TaxTMI 
TaxTMI 
2012 (10) TMI 741
X X X X Extracts X X X X
X X X X Extracts X X X X
....eposits of identical amounts (i.e. equivalent to the amounts stated to have been given to the assessee as loan) just before advancing the amounts to the assessee : (i) Shri Abhay Maheshwari Rs. 2,00,000 (ii) Shri Amit Maheshwari Rs. 2,00,000 (iii) Smt. Kirti Maheshwari Rs. 1,50,000 (iv). Smt. Mithilesh Maheshwari Rs. 2,50,000 (v) Shri Ram Pal Singh Rs. 2,50,000 (vi) Shri Shariq Ali Khan Rs. 2,50,000 Rs. 13,00,000 4.1 Since the sources of the above deposits in the bank accounts of the lenders were not known and such cash deposits were made just before advancing the amount to the assessee and hence, to verify the genuineness of said transactions, the AO required the assessee to produce all the above six persons for examination before him. Despite providing opportunity to the assessee, the assessee produced only one person, namely, Shri Abhay Maheshwari for examination and remaining five persons were not produced before the AO ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r submitted that so called balance sheets, cash books and cash flow statements have no evidentiary value, as those papers had not been filed with the return of income. It was also explained that the creditors are not persons of means. Therefore, the assessee failed to prove their creditworthiness and genuineness of the transaction in the matter. The ld. CIT(A) considering the explanation of the assessee in the light of findings of the AO, material on record and the remand report of the AO, confirmed the addition and dismissed this ground of appeal of the assessee. The findings of the ld. CIT(A) in para 8 and 9 of the appellate order are reproduced as under : "8. The next issue pertains to the addition of Rs. 14,00,000/-made u/s. 68 of I.T. Act being unexplained credit appearing in the name of 6 persons. 8.2 The learned AR has first contended that the AO has wrongly taken the total of these credits at Rs. 14,00,000/- instead of Rs. 13,00,000/-. It has been further submitted that the learned AR has also erred in taking the total figure of credits appearing in the name of Smt. Keerti Maheshwari and Smt. Mithilesh Maheshwari at Rs. 4,50,000/- instead of Rs. 4,00,000/-. It was thu....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Rs. 4,00,000/- while the AO has made the addition at Rs.4,50,000/- as mentioned in the above table. Since the assessee has clarified the position that the credit appearing in the name of Keerti Maheshwari and Mithilesh Maheshwari was Rs. 1,50,000/- and Rs. 2,50,000/-, respectively and the figures mentioned by the auditors in their audit report was a typographical mistake, the AO is directed to adopt the figures, as claimed by the assessee. It is also seen that the AO has taken the total of credits appearing in the name of these two lenders at Rs. 4,50,000/-instead of Rs. 4,00,000/-. The AO is accordingly directed to take the correct figure at Rs. 4,00,000/-. 9. The next issue pertains to the action of the AO in making addition u/s 68 appearing in the name of above lenders as unexplained cash credit. During appellate proceedings, it was submitted that in the case of above six lenders, the assessee duly furnished before the AO their confirmatory letters, affidavits, copies of bank pass book, copies of returns, balance sheet and cash flow statements. The learned AR has submitted that in their confirmatory letters as well as in the affidavits, the lenders have confirmed of having g....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... examination. As regards the details furnished by the assessee in respect of these lenders such as the balance sheet, cash book and cash flow statement, as has been rightly stated by the AO, the same has no evidentiary value as the same were not furnished along with their returns of income. The copies of return of income filed by the assessee in respect of these lenders show that they have shown very meager income in their return filed which create doubt about their creditworthiness to advance such loans. Thus, as has been rightly observed by the AO, the preponderance of probabilities is that these loans were in fact accommodation entries which were provided to the assessee by taking unexplained cash from her and routing it through the bank accounts to give it the colour of unsecured loans. Considering the entire facts and circumstances of the case, it is held that the AO has rightly added the credits appearing in the names of above six persons as unexplained cash credit u/s. 68 of I.T. Act. The addition made by the AO on this score is accordingly confirmed." 6. The ld. counsel for the assessee reiterated the submissions made before the authorities below and submitted that the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... other hand, the ld. DR relied upon the orders of the authorities below and submitted that the cash was deposited either on the date of issue of cheques in favour of the assessee or just prior to it of the equivalent amount, the source of which is not explained. The creditors have no source of income to advance loan to the assessee. Creditworthiness of the creditors has not been proved. The creditors were filing return of income at meager income and have no source to advance any money to the assessee. Therefore, the addition was rightly made in the matter. 8. The ld. counsel for the assessee in the rejoinder also submitted that the interest paid by the assessee on the loans have not been disputed by the AO. 9. We have considered the rival submissions and the material available on record. It is not in 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....source of cash deposit to the satisfaction of the AO. He was earning hardly one lac rupees and spent 40,000/- to 50,000/- for household purposes. During his examination on oath, he was not able to satisfactorily explain the availability of funds with him for giving loan to the assessee. In his case, he has filed return of income for the assessment year under appeal at Rs. 1,02,850/- (PB-60). In the case of Shri Amit Maheshwari, he was also having small bank balance of Rs. 2429/- before issue of cheque to the assessee and equal amount of the cash credit was deposited in the bank account. He has filed return of income for the assessment year under appeal at Rs. 44972/- (PB-71). In the case of Smt. Keerti Maheshwari, in her bank account, there was balance of Rs. 4688/- only prior to issue of cheque to the assessee 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 fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs prior to issue of cheques would clearly reveal that they were not having any source and it was the money of the assessee which was routed through the bank accounts of the creditors for the purpose of giving credits to the assessee. These were, therefore, accommodation entries only and as such, could not be considered as genuine transactions. Merely because the loans have been received through banking channel, is not sacrosanct to make a non-genuine transaction as genuine transaction. 10. Hon'ble Calcutta High Court in the case of Bharati (P.) Ltd. v. CIT [1978] 111 ITR 951 held as under : "In the course of assessment proceedings, the Income-tax Officer found that the assessee had shown Rs. 20,000 as loan in its books taken from two parties. The assessee produced the alleged confirmatory letters from those parties before 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 appe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f CIT v. Durga Prasad More [1971] 82 ITR 540 and Sumati Dayal (supra) held that "the Courts and Tribunal have to judge the evidences before them by applying the test of human probabilities after considering the surrounding circumstances." 11. On consideration of the facts of the case in the light of above discussion and decision, we do not find any justification to interfere with the order of the ld. CIT(A). The assessee has failed to prove the creditworthiness of all the creditors and no source of their income has been filed. At the best the assessee is able to prove identity of the creditors, but the assessee failed to prove the genuine credit in the matter. All the creditors have been rightly found to be men of meager means and no source of income have been filed to prove that they were having sufficient funds or savings in order to give loans to the assessee. On verification 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 day-to-day requirements. Therefore, it is unbelievable t....