TaxTMI 
TaxTMI 
2023 (6) TMI 875
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....ether on the facts and circumstances of the case and in law, the Ld CIT(A)-1, Amritsar was correct in deleting the addition of Rs. 1,75,00,000/- made by the Assessing Officer on account of unexplained cash credit without appreciating the facts that the assessee has failed to prove creditworthiness of creditors namely Shri Amandeep Singh and Shri Sukhdeep Singh and also failed to prove genuineness of the transaction. 3. Whether on the facts and circumstances of the case, the Ld CIT(A)-1, Amritsar was justified in deleting the addition of Rs. 1,75,00,000/- without appreciating the facts that in the course of assessment proceedings the creditors could not produce necessary documentary evidences to prove their creditworthiness and sources of huge cash deposits in their bank account just before advancing loan to the assessee. 4. Whether on the facts and circumstances of the case, the Ld CIT(A)-1, Amritsar was correct in deleting the addition of Rs. 1,75,00,000/- by admitting the cash flow statements of the loan submitted before the Assessing Officer; by recording the statements of the loan creditors during appellate proceedings and by estimating the agricultural income....
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.... is remained unexplained. 4.1 Similarly, in the case of Sh Sukhdeep Singh, Ajnala, the AO observed that the assessee has failed to prove the genuineness of the transaction, and creditworthiness of the payee. The assessee only submitted the bank statement of the person without any sources of the deposits in the bank. The amount has been paid out of cash of Rs. 75,00,000/- was deposited immediately in the cash credit (KCC Premium) account no. 617044008339 and transferred the same to his saving account from where cheques were issued to the assessee. The cash of Rs. 50,00,000/- and Rs. 25,00,000/- was deposited in the KCC account on 28/06/2013 and 02/07/2013 respectively. Therefore, the AO concluded that the assessee was misusing the said account of KCC premium (cash credit limit) for money- laundering by depositing unexplained cash into the account and further issuing cheques from that account to the assessee whom he does not know. Accordingly, the AO held that the entire amounts of cash of Rs. 75,00,000/- deposited in the account and converted into loan is totally unexplained. 4.2 In compliance to show cause notice of the AO, the AR of the assessee replied that assessee had to ....
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....r and whose salient points are stated above, the AO held that the said unsecured loans were unexplained credits and added back to the total income. After considering the assessment order, the written submissions of the appellant, the said unsecured loans are examined and the grounds of appeal are adjudicated here under:- (i) Unsecured loans of Rs. 1,00,00,000/- from Sh Amandeep Singh:- In the assessment order the AO observed that the amount has been paid out of ash deposited in the cash credit (KCC Premium) account no. 617044010848 of Rs. 98,00,000/- and transferring the same into his saving account from where cheques were issued to the assessee. The cash deposited in the KCC account was Rs. 50,00,000/- and Rs. 50,00,000/- deposited on 27/06/2013 and 29/06/2013 respectively. From his saving bank account Sh. Amandeep Singh issued cheques to the assessee of Rs. 40,00,000/-, Rs 30,00,000/- and Rs. 30,00,000/- on 28/06/2013, 04/07/2013 and-05/07/2013 respectively. It is observed by AO that cash of Rs. 1,00,00,000/- has been deposited within two days @ Rs 50,00,000/- each. Sh Amandeep Singh had filed return of income for AY 2014-15 at an income of Rs ....
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....remium account, it was explained that cash was available with the depositors out of cash withdrawals from KCC account earlier and from the sale of produce of agriculture land. Sh. Amandeep Singh was the owner of 25 acre agriculture land and had taken 25 acre on lease from Sh. Harpal Singh. Sh. Amandeep Singh deposited Rs. 50,00,000/- in his KCC premium cash credit account on 27.06.2013 and immediately transferred an amount of Rs. 50,00,000/- on 28.06.2013 to his saving bank account in Kota Mahindra Bank. Likewise while Sh. Amandeep Singh deposited Rs. 50,00,000/- in his KCC premium cash credit account in Kotak Mahindra Bank on 29.06.2013 and transferred Rs. 25,00,000/- and Rs. 25,00,000/- on 01.07.2013 and 02.07.2013 respectively therefrom to his savings bank account in the same bank. Sh. Amandeep Singh then transferred amounts of Rs. 40,00,000/-, Rs. 30,00,000/- and Rs. 30,00,000/- on 28.06.2013, 04.07.2013 and 05.07.2013 respectively to Smt. Raj Rani Arora from his said savings bank account in Kotak Mahindra Bank. The gross receipts of the Sh. Amandeep Singh from sale of agriculture produce during F.Y. 2013-14 in view of the above facts of the case and the state....
