TaxTMI 
TaxTMI 
2014 (8) TMI 685
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.... and moneylending, had raised loans from certain parties and as per the Assessing Officer (for short, "the AO") most of the parties are relatives of the respondent-assessee and they are said to be unsecured loans. It has been claimed by the Assessing Officer that in most of the cases, though the amount was received by account payee cheque and most of the creditors are assessed to the Income-tax Act and had even provided their permanent account number but on the desire of the Assessing Officer of producing the said parties, it transpired that none of the parties were able to prove the source of amount advanced to the respondent-assessee. It is further claimed by the Assessing Officer that immediately before the amount was advanced to the respondent-assessee by account payee cheque, cash was deposited in their respective bank accounts and thereafter the cheque could be cleared and the total amount is Rs. 17,27,250 in the name of the following creditors : (Rs.) (1) Smt. Bimla Devi Bakliwal 90,000 (2) Smt. Sonu Bakliwal 90,000 (3) Smt. Anita Bakliwal 70,000 (4) Smt. Hemlata Luhadia 25,000 (5) Smt. Saroj Bakliwal 55,000 (6) Ms Ranu Jain 6....
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.... sources and the funds were not required for any business purposes, rather the funds were taken on interest at a lower rate and advanced at higher rate. She contended that the respondent-assessee was unable to prove by acceptable evidence about the source of the funds advanced by those parties and the prime duty of the respondent-assessee was to show by acceptable evidence that the cash creditor had sufficient means to advance funds to the respondent-assessee. She contended that the Income-tax Appellate Tribunal has wrongly mentioned that the respondent-assessee was able to discharge the onus laid upon it and the onus has not been discharged. She contended that when statements were recorded, then none of the creditor was able to prove pin pointedly as to how cash was deposited in their respective bank account immediately before issuance of cheque and as to how immediately the cash was received by them. She further contended that most of the creditors have stated that they received gifts on festivals and occasions and were unable to prove the generation of the funds. She contended that merely advancing money by account payee cheque is not sufficient to discharge the onus and contend....
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....espondent-assessee, could have sent the information to the Assessing Officer, assessing the cash creditors for appropriate action in their cases but in so far as the respondent-assessee is concerned, in our view, the respondent-assessee has been able to discharge the burden which lay upon him. 10. Certainly, deposit of cash and immediate transfer of cheque or clearance of the cheque within a day or two casts a doubt as the transaction appears to be some what doubtful but suspicion howsoever strong it may be is not sufficient itself. On a perusal of the facts in the present case, we observe that the amounts advanced are not substantial and in most of the cases, the amounts are ranging from 25,000 to 90,000 and in some cases, it is exceeding Rs. 1,50,000. On a perusal of the facts, it is also apparent that in some of the cases (Uttan Chand Jain, HUF) even the karta of the HUF had produced the cash book and their ledger account before the Assessing Officer. Smt. Anju Gangwal had also produced her cash book so also Mr. Vinay Kumar Gangwal as well as Mr. Akhilesh Kumar Ankur Jain (HUF) and the Assessing Officer has drawn adverse inference finding some discrepancies in their respectiv....
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....tination. So far as the source is concerned, there is no material on the record to show that the amount came from the coffers of the respondent-firm or that it was tendered in Burrabazar Calcutta branch of the Central Bank, on November 15, 1944, on behalf of the respondent. As regards the destination of the amount, it has already been mentioned that there is nothing to show that it went to the coffers of the respondent. On the contrary, there is positive evidence that the amount was received by Biswanath on January 22, 1946. It would thus follow that both as regards the source as well as the destination of the amount, the material on the record gives no support to the claim of the department." 13. The Gauhati High Court, in the case of Nemi Chand Kothari v. CIT [2003] 264 ITR 254 (Gauhati), held that it is not the business of the assessee to find out the source or sources from where the creditor had accumulated the amount which he had advanced in the form of loan to the assessee and section 68 cannot be read to show that in the case of failure of sub-creditors to prove their creditworthiness the amount advanced as loan to the assessee by the creditor shall have to be read as cor....
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.... not necessarily mean that loan advanced by the sub-creditor to the creditors was income of the assessee from undisclosed sources unless there is evidence direct or circumstantial, to show that the amount which had been advanced by the sub-creditor to the creditor had actually been received by the sub-creditor from the assessee. 18. The logical interpretation will be that while the assessee has to prove as special knowledge, i.e., from where he has received the credit and once he disclosed the source from which he has received money, he must also establish that so far as his transaction with his creditor is concerned, the same is genuine and his creditor had the creditworthiness to advance the loan which the assessee had received. When the assessee discharges the burden so placed on him, the onus then shifts to the Assessing Officer, if the Assessing Officer assesses the said loan as the income of the assessee from undisclosed source he has to prove either by direct evidence or indirect/circumstantial evidence that the money which the assessee received from the creditor actually belong to and was owned by the assessee himself. 19. If there is direct evidence to show that the ....