TaxTMI 
TaxTMI 
2012 (7) TMI 371
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....lish the identity, creditworthiness and genuineness of the loans. The Assessing Officer noticed that some of the creditors have given contradictory statements. The Assessing Officer found that the loans were fictitious and the assessee's own unaccounted money. In view of the facts, the Assessing Officer made total addition of Rs.45,19,249/-. The details of the said amount are as under:- i) Shri Gopal Maheshwari Rs. 5,00,000/- ii) Shri Gopi Shyam Pathak Rs. 3,35,000/- iii) M/s Sharda Traders Rs. 2,50,000/- iv) Shri Anand Kumar Rs. 1,00,000/- v) Shri Ashok Kumar Rs. 1,00,000/- vi) Shri Dharmendra Pathak Rs. 3,35,000/- vii) M/s. R.G. Finlease (P) Ltd., Etawah Rs.20,00,000/- Other Loans: a) Shri Mahendra Pratap Singh Rs.1,39,249/- b) Shri K.K. Dubey Rs. 60,000/- c) Shri Laloo Prasad Rs.2,00,000/- d) M/s Mishra Arms Rs.2,00,000/- e) Shri Rajesh Kumar Rs.1,00,000/- f) Smt. Kusum Lata Rs.2,00,000/- Total ----------------- Rs.45,19,249/- ------------------ 4. The CIT(A) confirmed the addition of Rs.1,39,249/- in the name of Shr....
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....er:- M/s Bal Mukand Bhagwan Das 1.4.2001 - 31.3.2002 1.4.2002 - 31.3.2003 1.4.2003 - 31.3.2004 M/s Nand Kishore Arvind Kumar do I have considered the arguments of the appellant and perused the aforesaid documents. It is also observed from the assessment records that the Assessing Officer has not called for the creditor's bank statement nor questioned him as to the source of his funds. The Assessing Officer has also overlooked the fact that the loan was received by the appellant in 2 trenches of Rs.2,50,000/- each on 12.3.2004 and 27.3.2004 and therefore obviously the creditor was not entitled for interest of Rs.60,000, for the entire year, the loan having been given to the appellant only for 19 days and 4 respectively. In view of the foregoing facts, the loan of Rs.5,00,000/- is found to be duly explained by the appellant. Hence, the addition of Rs.5,00,000/-is deleted. (ii) Sri Gopy Shyam Pathak - Rs.3,35,000/- & Sri Dharmendra Pathak, S/o Sri Gopy Shyam Pathank - Rs.3,35,000/- The Assessing Officer recorded the statement of this creditor who confirmed giving the loan for interest @12% p.a. and stated that he has....
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....of appellate proceedings, vide written submissions filed on 7.2.2008, the appellant stated as under:- - The proprietor of M/s Sharda Traders is Sri Raj Kumar Chauhan. The said creditor appeared before the Assessing Officer on 29.11.2006 in person along with other depositors, but his statement could not be recorded. On the next hearing, when he was called upon to appear in person, he was out of station and expected to return on 26.12.2006. Hence, A.R. of the appellant requested the Assessing Officer to issue a notice to the creditor. The affidavit dated 6.11.2006 of the creditor stands filed before the AO. The loan was squared up on 29.3.2004. A declaration dated 5.7.2005 of the said creditor has been filed in which it is stated as under:- "This is to certify that I have given the unsecured loan to M/s Rhizome Engineers Pvt. Ltd., Near Gail Vihar, Dibiyapur, Auraiya through DD No.0592/006186 dated 23.09.2003 a sum of Rs.2,50,000/- (Two lac Fifty thousand only) I have received all my outstanding amount vide DD No.880005 dated 29.3.2004 against my outstanding amount and supply of material." A letter dated 12.2.2008 was addressed to the appellant by this office, as under:- ....
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....eged loan is reflected therein and there is no credit entry prior to that. No details of credit entry in bank a/c were furnished even though the AO repeatedly asked the appellant to prove the creditworthiness of the creditor and the genuineness of the loan transaction. Hence, the AO treated the said loan as unexplained and the appellant's own unaccounted money and accordingly added Rs.1,00,000/- to the appellant's income. Vide written submissions filed on 7.2.2008, the appellant contended that the said lender is doing business in building material. His father Sri Subedar Gupta is an agriculturist having his own agricultural income. His income is Rs.88,900/- not Rs.82,500/- as observed by the AO since Rs.82,500/- is income after 80L deduction. The lender's family consists of himself, his wife and 2 children who are studying in govt. school in class VIII and IX respectively. His personal expenses are approximately Rs.4000 per month as he does not have to pay house rent, vehicle maintenance and telephone expenses. Vide letter dated 12.2.2008 of this office, the appellant was asked to comply as under :- "In respect of loans from Anand Kumar, Ashok Kumar & Rajesh Kumar it is....
