K R AND PARTY ,JODHPUR V. .ACIT/DCIT, CIRCLE-1, JODHPUR

ITA 516/JODH/2024

AI Insights

The case involves an appeal by K.R. And Party against the order of the CIT(A), National Faceless Appeal Centre, Delhi, which sustained an addition of Rs. 98,00,000 as unexplained cash credit under section 68 of the Income Tax Act, 1961. The assessee argued that the CIT(A) erred in requiring proof of the 'source of source' for the credits and in sustaining the addition despite explanations and evidence provided. The AO had initially made the addition due to insufficient evidence on the identity, creditworthiness, and genuineness of the lenders. The ITAT found that the assessee had not provided complete addresses of the lenders or substantial evidence to support their creditworthiness and the genuineness of the loans. Consequently, the matter was restored to the AO for a fresh examination.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 31842 (ITAT-JODHPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2016-2017
• Other Referred Cases: Kale Khan Mohammad Hanif vs. CIT, Roshan di Hatti vs. CIT, ITO vs. Diza Holdings Pvt. Ltd., Shankar Industries vs. CIT, A. Govindarajulu Mudaliar vs. CIT, CIT vs. M. Ganapathi Mudaliar
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARVIND KUMAR GEHLOT
• Assessee Lawyers: RAJENDRA JAIN; ACIT CIRCLE; GIVING FOLLOWING
• Keywords: Unexplained cash credit; Source of fund
• Section: 143(3); 142(1); 143(2); 143(1); 68

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR. BEFORE: DR. S. SEETHALAKSHMI, JUDICIAL MEMBER & SHRI RATHOD KAMLESH JAYANTBHAI, ACCOUNTANT MEMBER I.T.A. No. 516/Jodh/2024 Assessment Year: 2016-17 K.R. And Party Plot No. 23, Hanwant M Circuit House Road, Ratanada, Jodhpur. [PAN: AAOFK8334M] (Appellant) Vs. ACIT/DCIT, Circle-1, Jodhpur. (Respondent) Appellant by Sh. Rajendra Jain, Adv. Respondent by Sh. Arvind Kumar Gehlot, JCIT Date of Hearing 24.10.2024 Date of Pronouncement 17.12.2024 ORDER Per:DR. S. Seethalakshmi, JM: This appeal is filed by the assessee aggrieved from the order of the Ld. CIT(A), National Faceless Appeal centre, Delhi dated 15.05.2024 [Here in after referred as “CIT(A)/NFAC”] for the assessment year 2016-17, which in turn arise from the order dated 25.12.2018 passed under section 143(3) of the Income Tax Act,1961 [ for short “Act” ] by the ACIT/DCIT, Circle-1, Jodhpur. 2. In this appeal, the assessee has raised following grounds: - “1. That on the facts and in the circumstances of the case, the order passed by the Ld. CIT(A) is bad in law and bad in facts. ITA No. 516/Jodh/2024 K.R. And Party 2 2. That on the facts and in the circumstances of the case, the order passed by the Ld. CIT(A) erred in requiring to prove source of source in respect of credit in the books of accounts particularly when the source of credits had been explained with supporting evidence. 3. That on the facts and in the circumstances of the case, the Ld. CIT(A) grossly erred in sustaining addition of Rs. 98,00,000/- in respect of unexplained cash credit u/s 68 of the Act. 4. That on the facts and in the circumstances of the case, the Ld. CIT(A) grossly erred in rejecting the valid and legal explanation furnished by appellant in arbitrarily manner. 5. That on the facts and in the circumstances of the case, the Ld. CIT(A) grossly erred in not considering the nature and source of credit in the books of accounts as explained by appellant in right perspective and judicious manner. 6. That on the facts and in the circumstances of the case, the Ld. CIT(A) grossly erred in not taken to consider the binding judicial decision as submitted by appellant. 3. Brief facts of the case are that the return of income for the A.Y.2016-17 was electronically furnished on 07.10.2016 declaring a total income of Rs. 1,00,94,290/-. The case was accordingly processed u/s 143(1) accepting the returned income. The case was selected for limited scrutiny under CASS and notice u/s 143(2) of the Income Tax Act, 1961 was issued on 16.08.2017 by the DCIT, Circle -1, Jodhpur, which was duly served upon the assessee in time through Income Tax Business Application (ITBA) platform also on assessee's email address [e-mail] through e-proceedings. Subsequently Notice U/s 142(1) along with a questionnaire dated 11.08.2018, 