TaxTMI 
TaxTMI 
2011 (1) TMI 740
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....Chand through Draft No. 045754 dt. 6-8-1999, which was admittedly purchased by him by issue of cheque No. 522129 drawn from his regular Canara Bank A/c. (2) That since the appellant has proved the identity creditworthiness & genuineness of transaction for the loan of Rs. 1,50,000 raised from M/s. Om Prakash Haresh Chand, the CIT (Appeal) has erred both on facts and in law in treating the loan amount as ungenuine at the cost of ignoring the Bank a/c, entries passed on through regular Cash Book and availability of funds which have all been accepted by the deptt. with Income-tax record lying at PAN AABHH0244A." 3.1 Arguing the assessee's appeal, which, as apparent, is in respect of a credit of Rs. 1.50 lakhs from one, M/s. Om Prakash Haresh Chand, and the interest allowed by the assessee on the said credit (at Rs. 11,700), it was submitted by the ld. A.R. that the said creditor, M/s. Om Prakash Haresh Chand, is also a part of the Ganga Ram Agarwal group of concerns, i.e., the group to which the other cash credit for Rs. 4 lakhs, addition in respect of which stands deleted by the ld. CIT(A), and contested by the Revenue per its appeal, belong to. To establish the same....
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.... stood immediately utilized for the purpose of purchase of the draft in the assessee's favour. The creditor has not been able to explain the source of cash, and that being the case, reliance on the creditor's cash-book by the assessee is wholly misplaced. Why, it may be asked, if the cash in the cash-book represented actual cash, the same stood not deposited in the bank account at any time earlier, so that the same indicts the genuineness of the credit ? Even in the remand proceedings, whereat the creditor stood also examined, no details or worthwhile information as to the source of cash with the creditor surfaced or stood furnished, i.e., apart from stating that the cash in question came from the creditor's cash-book. Further, on the basis of the creditor's statement, recorded thus, its total income for the year, including that of his HUF and wife, was found to yield a saving of Rs. 40,000 only, and that too at the end of the year, so that the creditor's capacity stands clearly un-established in the present case. Reliance by the ld. CIT(A) on the decision by the Tribunal in the case of Shyam Radios v. ITO [IT Appeal No. 55 (Agr.) of 2002] is also apposite, and the revenue's case m....
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....ablishing the genuineness of the credit transaction(s), whether the books are of the assessee or its creditor, as the law does not, nor cannot possibly, draw any distinction per se between the books maintained by two persons, and which, rather, if so, would be anomalous. All that an assessee in such a case would be required to show, to meet the burden of proof cast under section 68, is to exhibit it as being recorded in the books of the creditor, while the law specifically requires it to explain the nature and source of the credit, and which stands satisfied, or the onus in its respect discharged, it is trite, only by leading evidence on the parameters of the identity and the creditworthiness (of the creditor), and the genuineness of the credit transaction. The books, it may be emphasized, are only as near to reality as the transactions recorded therein are, being only their record. Why, as is well-settled, even the confirmation by the creditor or of it's emanating from the creditor's bank account, is by itself not adequate to prove the credit. On the contrary, even if the transaction is not recorded, for whatever reason, in the creditor's books, or he is not maintaining any, the c....
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....n(s), either way, so that where the credit is stated to be flowing from the creditor's regular accounts, the matter boils down to one of factual findings, rather than one of law. Suffice to say that the issue is factual and what is to be seen by the appellate authority, as the Tribunal, is whether the explanation(s) furnished by the assessee, including the material adduced in support, if any, in respect of the nature and source of the credit, leads to the positive establishment of the credit under reference on the three qualifying criterion or ingredients, and the onus for which is squarely on the assessee. This aspect of the matter is again a matter of trite law, though reference for the sake of authoritive drawn to the decision in the case of, among others, Oceanic Products Exporting Co. v. CIT [2000] 241 ITR 497 (Ker.) 4.4 In the present case, as we observe, even the capacity stands unexplained, as the necessary details, i.e., of the cash available with the creditor, could not be furnished. The creditor has stated to have lent money to the assessee out of borrowed money, details of which could not be furnished in spite of being afforded proper opportunity for the same, includ....
