The ITO, Ward-3(2)., Surat V. Shri Dilipbhai P.Wadhwani, Surat

ITA 874/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6060 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 18-07-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 20-03-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P R GHOSH
• Keywords: Unexplained cash credit; Income from undisclosed sources; Opportunity of being heard; Principle of natural justice; Source of fund; Corroborative evidences; Third party statement
• Section: 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND A. MOHAN ALAN KAMONY, AM) ITA NO.874/AHD/2009 A.Y .: 2005-06 THE INCOME TAX OFFICER, WARD 3 (2), SURAT, ROOM NO.208, AAYAKAR BHAVAN, MAJURA GATE, SURAT VS SHRI DILIP P. WADHWANI, PROP. M/S. PRAKASH HARDWARE, B/H BUS SAND, RAM NAGAR, SURAT PA NO. AAEPW 5752 D (APPELLANT) (RESPONDENT) APPELLANT BY SHRI P. R. GHOSH, DR RESPONDENT BY NONE O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-II , SURAT DATED 12 TH DECEMBER, 2008 FOR ASSESSMENT YEAR 2005-06 ON THE F OLLOWING GROUNDS: (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT(A)-II, SURAT HAS ERRED IN DELETING THE ADDITION OF RS.6,85,000/- MADE BY A.O. ON ACCOUNT OF UNEXPLAINED CASH CREDITS HOLDING THAT OUT OF 38 CREDITORS THE ASSESSEE HAS PRODUCED 14 CREDITORS PERSONALLY BEFORE THE A. O. DURING THE REMAND REPORT PROCEEDINGS AND THEREBY THE ASSESSEE HAS PROVED IDENTITIES AND CREDITWORTHINESS OF THE CREDITORS AS WELL AS THE GENUINENESS OF THE LOAN TRANSACTIONS WITHOUT APPRECIATING THE FACT THA T - A. AS PER REMAND REPORT OF THE A. O. OUT OF 38 CREDITORS, THE ASSESSEE HAD PRODUCED ONLY 14 CREDITORS WHO WERE MAN OF VERY SMALL MEANS ITA NO.874/AHD/2009 ITO, WARD -3(2), SURAT VS SHRI DILIPBHAI P. WADHWAN I. 2 I.E. RIKSHAW DRIVERS, TEMPO DRIVERS, VEGETABLE VENDORS, TEA STALL OWNERS ETC. AND THEY WERE NOT ASSESSED NOT INCOME TAX. B. REST OF 24 CREDITORS [ 38-14 ] WERE NEITHER PRODUCED PERSONALLY BY THE ASSESSEE BEFORE THE A. O. DURING REMAND REPORT PROCEEDINGS NOR ANY DETAILS OR EVIDENCES SUCH AS CONFIRMATORY LETTERS, I. R. ACKNOWLEDGEMENT, BANK STATEMENT OR COPY OF ACCOUNTS OF THE ASSESSEE AS APPEARING IN THEIR BOOKS OF ACCOUNTS ETC. TO PROVE THEIR IDENTITIES, CREDITWORTHINESS AND GENUINENESS OF THE LOAN TRANSACTIONS IN THEIR NAMES ARE FURNISHED BY THE ASSESSEE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE C IT(A) MAY BE SET-ASIDE AND THAT OF ASSESSING OFFICER MAYBE RESTORED TO THE ABOVE EXTENT. 2. WE HAVE HEARD THE LEARNED DR AND PERUSED THE FIN DINGS OF THE AUTHORITIES BELOW. HOWEVER, NONE APPEARED ON BEHAL F OF THE ASSESSEE DESPITE SERVICE OF THE NOTICE OF HEARING T HROUGH REGISTERED POST. A/D CARD DULY SERVED UPON THE ASSESSEE IS AVA ILABLE ON RECORD. IT MAY ALSO BE NOTED THAT EARLIER THIS APPEAL WAS A DJOURNED ON THE REQUEST OF MR. M. K. PATEL, ADVOCATE WHO WAS PRESEN T IN THE COURT AT THE TIME OF HEARING OF THIS CASE IN OTHER CASE BUT DID NOT APPEAR IN THE PRESENT APPEAL. THE ASSESSEE