10.09.2018 and 17.11.2018 were issued and served on the assessee by ACIT Circle-1, Jodhpur. In response to these notices the assessee replies and submitted ITA No. 516/Jodh/2024 K.R. And Party 3 response through E-filling portal on 22.08.2017, 04.10.2018, 20.11.2018, 28.11.2018, 05.12.2018, 10.12.2018, 12.12.2018, 17.12.2018 18.12.2018 and 24.12.2018. Assessee provided the required details and other explanations which are placed on record. The assessee firm engaged in business of Excess Royalty Collection Contracts and earned income from business, during the year under consideration. In this case, it is noted that the AO made addition of Rs.98.00 lacs u/s 68 of the Act in the hands of the assessee by holding as under:- “In the light of provisions of the section 68 of I.T Act, 1961 and above discussed facts followed by relevant judicial pronouncements, it is evident that in the case of any sum credited in the books of accounts, the \"onus\" to prove the identity & creditworthiness of the creditors and genuineness of the transaction is on the assessee but in the instant case this \"onus\" could not be discharged by the assessee. It is to be reiterated that assessee has completely failed to give any explanation to prove identity, creditworthiness & genuineness of some of the lenders and in case of others, the explanation offered was not found satisfactory as it was verified from Income Tax Returns of the creditors that the amount of funds transferred to the assessee in the form of unsecured loans were grossly disproportionate to their gross total income & known sources of income. Further, assessee has also failed to furnish any positive evidence in support of sources of the funds of the lender. Creditworthiness & genuineness are intertwined concepts, assessee could not defend either of them in the instant case. In adherence to the principle of natural justice, assessee was also given a fair & reasonable opportunity of being heard (as discussed in above paras) but assessee has not utilised that opportunity & miserably failed to discharge its onus under section 68. Hence, I conclude that sum of Rs. 98,00,000/- credited in the books of accounts of the assessee fails to pass the test of genuineness within the meaning of section 68 of the I.T. Act, 1961 and is held to be income of the assessee considering it as unexplained credit under section 68 of the I.T. Act, 1961.” ITA No. 516/Jodh/2024 K.R. And Party 4 4. Aggrieved, from the said order of assessment, assessee has filed an appeal before the ld. CIT(A) who after hearing the contention of the assessee dismissed the appeal of the assessee by giving following findings on the issue:- ‘’6. Decision 6.1 Brief facts of the case are that the appellant had filed its return RTMENT of income for the A.Y. 2016-17 on 7.10.2016 declaring a total income of Rs. 1,00,94,290/-. The case of the appellant was selected for limited scrutiny with reason \"Whether unsecured loans are genuine and from disclosed sources\". During the assessment proceedings the AO was not satisfied with the explanation of the appellant regarding certain unsecured loans taken by the appellant from various parties and thus he completed the assessment proceedings by making an addition of Rs. 98,00,000/- to the returned income of the appellant. 6.2 The appellant vide his reply has rebutted the contention of the AO and given his explanation regarding the source of the loans to be genuine and from explained sources. The explanation of the appellant has been examined and it is observed as under: Name particulars PAN Appellant’s Explanation Remarks Parsa Ram 10,00,000/- BPDPR6287M He is an agriculturist and engaged in contract job work. Confirmation of loan given by him. There is no evidence submitted of the source of the money given as loan given by him. Merely stating that he is an agriculturist and engaged in contract job work is not sufficient. Surendra Banga 10,00,000/- CCEPB1359K He is an agriculturists and engaged in contract job works & dairy business. Confirmation of Loan given by him. There is no evidence submitted of the source of the money given as loan given by him. Merely stating that he is an agriculturist and engaged in contract job work& dairy business is not sufficient. Surendra Khoja 7,00,000/- EBFPK5526P He