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....tnaik's case (supra) Sumati Dayal's case (supra) CIT v. P. Mohanakala [2007] 291 ITR 278/161 Taxman 169 (SC) In fact, the ld. CIT(A) has himself relied upon several decisions, which stand neither met nor even adverted to by the assessee during hearing, even as it impugns his order, as was also the case qua the order by the Tribunal in the case of Shyam Radios (supra) also relied upon by the ld. CIT(A): Nanak Chandra Laxman Das v. CIT [1983] 140 ITR 151/[1982] 9 Taxman 252 (All.) CIT v. United Commercial & Industrial Co. (P.) Ltd. [1991] 187 ITR 596/56 Taxman 304 (Cal.) CIT v. Precision Finance (P.) Ltd. [1994] 208 ITR 465/[1995] 82 Taxman 31 (Cal.) K.M. Sadhukhan & Sons (P.) Ltd. v. CIT [1999] 239 ITR 77/107 Taxman 403 (Cal.) Oceanic Products Exporting Co.'s case (supra) R.B. Mittal v. CIT [2000] 246 ITR 283/112 Taxman 480 (AP) 5. In view of the foregoing, we find no infirmity whatsoever in the findings by the Revenue, so that the same stand endorsed, and correspondingly, no merit in the assessee's case, so that the same does not find our favour. 6. In the result, the assessee's appeal is dismissed. ORDER Hari Om Maratha Judicial Member. - A c....
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.... being any other independent evidence(s) available on the record to support such an adverse finding. The assessee had taken various loans from different persons including one from M/s. Om Prakash Haresh Chand. Insofar as other loans are concerned, their deposits have been accepted by this very Bench through the common order which was later segregated and pronounced on 17-3-2009. But in relation to a loan of Rs. 1.5 lakhs received from M/s. Om Prakash Haresh Chand, despite being claimed to relate to GRG, the assessee also produced a copy of confirmation from M/s. Om Prakash Haresh Chand and a copy of bank account to exhibit the source of advance. But the Assessing Officer was not convinced because the draft was purchased on 6-9-1999 in favour of the assessee by the said creditor after depositing equal amount of Rs. 1.5 lakhs and because that before and after this transaction, the cash balance in this account remained static at Rs. 2,277. Thus, he disallowed cash credit of Rs. 1.5 lakhs and related interest of Rs. 11,700 and added them under section 68 of the Act. The ld. CIT(A) has confirmed this addition on the force of almost the similar reasons. Now the assessee is aggrieved. ....
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....s of the assessee in the books of the creditor is enclosed at PB-9 in which PA Number of the creditor has also been given. The only reason that an amount of Rs. 1.5 lakhs was deposited in cash, out of which DD was purchased for the same amount on the same day or the next day, cannot alone prove that the assessee had deposited his unaccounted money to purchase a draft through cash creditor's account. Something more is required to establish that the assessee has played such a trick to convert his black money into white. But to my knowledge, there is no such evidence, from which the adverse finding of the department can be approved. A copy of ledger, placed at PB 11 to 20, also clearly expresses the intention of the cash creditor. The cash creditor is an Income-tax assessee and has clearly explained and confirmed the transaction of loan and the receipt of interest having been received by him. The department has taken no action in the next year relating to receipt of interest in the hands of M/s. Om Prakash Haresh Chand, which was allowed while making assessment under section 143(3) in that case. Simply because a cash amount was deposited in the bank of the cash creditor and a draft wa....