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..../- Total 1,26,40,000/- 57,00,000/- It was stated by Sh. Amandeep Singh in his statement recorded by the AO in the assessment proceedings that he had withdrawn cash from his KCC premium -cash credit account during F.Y. 2013-14 for agriculture purposes and after utilizing the same, he had deposited the unused amount back in the same KCC premium cash credit account. In this regard statement of Sh. Amandeep Singh was recorded by the undersigned on 13.09.2019 and he was confronted on this statement. He was asked to explain the purpose of cash withdrawals of Rs. 126,40,000/- between 01.04.2013 to 17.06.2023 from the said KCC premium cash credit account and he replied that there was hardly any expenditure on cultivating the land during this period except for preparing the land for the next crops as well as sowing of the next crop. He stated that these withdrawals were basically with the intention to purchase land which was re-deposited in the KCC premium as no deal could materialize. Obviously, such huge withdrawals by no stretch of imagination was for agriculture operations in this period. The expenditure in this period from 01.04.2023 to 15....
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....nd and when the deal did not materialize, he re-deposited the amount of unused cash withdrawal in the KCC premium cash credit account. I agree with this explanation of Sh. Amandeep Singh for reasons given above that such huge withdrawals by no stretch of imagination was for agriculture operations in this period. In the period 01.04.2013 to 17.06.2013 the net cash available with Sh. Amandeep Singh after deducting Rs. 2,23,214/- on account of expenditure incurred for agriculture operation during this period as discussed above was only Rs. (1,26,40,000 - 57,00,000 - 2,23,214 )= Rs. 67,16,786/-. In the cash flow statement of Sh. Amandeep Singh for the F.Y. 2013-14 he has shown opening cash balance as on 01.04.2013 was of Rs. 31,01,679/-. The appellant has explained the generation of opening cashing hand as under- 1. 12-12-2012 Agriculture receipts Rs 164,864/- 2. 18.12.2012 Agriculture receipts Rs 226,902/- 3. 28-12-2012 Agriculture receipts Rs 263,318/- 4. KOTAK MAHINDRA BANK (CASH WITHDRAWAL) Rs 22,50,000/- 5. 2-01-2013 Agriculture receipts Rs 60,676/- 6. 16-1-2012 Agriculture receipts Rs 135.919/....
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....f cash withdrawals from his KCC account in HDFC bank was Rs 10,71,428/-. In absence of copy of bank statement of his KCC account in HDFC bank during FY 2012-13 and in absence of any evidence of investment/expenses incurred out of cash withdrawals therefrom in FY 2012-13 (except agriculture expenses of Rs 10,71,428/-), on conservative basis it is estimated that at least 50% of the said cash withdrawal of Rs 22,50,000/- in FY 2012-13 from KCC account in HDFC bank i.e. Rs 11,25,000/-, was available with him as on 1.4.2013 as cash in hand out of cash withdrawals of Rs 2,50,000/- from his KCC account in HDFC bank during FY 2012-13. Further, since Sh. Amandeep singh is an agriculturist who was cultivating 25 acre of his- own land and 25 acre land taken on lease from Sh. Harpal Singh in FY 2012-13 and whose gross agriculture receipts in FY 2012-13 has been taken at Rs 35,71,428/- as in FY 2013-14 (above),, therefore the cash receipts of Rs 164,864/- , Rs 226,902/-, Rs 263,318/-, Rs 60676/- and Rs 135,919/- during December 2012 and January 2013 respectively as given in the details of opening cash balance as on 1.4.2013 is accepted. Therefore the opening cash bala....