is an agriculturist and engaged in contract job work& dairy business. Confirmation loan given by him There is no evidence submitted of the source of the money given as loan given by him. Merely stating that he is an agriculturist and engaged in contract job work & dairy business is not sufficient. Sushila Devi 5,00,000/- COSPD0099C She is earning income from supply of milk No evidence submitted to support her sources of income. ITA No. 516/Jodh/2024 K.R. And Party 5 and agriculture produce. Loan given through banking channel and confirmation given. Merely because confirmation is there and loan is through bank does not mean it is genuine Rinku Rathi 5,00,000/- BFNPR8756P She is a graduate in B.Com and earned income from tuition & classes of commerce students. Loan given through bank and confirmation given No evidence submitted to support her sources of Income. Merely because confirmation is there and loan is through bank does not mean it is genuine. Satya Narain Ji 5,00,000/- EJLPS4779O He is businessman and loan was given through his current account of business. Loan confirmation given. No evidence given to support his source of income. Merely because confirmation is there and loan is through bank does not mean it is genuine. Sita Ram 4,00,000/- ALPPC4464N He is an agriculturist and engaged in transportation of bus & tractors. Confirmation given. No evidence given to support his source of income. Merely because confirmation is there and loan is through bank does not mean it is genuine. Budha Ram 5,00,000/- Not Available He had given loan from his salary from government. He has expired and family not co- operating now Loan received through banking Channel There is no document to prove the contention of the appellant. Mohan Lal 8,00,000/- Not Available He is engaged in dairy business & providing construction labour. Loan given through the banking channel and confirmation given. No evidence given to support his source of income. Merely because confirmation is there and loan is through bank does not mean it is genuine. In all the above case the appellant has explained the source of income of the various creditors but there is no evidence to support such sources. For e.g. in the case of the agriculturists there is no evidence to support their land holdings eg. Copies of Jamabandi of land and no evidence of agricultural income such as J forms. It is very surprising also that some of these persons are engaged in contractual works but they have not filed returns. The appellant has also not submitted copies of bank account of the persons who have advanced the loans to prove his claim that these were given from their past savings. The AO has disallowed the loans taken from Sh. Deva Ram, Sh. Mahaveer Bharti, Ms./Mrs. Pushpa, Ms./Mrs. Rekha Loya by holding that these parties do not have the creditworthiness to advance the loans. The appellant in his submission has again stated that these parties have given the loans from their past savings, have given confirmations of the loan and the loan transaction has been done through the banking channel. But again the appellant has not submitted any evidence in explaining that the money has been advanced through their own genuine sources ITA No. 516/Jodh/2024 K.R. And Party 6 such as evidence of agricultural income. Also again the appellant has not submitted bank account of any of these creditors in support of his contention. 6.3 The Hon'ble Supreme Court in the cases of Kale Khan Mohammad Hanif vs. CIT (1963) 50 ITR 1 (SC) and Roshan di Hatti vs. CIT (1977) 107 ITR 938 (SC) has held that the law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee, is on him. Where the nature and source of a receipt, whether it be of money or other property, cannot be satisfactorily explained by the assessee, it is open for the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that the income is from any particular source. The Hon'ble Kerala High Court in the case of ITO vs. Diza Holdings Pvt. Ltd. (2002) 120 Taxmann 539 (Ker.) has held that: \"It is clear on the terms of section 68 that the burden is on the assessee to offer a satisfactory explanation about the nature and source of the amount, found credited in the books of the assessee. It is also clear that the mere furnishing of particulars is not enough. The mere fact that payment was by way of account payee cheque is also not conclusive. Therefore, the assessing officer was entitled to consider whether notwithstanding the fact that the payments were made by cheques, whether the assessee has satisfactorily explained the nature and source of the amounts found credited in the books of the assessee.