TaxTMI 
TaxTMI 
2018 (11) TMI 1893
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....n the said information the AO reopened the assessment by way of issue of notice u/s.148 dated 14.11.2014 after duly recording the reasons. During the course of reassessment proceedings the A.O. has observed that assessee has taken loan of Rs. 1,75,00,000/- from the following persons:- Sr.No. Name PAN Amount 1 Duke Business P. Ltd. (JPK Trading I Pvt.Ltd) AABCJ6245N 50,00,000/- 2 Duke Business P. Ltd. (JPK Trading I Pvt.Ltd) AABO6245N . 35,00,000/- 3 Casper Enterprises P. Ltd. (Ostwal Trading I P. Ltd.) AAAC07955M 40,00,000/- 4 Sumukh Commercial Pvt.Ltd. (CapstownMer.P.Ltd.) AACCC400M 50,00,000/- Total Rs. 1,75, 00,000/- 5. The A.O. has not accepted the transactions as genuine. Accordingly, the loan of Rs. 1,75,00,000/- treated as unexplained and added to the total income of the assessee. 6. By the impugned order CIT(A) deleted the addition after observing as under:- "5. I have carefully gone through the assessment order passed by the A.O, written submissions filed by the appellant and relevant case laws cited by the appellant during the appellate proceedings. 5.1 All the gr....
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....ade the disallowance u/s 68 even in spite of all the conditioned satisfied by the appellant. 5.4 The expression "nature and source" has to be understood together as a requirement of identification of the source and the nature of the source, so that the genuineness or otherwise could be inferred. The Hon'ble Supreme Court, in Kale Khan Mohd. Hanif vs. CIT, pointed out that the onus on the assessee has to be understood with reference to the facts of each case and proper inference drawn from the facts. If the prima facie inference on the fact is that the assessee's explanation is probable, the onus will shift to the Revenue. As far as the creditworthiness or financial strength of the creditor/subscriber is concerned, that can be proved by producing the bank statement of the creditors/subscribers showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. Once these documents are / produced, the assessee would have satisfactorily discharged the onus cast upon him. Thereafter, it is for the Assessing Officer to scrutinize the same and in case he nurtures any doubt about the veracity of these documents, to prove the matter furth....
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....ncial capacity of the of the person giving cash credit to the assessee, i.e. the credit worthiness of the creditor. However, the onus of the assessee is limited to the extent of proving the source from which he received the cash credit. The credit worthiness of the creditor has to be judged vis-avis the transaction which had taken place between the assessee and the creditor, and it is not the burden of the assessee to find out the source of creditworthiness of the lender to prove the genialness of the transaction. This is held by the Gauhati High Court in the case of CIT v. Smt. SanghamitraBharali (2014) 361 ITR 481 (Gau) at page 482.(Copy enclosed)The aforesaid points were also affirmed in the past by the Appex Court in the case of CIT v. Orissa Corporation P, Ltd reported in (1986) 159 , ITR 78 (SC). In the case of CIT v. Varinder Rawley (2014) 366 ITR 232 (P & H) the court held that "where the assessee shows that the entries regarding credit in a third party's account were in fact received from the third party and are genuine, he discharges the onus. In that case, the sum cannot be charged as the assessee's income in the absence of any material to indicate that it belong....
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....urt held that "where the assessee shows that the entries regarding credit in a third party's account were in fact received from the third party and are genuine, he discharges the onus. In that case, the sum cannot be charged as the assessee's income in the absence of any material to indicate that it belongs to assessee", particularly in a case where no summons u/s 131 is issued against the third party. 5.10 The Bombay High Court has recently decided the case of Rushabh Enterprises vs ACIT, 24(3), Mumbai in Writ Petition no. 167 of 2015. In this case assessee had taken loans from 45 parties and out them 4 parties belonging to the same group of Bhanwarlal Jain were considered non genuine by the AO. It was pointed out that aforesaid 4 parties had advanced loans from through account paying cheques which were encased in the petitioner's Dank account used for business transactions. Interest is also paid on these loans and at the time of payment of interest, tax was deducted at source and TD5 returns were filed. It was contended by the department that they have received information from DGIT (InvJ that assessee had taken unsecured loans from the above parties by way o....
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....nuineness and credit worthiness of the lender, onus of proof shifts to revenue. Therefore, it was held that assessee had furnished all the details regarding genuineness of cash credit, i.e., he had discharged his burden of proof. AO did not make any attempt to discharge his burden of proof to rebut the evidences produced by assessee. No addition u/s.68 can be sustained 5.12 From the assessment order, it transpires that the AO has solely relied upon the statement did not carry out any worthwhile independent inquiry in the matter. He has totally ignored the documentary evidences submitted by the appellant. The AO has not pointed out any defect in the above mentioned documentary evidences submitted during assessment proceedings. Without pointing out any lacuna in the evidences submitted by the appellant, the sources and the genuineness of transactions cannot be doubted. Once evidences related to a transaction is submitted before the A.O., tne onus shifts on him to prove these as non-genuine or bogus. The A.O. has not discharged the onus casted on him. In my opinion, merely based on the statement of a third person without any corroborative evidence will not make the loan trans....
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....l has also held that the mere statement of a person cannot be a deciding factor for rejecting the genuineness of the purchase of shares by the assesseee specially when all other supporting evidences filed by the assessee were neither proved to be false or untrue. The Hon'ble ITAT Mumbai in the case of ITO vsAnand Shelters Pvt.Ltd. (2012) 20 Taxmann.com 153 has enumerated certain principles which would be extremely useful in understanding the issue in hand. It has been stated in the said judgment that over the years, law regarding cash credits have evolved and has taken a definite shape. A few aspects of law u/s.68 can be enumerated. 1. Sec. 68 can be invoked when there is a credit of amounts in the books maintained by the assessee, such credit is a sum of money during the previous year and either the assessee offers no explanation about the nature and source of such credits or the explanation by the assessee in the opinion of the AO is not satisfactory. 2. The opinion of the AO for not accepting the explanation offered by the assessee as not satisfactory is required . to be formed objectively with reference to the material on record. 3. Courts are of ....
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....of section 68 is clear. The Legislature has laid down that In the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of :he assessee of that previous year. In this case the legislative mandate is not in terms of the words "shall be charged to income-tax as the income of the assessee of that previous year". The Supreme Court while interpreting similar phraseology used in section 69 has held that in creating the legal fiction the phraseology employs the word "may" and not "shall .Thus the unsatisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the assessee as held by the Supreme Court in the case of CIT v. Smt. P. K. Noorjahan [1999] 237 ITR 570. 5.17 After considering the totality of facts, the rival submissions, the applicable law and on the basis of discussions mentioned above, I have come to the conclusion that nature and source of credit in the books of account of appellant stands explained. Consequently, addition u/s 68 cannot be sustained. Therefore, A.O. is directed to delete the addition of Rs. 1,75,00,000/-. This ....
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....count of Casper Enterprise P. Ltd. as it appears in the books of M/S. Shree Ganesh Developers for the period 01-04-2007 to 31-03-2010. b) Loan Confirmation for the Period 2007-08, 2008-09 & 2009-10. c) Certificate oj Incorporation from Registrar of Company. d) Copy of Bank Statement of Casper Enterprises P. Lid. highlighting the payment made to M/S. Shree Ganesh Developers. The sources of the fund is the loans received back by Casper Enterprises P. Ltd., from: i)Kunal Gems Rs. 1400,000/- ii) Kush International Rs. 26,00,000/- iii) Kunal Gems Rs. 10,00,000/- iv) Natasha Enterprises Rs. 36,00,000/- e) Copy of PAN Card f) Copy of Income Tax Return. g) Copy of Annual Repon and Balance Sheet for the Y.GBP 31-03-2008. h) The identity, creditworthiness of the M/S. Casper Enterprises P. Lid. is proved and the genutnity of the loan transaction in also proved as required u/s 68. B. DUKE BUSINESS P. L TD. (formerly known as J P K TRADI.\G (INDIA) P. L TD,) a) Copy of Ledger Account of Duke Business P. Led. as it appears in the books of M/S. Shree Ganesh Developers for the period 03-04-2007 to 31-03....
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....learned AR, the AO has erred in utilizing a 3rd person's statements against the assessee without giving an opportunity to the assessee for Cross Examining and Interrogation of the 3rd !' person in the presence of the A O. Additions to the income made merely on the basis of the statement made by an unknown person without giving an opportunity to the assessee to defend itself is a gross violation of natural justice and such additions made deserves to be deleted. 15. Our attention was invited to the fact that Pravin Kumar Jain has retracted from the statement given by him before the DDIT (Inv). Attention was invited to the copy of retraction by Pravin Kumar Jain. AR referred to the point no 7 and onwards of the retraction Affidavit, to show that the statement given to the DDIT (Inv) was under coercion, pressure and threat from the DDIT (Inv). The statement was recorded under the extenuating circumstances and Pravin Kumar Jain was not even aware of the content that was recorded by the DDIT(inv). The Search operation continued for 9 days and Pravin Kumar Jain in his Retraction affidavit has said that he signed the statement to ensure that the 9 days long search action ends. ....