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....d as discussed above, and the genuineness of transaction of giving loan through banking channel is also established. Therefore all the ingredients of section 68 of the act are satisfied with regard to loan*'of Rs 1,00,00,000/- received by the appellant from Sh. Amandeep Singh in the year under consideration and no addition of Rs. 1,00,00,000/- is called for u/s 68 of the act in respect of loan from Sh. Amandeep Singh and the same is hereby deleted. CIT pg. 29 to 39 The gross receipts of Sh. Sukhdeep singh from sale of agriculture produce during F.Y. 2013-14 in view of the above facts of the case are recomputed as under- (a). Net agriculture income ffom own land has been estimated @ Rs. 50,000/- per acre on the basis of statement of Sh. Sukhdeep Singh,' recorded by the AO in assessment proceedings and the decisions of Hon'ble ITAT, Amritsar in several cases. Therefore, net income from 23 acre of own land of Sh. Sukhdeep Singh comes to Rs. 11,50,000/-. The gross receipts work out to Rs. 16,42,857/-. 2. It was stated by Sh. Sukhdeep Singh in his statement on oath recorded by the AO that he earned net yearly income from lands taken on lease were ....
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.... rent) is considered the same @ Rs 50,000/- per acre in view of above facts. The net income (before payment of lease rent) of Sh. Sukhdeep Singh on leased land also works out to Rs (50000 x 35) = Rs 17,50,000/-. Therefore the gross receipts of Sh. Sukhdeep Singh in FY 2013-14 from term leased landsworks out to Rs 25,00,000/- The gross agriculture receipts of Sh. Sukhdeep Singh during the F.Y. 2013-14 were therefore Rs. (16,42,857 + 25,00,000) = Rs. 41,42,857/-. Sh. Sukhdeep Singh had shown his gross agriculture receipts of the F.Y. 2013-14 at Rs. 31,92,872/- in the cash flow statement which is less than the gross receipts computed above at Rs 41,42,857/- and therefore the gross receipts from agriculture as shown in the cash flow statement of Sh sukhdeep singh for FY 2013-14 at Rs 31.92,872/- is accepted. (b) Further the source of cash deposits of Rs. 50,00,000/- and Rs. 25,00,000/- on 28.06.2013 and 2.7.2013 respectively were stated to be from cash withdrawn from KCC cash credit account of Sh. Sukhdeep Singh in Kotak Mahindra Bank. The copy of the KCC premium account of Sh Sukhdeep Singh in Kotak Mahindra Bank as above reveals the following cash withdrawa....
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.... agriculture expenditure would be Rs. 957,861/- for earning gross receipts of Rs. 31,92,872/-. Therefore the agriculture expenditure of Sh. Sukhdeep Singh during 01.04.2013 to 2.7.2013 i.e. for 3 months of the year would have been Rs. 239,465/- only. In the cash flow statement of Sh. Sukhdeep Singh during the period 01.04.2013 to 7.12.2013 submitted during appeal proceedings has shown agriculture receipts of Rs. 15,31,192/- in the period 01.04.2013 to 17.06.2013 out of gross agriculture receipts during the said period from 01.04.2013 to 7.12.2013 of Rs. 31,92,872/- which have been accepted as above. Therefore the gross agriculture receipts of Rs 15.31.192/- during the period 1.4.2013 to 17.6.2013 shown in the cash flow statement is upheld. (c) Now coming to the cash available with Sh. Sukhdeep Singh out of cash withdrawals from the KCC premium cash credit account for re-deposit in the same account. Obviously, Sh. Sukhdeep Singh had not withdrawn the cash from his KCC premium cash credit account only for meeting the agriculture expenses of agriculture operations performed by him during the year under consideration. In his statement recorded by the undersigned in ap....
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....um account of Sh. Sukhdeep Singh in Kotak ' Mahindra bank was perused. It is observed therefrom that there were the following cash withdrawals and cash deposits therein during the period 9.8.2012 to 31.3.2013 and the net cash available as on 1.4.2013 out of cash withdrawals therefrom was as under- Date Cash withdrawal (self) Cash deposit Cash in hand 9.3.2012 5,00,000/- 5,00,000 13.8.2012 3,00,000/- 8,00,000 14.8.2012 5,00,000/- 13,00,000 16.8.2012 11,00,000/- 24,00 ,000 24.8.2012 8,00,000 16,00,000 27.8.2012 2,00,000/- 18,00,000 29.8.2012 6,50,000/- 24,50,000 27.9.2012 25000 24,75,000 29.11.2012 20,00,000/- 44,75,000 5.12.2012 18,00,000 26,75,000 6.12.2012 16,50,000 43,25,000 6.12.2012 1,30,000/- 44,55,000 7.01.2013 20,000 44,75,000 Therefore Sh. Sukhdeep singh had at best availability of cash in hand of Rs 44,75,000/- as on 1.4.2013 out of cash withdrawals from his KCC cash credit account in Kotak Mahindra Bank a....
