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2024 (1) TMI 423
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....68 of the Act by treating the unsecured loans raised from 12 entitie/companies along with interest of Rs. 17,85,862/- as unexplained cash credit under section 68 of the Act. 4. The facts in brief are that the assessee e-filed its return of income on 13.09.2013 declaring total income of Rs. 52,24,330/-. The case of the assessee was selected for scrutiny and statutory notices were duly issued and served upon the assessee. During the course of scrutiny proceedings, ld. Assessing Officer observed on the basis of audited accounts and de tails filed by the assessee that the assessee has raised unsecured loans from twelve parties aggregating to Rs. 3.40 crores during the year on which the assessee has paid interest of Rs. 17,85,862/- after deduction of tax at source, which was duly deposited in the Government Treasury. The ld. Assessing Officer called upon the assessee to prove the identity, creditworthiness of the lenders and genuineness of the transactions. Accordingly, the assessee complied with the said directions of the ld. Assessing Officer by filing copies of ITRs, Master-datas, audited financial statements, Memorandum & Article of Associations, copies of Bank statements evidenc....
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....ans mentioned at Serial Nos. 2 & 6. The ld. Assessing Officer also relied on the statement of Shri Sanjay Kumar Drolia, who arranged the loan taken which was mentioned at Serial No. 11 and the ld. Assessing Office r also relied on the statement of Shri Praveen Kumar Agarwal, who arranged the loan as stated at Serial No. 1. The ld. Assessing Officer observed that on the basis of these statements that the loans raised by the assessee were from paper companies and solely relied on the statements of above three individuals nonetheless these three individuals were never connected with the lender companies and nowhere has stated about the assessee-company being beneficiary of loans from these lenders. The ld. A.R. submitted that the ld. Assessing Officer has formed his opinion on the basis of three lenders, which was connected to these three persons and as regards the remaining lender companies, the ld. Assessing Officer has not stated anything as to why the ld. Assessing Officer has doubted the genuineness of the loans taken. The ld. A.R. also stated that even the money borrowed from these parties was duly repaid before the finalisation of assessment. The assessee filed the copies of th....
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....) may kindly be reversed and set aside and to direct the ld. Assessing Officer to delete the addition. 7. The ld. D.R., on the other hand, relied on the orders of authorities below by submitting that the assessee is beneficiary of these accommodation entries and mere furnishing all the evidences such as ITRs, Audited Statements, Loan confirmations and other documents would not automatically prove the genuineness of the transactions and creditworthiness of the creditors. The ld. D.R., therefore, relied heavily on the orders of authorities below, which are very detailed and speaking orders after discussing the facts and the modus operandi devised by the operators in this part of the country where black money is being routed in the guise of unsecured loans. The ld. DR stated that the transactions are nothing but accommodation entries and are intended for tax evasion by money laundering. The ld. D.R. finally prayed that the appeal of the assessee may be dismissed by upholding the order of ld. CIT(A). 8. After hearing the rival contentions and perusing the relevant material placed before us, we find that the assessee has raised loans from twelve entities, the details of which were....
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....re the ld. Assessing Officer and ld. Assessing Officer has acted on the basis of statements of three persons, which lacks evidentiary value in absence of any substantive and corroborative evidences being brought on re cords. The ld. AR stated that where the AO has any doubt about the lenders where the assessee has furnished all the evidences before the AO, then the matter should be looked into the hands of the creditors and not the assessee. The case of the assessee is supported by the decisions of the Hon'ble Calcutta High Court which are discussed as under: a) In the case of PCIT -vs.-Sreeleathers (supra) , the Hon'ble Court has held as under: "4. Before we examine the correctness of the order passed by the Tribunal and consider whether a substantial question of law arises for consideration in this appeal we need to take note of Section 68 of the Act. This provision deals with cash credits. It states that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not in the opinion of the Assessing Officer, satisfactory, th....
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....who claims it to be so. Bearing the above legal principles in mind, if we examine the case on hand, it is clear that the assessing officer issued show cause notice only in respect of one of the lender M/s. Fast Glow Distributors. The assessee responded to the show cause notice and submitted the reply dated 22.12.2017. The documents annexed to the reply were classified under 3 categories namely: to establish the identity of the lender, to prove the genuineness of the transactions and to establish the creditworthiness of the lender. The assessing officer has brushed aside these documents and in a very casual manner has stated that mere filing PAN details, balance sheet does not absolve the assessee from his responsibility of proving the nature of transaction. There is no discussion by the assessing officer on the correctness of the stand taken by the assessee. Thus, going by the records placed by the assessee, it could be safely held that the assessee has discharged his initial burden and the burden shifts on the assessing officer to enquire further into the matter which he failed to do. In more than one place the assessing officer used the expression "money laundering." We find such....