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.... it is not credible that a person with such meager income would give a loan of Rs.1,00,000/- and that too without interest. The appellant was asked to furnish the lender's relevant bank statement. On perusal of the bank statement, the AO found that only the debit of the alleged loan is reflected therein and there is no credit entry prior to that. No details of credit entry in bank ale were furnished even though the A.O. repeatedly asked the appellant to prove the creditworthiness of the creditor and the genuineness of the loan transaction. Hence, the A.O. treated the said loan as unexplained and the appellant's own unaccounted money and accordingly added Rs.1,00,000/- to the appellant's income. Vide written submissions dated 7.2.2008, the appellant has submitted that the lender is about 40 years old and deals in building material. His family consists of his father Sri Ram Iqbal Singh, himself, his wife and 2 sons, studying in Xth and Xllth in Dibiapur. His gross total income is Rs.79,900/- as per return filed. His father has agricultural income and contributes by way of agricultural produce. Vide letter dated 12.2.2008 of this office, the appellant was asked to comply as unde....
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....lant has taken loan of Rs.20,00,000/- from the above concern. Return of the said lender has been filed showing income of Rs.6,060/- only. Hence, the AO observed that the creditworthiness of the lender is doubtful. The AO also observed that in the bank a/e of the lender, there is a credit entry of Rs.20,00,000/- on 6.11.2003, prior to the impugned loan of like amount to the appellant on 12.11.2003. Hence, the AO held the loan to be fictitious and the appellant's own unaccounted money. Vide written submissions filed on 8.2.2008 the appellant stated that the above named lender had a FDR No.000177 Bank of India for Rs.29,14,262 (maturity value on 4.10.2003) which was deposited In It's a/c on 6.11.2003 on maturity. The bank credited the total sum of Rs.9,18,733/- i.e. Rs.9,14,262/- interest + Rs.4,471/- interest for broken period. The copy of the FDR and the certificate of Bank of India for deposit of the matured FDR have been furnished. It is stated by the appellant that the cheque deposited in the company's bank a/c. was produced before the AO. It is claimed by the appellant that the identity and creditworthiness of the lender and the genuineness of the transaction has been duly....
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....which was deposited in April 2005. Considering the above facts and circumstances, the loan cannot be treated as unexplained since falsity in the depositor's claim has not been established. Accordingly, the addition of Rs.60,000/- is hereby deleted. (c) Lalloo Prasad Gupta Rs.2,00,000/- The AO has added this loan stating that no information was given by the appellant to establish its genuineness. The appellant has stated that the loan was given by the above lender by draft dated 12.2.2004. The lender expired on 29.1.2005 for which death certificate has been furnished as proof. The lender's son Shri Ashok Kumar has given an affidavit dated 6.11.2006 that his father had given the said loan to the appellant which has been transferred in his name as his father has expired. On perusal of the assessment records, it is seen that vide para 7 letter dated 13.12.2006, the appellant had furnished before the AO the above explanation along with the above mentioned documents i.e. death certificate and affidavit. The appellant also requested the AO in para 12 of the said letter to call the depositors to appear in person and give their clarification. However, the AO has not brought any ....
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....records and gone through the orders of the Revenue Authorities. Regarding the loan of Rs.2,50,000/- from M/s. Sharda Traders, we notice that the loan of Rs.2,50,000/- was taken vide D.D. No.0061600 dated 23.09.2003. The party Shri Raj Kumar Chauhan, Proprietor of M/s Sharda Traders was not produced before the Assessing Officer for examination. However, an affidavit dated 29.03.2004 has been filed. The loan was repaid before expiry of the accounting year. The account was squared up by amount of loan as well as some bills of Rs.10,069/-. The assessee has furnished affidavit of Shri R.K. Chauhan, Proprietor of M/s. Sharda Traders and a confirmation of the loan. From the confirmation and affidavit, it is not established that the assessee has submitted sufficient material in support of creditworthiness of the creditor. In the affidavit simply the fact has been narrated and it has not been pointed out neither in the affidavit nor in the confirmation about the creditworthiness of the creditor. There is overwriting & corrections in the D.D. Number also in the affidavit as well as confirmation. The CIT (A) deleted the addition merely on the basis of identity of the creditor. The CIT(A) shif....
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....essee has been placed at page no 105 of the Paper Book. On perusal of the said bank statement, we noticed that there is a single entry of Rs.3,00,000/- dated 28.04.2003 under the head "transfer". The bank did not bifurcate all the three cheques separately while crediting the amount in assessee's bank account. As per the procedure of bank ,normally the bank is supposed to pass separate entries for each cheque on transfer. It was explained by the assessee that these Rs.3,00,000/- includes the amounts of loan received from S/Shri Ashok Kumar, Anand Kumar & Rajesh Kumar but relevant pay-in-slip and other materials have not been filed. Rajesh Kumar has also deposited cash of Rs.1,00,000/- in his bank account dated 22.03.2003 before issuing cheque to the assessee. 8. On perusal of relevant materials in respect of S/Shri Anand Kumar, Ashok Kumar and Rajesh Kumar, we notice that though the assessee has tried to establish all the ingredients which required under section 68 of the Act i.e. identity, credit worthiness and genuineness of the transaction by filing affidavit, confirmation and pointing out that they are assessed to tax, but it is relevant to state that law of evidence mandates....
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.... dispute that there were cash deposits of the equivalent amounts in the bank accounts of the creditors just before advancing loan to the assessee or on the date of issuing cheques to the assessee. In the case of the creditor, Shri Rampal Singh, his bank statement is filed at page 45 of the paper book, in which Rs.2,50,000/- has been deposited, but neither it is mentioned that it was cash nor it is mentioned how the amount similar to the credit was credited in his bank account. No explanation is given before the authorities below and even during the course of arguments before us. Nothing is clarified as to how equivalent amount of cash credit was deposited in his bank account. In the case of remaining creditors, it is not a denying fact that equivalent amounts of cash credit was deposited in their bank accounts in cash for issuing cheques in favour of the assessee. This created serious doubt in the explanation of the assessee regarding genuineness of the transaction in the matter. The AO asked the assessee to produce all the creditors for examination on oath in order to find out truth in the matter. The assessee produced one of the creditors before the AO for examination, but showed....
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....and equivalent amount of cash credit was deposited for the purpose of issue of cheque in favour of the assessee. For the assessment year under appeal, she has filed return of income at Rs.1,01,000/- only. In the case of Smt. Mithlesh Maheshwari, the bank balance before issue of cheque was Rs.10,794/- and equivalent amount of cash credit was deposited in her bank account for issue of cheque in favour of assessee. For assessment year under appeal, she filed return of income at Rs.1,02,476/- only. In the case of Sh. Rampal Sing, it is already noted above that the deposit entry in his case is not explained and prior to issue of cheque, there was bank balance of Rs.3708/- only. He has filed the return of income for the assessment year under appeal at loss with agricultural income (PB-102). In the case of Shri Shariq Ali Khan, the bank balance is his account was Rs.1055/- prior to issue of cheque and equivalent cash amount was deposited for issuing cheque in favour of the assessee. He has filed return of income at Rs.70,373/- plus agricultural income (PB-116). These details noted in the assessment order and the details verified from the paper book would clearly support the findings of th....
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....efore the Income-tax Officer in support of the two loans. The Income-tax Officer served notices under section 131 of the Income -tax Act, 1961, on the alleged creditors and since those notices came back unserved, the Income-tax Officer treated the loan as assessee's income from undisclosed sources. The Appellate Assistant Commissioner dismissed the assessee's appeal on the ground that the assessee could not even establish the identity of the parties. On further appeal by the assessee, the Appellate Tribunal held that mere filing of confirmatory letters did not discharge the onus that lay on the assessee and there was no material on the record to establish the identity of the creditors: Held, that the Tribunal had taken all the relevant facts into consideration and the conclusion arrived at by the Tribunal that the loans represented the assessee's income from undisclosed sources was not perverse or unreasonable." 10.1 The Hon'ble Calcutta High Court in the case of CIT Vs United Commercial and Industrial Co. (P) Ltd., 187 ITR 596 held as under: "The primary onus lies on the assessee to prove the nature and source of credits in its account. It is necessary for the assessee to prove....
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....of the bank account of the depositors, it was specifically found that there were no sufficient funds available in their bank account and they were having only small bank balance, which was even not sufficient to meet out their household expenses or dayto- day requirements. Therefore, it is unbelievable to accept the contention of the assessee that said persons were having creditworthiness to advance any loan to the assessee. The documents produced by the ld. counsel for the assessee in the paper book merely prove the case of assessee superficially, which is far from reality or truth. When the test of human probabilities after considering the surrounding circumstances as is propounded by Hon'ble Supreme Court in the case of Durga Prasad More (supra) and Sumati Dayal vs. CIT (supra), is applied to the facts of the case, it is clear that the ld. CIT(A) was justified in confirming the addition u/s. 68 of the IT Act. In the present case, the assessee has not adduced any sufficient evidence before the authorities below to prove the creditworthiness of the creditors and genuineness of the transactions in the matter. Therefore, the assessee has not satisfied the essential ingredients of se....
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....d of Rs.40,000/-. It is important to note that Shri Dubey is a bank employee and he did not furnish the relevant details of the draft number and his bank account etc. Merely on the basis of confirmation that Shri Dubey is a bank employee the creditworthiness and genuineness of the transaction cannot be said to be proved by the assessee. 12. As regards loan from Shri Laloo Prasad Gupta Rs.2,00,000, he has stated to be expired on 29.01.2005. An affidavit has been filed by his son confirming that the loan was given by his father. Though it is mentioned that it was requested to the Assessing Officer that the depositor may be called for examination, there is no material on record to show that Shri Laloo Prasad Gupta was having creditworthiness of Rs.2,00,000/-. 13. As regards loan from M/s. Mishra Arms, which is a proprietary concern of Shri Ajit Kumar Mishra, a sum of Rs.2,00,000/- was deposited in bank account on 27.03.2004 before issuing the cheque to the assessee. The explanation of the assessee was that a sum of Rs.49,000/- and Rs.1,20,000/- were withdrawn from the bank account on 25.03.2004 and 27.03.2004 from the joint saving account of Shri Ajit Kumar Mishra and Shoba Mish....