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....Hon'ble President under section 254(4) of the Income-tax Act for my opinion : "Whether, in the given facts and circumstances of the case, the impugned cash credit of Rs. 1.5 lakhs is genuine or not? 2. The facts as gathered from the record and the orders of both the Members are that the assessee has taken loan of Rs. 1,50,000 from M/s. Om Prakash Haresh Chand & Co. vide draft No. 045754 dated 6-8-1999 on Canara Bank. When the Assessing Officer asked to prove the genuineness of the cash credit, the assessee submitted the confirmation of Om Prakash Haresh Chand & Co. along with their Permanent Account Number, copy of the bank statement of M/s. Om Prakash Haresh Chand in Canara Bank as well as copy of cash book. The Assessing Officer noted that M/s. Om Prakash Haresh Chand has deposited cash of Rs. 1,50,000 in Canara Bank on 6-8-1999 itself, out of which demand draft in favour of the assessee was made. The Assessing Officer added the sum of Rs. 4,50,000 under section 68 of the Act holding that the assessee has introduced his own unaccounted money in the name of the aforesaid creditor. When the matter went before the CIT(A), the CIT(A) confirmed the order of the Assessing Officer....
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....k came through withdrawals from his cash book which is evident from page Nos. 9 to 20 of his paper book. The Hon'ble Jurisdictional High Court in the case of CIT v. M/s. Rajesh Dal Mill Kosi Kalan, Mathura, in like circumstances and under almost identical facts has held that when in the cash book of the creditor small sums are found but later on large amounts are shown, it may create a suspicion in the mind of the ITO, but this cannot be a proof of malpractice and when the transactions were made through bank draft and the creditor was an income-tax payee and sufficient funds were available with the creditor to finance the loan, such type of suspicion cannot over ride the overwhelming positive evidences. A copy of this decision dated 22-9-2006 was filed on record. Therefore, by following the jurisdictional High Court decision and in view of the overwhelming evidences available on record to confirm the identity and creditworthiness of the creditor as well as genuineness of the transaction, the loan amount of Rs. 1.5 lakhs cannot be treated as unexplained and, therefore, has to be deleted from the hands of the assessee." 3. The learned Accountant Member did not agree with the learn....
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....d the circumstances of the respective cases, and which were even otherwise neither taken us through by the ld. A.R. during hearing nor its reliance/applicability exhibited/pleaded : A. Govinda Rajulu Mudaliar v. CIT 34 ITR 807 (SC) Sreelekha Banerjee v. CIT 49 ITR 112 (SC) Kalekhan Mohammed Hanif v. CIT 50 ITR 1 (SC) CIT v.Durga Prasad More 82 ITR 540 (SC) CIT v. Biju Patnaik (supra) Sumati Dayal v. CIT (supra) CIT v. P. Mohanakala 291 ITR 278 (SC) In fact, the ld. CIT(A) has himself relied upon several decisions, which stand neither met nor even adverted to by the assessee during hearing, even as it impugns his order, as was also the case qua the order by the Tribunal in the case of Shyam Radios v. ITO (supra) also relied upon by the ld. CIT(A): Nanak Chandra Laxman Das v. CIT 140 ITR 151 (All.) CIT v. United Commercial & Industrial Co. Pvt. Ltd. 187 ITR 596 (Cal.) CIT v. Precision Finance Pvt. Ltd. 208 ITR 465 (Cal.) K Sadhukhan & Sons Pvt. Ltd. v. CIT 239 ITR 77 (Cal.) Oceanic Products Exporting Co. v. CIT (supra) R.B. Mittal v. CIT 246 ITR 283 (A.P.) 5. In view of the fore....