IS, THEREFORE, PROCEED ED EX-PATE. 3. THE FACTS OF THE CASE AS NOTED IN THE IMPUGNED O RDER ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS IN TRADING OF SANITARY ITEMS ITA NO.874/AHD/2009 ITO, WARD -3(2), SURAT VS SHRI DILIPBHAI P. WADHWAN I. 3 AND IS ALSO A PARTNER OF M/S. PRAKASH HARDWARE. THE ASSESSEE HAD SHOWN UNSECURED LOANS FROM 38 PERSONS TOTALING TO R S.11,59,100/-. THE AO ASKED THE ASSESSEE TO SHOW-CAUSE AS TO WHY T HE LOANS TOTALING TO RS.6,85,000/- TAKEN IN CASH, SHOULD NOT BE TREATED AS UNEXPLAINED IN TERMS OF SECTION 68 OF THE IT ACT. T HE REMAINING SUM OF RS.4,74,100/- HAD BEEN RECEIVED BY CHEQUE FROM ONE SHRI PRAKASHBHAI JITUBHAI WADHWANI. IN RESPONSE, THE ASS ESSEE FURNISHED THE LEDGER ACCOUNTS OF THE UNSECURED LOANS ALONG WI TH CONFIRMATIONS OF ACCOUNT STATEMENTS AND OTHER SUPPORTING EVIDENCE IN RESPECT OF SOME OF THE DEPOSITORS. IT WAS CLEAR THAT ALL SUCH LOANS HAD BEEN REPAID IN FULL IN THE SUBSEQUENT FINANCIAL YEAR. TH E AO DID NOT ACCEPT THE ASSESSEE'S SUBMISSION. HE OBSERVED THAT ALL THE 37 PERSONS HAD GIVEN LOANS BELOW RS.20,000/- AND ALL WERE IN CASH. NONE OF THE DEPOSITORS WERE ASSESSED TO TAX. NO CENTRA-CONFIRMA TION HAD BEEN FURNISHED EXCEPT FOR 9 CASES, WHICH WERE ALSO ON PL AIN PAPERS. NONE OF THE DEPOSITORS HAD THE CREDITWORTHINESS TO GIVE SUCH LOANS. CONSEQUENTLY, THE AO CAME TO THE CONCLUSION THAT NO NE OF THE LOANS WERE GENUINE AND NONE OF THE LOANS WERE PROVED. R ELYING ON CERTAIN CASE-LAWS, THE AO OBSERVED THAT NEITHER THE IDENTIT Y OF THE DEPOSITORS NOR THEIR CREDITWORTHINESS, NOR THE GENUINENESS OF THE TRANSACTIONS HAD BEEN ESTABLISHED. HE THEREFORE TREATED THE TO TAL SUCH UNSECURED CASH LOANS OF RS.6,85,000/- AS UNEXPLAINED AND ADDE D THE SAME TO THE ASSESSEE'S TOTAL INCOME UNDER THE PROVISIONS OF SECTION 68 OF THE IT ACT. IN THE WRITTEN SUBMISSION DATED 20-6-2008, IT WAS CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE AO HAD RAISED THE QUERY REGARDING THE GENUINENESS OF THE LOANS ONLY T OWARDS THE END OF THE ASSESSMENT PROCEEDINGS I. E. ON 14-12-2007. THE WRITTEN ITA NO.874/AHD/2009 ITO, WARD -3(2), SURAT VS SHRI DILIPBHAI P. WADHWAN I. 4 SUBMISSION, WHICH HAS BEEN REPRODUCED BY THE AO IN THE BODY OF THE ASSESSMENT ORDER, WAS FURNISHED BY THE ASSESSEE ON 27-12-2007. THE DEPOSITORS WERE MAINLY PART-TIME PLUMBERS AND LABOURERS WHO HAD KEPT THEIR SAVINGS WITH THE ASSES SEE FOR SAFE CUSTODY, SINCE THE ASSESSEE IS A PERSON WITH SOCIAL STATUS. SINCE SUFFICIENT TIME WAS NOT AVAILABLE, COMPLETE DETAILS COULD NOT BE PRODUCED BEFORE THE AO, ESPECIALLY WHEN NO SHOW-CAU SE NOTICE HAD BEEN ISSUED. THE LEARNED COUNSEL FOR THE ASSESSEE H AS PROVIDED THE NAMES AND ADDRESSES OF THE DEPOSITORS ALONG WITH HI S WRITTEN SUBMISSION, AND HAS STATED THAT HE WAS WILLING TO P RODUCE ALL THE DEPOSITORS AS AND WHEN REQUIRED. SINCE THE LEARNED COUNSEL FOR THE ASSESSEE CLAIMED THAT SUFFICIENT TIME HAD NOT BEEN PROVIDED TO FURNISH THE REQUISITE EVIDENCES REGARDING THE UNSEC URED LOANS, IN COURSE OF THE