TaxTMI 
TaxTMI 
TaxTMI 
2015 (2) TMI 935
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.... 2 (a) That the ld. CIT(A) has also grossly erred in sustaining the addition of Rs. 24 lakhs on account of amount received from Shri Vijay Kumar s/o of the Proprietor, despite confirmation and source of source of Shri Vijay Kumar explained during the course of assessment proceedings before him." 3. Brief facts in respect of first issue are that during assessment proceedings it was noticed by the AO that the assessee had shown various loans from friends and relatives at Rs. 1,40,50,668/- out of which loans amounting to Rs. 17,21,100/- were received during the year from family members. It was noticed that certain additions have been made in the loans in the name of these family members as under: Sewa Ram (HUF) Rs. 2,09,700.00 Smt. Shakuntla Rs. 2,12,300.00 Smt. Raj Kumari Rs. 2,16,000.00 Smt. Jyoti Kinger Rs. 2,17,100.00 Shri Vijay Kumar Rs. 2,15,000.00 Vijay Kumar (HUF) Rs. 2,14,050.00 Shri Vinod Kumar Rs. 2,14,600.00 Vinod Kumar (HUF) Rs. 2,22,150.00 Rs. 17,21,100/- On enquiry the assessee furnished the copies of account, income tax return, bank statements and also the b....
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....use most of these persons had very low income without the commodity profit. Information was called from M/s Satya Narayan Online Trading Pvt Ltd., Ludhiana. Copies of the client registration form were furnished by this company which depicted that all the forms bear same date i.e. 2.9.2006. The statement of Shri Kawitansh Khana, Director of the company was also recorded. In reply to the question who signed these forms, Shri Khanna stated that he knew only one person i.e. Shri Vijay Kumar who came for registration of these persons and also for other discussions and he could not state who had signed these forms. The AO noted that Shri Vijay Kumar is the son of the assessee. It was also noted that Voter Card in most of the cases as part of the identity proof were given later on because voter cards have been issue on 20.11.2006 whereas the registration forms were furnished on 2.9.2006. In reply to the show cause notice, it was submitted that the assessee was giving different account payee cheques for different members as required by the family members directly to the person to who payment was supposed to be made that is why the margin money cheques were issued out of account of such fam....
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....er and payment to the assessee. Therefore, merely because the account with assessee have been used as current account and cheques for margin have been issued by the assessee will not make any difference particularly because family members had sufficient credit balance with the assessee. He also referred to page No. 27 to 29 which are copy of contract note issued by M/s Satya Narayan Online Trading Pvt Ltd., Ludhiana to Sewa Ram HUF showing various profits earned. Page 30 & 31 is copy of return filed by Sewa Ram HUF. Further it is usual in every family that financial matters are looked after by one person of the family and therefore, Shri Vinod Kumar went to the commodity broker to open accounts on behalf of the family members and that should not make any difference. He then referred to page 101 which is a copy of statement of Shri Kawitansh Khanna, Director of M/s Satya Narayan Online Trading Pvt Ltd., Ludhiana in which it was confirmed that various family members had opened account with them. Nowhere earning of profit has been doubted by the AO. In fact similar profit was earned in last year also which has been accepted by the Department. In this regard he referred to page 162 to ....
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....ase the assessee had received four credit entries which according to the AO were fictitious and unaccounted income of the assessee. However, the Tribunal gave a finding that moneys had been advanced by account payee cheque and had been returned by the assessee with interest through account payee cheque and since copy of the bank account have been filed along with the confirmation, no addition could be made. These findings were confirmed by the Hon'ble Court. In case before us the assessee had filed the copies of the confirmation, bank account and proof of filing of income-tax return, therefore, credit in the names of these family members could not have been added as income of the assessee. 6. He pointed out that the ld. CIT(A) has given a lot of emphasis on the decision of Hon'ble Calcutta High Court in case of CIT V. Korlay Trading Cross-objections. Ltd. 232 ITR 820. In that case there was certain cash credits in the name of creditor. The assessee failed to file the confirmation. They were treated as income from undisclosed sources. The ld. CIT(A) confirmed the order of the AO. However, the Tribunal allowed the claim of the assessee on the ground that even they initially ....
