCOUNTS AND INCOME TAX MATTERS. IT IS CLARIFIED THAT HE DID NOT KNEW THAT THE PROJECT NANDINI-III WAS DEVELOPE D BY THE ASSESSEE VIZ. M/S. HAPPY HOME CORPORATION AND UNDER THESE CIRCUMS TANCES, HE HAD DENIED TO HAVE KNOWN M/S. HAPPY HOME CORPORATION OR GRANTED LOAN TO IT, SINCE, AS PER HIS BELIEF HE HAD GIVEN BOOKING ADVAN CE TO NANDINI-LLL. FURTHER, AS REGARDS SIGNATURE ON THE ACCOUNT CONFIRMATION, T HE SAID DEPOSITOR IN HIS AFFIDAVIT HAS CLARIFIED THAT THE SIGNATURE ON THE C ONFIRMATION WAS DONE BY HIS OFFICE STAFF UNDER HIS ABSENCE AND HENCE, DURING TH E COURSE OF RECORDING OF HIS STATEMENT, HE HAD STATED THAT HE HAS NOT SIGNED THE SAID CONFIRMATION. THERE IS NO ALLEGATION OF AO THAT EITHER ASSESSEE O R HIS EMPLOYEES FORGED THE SIGNATURE OF LENDER. ON GOING THROUGH THE AFFID AVIT FILED BY THE SAID DEPOSITOR, THERE REMAINS NO AMBIGUITY ABOUT THE SAI D LOAN TRANSACTION OF RS.5,00,000 (IN INDIVIDUAL CAPACITY) AND RS.9,00, 000/- (IN HUF CAPACITY) ON WHICH INTEREST OF RS.45,144/- & RS.81,431/- HAS BEEN CLAIMED DURING THE YEAR. ALL THE ISSUES BROUGHT O UT BY THE ID. AO IN STATEMENT OF LENDER HAVE BEEN SATISFACTORILY EXPLAI NED BY THE LENDER THROUGH HIS AFFIDAVIT. BESIDES THIS, PREPONDERANCE OF PROBA BILITY IS IN FAVOUR OF THE ASSESSEE TO HOLD THAT IMPUGNED TRANSACTION WAS GENUINE & PROPERLY EXPLAINED WITH REGARD TO NATURE & SOURCE OF DEPOSIT . (B) PRADIPGIRI B. GOSWAMI DURING THE YEAR, UNSECURED LOAN OF RS.5,00,000/- EA CH FROM PARDIPGIRI GOSWARNI IN HIS INDIVIDUAL & HUF CAPACITY WAS RECEI VED BY THE ASSESSEE ON WHICH INTEREST OF RS.20,466/- & RS.76,833/- WAS PAI D. IN SUPPORT OF EXPLANATION ABOUT NATURE & SOURCE, OF SUCH DEPOSITS , THE ASSESSEE HAS FURNISHED THE OWING DOCUMENTARY EVIDENCES FOR BOTH THE ENTITIES:- (I) ACCOUNT CONFIRMATION. (II) BALANCE SHEET & PROFIT & LOSS A/C. (III)COPY OF INCOME TAX RETURN. (IV)RESPECTIVE BANK STATEMENT. (V)NAME, ADDRESS & PAN OF DEPOSITOR. ITA NO.1991/AHD/2016 AND 715/AHD/2017 12 IN THE STATEMENT RECORDED BEFORE THE AO, THIS DEPOS ITOR HAD ALSO DENIED TO HAVE KNOWN THE ASSESSEE FIRM AND IN THIS REGARD, IN HIS AFFIDAVIT THE SAID DEPOSITOR HAS CLARIFIED THAT HE BEING NOT WELL EDU CATED, HIS FINANCIAL AND ACCOUNTING MATTERS ARE HANDLED BY HIS BROTHER SHRI AMRITGIRI GOSWAMI WHO WAS NOT PRESENT AT THE TIME OF RECORDING OF STATEME NT, HENCE CONFUSION. FURTHER, THE DEPOSITOR HAS CLARIFIED THAT HIS BROTH ER HAD INFORMED HIM REGARDING THE LOAN GIVEN TO SHRI MUKESH PATEL HOWEVER, HE DID NOT KNEW THAT THE SAID SHRI MUKESH PATEL IS THE PARTNER' OF THE ASSESSEE FIRM VIZ. M/S. HAPPY HOME CORPORATION AND THAT THE SAID LOAN WAS TAKEN BY SHR I MUKESH PATEL IN THE CAPACITY OF PARTNER OF THE ASSESSEE FIRM. THE EXPLA NATION SEEMS TO ME QUITE BONA FIDE AND ACCEPTABLE BECAUSE MANY A TIMES WHEN FINANCIAL MATTERS ARE HANDLED BY SOME OTHER PERSON, NOT KNOWING THE LOANE E PERSONALLY IS NOT UNUSUAL. AS REGARDS HIS DENIAL IN RESPECT OF THE SIGNATURE M ENTIONED ON THE CONFIRMATION, THE SAID DEPOSITOR HAS CLARIFIED IN H IS AFFIDAVIT THAT HE STAYS IN A JOINT FAMILY WITH HIS PARENTS, HIS BROTHERS FAMILY AS WELL HIS UNCLE SHRI DIPAK GOSWAMI. THE DEPOSITOR HAS FURTHER CLARIFIED THAT T HE CONFIRMATION WAS SIGNED BY HIS UNCLE SHRI DIPAK GOSWAMI WHO JOINTLY STAYS W ITH HIM AND SINCE, HE WAS OUT OF STATION, THE UNCLE HAD SIGNED THE CONFIRMATI ON. THERE IS NO ALLEGATION OF AO THAT EITHER ASSESSEE OR HIS EMPLOYEE HAS FAKED/F ORGED. ALTHOUGH SHRI PRADIPGIRI GOSWAMI DENIED OF HAVING ANY LOAN TRANSACTION WITH M/S HAPPY HOME CORP. BUT AT THE SAME TIME DID NOT DENY THAT C HEQUES ISSUED BY HIM WERE SIGNED BY HIM & ISSUED FROM HIS OWN BANK A/C W ITH UNION BANK. DOCUMENTARY EVIDENCES COUPLED WITH SUBSEQUENT AFFID AVIT HAS CLARIFIED ALL THE POINTS RAISED BY AO ON THE BASIS OF ORAL TESTIM ONY. THE AO COULD NOT BRING ANY COGENT EVIDENCE TO SUPPORT HER ALLEGATION THAT ALL THESE LOAN TRANSACTIONS WERE BOGUS IN THE LIGHT OF FACT THAT T RANSACTIONS ARE THROUGH BANKING CHANNEL & DULY REFLECTED IN BOOKS, BALANCE SHEET & RETURN OF INCOME OF THE LENDER. (C) KESUPRABAT; GOSWAMI IN THIS CASE, THE ASSESSEE HAS RECEIVED RS. 5,00,00 0/- AS LOAN FROM KESHUPARBAF GOSWAMI HUF & PAID INTEREST OF RS. 76,8 33/-(AFTER MAKING TDS) TO INDIVIDUAL & RS. 50,925/- TO HUF. IN SUPPOR T OF EXPLANATION IN RESPECT OF NATURE & SOURCE OF DEPOSITS, THE ASSESSE E HAS FURNISHED THE FOLLOWING DOCUMENTS- (J) ACCOUNT CONFIRMATION. (II) BALANBE SHEET & PROFIT & LOSS A/C. (III) COPY OF INCOME TAX RETURN. (IV) RESPECTIVE BANK STATEMENT. (V) NAME, ADDRESS & PAN OF DEPOSITOR. THE FACTS IN RESPECT OF THE STATEMENT OF THE DEPOSI TOR SHRI KESUPRABHAT GOSWAMI ARE ALSO SIMILAR TO THE FACTS IN RESPECT OF SHRI PRADIP GOSWAMI, WHEREBY, THE DEPOSITOR SHRI KESUPRABHAF GO SWAMI HAVING STUDIED ONLY UPTO 1 ST STANDARD HAS STATED THAT HIS FINANCIAL AND ACCOUNT ING AFFAIRS WERE HANDLED BY HIS RELATIVE SHRI AMITGIRI GOSWAMI WHO SAID TO BE HAVING ITA NO.1991/AHD/2016 AND 715/AHD/2017 13 COMPLETE KNOWLEDGE ABOUT THE LOAN GIVEN TO SHRI MUK E SH PATEL (PARTNER OF THE ASSESSEE FIRM), BUT DID NOT HAD ANY KNOWLEDGE THAT THE SAID LOAN WAS TAKEN BY SHRI MUKESH PATEL IN THE CAPACITY OF PARTN ER OF THE ASSESSEE FIRM. FURTHER, IN HIS AFFIDAVIT, THE SAID DEPOSITOR HAS CLARIFIED THAT THE CONFIRMATION WAS SIGNED BY HIS BROTHER S HRI SHANTIPARBAT GOSWAMI IN HIS ABSENCE AND UNDER THESE CIRCUMSTANCES, HE HA D DENIED TO HAVE SIGNED THE CONFIRMATION. INTERESTINGLY, ID. AO HA S NOT ALLEGED THAT ASSESSEE OR HIS STAFF FORGED THE SIGNATURE ON THE C ONFIRMATION GIVEN BY LENDER. IT IS EVIDENT FROM THE COPY OF BALANCE SH EET THAT OUTSTANDING BALANCES DUE FROM M/S HAPPY HOME CORPORATION ARE DU LY REFLECTED IN RESPECTIVE BALANCE SHEETS OF HUF & INDIVIDUAL AND I NTEREST