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.... favour of the assessee. The assessee has submitted confirmation of Om Prakash Haresh Chand along with PAN for which attention was drawn to page No. 1 of the paper book. He also submitted the copy of PAN Card of the lender, copy of bank statement and pointed out that the lender is an Income-tax assessee. Copy of assessee's account is available at page 9. It was also pointed out that even though the assessee has not to prove the sources of source, but still the assessee has submitted copy of cash book of lender from 22-5-1999 to 20-8-1999 for which my attention was drawn at pages 11 to 22 of the paper book. Referring to page 19, it was pointed out that the sum of Rs. 1,50,000 was deposited by the lender out of cash in hand available in his cash book. It was pointed out that there was opening cash in hand amounting to Rs. 1,56,748 which was brought forward from 22-7-1999. Even it was pointed out that on 15-7-1999 also, there was a cash in hand of Rs. 1,23,748. The Assessing Officer has totally ignored this vital evidence. Learned Judicial Member has duly taken the cognizance of this evidence and deleted the addition made by the Assessing Officer. Referring to the decision of the lear....
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....iate to reproduce the provisions of section 68 of the Act: "68. Cash Credits.-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 the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year." From the reading of the aforesaid section, it is apparently clear that this section lays down rule of evidence that when 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 of such credit found in the books of the assessee, or the explanation offered by the assessee, in the opinion of the Assessing Officer is not satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. 8. Before charging the credit as the income of the assessee, the Assessing Officer has to form an opinion. This opinion is subjective, but it has to be judicious and based on material on record. An opinion is a....
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....hority concerned to take an action, then on fulfilment of those conditions the word "may" take the character of "shall" and then it becomes mandatory. In section 68, we find that there are no such conditions on the fulfilment of which the Assessing Officer is duty bound to make the addition. The word "may" denotes the discretion of the Assessing Officer that he can make an addition or cannot make an addition. The Supreme Court in the case of CIT v. Smt. P. K. Noorjahan [1999] 237 ITR 570/103 Taxman 382 while dealing with the word "may" in section 69 observed, as under: "In the corresponding clause of the Bill which was introduced in Parliament, while inserting section 69 in the Income-tax Act, 1961, the word "shall" had been used but during the course of consideration of the Bill and on the recommendation of the Select Committee, the said word was substituted by the word "may". This clearly indicates that the intention of Parliament in enacting section 69 was to confer a discretion on the Income-tax Officer in the matter of treating the source of investment which has not been satisfactorily explained by the assessee as the income of the assessee and the Income-tax Officer is not....
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....nd even proved the source of sources which he is not obliged to prove. The assessee has duly explained in respect of the deposit and the circumstances under which the deposits were received. The identity of the persons is not beyond the doubt. The source of cash was duly explained. The identity and capacity of the creditors was duly established. The Assessing Officer only doubted the genuineness of the transactions. Under these facts in my opinion, the amount received by the assessee from M/s. Om Prakash Haresh Chand cannot be regarded to be unexplained one. 12. I have gone through the decision in the case of Biju Patnaik (supra). The facts involved in this case were that the assessee had claimed deduction in respect of payment of interest on loan taken from Kalinga Foundation Trust for the assessment years 1962-63 to 1964-65. The Assessing Officer asked the assessee to produce the evidence and to prove (i) that the cash credits in the name of the Trust were genuine, and (ii) that 39,000 shares of Kalinga Tubes Ltd. standing in the names of certain persons, were not really his own investments. The cash credit was claimed by the assessee to be loans from the Trust. The Trust was ....
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....invested anywhere. The question whether the moneys were raised by the Trust as donations from various people or not was not considered by the Tribunal in its proper perspective. In not appreciating the basic question or discussing the evidence in respect thereof, there was non-consideration of a relevant factor on a factual aspect and the question whether the Tribunal's decision was perverse in the sense that no man instructed properly in law could have acted as the Tribunal did and whether there was ignoring of material and relevant facts in considering this aspect arose out of the order of the Tribunal. Ignoring the point as to who made the donations and what was their capacity to make the donations which was a vital fact, gave rise to the question of law. 13. This case in my opinion is not applicable to the facts of the case before me. In the case before me, the identity of the lender is not denied even by the department. The lender is an Income-tax assessee and is being regularly assessed to Income-tax. In the case before the Supreme Court, the identity and creditworthiness of the donors were not established, but in the case before me, the assessee has duly produced evidence....
