AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (11) TMI 795
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.... against sale of property as unexplained income of the assessee u/s 68 of the Act. 2.1 Apropos Ground No. 1 of the assessee, the facts as emerges from the order of the ld. CIT(A) is as under:- "5.3 I have gone through the assessment order as well as submissions made by the appellant. Following have emerged. 1. That the assessee is a salaried employee deriving his income from salary. During the year under consideration, the appellant had declared total income of Rs. 2,70,278/-. 2. That a total of cash amounting to Rs. 39,78,000/- was found deposited in the bank account maintained at Axis Bank, Bharatpur during the year under consideration. 3. That in order to explain the source of cash deposits, the assessee had filed cash flow statement for the period and has shown an amount of Rs. 4,95,222/- as the opening in cash in hand. The assessee has claimed that the cash in hand represents accumulate cash from the preceding year. 4. That the AO has rejected the assessee's claim as no concrete evidence was filed in support of his claim and AO held it as mere afterthought to somehow explain the source of cash deposits. "5.3.2 I have....
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....he Ld. CIT(A) is unreasonable. Thus, an amount of Rs. 3,07,500/- out of opening cash balance of Rs. 4,95,222/- is verifiable from the bank account itself. It may be noted that in course of assessment proceedings, assessee has filed the Balance Sheet as on 31.03.2013. As per this Balance Sheet, the cash in hand as on 31.03.2013 is Rs. 4,95,222/- (PB 15). Thus, the entire opening cash balance as on 01.04.2013 is fully verifiable and therefore, in the absence of any material otherwise, the same be directed to be accepted. 3. Without prejudice to above, it is to submit that section 68 is applicable only if amount is credited in the books of accounts of the assessee in the relevant financial year. No addition can be made if the amount is brought forward from earlier years. In the present case also, the balance is coming from the last year. It is not the case of the AO that this amount is credited in the books of accounts on 01.04.2013. Thus, no addition for this amount can be made in the year under consideration as it is brought forward amount of previous year. For this purpose, reliance is placed on the following cases:- ACIT Vs. Smt. N. Sasikala 92 TTJ 1196 (Chennai) (Trib....
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....relevant financial year. 4. The AO has relied on the decision of Hon'ble Madras High Court in case of C. Packirisamy Vs. ACIT 315 ITR 293. In this case, assessee claimed opening balance of capital at Rs. 5,73,960/-. Books of accounts were not produced by assessee. The returns for earlier AYs were filed on the same day as that of current year. In these facts it was held that assessee failed to prove formation of capital and the addition of 50 per cent of opening capital is justified. Thus, this case is distinguishable on facts as in the preset case, assessee has furnished the Balance Sheet as on 31.03.2013 and also the cash book for the year under consideration from which the factum of opening cash balance as on 01.04.2013 is verifiable. In view of above, the addition confirmed by Ld. CIT(A) be directed to be deleted.'' 2.3 On the other hand, the ld. DR supported the order of the lower authorities and relied on following case laws. (i) Dayal Singh and Sons vs CIT, 335 ITR 90 (P&H) (ii) Umesh Krishnani vs ITO 217 Taxman 13 (Guj) (iii) Kamal Motors vs ld. CIT 131 Taxman 155 (Raj.) 2.4 The Bench has heard the rival contentions and perused the mate....
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....and ( iii) Shri Man Singh Rs. 2 lakhs). 4. That all such loans have been received through cheque. 5. That all the 3 persons have given confirmations. 6. That AO had found cash deposits in the bank account of the lender prior to advancement of loan through cheque. 7. That the AO has rejected the claim of the assessee as creditworthiness was not adequate in the opinion of the AO. 6.3.2 I have perused the evidences filed during the course of appellate proceedings. It is seen that unsecured loan received from various persons and the evidences filed during assessment and appellate proceedings is collated as under:- S.N. Name of the lender Loan amount in Rs. Cash/ cheque IT assessee or not Confirmation filed or not Remarks 1. Sh Kaushalendra Singh 6,00,000 Cheque Yes Yes Cash deposited prior to advancement of loan by cheque 2. Sh. Baney Singh 7,00,000 Cheque No Yes Cash deposited prior to advancement of loan by cheque 3. Sh. Man Singh 2,00,000 Cheque No Yes Cash deposited prior to advancement of loan by cheque 6.3.3 In this regard, I ....
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....the addition is reduced to Rs. 9 lakhs and the appellant's ground of appeal on this issue is partly allowed.'' 3.2 During the course of hearing, the ld.AR of the assessee prayed for deletion addition sustained by the ld. CIT(A) for which the ld.AR of the assessee filed the following written submission. "Submission:- 1. The assessee's explanation on the observation of the AO/CIT(A) is as under:- Sh. Baney Singh- Rs. 7 lacs He is an agriculturist deriving income from sale of agricultural produce. He is not liable to file his income tax return. The creditworthiness is proved from the fact that he his holding around 12 bigha of land (copy of Jamabandi is at PB 35-37) and regularly deposit the sale proceeds of agricultural produce in his bank account. Before giving loan to assessee, he has deposited cash of Rs. 3,50,000/- on 25.04.2013 and cheque of Rs. 1,50,000/- on 25/26.04.2013 against sale of agricultural produce to Food Corporation of India (PB 31). The bank statement also shows that he earned rent of Rs. 4,800/- p.m. from bank itself (PB 31-32). Thus, creditworthiness of creditor could not be doubted. The genuineness of transaction is proved ....