INCOME IS OFFERED FOR TAX IN THE RETURN OF INCOME AND CREDIT FOR TDS DULY CLAIMED. BANK STATEMENT OF HUF WITH UNION BANK OF INDIA IS REFLEC TING THE ENTRY OF LOAN THROUGH CHEQUE WITHOUT HAVING ANY CASH DEPOSITS. TH E DEPOSITORS HAS CLAIMED THAT HE WAS DOING REGULAR BUSINESS OF DIAMO ND TRADING AND OFFERED INCOME U/S 44AD OF THE ACT. ALTHOUGH, IN HIS STATEMENT RECORDED BEFORE AO HE HAD DENIED OF HAVING ANY KNOWLEDGE OF SUCH LOAN TRANSACTIONS DONE BY HUF OR INDIVIDUAL BUT NEVER DI SOWNED AS SAID DOCUMENTARY EVIDENCES NOT BELONGING TO HIM. HE RA THER IN HIS AFFIDAVIT HAS CONFIRMED THAT SAID LOAN TRANSACTION AND CLARIFIED ABOUT THE WRONG STATEMENT GIVEN BEFORE AO DUE TO CONFUSION & MISUNDERSTANDING CAUSED BY ABSENCE OF SHRI AMITGIRI GOSWAMI (HIS BROTHER IN LAW) WHO W AS HANDLING HIS FINANCIAL MATTERS. NEVERTHELESS, ORAL TESTIMONY CANNOT H AVE MORE WEIGHTAGE THAN THE DOCUMENTARY EVIDENCE INTER ALIA WHEN W ITNESS WAS NOT CROSS EXAMINED AND SUBSEQUENT AFFIDAVIT FILED BY THE ASSE SSEE HAS CLARIFIED ALL THE POINTS RAISED IN THE STATEMENT & SHOW CAUSE NOT ICE. (D) BINDVA P. PATEL (PROP. OF SONI GEMS) AND PRAFUL M. PATEL THE ASSESSEE HAS SHOWN RECEIPT OF UNSECURED LOAN OF RS. 1,50,00,000/- BY CHEQUE NO 44752 DT 4.4.2011 OF 1C1CI BANK IN THE NA ME OF PROPRIETARY CONCERN OF M/S SONI GEMS OF SMT. BINDIYABEN P PATEL . IN ORDER TO EXPLAIN THE NATURE & SOURCE OF DEPOSITS, THE ASSESSEE HAS FURNI SHED THE FOLLOWING EVIDENCES:- (I) NAME, ADDRESS & PAN OF DEPOSITOR (II) ACCOUNT CONFIRMATION (III) COPY OF RETURN OF INCOME (DULY SHOWING INTEREST INC OME & IDS) (IV) AUDIT REPORT WITH FINAL A/CS (B/S & P&L A/C) OF M/S SONI GEMS (V) COPY OF BANK STATEMENT OF LCICI BANK AS REGARDS THE DEPOSITOR SMT. BINDYA P. PATEL, SHE HAD STATED THAT ALL HER FINANCIAL MATTERS ARE HANDLED BY HER HUSBAND SHRI P RAFUL M. PATEL AND ACCORDINGLY, THE STATEMENT OF HER HUSBAND SHRI PRAF UL M. PATEL WAS RECORDED, WHO STATED THAT IN THE PROPRIETARY CONCERN OF HER W IFE M / S . SONI GEM, THE BUSINESS OF TRADING OF DIAMONDS IS CARRIED OUT AND AROUND 30% OF THE TRANSACTIONS ARE IN THE NATURE OF PROVIDING ACCOMMO DATING BILLS. FURTHER, HE HAD STATED THAT HE DOES NOT KNOW M/S. HAPPY HOME CO RPORATION AND HE HAD NO BUSINESS TRANSACTIONS WITH THE ASSESSEE FIRM, IN VIEW OF THESE FACTS, THE AO REJECTED THE GENUINENESS OF THE LOAN RECEIVED FROM THE DEPOSITOR SMT. BINDYA P. PATEL (PROP, OF SONI GEMS). ITA NO.1991/AHD/2016 AND 715/AHD/2017 14 IN THE NOTORIZED AFFIDAVIT FILED BEFORE AO, SHRF PR AFUL M. PATEL HAS CLARIFIED THAT SINCE, THE BUSINESS OF M/S. SONI GERNS WAS OF TRADI NG OF DIAMONDS, HE HAD STATED THAT THERE WERE NO BUSINESS/TRADING TRANSACT IONS WITH THE ASSESSEE FIRM. IT IS CLARIFIED THAT IN HIS STATEMENT HE HAD REFERR ED ONLY TO TRADING TRANSACTIONS I.E. PURCHASE / SALE AND NOT REFERRED TO THE SECTIO NS OF LOANS WHICH HAD INFACT BEEN ENTERED INTO WITH THE ASSESSEE FIRM. IT HAS ALSO BEEN NOTICED FROM TH E STATEMENT THAT ID AO HAS ALL ALONG REFERRED ONLY TO 'BUSINESS TRANSACTION' NOT TO ANY 'LOAN OR ADVANCE TRANSACTION' AND AO IN QUESTION NO .19 HAS RAISED A LEADING QUESTION TO THE WITNESS AS TO WHY TRANSACTION WITH M/S NAKSHATRA (Q 14) AND M/S HAPPY HOME CORP (Q-18) SHR I SANDIP BALVANT NAIK (Q. 16) SHOULD NOT BE CONSIDERED AS 'BILL ING TRANSACTION' TO WHICH NO REPLY WAS GIVEN. IN SUM & SUBSTANCE, ID. AO LED THE WITNESS TO BELIEVE THAT ID. AO WAS MEANT TO BOGUS BILLING OF PURCHASE/ SALE AND NO REFERENCE WAS MADE TO UNSECURED LOAN WITH M/S HAPPY HOME CORP ORATION. THE INTERFERENCE DRAWN BY THE AO FROM THE STATEMENT IS TOTALLY OUT OF PLACE AND NOT IN ACCORDANCE WITH THE FACTS NARRATED IN THE STATEMENT, NEVERTHELESS, IN SUBSEQUENT AFFIDAVIT, SHRI PRAF UL M PATEL HAS CLEARED ALL THE MISGIVINGS IF, ANY, AROSE FROM HIS STATEMENT BE FORE AO. FURTHER, IT HAS BEEN .CLARIFIED THAT HE HAD A BONA-FIDE BELIEF THAT THE NAME OF THE PARTNERSHIP FIRM OF SHRI MUKESH PATEL IS M/S. HAPPY HOME CONSTRUCTION INSTEAD OF THE CORRECT NAME OF M/S. HAPPY HOME CORP ORATION AND ACCORDINGLY, IN THE BALANCE SHEET ALSO THE LOAN HAS BEEN SHOWN IN THE NAME OF M/S. HAPPY HOME CONSTRUCTION. ON VERIFICATION O N RELEVANT RECORDS, THE CONTENTION OF LENDER IS FOUND DULY CORROBORATED BECAUSE IN SCHEDULE 5 : LOAN & ADVANCES (OF M/S. SONI GEMS) THE AMOUNT OF R S.1,62,05,014/- HAS BEEN SHOWN AGAINST M/S. HAPPY HOME CONSTRUCTION. TH US, AO HAVING ASKED ABOUT M/S. HAPPY HOME CORPORATION NOT ABOUT H APPY HOME CONSTRUCTION, CONFUSION WAS BOUND TO OCCUR. MO REOVER, IT HAS BEEN CLARIFIED THAT HE PERSONALLY KNEW SHRI MUKESH PATE L WHO IS THE PARTNER OF THE ASSESSEE FIRM VIZ. M/S. HAPPY HOME CORPORATION. CONSIDERING THE ABOVE FACTS, I AM OF A CONSIDERED O PINION THAT IN THE PRESENT CASE, THE DEPOSITORS BEING LOWLY EDUCATED O R SEMI LITERATE COULD NOT UNDERSTOOD THE SERIOUSNESS & IMPLICATIO N OF RECORDING OF STATEMENT AND COULD BEEN ABLE TO STATE PROPER FACTS BE FORE THE AO AND WERE UNABLE TO UNDERSTAND THE QUESTIONS RAISED BY THE AO IN PROPER PERSPECTIVE WHILE RECORDING OF THEIR STATEMENTS. FU RTHER, IT IS ALSO SEEN THAT HAVING THE DEPOSITORS DENIED TO KNOW THE ASSESSEE AND TRANSACTIONS WITH IT IN THE LIGHT OF THE FACT THAT DOCUMENTS E.G. BANK A /C, RETURN OF INCOME & BALANCE SHEET SHOWING THE FACT OF LOAN GRANTED BY T HEM, THE AO DID NOT PURSUE THE MATTER ANY FURTHER AND NEVER SOUGH T THEIR EXPLANATION OR CLARIFICATION, AS TO WHY THEY WERE DENYING THE FACT S IN SPITE OF EVIDENCES THAT THESE TRANSACTIONS STOOD DULY REFLECTED IN THE INCO ME TAX RETURNS, BALANCE SHEET AND BANK STATEMENT OF THE DEPOSITORS. THUS, I T GETS ESTABLISHED BEYOND DOUBT THAT ON ONE HAND, THE STATEMENTS OF TH E DEPOSITORS ARE NOT RELIABLE BEING INCOMPLETE AND FULL OF INCONGRUITY A ND ON THE OTHER HAND, THE