Rahul Agarwal, Kolkata V. A.C.I.T.,Circle-46, Kolkata

ITA 77/KOL/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6259 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Appeal Filed On: 20-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS
• Keywords: Unexplained cash credit; Unexplained investment; Source of fund; Accommodation entries; Onus to prove; Set aside; Bogus
• Section: 131; 68; 69; 201; 264; 64; 13; 20

Judgement Text

1 IT A NO . 77/KOL/2020 AY 2016 - 17 RAHUL AGARWAL , B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOLKATA [BEFORE HONBLE SHRI J.SUDHAKAR REDDY, AM AND HONBLE SHRI A. T. VARKEY, JM ITA NO. 77 /KOL /20 20 ASSESSMENT YEAR: 201 6 - 17 RAHUL AGARWAL PAN: AFRPA4752P V S . A.C.I.T - CIR - 46, KOLKATA APPELLANT RESPONDENT DATE OF HEARING (VIRTUAL) 14. 09 .2020 DATE OF PRONOUNCEMENT 23 .09.2020 FOR THE APPELLANT SHRI S.M. SURANA, ADVOCATE, LD. AR FOR THE RESPONDENT S MT. RANU BISWAS, ADDL. CIT/LD.DR ORDER SHRI A. T . VARKEY, JM THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT (A) , 14 , KOLKATA D ATED 0 4 - 12 - 2019 FOR THE ASSESSMENT YEAR 2016 - 17. 2. THE GROUND S OF APPEAL RAISED BY THE A SSESSEE ARE AS UNDER: - 1. FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 55,00,000/ U/S. 68 WHEN THE SAID CREDIT WAS A GENUINE HOME LOAN FROM M/S. GOURAV ROSE REAL ESTATE PVT. LTD (GRREPL) AND ALL THE SUPPORTING DOCUMENTS WERE PRODUCED AND THE DEPARTMENT FAILED TO PROVE OTHERWISE. 2. FO R THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION MADE BY AO ONLY ON THE BASIS OF THE STATEMENT OF ONE, MR. MONOHAR NANGALIA RECORDED U/S. 131 BY SOME OTHER AUTHORITY, A COPY OF WHICH WAS ALSO NOT PROVIDED TO THE ASSESSEE AND WITHOUT HIMSELF EXAMI NING THE DEPONENT AND ALLOWING THE ASSESSEE TO CROSS EXAMINE . 3. FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION MADE BY AO U/S 68 WHEN THE IDENTITY AND CREDITWORTHINESS OF THE TRANSACTION WAS PROVED AND THE ONUS OF THE ASSESSEE WAS DISCHARGED. 4 . FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ADDITION WAS NOT JUSTIFIED AND IS LIABLE TO BE DELETED. 5. FOR THAT EVEN OTHERWISE THE ADDITION IS NOT CALLED FOR SINCE THE SHAREHOLDING OF GRREPL HAS CHANGED AFTER THE ALLEGED STATEMENT MA DE U/ S 131 COMPLETELY AND NO PERSON WHO WAS THE SHAREHOLDER AT THE TIME OF RECORDING THE STATEMENT IS A SHAREHOLDER OF THE COMPANY DURING THE RELEVANT 2 IT A NO . 77/KOL/2020 AY 2016 - 17 RAHUL AGARWAL YEAR. 3. FROM A PERUSAL OF GROUND NOS. 1 TO 5 (SUPRA), IT IS NOTED THAT THE SOLE ISSUE OF THE ASS ESSEE IS AGAINST THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE IMPUGNED ADDITION OF RS. 5 5 LAKHS MADE U/S. 68 OF THE INCOME - TAX ACT, 1961 ( HEREINAFTER REFERRED TO AS THE ACT ) . 4 . BRIEF FACTS OF THE CASE AS NOTED BY THE AO ARE THAT THE ASS ESSEE IS AN INDIVIDUAL, HAD FILED HIS E - RETURN OF INCOME DISCLOSING TOTAL INCOME OF RS. 21,96,040/ - . LATER ON HIS CASE WAS SELECTED FOR SCRUTINY THROUGH CASS AND AFTER SERVING OF STATUTORY NOTICES , THE AO OBSERVES THAT THE ASSESSEE HAS RECEIVED RS. 55 LA KHS AS LOAN FROM M/S. GOURAV ROSE REAL ESTATE PVT. LTD ( HEREINAFTER REFERRED TO AS, M/S. GRREPL ) . ACCORDING TO THE AO, T HE MINISTRY OF CORPORATE AFFAIRS HAD CATEGORIZED THIS COMPANY AS A PAPER ENTITY/S HELL COMPANY AND THE INVESTIGATION WING OF I NCOME T AX DEPTT. H AD FOUND THAT THIS COMPANY IS INTO THE BUSINES OF PROVIDING OF ACCOMMODATION ENT RIES. THEREFORE, THE AO ISSUE D NOTICE TO THE ASSESSEE AND STATED THEREIN THAT THIS COMPANY IS IN THE BUSINESS OF PROVIDING OF ACCOMMODATION ENTRIES IN LIEU OF COMM ISSION AND ITS DIRECTOR, SHRI MONOHARL AL NANGALIA (HEREINAFTER REFERRED AS SHRI NANGALIA) HAD ADMITTED U/S. 131 OF THE ACT THAT M/S. GRREPL IS INVOLVED IN SUCH BUSINESS OF PROVIDING ACCOMMODATION ENTRIES . PURSUANT TO SAID NOTICE OF THE AO , THE ASSESSEE REPLIED THAT HE HAD TAKEN THE LOAN OF RS. 55 LAKHS FROM GENUINE AND VERIFIABLE COMPANY AND, THEREFORE, THE ASSESSEE CONTESTED THE ALLEGATION THAT M/S. GRREPL IS A PAPER & SH ELL COMPANY ENGAGED FOR PROVIDING ACCOMMODATION ENTRIES AND BROUGHT TO THE KNO WLEDGE OF AO THAT SHRI NANGALIA HAS BEEN REMOVED IN SEPT., 2011 BY THE LENDER COMPANY AND THEREFORE, THE STATEMENT RECORDED, IF ANY, CANNOT