TaxTMI 
TaxTMI 
2015 (1) TMI 1399
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....neer was trading in steel, wherein Hitech Engineers had transacted business to the tune of Rs. 5.63 crores. The AO further dug deep into the facts and ultimately came to the conclusion that LFPL was only the name giver and that there was no actual fund transfer in real sense from LFPL to the assessee. In the assessment proceedings, the AO concluded that assessee has not been able to establish the genuineness of loan transaction standing in the name of M/s Lorraine Finance Pvt Ltd, nor the assessee was able to prove the credit worthiness or real source of funds. 3. In the assessment proceedings, the AO concluded that assessee has not been able to establish the genuineness of loan transaction standing in the name of M/s Lorraine Finance Pvt Ltd, nor the assessee was able to prove the credit worthiness or real source of funds. 4. The assessee approached the CIT(A), before whom it was submitted, "1. Your appellant has not taken any sum from M/s Hitech Engineers but have taken advance from Lorraine Finance Private Limited. Hence it is absolutely incorrect to state that M/s Hitech Engineers have advanced any sum to appellant. 2. As far as our advance received i....
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....her said Citybase Multitrade or Hitech Engineers. Infect appellant not had any sales/purchase of these items so far. 8. Hon'ble Calcutta HC held in CIT v. Dataware Private Limited [ITA No. 263 of 2011 dated 02-09-2011] that "if the creditor discloses his PAN and claims to be an assessee, the AO cannot himself examine the return and P&L A/c of the creditor and brand the same as unworthy of credence. Instead, he should enquire from the creditor's AO as to the genuineness of the transaction and whether such transaction has been accepted by the creditor's AO. So long it is not established that the return submitted by the creditor has been rejected by the creditor's AO; the assessee's AO is bound to accept the same as genuine when the identity of the creditor and the genuineness of the transaction through account payee cheque has been established. 9. Where the department contended that the assessee company while discharging the onus cast on it has not established the capacity of the creditor the Hon. He held that the revenue could have gone back, in so far as the assessee was concerned, to determine whether the creditor was a genuine person and whether ....
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....ion 68 of the Act by relying solely on the statement made by a third person and the said statement was not given to the assessee nor was the assessee afforded an opportunity to cross examine the said person, on these facts, it was held that the additions made by the AO were liable to be deleted on the ground that the additions were made in gross violation of principles of natural justice, Heirs & L.Rs of Late Laxmanbhai S. Patel v, CIT [2008] 327 ITR 290. (Guj, HC) 16. Assessee having established identity of shareholders, additions u/s 68 cannot be made on the ground that assessee failed to explained source of credit. Department was free to proceed against persons giving sums in accordance with law. Hindustan Ink & Resins Ltd. V. DCIT [2011] 60 DTR 18 (Guj. HC). 17. When an unexplained credit is found in books of account of an assessee initial burden is placed on assessee and once that onus is discharged, it is for revenue to prove that credit found in with respect to deposit found in the books of accounts of assessee is undisclosed income of assessee. CIT v. Kinetic Capital Finance Limited [20111 202 Taxman 548. (Delhi HC). 18. Genuine of receipt of sums....
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....through his concern namely Citybase Multitrade Pvt. Ltd. without doing any actual purchase and sale of goods. M/s. Hitech has obtain purchase bills of Rs. 5,63,05,275/- from this concern and after showing sale proceed merely on paper, he has introduced the unaccounted money and has given the same to M/s. Lorraine Finance Pvt. Ltd. and in sequence, M/s. Lorraine Finance Pvt. Ltd. has given unsecured loan to the appellant company, hence it is very obvious that unaccounted money has been utilized and through banking channel same money has been received back by the assessee for its utilization. Thus, the black money has been channelized. It is very important to point out that by show cause notice dated 14.2.2013, Assessing Officer has made appellant aware of the fact noticed by him that the source of such unsecured loan is M/s. Citybase Multitrade Pvt. ltd. who is involved in hawala transaction/accommodation is a bill provider. The Director of the company has given categorical statement before the Sales Tax / VAT Authority. The statement of Shri Abhishek Morarka dated 06.01.20 10 containing 1 to 8 pages were given by the Assessing Officer to the appellant for its explanation and furthe....