AO HAS ALSO NOT BEEN ABLE TO PROPERLY APPRECIATE TH E FACTS DULY CORROBORATED & ESTABLISHED BY DOCUMENTARY EVIDENCES PROVING THE LOAN TRANSACTION. ITA NO.1991/AHD/2016 AND 715/AHD/2017 15 IT IS A WELL SETTLED LAW THAT THOUGH A STATEMENT IS A VERY IMPORTANT PIECE OF EVIDENCE, THE DOCUMENTARY EVIDENCES CLEARLY PREVAI L OVER THE ORAL STATEMENTS, MORE PARTICULARLY WHEN IT IS SHOWN THAT THE STATEMENT HAS BEEN MADE UNDER DIFFERENT CIRCUMSTANCES AND THEREFORE, S UCH A STATEMENT CANNOT BE BELIEVED TO BE FINAL. THIS VIEW IS SUPPORTED BY THE FOLLOWING JUDICIAL PRONOUNCEMENTS. (I) NAGHUBHAI AMMAL V. B. SHAMA RAO AIR 195 6 SC 1953 (II) ACIT V. ANOOP KUMAR 94 TTJ 288 (III) PULLANGODE RUBBER PRODUCE CO. LTD. V. ST ATE OF KERALA 91 ITR 18 THUS, THE CORRECTNESS OF THE FACTS ARE REQUIRED TO BE JUDGED THROUGH THE DOCUMENTARY EVIDENCES, WHICH IN THE PRESENT CASE AR E VERY CLEARLY SHOW THAT THE LOANS GIVEN ARE DULY REFLECTED IN THE BALA NCE SHEET OF THE DEPOSITORS, THE ACCEPTANCE AS WELL AS REPAYMENT OF THESE LOANS IS THROUGH BANKING CHANNEL WHICH GETS EVIDENT FROM THE BANK ST ATEMENTS OF THE DEPOSITORS, THE INTEREST PAID BY THE ASSESSEE HAS B EEN OFFERED FOR TAX IN THE INCOME TAX RETURNS OF THE DEPOSITORS AND CREDIT FOR TDS HAVING BEEN CLAIMED. FURTHER, IN MY VIEW, BY FURNISHING THE AFFIDAVITS O F ALL THE DEPOSITORS THE ASSESSEE HAS REBUTTED THE ONUS HAS CAST ON IT AND T HE ONUS THUS SHIFTED TO THE AO AND GOING STRICTLY BY THE RULES OF EVIDENCE, THE DEPOSITORS BECOME THE HOSTILE WITNESS OF THE AO AND THUS, THE STATEME NTS OF THE DEPOSITORS CANNOT BE READ WITHOUT TAKING AFFIDAVITS INTO CONSI DERATION. THIS VIEW IS SUPPORTED BY THE DECISION OF THE SUPREME COURT IN T HE CASE OF PRAKASHCHAHDRA NAHTA V. UNION OF INDIA & ORS 247 IT R 274 WHICH HAS BEEN FOLLOWED BY THE HIGH COURT OF MADHYA PRADESH IN THE CASE OF THE SAID ASSESSEE AS REPORTED IN 301 ITR 134. FURTHER, SIMIL AR VIEW HAS ALSO BEEN TAKEN BY THE ITAT, HYDERABAD IN THE CASE OF HERTZ & WEAVES ENGINEERS (P) LTD. V. ACIT 45 TTJ 290. FURTHER, IT IS SEEN THAT THE AO HAS REJECTED THE AF FIDAVITS OF THE DEPOSITORS FOR THE REASON THAT THESE AFFIDAVITS SHOULD HAD BEEN FI LED BEFORE HER IMMEDIATELY AFTER THE RECORDING OF THE STATEMENTS. I DO NOT AGREE WITH THE OBSERVATION OF THE AO IN THIS REGARD. IT IS SEEN THAT AFTER RECORDING OF THE STATEMENT, A COPY THEREOF WAS NEITHER GIVEN TO THE DEPOSITORS NO R TO THE ASSESSEE BUT ATTACHED WITH SHOW CAUSE NOTICE THEREFORE, ASSESSEE HAS CLAIMED THAT ON RECEIVING THE COPY OF THE STATEMENTS AFTER THE ISSU ANCE OF THE SHOW-CAUSE NOTICE BY THE AO, THE DEPOSITORS WERE CONTACTED AND CLARIFICATIONS WERE SOUGHT FROM THEM. MOREOVER, THE AO HAS REJECTED THE AFFIDAVITS OF THE DEPOSITORS FOR THE REASON THAT THE STAMP PAPERS OF MOST OF THE AFFIDAVITS HAVE BEEN PURCHASED FROM A COMMON STAMP VENDOR AND THAT THE LANGUAGE THEREOF IS ALSO SIMILAR, HAVE PERUSED THESE AFFIDAV ITS AND OBSERVATION OF THE AO IS FAR FROM TRUE. EACH & EVERY AFFIDAVIT CONTAIN S DIFFERENT FACTS & NARRATION WITHOUT HAVING ANY KIND OF STARK SIMILARI TIES, OF COURSE LEGAL LANGUAGE AND FORMAT MIGHT BE SIMILAR TO SOME EXTENT . I DO NOT AGREE WITH THE AO IN THIS REGARD, SINCE, AS PER LAW SUBSTANCE GETS PRECEDENT OVER ITA NO.1991/AHD/2016 AND 715/AHD/2017 16 FORM AND THEREFORE, THE CORRECTNESS OF THE AFFIDAVI TS ARE TO BE JUDGED FROM THE DOCUMENTARY EVIDENCES, AND FACTS NARRATED THERE IN WHICH IN THE PRESENT CASE, SUPPORT THE CONTENTIONS OF THE ASSESSEE. BUYI NG STAMP PAPERS FROM SAME VENDOR DOES NOT PROVE ANYTHING AGAINST THE ASS ESSEE OR DIES NOT ADVERSELY AFFECT THE TRUTHFULNESS OF AVERMENTS MADE IN AFFIDAVITS. IN VIEW OF THE ABOVE DISCUSSION, I AM OF THE VIEW T HAT THE EVIDENTIAL VALUE OF THE DOCUMENTARY EVIDENCES AND AFFIDAVIT CANNOT BE B RUSHED ASIDE ON FLIMSY GROUNDS BECAUSE WHAT IS IMPORTANT IS THE FACTS NARR ATED THEREIN. FURTHER, THESE DOCUMENTARY EVIDENCES VERY CLEARLY SHOW THAT THE LOANS WERE GIVEN BY THE DEPOSITORS TO THE ASSESSEE AND SAME ARE DULY REFLECTED IN THE RESPECTIVE BALANCE SHEET OF THE DEPOSITORS & ASSESS EE, THE ACCEPTANCE AS WELL AS REPAYMENT OF THESE LOANS ARE THROUGH BANKIN G CHANNEL WHICH IS EVIDENT FROM THE RESPECTIVE BANK STATEMENTS, THE IN TEREST PAID BY THE ASSESSEE HAS BEEN OFFERED FOR TAX AS INCOME IN THE INCOME TAX RETURNS OF DEPOSITORS AND CREDIT FOR IDS DULY CLAIMED. THEREFO RE, IN VIEW OF THESE FACTS, I HOLD THAT THE 2 ND CONDITION OF SECTION 68 REGARDING THE GENUINENESS OF THE TRANSACTION, STANDS FULLY SATISFIED BY THE ASSESSEE . 7.4 NOW COMING TO THE 3 RD CONDITION REGARDING THE CREDITWORTHINESS OF THE DEPOSITORS, IT IS SEEN THAT OUT OF THE TOTAL LOANS OF RS. 1,83,56,149/- , AN AMOUNT OF RS.1,63,38,904/- HAS BEEN RECEIVED FROM A SINGLE DEPOSITOR VIZ. SMT. BINDA P. PATEL (PROP, OF SONI GEMS). SHE HAS BEEN FILING HER RETURN OF INCOME AND SHOWN TAXABLE INCOME AT RS. 24,37,70/- I N AY 2012- 13. IT IS ALSO SEEN THAT SCRUTINY ASSESSMENT U/S. 143(3) HAS BEEN COMPLETED IN THE CASE OF THIS DEPOSITOR BY THE ITO, WARD- 2(3)(1), S URAT, FOR THE YEAR UNDER CONSIDERATION ITSELF I.E. A.Y. 2012-13, WHEREIN HER CREDITWORTHINESS WAS DULY ACCEPTED. FURTHER, IT IS SEEN THAT ALL THE DEPOSITORS ARE FILING THEIR INCOME TAX RETURNS, FROM WHEREIN THEIR CREDITWORTHINESS IS SAT ISFACTORILY PROVED & EXPLAINED. MOREOVER, ON MY DIRECTION, ASSESSEE ALSO FURNISHED DETAILS EXPLAINING EVEN THE 'SOURCE OF SOURCE' OF LOAN TRAN SACTION WITH LENDERS IN THEIR RESPECTIVE HANDS. FURTHERMORE, THE INTERES T INCOME EARNED FROM THE LOANS ADVANCED TO THE ASSESSEE HAS BEEN OFFERED FOR TAX IN THE INCOME TAX RETURNS OF THE DEPOSITORS AND. THE IDS CREDIT HAS A LSO BEEN DULY CLAIMED BY THEM. DURING THE APPELLATE PROCEEDINGS, LD. AR ALSO COLLATED THE DATA FROM