BE USED AGAINST THE ASSESSEE FOR THE TRANSACTION TAKING PLACE IN AY 2016 - 17 . THEREAFTER, THE AO HAS OBSERVED THAT HE HAD EXAMINED THE PRESENT DIRECTOR , SHRI BAL KRISHAN AGARWAL OF THE LENDER COMPANY, [ M/S. GRREPL ] , AND HAD GATHERED THAT HE IS ONLY A SALARIED EMPLOYEE DIRECTOR AND THE COMPANY HAS NOT CHANGED ITS SHARE HOLDINGS SINCE 20 10 - 11 , AND EVEN THE FINANCIAL S OF THE COMPANY I.E SHARE CAPITAL ETC. REMAINS THE SAME. THEREFORE, ACCORDING TO THE AO, MERE REMOVAL O F SHRI NANGALIA F ROM THE POSITION OF DIRECTOR DOES NOT CHANGE THE ESSENTIAL S OF THE FINANCIALS OF THE COMPANY AND ITS TRUE NATURE. THEREAFTER, THE AO N OTES THAT ASSESSEES REPLY AGAIN HE CONTEST ED THE ALLEGATION 3 IT A NO . 77/KOL/2020 AY 2016 - 17 RAHUL AGARWAL THAT IT HAD RECEIVED MONEY/LOAN FROM BOGUS SHAM /SHELL COMPANY AND SUBMITTED THAT EVEN THE ASSERTION OF THE AO THAT SHRI NANGALIA (ERSTWHILE DIRECTOR OF M/S. GRREPL ) HAD ADMITTED THAT M/S. GRRE PL IS ENGAGED IN THE BUSINESS OF PROVIDING IN ACCOMMODATION ENTRIES IS WRONG AND IT WAS INFORMED BY M/S. GRREPL THAT MR. NANGALIA HAS NOT GIVEN SUCH STATEMENT . EVEN THE ASSESSEE REQUESTED THE AO TO PROVIDE HIM SUCH COPY OF ADMISSION , IF ANY. IT WAS AGAIN POINTED OUT THAT SHRI N ANG AL IA, EX - DIRECTOR OF M/S. GRREPL WAS WAY BACK REMOVED FROM DIRECTORSHIP FROM 24 - 08 - 2011 . T HUS ACCORDING TO ASSESSEE THE RECEIPT OF LOAN FROM M/S. GRREPL CANNOT BE DISBELIE VED ON A STATEMENT, WHICH CAN BE TERMED AS MERE HEARSAY . THE ASSESSEE ALSO BROUGHT TO THE NOTICE OF THE AO THAT THE ASSESSEE HAD TAKEN A HOUSING LOAN OF RS. 55 LAKHS FROM M/S. GRREPL FOR WHICH TWO (2) PROPERTIES COSTING MORE THAN RS. 1.59 CRORES HAVE BEEN GIVEN AS SECURITIES . ACCORDING TO ASSESSEE, THE LO AN AMOUNT OF RS. 55 LAKHS WAS TO BE REFUNDED IN 55 QUARTERLY INSTALMENTS OF RS. 1 LAKH/EACH PLUS INTEREST @ 10% P.A. IT WAS BROUGHT TO THE NOTICE OF THE AO THAT THE ASSESSEE CONTINUES TO ABIDE BY THE SE TERMS OF THE LOAN AGREEMENT AND HE IS PAYING THE INSTA LLMENT REGULARLY. IT WAS ALSO BROUGHT TO THE NOTICE OF THE AO THAT M/S. GRREPL HAD GIVEN LOAN OF RS. 55 LAKHS TO ASSESSEE, WHICH IS NBFC COMPANY REGISTERED BY THE RESERVE BANK OF INDIA AND A CERTIFICATE TO THIS EFFECT W AS PRODUCED BEFORE THE AO. THE ASSE SSEE SUBMITTED THAT LENDER COMPANY, M/S. GRREPL HAS CONFIRMED ABOUT THIS LOAN TRANSACTION TO THE AO , MOREOVER, BROUGHT TO THE NOTICE OF THE AO THE SOURCE OF RS. 55 LAKHS , WHICH CAN BE TRACED AS THE LOAN REPAYMENT TO M/S. GRREPL FROM M/S. G.K ISPAT LTD , W HICH REFUNDED RS. 34 LAKHS AND RS. 21,04,200/ - TO M/S. GRREPL, WHICH IN TURN WAS GIVEN TO THE ASSESSEE. HOWEVER, THIS EXPLANATION OF THE ASSESSEE WAS NOT BELIEVED BY THE AO, WHO WAS OF THE OPINION THAT EVEN THOUGH SHRI NANGALIA , ERSTWHILE DIRECTOR OF THE C OMPANY, M/S. GRREPL WAS REMOVED FROM THE DIRECTORSHIP FROM 24 - 08 - 2011 , H OWEVER, THE STATUS OF THE LENDER, M/S. GRREPL HAS NOT CHANGED AS CAPITAL STRUCTURE IN THE BALANCE SHEET , REMAINS THE SAME. ACCORDING TO THE AO, SHAREHOLDERS MAY HAVE CHANGE D AND EVEN IF NEW DIRECTOR S HAVE COME , STILL THE SOURCE OF FUND HAVE NOT CHANGED. ACCORDING TO THE AO, THE MONEY HAS BEEN GIVEN AS LOAN FROM THE MIX ED CAPITAL AND CORRELATING THE SAME WITH A PARTICULAR RECEIPT/S, WHICH IS NOT ACCEPTABLE AND, THEREFORE, ACCO RDING TO HIM , THE GENUINENESS OF LOAN OF RS. 55 L A KHS HAS NOT BEEN PROVED AND, 4 IT A NO . 77/KOL/2020 AY 2016 - 17 RAHUL AGARWAL THEREFORE, HE ADDED BACK THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED BY THE AFORESAID ACTION , THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO WAS PLEASE D TO CONFIRM THE SAME AND DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE IS BEFORE US. 5 . W E HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. WE NOTE THAT THE ASSESSEE HAD TAKEN A HOUSING LOAN OF RS. 55 LAKHS FROM M/S. GRREPL , WHICH IS A NON - BANKING FINANCE COMPANY (NBFC) REGISTERED BY THE RESERVE BANK OF INDIA AND A CERTIFICATE TO THIS EFFECT IS FOUND PLACED AT PAGE - 54 OF THE PAPER BOOK. FROM A PERUSAL OF THE CERTIFICATE , IT IS DISCERNED THAT IT WAS REGISTERED ON 11 TH DAY OF OCTOBER 2003 BY THE RESERVE BANK OF INDIA AS A NON - BANKING FINANC IAL INSTITUTION TO CARRY ON THE BUSINESS OF NON - BANKING FINANCIAL INSTITUTION WITHOUT ACCEPTING PUBLIC DEPOSITS AND SUBJECT TO CERTAIN CONDITIONS . WE NOTE THAT MR. NANGALIA , CEASED TO BE DIRECTOR O F M/S. GRREPL FROM 24 AUGUST 2011. WE NOTE THAT THE PRESENT DIRECTORS ARE S/SHRI GAURAV AGARWAL AND BAL KISHAN AGARWAL, WHI CH IS DISCERNIBLE FROM PAGE 55 OF THE P.B. IT IS NOTED THAT THE ASSESEE HAD HAD BEEN SANCTIONED A LOAN OF RS. 55 LAKHS AGAIN ST SECURITY OF TWO IMMOVABLE PROPERTIES WORTH MORE THAN RS. 1.59 C RO R E S . AS PER LOAN AGREEMENT THE SAME HAS TO BE REFUNDED BACK BY ASSESSEE TO M/S. GRREPL BY 55 QUARTERLY INSTALMENTS OF RS. 1 LAKHS EA CH + INTEREST @ 1 0 % P.A. AND IT IS NOTED THAT THE AS SESSEE CONTINUES TO REPAY THE S AME (S AID LOAN ) AS PER LOAN AGREEMENT WITHOUT ANY DEFAULTS. WE NOTE THAT THE LOAN AMOUNT OF RS. 55 LAKHS HAS BEEN PAID BY A/C PAYEE CHEQUE. IN ORDER TO SHOW THE CREDITWORTHINESS OF THE LENDER, M/S. GRREPL , THE LD.AR OF T HE ASSESSEE DREW OUR ATTENTION TO THE AUDITED PROFIT AND LOSS ACCOUNT AND BALANCE SHEET P & L ACCOUNT OF M/S. G .RREPL AS ON 31.3.2015 , WHICH IS PLACED AT PAGE S - 8 O F THE PAPER BOOK. IT REVEALS THAT THE LENDER S ( M/S GRREPL) GROSS INCOME WAS TO THE TUNE OF R S. 85,23,684/ - FOR A PERIOD BETWEEN 1.4.2014 TO 31 - 03 - 2015 AND IT HAD SHOWN PROFIT OF RS. 45,14,706/ - AND IT PAID INCOME - TAX OF RS. 12,16,360/ - . THE AR ALSO DREW OUR ATTENTION TO PAGE - 11 OF THE P.B, WHICH SHOWS THAT M/S. GRREPL H A S GIVEN SHORT TERM LOAN AND ADVANCES AGAINST PROPERTIES AT RS. 10,49,79,372/ - . THE LD.AR ALSO DREW OUR ATTENTION TO THE P & L ACCOUNT OF M/S. G.R.E.P.L FOR THE PERIOD FROM 1.4.2015 TO 31.3.2016 (AY 2016 - 17) AND WE NOTE THAT THIS LENDER HAD INCOME OF RS. 5 IT A NO . 77/KOL/2020 AY 2016 - 17 RAHUL AGARWAL 94,08,607/ - AND HAD SHOWN PROFIT BEFORE TAX RS. 50,13,255/ - AND PAID INCOME TAX OF RS. 14,50,450/ - AND HAS DISBURSED ADVANCE AGAINST PROPERTY OF RS. 10,49,79,327/ - (REFER PAGE - 31 OF P.B) . THE LD. AR ALSO DREW OUR ATTENTION TO PAGE - 52, WHICH IS A COPY OF LOAN CONFIRMATION OF ACCOUN TS GIVEN/ISSUED BY M/S. GRREPL IN RESPECT OF SAID LOAN WHICH HAS BEEN GIVEN TO THE ASSESSEE TO THE TUNE OF RS. 55 LAKHS ON 26 - 02 - 2016. COPY OF BANK STATEMENT (AXIS BANK) OF M/S. GRREPL IS ALSO PLACED AT PAGE - 53 OF THE P.B. FROM WHICH, IT IS NOTED THAT ON 26 - 02 - 2016 BY WAY OF RTGS M/S. GRREPL RECEIVED TWO CREDIT ENTRIES OF RS. 21,04,200/ - AND RS. 34,00,000/ - ON 26 - 02 - 2016 FROM M/S. G.K ISPAT LTD AND THEREAFTER, THE ASSESSEE WAS DISBURSED BY CHEQUE NO. 334408 OF RS. 55 LAKHS . P AGE - 56 OF THE P.B IS THE COPY OF SCHEDULE OF REPAYMENT OF HOME LOAN (PRINCIPAL + INTEREST @ 10% P.A) BY THE ASSESSEE TO M/S. GRREPL, WHICH IS CORROBORATED BY BANK STATEMENT OF THE ASSESSEE, SHOWING THE REPAYMENT OF HOME LOAN TO STANDARD & CHARTERED BANK , FOUND PLACED AT PAGE 57 OF THE P.B . PAGE - 58 REVEALS THAT THE ASSESSEE HAS BEEN SANCTIONED HOME LOAN FROM STANDARD & CHARTERED BANK TO THE TUNE OF RS. 28 .81 LAKHS ON 30 - 07 - 20 1 3. THE SALE DEED FOR PURCHASE OF HOUSE IS SEEN FROM PAGES 64 - 75 OF THE P.B. PAGES 76 - 80 OF THE P.B ARE THE COPI ES OF LOAN AGREEMENT WITH M/S. GRREPL. ANOTHER PAPER BOOK PAGES AT 81 - 1 11, WHICH ARE THE COPIES OF AUDITED P & L ACCOUNT, BALANCE SHEET OF M/S. G.K. ISPAT LTD. , ( SOURCE OF SOURCE). F ROM THE AFORESAID DOCUMENTS, IT REVEALS THAT THE ASSESSEE HAD TAKEN LOAN OF RS. 55 LAKHS FROM M/S. GRREPL, (WHICH IS A NBFC - NON - BANKING FINANCE COMPANY) RECOGNISE D BY THE RESERVE BANK OF INDIA , IS FOUND TO BE AN INCOME - TAX ASSESSEE AND HAS PAID INCOME - TAX MORE THAN RS. 14.50 LAKHS IN THIS YEAR . IT ALSO OWNS IMMOVABLE PROPERTIE S OF RS. 6. 7 5 CRORES (PAGE - 31 OF THE PAPER BOOK ) IT CONTINUES TO DO BUSINESS BY PROVIDING LOANS TO SEVERAL PERSONS. BEFORE THE AO, THE ASSESSEE FILED BANK STATEMENT , CONFIRMATION FROM LENDER, M/S. GRREPL, SOURCE OF SOURCE TO M/S. GRREPL . I.E RS. 55 LAKH S OF LOAN FROM M/S. G . K ISPAT LTD ., ETC . HOWEVER, WE FIND THAT THE AO HAS NOT BROUGHT OUT ANY INFIRMITIES IN THE SAID DOCUMENTS , WHICH WERE FILED BEFORE THE AO. THE AO ERRED IN BRUSHING ASIDE ALL THE AFORESAID DOCUMENTS WITHOUT CONTROVERTING THE VERAC ITY OF IT. RATHER, THE AO GOT CARRIED AWAY BY THE UN - SUBSTANTIATED SO CALLED STATEMENT OF SHRI NANGALIA, WHO REMITTED OFFICE FROM M/S. GRREPL AS EARLY AS ON 24.08.2011, A COPY OF THE STATEMENT DESPITE ASKED BY THE ASSESSEE WAS NOT GIVEN TO HIM. IN ANY CA SE, IF 6 IT A NO . 