TaxTMI 
TaxTMI 
2012 (8) TMI 387
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....i Diwas Gupta had submitted his confirmation that he had given a sum of Rs. 3,50,000/- as loan to the appellant vide cheque No.863263 from his Savings Bank A/c No. 10729 with Allahabad Bank, Lakhimpur Kheri. (ii) That a copy of confirmation of statement of account of Sri Diwas Gupta duly signed by him was also placed before the Ld. A.O. in the course of assessment proceedings. (ii) That Sri Diwas Gupta is regularly assessed to Income Tax at PAN: AGSPG3966H by A.O. Range 2, Lakhimpur Kheri. (iii) That a copy of the bank statement of Allahabad Bank, Lakhimpur Kheri showing the debits aggregating to Rs. 3,50,000/- in his bank a/c was also submitted before the Ltd. A.O. (iv) That Sri Diwas Gupta was also produced before the Ld. A.O. on 20/12/2007 who on statement on oath confirmed of giving loan to appellant by accounts payee cheque of Rs. 3,50,000/- detailed above PAN letter, copy of income tax return acknowledgement & income statements. (v) That the said Sri Diwas Gupta who was produced before Ld A.O. has confirmed about his source of income and financial capacity. (vi) That after submission of above documents and statement on oath no further....
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....cts stated above, the addition made by the Ld. A.O. is not justified & may kindly be ordered to be deleted. 5. That the A.O. erred on facts and in law in not allowing the appellant proper and sufficient opportunity to have its say or make necessary compliance of the reasons relied by him in making various additions to the appellant's income in the present case. 6. The income assessed and interest charged are highly excessive and contrary to the facts, law and principles of natural justice and fair play. 7. The appellant prays for permission to modify and / or add any other ground or grounds of appeal as the circumstances of the case might require or justify. 2. This appeal came up for hearing on 9.11,2011, but none appeared on behalf of the assessee. On perusal of record, it is noticed that on the last date of hearing i.e. on 10.10.2011 when the matter was adjourned to 9.11.2011, the Id. counsel for the assessee has taken note of the date of hearing. Despite having knowledge of the date of hearing, none appeared on behalf of the assessee. We, therefore, had no option but to hear the appeal ex parte qua the assessee. Accordingly, the Revenue was heard. The ld. D.R. emphatically ....
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.... statement before the Assessing Authority made on oath had confirmed giving of loan of Rs. 3,50,000/- to the appellant by account payee cheque and had also furnished PAN letter, copy of acknowledgement of income tax returns and income statement etc. He is thus found to have given reasonable explanation about the source of income and financial capacity to establish creditworthiness of the amount so advanced as loan to the appellant. It is also not the case of Revenue that facts of source and availability of cash with the loan creditor are in the knowledge of the appellant In this view of the background and documentary information laid on record, the appellant can be said to have discharged the onus that lay upon him u/s 68 of the Act to prove nature and the source of the credit. The Assessing Officer, however, without bringing any contrary material on record and without requiring appellant to adduce further evidence, has failed to discharge the onus that had shifted on the Revenue and unilaterally accepted only part amount to the extent of Rs. 1,50,000/- and added the balance of Rs. 2,00,000/- taking the same to be assessee's own income routed through the bank account of Shri Diwas ....
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....he case of Smt. Ruchira Gupta also the appellant had submitted a confirmation stating that she has given a loan of Rs. 1,80,000/- vide cheque No. 216793 drawn on her Savings Bank Account No. 213379 with Allahabad Bank, Lakhimpur Kheri. She has also given a confirmed statement of account as appearing in the books of the assessee and the same was laid on the record of the Assessing Authority. The assessee has also brought on record that Smt. Ruchira Gupta has regularly been assessed to tax at PA Number AGSPG 3969G by the Assessing Officer, Range-4, Lakhimpur Kheri and copy of her bank account from where the aforesaid cheque was issued was also laid on assessment record. Her Husband Shri Manoj Gupta appeared on 20/12/2007 before the Assessing Authority and made a statement on oath that his wife has given loan to the appellant amounting to Rs. 80,000/- and also placed on record a copy of PAN letter, copy of acknowledgement of income-tax return and income statement etc. to substantiate the genuineness of the loan given to the assessee and established her source of income and financial capacity in that regard. The creditor also explained that the loan has been advanced out of realization....