THE ROI & B/S OF RESPECTIVE DEPOSITORS TO ESTABLISH THEIR CREDITWORTHINESS AS UNDER :- SR. NO. NAME OF THE PERSON GROSS TOTAL INCOME CAPITAL FIXED ASSETS CASH/ BANK BALANCE 1 MAHENDRO K. SHAH- HUF MAHENDRA K. SHAH 2,01,314 2,74,381 9,55,685 9,93,377 -- 23,800 2,52,615 68,505 2 PRADIPGIRI B. GOSWAMI PRODIPGIRI B. GOSWAM-HUF 4,75,695 1,75,850 1,81150 1 9, 4 9, 062 8,33,055 9,55,572 23,800 -- 5,50,000 3,21,120 4,252 13,127 ITA NO.1991/AHD/2016 AND 715/AHD/2017 17 3,57,000 77,88,627 5,50,000 17,379 3 KESHUPARBAT B. GOSWAMI KESHUPARBAT B. GOSWAMI- HUF 1,77,440 1,76,850 7,32,788 6,31, 875 -- -- 8,326 20,275 3,54,290 13,64,663 28,601 4 BINDIYA P. PATEL PROP. OF SONI GEMS 24,37,706 40,36,543 32,98,723 47,026 24,37,706 40,36,543 32,98,723 47,026 ON THE BASIS OF ABOVE DATA, IT IS ESTABLISHED BEYON D ANY DOUBT THAT DEPOSITORS WERE HAVING SUFFICIENT WEALTH AND MEANS TO ADVANCE LOAN TO THE APPELLANT. THEY WERE MEN OF MEANS & NOTHING ADVERSE COULD BE HELD AGAINST THEM. THUS, CONSIDERING, THESE FACTS, I HOLD THAT THE 3 RD CONDITION REGARDING THE CREDITWORTHINESS OF THE DEPOSITORS ALSO STAND FULFI LLED BY THE ASSESSEE. 8. RATIONALE BEHIND THE DECISION : CONCLUSI ON: DURING THE APPELLATE PROCEEDINGS, I HAVE GIVEN MY T HOUGHTFUL CONSIDERATION TO VARIOUS LEGAL AND FACTUAL CONTENTIONS RAISED BY THE APPELLANT WHICH HAVE IMPACTED MY FINAL DECISION MAKING OF TREATING THE I MPUGNED UNSECURED LOANS AS EXPLAINED. THESE ARE :- (A) BURDEN OF PROOF ABOUT THE CASH CREDITS SATISFAC TORILY DISCHARGED SEC. 68 CREATES A 'LEGAL FICTION BY WHICH AMOUNT FOUND CREDITED IN THE BOOKS ALTHOUGH NOT 'INCOME IN REAL SENSE BUT THE SAME CAN BE BROUGHT TO TA X IF ASSESSEE FAILED TO SATISFACTORILY EXPLAIN THE NATUR E & SOURCE OF IT, SAME CAN BE ADDED AS INCOME. LAW IS WELL SETTLED THAT PRIMAR Y ONUS IS ON THE ASSESSEE TO OFFER EXPLANATION ABOUT THE NATURE & SO URCE OF SUCH CREDITS. IF ASSESSEE OFFERS NO EXPLANATION OR EXPLANATION OFFER ED BY THE ASSESSEE IS IN THE OPINION OF THE AO IS NOT SATISFACTORILY, THAT S UM MAY BE CHARGED TO INCOME TAX AS INCOME OF THE ASSESSEE. ABOVE RATIO W AS LAID DOWN BY APEX COURT LONG BACK IN KALE KHAN MOHAMMED HANIF VS. CI T (1963) 50 1TR 1 (SC). THERE IS POPULAR DOCTRINE OF COMMON LAW WHIC H SAYS INCUMBIT PROBATIO QUI DIGIT NON QUI NEGAT I.E. BURDEN LIES UPON ONE WHO ALLEGES AND NOT UPON WHO DENIES THE EXISTENCE OF THE FACT. HOWEVER, IN SUBSEQUENT DECISION IN THE CASE OF CIT VS. MOHNKALA (2007) 291 ITR 278 (SC) HON'BLE COURT HAS HELD THAT IT IS TRUE THAT THE OPINION OF THE AO FOR NOT ACCEPTING THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT SATISFACTORY IS REQUIRED TO BE BASED ON PROPER APPR ECIATION OF MATERIAL AND ITA NO.1991/AHD/2016 AND 715/AHD/2017 18 ATTENDING CIRCUMSTANCES AVAILABLE ON RECORD. THE OPINION OF THE AO IS REQUIRED TO BE FORMED OBJECTIVELY WITH REFERENCE TO THE MATERIAL AVAILABLE ON RECORD. APPLICATION OF MIND IS SINE QUA NON FOR FORMING THE OPINION. AS EVIDENT FROM FACTS OF THIS CASE, APPELLANT HAS P RODUCED ALL THE CORROBORATIVE AND DIRECT EVIDENCE TO PROVE THE NATU RE & SOURCE OF DEPOSITS. LEARNED AO HAS SIMPLY RESTED HER CONCLUSION ON NON SPECIFIC & GENERIC QUESTION RAISED WHILE RECORDING THE STATEMENT. SHE DID NOT ASK SPECIFIC & RELEVANT QUESTIONS ABOUT THE BOOKS ENTRIES, CHEQUES ISSUED AND AMOUNT SHOWN AS LOAN IN THE BOOKS / BALANCE SHEET OF RESPE CTIVE LEDGERS. ON THE BASIS OF INCOMPLETE ENQUIRY FINAL CONCLUSION WERE D RAWN BY THE AO. SHE FAILED TO GRILL THEM AS TO WHY INTEREST INCOME IS O FFERED FOR TAX AND LOAN AMOUNT IS SHOWN IN THEIR BALANCE SHEET IF TRANSACTI ONS ARE NOT OWNED UP BY THEM AND MOST IMPORTANTLY WHAT IS THE SOURCE OF MON EY ADVANCED AS LOAN. POSSIBILITY CANNOT BE RULED OUT IF THE LENDERS HAVE SKELETON IN THEIR CUPBOARD AND TO SAVE HIS / HER SKIN THEY DENY THE TRANSACTION OUT RIGHTLY DESPITE BEING SHOWN IN THEIR BOOKS / BANKS / RETURN . SIMPLE DENIAL MADE BY THE LENDER CANNOT PUT THE BURDEN; BACK ON THE ASSESSEE ESPECIALLY WHE N CROSS EXAMINATION OPPORTUNITY WAS NOT PROVIDED TO APPELLANT AND FACTS STATED IN SUBSEQUENT AFFIDAVIT REMAINED UNCONTROVERTED. IN VIEW OF DOCUM ENTARY EVIDENCES & AFFIDAVITS, THE ONUS HAS SHIFTED FORTH TO THE AO WH O FAILED TO DISCHARGE THE SAME BY SIMPLY REJECTING THE AFFIDAVITS SOLELY RELY ING ON ORAL TESTIMONY OF THE WITNESS. IT IS A COMMON SAYING THAT MAN MAY LIE B UT NOT THE DOCUMENTS. MOST IMPORTANTLY, LEARNED AO HAS NOT IMPEACHED ABOU T THE GENUINENESS OF THESE DOCUMENTARY EVIDENCES. IN NUTSHELL, IT COULD BE SUMMED UP THAT LOOKING TO THE QUALITY OF EVIDENCES & ATTENDING CIR CUMSTANCES, APPELLANT HAD SATISFACTORILY DISCHARGED ITS BURDEN. (B) EVIDENTIARY VALUE OF DOCUMENTS VIS-A-VIS ORAL EVIDENCE (STATEMENT): IN GENERAL TERMS EVIDENCE INCLUDES EVERYTHING THAT IS USED TO DETERMINE OR DEMONSTRATE THE TRUTH OF AN ASSERTION. GIVING OR PR OCURING EVIDENCE IS THE PROCESS OF USING THOSE THINGS THAT ARE EITHER (A) P RESUMED TO BE TRUE, OR (B) WHICH WERE PROVED BY EVIDENCE, TO DEMONSTRATE AN AS SERTION'S TRUTH. EVIDENCE IS THE CURRENCY BY WHICH ONE FULFILLS THE BURDEN OF PROOF. IN LAW, THE PRODUCTION AND PRESENTATION OF EVIDENCE DEPENDS FIRST ON ESTABLISHING ON WHOM THE BURDEN OF PROOF LAYS. ADMI SSIBLE EVIDENCE IS THAT WHICH A COURT RECEIVES AND CONSIDERS FOR THE PURPOS ES OF DECIDING A PARTICULAR CASE. TWO PRIMARY BURDEN-OF-PROOF CONSID ERATIONS EXIST IN LAW. THE FIRST IS ON WHOM THE BURDEN RESTS. IN MANY, ESP ECIALLY WESTERN, COURTS, THE BURDEN OF PROOF IS PLACED ON THE PROSECUTION. T HE SECOND CONSIDERATION IS THE DEGREE OF CERTITUDE PROOF MUST REACH, DEPEND ING ON BOTH THE QUANTITY AND QUALITY OF EVIDENCE. THESE DEGREES ARE DIFFEREN T FOR CRIMINAL AND CIVIL CASES, THE FORMER REQUIRING EVIDENCE BEYOND REASONA