TaxTMI 
TaxTMI 
2013 (1) TMI 140
X X X X Extracts X X X X
X X X X Extracts X X X X
....k, income of other sources including agricultural income amounting to Rs.6000/-. The case of the assessee was duly processed on 30.03.2005. However, a notice under Section 147 was issued on 23.11.2005 for the same assessment year which was duly served upon the assessee on 26.11.2005. The reasons for re-opening the case is based on the fact that the assessee had taken loans from 148 different persons amounting to Rs.25.97 lakhs during the financial year 2002-03(relevant to the assessment year 2003-04). All these loans were taken in cash and are below Rs.20000/-. On the basis of this fact, the A.O. had reasons to believe that because of this clandestine deal, the assessee had escaped assessment of income for the assessment year 2003-04. 4. In response to the notice under Section 142(1), the assessee filed a petition dated 12.09.2006 and requested the Department to accept original returns filed on 22.04.2004, as returns was filed under Section 148 of the Act of 1961. In view of the above, the case was fixed for hearing by issuing notice under Section 143(2) afresh. In course of scrutiny, the assessee was asked to file the details of the names and addresses of the persons from whom h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d of two to three days i.e., from 07.05.2002 to 09.05.2002. This fact found support from the document filed in the L.P.A. by the appellant himself along with supplementary affidavit filed on 03.07.2012. The A.O. had doubt that how in the such short period, the assessee could have contacted so many persons and they were agreed to give the money in cash. To this suspicion of the A.O., the assessee's plea was that he being a politician, could collect cash money for advancing loan to Ajay Kumar of Hazaribagh by utilizing his personal contact as politician. 7. Be that as it may, the A.O., after taking note of the legal position that in such a situation, the assessee was required to show (1) genuineness of the loan creditors, (2) genuineness of the transaction and (3) creditworthiness of the loan creditors, considered the facts in detail and thereafter, declared that out of the entire transaction of taking loan of Rs.32 lakhs, Rs.25.97 lakhs have been alleged to have been taken from 148 different persons, is absolutely bogus transaction and, therefore, added amount of Rs.2,88,000/- as taxable income of the assessee and assessed the total taxable income to the tune of Rs.38,66,230/-. The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....segregated the transaction which were genuine and could have rejected the transactions which were not true transactions. No genuine transaction can be rejected on the basis of other independent transaction which could not have been believed by the A.O. 11. Learned senior counsel for the appellant, Shri Binod Poddar, also submitted that the same mistake had been committed by the appellate authority as well as by the Tribunal, who may have been influenced by the involvement of large number of persons who advanced money to the assessee as well as because of the fact that all the said amount had been paid in cash to the assessee. 12. Learned senior counsel for the appellant has relied upon a judgment delivered in the case of Commissioner of Income Tax Vrs. Orissa Corporation (Pvt.) Limited reported in (1986)159 ITR 78 (SC), wherein also in a case where the A.O. was informed about the details of the creditors who were the income tax assessees, and to whom notice under Section 131 of the Act was issued at the instance of assessee, the A.O. did not pursue the matter further, nor did he examine the source of income of the said alleged creditors to find out whether they were credit....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... stands discharged and then burden lies upon the A.O. to proceed further. One of the ways is to obtain the confirmation of the loan from the creditors and if, there is any doubt, the A.O. may summon such creditors under Section 131 of the Act of 1961 and may enquire about the genuineness of the transaction. If the A.O. feels satisfied about the genuineness of the creditors and then A.O. is required to examine the creditworthiness of the loan creditors. Thereafter, A.O. is required to examine, whether loan was advanced by the creditor to assessee. The question of consideration is that whether in all cases where assessee has given particulars of persons and also submitted the confirmation letters of such creditors, whether it is necessary in all cases to adopt only above procedure or there can be exception to above procedure? 14. Similar question came-up for consideration before the Division Bench of this Court in the case of Mukesh Shaw Vrs. Income Tax Officer reported in 2012 (1) JCR 230 (Jhr), wherein it has been held that the admission contrary to the trustworthy evidence of donor cannot be accepted as binding upon the A.O. The admission binds the author of admission and operat....