77/KOL/2020 AY 2016 - 17 RAHUL AGARWAL T HE STATEMENT, IF ANY, OF SHRI NANGALIA WAS INTENDED TO BE USED AGAINST THE ASSESSEE, THEN IN ALL FAIRNESS, A COPY OF THE SAME SHOULD HAVE BEEN SERVED UPON THE ASSESSEE, WHICH THE AO DID NOT DO AND EVEN THE STATEMENT IF ANY RECORDED BEHIND THE BA CK OF ASSESSEE CANNOT BE RELIED UPON BY THE AO TO DRAW ADVERSE INFERENCE AGAINST THE ASSESSEE UNLESS THE SAME IS TESTED ON THE TOUCH - STONE OF CROSS - EXAMINATION, WHICH ACTION WAS ALSO NOT DONE, SO THE AO ERRED IN RELYING ON THE SO CALLED STATEMENT OF EX - DI RECTOR AND THEREFORE THE AOS ACTION IS UN - TENABLE . WE FIND THAT S INCE THE ASSESSEE HAS DISCHARGED HIS ONUS BY PROVIDING THE LENDERS (M/S. GRREPL) IDENTITY, CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTION AS WELL AS SOURCE OF SOURCE AS REQUIRED UND ER SECTION 68 OF THE ACT, THE IMPUGNED ADDITION CANNOT BE SUSTAINED AGAINST THE ASSESSEE. FOR COMING TO SUCH A CONCLUSION, LET US DISCUSS SECTION 68 OF THE ACT AND SOME CASE LAWS : 6 . S ECTION 68 UNDER WHICH THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFI CER READS AS UNDER: '68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF T HE ASSESSING 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 LEGISLATURE HAS LAID DOWN THAT IN THE ABSENCE OF A SATISFACTORY EXPLANA TION, THE UNEXPLAINED CASH CREDIT MAY BE CHARGED TO INCOME - TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. IN THIS CASE THE LEGISLATIVE MANDAT E IS NOT IN TERMS OF THE WORDS SHALL BE CHARGED TO INCOME - TAX AS THE INCOME OF THE ASSESSEE OF THAT PRE VIOUS YEAR'. THE SUPREME COURT WHILE INTERPRETING 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 EXPLANATION DOES NOT AND NEED N OT 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 OF CIT V. SMT. P. K. NOORJAHAN [1999] 237 ITR 570. WE NOTE THAT A GAINST THE SAID DECISION OF HON'BLE GUJARAT HIGH COU RT THE SPECIAL LEAVE PETITION FILED BY THE REVENUE HAS ALSO BEEN DISMISSED BY THE HON'BLE APEX COURT. 7 . THE HON'BLE APEX COURT IN THE CASE OF ORISSA CORPN. (P) LTD. (SUPRA) 159 ITR 78 7 IT A NO . 77/KOL/2020 AY 2016 - 17 RAHUL AGARWAL AND THE HON'BLE GUJARAT HIGH COURT, 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 FULLY DISCHARGED IF THE IDENTITY OF THE CREDITOR IS ESTABLISHED AND ACTUAL RECEIPT OF MONEY FROM SUCH CREDITOR IS PROV ED. IN CASE, THE ASSESSING OFFICER IS DI SSATISFIED ABOUT THE SOURCE OF CASH DEPOSITED IN THE B ANK 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 S TRESSED THE PRESENCE OF WORD 'MAY' IN SECTION 68. RELEVANT OBSERVATIONS AT PAGES 369 AND 370 OF THIS REPORT ARE REPRODUCED HEREUNDER: - 'MERELY BECAUSE SUMMONS ISSUED TO SOME OF THE CREDITORS COUL D NOT BE SERVED OR THEY FAILED TO ATTEND BEFORE THE ASSESSING OFFICER, CANNOT BE A GROUND TO TREAT THE LOANS TAKEN BY THE ASSESSEE FROM THOSE CREDITORS AS NON GENUINE IN VIEW OF THE PRINCIPLES LAID DOWN BY THE SUPREME COURT IN THE CASE OF ORISSA CORPORATIO N [1986] 159 ITR 78. IN THE SAID DECISION THE SUPREME COURT HAS OBSERVED THAT WHEN THE ASSESSEE FURNISHES NAMES AND ADDRESSES OF THE ALLEGED CREDITORS AND THE GIR NUMBERS, THE BURDEN SHIFTS 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 NONCOMPLIANCE OF SUMMONS ISSUED BY THE ASSESSING OFFICER UNDER SECTION 131, BY THE ALLEGED CREDITORS WILL NOT BE SUFFICIENT TO DRAW AND ADVER SE INFERENCE AGAINST THE ASSESSEE. IN THE CASE OF SIX CREDITORS WHO APPEARED BEFORE THE ASSESSING OFFICER AND WHOSE STATEMENTS WERE RECORDED BY THE ASSESSING OFFICER, THEY HAVE ADMITTED HAVING ADVANCED LOANS TO THE ASSESSEE BY ACCOUNT PAYEE CHEQUES AND IN CASE THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE CASH AMOUNT DEPOSITED BY THOSE CREDITORS IN THEIR BANK ACCOUNTS, THE PROPER COURSE WOULD HAVE BEEN TO MAKE ASSESSMENTS IN THE CASES OF THOSE CREDITORS BY' TREATING THE CASH DEPOSITS IN THEIR BANK ACCOUN TS AS UNEXPLAINED INVESTMENTS OF THOSE CREDITORS UNDER SECTION 69. 