BLE, THE LATTER CONSIDERING ONLY WHICH SIDE HAS THE PREPONDERANCE O F EVIDENCE, OR WHETHER THE PROPOSITION IS MORE LIKELY TRUE OR FALSE. ITA NO.1991/AHD/2016 AND 715/AHD/2017 19 SECTION 3 OF THE INDIAN EVIDENCE ACT, DEFINES THE E VIDENCE IN THE FOLLOWING WORDS:- (1) ALL THE STATEMENTS WHICH THE COURT PERMITS OR REQUIRES TO BE MADE BEFORE IT BY WITNESSES, IN RELATION TO MATTERS OF F ACT UNDER ENQUIRY; SUCH STATEMENTS ARE CALLED ORAL EVIDENCE; (2) ALL THE DOCUMENTS INCLUDING ELECTRONIC RECORDS PRODUCED FOR THE INSPECTION OF THE COURT; SUCH DOCUMENTS ARE CALLED DOCUMENTARY EVIDENCE; DIFFERENT FORMS OF EVIDENCE: (A) ORAL EVIDENCE (F) HEARSAY EVIDENCE (B) DOCUMENTARY EVIDENCE (G) JUDICIAL EVIDENCE (C) PRIMARY EVIDENCE . (H) NON-JUDICIAL EVIDENC E (D) SECONDARY EVIDENCE (I) DIRECT EVIDENCE (E) REAL EVIDENCE (J) CIRCUMSTANTIAL EVIDENCE OR INDIRECT EVIDENCE LEGAL CASES HAVE DECIDED THE ISSUE RELATING TO WHIC H EVIDENCE IS TO BE TREATED SUPERIOR. IN ORDINARY CIRCUMSTANCES DIRECT EVIDENCES & DOCUMENTARY EVIDENCE SHALL PREVAIL OVER ORAL EVIDENCE BECAUSE W ITNESS MAY TELL A LIE OR HUMANS ARE FALLIBLE WHO MAY NOT REMEMBER THE FACTS CORRECTLY. IN THE PRESENT CASE, LEARNED AO HAS PLACED UNDUE OR OVER R ELIANCE ON THE 'ORAL TESTIMONY' OF THE WITNESSES GIVING COMPLETE DISREGA RD TO THE DIRECT & DOCUMENTARY EVIDENCES IN THE FORM OF BANK ACCOUNT, RETURN OF INCOME, BALANCE SHEET & BOOKS ENTRIES, INTEREST INCOME REFL ECTED IN RETURN, TDS WAS MADE AND REPAYMENT HAVE BEEN MADE IN SUBSEQUENT YEA RS BY CHEQUE. ON A CLOSER BOOK OF STATEMENT IT IS SEEN THAT WITNESSE S HAVE STATED CERTAIN FACTS THEREIN WHICH ARE CONTRARY TO THE DIRECT / DO CUMENTARY EVIDENCES. AND MOST IMPORTANTLY, ID. AO HAS NEITHER ALLEGED THESE DOCUMENTS AS BOGUS OR UNRELIABLE NOR PROVED THEM IN GENUINE. HENCE, IT IS FOR THE PERSON TO PROVE THAT APPARENT IS NOT REAL AS HELD IN THE CASE OF CIT VS. DURGA PRASAD MORE (1971) 82 ITR 540 (SC). HENCE, AO HAS TO BRING THE EVIDENCE TO PROVE THAT WITNESSES'S STATEMENT WAS TRUE & SUBSEQUENT AFFIDA VIT WAS TO BE DISBELIEVED AS EVIDENCE. NONETHELESS, THE STATEMENT OF THE WITNESS WAS NOT ALLOWED TO BE CROSS EXAMINED BY THE AO. AT THE OUTSET, IT HAS BEEN HELD IN VARIOUS CASES ADMISSION IS NOT A CONCLUSIVE PIECE O F EVIDENCE WHICH IS REBUTTABLE AND SHOULD BE PROVED BY DOCUMENTARY EVID ENCE:- NAGHABLAW AMMAI V.B. SHAMA RAO AIR 1 956 SC 1953 ACIT VS. ANOOP KUMAR (2005) 94 TTJ (ASR) 288 PULLANGODE RUBBER PRODUCE CO. LTD. VS. STATE OF K ERALA 91 ITR 18 (SC) SUBSEQUENTLY, AFFIDAVITS WERE FILED BY THE APPELLAN T OF RESPECTIVE LENDERS WHEREIN THEY EXPLAINED THE CIRCUMSTANCES UNDER WHIC H STATEMENTS WERE RECORDED AND STATED THE TRUE FACTS WHICH ARE TOTALL Y CONTRARY TO THE EARLIER STATEMENT. LEARNED AO HAS SUMMARILY DISMISSED THESE AFFIDAVITS AS AN ITA NO.1991/AHD/2016 AND 715/AHD/2017 20 'AFTER THOUGHT' & SAYING THEM AS PREPARED AT THE IN STANCE OF THE APPELLANT. LEARNED AO HOWEVER, HAVE NOT BROUGHT ANY POSITIVE M ATERIAL TO SUPPORT HER SUCH ALLEGATION, THEREFORE, NO CREDENCE CAN BE GIVE N TO SUCH SWEEPING REMARKS. IT IS ALSO A FACT THAT NEITHER OF THE WITN ESSES WERE CROSS EXAMINED WHICH IS MANDATORY BEFORE DISBELIEVING THE AVERMENT S MADE IN THE AFFIDAVITS AS HELD BY HON'BLE SUPREME COURT IN THE CASE OF MEH TA PARIKH & CO. V/S. CIT (1956) 30 ITR 181 (SC). IT HAS BEEN HELD IN NUMEROUS CASES THAT IF ASSESSEE IS NOT ALLOWED TO CROSS EXAMINE THE WITNESSES, THEN SAME CANNOT BE USED AS EVIDENCE, HON'BLE SUPREME COURT IN SIVRAJBHAN VS. HARCHANDGIRI (AIR 1 954 SC 564) HAS HELD THAT THE WORD EVIDENCE IN CONNECTION WITH LAW, ALL VALID MEANINGS, INCLUDES ALL EXCEPT AGREEMENT WHICH PROVE DISPROVE ANY FACT OR MATTER WHOSE TRUTHFULNESS IS PRESENTED FOR JUDICIAL INVESTIGATIO N. AT THIS STAGE IT WILL BE PROPER TO KEEP IN MIND THAT WHERE A PARTY AND THE O THER PARTY DON'T GET THE OPPORTUNITY TO CROSS-EXAMINE HIS STATEMENTS TO ASCE RTAIN THE TRUTH THEN IN SUCH A CONDITION THIS PARTY'S STATEMENT IS NOT EVID ENCE. IN INCOME TAX MATTERS ALSO IN THE FOLLOWING CASES I N ABSENCE OF CROSS EXAMINATION OF PARTIES, THE ASSESSMENT PROCEEDINGS WERE QUASHED :- (I) ANDAMAN TIMBER INDUSTRIES VS COMMISSIONER OF CE NTRAL EXCISE KOLKATA (SC) CIVIL APPEAL NO. 428 OF 2006 (II) MRS. HANSA V. VASOA VS. ITO (1TA NO. 6417/MUM/ 2012) (III) PRAKASH CHAND NAHTA VS. CIT 301 1ITR 134 (MP) STATEMENT RECORDED BEHIND THE BACK OF THE ASSESSEE CANNOT BE USED AGAINST THE ASSESSEE. TO SUM UP, ID AO ERRED IN PLACING OVER RELIANCE ON THE ORAL TESTIMON Y OF WITNESSES WHICH WAS NOT EVEN CONCLUSIVE AND SUBSEQU ENTLY EVEN RETRACTED BY AFFIDAVITS AS AGAINST DIRECT AND DOCUMENTARY EVI DENCES. THE APPROACH OF AO IN ADMISSION OF EVIDENCE WAS AGAINST SETTLED LEG AL PRINCIPALS. HENCE I HOLD THAT ORAL TESTIMONY RECORDED BY AO DESERVE TO BE IGNORED AND DOCUMENTARY EVIDENCES ALONG WITH AFFIDAVITS TO BE G IVEN CREDENCE. (C) SUFFICIENCY OF DOCUMENTARY EVIDENCES FILED IN RESPECT OF JOAN TRANSACTION AS DISCUSSED EARLIER THE APPELLANT HAS FILED SUFFIC IENT EVIDENCES TO DISCHARGE HIS BURDEN PROOF, THE SAME FACTS ARE NOT REPEATED HERE ONCE AGAIN. IT HAS BEEN HOLD IN THE FOLLOWING CASES THAT ASSESSEE HAS DULY ESTABLISHED THE GENUINENESS OF TRANSACTION (THROUGH BANKING CHANNEL), IDENTITY (PARTIES ARE PRODUCED) CREDITWORTHINESS (R ETURN OF INCOME / BALANCE SHEET/SOURCE OF SOURCE FILED) OF THE PARTIES, AO CA NNOT TREAT THE UNSECURED LOANS AS UNEXPLAINED CASH CREDITS. THIS CONTENTION IS SUPPORTED BY THE FOLLOWING DECISIONS :- CIT VS. DAULATRAM RAVATMAL 87 ITR 349 (S.C) ITA NO.1991/AHD/2016 AND 715/AHD/2017 21 DHIRAJLAL GIRDHARLAL VS. CIT (1954) 26 ITR 736 (SC ) MURLIDHAR LAHORIMAL VS. CIT 280 ITR 512 (GUJ) CIT VS. PRAGATI CO-OPERATIVE BANK LTD. 278 ITR 170 [GUJ) (C) EVEN 'SOURCE