AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (12) TMI 1348
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....editors viz. Sri Biswajit Ghosh, Sri Ashis Roy, Sri Nirmal Ghosh and Sri Ram Chandra Samanta. Their statements were also recorded by the A.O. and based on the deposition made by them, the following observations and findings were recorded by the A.O. in respect of each and every loan creditors: "1. Sri Biswajit Ghosh Sri Biswajit Ghosh had stated that he is a potato trader. From the copy of balance sheet and return of income of Shri Biswajit Ghosh it reveals tht during the relevant financial year 2010-11 he had earned Rs. 1,47,030/- from his business of potato trading out of gross sales at Rs. 16,33,370/-. Gross total income was shown at Rs. 1,58,990/-. In the balance sheet as on 31.03.2011unsecured loan to K.K. Roy was shown at Rs. 4,00,000/- and investment in Alok Dighi Hatchery (P) Ltd. Was shown at Rs. 1,00,000/-. No such entries in the balance sheet as on 31.03.2010 was noticed. In his statement deposed before this office Sri Biswajit Ghosh had stated the assessee is his maternal uncle. The loan was given on his request as he was in need of cash for his business. He had further stated that he had not given any further loan to the assessee and also stated that the previo....
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....is business need. He had further stated that he had not given any further loan to the assessee and also stated that the previous loon was still outstanding as on the date of deposition. i.e. 19.12. 2013. No interest was charged on this loan. However, the balance sheet of the deponent as on 31.03.2012 shows there were no loan in his asset side. The credit entry of Rs. 2,65,000/- on 22.11.2011 credited by Kajal Kumar Roy shows that there were some payment made to him. Further, deponents statement that he had not given any further loan to Sri Kajal Kumar Roy is contrary to the fact that he had paid Rs. 5,00,000/- on 16.02.2012 through his bank account in BOI. Kable Branch (Account No. 425410100007248) which was repaid on 23.03.2012. Thus the deponent being of sound mind is totally unaware of his transaction in his bank account and investment made. From the foregoing discussion there are many contradictions with the statement of alleged loan creditors with his balance sheet as on 31.03.2011. Not other payments by issuing cheques were made by the assessee. All the payments in his business were, therefore, maintained by cash only. It is seen that after debiting the alleged loan as on ....
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....'s statement in regard to contract of share for his alleged investment is absurd in the matter of business affairs of a company. Thus the deponent being of sound mind, is totally unaware of his transaction in his bank account and investment made. From the foregoing discussion there are many contradictions with the statement of alleged loan creditors with his balance sheet as on 31.03.2011. No other payments by issuing cheques were made by the assessee. All the payments in his business was therefore, maintained by cash only. It is seen that after debiting the alleged loan as on 13.12.2010 for Rs. 3,20,000/- from his bank account, the balance amount stands at his account is only Rs. 3,642/-. It must had made a crunch in his financial position and therefore, smooth proceedings in his potato business during February March'11 which is the pick time of potato business. Further the alleged loan creditor was a small trader, the alleged loans would taken out a fair chunk of his capital and he would be incapacitated by taking out a huge sum from his circulating fund. It is not in human nature to give loans without interest to relatives who are financially strong by stifling his own bus....
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....e said loans were genuine. This explanation of the assessee was not found acceptable by the A.O. According to him, the concerned four loan creditors had no financial capacity to give the loans to the assessee and they were not even aware of the transactions reflected in their bank accounts. He also noted that the loans given to the assessee by the said creditors were still outstanding even on the date of deposition i.e. 19.12.2013. He accordingly treated the loans claimed to be received by the assessee from the concerned four creditors as unexplained and added the amount of such loans aggregating Rs. 13,03,000/- to the total income of the assessee under section 68 in the assessment completed under section 143(3) vide an order dated 25.03.2014. 4. Against the order passed by the A.O. under section 143(3), an appeal was preferred before the Ld. CIT(A) challenging the addition of Rs. 13,03,000/- made by the A.O. on account of loans received from the concerned four creditors by treating the same as unexplained. During the course of appellate proceedings before the Ld. CIT(A), the following submissions were made by the assessee in writing in support of his case: "In the instant case,....