7 . IN THE CASE OF NEMI CHAND KOTHARI 136 TAXMAN 213, (SUPRA), THE HON'BLE GUAHA TI HIGH COURT HAS THROWN LIGHT ON ANOTHER ASPECT TOUCHING THE ISSUE OF ONUS ON ASSESSEE UNDER SECTION 68, BY HOLDING THAT THE SAME SHOULD BE DECIDED 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. THE HON'BLE COURT IN THE SAID CASE HELD THAT , ONCE IT IS FOUND THAT AN ASSESSEE HAS ACTUALLY TAKEN MONEY FROM DEPOSITOR / LENDER WHO HAS BEEN FULLY IDENTIFIED, THE ASSESSEE/BORROWER CANNOT BE CALLED UPON TO EXPLAIN, MUCH LESS PROVE THE AFFAIRS OF SUCH THIRD PARTY, WHICH HE IS N OT EVEN SUPPOSED TO KNOW OR ABOUT WHICH HE CANNOT BE HELD TO BE ACCREDITED WITH ANY KNOWLEDGE. 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 8 IT A NO . 77/KOL/2020 AY 2016 - 17 RAHUL AGARWAL OF THE REPORT ARE REPRODUCED HEREIN BELOW: - 'WHILE INTERPRETING THE MEANING AND SCOPE OF SECTION 68, ONE HAS TO BEAR IN MIND THAT NORMALLY, INTERPRETATION OF A STATUTE SHALL BE GENERAL, IN NATURE, SUBJECT ONLY TO SUCH EXCEPTIONS AS MAY BE LOGICAL LY PERMITTED BY THE STATUTE 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 DOES THE WORDING OF SECTION 68 INDICATE THAT SECTION 68 DOES NOT AUTHORIZE THE REVENUE DEPARTMENT TO MAKE INQUIRY INTO THE SOURCE(S) OF THE CREDIT AND/OR SUB CREDITOR. 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 WE HOLD THAT AN INQUIRY UNDER SECTION 68 NEED NOT NECESSARILY BE KEPT CONFINED BY THE ASSESSING OFFICER WITHIN THE TRANSACTIONS, WHICH TOOK PLACE BETWEEN THE ASSESSEE AND HIS CREDITOR, BUT THAT THE SAME MAY BE EXTENDED TO THE TRANSACTIONS, WHICH HAVE TAKEN PLACE BETWEEN THE CREDITOR AND HIS SUB CREDITOR. THUS, WHILE THE ASSESSING 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. THI S LIMIT HAS BEEN IMPOSED BY SECTION 106 OF THE EVIDENCE ACT WHICH READS AS FOLLOWS: '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 FROM WHICH HE HAS RECEIVED THE CASH CREDIT, SECTION 68 GIVES AMPLE FREEDOM TO THE ASS ESSING OFFICER TO MAKE INQUIRY NOT ONLY INTO THE SOURCE(S)OF THE CREDITOR BUT ALSO OF HIS (CREDITOR'S) SUBCREDITORS AND PROVE, AS A RESULT, OF SUCH INQUIRY, THAT THE MONEY RECEIVED BY THE ASSESSEE, IN THE FORM OF LOAN FROM THE CREDITOR, THOUGH ROUTED THRO UGH 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 SUBCREDITORS. IF SECTION 106 AND SECTION 68 ARE TO STAND TOGETHER, WHICH THEY MUST, THEN, THE INTERPRETATION OF SECTION 68 ARE TO STAND TOGETHER, WHICH THEY MUST, THEN THE INTERPRETATION OF SECTION 68 HAS TO BE IN SUCH A WAY THAT IT DOES NOT MAKE SECTION 106 REDUNDANT. HENCE, THE HARMONIOUS CONSTRUCTION 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 ASSESSEE 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 TRANSACTIONS AS WELL AS THE CREDITWORTHINESS OF THE CREDITOR MUST REMAIN CONFINED TO THE TRANSACTIONS, WHICH HAVE TAKEN PLACE BETWEEN THE ASSESSEE AND THE CREDITOR. WHAT FOLLOWS, AS A COROLLARY, IS THAT IT IS NO T 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 CASH CREDIT TO THE CREDITOR FROM WH OM THE CASH CREDIT HAS BEEN. EVENTUALLY, RECEIVED BY THE ASSESSEE. IT, THEREFORE, FURTHER LOGICALLY 9 IT A NO . 77/KOL/2020 AY 2016 - 17 RAHUL AGARWAL FOLLOWS THAT THE CREDITOR'S CREDITWORTHINESS 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 GENUINENESS OF THE TRANSACTIONS, WHICH TOOK BETWEEN 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 PART OF THE ASSESSEE TO OBTAIN SUCH AMOUNT OF MONEY OR P ART THEREOF FROM THE CREDITOR, BY WAY OF CHEQUE IN THE FORM OF LOAN AND IN SUCH A CASE, IF THE CREDITOR FAILS TO SATISFY AS TO HOW HE HAD ACTUALLY RECEIVED THE SAID AMOUNT AND HAPPENED TO KEEP THE SAME IN THE BANK, THE SAID AMOUNT CANNOT BE TREATED AS INCO ME OF THE ASSESSEE FROM UNDISCLOSED SOURCE. IN OTHER WORDS, THE GENUINENESS AS WELL AS THE CREDITWORTHINESS OF A CREDITOR HAVE TO BE ADJUDGED VISA VIS THE TRANSACTIONS, WHICH HE HAS WITH THE ASSESSEE. THE REASON WHY WE HAVE FORMED THE OPINION THAT IT IS N OT THE BUSINESS OF THE ASSESSEE TO FIND OUT THE ACTUAL SOURCE OR SOURCES FROM WHERE THE CREDITOR HAS ACCUMULATED THE AMOUNT, WHICH HE ADVANCES, AS LOAN, TO THE ASSESSEE IS THAT SO FAR AS AN ASSESSEE IS CONCERNED, HE HAS TO PROVE THE GENUINENESS OF THE TRAN SACTION AND THE CREDITWORTHINESS OF THE CREDITOR VISA VIS THE TRANSACTIONS WHICH HAD TAKEN PLACE BETWEEN 