TaxTMI 
TaxTMI 
2010 (9) TMI 647
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....68 of the I.T. Act, 1961 Rs.[70000 +185000 + 30000] i.e. Rs.285000/- out of Rs.[220000 + 385000 + 100000] i.e. Rs.705000 respectively, therefore not justifiable." 3. In the Revenue's appeal, the following grounds are raised :- "(i) That on the facts and in the circumstances of the case that the Ld. CIT(A), Jalpaiguri erred in deleting the addition of Rs.9,70,000/- on account of bogus loan without considering the creditworthiness of the loan creditors and genuineness of the transactions. (ii) That on the facts and in the circumstances of the case that the Ld. CIT(A), Jalpaiguri not justified in deleting the addition of Rs.2,00,000/- on account of bogus gift without considering the creditworthiness of the alleged gift doners and genuineness of the transactions. (iii) That on the facts and in the circumstances of the case that the Ld. CIT(A), Jalpaiguri had failed to note that no prudent person would make such a big loan/ donation to a wealthy person like the assessee. (iv) That on the facts and in the circumstances of the case that the order of the Ld. CIT(A), Jalpaiguri is devoid of common sense and human probability." 4. We will ....
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...., the creditworthiness of the donor, Smt. Minu Agarwal, is accepted for the gift amount of Rs.2,00,000/-. In view of these findings, the gift at Rs.2,00,000/- from Smt. Minu Agarwal, is accepted as genuine. Therefore, the addition of Rs.2,00,000/- in respect of the gift taken from Smt. Minu Agarwal by the appellant, is deleted." 4.3. At the time of hearing before us, the ld. Departmental Representative supported the order of the A.O. and stated that the A.O. has rightly treated the alleged gift of Rs. 2 lakhs as assessee's undisclosed source of income and added to the total income of the assessee u/s. 68 of the Act. In addition to the above, he also filed a written submission, which is placed on record. 4.4. On the other hand, the ld. A/R of the assessee placed reliance on the order of the ld. C.I.T.(A) on this issue and submitted that the gifts were received through banking channel from Smt. Minu Agarwal, who is assessed to tax. He further submitted that the donor has submitted her PAN details along with copies of income-tax returns and statement of accounts for assessment years 2001-02 to 2003-04. The ld. A/R further submitted that in response to summon u/s. 1....
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....i High Court in the said case while explaining the scope of Sec. 68 of the Act, the relevant portion of which reads as under :- ".... The logical conclusion, therefore, has to be that an inquiry under section 68 need not necessarily be kept confined by the Assessing Officer to the transactions, which took place between the assessee and his creditor but 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." [ Emphasis given] It was in this context that Hon'ble Gauhati High Court has held that u/s. 68, creditor's creditworthiness has to be judged vis-à-vis transactions, which have taken place between the assessee and the creditor, and it is not the business of assessee to find out source of money of his creditor or genuineness of transactions which took place between creditor and sub-creditor and/or creditworthiness of sub-creditors, for these aspects may not be within special knowledge of the assessee. The observa....
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....s, who are relatives of the assessee and also assessed to tax, was treated by the A.O. as assessee's income from undisclosed sources and thus added the same to the total income of the assessee u/s. 68 of the Act :- Sl.No. Name of loan creditor (Rs.) Old Balance (Rs.) Loan taken during the year (Rs.) Relationship with assessee 01 Rajendra Kr. Agarwal 6,98,618 2,20,000 Brother 02 Prahlad Kr. Agarwal 7,48,391 3,85,000 Brother 03 Beharilal Agarwal(HUF) 1,50,790 1,00,000 Father 04 Bimla Devi Agarwal 4,00,450 1,00,000 Mother 05 Sushila Devi Agarwal 2,26,418 1,00,000 Wife 06 Sarita Agarwal 2,88,000 50,000 Wife of assessee's brother 07 Rajendra Kr.Agarwal (HUF) - 1,00,000 Karta is brother of assessee 08 Sumit Kr. Agarwal - 1,00,000 Son of assessee's Brother 09 Amit Kr. Agarwal 1,47,140 1,00,000 - do - Total Rs.12,55,000/- 6. During the course of assessment proceedings, the assessee furnished copies of income-tax returns of each of the above loan creditors along with their respective ....
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.... Pritam Daftary vs. CIT [195 CTR 304 (Cal)] CIT vs. Piara Singh [124 ITR 40 (SC)] CIT s. Lalchatoorah Tea Co. Ltd. [200 ITR 391 (Cal)] P.K. Sethi vs. CIT [206 CTR 445 (Gau)] 7.1. The ld. C.I.T.(A) asked for remand report from the A.O. on the submissions of the assessee and evidences filed by him and in response, the A.O. sent comments stating that the assessee has filed the return accompanied by loan confirmations. It is also fact that the loan transactions were effected by cheques. It was further stated by the A.O. that as per the assessee the respective balance sheet of the loan creditors showed that all of them have sufficient available fund for advancing loan to the assessee, then the question arises wherefrom the loans were given by those loan creditors if they did not have sufficient cash or bank balances. There were no sufficient earnings of the loan creditors for the year under consideration. The A.O. further reported that the source of the loans were obviously the gifts received by the loan creditors and on examining the bank accounts of the loan creditors it appeared that prior to the date of loan transaction, similar amou....
