TaxTMI 
TaxTMI 
2012 (10) TMI 601
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.... was the sole trustee of all these eight trusts and all deposits were made in cash and the trusts instead of utilizing these deposits for the aims and objectives of the trusts, loaned out to the assessee company, which proves that these trusts had no independent identity and acted as a tool in the hands of the assessee-company. (2) Whether on the facts and circumstances of the case the Hon'ble ITAT was justified in holding that the credit worthiness of 8 trusts was established when the source of funds with all of them was not proved by the assessee, which fact is further fortified by ill placed utilization of trust funds. (3) Whether on the facts and circumstances of the case the Hon'ble ITAT was justified in holding that the genuineness of transaction was established when the whole transaction apparently is a colourable device just to hoodwink the revenue. These eight trusts were managed by sole and same trustee, who was also managing and controlling the assessee company and the funds deposited in cash in the trusts were simply taken out by the Managing Director of the assessee company to use in the hands of the company." 3. For the assessment year 2003-04 the....
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....so considered the facts brought out by the AO in the assessment order as well as in his reported, referred to above. The facts emerges out from the material on record are as follows:- (i) Shri Rajesh Kumar Agarwal the Director of the Appellant Company is the sole trustee in respect of the 8 trusts. (ii) The ld. A.R. has pointed out that the said trusts are assessed to tax and the AO has informed that the returns of the trusts are not subjected to scrutiny. (iii) The AO has also reported that neither the books of account have been produced nor any evidence furnished in respect of the petty charity received. (iv) A perusal of bank statement shows that these so called trusts are receiving money in cash on regular basis and identical amount is being given away by cheque. (v) From the entries in the bank pass book apparently there is neither any expenditure shown nor any application of fund towards objective of the trust nor any outgoing towards beneficiary of the trust. (vi) The appellant has neither furnished copy of trust deed before AO nor before me to prove the genuine existence of the trusts. Shri Rajesh Kumar Agarwal is ....
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...., it does not conclusively prove genuine and independent existence of these trusts." 7. The appeal was dismissed. 8. The Income Tax Appellate Tribunal has allowed the appeal with the findings, as follows:- "8. Considering the facts of the case in the light of these above decisions and decisions cited by both the parties, we are of the view that assessee has discharged the initial onus which lay upon it in terms of S. 68 of the I.T. Act by proving the identity of the creditors, their credit worthiness and genuineness of the transaction in the matter. The assessee has filed copies of the balance sheets and income & expenditure/ac of all the 8 trusts in the paper book. It is not in dispute that the assessee received loans/advances from these 8 trusts through cheques and banking channels. On perusal of the balance sheet of these trusts, we find that these trusts were having initial capital brought from preceding A.Ys which is more than the amount advanced by these Trusts to the assessee. All these 8 trusts are income tax assessee with the same AO (ACIT, Circle-I Ghaziabad) who is also A.O. in the case of the assessee company. The details of the PAN no. of these Trusts are also....
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....sts. Therefore, independent status of the trusts have not been proved. The above objection of the authorities below is also not legally sustainable because assessee is registered under the Companies Act and is a legal entity. All the Trusts are assessed to income tax separately and their returns have been accepted by the AO. Therefore, there is no bar for the M.D. of the assessee company to become trustee in other organizations like the trust in question. The assessee has therefore proved that the assessee company and the 8 trusts are independent legal entities. The authorities below have also noted that books of accounts of the assessee are not produced before them. It was submitted by the assessee that during the A.Y. in question the 8 trusts were having only interest income and no business is carried on by the trusts. Therefore for non-production of the books of the trusts would not be a ground for rejecting the explanation offered by the assessee. If the income tax returns of all the 8 trusts are processed only u/s 143(1)(a) by the same AO, there is no fault on the assessee company in this way. The assessee company cannot control the wisdom of the AO whether to process the inco....