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....ch individual but by the assessee without pointing out any evidence in this regard. 9. We have heard the rival submissions carefully and it has to be noted that addition has not been made u/s 68 of the Act but the addition has been made by observing that commodity profit earned by eight family members is income from undisclosed sources of the assessee. It is very strange that the AO has nowhere stated that income from commodity transactions is bogus or not genuine. In fact the assessee has shown an amount from eight members as per detailed below as loans:- Sewa Ram (HUF) Rs. 2,09,700.00 Smt. Shakuntla Rs. 2,12,300.00 Smt. Raj Kumari Rs. 2,16,000.00 Smt. Jyoti Kinger Rs. 2,17,100.00 Shri Vijay Kumar Rs. 2,15,000.00 Vijay Kumar (HUF) Rs. 2,14,050.00 Shri Vinod Kumar Rs. 2,14,600.00 Vinod Kumar (HUF) Rs. 2,22,150.00 Rs. 17,21,100/- In response to enquiry copies of the account, PAN No., income- tax return, bank statement and even bills of commodity broker were furnished to explain the source of funds in the hands of the above family members. We further find that perusal of sample copy of account of Sewa Ram HUF at page 23 of the paper book clearly sho....
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....isclosure of the source of fund by way of profit from commodity transactions. Therefore, the matter should have ended there only. If the AO was of the view that these profits are not genuinely earned by these family members then initially assessments of such family members should have been taken up for scrutiny and enquiry should have been made by recording the statements of such family members which has not been done. The fact remains that earning the profit through commodity transactions has not been doubted. Only aspect which has been doubted is that cheques have been issued by the assessee on behalf of the members of the family. Again referring to the copy of account, it is clear that Sewa Ram HUF has been treating its account with the assessee as current account and some other payments perhaps for payment of income-tax and deposit in the saving schemes has been also issued by the assessee on behalf of Sewa Ram HUF. In fact cheque for Rs. 1500/-, Rs. 5,000/-, Rs. 6,894/-, Rs. 7,000/-, Rs. 70,000/- and Rs. 30,000/- have been issued on various dates. Only a sum of Rs. 5,000/- has been paid as margin money and rest of the payments have been made towards other purposes. There is no....
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....ubmissions of the ld. DR for the revenue that the observations of the Hon'ble Supreme Court in case of CIT V. P. Mohankala (supra) is applicable to the case of the assessee. According to him once the AO has given a finding that the explanation of the assessee is not satisfactory then same is binding on the assessee. In case of CIT V. P. Mohankala (supra) Hon'ble Apex Court was concerned with a case where the assessee and his family members have received gifts of Rs. 1,79,27,703/- in various years from Non Resident Indian (NRI) who was not related to the assessee. Various contradictions were found in the statements of Shri SampathKumar who was a common donor and the AO recorded various findings which have been summaries by the Court at para 8 which is as under:- "The AO after an elaborate consideration of the material available on record and the statements of the assessees as well as that of Sampath Kumar noted that all the gifts were received from Ariavan Thotan and Suprotoman. It is only after the enquiries by the Department, it was informed by letter dated April 25, 1996, that Ariavan Th....
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....gainst the assessees, viz., the receipt of money, and if the assessees fail to rebut the said evidence the same can be used against the assessees by holding that it was a receipt of an income nature. In the case in hand the authorities concurrently found the explanation offered by the assessees unacceptable. The authorities upheld the opinion formed by the AO that the explanation offered was not satisfactory. The assessees did not take the plea that even if the explanation is not acceptable the material and attending circumstances available on record do not justify the sum found credited in the books to be treated as a receipt of an income nature. The burden in this regard was on the assessees. No such attempt has been made before any authority. All the decisions cited and referred to hereinabove are required tobe appreciated and understood in the light of the law declared by this court in Sumati Dayal (1995) Supp 2 SCC 453." A plain reading of the above para very clearly shows that the explanation given by the assessee has to be looked into on the basis of facts and circumstances of the case and since there were various inconsistencies in the statement of donor and it was a case o....
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....nd certain payments in cash in excess of Rs. 2,500 were disallowed. The Appellate Tribunal allowed the assessee's appeal holding that since the cash credits came from bank accounts held by the wife, the son and the daughter-in-law, the Officer could not add back these amounts unless he could prove that these persons were the benamidats of the assessee. With respect to the cash payments in excess of Rs. 2,500, the Tribunal held that the matter was covered by a Board Circular and the payments had to be allowed. Commissioner of Income-tax V Chunnilal: SLP (Civil) No. 21334 of 1994." Thus it is clear that when loans have been taken from the family members and which have been routed through bank by most of such family members, they cannot be added as cash credits unless it is found as a fact that such bank accounts are benami of the assessee. In case before us, it cannot be alleged that bank account of various family members are benami of the assessee because loans have been taken from such family members for last many years and which have been shown as opening balance and have been accepted by the Department. In fact similar observations have been made by Hon'ble Punjab & Haryana ....