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.... Income Tax Act, 1961 which were duly audited under the statutory requirement of section 44AB of the Act. In fact, the details of the amounts received by the appellant on account of loan are duly incorporated therein. The provisions of section 68 of the Income Tax Act, 1961 came into play only where the Assessing Authority finds that a cash credit is recorded in the books and the taxpayer offers no explanation as to the nature and source thereof or the explanation offered is not satisfactory in his opinion then such credit may be deemed to be the income of the taxpayer for the corresponding assessment year. Thus, the conditions precedent for assuming jurisdiction u/s 68 of the Act are that (1) there shall be a credit appearing in the books of accounts of the assessee, (2) an opportunity for submitting an explanation as to the nature and source of such credit entry appearing within the books of account is to be provided to the assessee and (3) the assessee offers no explanation or the explanation offered by him is not satisfactory in the opinion of the Assessing Authority, only then the amount may be deemed to be the income of the assessee. Thus the statutory parameters for the non ....
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....m the additions made by the A.O. under section 68 for the following reasons given in paragraph no 5 and 6 of his impugned order: "5. I have considered the facts of the case and the appellant's submissions. The AO's case has already been summarised above. In brief, the relied upon circumstantial evidence to the effect that there were many contradictions in the statements of the lenders and the financial capacity of the lenders was not credible. Further, the fact that the alleged lenders were not aware of the transactions in their own bank accounts showed that the appellant was controlling their bank accounts and financial transactions. The appellant's case is that the appellant had furnished necessary documents like copies of income tax returns, bank statements and balance sheets to discharge his onus under section 68 of the Act to prove the genuineness of transactions which had been done by way of account payee cheques and the creditworthiness and identity of the loan creditors. Moreover, the loan creditors appeared before the AO in response summons u/s 131 of the Act and confirmed the transactions. The AO did not have any direct evidence to disbelieve the evidence presented by t....
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....sh 3,18,000 1,57,980 9,75,693 2,68,583 8,059 Nil 6,70,500 3 Ashis Roy 2,65,000 15,863 8,11,690 1,70,466 4,896 2,50,500 Nil 4 Ram Chandra Samanta 3,20,000 1,57,993 8,32,065 40,895 47,305 2,00,000 Nil a. The incomes declared are not commensurate with the loans advanced and the opening capital (regarding which no supporting evidence is available) which are quite substantial; b. The loans have been advanced partly out of opening cash balances and opening balances of debtors, which are not supported by any tangible evidence; c. The opening and closing balances of debtors do not show a uniform patter. Three loan creditors have shown very high outstanding debtors and nil closing debtors and one loan creditor had not opening debtors balance but very high closing balance of debtors. In other words, the modus operandi of their business in trading of potatoes has not remained consistent which is difficult to understand. At any rate, in the seasonal business of potatoes which the loan creditors are apparently engaged in, the possibility of outstanding debtors is remote; d. The opening and closing balances of cash in the case of Sri Nirmal Ghosh and Shri As....
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....ly when the assessee proves identity and capacity of the creditor along with the genuineness of transaction to the satisfaction of the AO. All the three conditions are required to be cumulatively satisfied. If one or more of them is absent, then the AO can make the addition as per section 68 of the Act. This is the settled position of law. In spite of the furnishing of various documents, the appellant cannot be said to have established the capacity of the creditors to lend. Further, it was held in the case of Sumati Dayal vs CIT (SC) 214 ITR 801 by the Hon'ble Supreme Court that where any sum is found credited in the books of the assessee for any previous year it may be charged to income tax as the income of the assessee for that previous year if the explanation offered by assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In that case the Hon'ble Court referred to its own judgement in the case CIT vs Durga Prasad More (197) 82 ITR 540 and held that the matter had to be considered in the light of human probabilities. It was further held that "In our opinion, the majority opinion after considering surrounding circumstances and....
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.... his impugned order in the table form to contend that the concerned four creditors had no financial capacity to give the loans in question to the assessee. In this regard, it is observed that the Ld. CIT(A) has mainly relied on the quantum of total income declared by the concerned four creditors to doubt their financial capacity, it is, however, observed that the said loan creditors as per the information given by the Ld. CIT(A) himself in his impugned order had sufficient opening balance of capital to given the loan amount to the assessee. Moreover as already noted the said loans were duly reflected in the balance sheet of the concerned loan creditors filed along with the returns of income. 8. The Ld. CIT(A) in his impugned order has already relied on the decisions of the Hon'ble Supreme Court in the case of CIT vs Durga Prasad More (supra) to hold that the matter was required to be considered in the light of human probabilities. It is, however, observed that the facts involved in the said case were materially different from the facts involved in the case of the assessee in as much as in the said case had claimed to have earned substantial amount by way of winning from races and ....