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., it is the assessee who claimed before the AO to have raised loans aggregating to Rs.25.97 lakhs from 148 persons and utilized the same for giving loan to Shri Ajay Kumar. Perusal of Annexure 'A' to the assessment order shows that majority of the creditors claimed to have given loan in cash on 8.5.2002. The short point is as to whether it was at all possible to raise loans of such magnitude by contacting 148 persons in two-three days in such a manner that all of them would be willing to give loan below Rs.20,000/- in cash immediately. In the ordinary course of human conduct, it is not possible to do so unless there are strong materials to believe so. In the present case, there is no such material. It is unlikely that a person would be able to contact 148 person over 2-3 days to raise loan of Rs.25.97 lakhs from them. The finding recorded by the Assessing officer in this behalf and confirmed by the ld. CIT (A) is, therefore, in order. Secondly, it is highly improbable that a person of ordinary prudence would approach 148 person for raising loans in order to pass on the same as loan to another person. It would be basically an exercise as middleman without any gain and thus, an exer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed Rs. 25.97 lakhs in no time and that too, as interest-free loan and further to give it to a Company as interest free loan! These facts itself were sufficient reasons for serious doubt. However, mere doubt is not sufficient and, therefore, such transaction was not rejected by the A.O. on the basis of mere doubt. The assessee did not produce very basis and reason for taking loan from 148 persons in cash which is the original agreement dated 10.5.2002. However, a photo copy of this agreement has been placed on record by the assessee along with supplementary affidavit filed before us on 03.07.2012 in L.P.A. In this appeal also, original agreement was not produced. The agreement alleged to have been entered into between the parties on 10.05.2002 and it has been mentioned in the said agreement (copy of original agreement was not produced) that both the parties agreed to enter into this agreement on 10.5.2002 at Dhanbad and Shri Ajay Kumar, who is one of the Directors of M/s Dhanu Agency (P) Limited, registered under the Companies Act, 1956 on 30.04.1998 and having its registered office at Mumbai, is carrying on business of Commission Agents traders and/or imports and exports in all kin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t evidence, then inference can be drawn that if that evidence would have been produced, it would have gone against him. It is for the assessee to explain the reason for not filing original agreement. From the facts it is clear that, assessee failed to prove the agreement with Shri Ajay Kumar or his Company. 18. We may mention a few more facts again which are relevant evidence on record and which are the facts which were not disputed by the assessee. The appellant's own case is that his total income was of Rs.84,200/- for the relevant Assessment Year and his source of income was from tuition, sale of cow milk, income from other sources including agricultural income etc. It will be worthwhile to mention here that his agricultural income was of Rs.6000/- only. With this background, the assessee's contention that being a politician, he is a political leader(as per A.O., not star Politician and not disputed by the assessee) and, therefore, he could contact 148 persons in a very short period of three days and had collected Rs.25.97 lakhs, does not inspire confidence. The assessee's further admitted case is that he is the brother of an Advocate and there is allegation of one of the pers....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ness in the original transaction and advancement of loan by the assessee to another person but certainly proved that transaction was carefully projected so as to unnecessary inquiry by revenue authorities and to run after 148 persons and that too for the purpose of finding out the creditworthiness of Rs.20000/- or less than Rs. 20000/- and to find out their source of income even of Rs.20000/-. 20. In the fact situation of the present case, even if the revenue would have run after 148 persons, then it would have been very easy for all 148 persons to prove their creditworthiness so as to lend Rs.20000/- or less or more to one person. But that proof would not have proved the transaction of consequential advancement of loan to M/s Dahanu Agency (P) Ltd. or it's Director Ajay Kumar. The taking loan from 148 and other persons and advanced to said Company or person, in the facts of case is inseparable transaction. Therefore, in the fact situation, there was no need for further inquiry by the A.O. regarding the creditworthiness of all the creditors and sample inquiry was justified which finds support from findings recorded for other creditors. Therefore, we are of the considered opinion t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n not in its own name but in the name of one of the Directors of the Company, (vii) The resolution of Company was not placed before any of the authorities below. (viii) Original agreement with the Company dated 10.5.2002 was not produced before the A.O., (ix) The Agreement was executed between the Company on 10.5.2002 and the assessee collected the money prior to it, between 07.05.2002 and 09.05.2002(Agreement is dated 10.5.2002), (x) The money, borrowed in this manner from 148 person in less than Rs.20000/- in cash, had been advanced to a registered Company as interest free loan, (xi) One of the close associates of the assessee, Shri Rakesh Kumar Singh, summoned under Section 131 of the Act of 1961, was found to be a person 'Benamidar' of the assessee, whose vehicle was financed by the assessee, (xii) The assessee, whose worth, as we have already stated above, must have prepared all the confirmation letters, which are verbatim same for all the creditors and as per the documents placed before us along with supplementary affidavit filed by the appellant (dated 03.7.2012) and endorsement has been obtained for repayment of the money by the assessee to such lenders, (xiii) Total....