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....(A) who had in our view rightly appreciated the facts and circumstances of the case. As pointed out earlier, the assessing officer brushed aside the explanation offered by the assessee by stating that merely filing PAN details, balance sheet does not absolve the assessee from his responsibilities of proving the nature of transactions. It is not enough for the assessing officer to say so but he should record reasons in writing as to why the documents which were filed by the assessee along with the reply dated 22.12.2017 does not go to establish the identity of the lender or prove the genuineness of the transaction or establish the creditworthiness of the lender. In the absence of any such finding, we have to hold that the order passed by the assessing officer was utterly perverse and rightly interfered by the CIT(A). The Tribunal re-appreciated the factual position and agreed with the CIT(A). The tribunal apart from taking into consideration, the legal effect of the statement of Ashish Kumar Agarwal also took note of the fact that the notices which were issued by the assessing officer under Section 133 (6) of the Act to the lenders where duly acknowledged and all the lenders confirm....
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....blished". c) In the case of Crystal Networks (P) Limited -vs.- Commissioner of Income Tax (supra) The Hon'ble Court :- This appeal was admitted by this Court on the following substantial questions of law :- "I. Whether on the facts and in the circumstances of the case the Tribunal is justified in law in confirming the addition of Rs. 8,50,000/- as unexplained cash credit made by the Assessing Officer solely relying on an entry made in the order sheet which has no direct nexus with the present issue and while completely ignoring all the relevant materials and evidence available ? II. Whether the addition of Rs. 8,50,000/- to the income of the assessee as unexplained cash credit by the Tribunal is sustainable in law and/or is not unreasonable and perverse ?" This appeal relates to Assessment Year 1994-95. The fact of the case is summarised as follows :- The assessee/appellant at the relevant point of time has been trading bidi and as such used to sell and distribute to various customers situates at different parts of the country. In course of business the assessee used to receive from time to time cash from the customers by way of advance. In....
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....bmits that ITO did not consider the material evidence showing credit worthiness and also other documents viz., confirmatory statements of the persons, of having advanced cash amount as against the supply of bidi. These evidences were duly considered by the CIT (Appeals). Therefore, the failure of the person to turn up pursuant to the summons issued to any witness is immaterial when material documents made available, should have been accepted and indeed in subsequent year the same explanation was accepted by the ITO. He further contended that when the Tribunal has relied on the entire judgment of the CIT (Appeals), therefore it was not proper to take up some portion of the judgment of the CIT (Appeals) and to ignore the other portion of the same. The judicial propriety and fairness demands that the entire judgment both favourable and unfavourable should have been considered. By not doing so the Tribunal committed grave error in law in upsetting the judgment in the order of the CIT (Appeals). In this connection he has drawn our attention to a decision of the Supreme Court in the case of UdhavdasKewalram Vs. Commissioner of Income-Tax, Bombay City reported in 66ITR 462 In thi....
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....465 that if the Tribunal does not discharge the duty in the manner as above then it shall be assumed the judgment of the Tribunal suffers from manifest infirmity. Taking inspiration from the Supreme Court observation we are constrained to hold in this matter that the Tribunal has not adjudicated upon the case of the assessee in the light of the evidence as found by the CIT (Appeals). We also found no single word has been spared to up set the fact finding of the CIT (Appeals) that there are materials to show the cash credit was received from various persons and supply as against cash credit also made. Hence the judgment and order of the Tribunal is not sustainable. Accordingly, the same is set aside. We restore the judgment and order of the CIT (Appeal). The appeal is allowed. There will be no order as to costs". d) ITAT, Kolkata in the case of Poddar Realtors -vs.- ITO has decided as under afte r following the decision of the Hon'ble Calcutta High Court in the case of Pr.CIT vs. Sreeleathers (supra) :- "8. In view of the above facts, the reliance placed by the Ld. Counsel for the assessee on the decision of the jurisdictional Calcutta High Cou....
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....ficer had brushed aside these documents and in a very casual manner had stated that merely filing the permanent account number details, and balance sheet did not absolve the assessee from his responsibility of proving the nature of the transaction. There was no discussion by the Assessing Officer on the correctness of the stand taken by the assessee. Thus, going by the records placed by the assessee, it could be safely held that the assessee had discharged his initial burden and the burden shifted onto the Assessing Officer to enquire further into the matter which he failed to do. In more than one place the Assessing Officer used the expression "money laundering". Such usage was uncalled for as the allegation of money laundering is a very serious allegation and the effect of a case of money laundering under the relevant Act is markedly different. The order passed by the Assessing Officer was utterly perverse and had been rightly set aside by the Commissioner (Appeals). The Tribunal had rightly deleted the additions under section 68." 9. As noted earlier, the loan was repaid in 2014-15 and, therefore, the allegation of the AO that assessee was a beneficiary of the loan cann....