ASSESSMENT PROCEEDINGS AND SINCE HE O FFERED TO PRODUCE ALL THE DEPOSITORS IN APPELLATE PROCEEDINGS THE AO WAS ASKED VIDE THIS OFFICE LETTER DATED 20-6-2008 TO PR OVIDE FURTHER OPPORTUNITY TO THE ASSESSEE TO PRODUCE THE REQUISIT E DOCUMENTARY EVIDENCES PERTAINING TO THE GENUINENESS OF THE UNSE CURED LOANS. IN THE INTEREST OF EQUITY AND NATURAL JUSTICE, THE AO WAS DIRECTED TO GIVE SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO SUBSTANTI ATE HIS CLAIM. IN HIS REMAND REPORT DATED 1-10-2008, IT HAS BEEN STATED B Y THE AO THAT HE HAD ISSUED SUMMONS U/S.131 TO THE 37 ALLEGED DEPOSI TORS ON 30.6.2008 REQUIRING THEIR ATTENDANCE BEFORE HIM. AP PARENTLY, THE ASSESSEE PRODUCED ONLY 14 OUT OF THE 37 DEPOSITORS FOR VERIFICATION. THE RELEVANT DETAILS PERTAINING TO THE 14 DEPOSITOR S HAVE BEEN SUBMITTED BY THE AO, WHICH IS REPRODUCED AS UNDER:- ITA NO.874/AHD/2009 ITO, WARD -3(2), SURAT VS SHRI DILIPBHAI P. WADHWAN I. 5 SI. NO. NAME OF THE DEPOSITORS AMOUNT OF ADVANCE SLATURE OF BUSINESS/ ACTIVITY OF THE CREDITOR 1. SHRI RAMESHBHAI VASUMAL SUKHEJA 19000/- AUTORIKSHAW DRIVER 2. SHRI CHANDUBHAI SHANKERBHAI PATEL 17000/- AUTORIKSHAW DRIVER 3. SHRI GURDASBHAI BUDHARMAL HASANI 18000/- SALE OF VEGETABLES AND FLOWERS. 4. SHRI NARESHKUMAR NANDLALBHAI HASANI 19000/- BUSINESS OF SEASONAL GARMENTS ON SMALL SCALE BASIS. 5. SHRI RARNCHANDRA LOKUMAL FAGWANI 19000/- SUPERVISORY WORK IN BAKERY 6. SHRI MULCHAND FATANMAL NAKANI 17000/- AUTORIKSHAW DRIVER. NOW RETIRED. 7. SHRI KHEMCHAND KHATARMAL AHUJA 18000/- SALE OF TEA AND SNACKS 8. SHRI DINESH DAYARAM PATEL 19000/- TEMPO DRIVER 9. SHRI ANILKUMAR ASHOK VASWANI 17000/- SALARY OF RS.5,000/-P.M. FROM M/S.VECTRA RO, ADAJAN, SURAT. 10. NARESH KHARAMCHAND BALCHANDANI 18000/- VIDEO SHOOTING 11. SHRI RAJESH INDERIAL KHUBCHANDANI 17000/- SALESMAN IN TEXTILE SHOP 12. SHRI ASHOK ISHVERLAL MEHTA 18000/- DIAMOND CUTTER 13. SHRI SHANKARBHAI KHUBCHAND ASIJA 18000/- SUPERVISORY WORK IN BAKERY. 14. SHRI AMITKUMAR MADHAVPRASAD TRIVEDI 17000/- DALALI BUSINESS IN PROPERTIES. ITA NO.874/AHD/2009 ITO, WARD -3(2), SURAT VS SHRI DILIPBHAI P. WADHWAN I. 6 THE AO HAS SUBMITTED THAT HE RECORDED THE STATEMENT S OF SUCH DEPOSITORS AND THAT, ON THE BASIS OF THE STATEMENTS , IT WAS CLEARLY ESTABLISHED THAT ALL THESE 14 PERSONS HAD VERY MEAG ER SOURCES OF INCOME WHICH WAS NOT SUFFICIENT FOR THEM TO HAVE SA VINGS WHICH COULD BE GIVEN AS LOANS TO THE ASSESSEE. MOREOVER, NO CEN TRA-CONFIRMATION HAD BEEN FILED BEFORE HIM. IT HAS ALSO BEEN OBSERVE D THAT OUT OF THE 14 PERSONS, ONLY ONE WAS MAINTAINING A BANK ACCOUNT . ON VERIFICATION OF THE BANK PASS-BOOK OF THIS DEPOSITOR, IT WAS SEE N THAT HE DID NOT HAVE ANY BALANCE WHICH COULD BE WITHDRAWN AND ADVAN CED TO THE ASSESSEE. NONE OF THE 14 PERSONS WERE ASSESSED TO T AX. ON THE BASIS OF SUCH FACTS, NONE OF THE LOANS SHOULD BE TR EATED AS GENUINE. IN HIS WRITTEN REBUTTAL DATED 10-12-2008, THE LEARN ED COUNSEL FOR THE ASSESSEE HAS REITERATED THE EARLIER CLAIM THAT, THE ASSESSEE BEING