TaxTMI 
TaxTMI 
TaxTMI 
2017 (9) TMI 1944
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....irst narrate the facts relating to the appeal filed for AY 2008-09. The AO noticed that the assessee has received loan of Rs. 25.00 lakhs from M/s Sankhala Exports P Ltd during the year relevant to AY 2008-09. The said concern belonged to Bhanwarlal Jain group, which was searched on 03-10-2013. During the course of search, Shri Bhanwarlal Jain had admitted that his group concerns were providing only accommodation bills towards unsecured loans etc. Based on this information, the AO reopened the assessment of the year under consideration. The AO noticed that the assessee had taken loan of Rs. 25.00 lakhs each from M/s Sankhala Properties P Ltd and M/s Sankhala Exports P Ltd during the year relevant to AY 2007-08 and the same was added in that year u/s 68 of the Act. Accordingly the AO added the amount of Rs. 25.00 lakhs received by the assessee as loan from M/s Sankhala Exports P Ltd during the year under consideration by invoking the provisions of sec. 68 of the Act. The AO also noticed that the assessee has paid interest of Rs. 4.02 lakhs on the loans taken in the preceding year and interest of Rs. 2.28 lakhs on the loan taken during the year under consideration. The AO disallowed ....
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.... that the assessee has discharged the initial burden of proof placed upon it by furnishing the required documents to prove the three main ingredients, viz., the identity of the creditor, the credit worthiness of the creditor and the genuineness of transactions. I also notice that the AO has summoned the creditor and the creditor also has appeared before the assessing officer and confirmed the loan transactions. Despite these facts, I notice that the AO chose to place reliance on the general statement given by Shri Bhanwarlal Jain, meaning thereby, there is merit in the contentions of Ld A.R that the AO has failed to discharge the burden shifted upon his shoulders. 11. I notice that identical addition was made in the case of M/s Reliance Corporation (supra) and the assessee therein also furnished all the relevant details in order to discharge the burden of proof placed upon it u/s 68 of the Act. The creditor also appeared before the AO and confirmed the transactions. The AO, however, made the addition by placing reliance on the statement given by Shri Bhanwarlal Jain. When the matter reached the Tribunal, the division bench deleted the addition. Since the facts of the present case ....
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....tment to disprove the stand of the assessee, which department has failed to do so in the present case. The AO has merely proceeded and relied on the information received from the DGIT(Inv), Mumbai that the assessee is one of the beneficiary of the accommodation entries without bringing any material against the assessee on record by contrary to the defense put up by the assessee during the course of appellant proceedings. No cross examination was allowed to the assessee and information was used against the assessee causing violation of natural justice. The FAA dismissed the appeal of the assessee exparte for non attendance of the ld.AR. In the case of Lakhmani Mewal (supra) the Hon'ble Supreme Court has held as under : "Section 147 of the Income-tax Act, 1961 [Corresponding to section 34(1) of Indian Income-tax Act, 1922] - Income escaping assessment - Illustrations - Assessment year 1958-59 - Whether reasons for formation of belief contemplated by section 147(a) for reopening of assessment must have rational connection with or relevant bearing on formation of belief, and rational connection postulates that there must be direct nexus or live link between material coming to Inc....
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.... Whether it was simply a sort of modus operandi to convert undisclosed income into a long-term 'capital gain' claiming same to be exempted invoking section 54F - Held, yes [Para 44] [In favour of revenue] II. Section 68 of the Income-tax Act, 1961 - Cash credits (Advance by purchaser) - Assessment year 2001-02 - One VHPL allegedly advanced assessee cash against booking of flat - Assessee proved that amount so received was duly recorded in books of account of VHPL - Identity of VHPL was also established by filing its IT returns, balance sheets, etc. - Whether no addition could be made in hands of assessee - Held, yes [Para 59] [In favour of assessee] III. Section 68 of the Income-tax Act, 1961 - Cash credits (Advance by purchaser) - Purchaser of car advanced certain sum to assessee - Identity of purchaser and genuineness of transaction was established - Whether transaction could not be treated as bogus and impugned amount could not be treated as an undisclosed income of assessee - Held, yes [Para 64] [In favour of assessee]" In the case of Gangeshwari Metal (P) Ltd (supra), the Hon'ble Delhi High Court has held as under : "There are two types of cases, one in wh....
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.....e. (1) identity of the creditor (2) capacity of the creditor to advance money and (3) genuineness of the transaction. Held, dismissing the appeal, that all cash creditors were assessed to income-tax and they proved a confirmation as well as their permanent account number. They had their own respective bank accounts which they had been operating and it was not the claim of the Assessing Officer that the assessee was operating their bank accounts. Most of the cash creditors appeared before the Assessing Officer and their statements under Section 131 of the Income-tax Act, 1961, were also recorded on oath. There was no clinching evidence nor had the Assessing Officer been able to prove that the money actually belonged to none but the assessee. The addition of Rs. 17,27,2501- under section 68 was not justified. In the case of Nemi Chand Kothari (supra), the Hon'ble High Court has held as under : "16. A person may have funds from any source and an assessee, on such information received, may take loan from such a person. It is not the business of the assessee to find out whether the source or sources from which the creditor had agreed to advance the amounts were genuine or not.....
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....ailure, on the part of the creditor cannot, in the absence of any clinching evidence, be treated as the income of the assessee derived from undisclosed source. :Held (i) that the assessee had established the identity of the creditors. The assessee had also shown, in accordance with the burden, which rested on him, under section 106 of the Evidence Act, that the said amounts had been received by him by way of cheques from the creditors which was not in dispute. Once the assessee had established these, the assessee must be taken to have proved that the creditor had the creditworthiness to advance the loans. Thereafter, the burden had shifted to the Assessing Office to prove the contrary. The failure on the part of the creditors to show that their Sub-creditors had creditworthiness to advance the said loan amounts to the assessee, could not, under the law be treated as the income by the appellant from undisclosed sources merely on the failure of the sub-creditors to prove their creditworthiness from undisclosed sources of the assessee himself, when there was neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or where owned by, the ....
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....by the Jurisdictional High Court in the case of CIT v. Ashish International. In our considered view the facts of the assessee case are squarely covered by the ratio laid down in the decisions referred to above. We, therefore, in view of our observations and the ratio laid down by the various decisions are inclined to set aside the order of CIT(A) and direct he AO to delete the additions of Rs. 1,29,04,231/-. Since we have decided the issue of addition u/s 68 in favour of the assessee, the addition as sustained by the ld CIT(A) u/s 69C of the Act of Rs. 3,45,000/- is also ordered to be deleted. In result the appeal of the assessee is allowed." 12. Since the facts are identical, following the decision rendered by the division bench in the case of Reliance Corporation (supra), I hold that the Ld CIT(A) was not justified in confirming the addition of Rs. 25.00 lakhs made in AY 2008-09. Accordingly I set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition of Rs. 25.00 lakhs made in AY 2008-09. 13. I notice that the addition of Rs. 50.00 lakhs made in AY 2007-08 does not survive, since the Ld CIT(A), vide his order dated 16-02-2016 passed in No....