TaxTMI 
TaxTMI 
2011 (8) TMI 476
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....d by the judgment dated 27.4.2007 passed by the ITAT. As indicated hereinabove the only issue which arises for our consideration is as to whether the ITAT erred, in the given facts and circumstances of the case in sustaining the addition of sum of Rs. 8,24,000.00 in the income of the assessee. 4. In order to decide the aforementioned issue the following facts are required to be noticed. 4.1 The assessee is engaged in the business of trading in imported tailoring accessories like buttons etc. During the relevant assessment year, the assessee had raised unsecured loans from its Directors and shareholders. The total amount of loan raised was, in fact, added to its income, i.e. Rs. 8,24,000.00. The persons, who had lent money to the assessee company were five (5) in number. Out of the five (5) persons, two (2) persons were at the relevant time the Directors of the assessee, while the other three (3) persons were, its shareholders. 4.2 The Assessing Officer (for short 'AO') while carrying out the assessment sought information from the assessee vide notice dated 10.10.2003 qua the credits found in its books of accounts, vis-a-vis the loans extended b....
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....spute that in so far as the other creditors were concerned they filed their affidavits stating therein the source of funds, which were used in lending the amounts to the assessee company. The AO also records in the assessment order that the said creditors filed with him their income tax returns as well as their bank statements. 4.5 It may be noted at this stage that the AO after perusing the reply of the creditors as well as that of the assessee issued summons under Section 131 of the IT Act, on 24.2.2005, even to the entities which evidently had paid commission and given gifts to the five (5) creditors (hereinafter referred to as sub creditors) which formed the source of funds available with the said creditors. The notices under Section 131 of the IT Act were issued to the following entities/persons: i) M/s. Vasu Apparels (P) Ltd. ii) Mr. Ramesh Kumar Goel. iii) Mr. Deepak Gupta. 4.6 It is important to note that even though these notices had been sent to the aforementioned entities/persons only on 24.2.2005, the AO proceeded to pass the assessment order within four (4) days of the issuance of notice, that is, on 2....
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....sp; 6.3 As regards the genuineness of the transaction, Mr. Krishnan submits that all transactions had been routed through banks, and necessary material has been placed before the authorities below. 6.4 Mr. Krishnan submits that once the assessee had done the needful, the onus shifted on to the revenue, and if the revenue contended that the monies which the sub-creditors gave to the creditors was that of the assessee then, the revenue would have to prove the same by placing on record the necessary material and cogent evidence in that regard. In this case, Mr. Krishnan submits, no such material has been placed on record nor is there any finding to that effect. 6.5 In support of the aforesaid submissions Mr Krishnan relied upon the following judgments. CIT vs Value Capital Services P. Ltd. (2008) 307 ITR 334 (Del) and Nemi Chand Kothari vs CIT and Anr. (2003) 264 ITR 254. 7. As against this, Mr. Sabharwal before us submits that the details supplied by the assessee would show that the source of funds of the creditors was by way of commissions and gifts. Mr. Sabharwal further submits that in this case the assessee impeded the inquiry of the AO inasmuch a....
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....rs did not personally appear before him in response to the summons issued to them. (v) The said creditors had paid small amounts as tax qua their individual returns and that tax had not been deducted at source in respect of commission received by them. 9. We may note at this stage that in the order of the CIT(A) there is a discussion with respect to the response received from the assessee on these aspects. Broadly, the CIT(A) recorded the fact that in so far as the credit worthiness of the aforementioned creditors was concerned they had in support of their submission disclosed that their source of funds were largely commissions (except two instances where gifts were received), in support of which certificates have been submitted from parties who had paid the commission. It is also observed in the CIT(A)'s order that parties which paid the commission, as also donors of gifts, were assessed to tax and confirmations in respect of commission as well as gift deeds were also alluded to. 9.1 As regards the creditors which included the four creditors who had not appeared before the A.O., following documents were filed: (i) Acknowledge....
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....ct that the creditors Permanent Account Number (in short 'PAN') as well as the credit entries made in their bank accounts were available with the A.O., was also noticed. It was also noticed that PAN of other parties, who had made the payments to the creditors, were also available. The details of the two donors, who had given gifts of Rs. 1 lac to the two creditors, were also available with the A.O. 10. With these materials on record, a finding was returned that credit worthiness of the aforementioned creditors was established. The CIT(A) thus came to the conclusion that in these circumstances non-appearance of the remaining four creditors before the A.O. was not material and that in the wake of the material before the A.O. the onus had shifted on to the revenue to prove, if it disputed, as it did, the genuineness of the loans extended to the assessee. The CIT(A) also disagreed with the A.O.'s observation that since the creditors had paid small amounts as tax against their individual assessments, it would demonstrate that the loans advanced to the assessee were not genuine. 11. In our view, with the findings of fact recorded by the CIT(A), the ITAT ou....
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....tablished. (ii) It was also established that the funds available at the relevant point in time were not infused into the bank accounts of the creditors by way of cash but were in fact credited to their account again by way of cheques largely on account of commissions received by them save and except two transactions of Rs. 1 lac each received by two creditors from verifiable donors. (iii) The bank accounts as well as returns filed by the creditors who were assessable to tax alongwith their PANs were also available with the A.O. (iv) The assessee in turn had received the monies by way of cheques in respect of which credits were made in their books of accounts. (v) The creditors had also placed on record receipts of commission as well as the gift deeds in respect of gifts made to the donors. (vi) The identity and addresses of sub creditors was also available. 14. With this material on record in our view as far as the assessee was concerned, it had discharged initial onus placed on it. In the event the revenue still had a doubt with regard to the genuineness of the transactions in issue, or as re....
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....the A.O. As observed above, notices had been issued to the sub-creditors on 24.02.2005. The A.O. without giving sufficient time for the services to be effected on the said noticees, within a period of four days proceeded to frame the assessment order. As a matter of fact the A.O. quite curiously, has observed in the assessment order, that the said noticees have preferred not to reply to the summons issued to them. There is no observation whatsoever as to the date on which the said notices were dispatched and thereafter served on the said noticees. It is not uncommon that notice issued by the revenue get dispatched much later than the date mentioned on the notice and as a matter of fact get served on the noticee either on the date of appearance or thereafter. The aforesaid circumstances, according to us, show that the A.O. framed the assessment in haste. If the A.O. was genuinely interested in establishing the allegations made in the assessment order, which is, that the assessee had routed its own money through the device of creditors and sub-creditors, it ought to have given sufficient time to the said noticees to produce relevant material before him. These are aspects which the IT....