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....on forge Amount 17.4.2002 15,000/- 17.4.2002 14,000/- 29.4.2002 10,000/- 29.4.2002 10,000/- 14.08.2002 20,000/- 14.8.2002 20,000/- 19.8.2002 1,10,000/- 19.8.2002 1,10,000/- 08/01/03 30,000/- 08/01/03 30,000/- 10/01/03 15,000/- 10/01/03 15,000/- GODDESS BHAWANI JI TRUST Date of cash deposit Amount Date of transfer to Hindon forge Amount 17.4.2002 15,000/- 17.4.2002 14,000/- 29.4.2002 15,000/- 29.4.2002 15,000/- 14.08.2002 20,000/- 14.8.2002 20,000/- 08/01/03 30,000/- 08/01/03 30,000/- 10/01/03 20,000/- 10/01/03 20,000/- GODDESS LAXMI JI TRUST Date of cash deposit Amount Date of transfer to Hindon forge Amount 17.4.2002 15,000/- 17.4.2002 14,000/- 29.4.2002 15,000/- 29.4.2992 15,000/- 14.08.2002 15,000/- 14.8.2002 15,000/- 24.8.2002 1,20,000/- 24.8.2002 1,20,000/- 08/01/03 30,000/- 08/01/03 30,000/- 10/01/03 20,000/- 10/01/03 20,000/- LORD GANPATI JI TRUST Date of cash deposit Amount Date of transfer to Hindon forge Amount 17.4.2002 ....
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....r. Rajesh Kumar Agarwal, who was the director of the assessee-company and was managing of all the eight trusts. He had created these trusts for money laundering. He kept on depositing the cash amounts in the trusts and thereafter transferring the same on the same date to the company. All the dates of donations and loan taking from these trusts are the same. The assessee did not produce the trust deeds; the object and the beneficiaries of the trusts. In the entire transactions Shri Rajesh Kumar Agarwal was the author, donor and the beneficiary. He could not explain satisfactorily to the assessing officer that these trusts were genuine and give explanation about the genuineness of the credits in the accounts of the assessee company. 11. Shri Suyash Agrawal, on the other hand, submits that the respondent-assessee is not required to prove the source of the source. There was no dispute that all the eight trusts were subjected to assessments and that they were not called for any scrutiny. Their returns were accepted under Section 143(1)(a) of the Act. Their PAN numbers also given the the balance sheets were produced. It was not denied that these trusts had the capital, which were carr....
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....965' 12. Section 68 and 69 of the Income Tax Act reads as follows: "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 years. 69. Unexplained investments.- Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by It in for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year." 13. Under Section 68 of the Act if any sum is found credited in the books of account of the assessee and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is ....
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....ntry in the account books of the assessee which showed the receipt of a sum on conversion of high denominations notes tendered for conversion by the assessee himself, it is necessary for the assessee to establish it asked, what the source of that money was and to prove that it was not income The Department was not at that stage required to prove anything. It could ask the assessee to produce any books of account or other documents or evidence pertinent to the explanation if one was furnished and examine the evidence and the explanation. If the explanation showed that the receipt was not of an income nature, the Department could not Act unreasonably and reject that explanation to hold that it was income. If however. the evidence was unconvincing, then such rejection could be made The Department cannot by merely rejecting a good explanation unreasonably, corvert good prod into no proof. 19.In the case of Commissioner of Income Tax v. Orissa Corporation P. Ltd. reported in 159 I.T.R., 78. the Apex Court observed as follows;- "In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were ....
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....der Section 69 of the Act to treat the source of investment as the income of the assessee if the explanation offered by the assessee is not found satisfactory and the said discretion has to be exercised keeping in view the facts and circumstances of the particular case." 12. In the present case, we find that the assessee could not prove the genuineness of the transactions before the assessing officer. The identity of the creditor (the eight trusts) in the present case was that of the assessee himself. Shri Rajesh Kumar Agarwal-the managing director of the assessee-company, with majority shareholdings along with his close associates, was the common managing trustee of all the trusts. He did not produce the trust deeds, its objects, and the beneficiaries of the trusts to establish that though the trusts were registered, there were beneficiaries other than him and his associates. The capacity of the creditors was built up by the assessee himself as he could not explain the sources for which he has received the money. It was found by the AO and the CIT(A), that the trusts were receiving cash donations, which were transferred on the same date to the company. The dates of donations to....