TaxTMI 
TaxTMI 
2023 (10) TMI 1396
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....to add to, amend or alter the above grounds as may be deemed necessary. Relief claimed in appeal It is prayed that the order of the CIT (Appeals) be set aside and that of the Assessing Officer be restored." 3. The only issue raised by the revenue is that the learned CIT(A) erred in deleting the addition of unexplained cash credit in the form of unsecured loans for Rs. 6,73,19,000/- under section 68 of the Act. 4. The facts in brief are that the assessee is an individual and engaged in 3 separate business activities namely Share Trading business, Construction business and Transportation business under different name and style. The assessee, for each business activity, is also maintaining separate books of accounts. The assessee in the business of share trading has shown receipt of interest free unsecured loans from different entities detailed as under: Sr. No. Particulars Amount (Rs.) 1 Amazing Suppliers Pvt. Ltd. 1,20,00,000/- 2 Channel Guide Indis Ltd. 28,00,000/- 3 Radford Real Estate Pvt. Ltd. 50,00,000/- 4 V & R Yearns Pvt. Ltd. 10,00,000/- 5 Krystalklear Properties Pvt. Ltd. 25,00,000/- 6 Jaylalitha Commodities Pvt. Ltd. 55,00,000/- 7 Alsih Trader....
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....e unlisted and that too without affording the opportunity of cross examination. 4.4 However, the AO disagreed with the contention of the assessee and held that the assessee failed to explain the source of the sum credited in his books and accordingly treated the entire sum of Rs. 7,80,19,000/- as unexplained cash credit under section 68 of the Act. The reasoning/view of the AO for holding the credit from each party mentioned in the above reproduced table as unexplained credit are placed at pages 25 to 43 of assessment order. However, on close perusal of the same, the reasoning of the AO can be briefly summarized as under: (a) Notices under section 133(6) of the Act were issued to all the parties but no response. (b) Commission under section 131(1)(d) of the Act was appointed to carry out enquiries from the parties but they were not found available at the given address. (c) The parties were showing merger income in comparison to the amount advanced to the assessee. (d) Their bank accounts got credited just before making transfer of fund to the assessee. (e) The DDIT (Mum) in the commission report under section 131(1)(d) reported that the parties appearing at serial No. 2 ....
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....h on the aspects of genuineness of the transaction in issue and the creditworthiness of the creditors who lent money to assessee. As noticed above, the first aspect, i.e., identity of the creditors was established before the AO beyond any doubt. It will have to be kept in mind that section 68 of the I.T. Act only sets up a presumption against the assessee whenever unexplained credits are found in the books of account of the assessee. It cannot but be gainsaid that the presumption is rebuttable. In refuting the presumption raised, the initial burden is on the assessee. This burden, which is placed on the assessee, shifts as soon as the assessee establishes the authenticity of transactions as executed between the assessee and its creditors. It is no part of the assessee's burden to prove either the genuineness of the transactions executed between the creditors and the sub- creditors nor is it the burden of the assessee to prove the creditworthiness of the sub-creditors. These principles have been set by various judicial authorities including jurisdictional High Court as held in the cases of Apex Therm Packaging (P.) Ltd.(Supra) and Sachitel Communications (P.) Ltd.(Supra) as well....
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....ute adopted by the assessee to plough back its own undisclosed income into its accounts, can be of no avail. The AO was required to prove this allegation. An allegation by itself which is based on assumption will not pass muster in law. The Assessing Officer was required to bridge the gap between the suspicions and proof in order to bring home this allegation. In my considered view, the Assessing Officer ought to have analyzed the material before him rather than be burdened by the fact that some of the directors have business connections in the creditors. If the Assessing Officer had any doubt about the material placed on record, which was largely bank statements of the creditors and their Income-tax returns, he could have gathered the necessary information from the sources to which the said information was attributable to. No such exercise had been conducted by the Assessing Officer. In any event what the Assessing Officer lost track of was that it was dealing with the assessment of the company, i.e., the recipient of the loan and not that of its directors and shareholders or that of the sub-creditors. If it had any doubts with regard to their creditworthiness, the revenue could a....
