TaxTMI 
TaxTMI 
2013 (8) TMI 79
X X X X Extracts X X X X
X X X X Extracts X X X X
....cured loans from various persons - the total amount of such deposit came to be Rs. 7,25,000/=. When called upon to furnish necessary evidence, he furnished confirmation of accounts and produced some of these depositors for personal examination. Assessing Officer, on noting that the substantial amount of cash was deposited in the bank account of these persons just prior to issuance of the cheques in favour of the assessee as an advance, the genuineness of such unsecured loan was questioned. 2.2 It is to be noted that the Assessing Officer on receiving the letters of confirmation from these parties chose to summon them and examine them on oath. Some of them did remain present and on the basis of their oral versions, he was convinced that they did not have sufficient resources so as to advance loan of substantial amount ranging from Rs.50,000/to Rs.2,75,000/. After seeking assessee's explanation by a show cause notice, the Assessing Officer held this to be accommodation entries and further held that these amounts reflected assessee's own unaccounted funds which were circulated along with interest @ 24% per annum. 2.3 Giving thus an elaborate finding, the Assessing Officer conclu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ther appeal, challenged the same before the Tribunal. 4.1 The Tribunal concurred with both the authorities by holding thus "...It is to be seen that in the case of Mrs. Sunit Krishnani also all these details were available with the Tribunal for the assessment year 200102. But inspite of that the Tribunal has held that the credit worthiness of Mrs. Sunita Krishnani was not satisfactorily explained and accordingly upheld the addition. Therefore, the point emerges out of the situation is that it is not sufficient to satisfy the technical requirements of explaining case credits, such as, identity of person, mode of transaction, PAN, statement of accounts, etc. The crucial question to be considered is whether the creditor is in a position to raise that much fund necessary for advancing to the assessee. The soul and substance of the issue is whether the creditor has resourcefulness to make advance of certain amounts to the assessee. While explaining the sources available in the hands, these creditors usually explain that they received amount from vocations like tuition, gardening, tailoring and so many such fancy items. It is true that a housewife may be earning income out of tuiti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the same restraining ourselves from ordering cost. " 4.3 The tribunal decided entire issue classifying the same into three aspects viz., (i) establishment of identity of the creditors or donors; (ii) genuineness of the transactions and (iii) capacity of the donor/creditor to make gift or deposit. The Tribunal held that the main source of income of the assessee is the receipt of agency commission and during the year under question, he received a total sum of Rs.40,32,867/and there does not appear to be any apparent need for receiving more funds as what all he needed to do was to run the agency and the initial stage of obtaining the agency where fund requirement would be much more was long over. It was also noted by the CIT[A] that the documents adduced reflected his capabilities to pay to his brokers and no liquidity crunch emerged from the record so as to obtain loan to ratify the contention of obtaining the loan at the rate as high as twenty four per cent. This was held in these circumstances as nothing but an attempt to reduce the instance of tax by increasing the interest liability by using his own funds through these creditors. In essence thus, the Tribunal's ultimate conclu....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the order impugned. These are : [ a] Commissioner of Income Tax, Orissa v. Orissa Corporation P. Limited, reported in 159 ITR 78; [b] Commissioner of IncomeTax v. Pragati Cooperative Bank Limited, reported in [(2005) 278 ITR 170 (Guj)]; [c] Murlidhar Lahorimal v. Commissioner of IncomeTax, reported in [(2006) 280 ITR 512 (Guj)]; [d] Commissioner of IncomeTax v. Ranchhod Jivabhai Nakhava, reported in [(2012) 21 Taxmann.com 159 (Guj)]. 7. In the case of CIT v. Orissa Corporation P Limited [Supra] before the Apex Court, the assessee was a private limited company which was maintaining the accounts according to the calender year. The credit entries in the books of account of the assessee stood in the name of third party and the explanation was that the amount represented loans to the assessee from the concerned persons. The assessee had produced discharged Hundis and confirmation letters from the alleged lenders. Before the Supreme Court, the inconsistency in the confirmation letters were pointed out. It was also pointed out that the assessee had not discharged the burden. The Apex Court, after discussing various caselaws, noted that the assessee had given names and addr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....apital account of the partnership firm. A credit entry reflected gift of Rs. 50,000/= to such assessee. A notice was issued as such gift was not found genuine and was held to be assessable under Section 68 of the Act. The Tribunal, found that the donor was genuine and the gift was by way of bank draft, he also produced evidence in support of the source from which the funds for making the gift were available with him. Even though motivation for making the gift was not established, the Court held that the addition of Rs. 50,000/= was not found justifiable. The Court further held therein that the revenue if was not satisfied with the source of the funds in the hands of the donor, it was up to the Revenue to take appropriate action and the motivation of making the gift was not a relevant consideration. 10. This Court, in case of CIT vs. Ranchhod Jivabhai Nakhava [Supra], was dealing with an assessee who had received advance by way of an account payee cheques from the lenders who were all Incometax assessees and whose PAN also had been disclosed. The Court held that the burden under Section 68 of the Act was duly discharged by him. The Court in terms held that the assessee could not ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the source of credit in his books of account, however, he cannot be asked to prove the source of source. 12. Before adverting to the case of the appellant herein, it would be profitable to reproduce at this stage, some of the decisions on the subject. [a] Commissioner of Income Tax v. United Commercial & Industrial Co. (P) Limited, reported in 187 ITR 596; [b] Commissioner of Income Tax v. Precision Finance Pvt Limited, reported in 208 ITR 465. [c] Commissioner of Income Tax v. Mohankala, reported in [(2007) 291 ITR 278]. 13. The Calcutta High Court in case of CIT v. United Commercial & Industrial Co. (P) Limited [Supra] was considering the case of an assessee who was asked by the Incometax Officer to prove genuineness of the said loans. The assessee had produced confirmatory letters and discharged hundis. He also filed copies of accounts to show that the receipts and repayments were made by cheques. When asked to produce parties, he did not. Notices came unserved. In such circumstances, ITO added entire income to the returned income of the assessee as "income from undisclosed sources" and also disallowed interest thereon. It was held and observed as under : " The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee and it would be he who shall have to rebut such evidence and on such failure, receipt can be held in the nature of an income of the assessee. 15. This Court recently in case of Blessing Construction vs. Income Tax Officer [Tax Appeal No. 16 of 2013 :: Decided on 13/03/2013], when found serious questions of credentials of the genuineness of the transactions, dismissed the appeal by confirming the order of the revenue authorities , which held such income as a part of the assessee's income having come from the unexplained sources. It would be apt to reproduce relevant observations, which read thus" 6.1 Counsel further submitted that assessee had not only established the identity of the deposits, had received the amount through cheque. Genuineness of the transaction therefore, could not have been doubted. The creditworthiness of the deposits also was sufficiently established. Assessee thereafter, could not have been asked to establish the source of the income of such creditors. 7. With respect to the legal contention that the Revenue cannot insist on assessee supplying the source of source is impeccable. However, the facts of the present case are vastly different. It is o....