OF THE SOURCE' HAS BEEN EXPLAINED: IT IS SETTLED LAW THAT ADDITION U/S. 68 OF THE ACT CANNOT BE MADE IF SOURCE OF SOURCE IS NOT EXPLAINED. LAW IS VERY CLEAR THAT ASS ESSEE IS NOT REQUIRED TO PROVE THE 'SOURCE OF SOURCE' OF CASH CREDITS. THIS PROPOSITION IS WELL SUPPORTED BY THE FOLLOWING JUDICIAL PRONOUNCEMENTS S. HASTIMAL V. CIT 49 ITR 273 (MAD) TOLARAM DAGA VS. CIT 59 ITR 632 (ASSAM) CIT VS. DAULATRAM RAWATMAL 87 ITR 349 (SC) SAROGI CREDIT CORPORATION VS. CIT 103 ITR 344 NEMICHAND KOTHARI VS. CIT 264 ITR 254 (GUJ) DCIT VS. ROHINI BUILDERS 256 ITR 360 (GUJ) NEVERTHELESS TAKING ABUNDANT PRECAUTION, DURING APP ELLATE PROCEEDINGS, LEARNED AR OF THE ASSESSEE WAS ASKED TO SUBMIT THE EVIDENCES TO EXPLAIN THE 'SOURCE OF SOURCE' OUT OF WHICH IMPUGNED LOANS WAS GRANTED TO THE ASSESSEE. IN RESPONSE, THE ASSESSEE FILED THE EXPLANATION VID E LETTER DATED 12.04.2016 BY FILING LETTERS FROM SAID LENDERS EXPLAINING THE SOU RCE AS UNDER (ANNX. 12):- NAME OF DEPOSITOR AMOUNT SOURCE OF SOURCE 1. M/S SONI GERNS PROP. BINDIYA 1 ,50,00,000 SALE PROCEEDS REALIZED FROM P.PATEL M /S. GURUDEV CORPORATION 2. PRADIPGIRI B. GOSWAMI (HUF) 5,00 ,000 SALE PROCEEDS FROM M/S. NISHI GEMS 3 PRADIPGIRI B. GOSWAMI (IND.) 5 ,00,000 SOURCE EXPLAIN FROM LOANS & ADVANCES 4 KESHUPARBAT B. GOSWAMI (HUF) 5,00,000 SOURCE EXPLAIN FROM LOANS & SALES PROCEEDS THEREFORE, EVEN THE 'SOURCE OF SOURCE' IS FOUND PRO PERLY EXPLAINED AND NO CASH WAS FOUND DEPOSITED IN BANK ACCOUNT BEFORE ISSUE OF CHEQUE TO THE ASSESSEE. THE HON'BLE GUWAHATI HIGH COURT IN THE CASE OF KOTH ARI VS. CIT (2003) 264 ITA NO.1991/AHD/2016 AND 715/AHD/2017 22 ITR 254 (GAU) HAS HELD ON A HARMONIOUS CONSTRUCTION OF SECTION 106 OF THE EVIDENCE ACT AND SECTION 68 OF THE ACT, HELD THAT I T IS NOT THE BURDEN OF THE ASSESSES TO PROVE THE GENUINENESS OF THE TRANSACTIO NS BETWEEN HIS CREDITOR AND SUB-CREDITORS NOR IS IT THE BURDEN OF THE ASSES SEE TO PROVE THAT THE SUB- CREDITORS NOR IS IT THE BURDEN OF THE ASSESSEE TO P ROVE THAT HAD THE CREDITWORTHINESS TO ADVANCE THE CASH CREDIT TO THE CREDITOR FROM WHOM THE CASH CREDIT HAS BEEN EVENTUALLY RECEIVED BY THE ASS ESSEE . IF, THEREFORE, FURTHER LOGICALLY FOLLOWS THAT THE CREDITOR'S CREDI TWORTHINESS HAS TO BE JUDGED VIS-A-VIS THE TRANSACTIONS, WHICH HAVE TAKEN PLACE BETWEEN THE 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 GENUINENE SS OF THE TRANSACTIONS, WHICH TOOK BETWEEN THE CREDITOR AND SUB-CREDITOR AN D / OR CREDITWORTHINESS OF THE SUB-CREDITOR FOR THESE ASPECTS MAY NOT BE WI THIN THE SPECIAL KNOWLEDGE OF THE ASSESSEE. FURTHER, IN THE CASE OF MOD. CREATIONS PVT. LTD. VS . ITO (2013) 354 ITR 282 (DEL) IT HAS BEEN OBSERVED THAT THE POSITION WAS CL ARIFIED BY THE HON'BLE DELHI HIGH COURT AND IT WAS HELD THAT THE BURDEN U/ S. SECTION 68 OF THE I.T., WHICH IS PLACED ON THE ASSESSEE, SHIFTS AS SOON AS THE ASSESSEE ESTABLISHES THE AUTHENTICITY OF TRANSACTIONS AS EXE CUTED BETWEEN THE ASSESSEE AND ITS CREDITORS. IT IS NO PART OF THE AS SESSEE'S BURDEN TO PROVE EITHER THE GENUINENESS OF THE TRANSACTIONS EXECUTED BETWEEN THE CREDITORS AND THE SUB-CREDITORS NOR IS IT THE BURDEN OF THE A SSESSEE TO PROVE THE CREDITWORTHINESS OF THE SUB-CREDITORS. ALTHOUGH, THE ASSESSEE CANNOT BE BURDENED WITH THE RESPONSIBILITY OF PROVING THE SOURCE OF THE SOURCE STILL FOR ABUNDANT PRECAUTION DETAILS ABOUT THE SOURCE OF SOURCE WERE CALLED FOR AND NOTHING FI SHY HAS BEEN NOTICED. IN VIEW OF THESE FACTS, I AM OF CONSIDERED VIEW THAT I D. AO UNMINDFULLY RUSHED TO THE DECISION OF TREATING THE GENUINE UNSECURED C ASH CREDITS ON HALF-BAKED INFORMATION EXTRACTED FROM THE LOWLY EDUCATED WITNESSES . ACTION OF THE AO IS NEITHER SUSTAINABLE ON FACTS NOR IN LAW. (D) TRANSACTIONS WERE THROUGH BANKING CHANNEL: IT IS OFTEN SAID THAT TRANSACTION BY CHEQUE MAY NOT BE SACROSANCT AND ASSESSEE IS REQUIRED TO PROVE ALL THE 3 CONDITIONS I.E. IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION . HOWEVER, TRANSACTION THROUGH BANKING CHANNEL IS A VERY MUCH IMPORTANT AS PECT TO CLAIM JUDGE WHETHER LOAN TRANSACTION WAS GENUINE OR NOT. IN THI S CASE, THE ASSESSEE WAS EVEN ASKED TO SUBMIT DETAILS WITH REGARD TO REP AYMENT OF LOANS WHICH HAVE BEEN FURNISHED BEFORE ME VIDE LETTER DATED 12- 04-201 6 - (ANNX 11). SUCH DETAILS ARE AS UNDER: (I) LOANS HAVE BEEN ACCEPTED AS WELL AS REPAID THRO UGH BANKING CHANNEL IT MAY BE NOTED THAT ALL THE LOANS UNDER CONSIDERAT ION HAVE BEEN ACCEPTED VIDE ACCOUNT PAYEE CHEQUES. FURTHER, MOST OF THE LOANS WHICH HAVE BEEN ADDED U/ S. 68 OF THE ACT; HAVE EVEN BEEN REPAID IN THE SUBSEQUENT YEARS, VIDE ACCOUNT PAYEE CHEQUES. ITA NO.1991/AHD/2016 AND 715/AHD/2017 23 THE DETAIL OF ADDITION MADE U/S. 68 OF THE ACT AND THE REPAYMENT OF THESE LOANS IN THE SUBSEQUENT YEARS IS GIVEN IN THE FOLLOWING TABLE. SR. NO. NAME OF THE PERSON ADDITION U/S. 68 IN AY 2012-13 YEAR OF REPAYMENT 1 MAHENDRA K. SHOH-HUF 1,81,431 A.Y. 201 5-16 2 MAHENDRA K. SHAH 45,144 A.Y. 2015-16 3 PRQDIPGIRI B. GOSWAMI 5,97,446 A.Y. 2016-17 4 PRADIPGIRI B. GOSWAMI-HUF 5,20,466 A.Y. 2015-16 5 KESHUPARBAT B. GOSWAMI 76,833 -- 6 KESHUPARO.AT B. GOSWAMI-HUF 5,95,925 A.Y. 2015- 16 (PARTLY) 7 BINDIYA P. PATEL (PROP. OF SON/ GEMS) TOTAL 1, 63, 38, 904 A.Y. 201.4-15 1 ,83,56, 149 THE LEDGER ACCOUNT OF THE AFORESAID UNSECURED LOANS FROM THE BEGINNING UP TO TILL DATE ALONG WITH A COPY OF OUR BANK STATEMENT, HIGHLIGHTI NG ALL THE RELEVANT TRANSACTIONS OF ACCEPTANCE AS WELL AS REPAYMENT IS ENCLOSED HEREWIT H IN ANNEXURE-11 FOR THE IMMEDIATE REFERENCE OF YOUR HONOUR. THUS, IN THE EVENT OF THE UNSECURED LOANS BEING ACC EPTED AND REPAID THROUGH BANKING CHANNEL, THERE REMAINS NO POINT OF DOUBTING THE GEN UINENESS OF THE SAID LOANS. ON THE BASIS, OF COPIES OF LEDGER ACCOUNT