\" The Hon'ble Calcutta High Court in the case of Shankar Industries vs. CIT (1978) 114 ITR 689 (Cal.) has held that: \"It is necessary for the assessee to prove prima facie the transaction which results in a cash credit in his books of accounts. Such proof includes proof of identity of his creditor, the capacity of such creditor to advance the money and lastly the genuineness of the transaction.\" The Hon'ble Supreme Court in the cases of A. Govindarajulu Mudaliar vs. CIT (1958) 4 ITR 807 (SC) and CIT vs. M. Ganapathi Mudaliar (1964) 53 ITR 623 (SC) has held that where the assessee has failed to prove satisfactorily the source and nature of credit entry in his books, and it is held that the relevant amount is the income of the assessee, it is not necessary for the department to locate its exact source. 6.4 As is evident from the facts mentioned above the appellant has failed to satisfactorily explain the genuineness and the creditworthiness of the loans taken by him the addition of Rs.98,00,000/- made by the AO is sustained. 7. The appeal is dismissed.” 5. Feeling dissatisfied from the above order of the ld. CIT(A), the assessee has preferred the present appeal on the ground as stated hereinabove. To support ITA No. 516/Jodh/2024 K.R. And Party 7 the various grounds so raised by the ld. AR of the assessee and has relied upon the following evidences in support of the contentions so raised:- S. No. Particulars Page No. 1. Copy of written submission submitted before the Ld. CIT(A). 1-13 2. Copy of ITR and computation of Income 14-16 3. Copy of reply furnished during the assessment proceeding before the Ld. AO. 17-21 4. Copy of confirmations, ITR etc. 22-49 5. Copy of bank statements. 50-91 6. Copy of decision of the Hon’ble ITAT, Jodhpur Bench in the case of Anshul Sharma ITA No. 47/Jodh/2016 dated 16/09/2016 92-101 During the course of hearing, the ld.AR of the assessee prayed that one more chance may be given to adduce the document / evidences as required by the AO in order to settle the dispute of addition of Rs.98.00 lacs 6. Per contra, ld. DR relied upon the orders of the lower authorities. 7. We have heard both the parties and perused the materials available on record. In this case, it is noted that the AO made an addition of Rs.98.00 lacs in the hands of the assessee u/s 68 of the Act. It is also noted that the assessee had submitted the confirmation of unsecured loans taken during the year under consideration but complete addresses of the lenders were not provided by the assessee. Further, it is noted from the assessment order that the assessee did not provide any substantial evidence to support the creditworthiness and genuineness of the lenders. The Bench has taken into consideration the written submission of the assessee and come to conclusion that one more chance should be given to the assessee to submit the evidences/ documents as desired by the ITA No. 516/Jodh/2024 K.R. And Party 8 AO in order to settle the dispute in question. Hence, the matter is restored to the file of the AO to decide it afresh by providing one more opportunity of hearing, however, the assessee will not seek any adjournment on frivolous ground and remain cooperative during the course of proceedings. The AO is also directed to examine the case of the assessee and allow the relief in accordance with law. Thus the appeal of the assessee is allowed for statistical purposes. 8 Before parting, we may make it clear that our decision to restore the matter back to the file of the AO shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by AO independently in accordance with law. 9 In the result, the appeal of the assesee is allowed for statistical purposes Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board. Sd/- Sd/- (Rathod Kamlesh Jayantbhai) (DR. S. Seethalakshmi) Accountant Member Judicial Member Dated 17/12/2024 Santosh- Sr. P.S Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order "