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....ppellant who has to prove the genuineness of credit appearing in the books of account vide Seth Kalekhan Md. Hanif vs. CIT (1958) 34 ITR 669, 673, 674 (MP). Further, mere furnishing of the particulars is not enough. Mere payment by account payee cheque is also not sacrosanct nor can it make a non-genuine transaction genuine one. It is very evident that attempt has been made to take shelter of the various legal propositions that there is no need to such recipient to prove the source of sources. Such propositions is not applicable to the facts of the case of the appellant because after receipt of justificatory evidences, Assessing Officer has made the investigations or utilized the outcome of investigation in the case of Citybase Multitrade Pvt. Ltd., hence the ultimate source of such fund under reference is found to be created by utilizing black money or unaccounted income and that is why in connivance, such arrangement has been made just with a view to give white colour to such transaction. While reviewing the facts and circumstances of the case, one cannot ignore such visible or implied facts. Thus, Ld. Assessing Officer has discharged his onus and has communicated the facts to th....
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....various fora, wherein the crux of the issue is that the assessee has to prove the genuineness of his/its creditor, i.e. the source. The source of source need not be proved. But in the instant case, the source of source has also been proved. The assessee has placed reliance on the following decision, 9. The AR, therefore, submitted that the addition as made, should be deleted. 10. The DR on the other hand submitted that the AO has gone an extra mile to stretch his investigation and to prove the evidences as produced as wrong. 11. The DR therefore, submitted that the revenue authorities order be sustained. 12. We have heard the arguments and have perused the material on record. The basic issue is that whether the loan has come from a genuine source. The facts that the loan has been raised from Lorraine Finance Pvt. Ltd. is not disputed. The fact that Lorraine Finance Pvt. Ltd. has submitted the confirmations, bank account details and its source of funds is also not disputed. What is disputed by the AO is the source of source of source. But what we are concerned with is loan received from M/s Lorraine Finance P Limited. The fact that LFPL has confirmed the same through var....
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....Citibase Multitrade, who stated that they were providing book entries. Probably, this was the reason, why the revenue authorities had been using the pharse, "unholy nexus". If the learned AO was in possession of any such information, why instead of supplying the same to respective AO of said parties, the same was used against appellant as there is no connection whatsoever between us and the dealings of said parties. 15. We find that Hon'ble Calcutta High Court in the case of CIT vs Dataware Private Limited, in ITA 263 of 2011 dated 02- 09-2011, held, "that if the creditor discloses his PAN and claims to be an assessee, the AO cannot himself examine the return and Profit & Loss Account of the creditor and brand the same as unworthy of credence. Instead, he should have enquired from the creditor's AO as to the genuineness of the transaction and whether such transaction has been accepted by the creditor's AO. So long it is not established that the return submitted by the creditor has been rejected by the creditor's AO, the assessee's AO is bound to accept the same as genuine when the identity of the creditor and the genuineness of the transaction through ac....
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....been taken in the case of CIT vs STL Extrusion P Ltd., reported in 333 ITR 269, "that where the assessee had provided, to the AO the name, address and details of share applicants, addition u/s 68 cannot be made". 23. The third party statement taken at the back of the assessee and used against him is a clear violation of natural justice, on this ground itself, the addition can be deleted, as has been held by the Hon'ble Gujarat High Court in the case of Heirs & LRs of Late Laxmanbhai S. Patel vs CIT, reported in 327 ITR 290 (Guj, HC). 24. Hon'ble Gujarat High Court in the case of Hindustan Ink & Resins Ltd. V. DCIT [2011] 60 DTR 18 (Guj. HC), laid down the proposition that assessee having established the identity of shareholders, additions u/s 68 cannot be made on the ground that assessee failed to explained source of their credit. Department was free to proceed against those persons giving sums, which according to the revenue remained unexplained, in accordance with law. 25. Hon'ble Delhi High Court in the case of CIT vs Kinetic Capital Finance Limited, reported in 202 Taxman 548 (Delhi HC), held, "that when a credit is found in books of account of an ass....