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 T O FIND OUT AS TO WHAT SOURCES FROM WHERE THE CREDITOR HAD RECEIVED THE AMOUNT, HIS SPECIAL KNOWLEDGE UNDER SECTION 106 OF THE EVIDENCE ACT MAY VERY WELL REMAIN CONFINED ONLY TO THE TRANSACTIONS, WHICH HE HAD' WITH THE CREDITOR AND HE MAY NOT KNOW WHAT TRAN SACTION(S) HAD TAKEN PLACE BETWEEN HIS CREDITOR AND THE SUB CREDITOR ' ********** 'IN OTHER WORDS, THOUGH UNDER SECTION 68 AN ASSESSING OFFICER IS FREE TO SHOW, WITH THE HELP OF THE INQUIRY CONDUCTED BY HIM INTO THE TRANSACTIONS, 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 CREDITWORTHINESS, IT WILL NOT NECESSARILY MEAN THAT THE LOAN ADVANCED BY THE SUB CREDITOR TO THE CREDITOR WAS INCOME OF THE AS SESSEE FROM UNDISCLOSED SOURCE UNLESS THERE IS EVIDENCE, 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 .' ********** 'KEEPI NG 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 AGARW ALLA. THE APPELLANT HAD ALSO SHOWN, IN ACCORDANCE WITH THE BURDEN, WHICH RESTED ON HIM UNDER SECTION 106 OF THE EVIDENCE ACT, THAT THE SAID AMOUNTS HAD BEEN RECEIVED BY HIM BY WAY OF CHEQUES FROM THE CREDITORS AFOREMENTIONED. IN FACT THE FACT THAT THE ASSE SSEE HAD RECEIVED THE SAID AMOUNTS 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 10 IT A NO . 77/KOL/2020 AY 2016 - 17 RAHUL AGARWAL ASSESSEE MUST BE TAKEN TO HAVE PROVED THAT THE CREDITO R HAD THE CREDITWORTHINESS TO ADVANCE THE LOANS. THEREAFTER THE BURDEN HAD SHIFTED TO THE ASSESSING OFFICER TO PROVE THE CONTRARY. ON MERE FAILURE ON THE PART OF THE CREDITORS TO SHOW THAT THEIR SUB CREDITORS HAD CREDITWORTHINESS TO ADVANCE THE SAID LOAN A MOUNTS 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 THERE WAS NEITHER DIRECT NOR CIRCUMSTANTIAL EVIDENCE ON RE CORD THAT THE SAID LOAN 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 THE HANDS OF THE SUB CREDITORS, HAD ACTUALLY BEEN RECEIVED BY THE SUB CREDITORS FROM THE ASSESSEE. IN THE ABSENCE OF ANY SUCH EVIDENCE ON RECORD, THE ASSESSING OFFICER COULD NOT HAVE TREATED THE SAID AMOUNTS AS INCOME DERIVED BY THE A PPELLANT FROM UNDISCLOSED SOURCES. THE LEARNED TRIBUNAL SERIOUSLY FELL INTO ERROR IN TREATING THE SAID AMOUNTS AS INCOME DERIVED BY THE APPELLANT FROM. UNDISCLOSED SOURCES MERELY ON THE FAILURE OF THE SUB CREDITORS TO PROVE THEIR CREDITWORTHINESS. 8 . FURT HER, IN THE CASE OF CIT V. S. KAMALJEET SINGH [2005] 147 TAXMA N 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 UNDER: - '4. THE TRIBUNAL HAS R ECORDED A FINDING THAT THE ASSESSEE HAS DISCHARGED THE ONUS WHICH WAS ON HIM TO EXPLAIN THE NATURE AND SOURCE OF CASH CREDIT IN QUESTION. THE ASSESSEE DISCHARGED THE ONUS BY PLACING (I) CONFIRMATION LETTERS OF THE CASH CREDITORS; (II) THEIR AFFIDAVITS; (II I) THEIR FULL ADDRESSES AND GIR NUMBERS AND PERMANENT ACCOUNT NUMBERS. IT HAS FOUND THAT THE ASSESSEE'S BURDEN STOOD DISCHARGED AND SO, NO ADDITION TO HIS TOTAL INCOME ON ACCOUNT OF CASH CREDIT WAS CALLED FOR. IN VIEW OF THIS FINDING, WE FIND THAT THE TRIB UNAL WAS RIGHT IN REVERSING THE ORDER OF THE AA C, SETTING ASIDE THE ASSESSMENT ORDER. 9. 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 34 7 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 INITIAL 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 TRANSACTION OF LOAN. BUT THE LAW IS EQUALLY SETTLED THAT IF THE INITIAL BURDEN IS DISCHARGED BY THE ASSESSEE BY PRODUCING SUFFICIENT MATERIALS IN S UPPORT OF THE LOAN TRANSACTION, THE ONUS SHIFTS UPON THE ASSESSING OFFICER AND AFTER VERIFICATION, HE CAN CALL FOR FURTHER EXPLANATION FROM THE ASSESSEE AND IN THE PROCESS, THE ONUS MAY AGAIN SHIFT FROM THE ASSESSING OFFICER TO ASSESSEE. 16. IN THE CASE B EFORE US, THE APPELLANT BY PRODUCING THE LOAN CONFIRMATION CERTIFICATES SIGNED BY THE CREDITORS, DISCLOSING THEIR PERMANENT ACCOUNT NUMBERS AND ADDRESS AND FURTHER INDICATING THAT THE LOAN WAS TAKEN BY ACCOUNT PAYEE CHEQUES, NO DOUBT, PRIMA FACIE, DISCHARG ED THE INITIAL BURDEN AND THOSE MATERIALS DISCLOSED BY THE ASSESSEE PROMPTED THE 11 IT A NO . 77/KOL/2020 AY 2016 - 17 RAHUL AGARWAL ASSESSING OFFICER TO ENQUIRE THROUGH THE INSPECTOR TO VERIFY THE STATEMENTS. 