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.... money through the bank account of Smt. Ruchira Gupta for obtaining loan and crediting the same in his books of account whose correctness has not been doubted by the Assessing Officer himself. Merely because there were cash deposits in the account of loan creditor, that by itself could not give jurisdiction to the Assessing Authority or to the learned CIT(A) to draw any adverse inference. The learned CIT(A) also without appreciating the legal position in right perspective and putting blinkers to the glaring facts and documents that appellant had brought on record to substantiate identity, creditworthiness and genuineness of the transactions, proceeded to hold that the genuineness of the transaction or creditworthiness of the transaction in this case has not been established and thus erred in reaching findings contrary to facts and sustained the addition of Rs. 1,30,000/- without any justifiable reason or cause of such a genuinely raised loan by the appellant. 5. The aforesaid findings are supported by the legal position decided by various courts and the Tribunal as under: 5.1 Hon'ble Assam High Court in the case of Nabadwip Chandra Roy v. CIT [1962] 44 ITR 591 (Assam) and as also....
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....pport can be derived from section 4 of Bankers Book Evidence Act 1891 which reads as under:- "4. Mode of proof of entries in bankers' books Subject to the provisions of this Act, a certified copy of any entry in a bankers' book shall in all legal proceedings he received as prima facie evidence of the existence of such entry, and shall be admitted as evidence of the matters, transactions and accounts therein recorded in every cases where, and to the same extent as, the original entry itself is now by law admissible, but not further or otherwise." Following the said legislation, the coordinate bench of ITAT Allahabad vide its judgment and order dated 11.2.2008 in the case of Anand Prakash Agarwal v. ACIT [2008] 6 DTR (All) (Trib) 191 at page 207 & 208 has held as under:- "The question that remains to be decided now is whether the subject matter of transfer was the asset belonging to the transferor/donors themselves. There is enough material on record which goes to show that there were various credits in the bank accounts of the donors, prior to the transaction of gifts, which undisputedly belonging to the respective donors themselves, in their own rights. No part of the credits i....
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....e of six creditors who appeared before the Assessing Officer and whose statements were recorded by the Assessing Officer, they have admitted having advanced loans to the assessee by account payee cheques and in case the Assessing Officer was not satisfied with the cash amount deposited by those creditors in their bank accounts, the proper course would have been to make assessments in the cases of those creditors by treating the cash deposits in their bank accounts as unexplained investments of those creditors under section 69. Further we may point out that section 68 under which the addition has been made by the Assessing Officer reads as under: "68. 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." The phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to in....
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.... have taken place between the assessee and the creditor nor does the wording of section 68 indicate that section 68 does not authorize the Revenue Department to make inquiry into the source(s) of the credit and/or sub-creditor. The language employed by section 68 cannot be read to impose such limitations on the powers of the Assessing Officer. The logical conclusion, therefore, has to be, and we hold that an Inquiry under section 68 need not necessarily be kept confined by the Assessing Officer within the transactions, which took place between the assessee and his creditor, but that 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. This limit has been Imposed by section 106 of the Evidence Act, which reads as follows: "Burden of proving fact especially within knowledge.--When any fact is especially within the knowledge of any person, the burden of proving that fact is upon him." ** ** ** "What, thus, transpires f....
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....tions, which took between the creditor and sub-creditor and/or creditworthiness of the sub-creditors, for, these aspects may not be within the special knowledge of the assessee." ** ** ** "...if a creditor has, by any undisclosed source, a particular amount of money in the bank, there is no limitation under the law on the part of the assessee to obtain such amount of money or part thereof from the creditor, by way of cheque in the form of loan and in such a case, if the creditor fails to satisfy as to how he had actually received the said amount and happened to keep the same in the bank, the said amount cannot be treated as income of the assessee from undisclosed source. In other words, the genuineness as welt as the creditworthiness of a creditor have to be adjudged vis-a-vis the transactions, which he has with the assessee. The reason why we have formed the opinion that it is not the business of the assessee to find out the actual source or sources from where the creditor has accumulated the amount, which he advances, as loan, to the assessee is that so far as an assessee is concerned, he has to prove the genuineness of the transaction and the creditworthiness of the ....
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....nder the law, treated as the income from the undisclosed sources of the assessee himself when there was neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or were owned by, the assessee. Viewed from this angle, we have no hesitation in holding that in the case at hand, the Assessing Officer had failed to show that the amounts, which had come to the hands of the creditors from the hands of the sub-creditors, had actually received by the sub-creditors from the assessee. In the absence of any such evidence on record, the Assessing Officer could not have treated the said amounts as income derived by the appellant from undisclosed sources. The learned Tribunal seriously fell into error in treating the said amounts as income derived by the appellant from undisclosed sources merely on the failure of the sub-creditors to prove their creditworthiness." 5.6 in the case of CIT v. S. Kamaljeet Singh [2005] 147 Taxman 18 (All) their lordships, on the issue of discharge of assessee's onus in relation to a cash credit appearing in his books of account, has observed and held as under:- "4. The Tribunal has recorded a finding that the assessee ha....
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....nasmuch as the amount has been advanced by account payee cheques, through bank, and is duly supported by documentary evidence, as well as the evidence of the two lenders, and that satisfies the 2nd requirement also, about the discharge of burden on the part of the assessee to prove identity and genuineness of the transaction. So far as capacity of the lender is concerned, in our view, on the face of the judgement of Hon'ble Supreme Court, in Dauiat Ram's case (supra), and other judgments, capacity of the lender to advance money to the assessee, was not a matter which could be required of the assessee to be established, as that would amount to calling upon him to establish source of the source. In that view of the matter, since this part of the judgment runs contrary to the judgment of the Hon'ble Supreme Court, in Daulat Ram's case (supra), while this Court in a subsequent judgment in Mangilal's case (supra) relying upon Dauiat Ram's case (supra), has taken a contrary view, we stand better advised to follow the view, which has been taken in Mangilal's case (supra)" 5.8 There is no responsibility on the assessee to show that the money has come from the accounted sources of the lend....
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....f the Third Member. 2. When the questions were placed before the Hon'ble President he was pleased to nominate me as Third Member with a direction to reframe the question, if necessary, to bring out the point of difference " and to resolve the difference accordingly. 3. Both the parties have agreed that the following reframed question would focus the issue in dispute in its correct perspective" "Whether on the facts and in the circumstances of the case, the addition made under section 68 of the Act be confirmed or deleted?" 4. The facts necessary for the disposal of the matter are set out in brief. The assessee firm is engaged in the business of manufacture of sugar. In respect of the previous year relevant to AY 2005-06 assessee declared a total income of 71,31,930/-. Upon taking up the case for scrutiny the AO examined the books of account, etc. wherein it was noticed that the assessee maintained books of account, vouchers, etc. which were also audited. They were examined on test check basis and the gross profit and net profit was compared to the results of the previous years. The AO noticed that the profit declared for this year is comparatively positive and hence it does not....
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.... qua assessee, though on merits. The learned Judicial Member observed that the assessee raised many grounds which are more in the form of arguments and he extracted the relevant grounds wherein it was contended that the creditors were regularly assessed to income-tax, copy of the bank statements submitted before the AO and the creditors were produced before the AO, who on statement of oath confirmed having given the loan (in the case of Smt. Ruchira Gupta Shri Manoj Kumar Gupta, husband of the creditor appeared before the AO, who confirmed on oath that she has given the loan to the assessee by account payee cheque). It was contended that, in the peculiar circumstances, the assessee discharged its onus by proving the identity of the persons, genuineness of the transactions as well as creditworthiness of the depositors. 9. The learned Judicial Member observed that the learned CIT(A) has adjudicated the impugned issue minutely and therefore no interference is called for. 10. However, the learned Accountant Member passed a separate order wherein he highlighted that there is no basis for invoking provisions of section 68 of the Act since the assessee has proved the identity, genuinene....
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....the assessee paid interest on the loan advanced by the aforementioned two persons and the same was accepted by the AO. If the interest paid is accepted as deduction it has to be assumed that the loan was given by the respective parties and if there is any dispute with regard to the source from which the third party has given the loan, addition can, at best, be made in the hands of the third party; unsatisfactory explanation by third parry cannot be the sole basis for making an addition in the hands of the assessee under section 68 of the Act. In the present case section 106 of the Evidence Act comes to the aid of the assessee inasmuch as a person can be required to prove such facts which are within his personal knowledge and not otherwise. The learned counsel admitted that in the P & L Account the gross interest payable was debited and bifurcation was not available but the fact remains that no disallowance was made referable to pro rata interest on the amount disallowed by the AO. He also adverted my attention to page 33 of the paper book to submit that in the statement given by Shri Diwas Gupta it was stated that he had earned income as a freelancer and reflected such income in hi....
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....n and the Legislature in its wisdom deems cash credits in the books as unexplained i.e., prima facie burden is on the assessee to prove not only the identity and genuineness of the creditors but also the creditworthiness of the creditors. The initial onus placed upon the assessee was not discharged in the instant case. In fact none appeared on behalf of the assessee before appellate Tribunal during the course of hearing the appeal by the Division Bench. He thus strongly relied upon the order passed by the leaned Judicial Member. 15. I have carefully considered the rival submissions and perused the record. At the outset it may be noticed that the AO has given a categorical finding that the trade results of the assessee are correct, which implies that the assessee has not earned any additional income from the sugar business. It is also necessary to notice that the assessment was completed on 31.12.2007 whereas the details of the credits were called for vide letter dated 14.12.2007 and the case was fixed for hearing on 18.12.2007. Assessee produced five persons, whose statements were taken. Vide order sheet entry dated 18.12.2007 the counsel of the assessee was required to produce Sh....