AND BANK STATEMENT, IT IS PROVED BEYOND DOUBT THAT RECEIPTS OF LOAN & REPAYMENT WERE THROUGH BANKING CHANNEL WITHOUT HAVING INVOLVED ANY CASH TRANSACTION / DEPO SITS. VARIOUS COURTS/TRIBUNALS HAVE TAKEN A POSITIVE VIEW OF THE VERY FACT THAT LOANS HAVE BEEN REPAID BY ACCOUNT PAYEE CHEQUE WHILE DETE RMINING THE ISSUE OF GENUINENESS OF UNSECURED LOANS. SOME OF CASE LAWS A RE AS UNDER:- ANIL KUMAR MIDHA HUF VS ITO 23 CCH 0719 (JODH) VIJAY LAXMI PRINTING WORKS PVT. LTD. VS. DCIT 37 CC H 261 (DEL) CIT VS. KARA] SINGH 79 CCH 0278 (P & H) GURUPREMA ENTERPRISES VS. ACIT 30 CCH 0017 (MUM) YAMUNA SYNTHETICS PVT. LTD. 23 CCH 0134 (DEL) PARMINDER SINGH VS. ITO 22 CCH 0279 (CHD) ITA NO.1991/AHD/2016 AND 715/AHD/2017 24 (J) LENDERS REGULARLY ASSESSED TO TAX: THE ASSESSEE FURNISHED THE COPY OF RESPECTIVE RETUR NS OF INCOME OF LENDERS WHEREIN INTEREST INCOME IF DULY FOUND REFLECTED. LE NDERS HAVE BEEN REGULARLY ASSESSED TO TAX. IN THE CASE OF THE MAJOR LENDER PA RTLY NAMELY SMT. BINDIYA P. PATEL PROP. OF SONI GEMS, ASSESSMENT U/S. 143(3) FO R AY 2012-13 HAS BEEN COMPLETED BY ITO, WARD 2(3)(1), SURAT ON 27-03-2015 WHEREIN HER CREDITWORTHINESS AS WELL AS HER SOURCE OF FUNDS WER E DULY STOOD ACCEPTED. IT IS VERY NAIVE TO BELIEVE THAT EVEN IF A PERSON WHO HAS SHOWN TOTAL INCOME OF RS. 23,37,706/- AND PAID TAXES OF RS. 5,68,882/- IN AY 2012-13 WAS NOT A BONA- FIDE ASSESSEE AND NOT HAVING CREDITWORTHINESS TO AD VANCE LOAN TO THE ASSESSEE. HON'BLE GUWAHATI HIGH COURT IN THE CASE O F JALAN TIMBER VS-. CIT 223 ITR 11 HAS HELD THAT IF ASSESSEE AND CREDITORS BOTH HAVE SHOWN IMPUGNED AMOUNT IN THEIR INCOME TAX RETURN, NO ADDITION U/S. 68 CAN BE MADE IF THE RETURNS OF CREDITORS HAVE BEEN ACCEPTED BY ITO. AS DISCUSSED ABOVE, THE CASE OF CREDITOR HAS BEEN ACCEPTED BY THE DEPARTMENT. IN VIEW OF THE ABOVE, LEARNED AO WAS NOT JUSTIFIED TO RAISE DOUBTS ABOUT THE CREDITWORTHINESS OF THE CREDITORS WHO HAVE BEEN REG ULARLY ASSESSED TO TAX THUS, CREDITWORTHINESS IS DULY ESTABLISHED WITH THE HELP OF THE EVIDENCES. CONCLUSION: THUS, CONSIDERING THE FACTS OF THE CASE IN TOTALITY , I HOLD THAT IN THE PRESENT CASE, ALL THE 3 PARAMETERS AS LAID DOWN U/S. 68 OF THE ACT, I.E. (I) IDENTITY OF THE DEPOSITORS; (II) GENUINENESS OF THE TRANSACTION S; AND (III) CREDITWORTHINESS OF THE DEPOSITORS, HAVE BEEN FULFI LLED BY THE ASSESSEE AND THEREFORE, THE AO IS NOT JUSTIFIED IN TREATING THE LOANS RECEIVED BY THE ASSESSEE AS UNEXPLAINED CASH CREDITS U/S. 68 OF THE ACT. HENCE, THE ADDITION OF RS. 1,83,56,149/- MADE BY THE AO FOR UN EXPLAINED CASH CREDITS U/S. 68 IS HEREBY DELETED. THUS, THE GROUND OF APPEAL NO. 1 OF THE ASSESSEE IS ALLOWED. 8. BEFORE US, THE LD.DR SUPPORTED THE ORDER OF THE AO. HE FURTHER SUBMITTED THAT IN THE STATEMENT OF VARIOUS LENDERS RECORDED ON OATH, THEY HAVE DENIED HAVING ENTERED LOAN TRANSACTION WITH THE ASS ESSEE AND THEY EVEN STATED THAT THEY DID NOW KNOW ABOUT HAPPY HOME CORPORATION OR ITS PARTNERS. THEY HAVE ALSO DENIED SIGNING OF ANY CONFIRMATION OF THE LOAN TRANSACTIONS. 9. ON THE OTHER HAND, THE LD.COUNSEL FOR THE ASSESS EE RELIED UPON THE ORDER OF THE LD.CIT(A). HE ALSO REITERATED SUBMISSIONS M ADE BEFORE THE REVENUE AUTHORITIES. HE FURTHER SUBMITTED THAT DOCUMENTARY EVIDENCES FILED BEFORE THE AO CLEARLY DEMONSTRATE NOT ONLY GRANTING OF LOANS B Y LENDERS TO THE ASSESSEE, ITA NO.1991/AHD/2016 AND 715/AHD/2017 25 BUT ALSO SHOWED INTEREST INCOME EARNED BY THEM FROM THE ASSESSEE, WHICH WAS OFFERED FOR TAXATION IN THEIR RETURN OF INCOME. A SSESSEE HAS FILED COPY OF INCOME-TAX RETURNS; COMPUTATION OF INCOME, BALANCE SHEET, PROFIT AND LOSS ACCOUNT/CAPITAL ACCOUNT AND BANK STATEMENT/PASS BOO K OF EACH LENDER; WHICH REFLECT THAT UNSECURED LOANS GIVEN TO THE ASSESSEE WERE GENUINE. BESIDES THAT THE LENDERS HAVE ACCOUNTED INTEREST EARNED ON THE L OAN IN THEIR RETURN, AND THAT CREDIT FOR TDS WHEREVER APPLICABLE HAS BEEN CLAIMED IN THE RETURN INCOME. THEREFORE, ALL THE CORROBORATIVE EVIDENCES UNDOUBTE DLY PROVE THE TRANSACTIONS OF LOANS BY THE CREDITORS. SO FAR AS STATEMENTS O F LENDERS BEFORE THE LD.AO ARE CONCERNED, THE SAME HAVE BEEN DENIED BY THEM IN THE IR SUBSEQUENT AFFIDAVITS. SUCH STATEMENTS WERE RECORDED UNDER SOME MISCONCEPT ION AND MISREPRESENTATION OF FACTS BY THE LD.AO. THE LENDE RS CAME TO KNOW ABOUT THE FACTS ONLY WHEN THEY GOT COPY OF SUCH STATEMENTS, A ND IMMEDIATELY THEREAFTER, THEY FILED AFFIDAVITS AMENDING THEIR STATEMENTS. I T IS SUBMITTED THAT ALL THE DEPOSITORS ARE ASSESSED TO TAX AND ARE DULY FILING THEIR RETURNS OF INCOME. LOANS WERE GIVEN THROUGH ACCOUNT PAYEE CHEQUES AND THE INTEREST ON THEM WERE RECEIVED BY THEM AND REFLECTED IN THEIR RETURN OF INCOME. THEREFORE, ALL THREE PARAMETERS STIPULATED UNDER SECTION 68 OF THE STANDS DISCHARGED BY THE ASSESSEE, AND ONUS NOW SHIFTED TO THE REVENUE TO PR OVE OTHERWISE, WHICH THEY FAILED IN ALL RESPECTS. THE LD.CIT(A) HAS ANALYSED ALL THE DETAILS AND AFTER DETAILED DISCUSSION, BOTH ON FACTS AND IN LAW, JUST IFIED THE CLAIM OF THE ASSESSEE, WHICH THEREFORE DESERVES TO BE UPHELD AND THE APPEAL OF THE REVENUE IS TO BE DISMISSED. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD CAREFULLY. DURING THE COURSE OF ASSESSMENT AS DIRE CTED THE ASSESSEE HAS FURNISHED THE FOLLOWING DETAILS TO PROVE THE IDENTI TY, GENUINENESS OF TRANSACTION AND CREDIT WORTHINESS OF THE LENDERS: ITA NO.1991/AHD/2016 AND 715/AHD/2017 26 I) NAMES AND ADDRESS OF THE DEPOSITORS; II) PAN OF THE DEPOSITORS III) CONFIRMATION OF THE DEPOSITORS; IV) ACKNOWLEDGEMENT OF THE I.T. RETURN FILED BY THE DEP OSITORS; V) BALANCE SHEET, P&L AND CAPITAL ACCOUNT OF THE DEPOS ITORS; VI) BANK STATEMENT OF THE DEPOSITORS. 