1 0 . IN A CASE WHERE THE ISSUE WAS WHETHER THE ASSESSEE AVAILED CASH CREDIT AS AGAINST FUTURE SA LE OF PRODUCT, THE AO ISSUED SUMMONS TO THE CREDITORS WHO DID NOT TURN UP BEFORE HIM, SO AO DISBELIEVED THE EXISTENCE OF CREDITORS AND SADDLED THE ADDITION, WHICH WAS OVERTURNED BY LD. CIT(A). HOWEVER, THE TRIBUNAL REVERSED THE DECISION OF THE LD. CIT(A) AND UPHELD THE AOS DECISION, WHICH ACTION OF TRIBUNAL 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 OVERTURNED AND DECISION OF LD. CIT(A) UPHELD AND THE HONBLE HIGH COURT HAS HEL D THAT WHEN THE BASIC EVIDENCES ARE ON RECORD THE MERE FAILURE OF THE CREDITOR TO APPEAR CANNOT BE BASIS TO MAKE ADDITION. THE COURT HELD AS FOLLOWS: 8. ASSAILING THE SAID JUDGMENT OF THE LEARNED TRIBUNAL LEARNED COUNSEL FOR THE APPELLANT SUBMITS THAT INCOME TAX OFFICER DID NOT CONSIDER THE MATERIAL EVIDENCE SHOWING THE CREDITWORTHINESS AND ALSO OTHER DOCUMENTS, VIZ., CONFIRMATORY STATEMENTS OF THE PERSONS, OF HAVING ADVANCED CASH AMOUNT AS AGAINST THE SUPP LY OF BIDIS. THESE EVIDENCE WERE DULY CONSIDERED BY THE COMMISSIONER OF INCOME TAX (APPEALS). THEREFORE, THE FAILURE OF THE PERSON TO TURN UP PURSUANT TO THE SUMMONS ISSUED TO ANY WITNESS IS IMMATERIAL WHEN THE MATERIAL DOCUMENTS MADE AVAILABLE, SHOULD HAV E BEEN ACCEPTED AND INDEED IN SUBSEQUENT YEAR THE SAME EXPLANATION WAS ACCEPTED BY THE INCOME TAX OFFICER. HE FURTHER CONTENDED THAT WHEN THE TRIBUNAL HAS RELIED ON THE ENTIRE JUDGMENT OF THE COMMISSIONER OF INCOME TAX (APPEALS), THEREFORE, IT WAS NOT PROP ER TO TAKE UP SOME PORTION OF THE JUDGMENT OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND TO IGNORE THE OTHER PORTION OF THE SAME. THE JUDICIAL PROPRIETY AND FAIRNESS DEMANDS THAT THE ENTIRE JUDGMENT BOTH FAVOURABLE AND UNFAVOURABLE SHOULD HAVE BEEN CONSI DERED. 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 UDHAVDA S KEWALRAM V. CIT [19671 66 ITR 462. IN THIS JUDGMENT IT IS NOTICED THAT THE SUPREME COURT AS PROPOSITION OF LAW HELD THAT 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. 10. WE FIND CONSIDERABLE FORCE OF THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE APPELLANT THAT THE TRIBUNAL HAS MERELY NOTICED THAT SINCE THE SUMMONS ISSUED BE FORE ASSESSMENT RETURNED UNSERVED AND NO ONE CAME FORWARD TO PROVE. THEREFORE, IT SHALL BE ASSUMED THAT THE ASSESSEE FAILED TO PROVE THE EXISTENCE OF THE CREDITORS OR FOR THAT MATTER THE CREDITWORTHINESS. AS RIGHTLY POINTED OUT BY THE LEARNED COUNSEL THAT THE COMMISSIONER 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 BIDIS AS AGAINST THE ADVANCE. THEREFORE, THE ATTENDANCE OF TH E WITNESSES PURSUANT TO THE SUMMONS ISSUED, IN OUR VIEW, IS NOT IMPORTANT. THE IMPORTANT IS TO PROVE AS TO WHETHER THE SAID CASH CREDIT WAS RECEIVED AS AGAINST THE FUTURE SALE OF THE PRODUCT OF THE ASSESSEE OR 12 IT A NO . 77/KOL/2020 AY 2016 - 17 RAHUL AGARWAL NOT. WHEN IT WAS FOUND BY THE COMMISSIONER OF INCOME TAX (APPEALS) ON FACTS HAVING EXAMINED THE DOCUMENTS 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 FINDING OF THE CO MMISSIONER OF INCOME TAX (APPEALS) AS RIGHTLY POINTED OUT BY THE LEARNED COUNSEL. THE SUPREME COURT HAS ALREADY STATED AS TO WHAT SHOULD BE THE DUTY OF THE LEARNED TRIBUNAL TO DECIDE IN THIS SITUATION. IN THE SAID JUDGMENT NOTED BY US AT PAGE 464, THE SUPR EME COURT HAS OBSERVED AS FOLLOWS: 'THE INCOME TAX APPELLATE TRIBUNAL PERFORMS A JUDICIAL FUNCTION UNDER THE INDIAN INCOME TAX ACT; IT IS INVESTED WITH AUTHORITY TO DETERMINE FINALLY ALL QUESTIONS OF FACT. THE TRIBUNAL MUST, IN DECIDING AN APPEAL, CONSIDE R 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, CONSIDER 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 ALSO 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 MANIFEST INFIRMITY. 12. TAKING INSPIRATION FROM THE SUPREME COURT OBSERVATIONS WE ARE CONSTRAINED TO HOLD IN THIS MATTER THAT THE TRIBUNAL HAS NOT ADJUDICATED UPON THE 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 WAS RECEIVED FROM VARIOUS PERSONS AND SUPPLY AS AGAINST CASH CREDIT ALSO MADE. 13. HENCE, THE JUDGMENT AND ORDER OF THE TRIBUNAL IS 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. 