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....ent of Sh. Sukhdeep Singh for FY 2013-14 was as under- Date Particulars debit credit Balance 1.4.2013 Opening balance 55,77,730 55,77,730 20.4.2013 Agriculture receipt 335,415 5913145 24.4.2013 Agriculture receipt 402,498 6315643 26.4.2013 Agriculture receipt 457,864 6773507 1.5.2013 Agriculture receipt 335,415 7108922 6.5.2013 Kotak Mahindra bank 37,00,000 3408922 7.5.2013 Kotak Mahindra bank 6,00,000 2808922 10.5.2013 Kotak Mahindra bank 37,00,000 6508922 30.5.2013 Agriculture receipt 87,847 6596769 17.6.2013 Kotak Mahindra bank 30000 66,26,769 28.6.2013 Kotak Mahindra bank 50,00,000/- 2.7.2013 Kotak Mahindra bank 25,00,000-' Therefore as per recast cash flow statement of Sh. Sukbdeep Singh for FY 2013- 14 as above, Sh. Sukhdeep singh had cash availability of only Rs 66,26,769/- as on 30.5.2013, out of which he had deposited cash of Rs 50,00,000/- as on 28.6.2013 in his KCC accou....
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....hat the said cash was not available with Sh. Sukhdeep singh on 1.4.2013, it is considered that Sh. Sukhdeep Singh had availability of cash of at least Rs (75,00,000 - 71,76,769) = Rs 3,23,231/- out of cash withdrawn on 6.8.2012 on internal foreclosure to re-deposit cash to this extent in his KCC account on 28.6.2013 and the addition of Rs 323,231/- is also deleted." 6. The Addl. CIT(DR) submitted that the Ld CIT(A)-1, Amritsar was not justified in deleting the addition of Rs. 1,75,00,000/- made by the Assessing Officer on account of on account of unexplained cash credits without appreciating the facts of the case; that the assessee has failed to prove creditworthiness of creditors namely Shri Amandeep Singh and Shri Sukhdeep Singh and also failed to prove genuineness of the transaction; that in the course of assessment proceedings the creditors could not produce necessary documentary evidences to prove their creditworthiness and sources of cash deposits in their bank account just before advancing loan to the assessee; that the Ld CIT(A)-1, Amritsar was not correct in deleting the addition by admitting the cash flow statements of the loan submitted before the Assessing Officer; b....
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....ined to the AO that cash was available with the depositors out of cash withdrawls from KCC A/cs earlier. Copies of the KCC limit A/cs of the two depositors were submitted before the AO. The loan creditors were also having huge agriculture income. (vii) The confirmations of the above two depositors were filed with the AO along with the copies of their bank accounts from where they had advanced the deposits to the appellant. (viii) Not satisfied the AO issued summons to the two depositors for their personal appearance. They duly appeared before the AO who recorded their statement on oath. (ix) During the course of their examination the depositors duly confirmed the amount of deposits given to the appellant. Copies of the statement of loan creditors recorded by the AO are enclosed. (x) It was confirmed by both the loan creditors that advance was made out of their Kissan Credit Card limit Accounts by redepositing the amounts which were withdran earlier. (xi) Copies of Premium KCC Cash Credit A/c of Amandeep Singh & Sukhdeep Singh with Kotak Mahindra Bank are enclosed for your honor's ready reference along with copy of saving a/c of Sh.Amande....