A WELL KNOWN BUSINESS PERSON OF THE ADAJAN RANDER ARE A, SMALL TIME LABOURERS, RICKSHAW DRIVERS, VEGETABLE VENDORS, TEA STALL OWNERS, ETC. ETC. WHO DID NOT HAVE SECURED DWELLING PLACES, DEPO SITED THEIR VALUABLES INCLUDING MONEY WITH THE ASSESSEE SO AS T O ENSURE THEIR SAFETY. THEY WITHDRAW THE SAME BEFORE TRAVELING TO THEIR NATIVE PLACES. BECAUSE OF THE FREQUENT FLIGHT OF SUCH PEOP LE TO THEIR NATIVE PLACES, IT WAS NOT POSSIBLE TO PRODUCE ALL THE DEPO SITORS BEFORE THE AO. IT HAS BEEN AGUED BY THE LEARNED COUNSEL FOR TH E ASSESSEE THAT FROM THE REMAND REPORT OF THE AO, IT SEEMS THAT THE AO DOUBTED ONLY THE CAPACITY OF THE DEPOSITORS TO MAKE THE DEPOSITS /LOANS WITH THE ASSESSEE. LOOKING AT THE TYPICAL NATURE OF THE DEPO SITS AND ALSO THE OTHER FACTS, IT HAS BEEN REQUESTED THAT THE ADDITIO N MAY BE DELETED. ITA NO.874/AHD/2009 ITO, WARD -3(2), SURAT VS SHRI DILIPBHAI P. WADHWAN I. 7 4. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION O F THE ASSESSEE DELETED THE ADDITION OF RS.6,85,000/- AND ALLOWED THE APPEAL OF THE ASSESSEE. HIS FINDINGS IN PARA 7 OF T HE APPELLATE ORDER ARE REPRODUCED AS UNDER: 7. THE ASSESSEE WAS PROVIDED WITH FAIR OPPORTUNITY DURING THE REMAND PROCEEDINGS TO PRODUCE THE DEPOSI TORS. ONLY 14 WERE PRODUCED. EVEN THOUGH ALL THESE 14 WER E PERSONS OF SMALL MEANS BEING RICKSHAW DRIVERS, VEGE TABLE VENDORS, TEA STALL OWNERS, TEMPO DRIVERS, SALES PER SONS, ETC. ETC. IT WAS NOT UNUSUAL THAT THEY COULD HAVE ACCUMULATED SUMS OF RS.17,000- RS.18,000-.RS.19,000 WHICH THEY COULD HAVE KEPT WITH A RESPONSIBLE PERSO N OF THE LOCALITY FOR SAFE CUSTODY. THERE ARE LAKHS OF M ENIAL LABOURERS IN SURAT WHO WORKS FOR SOME MONTHS OF THE YEAR AND GO BACK HOME TO BIHAR, ORISSA, U.P., BENGAL AND SAURASHTRA. THEY DO NOT HAVE ANY BANK ACCOUNT, AND THEREFORE IT IS A LOGICAL THAT THEY WOULD REQUIRE S OME PLACE OR SOME PERSON WHERE OR WITH WHOM THEY COULD KEEP T HEIR SAVINGS. MOST OF THEM ARE DAILY WAGE EARNERS. THE V ERY FACT THAT 14 OUT OF 37 OF THE DEPOSITORS ACTUALLY A PPEARED BEFORE THE AO AND OFFERED THEMSELVES FOR EXAMINATIO N, WAS A VERY SERIOUS AND SIGNIFICANT EFFORT MADE BY T HE ASSESSEE TOWARDS ESTABLISHING THE GENUINENESS OF TH E LOANS. THE EXPLANATION OF THE AR REGARDING SUCH SMA LL TIME LABOURERS AND WORKMEN DEPOSITING THEIR DAILY S AVINGS WITH A RESPONSIBLE PERSON OF THE LOCALITY IS A VERY CREDIBLE AND PRACTICAL EXPLANATION. THE 14 DEPOSITORS HAD PR OVED THEIR IDENTITY BY THEIR PERSONAL APPEARANCE AND HAD CONFIRMED THE FACT OF THEIR HAVING GIVEN/MADE SUCH LOANS/DEPOSITS TO/WITH THE ASSESSEE. THE GENUINENES S OF THE TRANSACTIONS WAS THUS ESTABLISHED. AS REGARDS T HEIR CREDITWORTHINESS, I AM OF THE VIEW THAT EVEN THOUGH THE AO HAS RAISED DOUBTS, THE FACT THAT THE LOANS WERE OF VERY SMALL SUMS, IT OUGHT TO HAVE BEEN ACCEPTED THAT SU CH DEPOSITORS THE ABILITY AND THE CAPACITY TO MAKE SUC H DEPOSITS WITH THE ASSESSEE. IT IS ALSO A VERY RATIO NAL EXPLANATION THAT, SINCE SUCH LABOURERS FREQUENTLY G O BACK ITA