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.... proper to make further Investigation about the source of deposits in these bank accounts which were mainly clearing entries with details of third parties. No statement of any such party was recorded. Similarly, after having doubts about the whereabouts of the creditor companies, no attempt was made to make enquiry from the offices of ROC. B. In para 11.1 and 11.2 of the assessment order, Assessing Officer has mentioned that commission under section 131(1)(d) was issued to DDIT(Inv.), Mumbai on 22.02.2014 and a list of ten companies, assessed at Mumbai, was given to him for enquiry. From the reply of DDIT, referred by the Assessing Officer in these para, it transpires that these companies are part of some "Shah scam group". It also transpires that nine out of these ten companies were also searched. by the department and these were centralized with Central Circle-12, Mumbai, However, no adverse finding from Assessing Officer of Central Circle-12, Mumbai was reported about the assessee. In para 9 at page 8 of assessment order it is mentioned as under: "As understood from him, the assessee Shri Jayesh Thakkar and his company M/s Prabhav Industries was also a part of Sirish shah an....
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.... that the loans are not genuine and in fact assessee has obtained "accommodation entries"/routed his own unaccounted money. This approach of the AO is clearly against the spirit of aforementioned judicial decisions as well as in contravention to the facts of the present case. E. The assessment of the appellant for A.Y. 2007-08 was finalized u/s. 143(3) on 30.12.2009 determining total loss at Rs. 2,47129/- after making addition on account of agricultural rent of Rs. 9,64,000/- and on account of unsecured loan of Rs. 66,000/- totaling to Rs. 10,30,000/-. Again for A.Y. 2010-11, assessment was finalized by the Assessing Officer under section 143(3) of the Act. The Return of Income was fed by the assessee declaring total income of 83704700 The assessment u/s 143(3) was finalized on 12.03.2013 determining total income of Rs 19,54,700/- after making routine addition of Rs. 150,000/- on account of unexplained expenditure and Rs. 1,00,000 on account of low house hold withdrawal. Thus, there is no whisper of generation of unaccounted income by the appellant even up to AY. 2010-11, and the Assessing Officer has not been able to pinpoint in the present assessment as to during which period a....
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....enue has not pointed out any defect in the documentary evidence submitted by the assessee. According to the learned counsel for the assessee, there cannot be any adverse inference against the assessee merely on the reasoning that loan parties were not available at the premises especially in the circumstances where no defect of whatsoever was pointed out by the revenue in the supporting documents filed by the assessee. The learned AR before us vehemently supported the order of the learned CIT-A. 9. We have heard the rival contentions of both the parties and perused the materials available on record. Undisputedly, the assessee during the year under consideration has shown receipts of unsecured loan of Rs. 7,80,19,000/- from the 15 different companies/concern based in Kolkata and Mumbai and other places. The dispute before us is with respect to sum credited from 13 parties for an amount aggregating to Rs. 6,73,19,000/- only. The issue on hand has bearing on the provisions of section 68 of the Act. The provision of section 68 of the Act suggests that if there is any sum credited in books of account maintained for the any previous year then the assessee is required to offer proper and ....
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....onies have been advanced to the assessee. f. Copy of Ledger Accounts of all the above parties. g. Copy of various ROC Documents showing the existence and identity of the parties and h. Affidavits of Directors of all the parties to prove Identity and genuineness of the loan. 9.2 From the above-mentioned list of documentary evidence, it is discernable that the assessee has provided sufficient documents such as PAN, copies of ITR-V and various ROC forms to establish the identity of the creditor. Similarly, the assessee also provided sufficient documents in the form of confirmation letter from creditor, affidavit from their director, bank statement showing amount debited in the creditor's bank account and credited in assessee's bank through RTGS to establish genuineness of transaction. Likewise, the creditworthiness of the creditor is also discernable from their balance sheet and bank statements though they were declaring lower income in the IT return but have fund in the form of share capital reserve and loans liability. 9.3 However, the AO did not accept the genuineness of loans credited in the books of the assessee because notices issued to loans parties for independent inqu....
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....hat there is no cash trail, and that all the source of source companies maintained regular books of account, financial statements and regularly filed their tax returns, but the Ld. CIT(A) rejected it by simply alleging it to be a window dressing and even went on to say that 'if' dug deeper, it shall be found that they are not real companies. In our considered view, such an observation the Ld CIT(A) ought not to have made, because such an observation itself implies that he has not investigated about the source companies and in any case, if he nursed such a suspicion, he [Ld. CIT(A)] enjoying co-terminus powers as that of AO ought to have dug deeper/enquired/investigated and thus should have brought on record evidence to substantiate the allegation or his adverse assumption of these companies. According to us, the Ld. CIT(A) could not have abdicated from his duty, if he harbored a suspicion that, what was apparent was not real. It is further noted that the Ld. CIT(A) was unable to point out any defect in the documents furnished by the assessee to discharge the burden to prove the "source of source" as required as per proviso to section 68 of the Act and that of the shareholde....