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TaxTMI 
TaxTMI 
TaxTMI 
2022 (2) TMI 1183
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....e by the AO u/s 68 in respect of unsubstantiated unsecured loans." 2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the assessee had discharged the primary onus cast upon it, without addressing the significant improbabilities identified by the AO particularly vide Para 4.4 and 4.9 of his order." 3. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in failing to appreciate that documents furnished by the assessee have to be seen in the light of antecedent circumstances before concluding in respect of genuineness of a transaction. 4. "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of interest of Rs. 17,80,807/-claimed to have been paid to the lenders of the above loans which remained unsubstantiated." 5. "The appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of appeal." 6. "The appellant prays that the order of CIT(A) on the above ground be set-aside and that of the assessing officer be restored." 4. Briefly stated the material f....
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.... transactions. It was this backdrop that the Assessing Officer proceeded to made an addition of the unexplained cash credits in question aggregating to Rs. 3,05,00,000/- and disallowed interest payment of such unsecured loan aggregating to Rs. 17,80,807/-. While doing so the Assessing Officer observed as follows:- 4.4 However, on verification of Copies of returns of income and copies of bank statements of persons from whom loans are borrowed, it was seen that the parties were filing their returns of income with total income being much less than the amount of money invested given as loan in many cases. Further, no profit and loss account or balance sheet or capital account of these parties was filed by the assessee company despite being asked specifically. In the absence of any such details filed, the creditworthiness of the parties to lend such huge sums of money cannot be ascertained. In fact perusal of extract of the bank statement of these parties shows that these parties do not have any regular source of income. Funds of exactly equal amounts are credited to bank accounts by way of clearing immediately prior to alleged investment and these funds are subsequently advanced as s....
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.... been established. 4.9 It is quite strange to note here that letter could be filed in response to the notice u/s 133(6) but the assessee could not attend the office personally and that also in spite of the Assessing Officer asked to do so, only one entity i.e. Kuvam International Pvt. Ltd. appeared and submitted the details called for. The partial details allegedly filed by these parties also do not contain any seal of those companies. Further, the identity as well as genuineness of the signatory claiming to be authorized signatory of these alleged entities is not known or verifiable from these papers. Further, the details filed also do not contain any documentary evidence to establish creditworthiness of those parties. These submissions give in response to notice u/s 133(6) have been allegedly stage managed by the assessee company to show mechanical & partial compliance to the requirements of section 68 to the extent of filing of some papers only to allegedly demonstrate that the alleged share applicants are actually existent but these documents also do not establish the creditworthiness, identity of these parties or genuineness of the alleged transactions. The assessee company....
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....e in whose books of account a sum is found to be credited. The principle has been firmly established by the Apex Court in various judgments, some of which are highlighted as under: - * Supreme Court in case of CIT v. P. Mohanakala (2007] 291 ITR 278 / 161 Taxman 169 held that the expression "assessee offers no explanation" means where the assessee offers no proper, reasonable and acceptable explanation as regards the sum found credited in the books maintained by the assessee. * The law is well-settled that the onus of proving the source of a sum of money found to have been received by an assessee is on him and where the nature and source of a receipt, whether it be of money or other property, cannot be satisfactorily explained by the assessee, it is open to the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that the income is from any particular source [Roshan Di Hatti v. CIT [1977] 107 ITR 938 (SC)] * The burden to prove the genuineness of cash credit lies on the taxpayer. If the assessee fails to prove satisfactorily the source and nature of amounts of cash received and creditworthiness of the creditor, the AO is enti....
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....not sacrosanct and it would not make an otherwise non-genuine transaction genuine. 4.21 CIT Vs Durga Prasad More 82 ITR.540(SC) wherein it is held by the Apex Court that where a party relies on self-serving recitals in a document, it is for that party to establish the truth of these recitals. It was further held by the Apex Court in this case that the tax authorities are entitled to look into the surrounding circumstances to find out the reality of such recitals. The Hon'ble Apex Court has specifically observed as under: "Science has not yet invented any instrument to test the reliability of the evidence placed before a Court or Tribunal. Therefore, the Courts and Tribunals are applying the test of human probabilities. Human minds may differ as to the reliability of a piece of evidence." 4.22 Juggilal Kamlapat Vs CIT 73 IT 702(SC), wherein it was held that the Assessing Officer could go beyond the legal form and find out substance having regard to the economic realities behind the legal facade. 4.23 It is quite clear from the above discussion that in the instant case, the assessee company has failed to discharge its burden of establishing the identity and creditwort....
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....s. 8. We have heard the learned Departmental Representative but none appeared for the assessee. We also perused the material on record and duly considered facts of the case in the light of the applicable legal position. 9. We find that in the present case the Assessing Officer has granted the impugned relief simply of the basis that amounts are received through banking channels and the supported by the balance confirmation and bank statement etc. which, accordingly to the learned CIT(A), by itself prove genuineness of the transaction. Such an approach however is clearly unsustainable in law in view of the fact that the amounts having come through banking channels and the balance confirmation being on record cannot by itself prove or establish genuineness of the transaction while on the aspect of the matter we may usefully refer to following observations of the coordinate bench in the case of DCIT vs. Leena Power Tech Pvt Ltd. [2021] 130 taxmann.com 341 (Mumbai - Trib.) are as under:- 7. The fundamental question that we have to deal with is whether or not the learned CIT(A) was justified in deleting the addition of Rs. 8,13,29,600 as unexplained credit under section 68 in the ha....
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....banking channels or even by filing the income tax assessment particulars. The genuineness of the transaction as a whole is thus a very important and critical factor in the examination of explanation of the assessee, as required under section 68, with respect to the share application monies received by an assessee. 8. It would thus appear that the learned counsel for the assessee is not really right in approaching on the basis as if the onus is on the Assessing Officer to prove the alleged money laundering racket - an onus that may perhaps be relevant only when the money laundering racket is being prosecuted, but that is something we are not really concerned about. As far as we are concerned, we must remain confined to the narrow issue of onus on the assessee to prove 'bonafides' or 'genuineness' of the share application money credited in his books of accounts, and that is the call we have to take in the light of facts before us and the ground realities of the commercial world. As we proceed to deal with the genuineness aspect, it is also important to bear in mind the fact that what is genuine and what is not genuine is a matter of perception based on facts of the....
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....evidence placed before a court or tribunal. Therefore, the courts and Tribunals have to judge the evidence before them by applying the test of human probabilities". Similarly, in a later decision in the case of Sumati Dayal v. CIT [1995] 80 Taxman 89/214 ITR 801 (SC)], Hon'ble Supreme Court rejected the theory that it is for alleger to prove that the apparent and not real, and observed that, "This, in our opinion, is a superficial approach to the problem. The matter has to be considered in the light of human probabilities.... Similarly the observation.... that if it is alleged that these tickets were obtained through fraudulent means, it is upon the alleger to prove that it is so, ignores the reality. The transaction about purchase of winning ticket takes place in secret and direct evidence about such purchase would be rarely available In our opinion, the majority opinion after considering surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant's claim about the amount being her winning from races is not genuine. It cannot be said that the explanation offered by the appellant in respect of the said amounts has been rej....
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....ight of surrounding circumstances, the preponderance of probabilities and ground realities, rather than being swayed by the not so convincing, but apparently in order, documents and examining them, in a pedantic manner, with the blinkers on. 10. We may also add that the phenomenon of shell entities being subjected to deep scrutiny by tax and enforcement officials is rather recent, and that, till recently, little was known, outside the underbelly of the financial world, about modus operendi of shell entities. There were, therefore, not many questions raised about the genuineness of transactions in respect of shell entities. That is not the case any longer. Just because these issues were not raised in the past does not mean that these issues cannot be raised now as well, and, to that extent, the earlier judicial precedents cannot have blanket application in the current situation as well. As Hon'ble Supreme Court has observed in the case in Mumbai Kamgar Sabha v. Abdulbhai Faizullabhai AIR 1976 SC 1455 "It is trite, going by Anglophonic principles that a ruling of a superior court is binding law. It is not of scriptural sanctity but of ratio-wise luminosity within the edifice of....
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.... excuse enough to fight shy of this call of duty and not to probe the matter properly for taking a well-considered call on whether the impugned share application monies received, in this case, a genuine transaction or not. We cannot, as we have noted earlier as well, afford to be rather superficial in this respect. Being superficial in approach is not only against the ethos of the judiciary, but certainly an antithesis for justification of the specialized Tribunals like this Tribunal. Unlike in a court of law, this Tribunal has the benefit of expertise of technical members, from accountancy and revenue service background, and the least expected of them is to ensure that the facts are properly analyzed, in the light of expert domain knowledge they have or they are legitimately expected to have, and set out the same before application of the legal principles on those facts. That is the approach that has been upheld right upto Hon'ble Supreme Court in the case of Pavankumar M Sanghvi (supra). On a somewhat similar note, and particularly in the context of issuance of shares at high premium to the companies which are seemingly shell companies, Hon'ble Supreme Court has, in the c....