11. ON THE BASIS OF THE DETAILS FURNISHED, THE AO H AS ISSUED NOTICES U/S.133(6) AND SUMMONS U/S.131 OF THE ACT TO THE VA RIOUS DEPOSITORS, HOWEVER, AS MENTIONED SUPRA IN THIS ORDER, FOUR OF THE DEPOSITORS HAVE DENIED KNOWING THE ASSESSEE, AND HAVING BUSINESS WITH THE ASSESSEE. THE ASSESSEE HAS RESPONDED THAT THE UNSECURED LOANS WERE DULY RE FLECTED IN THE INCOME-TAX RETURNS, BALANCE SHEET AND BANK STATEMENT OF THE DE POSITORS. THE ASSESSEE HAS ALSO FILED AFFIDAVITS OF ALL THE SAID DEPOSITORS, W HEREIN THEY HAVE CLARIFIED THAT THEY HAVE GIVEN LOAN TO THE ASSESSEE FROM THEIR OWN SOURCES AND THAT WHILE RECORDING OF THEIR STATEMENT CERTAIN FACTS COULD NO T BE PROPERLY EXPLAINED BY THEM ON ACCOUNT OF VARIOUS REASONS WHICH HAVE BEEN DULY CLARIFIED IN THE NOTARISED AFFIDAVITS. 12. IT IS ALSO NOTICED THAT OUT OF THE TOTAL UNSECU RED LOAN OF RS.1,83,56,149/-, UNSECURED LOAN OF RS.1,63,38,904/- HAS BEEN RECEIVE D BY THE ASSESSEE FROM A SINGLE DEPOSITOR, PROP. OF SONI GEM AND IN THE CASE OF THE SAID DEPOSITOR, THE SCRUTINY ASSESSMENT U/S.143(3) HAS BEEN COMPLETED B Y THE ITO, WARD-2(3)(1), SURAT ON 27.3.2015 WHEREIN THE CREDIT-WORTHINESS OF THE DEPOSITOR WAS ACCEPTED. THE AO HAS NOT DISPROVED THE MATEIRAL FA CTS REPORTED IN THE AFFIDAVITS FILED BY THE IMPUGNED DEPOSITORS. EVEN THE AO HAS NOT MADE ANY CROSS-EXAMINATION OF THE DEPONENTS TO DISPROVE THE AVERMENTS MADE IN THE ITA NO.1991/AHD/2016 AND 715/AHD/2017 27 AFFIDAVITS. THE LD.CIT(A) HAS ELABORATED IN HIS FI NDING THE DETAILS OF CLARIFICATION GIVEN BY ALL THE DEPOSITORS IN THEIR AFFIDAVITS ABOUT THE WRONG STATEMENTS GIVEN BY THEM BEFORE THE AO DUE TO CONFU SION AND MISUNDERSTANDING UNDER THE DIFFERENT CIRCUMSTANCES. IT IS NOTICED THAT THE AO HAS REJECTED THE AFFIDAVITS OF THE DEPOSITORS WITHO UT ANY VERIFICATION AND DISPROVING THE MATERIAL FACTS REPORTED IN THEIR AFF IDAVIT. THE AO HAS NOT BROUGHT ANY EVIDENCE TO PROVE THAT THE STATEMENTS O F THE DEPOSITORS WERE TRUE AND THE SUBSEQUENT AFFIDAVITS WERE FALSE. IT IS OB SERVED THAT THE AO HAS NOT BROUGHT ANY POSITIVE RELEVANT MATERIAL TO REJECT TH E AFFIDAVITS OF THE DEPOSITORS AND NEITHER OF THE DEPOSITS WERE ALLOWED TO BE CROS S-EXAMINED. 13. IT IS ALSO PERTINENT TO NOTE THAT THE ASSESSEE HAS MADE REPAYMENT OF THE LOANS TO THE DEPOSITORS THROUGH ACCOUNT PAYEE CHEQU ES, DETAILS WHICH HAVE BEEN NOTICED BY THE REVENUE AUTHORITIES IN THEIR RESPECT IVE ORDERS. AS OBSERVED EARLIER, THE INITIAL ONUS CAST UPON THE ASSESSEE IS TO ESTABLISH THREE THINGS NECESSARY TO OBVIATE THE MISCHIEF OF SECTION 68. ON LY WHEN THESE THREE INGREDIENTS ARE ESTABLISHED PRIMA FACIE , THE DEPARTMENT IS REQUIRED TO UNDERTAKE FURTHER EXERCISE. WHILE GOING THROUGH DOCUMENTARY E VIDENCES SUBMITTED BY THE ASSESSEE, IT CAN BE SAID THAT THE ASSESSEE HAS FULF ILLED ALL ABOVE CONDITIONS AND DISCHARGED ITS ONUS. WE FIND THAT THE LD.CIT(A) HAS LOOKED INTO THESE ASPECTS; BOTH ON FACTS AND IN LAW, AND CONSIDERED MATERIAL P LACED BEFORE HIM AND SATISFIED THAT IMPUGNED LOANS ADVANCED BY THE DEPOSITORS ARE GENUINE AND THE ADDITION IS UNJUSTIFIED. HE HAS LUCIDLY EXPLAINED ON EACH AND EVERY ASPECT, AND WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A), W HICH IS UPHELD AND THE GROUNDS OF APPEAL OF THE REVENUE ARE REJECTED. 14. NOW WE TAKE APPEAL OF THE REVENUE FOR THE ASSTT .YEAR 2013-14. 15. IN THIS APPEAL, REVENUE HAS RAISED SEVEN GROUND S. HOWEVER, MAIN ISSUE AGITATED BY THE REVENUE IS IN RESPECT OF DELETION O F A SET OF ADDITIONS MADE BY THE AO UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. TOT AL OF THE DISPUTED ITA NO.1991/AHD/2016 AND 715/AHD/2017 28 ADDITION INVOLVED IS RS.2,40,46,423/- REPRESENTING RS.1,06,66,943/-, RS.63,37,753/-, RS.21,41,727/- ON ACCOUNT OF ALLEGE D UNEXPLAINED LOANS CLAIMED BY THE ASSESSEE UNDER SECTION 68, AND ADDITION OF R S.49,00,000/- REPRESENTING UNDISCLOSED INCOME ON THE BASIS OF A DIARY SEIZED F ROM THIRD PARTY. WE PROCEED TO DISPOSE OF THIS ISSUE ACCORDINGLY AS UNDER. 16. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE-FIRM HAS FILED ITS RETURN OF INCOME ON 28.9.2013 DECLARING TOTAL INCOME AT RS.4, 48,41,970/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND N OTICE UNDER SECTION 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTI NY OF THE RECORD, THE AO NOTICED THAT THE ASSESSEE HAS TAKEN UNSECURED LOANS FROM THE DEPOSITORS FOR WHICH THE ASSESSEE HAS FURNISHED DETAILS. ACCORDINGLY, F OR VERIFICATION OF GENUINENESS OF THE SAID LOANS, NOTICES UNDER SECTION 133(6) OF THE ACT WERE ISSUED TO THE PARTIES. HOWEVER, FEW NOTICES ISSUED TO THE DEPOSI TORS, WHICH WERE ELEVEN IN NUMBER, WERE RETURNED UNSERVED AND THEIR DETAILS WE RE NOTICED BY THE AO IN PAGE NO.3 OF THE ASSESSMENT ORDER. THEREFORE, THE AO IS SUED SHOW CAUSE NOTICE TO THE ASSESSEE AS TO WHY LOAN OF RS.1,06,66,943/- SHOULD NOT BE TREATED AS BOGUS. ASSESSEE REPLIED THAT OUT OF ELEVEN DEPOSITORS, EIG HT DEPOSITORS HAVE BEEN REPAID AND ONLY LOANS TO THE THREE DEPOSITORS WERE OUTSTAN DING. THESE THREE DEPOSITS COULD NOT APPEAR BECAUSE PAUCITY OF TIME. THE LD.AO DID NOT ACCEPT THIS CONTENTION OF THE ASSESSEE AND TREATED UNSECURED LO ANS TO THE TUNE OF RS.1,06,66,943/- AS BOGUS AND ADDED TO THE TOTAL IN COME OF THE ASSESSEE. 17. SIMILARLY, IN ANOTHER SET OF ADDITION AMOUNTING TO RS.63,37,753/-, THE LD.AO ON VERIFICATION OF DETAILS NOTICED THAT CASH HAS BEEN DEPOSITED IN THE BANK ACCOUNTS OF THE PARTIES IMMEDIATELY BEFORE GIVING L OAN TO THE ASSESSEE. THE AO DOUBTED CREDIT WORTHINESS OF THE PARTIES AND SOUGHT EXPLANATION OF THE ASSESSEE IN THIS REGARD. IN RESPONSE TO THAT, THE ASSESSEE FIL ED CONFIRMATION, COPY OF IT RETURN, BALANCE SHEET AND BANK STATEMENT OF THE DEP OSITORS TO DEMONSTRATE CREDIT- WORTHINESS OF THE PARTIES. THE AO WAS NOT SATISFIED WITH THE EXPLANATION OF THE