TaxTMI 
TaxTMI 
2019 (3) TMI 1400
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....as noticed that the assessee has taken loan of Rs. 5 lakhs from one Shri Vrajlal Chagnial Sorthiya. The aforesaid lender had not filed return of income for AY 2013-14. To verify the genuineness of the loan, the lender was examined on oath under s.131(1) of the Act on 08/12/2015. It transpired that lender is a retired government employee and drawing pension and claims to have 6.4 hectors agricultural land. However, on enquiry, the assessee could support the holding of land to the extent of 1.38 hectors only. The Assessing Officer made further enquiry with the lender in the proceedings under s.131 of the Act and found that the lender is withdrawing Rs. 25,000/- to Rs. 30,000/- per month out of pension regularly. It was further found that the lender had deposited cash of Rs. 5 lakhs immediately before lending the same to the assessee. The Assessing Officer found that the aforesaid deposit of cash was not out of the known sources of the lender and therefore drew inference that the deposit in cash in the account of the lender remains unproved. The source of loan in the hands of the assessee therefore was found to be unsatisfactory as contemplated under s.68 of the Act. The Assessing ....
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....in various judgments/decisions as under: 8.2.1 The Hon'ble Supreme court in the case of Commissioner of Income-tax v. P. Mohanakaia [2007] 161 TAXMAN 169 (SC) held that "We are unable to persuade ourselves to accept the submission. The findings of fact arrived at by the authorities below are based on proper appreciation of the facts and the material available on record and surrounding circumstances. The doubtful nature of the transaction and the manner in which the sums were found credited in the books of account maintained by the assessee have been duly taken into consideration by the authorities below. The transactions though apparent were held to be not real one. May be the money came by way of bank cheques and paid through the process of banking transaction but that itself is of no consequence." 8.2.2 In case of CIT v Precision Finance (P.) Ltd. [1995] 82 TAXMAN 31 (CAL.) the Hon'ble Calcutta High Court held that - "It was for the assesses to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. On the facts of this case, the Tribunal did not take into account all these ingredients which ....
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....planation is in effect an in-built safeguard in section 68 protecting the interest of the assesses. It provides for an opportunity to the assessee to explain the nature and source of the fund. Once it is explained, it is incumbent on the Assessing Officer to consider the same and form an opinion whether the explanation is satisfactory or not. The expression used in the section clearly lays the burden on the assessee to explain the nature and source of the fund. Unless explanation is offered, the Assessing Officer is free to treat the fund as income of the assessee from undisclosed sources chargeable to tax. Once explanation is offered, the Assessing Officer is bound to consider the same. Such consideration is guided by sound principle of law. The opinion so formed must be reasonable and based on materials and shall not be perverse. The extent of the power of the Assessing Officer while considering the materials produced by the assesses is very wide. It is a question of examining as to whether the apparent is real. The Assessing Officer is empowered to lift the corporate veil and examine the real nature of the transaction. In the process, it may exercise its power of examin....
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.... 8.2.5 In the case of CIT vs. Indian Express News Papers 238 ITR 70 (Mad) the Hon'ble Madras High Court held as under - The fact that the money was not paid directly but was shown as having been invested in the subsidiary company was not decisive of the true character of the transact/oh. The mere fact that the investment company was a distinct legal entity did not by itself establish that the purported investment was a genuine investment which assessee-company had made for securing benefits to Itself by way of trading or carrying on business through that subsidiary. The impugned sum was paid to the Bombay company on the same day on which it was paid to the investment company. Though the investment company was purported to charge interest in the first year, subsequently no interest at all was charged to the Bombay company on that sum. It was not the assessee's case that the money was returned by the investment company subsequently with interest or that the assessee received dividends from out of the investments made by it in that company. It is well-settled that the corporate veil of a company can be lifted for the purpose of ascertaining the real cha....
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....ver observed that it concerns state of affairs of the lender with which the assessee is not privy to. The Ld.AR for the assessee however submitted that a benign view should be taken and the assessee should be absolved from the additions made by the revenue authorities. 7. The Ld.DR, on the other hand, relied upon the orders of the authorities below and stridently opposed the contentions raised on behalf of the assessee. It was submitted that the bank statement of the lender says it all that he has no financial capacity nor has any wherewithal to deposit such large amount of cash immediately prior to the issue of cheque to the assessee. The Ld.DR submitted that the aforesaid amount of cash deposit in the bank account of the lender clearly appears to be unaccounted income of the assessee herein for which he was accommodated by way of lending. The Ld.DR supported the observations made by the Assessing Officer that the lender was withdrawing money in cash of Rs. 25,000/- to Rs. 30,000/- per month out fo pension regularly to meet his expenditure. No prudent person will withdraw such money when he has accumulated funds of Rs. 5 lakhs in cash as claimed. The Ld.DR thus submitted tha....