NO.874/AHD/2009 ITO, WARD -3(2), SURAT VS SHRI DILIPBHAI P. WADHWAN I. 8 TO THEIR NATIVE PLACES, IT IS NOT POSSIBLE TO PRODU CE ALL OF THEM AT THE SAME TIME BEFORE THE AO. THE ASSESSEE W AS UNABLE TO PRODUCE ANY ONE OF THEM DURING THE ASSESSMENT PROCEEDINGS, SINCE THE AO MADE THE REQUISITION ONLY ON 14.12.2007, WHEN THE ASSESSMENT WAS GETTING TIME BARRED ON 31.12.2007. IF THE ASSESSEE HAD NOT MADE SERIOUS EFFORTS TO LOCATE SUCH PERSONS, 14 OF THEM COULD NOT HAVE BEEN PRODUCED BEFORE THE AO. GI VEN SUCH SURROUNDING FACTS AND CIRCUMSTANCES, I DO NOT THINK THAT THERE REMAINS ANY DOUBT REGARDING THE GENUINEN ESS OF ALL THE DEPOSITS. I AM OF THE VIEW THEREFORE, TH AT THE UNSECURED LOANS/DEPOSITS FROM 38 DEPOSITORS TOTALLI NG RS.6,85,000 SHOULD BE ACCEPTED AS GENUINE. CONSEQUENTLY, THE AO IS DIRECTED TO DELETE THE SAID SUM. 5. ON CONSIDERATION OF THE SUBMISSIONS OF THE LEARN ED DR IN THE LIGHT OF THE FINDINGS OF THE AUTHORITIES BELOW WE D O NOT FIND ANY JUSTIFICATION TO SUSTAIN THE ORDER OF THE LEARNED C IT(A). THE LEARNED DR SUBMITTED THAT THE ASSESSEE FAILED TO PRODUCE AL L THE CREDITORS BEFORE THE AO EVEN IN THE REMAND PROCEEDINGS. THE A SSESSEE HAS FAILED TO PROVE THE CREDITWORTHINESS OF ALL THE CRE DITORS AND NO SOURCE OF INCOME IS FILED. EVEN IF, 14 CREDITORS WERE PROD UCED, THE SAME WOULD AT THE BEST PROVE THEIR IDENTITY BUT IN THOSE CASES ALSO THE CREDITWORTHINESS IS NOT PROVED. WE FIND SUBSTANCE I N THE ARGUMENTS OF THE LEARNED DR. IT IS SETTLED LAW THAT FOR PROVING GENUINE CREDITS U/S 68 OF THE IT ACT, THE BURDEN IS UPON THE ASSESSEE TO P ROVE IDENTITY OF THE CREDITORS, THEIR CREDITWORTHINESS AND GENUINENESS O F THE TRANSACTIONS IN THE MATTER. IN THIS CASE, 38 PERSONS HAVE STATE D TO HAVE GIVEN LOANS BELOW RS.20,000/- IN CASH WHICH WERE NOT FOUN D GENUINE. THE AO NOTED THAT ALL THESE 38 PERSONS ARE NOT ASSESSED TO TAX AND HAVE NO CAPACITY TO ADVANCE ANY LOAN TO THE ASSESSEE. NO CONTRA CONFIRMATIONS HAVE BEEN FILED, THOUGH IN 9 CASES CO NTRA CONFIRMATIONS ITA NO.874/AHD/2009 ITO, WARD -3(2), SURAT VS SHRI DILIPBHAI P. WADHWAN I. 9 WERE FILED BUT ONLY ON PLAIN PAPERS BY OBTAINING TH EIR SIGNATURES. THE AO, THEREFORE, NOTED THAT THE ASSESSEE FAILED TO ES TABLISH THE IDENTITY OF THE CREDITORS, THEIR CREDITWORTHINESS AND GENUIN ENESS OF THE TRANSACTIONS. THE ASSESSEE SUBMITTED BEFORE THE LEA RNED CIT(A) THAT NO SUFFICIENT TIME WAS GIVEN TO PROVE THE INGREDIEN TS OF SECTION 68 OF THE IT ACT AT THE ASSESSMENT STAGE AND OFFERED TO P RODUCE ALL THE DEPOSITORS AT THE APPELLATE STAGE. THE LEARNED CIT( A), THEREFORE, DIRECTED THE AO TO PROVIDE FURTHER OPPORTUNITY TO T HE ASSESSEE TO PRODUCE THE REQUISITE DOCUMENTARY EVIDENCES PERTAIN ING TO GENUINENESS OF THE UNSECURED LOANS. THE AO ISSUED S UMMONS TO ALL THE DEPOSITORS AND THE ASSESSEE PRODUCED ONLY 14 DE POSITORS OUT OF 38 DEPOSITORS FOR VERIFICATION. ALL THE 14 DEPOSITO RS WHO WERE PRODUCED BEFORE THE AO FOR EXAMINATION WERE FOUND T O BE MAN OF MEAGER INCOME AND NO SOURCE OF INCOME