TaxTMI 
TaxTMI 
2019 (10) TMI 1072
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.... capital account as unexplained. He has also erred in not allowing the set off of the addition of Rs. 63,380/- made u/s 43CA against the addition confirmed by him. 3. The assessee craves to amend, alter and modify any of the grounds of appeal. 4. The appropriate cost be awarded to the assessee." Ground No. 1 is regarding addition made by the AO under section 68 of the IT Act on account of loan received from 9 persons. 2. The assessee is an Individual and proprietor of M/s. Leela Kothari. The assessee filed her return of income on 12th September, 2015 declaring total income of Rs. 7,36,940/-. During the course of scrutiny assessment proceedings, the AO noted that the assessee has raised loans from various persons. In order to examine the conditions as provided under section 68, the AO issued notices under section 133(6) to 13 loan creditors. After receiving the response as well as confirmations and other documents including the bank statements of the loan creditors, the AO noted that out of 13 loan creditors, cash has been deposited prior to the issuing cheques to the assessee in case of 9 loan creditors. Thus the AO proceeded to examine the claim of....
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....anks of the family members. Thus the ld. A/R has submitted that when there is a close relationship between Shri Manish Chouhan and other 6 loan creditors, then suspecting the transactions of deposit and withdrawal by one person is not justified. He has further contended that all the loan creditors have confirmed this fact including Shri Manish Chouhan that he was doing all the financial transactions on behalf of the family members. The AO also examined Shri Arvind Ajmera who has also explained that all the transactions in his bank account are done by Shri Narendra Surana, accountant of Shri Renu Jain and, therefore, he was not able to explain all the details of the deposits and withdrawals made from their accounts. The ld. A/R has further submitted that the assessee has also produced the record to show that earlier these loan creditors made investments in M/s. Gandhar Rocktech and M/s. Hemant Sales Corporation and after receiving back the amount from those concerns, they withdrawn the amount from their bank account and the said amount was again deposited in the bank account before giving the loan to the assessee. There is a direct co-relation between the funds withdrawn from ....
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....editors in the month of July, 2014 of amount which are more than subsequent cash deposits in their bank accounts. Therefore, there was no reason to doubt the creditworthiness and genuineness of the transactions when there was withdrawal of more than the amount subsequently deposited in the bank accounts of these loan creditors. Further, all these loan creditors were examined by the AO and they have explained the facts regarding the transactions of withdrawals from the bank account and again deposited the cash in the bank account and thereafter given loan to the assessee. Merely because one of the family members of the loan creditors have done the transactions of deposits and withdrawals will not render the transactions as bogus particularly when this fact was explained that Shri Manish Chauhan, a family member was looking after the financial transactions of all the family members of the loan creditors and, therefore, nothing abnormal in this practice of withdrawing the amount from the bank accounts of his family members and thereafter depositing back the amount on behalf of the family members. Similarly, Shri Arvind Ajmera is neighbor and friend of Shri Manish Chauhan, theref....
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....tted that the AO has conducted a thorough enquiry during the assessment proceedings as well as during the remand proceedings and has established that the assessee has failed to establish the creditworthiness of the loan creditors and since there was a prior cash deposit of equal amount in the bank accounts of all the 9 loan creditors, therefore, the genuineness of the transaction is very much doubted and not proved by the assessee. She has relied upon the orders of the authorities below and submitted that in the statements recorded by the AO under section 131 of the IT Act, the loan creditors have given contradictory statements and were not able to ever explain the transactions of withdrawals and deposits made in their bank accounts. Therefore, the genuineness of the transaction was not proved by the assessee. 5. We have considered the rival submissions as well as the relevant material on record. In order to verify the claim of loans taken by the assessee, the AO issued summons under section 133(6) to 13 persons as recorded in para 3.2 of the assessment order as under :- " 1. Sh. Hemant Kothari 2. Ms Sarita Parakh 3. Sh. Arvind Ajmera 4. Sh. Akshay Ajmera 5. Smt. ....
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....oted that in case of 7 loan creditors, the self cheques were presented by Shri Manish Chauhan. On the basis of these enquiries and the information obtained from the bank regarding deposit slips and withdrawals through self cheques, the AO doubted the transactions and decided to examine the loan creditors. Accordingly, the AO examined the loan creditors under section 131 of the IT Act. Some of the loan creditors have explained that they cannot explain all details of the bank transactions as the other family members are looking after them. Similarly, the AO has also examined Shri Manish Chauhan who has accepted the fact that he is doing the bank transactions on behalf of the family members who are the loan creditors and in some of the cases the transactions are also done through his neighbor and friend Shri Arvind Ajmera. The AO finally held that since there were cash deposits for equal amounts in the bank accounts of these loan creditors immediately before issuing cheques to the assessee, the assessee has failed to establish the creditworthiness and genuineness of the transactions and consequently an addition of Rs. 59,50,000/- was made under section 68 of the Act. Before the ld.....
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....as under : Name of creditor Date of withdrawal Amount withdrawn Name of person withdrawing the amount Date of cash deposit Amount of cash deposited Name of person depositing the cash Shashi Chauhan 24.07.2014 Rs. 9,49,700 Manish Chauhan 05.12.2014 Rs. 9 lacs Arvind Priyanka Chauhan 24.07.2014 Rs. 8,09,100 Manish Chauhan 02.12.2014 Rs. 8 lacs Manish Inder Singh Chauhan 24.07.2014 Rs. 4,57,800 Manish Chauhan 02.12.2014 Rs. 2 lacs Manish Inder Singh Chauhan HUF 24.07.2014 Rs. 10,68,400 Manish Chauhan 22.09.2014 Rs. 2 lacs Manish Rekha Chauhan 24.07.2014 Rs. 10,00,000 Manish Chauhan 05.12.2014 Rs. 6 lacs Arvind Sunil Chauhan 22.09.2014 05.12.2014 Rs. 4 lacs Rs. 4 lacs Arvind Thus it is clear that the withdrawals were made through self cheques presented by Shri Manish Chauhan who is family member of the loan creditors but the deposit slips were signed by Shri Manish Chauhan as well as by Shri Arvind Ajmera. Once the assessee has produced the confirmations as well as affidavits of these loan creditors along with the ban....
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....e's own unaccounted income was used for deposit of cash in the bank accounts of the loan creditors and was received back in the garb of unsecured loans. The assessee has produced the source of the cash deposited in the bank accounts of these loan creditors by showing the earlier transactions of the loans given by these loan creditors to M/s. Gandhar Rocktech in the month of March, 2013 and the said loan was received back by these loan creditors in the month of July, 2014 and subsequently the amounts were withdrawn by the loan creditors. When the loans were given to the assessee, these loan creditors again deposited the amount in their bank accounts before issuing cheques to the assessee. Only because there were cash deposits in the accounts of these loan creditors, the AO and ld. CIT (A) has doubted the genuineness of the transactions but once the assessee has produced the documentary evidence to show the source of these cash deposits in the hands of the loan creditors being the prior withdrawal of much more amount from the bank accounts, then this explanation of the assessee as a source of deposit and creditworthiness of the creditors cannot be rejected in the absence of any contr....
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....levant documentary evidence in support of the claim that the loans were given from the funds available with them through banking channel. The deposits of the cash in the bank accounts is certainly a relevant aspect and strong reason to conduct an enquiry and to verify the transaction but the deposit itself cannot be a ground to hold that the transaction is not genuine and the loan creditors were not having the capacity to grant the loan. Accordingly, when the assessee has produced all the documentary evidence to dispel the doubts of the AO, then the transaction cannot be held as non-genuine without bringing any material or fact to show that the assessee's own unaccounted money has routed through the bank accounts of the loan creditors. 5.2. The last loan credit is Ms Neha Jain of Rs. 5 lacs. The assessee has produced the income tax returns filed by Ms Neha Jain for the assessment years 2007-08 to 2014-15 showing opening cash balance of Rs. 7,61,376/-. The AO has rejected the claim on the ground that there was a cash deposit of Rs. 5 lacs in the bank account of Ms Neha Jain prior to the loan of Rs. 5 lacs given to the assessee. It is also brought on record that prior to the pr....
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....ssessee from the assessment year 2007-08 onwards and submitted that there was an opening cash balance of more than Rs. 44 lacs as on 1st April, 2014 and, therefore, the introduction of capital of Rs. 14,25,000/- during the year is from the opening cash balance of Rs. 44,41,950/-. He has referred the personal balance sheet as well as proprietorship balance sheet of the assessee and submitted that the assessee has produced these records before the ld. CIT (A) which was sent to the AO for remand report. However, the ld. CIT (A) has confirmed the addition without considering all these evidences produced by the assessee. Thus the ld. A/R has submitted that in view of the assessee was having more than Rs. 44 lacs of opening cash balance in her personal balance sheet then the source of capital of Rs. 14,25,000/- introduced during the year is duly explained and established. 8. On the other hand, the ld. D/R has submitted that the authenticity of the personal balance sheet cannot be accepted when these are not filed along with the return of income or in the assessment proceedings. These documents are assessee's own documents not part of the assessment record. She has relied upon the orde....