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....hey had sufficient cash balance in hand out of withdrawls made from the KCC limit A/c. It was the rotation of the same amount as they had huge KCC limit. The loan creditors also had huge cash earnings from agriculture available with them for making the deposit in the bank. The AO while making the above observation has conveniently ignored the withdrawls made from the KCC Limit A/c by the two depositors. He has tried to project in a way that the total deposits by the depositors in their KCC limit A/c are all fresh deposits whose source is unexplained. After giving the telescopic effect to the cash withdrawls all the deposits in the bank account get fully explained. As regards AO's contention that the depositors had deposited cash in their KCC limit A/c just two days before giving the deposit to the assessee it is submitted that before the deposits of cash in the KCC limit A/cs the depositors had enough cash balance out of cash withdrawls as explained earlier. Creditworthiness of the depositors: --------------------------------------------------- This is an incontrovertible fact that both the depositors are of high net worth means as their combined....
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.... income as consideration. From the reading of the above judgement it will be appreciated that the same is distinguishable from the present case. Here the creditworthiness and genuineness of transactions stand proved beyond any doubt. The source of deposit of cash by the depositors in their bank account stand proved beyond any reasonable doubt as the depositors had sufficient cash in hand which was withdrawn from the bank. Moreover, the depositors had been paid interest by the assessee @12% and tax was duly deducted therefrom. So the criteria of return on investment laid by the Hon'ble High Court stand fully satisfied as well as that of creditworthiness. Further, in the case decided by the Hon'ble Delhi High Court the investor could not prove the source of cash deposited by it in the bank before issuing the cheques. However, in the case of the appellant the source of cash deposit by the depositors stand fully explained. The cash deposited by them in their bank a/cs was earlier withdraw from the bank a/c itself. Repayments of loans by the assessee: ------------------------------------------------------ We are submitting herewith copies of ....
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....- and Rs. 25,00,000/- on 01.07.2013 and 02.07.2013 respectively therefrom to his savings bank account in the same bank. Thereafter, Sh. Amandeep Singh transferred amounts of Rs. 40,00,000/-, Rs. 30,00,000/- and Rs. 30,00,000/- on 28.06.2013, 04.07.2013 and 05.07.2013 respectively to Smt. Raj Rani Arora from his said savings bank account in Kotak Mahindra Bank. The LD. CIT (A) has discussed at length the gross receipts of the Sh. Amandeep Singh from sale of agriculture produce during F.Y. 2013-14 and cash flow statement to substantiate its source as above. Accordingly, the CIT(A) has observed that Sh. Amandeep Singh had cash in hand available at more than Rs. 1 crore as on 17.06.2013 immediately before depositing cash of Rs. 50,00,000/- and Rs. 50,00,000/- in his KCC premium cash credit account in Kotak Mahindra Bank on 26.06.2013 and 29.06.2013 respectively. Therefore it is held that Sh. Amandeep Singh has creditworthiness to deposit Rs 50,00,000/- and Rs. 50,00,000/- in his KCC premium cash credit account in Kotak Mahindra Bank on 26.06.2013 & 29.06.2013 respectively. 10. The Ld. AR argued that appellant had submitted the copy of account of the loan creditor Sh. Amandeep Singh ....
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.... 50,00,000/-. Sh. Sukhdeep singh had also deposited cash of Rs 25,00,000/- in his said KCC account in Kotak Mahindra bank on 2.7.2013 which was met to the extent of Rs 16,26,769/- out of cash in hand as per recast cash flow statement of FY 2013-14 / as above and the net income of Sh. Sukhdeep Singh from the sale of animal fodder and vegetables grown between April 2013 to june 2013 after harvest of wheat was accepted to the tune of Rs 5,50,000/-; cash withdrawn of Rs 323,231/- on 6.8.2012 on internal foreclosure and thus Rs (50,00,000 + 16,26,769 + 5,50,000 + Rs 323,231/-) = Rs 75,00,000/- stands explained. Since, the identity of Sh. Sukhdev Singh stands established as he attended proceedings before the AO and the appeal proceedings as well and the genuineness of transaction is established as the loan was given through banking channel and that credit worthiness to pay advance of Rs. 75,00,000/- to the appellant is established as discussed above and hence the addition has been rightly deleted by the Ld. CIT(A). In our view, the decision of the Ld. CIT(A) in deleting the addition of Rs. 1,75,00,000/- is justified. 13. It is noted that the reliance placed by the AO on the decision o....