WAS FILED TO PROVE THAT THEY WERE HAVING SUFFICIENT FUNDS OR SAVINGS IN ORDER TO GIVE LOANS TO THE ASSESSEE. NO CONTRA CONFIRMATIONS HAVE BEEN FILED A T THE REMAND PROCEEDINGS. EVEN OUT OF THE 14 PERSONS/DEPOSITORS ONLY ONE WAS MAINTAINING BANK ACCOUNT AND ON VERIFICATION OF THE BANK PASS BOOK OF THIS DEPOSITOR IT WAS FOUND THAT HE DID NOT HAVE ANY BALANCE WHICH COULD BE WITHDRAWN AND ADVANCED TO THE ASSESSEE. FO R THE REMAINING 24 DEPOSITORS, THE ASSESSEE NEITHER PRODUCED THEM P ERSONALLY BEFORE THE AO NOR FILED ANY CONFIRMATION LETTERS AS IS NOT ED IN THE GROUND OF APPEAL. NONE OF THE DEPOSITORS WAS ASSESSED TO TAX AND NO EVIDENCE TO PROVE THEIR CREDITWORTHINESS WAS FILED AT ANY ST AGE BEFORE THE AUTHORITIES BELOW. AT THE BEST, IT COULD BE TAKEN T HAT THE ASSESSEE PRODUCED 14 DEPOSITORS BEFORE THE AO AT THE REMAND PROCEEDINGS AND WAS ABLE TO PROVE THEIR IDENTITY. THE LEARNED CIT(A) IGNORED THE ITA NO.874/AHD/2009 ITO, WARD -3(2), SURAT VS SHRI DILIPBHAI P. WADHWAN I. 10 FACT THAT THE ASSESSEE PLEADED SPECIFICALLY BEFORE THE CIT(A) THAT THE ASSESSEE OFFERED TO PRODUCE ALL THE DEPOSITORS FOR VERIFICATION AT THE APPELLATE STAGE. BUT THE ASSESSEE DID NOT HONOR HIS COMMITMENT AND FAILED TO PRODUCE 24 DEPOSITORS BEFORE THE AO AT TH E REMAND PROCEEDINGS. THEREFORE, IN THE REMAINING CASES OF 2 4 CREDITORS EVEN THEIR IDENTITY IS NOT PROVED BY THE ASSESSEE. IT WO ULD STAND PROVED ON RECORD THAT THE ASSESSEE FAILED TO PROVE THE CREDIT WORTHINESS OF ALL THE CREDITORS AND THE GENUINENESS OF THE TRANSACTIONS I N THE MATTER. EVEN IN THE CASE OF 14 CREDITORS WHO WERE PRODUCED BEFOR E THE AO IN THE REMAND PROCEEDINGS THEIR CREDITWORTHINESS WERE NOT PROVED BY THE ASSESSEE. IT IS, THEREFORE, CLEAR THAT NO EVIDENCE OF CREDITWORTHINESS OF ANY OF THE CREDITORS WAS FILED AT ANY STAGE BEFO RE THE AUTHORITIES BELOW. THE SOURCE OF CREDIT IS NOT EXPLAINED. THE L EARNED CIT(A) GAVE A SPECIFIC FINDING THAT EVEN THOUGH THE AO HAS RAIS ED DOUBT ABOUT THE CREDITWORTHINESS OF THE CREDITORS BUT THE AO SHOULD HAVE ACCEPTED THE ABILITY AND CAPACITY OF THE DEPOSITORS TO GIVE DEPO SITS TO THE ASSESSEE. IT WOULD, THEREFORE, PROVE THAT THE LEARN ED CIT(A) ALSO ADMITTED THAT THE ASSESSEE HAS FAILED TO PROVE CRED ITWORTHINESS OF ALL THE CREDITORS. THE ISSUE OF ABILITY AND CAPACITY TO MAKE DEPOSIT IS IRRELEVANT TO THE ISSUE OF UNEXPLAINED CREDIT U/S 6 8 OF THE IT ACT BECAUSE THE ASSESSEE SHALL HAVE TO PROVE THE IDENTI TY OF THE CREDITORS, THEIR CREDITWORTHINESS AND THE GENUINENE SS OF THE TRANSACTIONS. THUS, THE ASSESSEE SHALL HAVE TO PROV E THAT THE CREDITORS HAVE ACTUAL SOURCE OF INCOME WHICH THE AS SESSEE HAS FAILED TO PROVE. THE FINDING OF FACT GIVEN BY THE AO THAT THE DEPOSITORS HAVE MEAGER SOURCE OF INCOME AND HAVE NO SUFFICIENT SAVI NGS TO GIVE LOAN TO THE ASSESSEE IN THE CASE OF 14 PERSONS APPEARED BEFORE THE AO ITA NO.874/AHD/2009 ITO, WARD -3(2), SURAT VS SHRI DILIPBHAI P. WADHWAN I. 11 HAS NOT BEEN REBUTTED BY THE LEARNED CIT(A) IN HIS FINDINGS. FOR THE REST OF T HE PERSONS EVEN NO EVIDENCE WAS FILED TO PROVE THEIR IDENTITY AND CREDITWORTHINESS. THE LEARNED CIT(A), THEREFORE , TOOK INTO CONSIDERATION IRRELEVANT FACTS FOR DELETING THE ADD ITION BUT DID NOT CONSIDER THAT BURDEN WAS UPON THE ASSESSEE TO PROVE ALL THE THREE INGREDIENTS OF PROVING GENUINENESS OF THE CREDITS I N THE MATTER. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF BHARATI PVT. LTD. VS CIT, 111 ITR 951 HELD AS UNDER: IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE INCOME-TAX OFFICER FOUND THAT THE ASSESSEE HAD SHOWN RS.20,000 AS LOAN IN ITS BOOKS TAKEN FROM TWO PARTIES. THE ASSESSEE PRODUCED THE ALLEGED CONFIRMATORY LETTERS FROM THOSE PARTIES BEFORE THE INCOME-TAX OFFICER IN SUPPORT OF THE TWO LOANS. THE INCOME-TAX OFFICER SERVED NOTICES UNDER SECTION 131 OF THE INCOME TAX ACT, 1961, ON THE ALLEGED CREDIT ORS AND SINCE THOSE NOTICES CAME BACK UNSERVED, THE INCOME-TAX OFFICER TREATED THE LOAN AS ASSESSEES INCOME FROM UNDISCLOSED SOURCES. THE APPELLATE ASSISTANT COMMISSIONER DISMISSED THE ASSESSEES APPEAL ON THE GROUND THAT THE ASSESSEE COULD NOT EVEN ESTABLISH THE IDENTITY OF THE PARTIES. ON FURT HER APPEAL BY THE ASSESSEE, THE APPELLATE TRIBUNAL HELD THAT MERE FILING OF CONFIRMATORY LETTERS DID NOT DISCHARGE THE ONUS THAT LAY ON THE ASSESSEE AND THERE WAS NO MATERIAL ON THE RECORD TO ESTABLISH TH E IDENTITY OF THE CREDITORS: HELD, THAT THE TRIBUNAL HAD TAKEN ALL THE RELEVANT FACTS INTO CONSIDERATION AND THE CONCLUSION ARRIVED AT BY THE TRIBUNAL THAT THE LOANS REPRESENTED THE ASSESSEES INCOME FROM UNDISCLOSED SOURCES WAS NOT PERVERSE OR UNREASONABLE. ITA NO.874/AHD/2009 ITO, WARD -3(2), SURAT VS SHRI DILIPBHAI P. WADHWAN I. 12 5.1 THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS UNITED COMMERCIAL AND INDUSTRIAL CO. (P) LTD., 187 ITR 596 HELD AS UNDER: THE PRIMARY ONUS LIES ON THE ASSESSEE TO PROVE THE NATURE AND SOURCE OF CREDITS IN ITS ACCOUNT. IT IS NECESSARY FOR THE ASSESSEE TO PROVE PRIMA FACIE THE IDENTITY OF HIS CREDITORS, THE CAPACITY OF SUCH CREDITORS TO ADVANCE THE MONEY AND LASTLY THE GENUINENESS OF THE TRANSACTIONS. ONLY WHEN THESE THINGS ARE PROVED BY THE ASSESSEE PRIMA FACIE AND ONLY AFTER THE ASSESSEE HAS ADDUCED EVIDENCE TO ESTABLISH THE AFORESAID FACTS DOES THE ONUS SHIFT O N TO THE DEPARTMENT. IT IS NOT ENOUGH TO ESTABLISH THE IDENTITY OF THE CREDITORS. MERE PRODUCTION OF THE CONFIRMATION LETTERS BEFORE THE INCOME-TAX OFFICER WOULD NOT BY ITSELF PROVE THAT THE LOANS HAVE BEEN OBTAINED FROM THOSE LOAN CREDITORS OR THAT THEY HAV E CREDIT-WORTHINESS. HELD, THAT, IN THE INSTANT CASE, THE TRIBUNAL MISDIRECTED ITSELF IN HOLDING THAT THE TRANSACTIONS WERE GENUINE SIMPLY BECAUSE SOME OF THE TRANSACTIONS WERE MADE BY CHEQUES. THE ASSESSEE HAD FAILED TO PROVE THE CREDIT-WORTHINESS OF THE ALLEGED LENDERS. A NUMBER OF OTHER ASSESSEES HAD ALSO ADMITTED THAT LOANS OBTAINED FROM THESE BANKER S AGAINST HUNDIS WERE NOT GENUINE AND SUCH HUNDI LOANS REALLY REPRESENTED THEIR OWN CONCEALED INCOME . THE ASSESSEE HAD NOT DISCHARGED ITS BURDEN OF PROVING THAT THE LOANS IN QUESTION WERE GENUINE. 