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....wala and the Karta of the HUF Beharilal Agarwala(HUF) and Rajendra Kumar Agarwala (HUF) and the donor, Smt. Minu A.garwala, have been examined by the AO. Therefore, the identity of these cash creditors and the donor is proved. Other two cash creditors, Sumit Kumar Agarwala and Amit Kumar Agarwala, have been filing return of income for the year under consideration i.e. AY 03-04 and they have also filed return of income for the two earlier assessment years i.e. 02-03 and 01-02. In view of returns of income of Sumit Kumar Agarwala and Amit Kumar Agarwala, for the AY 03-04, 02-03 and 01-02, their identity is considered to be proved. The cash creditor, Rajendra Kumar Agarwala, has shown the returned income at Rs.1,32,008/- in the AY 03-04 Rs. 82,615/- in the AY 02-03 and Rs. 73,645/- in the AY 01 -02. Thus, his total returned income is at Rs. 2,88,268/- in the AY 03-04, 02-03 and 01-02. The cash creditor, Rajendra Kumar Agarwala has given loan to the appellant at Rs. 2,20,000/-. In the light of the returned income for the three assessments years as stated above, the creditworthiness of Rajendra Kumar Agarwala, is accepted up to the limit of the loan at Rs.1,50,000/-. In view of these fi....
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.... creditor, Beharilal Agarwala (HUF) has given loan to the appellant at Rs. 1,00,000/-. In light of the returned income for the three assessments years as stated above, the creditworthiness of Beharilal Agarwala (HUF), is accepted up to the limit of the loan at Rs. 70,000/-. In view of these findings, the loan up to Rs. 70,000/- from the Beharilal Agarwal (HUF) is accepted as genuine. Therefore, the addition of Rs. 70,000/- in respect or the loan taken from Beharilal Agarwala (IIUF), by the appellant is deleted. And balance amount of Rs. 30,000/- as loan taken from Beharilal Agarwala (HUF), is hereby confirmed. The cash creditor, Sushila Devi Agarwala, has shown the returned income at Rs. 1,00,633/- in the AY 03-04, Rs, 98,589/- in the AY 02-03 and Rs.1,40,040/- in the AY 01-02. Thus, her total returned income is at Rs. 3,39,262/- in the AY 03-04, 02-03 and 01-02. The cash creditor, Sushila Devi Agarwala has given loan to the appellant at Rs. 1,00,000/-. In light of the returned income for the three assessments years as stated above, the creditworthiness of Sushila Devi Agarwala, is accepted for the loan amount of Rs.1,00,000/-. In view of these findings, the loan upto Rs.1,00,000/-....
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.... of the loan taken from Sumit Kumar Agarwala, by the appellant, is deleted. The cash creditor, Amit Kumar Agarwala, has shown the returned income at Rs. 78,744/- in the AY 03-04 Rs. 78,580!- in the ÀY 02-03 and Rs.78,165/- in the ÀY 01- 02. Thus, his total returned income is at Rs. 2,35,489/- in the ÀY 03-04, 02-03 and 01- 02. The cash creditor, Amit Kumar Agarwala has given loan to the appellant at Rs. 1,00,000/-. In light of the returned income for the three assessments years as stated above, the creditworthiness of Amit Kumar Agarwala, is accepted for the loan amount of Rs. 1,00,000/-. In view of these findings, the loan up to Rs. 1,00,000/- from Amit Kumar Agarwal is accepted as genuine. Therefore, the addition of Rs.1,00,000/- in respect of the loan taken from Amit Kumar Agarwala, by the appellant, is deleted." 8. Being aggrieved with the said order of ld. C.I.T.(A), the assessee is in appeal for sustenance of addition of Rs.2,85,000/- and the department also is in appeal against deletion of addition of Rs.9,70,000/- made u/s. 68 of the I.T. Act. 9. At the time of hearing before us, the learned representatives of the parties made submissions in l....
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....e been accepted by the department. Further, the department could not bring on record any conclusive evidence to establish the doubt of the A.O. that assessee's own money has routed through the loan creditors. Therefore, the action of the A.O. in rejecting the loan transaction in its entirety was not justified. 9.1. Now let us consider the addition sustained and confirmed by the ld. C.I.T.(A) on the facts and circumstances given above. Out of the total addition of Rs.12,55,000/- made u/s. 68 of the Act, the ld. C.I.T.(A) deleted the addition of Rs.9,70,000/- and sustained the same to the extent of Rs.2,85,000/- as per table below :- Sl.No. Name of Creditor Loan Amount Accepted by C.I.T.(A) Sustained by CIT(A) 01 Rajendra Kr. Agarwala 2,20,000 1,50,000 70,000 02 Prahlad Kr. Agarwala 3,85,000 2,00,000 1,85,000 03 Bimla Devi Agarwala 1,00,000 1,00,000 Nil 04 Beharilal Agarwala 1,00,000 70,000 30,000 05 Sushila Devi Agarwala 1,00,000 1,00,000 Nil 06 Sarita Agarwala 50,000 50,000 Nil 07 Rajendra Kr. Agarwala (HUF) 1,00,000 1,00,000 Nil 08 Sumit Kr. Agarw....