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....amounts varying generally between Rs. 2,000 and Rs. 3,000, (iv) the assessee's capital account was credited with the gross amount without showing any expenses and purchases of tickets or for losses, (v) in view of the exceptional luck claimed to have been enjoyed by the assessee, her loss of interest in races from 1972 was very significant. The Settlement Commission took the view that one would not lose interest in race from 1972 and income yielding activities merely because the income from that source become chargeable to tax. When the matter went before the Supreme Court, it dismissed the appeal of the assessee. From the facts of this case, it is apparent that this case does not relate to the case where the assessee has taken loan from any parties but it is a case where the assessee himself has shown the income from a particular source and income shown by the assessee was not found to be genuine. This case, in my opinion, will not assist the revenue. 15. In the case of Rohini Builders (supra), the facts are that during the assessment year under consideration, the assessee had taken loans from various parties and during the course of assessment proceedings, the assessee had fur....
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....proposition that the assessee is not required to prove the source of source. The assessee can be asked only to prove the source of the credit. This decision, in my opinion, is clearly applicable to the facts of the case before me. The assessee in the case before me has duly discharged his onus by filing the confirmation, address, permanent account number and the copy of bank account of the creditor. Even though the assessee was not required to prove the source of source but still the assessee in the case before me has filed the copy of cash book of the lender from which it is apparent that the lender was having the cash in hand on the date when he has deposited the amount in his bank account. 16. I have also gone through the decision in the case of Juaharimal Goel (supra). In this case, the Assessing Officer found two deposits in the books of account of assessee in the name of his daughters. The Assessing Officer asked the assessee to explain these deposits. The assessee explained that the amounts were paid by the two ladies through cheque and that both of them had been assessed to tax under the Amnesty Scheme. The Assessing Officer was of the view that the assessee had introduc....
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....e the assessee was asked to explain the deposits in his books of account about the nature and source, which the assessee had explained. The assessing Authority had not accepted the explanation but the Commissioner (appeals) and the Tribunal had accepted the explanation. The finding of the Tribunal was a finding of fact in that regard and it was not shown that the finding recorded by the Tribunal was perverse. Various courts have held that the assessee has to prove three conditions : (1) identity of the creditor (2) capacity of such creditor to advance money, and (3) genuineness of the transactions. If all the aforesaid three conditions are proved, the burden would shift on the revenue to prove that the amount belonged to the assessee. It has been held by the various High Courts that the assessee cannot be asked to prove the source of source or the origin of deposit. Under the Amnesty scheme, the new tax payers were allowed to declare their income for various years and their returns were allowed to be accepted without any charge of penalty and interest. It appeared that both the ladies had filed returns under the Amnesty Scheme declaring certain income and as a result of such ....
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....stained. 18. I have also gone through the decision in the case of Rajesh Dal Mill (supra) Mathura in Reference No. 12 of 1994 dated 22-9-2006, copy of which available on record, wherein, the Hon'ble Allahabad High Court has held as under :- "We have heard Shri R.K. Upadhyaya, learned standing counsel appearing on behalf of the Revenue and Sri Krishna Agarwal, learned counsel for the applicant. Learned standing counsel submitted that even though the creditors were genuine and the Income-tax payees and the deposits were made through bank draft, they did not have sufficient funds to give the amount in question to the assessee and it was only to utilize the unaccounted money of the assessee. The submission is misconceived. The Commissioner of Income-tax (Appeals) as well as the Tribunal has recorded categorical findings of fact that the creditors were Income-tax payees and the transactions were made by way of bank drafts. Sufficient funds were available with the creditors to finance loan which findings cannot be questioned in the present reference. In this view of the matter, we are of the considered opinion that the Tribunal was right in deleting the addition in question." ....