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....e is not a matter which could be required to be established by the assessee as that would amount to calling upon him to establish the source of the source. No direct enquiry was made by the AO from these creditors. In these circumstances, genuineness of the transaction & the creditworthiness of the creditor cannot be doubted & the addition confirmed by the Ld. CIT(A) be deleted. In this connection, reliance is placed on the following cases:- CIT Vs. Jai Kumar Bakliwal (2014) 366 ITR 217/ 101 DTR 377 (Raj.) (HC) The assessee raised unsecured loan from the relatives. The AO made addition u/s 68 on the ground that none of the creditors were able to prove the source of amount advanced to the assessee and immediately before the grant of loan by them, cash was deposited in their accounts. However, it was admitted by the AO that all the creditors were assessed to income-tax and they have provided confirmation as well as their PAN. Moreover, all the payments were through account payee cheques and most of the cash creditors appeared before the AO and were examined on oath. It was held that since there was no clinching evidence nor the AO had been able to prove that the mon....
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....ished by the assessee and making additions of such deposits as income of the assessee from undisclosed sources by invoking section 68, unless it can be shown by the department that the source of such moneys come from the assessee himself or such source could be traced to the assessee itself. In the present case, while the existence of the creditor is not in doubt & he has admitted to have advance the loan to the assessee, the fact that the explanation furnished by the creditor about his source of such advancement has not been accepted by the revenue authority cannot lead to any presumption that the source of such advancement by creditor emanated from the assessee. Therefore, the addition in the income of the assessee as cash credit cannot be sustained. Aravali Trading Co. Vs. ITO 187 Taxman 338 (Raj.) (HC) Once the existence of the creditors is proved and such persons own the credits which are found in the books of the assessee, the assessee's onus stands discharged and the latter is not further required to prove the source from which the creditors could have acquired the money deposited with him either in terms of s. 68 or on general principle. Merely because the....
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....ditor nor is it burden of assessee to prove creditworthiness of sources of sub-creditors. However, AO has ample freedom to make inquiry not only into sources of creditors but also of his (creditor's) sub-creditors and prove as a result of such inquiry that money received by assessee in form of loan from creditor though routed through sub-creditors actually belongs to or was of assessee himself. CIT Vs. Varinder Rawlley (2015) 366 ITR 232/114 DTR 367 (P&H) (HC) Assessee received and repaid the amount in question through banking channels and also furnished PAN of creditor. The transactions were reflected in the bank accounts of the assessee as well as the creditor. The assessee having shown that the entries regarding credit in a third party's account were in fact received from the third party and are genuine, it cannot be charged as the assessee's income in the absence of any material to indicate that they belong to the assessee. Thus, assessee burden u/s 68 stood discharged and AO having failed to invoke sec.131 for summoning the creditor, Tribunal was justified in deleting the addition. In view of above, the addition confirmed by CIT(A) be directed to b....
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....tion is established and therefore, the addition is directed to be deleted. Thus ground No. 2 of the assessee is allowed. 4.1 Apropos Ground No. 3 of the assessee, the facts as emerges from the order of the ld. CIT(A) is as under:- "7.3 I have gone through the assessment order as well as submissions made by the appellant. The appellant has claimed that an amount of Rs. 15 lakhs were received as advance against the impending sale of property to Shri Jay Singh and Smt. Manu Singh. However, I find it quite strange that even after lapse such a long time, the property in question was never sold to Shri Jay Singh and Smt. Manju Singh. Curiously, they have not even demanded the money back from the appellant also. The contents of the statement recorded by the AO during assessment proceeding also shows that the explanation given for this amount is far from satisfactory. Therefore, the AO has rightly concluded that explanation put forward by the appellant in support of deposits of Rs. 15 lakhs in his bank account lacks reasonableness. Therefore, in my considered view that the addition of Rs. 15 lakhs in the hand of the appellant under section 68 of the Act is justified hence susta....
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.... deeming provision is sought to be invoked. The principle that governs a deeming provision is that the initial onus lies upon the revenue to raise a prima facie doubt on the basis of credible material. The onus, thereafter, shifts to the assessee to prove that the gift is genuine and if the assessee is unable to proffer a credible explanation, the AO may legitimately raise an inference against the assessee. If, however, the assessee furnishes all relevant facts within his knowledge and offers a credible explanation, the onus reverts to the revenue to prove that these facts are not correct. The revenue cannot draw an inference based upon suspicion or doubt or perceptions of culpability or on the quantum of the amount involved. Any ambiguity or any ifs and buts in the material collected by the AO must necessarily be read in favour of the assessee, particularly when the question is one of taxation under a deeming provision. Thus, neither suspicion/doubt, nor the quantum shall determine the exercise of jurisdiction by the AO. The above exposition shall not be misconstrued to restrict the power of the revenue to raise an inference as to the efficacy of material produced by or before the....