5.2 THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF M/S. PRECISION FINANCE PVT. LTD., 208 ITR 465 RELIED UPON BY THE A O IN THE ASSESSMENT ORDER HELD THAT EVEN THE LOAN THROUGH BANK CANNOT BE ACCEPTED AS GENUINE UNLESS THE IDENTITY AND CRED ITWORTHINESS OF THE CREDITORS ARE PROVED. MERE PAYMENT OF ACCOUN T PAYEE ITA NO.874/AHD/2009 ITO, WARD -3(2), SURAT VS SHRI DILIPBHAI P. WADHWAN I. 13 CHEQUE IS NOT SACROSANCT NOR CAN IT MAKE A NON-GENU INE TRANSACTION GENUINE. 5.3 THE HONBLE SUPREME COURT IN THE CASE OF DURGA PRASAD MORE, 82 ITR 540 AND SUMATI DAYAL, 214 ITR 801 HELD THAT THE COURTS AND TRIBUNAL HAVE TO JUDGE THE EVIDENCES BEFORE THE M BY APPLYING THE TEST OF HUMAN PROBABILITIES AFTER CONS IDERING THE SURROUNDING CIRCUMSTANCES. WHEN THIS TEST IS APPLIED TO THE FACTS OF THE CASE, IT IS CLEAR THAT THE ORDER OF THE LEAR NED CIT(A) IN DELETING THE ADDITION IS NOT JUSTIFIED, RATHER THE ORDER OF THE LEARNED CIT(A) IS BASED ON NO EVIDENCE AND IS PERVERSE . IN THE PRESENT CASE THE ASSESSEE HAS NOT ADDUCED ANY SUFFICIENT EV IDENCE BEFORE THE AO AT THE ASSESSMENT STAGE TO PROVE THE IDENTIT Y OF THE DEPOSITORS, THEIR CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS IN THE MATTER. EVEN AT THE APPELLATE S TAGE, THOUGH THE ASSESSEE IS ABLE TO PROVE THE IDENTITY OF ONLY 14 P ERSONS WHO HAVE APPEARED BEFORE THE AO IN THE REMAND PROCEEDINGS, B UT FOR THE REMAINING PERSONS/DEPOSITORS, THE ASSESSEE FAILED T O PROVE THEIR IDENTITY. THE TRANSACTIONS ARE IN CASH. THEREFORE, THE BURDEN IS VERY HEAVY UPON THE ASSESSEE TO PROVE ALL THE INGREDIENT S IN THE MATTER. THE ASSESSEE ALSO FAILED TO FILE ANY CONTRA CONFIRM ATIONS AS WELL AS ANY EVIDENCE OF CREDITWORTHINESS OF ALL THE CREDITO RS AND ALSO FAILED TO PROVE GENUINENESS OF THE TRANSACTIONS IN THE MATTER . 6. CONSIDERING THE ABOVE DISCUSSIONS WE ARE OF THE VIEW THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN DELETING THE EN TIRE ADDITION. SUFFICIENT OPPORTUNITY WAS GIVEN TO THE ASSESSEE AT THE APPELLATE ITA NO.874/AHD/2009 ITO, WARD -3(2), SURAT VS SHRI DILIPBHAI P. WADHWAN I. 14 STAGE WHICH WAS ALSO NOT AVAILED TO BY THE ASSESSEE . DESPITE GIVING OPPORTUNITY OF BEING HEARD AT THE SECOND APPELLATE STAGE, THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE IN SUPPORT OF ITS CASE. IN VIEW OF THE ABOVE DISCUSSIONS, WE DO NOT FIND ANY JUSTIF ICATION IN THE ORDER OF THE LEARNED CIT(A) DELETING THE ADDITION. THE AS SESSEE FAILED TO PROVE GENUINENESS OF THE CREDITS IN THE MATTER. THE AO, WAS, THEREFORE, JUSTIFIED IN MAKING THE ADDITION. WE ACC ORDINGLY, SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND RESTORE THE ORD ER OF THE AO. 7. IN THE RESULT, THE DEPARTMENTAL APPEAL IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 22-07-2011 SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 22-07-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD