Shri Jivraj V. Desai, Mehsana V. The Deputy Commissioner of Income Tax, Central Circle-2(1), Ahmedabad

ITSSA 102/AHD/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4091 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 17-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 22-10-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 27-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P SHARMA
• Assessee Lawyers: S N DIVETIA
• Keywords: Unexplained cash credit; Principle of natural justice; Source of fund; Block assessment
• Section: 153A; 250; 208; 13; 68; 69; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI WASEEM AHMED, ACCOUNTANT MEMBER) IT(SS)A. NO: 102/AHD/2017 (ASSESSMENT YEAR: 2011-12) SHRI JIVRAJ V. DESAI PROP. M/S MAHADEV ENTERPRISE 5 ASHOKNAGAR SOCIETY RADHANPUR ROAD, MEHSANA V/S THE DCIT, CENTRAL CIRCLE- 2(1), AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAWPD8565F APPELLANT BY : SHRI S.N. DIVETIA, AR RESPONDENT BY : SHRI O.P. SHARMA, CIT/DR ( )/ ORDER DATE OF HEARING : 24 -10-201 9 DATE OF PRONOUNCEMENT : 17 -01-2020 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A)-7, AHMEDABAD DATED 30.01.2017 PERTAINING TO A.Y. 2011-12 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: IT(SS)A NO. 102/AHD/2017 . A.Y. 2011-12 2 1.1 THE ORDER PASSED U/S. 250 ON 30.01.2017 FOR A.Y. 2011-12 BY CIT(A)-7, ABAD UPHOLDING THE VALIDITY OF PROCEEDINGS U/S. 153A OF THE ACT AS WELL AS THE DISALLOWANCE OF INTEREST EXP. RS. 24,30,617/- UNSEC URED LOAN OF RS.7,45,00,000/- IS WHOLLY ILLEGAL, UNLAWFUL AND AGAINST THE PRINCIP LES OF NATURAL JUSTICE. 1.2 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW A ND OR ON FACTS IN NOT CONSIDERING FULLY AND PROPERLY THE SUBMISSIONS MADE AND EVIDENC E PRODUCED BY THE APPELLANT WITH REGARD TO THE IMPUGNED ADDITIONS. 2.1 THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW A ND ON FACTS IN CONFIRMING THE VALIDITY OF PROCEEDINGS AS WELL AS NOTICE U/S.153A DATED 19.11.2013 FOR A.Y.2011- 12, THOUGH THE CONDITIONS PRECEDENTS WERE NOT FULFI LLED. THEREFORE, THE NOTICE AS WELL AS PROCEEDINGS U/S.153A(1) WERE WHOLLY ILLEGAL AND UNLAWFUL IN VIEW OF NO INCRIMINATING MATERIAL FOUND DURING THE COURSE OF S EARCH FOR THIS YEAR. 2.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE AS WELL AS IN LAW, THE LD.CIT(A) OUGHT NOT TO HAVE UPHELD THE VALIDITY OF PROCEEDINGS AS WELL AS NOTICE U/S.153A DATED 19.11.2013 FOR A.Y.2011-12. 3.1 THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW A ND ON FACTS IN CONFIRMING THE DISALLOWANCE OF INTEREST EXP. TO THE EXTENT OFRS.24 ,30,617/-WITHOUT CONSIDERING THE WRITTEN SUBMISSION AND DETAILS PRODUCED. THE LD . CIT(A) HAS PASSED A CRYPTIC AND NON-SPEAKING ORDER CONFIRMING THE DISALLOWANCE. 3.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE AS WELL AS IN LAW, THE LD.CIT(A) OUGHT NOT TO HAVE UPHELD THE DISALLOWANCE OF INTEREST EXP. TO THE EXTENT OFRS.24,30,617/-WITHOUT CONSIDERING THE WRITTEN SUB MISSION AND DETAILS PRODUCED. 4.1 THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW A ND ON FACTS IN CONFIRMING THE ADDITION OF RS.7.45 CR. TOWARDS UNSECURED LOANS FRO M MASTER DEVELOPERS. THE LD. CIT(A) HAS CONFIRMED THE ADDITION BY A NON-SPEAKING ORDER AND FLIMSY GROUND (EVEN WITHOUT GIVING OPPORTUNITY FOR THE SAME). 4.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE AS WELL AS IN LAW, THE) LD.CIT(A) OUGHT NOT TO HAVE UPHELD THE ADDITION OF RS.7.45 CR. TOWARDS UNSECURED LOANS FROM MASTER DEVELOPERS. IT IS, THEREFORE, PRAYED THAT THE DISALLOWANCE OF R S.24,30,617/- AND VALIDITY U/S.153A(1) UPHELD BY THE CIT(A) MAY KINDLY BE DELE TED. 2. THE 1 ST ISSUE RAISED BY THE ASSESSEE IN GROUND NO. 1 IS GE NERAL IN NATURE AND NO SEPARATE ADJUDICATION IS REQUIRED FOR THE SAME. THE REFORE WE DISMISS THE SAME AS INFRUCTUOUS. IT(SS)A NO. 102/AHD/2017 . A.Y. 2011-12 3 3. THE 2 ND ISSUE RAISED BY THE ASSESSEE IN GROUND NUMBER 2 WA S NOT PRESSED BY THE LEARNED COUNSEL FOR THE ASSESSEE. THEREFORE, WE DIS MISS THE SAME AS NOT PRESSED. 4. THE 3 RD ISSUE RAISED BY THE ASSESSEE IN GROUND NO. 3 IS TH AT THE LEARNED CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 24,30,6 17/- ON ACCOUNT OF INTEREST EXPENSES. 5. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IN THE PRE SENT CASE IS AN INDIVIDUAL AND ENGAGED IN THE MULTIPLE BUSINESSES SUCH AS REAL EST ATE, FINANCING AND SHARE TRADING ETC. THE ASSESSEE IS ALSO A PARTNER IN A FI RM NAMELY M/S MASTER DEVELOPERS (FOR SHORT MD). 6. THE ASSESSEE DURING THE YEARS HAS CLAIMED INTEREST EXPENSES OF RS. 6,83,971/- AND 17,46,646/- AGGREGATING TO RS. 24,30,617/- ON S ECURED LOAN FROM THE BANK OF RS. 46,01,050/- AND ON UNSECURED LOAN FROM THE P ARTIES AT RS. RS. 7,78,41,277/- RESPECTIVELY. 7. HOWEVER, THE AO OBSERVED THAT THE ASSESSEE IN THE Y EAR UNDER CONSIDERATION HAS PAID THE TAX AMOUNTING TO RS. 5,06,83,141/- ONL Y. SIMILARLY, THERE WAS ALSO NO INVESTMENT SHOWN BY THE ASSESSEE IN REAL ESTATE BUSINESS AS EVIDENT FROM THE VERIFICATION OF TRADING ACCOUNT EXCEPT STOCK IN TRA DE OF LAND AT RS 32,03,811/- ONLY. ACCORDINGLY, THE AO WAS OF THE VIEW THAT TH E AMOUNT BORROWED BY THE ASSESSEE HAS NOT BEEN UTILIZED FOR THE PURPOSE OF T HE BUSINESS. THUS THE AO DISALLOWED THE AMOUNT OF INTEREST EXPENSES CLAIMED BY THE ASSESSEE FOR RS. 24,30,617/- AND ADDED TO THE TOTAL INCOME OF THE AS SESSEE. 8. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARN ED CIT (A). IT(SS)A NO. 102/AHD/2017 . A.Y. 2011-12 4 9. THE ASSESSEE BEFORE THE LEARNED CIT (A) SUBMITTED T HAT IT HAS INTEREST-FREE LOAN OF RS. 7,80,00,000/-. THE DETAIL OF SUCH INTEREST-F REE LOAN STANDS AS UNDER: N AME OF THE FIRM INTEREST FREE AMOUNT MASTER DEVELOPERS 7, 45,00,000/ - RJD BUILDCON LTD. 35,00,000/ - TOTAL 7,80,00,000/ - 10. IN VIEW OF THE ABOVE THE ASSESSEE CLAIMED THAT THE AMOUNT OF TAX WAS PAID OUT OF SUCH INTEREST-FREE LOAN. ACCORDINGLY THE ASSESSE E CLAIMED THAT THERE CANNOT BE ANY DISALLOWANCE ON ACCOUNT OF INTEREST EXPENSES . 11. HOWEVER, THE LEARNED CIT (A) DISAGREED WITH THE CON TENTION OF THE ASSESSEE AND THEREFORE CONFIRMED THE ORDER OF THE AO BY OBSE RVING AS UNDER: 7.1 DURING ASSESSMENT PROCEEDINGS,-THE A.O MADE THE IMPUGNED DISALLOWANCE HOLDING THAT THE APPELLANT HAD USED UNSECURED LOANS TAKEN BY HIM, ON WHICH INTEREST HAD BEEN PAID AND CLAIMED AS EXPENDITURE, TO PAY HIS INCOME TAX DUES IN RESPECT OF HIS BLOCK ASSESSMENT DEMAND, AND THAT TH IS WAS ALSO RECORDED AS SUCH IN HIS BOOKS OF ACCOUNTS. IT IS SEEN FROM A PERUSAL OF THE ASSESSMENT ORDER AND SUBMISSIONS MADE BY THE APPELLANT THAT HAS NOT CORR OBORATED WITH DOCUMENTARY EVIDENCES HIS CLAIM THAT INTEREST BEARING FUNDS WER E NOT USED TO PAY HIS INCOME TAX DUES, AND THAT THE SAME WERE PAID OUT OF HIS IN TEREST FREE FUNDS. THE TOTAL INCOME .TAX DUES PAID BY THE APPELLANT AMOUNTED TO RS. 5.06,83,141/-, OF WHICH RS. 24,30,617/- WAS DISALLOWED @ 12% INTEREST. LOOK ING TO THE FACTS OF THE CASE, I AM IN AGREEMENT WITH THE DECISION OF THE A.O. THE A DDITION OF RS. 24,30,617/- ON ACCOUNT OF BEING USED FOR NON-BUSINESS PURPOSES IS CONFIRMED. GROUND OF APPEAL NO.3 IS DISMISSED. 12. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A) THE ASSESSEE IS IN APPEAL BEFORE US. IT(SS)A NO. 102/AHD/2017 . A.Y. 2011-12 5 13. THE LEARNED AR BEFORE US SUBMITTED THAT THE AMOUNT OF TAX WAS PAID OUT OF THE INTEREST-FREE FUND AVAILABLE WITH THE ASSESSEE. ACC ORDINGLY, THERE WAS NO DIVERSION OF INTEREST-BEARING FUND FOR NON-COMMERCI AL ACTIVITY. 14. ON THE CONTRARY, THE LEARNED DR BEFORE US VEHEMENTL Y SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 15. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. ADMITTEDLY, THE ONUS LIES ON THE ASSESSEE TO JUSTIFY BASED ON DOCUMENTARY EVIDENCE THAT THE INTE REST EXPENSES WAS INCURRED ON THE MONEY BORROWED FROM THE BANK AND OTHER PARTI ES FOR THE PURPOSE OF THE BUSINESS. BUT THE ASSESSEE, IN THE PRESENT CASE HAS FAILED TO DO SO. 16. IT IS ALSO PERTINENT TO NOTE THAT THE ASSESSEE CLAI MED TO HAVE RECEIVED INTEREST- FREE LOAN OF RS. 7,45,00,000/- FROM M/S MASTER DEVE LOPERS IN THE SUBMISSION MADE BEFORE THE LEARNED CIT (A). HOWEVER, THE ASSES SEE TO ESTABLISH THE GENUINENESS OF LOAN OF RS. 7,45,00,000/- FROM M/S M ASTER DEVELOPERS HAS CONTENDED BEFORE THE LEARNED CIT (A) THAT IT HAS PA ID INTEREST ON THE MONEY BORROWED FROM MD. THE RELEVANT SUBMISSION OF THE AS SESSEE BEFORE THE LEARNED CIT (A) STANDS AS UNDER: THE LD. A.O. HAS DISALLOWED THE OUTSTANDING AMOUN T ALONG WITH INTEREST PAID TO MASTER DEVELOPERS U/S. 41(1) OF THE I.T. ACT. 1961. 17. THUS, FROM THE ABOVE IT IS TRANSPIRED THAT THE ASSE SSEE HAS MADE CONTRADICTORY SUBMISSIONS BEFORE THE LEARNED CIT (A) AND HAS NOT FURNISHED THE REQUIRED DETAILS OF THE INTEREST EXPENSES TO JUSTIFY THAT TH E INTEREST COST WAS INCURRED IN THE COURSE OF THE BUSINESS. THUS IN THE ABSENCE OF SUFFICIENT DOCUMENTARY IT(SS)A NO. 102/AHD/2017 . A.Y. 2011-12 6 EVIDENCE ABOUT THE INTEREST EXPENSES ON THE BORROWE D FUND WHETHER THE SAME WAS UTILIZED FOR THE PURPOSE OF BUSINESS, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE AUTHORITIES BELOW. HENCE THE GR OUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 18. THE 4 TH ISSUE RAISED BY THE ASSESSEE IN GROUND NO. 4 IS TH AT THE LEARNED CIT (A) ERRED IN TREATING THE AMOUNT OF LOAN RECEIVED FROM M/S MD FOR RS. 7,45,00,000/- AS UNEXPLAINED CASH CREDIT UNDER SECT ION 68 OF THE ACT. 19. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HA S RECEIVED A SUM OF RS. 7,45,00,000/- AS LOAN FROM THE FIRM NAMELY MD IN WH ICH HE (THE ASSESSEE) WAS ONE OF THE PARTNER. THE ASSESSEE IN SUPPORT OF SUCH LOAN TRANSACTION HAS FILED THE COPY OF THE LEDGER ACCOUNT IN THE BOOKS OF M/S MASTERS DEVELOPER. 20. HOWEVER, THE AO DURING THE ASSESSMENT PROCEEDINGS O BSERVED CERTAIN FACTS AS DETAILED UNDER: I. M/S MD DID NOT FILE ITS RETURN OF INCOME AFTER T HE ASSESSMENT YEAR 2002-03. SIMILARLY, THERE WAS NO BALANCE SHEET , PROFIT AND LOSS ACCOUNT, COMPUTATION OF INCOME OF M/S MD WAS FILED DURING THE ASSESSMENT PROCEEDINGS. II. THE ASSESSEE BEING PARTNER IN M/S MD WAS IN A P OSITION TO FABRICATE THE LEDGER ACCOUNT FURNISHED BY HIM SHOWI NG THE AMOUNT OF LOAN RECEIVED FROM IT. THEREFORE, THE COPY OF SUCH LEDGER ACCOUNT CANNOT BE TRUSTED WITHOUT THE AUTHENTICATED DOCUMENTARY EV IDENCE I.E. BALANCE SHEET, PROFIT AND LOSS ACCOUNT OF M/S MASTER DEVELO PERS. IT(SS)A NO. 102/AHD/2017 . A.Y. 2011-12 7 III. THE ASSESSEE WAS DIVERTING ITS TAXABLE INCOME BY PAYING THE AMOUNT OF INTEREST ON SUCH LOAN TAKEN FROM M/S MD. 21. IN VIEW OF THE ABOVE, THE AO OBSERVED THAT THE ASSE SSEE FAILED TO DISCHARGE HIS ONUS BY PROVING THE CAPACITY OF THE PARTY WHO ADVAN CED LOAN AND GENUINENESS OF THE TRANSACTION AS REQUIRED UNDER SECTION 68 OF THE ACT. ACCORDINGLY THE AO TREATED THE IMPUGNED AMOUNT OF LOAN AS UNEXPLAINED CASH CREDIT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 22. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARN ED CIT (A). 23. THE ASSESSEE BEFORE THE LEARNED CIT (A) SUBMITTED T HAT M/S MD WAS ENGAGED IN THE DEVELOPMENT OF REAL ESTATE PROJECTS FOR RESI DENTIAL AND COMMERCIAL PURPOSES. M/S MD HAS RECEIVED AMOUNT FROM VARIOUS P ARTIES AGAINST THE PROJECT LAUNCHED BY IT. HOWEVER, SUCH PROJECTS COUL D NOT TAKE PLACE DUE TO SOME TECHNICAL HITCH. ACCORDINGLY, M/S MD ADVANCED LOAN TO THE RELATED PARTIES ON INTEREST BASIS. AS SUCH THE AMOUNT OF IN TEREST WAS UTILIZED BY M/S MD FOR REPAYMENT OF THE AMOUNT OF THE ADVANCE BOOKI NG RECEIVED FROM THE PARTIES. 24. THE ASSESSEE IN SUPPORT OF ITS TRANSACTION OF THE L OAN RECEIVED FROM M/S MD HAS ALSO PRODUCED THE COPY OF THE BANK STATEMENT AN D CONFIRMATION FROM THE FIRM I.E. M/S MD. 25. THE ASSESSEE FURTHER CLARIFIED THAT M/S MD HAS RECE IVED BACK THE AMOUNT OF LOAN OF RS. 14,24,95,231/- FROM SHRI RAJNIBHAI DESA I WHICH WAS UTILIZED BY GIVING A LOAN OF RS. 7,45,00,000/- TO HIM (THE ASSE SSEE). THE ASSESSEE IN SUPPORT IT(SS)A NO. 102/AHD/2017 . A.Y. 2011-12 8 OF HIS CONTENTION HAS PRODUCED THE COPY OF LEDGER A CCOUNT OF M/S MD IN THE BOOKS OF SHRI RAJNI BHAI DESAI ALONG WITH THE BANK STATEMENT. 26. THE ASSESSEE ALSO SUBMITTED THAT M/S MD HAS FILED T HE INCOME TAX RETURN FOR THE ASSESSMENT YEARS 2007-08 TO 2010-11 WHEREIN HUG E INCOME WAS OFFERED IN THE INCOME TAX RETURN. THE DETAILS OF THE INCOME D ISCLOSED BY M/S MD AND THE PAYMENT OF TAX STAND AS UNDER: ASSTT. YEAR DATE OF . FILLING INCOME OFFERED TAX PAYABLE . TAX PAID 2007 - 08 14 - 11 - 2007 - - NIL - - NIL - - NIL - 2008 - 09 04 - 03 - 2016 141,30,361 / - 4802908/ 4802908/ - 2009 - 10 04 - 03 - 2016 134,7 '4250 / - 4579900/ 4579900/ - 2010 - 11 06 - 12 - 2016 12302720/ - 3801540/ 3801540/ - 27. HOWEVER, THE LEARNED CIT (A) DISREGARDED THE CONTEN TION OF THE ASSESSEE AND CONFIRMED THE ORDER OF THE AO BY OBSERVING AS UNDER : 6.2. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORD ER AND THE SUBMISSIONS MADE BY THE APPELLANT. IT IS SEEN FROM A PERUSAL OF THE SAME THAT WHILE A COPY OF BANK STATEMENT OF MASTER~DEVELOPERS HAS BEEN SUBMITTED, THE COPIES OF LEDGER ACCOUNTS AND ACCOUNTS OF THE APPELLANT FROM THE BOO KS OF MASTER DEVELOPERS AND RAJNIBHAI DESAI, ARE .SIMPLE PRINTOUTS WITHOUT ANY SIGNATURE. THESE CANNOT BE ACCEPTED AS HAVING ANY EVIDENTIARY VALUE. IT IS ALS O SEEN THAT THE APPELLANT HAS GIVEN A VERY CONVOLUTED EXPLANATION FOR THE-SAID UN SECURED LOAN (REPRODUCED IN PARA 4.2 ABOVE), WHICH IS NOT BACKED BY ANY DOCUMEN TARY EVIDENCES. IN VIEW OF THESE FACTS AND THE FACT THAT NO BALANCE SHEET OR P & L A/C OR BANK STATEMENTS OF MASTER DEVELOPERS, RAJNIBHAI DESAI OR THE APPELLANT HAVE BEEN PRODUCED TO CORROBORATE AND EXPLAIN THE TRANSACTIONS BETWEEN TH E* THREE PARTIES HAVE BEEN PRODUCED, THE ADDITION OF RS.7,45,00,000/- MADE BY THE A.O IS CONFIRMED. GROUND OF APPEAL NO 2 IS DISMISSED. IT(SS)A NO. 102/AHD/2017 . A.Y. 2011-12 9 28. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT-A, THE ASSESSEE IS IN APPEAL BEFORE US. 29. THE LEARNED AR BEFORE US SUBMITTED THAT THE AMOUNT OF LOAN WAS TAKEN FROM THE PARTNERSHIP FIRM NAMELY MD AND THE ASSESSEE HAS FURNISHED NECESSARY DOCUMENTARY EVIDENCE BEFORE THE LEARNERS CIT (A). 30. ON THE CONTRARY, THE LEARNED DR BEFORE US VEHEMENTL Y SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. THE LEARNED DR WITHOUT PREJU DICE TO THE ABOVE ALSO SUBMITTED THAT THE CONDITIONS SPECIFIED UNDER SECTI ON 68 OF THE ACT I.E. IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION S WAS NOT ESTABLISHED BY THE ASSESSEE. THEREFORE, AT THE MOST THE MATTER CAN BE REFERRED BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION AS PER THE PROVISIONS OF LAW. 31. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE PRECEDING D ISCUSSION, WE NOTE THAT THE ASSESSEE HAS RECEIVED A SUM OF RS. 7,45,00,000/- FO RM M/S MASTER DEVELOPERS WHICH WAS TREATED BY THE AO AND THE LEARNED CIT (A) AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. 32. THE PROVISION OF SECTION 68 OF THE ACT FASTENS THE LIABILITY ON THE ASSESSEE TO PROVIDE THE IDENTITY OF THE LENDERS, ESTABLISH THE GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINESS OF THE LENDERS. THESE LIABILIT IES ON THE ASSESSEE WERE IMPOSED TO JUSTIFY THE CASH CREDIT ENTRIES UNDER SE CTION 68 OF THE ACT BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. PRECISION FINANCE (P) LTD REPORTED IN 208 ITR 465 WHEREIN IT WAS HELD AS UNDE R: IT WAS FOR THE ASSESSEE TO PROVE THE IDENTITY OF T HE CREDITORS, THEIR CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSAC TIONS. ON THE FACTS OF THIS CASE, THE TRIBUNAL DID NOT TAKE INTO ACCOUNT ALL TH ESE INGREDIENTS WHICH HAD TO BE IT(SS)A NO. 102/AHD/2017 . A.Y. 2011-12 10 SATISFIED BY THE ASSESSEE. MERE FURNISHING OF THE P ARTICULARS WAS NOT ENOUGH. THE ENQUIRY OF THE ITO REVEALED THAT EITHER THE ASSESSE E WAS NOT TRACEABLE OR THERE WAS NO SUCH FILE AND, ACCORDINGLY, THE FIRST INGRED IENT AS TO THE IDENTITY OF THE CREDITORS HAD NOT BEEN ESTABLISHED. IF THE IDENTITY OF THE CREDITORS HAD NOT BEEN ESTABLISHED, CONSEQUENTLY, THE QUESTION OF ESTABLIS HMENT OF THE GENUINENESS OF THE TRANSACTIONS OR THE CREDITWORTHINESS OF THE CREDITO RS DID NOT AND COULD NOT ARISE. THE TRIBUNAL DID NOT APPLY ITS MIND TO THE FACTS OF THIS PARTICULAR CASE AND PROCEEDED ON THE FOOTING THAT SINCE THE TRANSACTION S WERE THROUGH THE BANK ACCOUNT, IT WAS TO BE PRESUMED THAT THE TRANSACTION S WERE GENUINE. IT WAS NOT FOR THE ITO TO FIND OUT BY MAKING INVESTIGATION FROM TH E BANK ACCOUNTS UNLESS THE ASSESSEE PROVED THE IDENTITY OF THE CREDITORS AND T HEIR CREDITWORTHINESS. MERE PAYMENT BY ACCOUNT PAYEE CHEQUE WAS NOT SACROSANCT NOR COULD IT MAKE A NON- GENUINE TRANSACTION GENUINE. 33. ADMITTEDLY THE ASSESSEE HAS DISCHARGED ITS ONUS BY FURNISHING THE NECESSARY DETAILS SUCH AS A COPY OF LEDGERS, CONFIRMATION, BA NK DETAILS, ETC. IN SUPPORT OF IDENTITY OF THE PARTIES. 34. THERE IS ALSO NO DOUBT THAT THE TRANSACTION FOR THE LOAN RECEIVED FROM M/S MASTER DEVELOPERS WAS CARRIED OUT THROUGH THE BANKI NG CHANNEL AS EVIDENT FROM THE SUBMISSION OF THE ASSESSEE BEFORE THE LD. CIT-A WHICH IS REPRODUCED AS UNDER: WHERE AS IN PRESENT CASE THE APPELLANT PRODUCES B ANK STATEMENT AS WELL AS CONFIRMATION OF FIRM HENCE FACTS OF THE CASE RELIED UPON IS NOT IDENTICAL HENCE NOT APPLICABLE. THE OBSERVATION/CONCLUSION OF THE LEARN ED AO IS NOT CORRECT. 35. THIS FACT WAS ALSO ADMITTED BY THE LEARNED CIT (A) IN HIS ORDER AS EVIDENT HERE IN BELOW: 6.2. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORD ER AND THE SUBMISSIONS MADE BY THE APPELLANT. IT IS SEEN FROM A PERUSAL OF THE SAME THAT WHILE A COPY OF BANK STATEMENT OF MASTER DEVELOPERS HAS BEEN SUBMITTED, THE COPIES OF LEDGER ACCOUNTS AND ACCOUNTS OF THE APPELLANT FROM THE BOO KS OF MASTER DEVELOPERS AND RAJNIBHAI DESAI, ARE SIMPLE PRINTOUTS WITHOUT ANY S IGNATURE. THESE CANNOT BE ACCEPTED AS HAVING ANY EVIDENTIARY VALUE. IT IS ALS O SEEN THAT THE APPELLANT HAS IT(SS)A NO. 102/AHD/2017 . A.Y. 2011-12 11 GIVEN A VERY CONVOLUTED EXPLANATION FOR THE-SAID UN SECURED LOAN (REPRODUCED IN PARA 4.2 ABOVE), WHICH IS NOT BACKED BY ANY DOCUMEN TARY EVIDENCES. IN VIEW OF THESE FACTS AND THE FACT THAT NO BALANCE SHEET OR P & L A/C OR BANK STATEMENTS OF MASTER DEVELOPERS, RAJNIBHAI DESAI OR THE APPELLANT HAVE BEEN PRODUCED TO CORROBORATE AND EXPLAIN THE TRANSACTIONS BETWEEN TH E* THREE PARTIES HAVE BEEN PRODUCED, THE ADDITION OF RS.7,45,00,000/- MADE BY THE A.O IS CONFIRMED. GROUND OF APPEAL NO 2 IS DISMISSED. 36. IN VIEW OF THE ABOVE, WE FIND THE ASSESSEE HAS DISC HARGED HIS ONUS REGARDING THE IDENTITY AND GENUINENESS OF THE TRANSACTIONS. T HUS, THE LEDGER COPIES FILED BY THE ASSESSEE WITHOUT SIGNATURE CANNOT BE THE BAS IS OF TREATING THE IMPUGNED TRANSACTION OF LOAN AS UNEXPLAINED CASH CREDIT UNDE R SECTION 68 OF THE ACT AFTER IGNORING THE BANK STATEMENT AND CONFIRMATION FILED BY THE ASSESSEE. THUS THERE IS NO DOUBT THAT THE TRANSACTION OF THE LOAN WAS CA RRIED OUT THROUGH THE BANKING CHANNEL. THEREFORE THERE CANNOT BE ANY DOUB T ABOUT THE GENUINENESS OF THE TRANSACTIONS. IN THIS REGARD, WE FIND SUPPOR T AND GUIDANCE FROM THE JUDGMENT OF HONBLE HIGH COURT OF BOMBAY IN THE CAS E OF CIT VS. GREEN INFRA LTD REPORTED IN 78 TAXMANN.COM 340 WHEREIN IT WAS H ELD AS UNDER: SO FAR AS THE GENUINENESS OF THE TRANSACTION OF SH ARE SUBSCRIBER IS CONCERNED, IT CONCLUDES AS THE ENTIRE TRANSACTION IS RECORDED IN THE BOOKS OF ACCOUNT AND REFLECTED IN THE FINANCIAL STATEMENTS OF THE ASSESS EE SINCE THE SUBSCRIPTION WAS DONE THROUGH THE BANKING CHANNELS AS EVIDENCED BY B ANK STATEMENTS WHICH WERE EXAMINED BY THE TRIBUNAL. WITH REGARD TO THE CAPACI TY OF THE SUBSCRIBERS THE IMPUGNED ORDER RECORDS A FINDING THAT 98 PER CENT O F THE SHARES IS HELD BY IDFC PRIVATE EQUITY FUND-II WHICH IS A FUND MANAGER OF I DFC LTD. MOREOVER, THE CONTRIBUTIONS IN IDFC PRIVATE EQUITY FUND-II ARE AL L BY PUBLIC SECTOR UNDERTAKINGS. THE TRIBUNAL HAS EXAMINED THE CASE OF THE REVENUE O N THE PARAMETERS OF SECTION 68 AND FOUND ON FACTS THAT IT IS NOT SO HIT. THEREF ORE, SECTION 68 CANNOT BE INVOKED. THE REVENUE HAS NOT BEEN ABLE TO SHOW IN ANY MANNER THE FACTUAL FINDING RECORDED BY TRIBUNAL IS PERVERSE IN ANY MANNER. 37. NOW COMING TO THE 3RD CONDITION, I.E. CREDITWORTHIN ESS OF THE PARTIES, REGARDING THIS IT IS ALSO PERTINENT TO NOTE THAT M/S MASTER D EVELOPERS DID NOT FILE THE INCOME TAX RETURNS FOR THE ASSESSMENT YEARS 2008-09 TO AY 2010-11 UNDER IT(SS)A NO. 102/AHD/2017 . A.Y. 2011-12 12 SECTION 139 (1) OF THE ACT. BUT M/S MASTER DEVELOPE RS HAS FILED THE RETURNS OF INCOME IN RESPONSE TO THE NOTICE ISSUED UNDER SECTI ON 148 OF THE ACT, DECLARING THE INCOME WHICH HAS BEEN ELABORATED IN THE PRECEDI NG PARAGRAPH. INDEED THE RETURNS WERE FILED BY THE M/S MASTER DEVELOPERS SUB SEQUENT TO THE ASSESSMENT ORDER DATED 30-03-2015 DECLARING THE INCOME WHICH H AS BEEN ELABORATED IN THE PRECEDING PARAGRAPH. AS SUCH THE INCOME DECLARED BY THE M/S MASTER DEVELOPERS IN ITS INCOME TAX RETURNS WERE DULY ACCE PTED BY THE REVENUE. THOUGH, THESE RETURNS WERE FILED BY MD SUBSEQUENT T O THE ASSESSMENT IN THE HANDS OF THE ASSESSEE, BUT THESE RETURNS IN OUR CON SIDERED VIEW ARE CRUCIAL FOR DETERMINING THE NET WORTH OF MD. THESE RETURNS WERE FILED BEFORE THE LEARNED CIT (A) AND NO DOUBT WAS RAISED ON THESE RETURNS. 38. SIMILARLY, WE ALSO NOTE THAT THE ASSESSEE IN RESPEC T OF SOURCE OF FUND IN THE HANDS OF THE LENDER I.E. MD HAS FURNISHED THE SUFFI CIENT DOCUMENTARY PIECES OF EVIDENCE SUCH AS BANK STATEMENT, LEDGER COPY OF MD AND SHRI RAJNIBHAI DESAI IN THE BOOKS OF EACH OTHER INCLUDING THE DETAILS OF THE INCOME OF MD WHICH HAS BEEN ELABORATED IN THE PRECEDING PARAGRAPH. THE REFORE IN OUR CONSIDERED VIEW, THE ASSESSEE HAS DISCHARGED ITS ONUS IMPOSED UNDER SECTION 68 OF THE ACT. 39. THE ASSESSEE IN THE PRESENT CASE HAS DULY EXPLAINED THE SOURCE OF MONEY RECEIVED IN ITS HANDS. THE ASSESSEE IS NOT ANSWERAB LE TO JUSTIFY THE SOURCE OF THE SOURCE OF THE MONEY RECEIVED BY IT. IN THIS CONNECT ION, WE PLACE OUR RELIANCE ON THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE C ASE OF DCIT VS. ROHINI BUILDERS REPORTED IN 256 ITR 360 WHEREIN IT WAS HEL D AS UNDER: IT HAS ALSO PROVED THE CAPACITY OF THE CREDITORS B Y SHOWING THAT THE AMOUNTS WERE RECEIVED BY THE ASSESSEE BY ACCOUNT PAYEE CHEQ UES DRAWN FROM BANK ACCOUNTS OF THE CREDITORS AND THE ASSESSEE IS NOT E XPECTED TO PROVE THE GENUINENESS OF THE CASH DEPOSITED IN THE BANK ACCOU NTS OF THOSE CREDITORS IT(SS)A NO. 102/AHD/2017 . A.Y. 2011-12 13 BECAUSE UNDER LAW THE ASSESSEE CAN BE ASKED TO PROV E THE SOURCE OF THE CREDITS IN ITS BOOKS OF ACCOUNT BUT NOT THE SOURCE OF THE S OURCE AS HELD BY THE BOMBAY HIGH COURT IN THE CASE OF ORIENT TRADING CO. LTD. V. CIT [1963] 49 ITR 723. THE GENUINENESS OF THE TRANSACTION IS PROVED BY THE FACT THAT THE PAYMENT TO THE ASSESSEE AS WELL AS REPAYMENT OF THE LOAN BY TH E ASSESSEE TO THE DEPOSITORS IS MADE BY ACCOUNT PAYEE CHEQUES AND THE INTEREST I S ALSO PAID BY THE ASSESSEE TO THE CREDITORS BY ACCOUNT PAYEE CHEQUES. 40. WE ALSO CONSCIOUS TO THE FACT THAT THE ASSESSEE HAS FURNISHED THE BASIC DETAILS ABOUT THE LOAN TAKEN FROM MD SUCH AS, CONFIRMATION, BANK STATEMENT, SOURCE OF MONEY RECEIVED BY MD I.E. RAJNI BHAI DESAI BUT T HE AO HAS NOT MADE ANY VERIFICATION FROM SUCH PARTIES. AS SUCH, THE CASE O F THE ENTIRE GROUP WAS CENTRALIZED AND ALL THE RELEVANT DOCUMENTS OF MD AN D RAJNI BHAI DESAI WERE AVAILABLE BEFOR THE AO. BUT THE AO HAS NOT MADE ANY REFERENCE TO SUCH DOCUMENTS AND ARRIVED AT THE CONCLUSION THAT THE IM PUGNED AMOUNT REPRESENTS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT . 41. SIMILARLY WE ALSO NOTE THAT, THE ASSESSEE BEFORE TH E LEARNED CIT (A) HAS FURNISHED THE COPIES OF THE INCOME TAX RETURN FILED BY MD BUT THE LEARNED CIT (A) WITHOUT CONSIDERING THE SAME INSISTED FOR FINAN CIAL STATEMENTS OF MD. IF THE ASSESSEE HAS NOT FURNISHED THE DETAILS OF MD, T HEN THE CIT (A) COULD HAVE EASILY COLLECTED THE SAME FROM THE OFFICE OF THE IN COME TAX DEPARTMENT. BUT HE HAS NOT DONE SO. 42. IN OUR CONSIDERED VIEW ONCE THE ASSESSEE HAS DISCHA RGED PRIMARY ONUS BY PROVING THE IDENTITY OF LENDER, GENUINENESS OF TRAN SACTION AND CAPACITY TO ADVANCE THE LOAN THEN IT IS THE BURDEN OF THE REVEN UE TO PROVE IT OTHERWISE. IN THIS REGARDS WE DRAW GUIDANCE AND SUPPORT FROM DECI SION OF HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT VS. METACHEN INDUSTRIES REPORTED IN 116 TAXMAN 572 WHERE IT WAS HELD AS UNDER; IT(SS)A NO. 102/AHD/2017 . A.Y. 2011-12 14 ONCE IT IS ESTABLISHED THAT THE AMOUNT HAS BEEN IN VESTED BY A PARTICULAR PERSON, BE HE A PARTNER OR AN INDIVIDUAL, THEN THE RESPONSIBILITY O F THE ASSESSEE-FIRM IS OVER. THE ASSESSEE-FIRM CANNOT ASK THAT PERSON WHO MAKES INVE STMENT, WHETHER THE MONEY INVESTED IS PROPERLY TAXED OR NOT. THE ASSESSEE IS ONLY TO EXPLAIN THAT THE INVESTMENT HAS BEEN MADE BY THE PARTICULAR INDIVIDUAL AND IT IS TH E RESPONSIBILITY OF THAT INDIVIDUAL TO ACCOUNT FOR THE INVESTMENT MADE BY HIM. IF THAT PER SON OWNS THAT ENTRY, THEN THE BURDEN OF THE ASSESSEE-FIRM IS DISCHARGED. IT IS OPEN FOR THE ASSESSING OFFICER TO UNDERTAKE FURTHER INVESTIGATION WITH REGARD TO THAT INDIVIDUA L WHO HAS DEPOSITED THIS AMOUNT. SO FAR AS THE RESPONSIBILITY OF THE ASSESSEE IS CONCERNED, IT IS SATISFACTORILY DISCHARGED. WHETHER THAT PERSON IS AN INCOME-TAX PAYER OR NOT OR FROM W HERE HE HAD BROUGHT THIS MONEY, IS NOT THE RESPONSIBILITY OF THE FIRM. THE MOMENT THE FIRM HAS GIVEN A SATISFACTORY EXPLANATION AND PRODUCED THE PERSON WHO HAS DEPOSIT ED THE AMOUNT, THEN THE BURDEN OF THE FIRM IS DISCHARGED AND IN THAT CASE THAT CREDIT ENTRY CANNOT BE TREATED TO BE THE INCOME OF THE FIRM FOR THE PURPOSES OF INCOME-TAX. IT IS OPEN FOR THE ASSESSING OFFICER TO TAKE APPROPRIATE ACTION UNDER SECTION 69 AGAINST TH E PERSON WHO HAS NOT BEEN ABLE TO EXPLAIN THE INVESTMENT. 43. IN THIS RESPECT WE ALSO FIND SUPPORT AND GUIDANCE F ROM THE JUDGMENT OF HONBLE SUPREME COURT IN CASE OF PCIT VS. NRA IRON STEEL (P.) LTD. REPORTED IN 103 TAXMANN.COM 48. THE RELEVANT EXTRACT OF THE JUDGMENT ARE AS UNDER; 8.2 AS PER SETTLED LAW, THE INITIAL ONUS IS ON THE ASS ESSEE TO ESTABLISH BY COGENT EVIDENCE THE GENUINENESS OF THE TRANSACTION, AND CR EDIT-WORTHINESS OF THE INVESTORS UNDER SECTION 68 OF THE ACT. THE ASSESSEE IS EXPECTED TO ESTABLISH TO THE SATISF ACTION OF THE ASSESSING OFFICER CIT V. PRECISION FINANCE (P.) LTD. [1995] 82 TAXMAN 31/[19 94] 208 ITR 465 (CAL.): PROOF OF IDENTITY OF THE CREDITORS; CAPACITY OF CREDITORS TO ADVANCE MONEY; AND GENUINENESS OF TRANSACTION THIS COURT IN THE LAND MARK CASE OF KALE KHAN MOHAM MED HANIF V. CIT [1963] 50 ITR 1 (SC) AND ROSHAN DI HATTI V. CIT [1977] 107 ITR 938 (SC) LAID DOWN THAT THE ONUS OF PROVING THE SOURCE OF A SUM OF MONEY FOUND TO HAVE BEEN RECEIVED BY AN ASSESSEE, IS ON THE ASSESSEE. ONCE THE ASSESSEE HAS SUBMITTED THE D OCUMENTS RELATING TO IDENTITY, GENUINENESS OF THE TRANSACTION, AND CREDIT-WORTHINE SS, THEN THE AO MUST CONDUCT AN INQUIRY, AND CALL FOR MORE DETAILS BEFORE INVOKING SECTION 68. 44. THUS, IN THE PRESENT FACTS AND CIRCUMSTANCES, CREDI TWORTHINESS OF MD CANNOT BE DOUBTED MERELY ON THE GROUND THAT THE ASSESSEE F AILED TO FURNISH THE FINANCIAL STATEMENT. AS SUCH, MD HAS DECLARED THE I NCOME IN ITS INCOME TAX RETURN AS EVIDENT FROM THE PRECEDING PARAGRAPH WHIC H IS RUNNING INTO CRORES OF IT(SS)A NO. 102/AHD/2017 . A.Y. 2011-12 15 RUPEES AND THERE WAS NO DEFECT OF WHATSOEVER WAS PO INTED OUT BY THE AUTHORITIES BELOW. 45. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY REASON TO UPHOLD THE ORDER OF LD. CIT (A). HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 46. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 17 - 01- 2020 SD/- SD/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 17 /01/2020 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD