2022 (3) TMI 1281

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....ed against order dated 23.11.2016 u/s 143(C) of the Income Tax Act, 1961 (hereinafter referred to as the "Act") passed by the Dy. Commissioner of Income Tax, Circle, Haridwar (hereinafter referred to as the "Ld. AO). 2. The facts in brief are, the case of assessee, which is a partnership firm, was selected through CASS for scrutiny and statutory notice u/s 143(2)of the Act was issued. The partners of the assessee had issued capital of Rs. 2 crore each in the firm for which explanation was sought to explain the source of the amount of Rs. 4 crores introduced by the partners in the firm. The assessee informed the Ld. AO that amount was introduced by way of cheques by the two partners but the cheques could not be cleared and were returned b....

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.... account of unexplained unsecured loan ignoring the facts that loan shown from the two partners were fictitious and never received by the assessee and as such the balance sheet of the assessee was projecting this fact. 2. The Ld. CIT(A) has erred in law and on facts in holding that no funds have actually been received by the assessee in respect of the credit by both partners. 3. That the order of ld. CIT(A) be set aside and that of the A.O. be restored." 5. Heard the Ld. Sr. DR for the revenue / appellant and counsel for the assessee. On behalf of the revenue the Ld. Sr. DR submitted that the findings of ld. AO are relied as Ld. AO has taken into consideration the fact that amount was introduced in the form of capital a....

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....iven by the lender, (v) the genuineness and regularity, in the maintenance of the account has to be taken into consideration by the taxing authorities, (vi) if the explanation is not supported by any documentary or other evidence, then the deeming fiction credited by Section 68 can be invoked. 6.1 Then particularly in case of fictitious entries where there is no actual flow of cash, the Coordinate Bench in ITO Vs Zexus Air Services Pvt. Ltd. (ITAT Delhi) Appeal Number : ITA No.2608/Del/2018 vide order dated 23/04/2021 has observed; "12.1 We find, the Delhi Bench of the Tribunal in the case of ACIT vs. Shri Suren Goyal (ITA No.1767/Del/2011, order dated 1st December, 2011; has held that where the assessee has re....

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....ny sum was credited to the books of the assessee." 7. Thus, what can be concluded is that it is not just entry of cash credit in the books of accounts that would create liability of explanation from the assessee, but there should be an actual flow of funds. Once the flow of funds is established then the question of explanation from the assessee actually arises. Where the books of accounts on its own establish that the entry was fictitious and sham for window dressing , then as such the initial burden on the revenue is not discharged to shift onus on the assessee to explain further identity, capacity and genuineness of the source. 8 It can be seen in present case that the Ld. AO had observed from the books of accounts that the entry wa....