1 1 . WHEN A QUESTION AS TO THE CREDITWORTHINESS OF A CREDITOR IS TO BE ADJUDICATED AND IF THE CREDITOR IS AN INCOME TAX ASSESSEE, I T IS NOW WELL SETTLED BY THE DECISION OF THE CALCUTTA HIGH COURT THAT THE C REDITWORTHINESS OF THE CREDITOR CANNOT BE DISPUTED BY THE AO OF THE ASSESSEE BUT THE AO OF THE CREDITOR. IN THIS REGARDS OUR ATTENTION WAS DRAWN TO THE DECISION OF THE HON'BLE HIGH COURT, CALCUTTA IN THE COMMISSIONER OF INCOME TAX, KOLKA TA - ILL VERSUS DATA WARE PRIVATE LIMITED ITAT NO. 263 OF 2011 DATE: 21S T SEPTEMBER, 2011 WHEREIN THE COURT HELD AS FOLLOWS: IN OUR OPINION, IN SUCH CIRCUMSTANCES, THE ASSESSING OFFICER OF THE ASSESSEE CANNOT TAKE THE BURDEN OF ASSESSING THE PROFIT AND LOSS ACCOUNT OF THE CR EDITOR WHEN ADMITTEDLY THE CREDITOR HIMSELF IS AN INCOME TAX ASSESSEE. AFTER GETTING THE PAN NUMBER AND GETTING THE INFORMATION THAT THE CREDITOR IS ASSESSED UNDER THE ACT, THE ASSESSING OFFICER SHOULD ENQUIRE FROM THE ASSESSING OFFICER OF THE CREDITOR AS TO THE GENUINENESS' OF THE TRANSACTION AND WHETHER SUCH TRANSACTION HAS BEEN ACCEPTED BY THE ASSESSING OFFICER OF THE CREDITOR BUT INSTEAD OF ADOPTING SUCH COURSE, THE ASSESSING OFFICER HIMSELF COULD NOT ENTER INTO THE RETURN OF THE CREDITOR AND BRAND THE SAME AS UNWORTHY OF CREDENCE. SO LONG IT IS NOT ESTABLISHED THAT THE RETURN SUBMITTED BY THE CREDITOR HAS BEEN REJECTED BY ITS 13 IT A NO . 77/KOL/2020 AY 2016 - 17 RAHUL AGARWAL ASSESSING OFFICER, THE ASSESSING OFFICER OF THE ASSESSEE IS BOUND TO ACCEPT THE SAME AS GENUINE WHEN THE IDENTITY OF THE CREDITO R AND THE GENUINENESS' OF TRANSACTION THROUGH ACCOUNT PAYEE CHEQUE HAS BEEN ESTABLISHED. WE FIND THAT BOTH THE COMMISSIONER OF INCOME TAX (APPEAL) AND THE TRIBUNAL BELOW FOLLOWED THE WELL ACCEPTED PRINCIPLE WHICH ARE REQUIRED TO BE 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. 12 . IN THIS CASE ON HAND, T HE ASSESSEE HAD DISCHARGED ITS ONUS TO PROVE THE IDENTITY, CREDITWORTHINESS AND GEN UINENESS OF THE LENDER, THEREAFTER THE ONUS SHIFTED TO AO TO DISPROVE THE DOCUMENTS FURNISHED BY ASSESSEE AND IT CANNOT BE BRUSHED ASIDE BY THE AO TO DRAW ADVERSE VIEW WHICH OMISSION ON THE PART OF AO CANNOT BE COUNTENANCED. IN THE ABSENCE OF ANY INVES TIGATION, MUCH LESS GATHERING OF EVIDENCE BY THE AS SESSING OFFICER, WE HOLD THAT ADDITION CANNOT BE SUSTAINED MERELY BASED ON INFERENCES DRAWN BY STATEMENT OF EX DIRECTOR AS DISCUSSED SUPRA AT PARA 4 . APPLYING THE PROPOSITIONS LAID DOWN IN THESE CASE LAWS TO TH E FACTS OF THIS CASE, WE ARE INCLINED TO ALLOW THE APPEAL OF ASSESSEE 13 . TO SUM UP S ECTION 68 OF THE ACT PROVIDES THAT IF ANY SUM FOUND CREDITED IN THE YEAR IN RESPECT OF WHICH THE ASSESSEE FAILS TO EXPLAIN THE NATURE AND SOURCE SHALL BE ASSESSED AS ITS UNDISCLOSED INCOME. IN THE FACTS OF THE PRESENT CASE, BOTH THE NATURE & SOURCE OF THE LOAN RECEIVED WAS FULLY EXPLAINED BY THE ASSESSEE. THE ASSESSEE HAD DISCHARGED ITS ONUS TO PROVE THE IDENTITY, CREDITWORTHINESS AND GEN UINENESS OF THE LENDER . THE CI N DETAILS, BANK ACCOUNT STATEMENTS, AUDITED FINANCIAL STATEMENTS AND THE LENDER IS INCOME TAX ASSESSEE . ACCORDINGLY ALL THE THREE CONDITIONS AS REQUIRED U/S. 68 OF THE ACT I.E. THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION WAS PLACED B EFORE THE AO AND THE ONUS SHIFTED TO AO TO DISPROVE THE MATERIALS PLACED BEFORE HIM. WITHOUT DOING SO, THE ADDITION MADE BY THE AO IS B ASED ON SO CALLED STATEMENT OF EX DIRECTOR OF LENDER COMPANY ON THE FACTS DISCUSSED AT PARA 4 SUPRA CANNOT BE JUSTIFIED . IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED ABOVE, NO ADDITION WA S WARRANTED UNDER SECTION 68 OF THE ACT. THEREFORE, WE D IRECT DELETION OF ADDITION AND CONSEQUENTLY TH E APPEAL OF ASSESSEE IS ALLOWED . 14 IT A NO . 77/KOL/2020 AY 2016 - 17 RAHUL AGARWAL 14. IN THE RESULT, THE APPEAL OF AS SESSEE IS ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 23 SEPTEMBER 2020 SD/ - SD/ - ( J. SUDHAKAR REDDY) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 23 SEPTEMBER 2020 **PP(SR.P.S.) COPY OF THE ORDER F ORWARDED TO: 1. APPELLANT SHRI RAHUL AGARWAL 2 N.C DUTTA SARANI, SAGAR ESTATE, 4 TH FL., UNIT NO. 3, KOLKATA - 1. 2 RESPONDENT THE ASSTT. COMMISSIONER OF INCOME - TAX, CIR - 46, 3 GOVT PLACE, KOLKATA - 1. 3. 4. 5. CIT(A) - , KOLKATA (SENT THROUGH E - MAIL) C IT - , KOLKATA. DR, ITAT, KOLKATA. (SENT THROUGH E - MAIL) BY ORDER, / TRUE COPY, ASSISTANT REGISTRAR