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.... normally claimed to be paying interest @ 10% on the unsecured loans raised even from close relatives." As far as statement of Shri Subhash Kinger is concerned, the AO noticed that statement has many inconsistencies. For example the lender did not know whether he had taken any loan against his FDR. He did not know about the cash transactions in his account. Therefore, the statement was not trustworthy. In fact Shri Subhash Kinger was a person of small means. Therefore, the assessee was issued a show cause notice dated 18.12.2009 confronting these observations and was asked as to why the amount of Rs. 24.00 lakhs should not be treated as income from undisclosed sources which have been routed through sham transactions. The genuineness of transaction and the creditworthiness and capacity of the lender could not be proved. The reply and observations of the AO are contained in para 4.3 of assessment order which read as under:- "4.3 In response thereof the assessee has submitted that the alleged amount has been taken through account payee cheque and no interest has been paid on the said amo....
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....ubhash Kinger was also produced, therefore, no addition was possible in case of the assessee when Shri Vijay Kumar being a regular income-tax assessee has already confirmed the loan. It was further contended before the ld. CIT(A) that in fact the AO has already reopened assessment of Shri Vijay Kumar u/s 148 of the Act. In any case Shri Subhash Kinger had withdrawn money from his bank account and had also taken certain loans against FDR, therefore, sources of money also stood proved. The ld. CIT(A) did not find force in the submissions. He also called for the assessment record of Shri vijay Kumar and noted that in the assessment order passed u/s 143(3) of the Act following observations have been made:- "During the course of assessment proceedings in the case of Shri Sewa Ram it was proved beyond doubt that Shri Subhash Kinger could not in any case have lent huge sum of Rs. 24 lakhs to anybody. The assessee's contention that he has paid interest of Rs. 20,220/- for the period from 5.2.2007 to 31.3.2007 on 15.3.2010 is only an afterthought since the assessee had not been able to prove genuinen....
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....ment at page 109. For this Shri Subhash Kinger had deposited certain cash in US Dollars when he has returned from abroad. Since the transactions have been routed through bank and all the documents have been furnished in respect of sources of sources, the addition was not called for and in this regard he relied on the decision of the Chandigarh Bench of the Tribunal in case of Ashok Kumar Prop. Shree Shankarjee Rice & General Mills bearing ITA No. 825/Chd/2007 (copy of judgment has been enclosed at page 8 to 21 of paper book regarding judgments). He also submitted that the AO has made some observations that Shri Subhash Kinger did not know the fact that a loan was taken against FDR, or balance on particular date which are minor things and in fact nobody would remember the balance in accounts on a particular date. Further Shri Vijay Kumar was very close to Shri Subhash Kinger and during his absence of Shri Kinger to Japan, Shri Vijay Kumar has been helping the family of Shri Kinger which is clear from the statement of Shri Subhash Kinger before the AO that he has took help of Shri Vijay Kumar with small sums for daily expenses before the year 1992. Because of these considerations Shr....
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....Shri Subhash Kinger was produced before the AO where he has explained that he had gone to Japan in 1993 and returned later. The AO has made observation that Shri Subhash Kinger had meager income but the statement filed before us show that loan of Rs. 24.00 lakhs was given by Shri Subhash Kinger not out of his current income but out of the money earned abroad which was deposited in NR NR account with State Bank of India. Both the loans of Rs. 14.00 lakhs and Rs. 10.00 lakhs have been given by Shri Subhash Kinger by account payee cheques out of his funds lying in the bank. Further even the sources of these funds have been explained initially in a sum of Rs. 14,05,275/- came out of encashment of FDR which was made on 26.8.2005. Second sum of Rs. 10.00 lakhs came out of bank balance lying in the account and some money came out of transfer from another account and some deposit in US Dollars which was stated to be brought by him from his earning abroad. Therefore, clearly all documents have been filed and even the source of source have been explained. Once all these documents and source of money are proved, the AO should have accepted the loans. We find that in case of Shri Ashok Kumar P....
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....s. 33,410/-. In respect of the opening balance, the assessee has furnished the 'J' forms of the earlier orders justifying the accumulation of the opening balance in the hands of the father of the assessee. 19. The onus on the assessee in respect of any cash loan received during the year is to establish the identity, creditworthiness and genuineness of the transactions u/s 08 of the Act. The assessee before us has discharged his onus of complying with the three conditions in respect of loan received during the year. Tlic identity of the person being father of the assessee stands established in view of the statement recorded during the course of assessment proceedings. The credit worthiness of the person is also established by the series of evidence filed, wherein in addition to the agriculture income earned by him, the father of assessee has shown the receipt of money by way of return of loans, which were advanced as per registered mortgage deed, placed before us in the paper book. Further, the said amount then being transferred to the bank account of the father of the assessee. from where the cheques ....