TaxTMI 
TaxTMI 
2025 (8) TMI 1767
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....hereby condoned in light of Collector, Land & Acquisition vs. Mst. Katiji & Others (1987) 167 ITR 471 (SC). 3. It transpires during the course of hearing that there arises the first and foremost issue of validity of the impugned reopening/reassessment itself as the learned lower authorities have set into motion the amended section 148 proceedings against the assessee in assessment year 2016-17; vide show-cause notice dated 23rd May, 2022 under section 148A(d) of the Act; for the purpose of assessing its alleged unexplained transactions. The Revenue could hardly dispute the clinching fact that the learned lower authorities had obtained the necessary approval of the learned Principal Commission of Income Tax -7, Delhi, under section 151(i) of the Act than under the latter clause (ii) thereto applicable in such an instance wherein a time bar of more than three years has elapsed from the end of the relevant assessment year. 4. Faced with the foregoing factual position, we are of the considered view that the impugned reopening itself is not sustainable in law as the learned lower authorities have not obtained the necessary approval under section 151(ii) of the Act in light of Unio....
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....ifies a higher level of authority for the grant of sanctions in comparison to the old regime. Therefore, in terms of Ashish Agarwal (supra), after 1 April 2021, the prior approval must be obtained from the appropriate authorities specified under Section 151 of the new regime. The effect of Section 151 of the new regime is thus: (i) If income escaping assessment is less than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining PART E the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) no notice could be issued after the expiry of three years; and (ii) If income escaping assessment is more than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) after three years after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General. 76. Grant of sanction by the appropriate authority is a precondition for the assessing officer to assume....
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....acts in reversing the Assessing Officer's action treating the amount in question of Rs.20,25,63,469/- as unexplained cash credits vide following detailed discussion: "5. BRIEF FACTS The assessee has filed the appeal against the assessment order dated 31.03.2023 in which the Assessing Officer has made an addition of Rs. 20,25,63,469/-. The said addition has been made on two counts. First addition has been made in respect of amount received from Mukesh Khurana representing the outstanding balance of Rs. 19,75,63,469/- as on 31.03.2016. The AO in the assessment order has observed that the assessee has raised funds to the tune of Rs. 43,85,36,469/-from Sh. Mukesh Khurana out of which, a sum of Rs. 19,75,63,469/- was outstanding as on 31.03.2016. Thus, the AO has made the addition u/s 68 to the extent of amount outstanding from Mukesh Khurana of Rs. 19,75,63,469/-. Secondly, the AO has also made addition of Rs. 50,00,000/- deposited as cash in Axis Bank account number 914020023711938 on 21.03.2016. As per AO, the assessee was not able to explain the source of cash deposit and as such, the addition of Rs. 50 lac was made on account of cash deposit. Thus, the AO....
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....2016 The appellant explained that total amount of Rs. 12.08 crore was received by the appellant from Sh. Mukesh Khurana on 28.03.2016 and relied upon a flow chart which is reproduced at page no. 6 of written submissions. From the said flow chart, it was explained that the sum credited in the bank account of appellant was sourced from Sh. Mukesh Khurana who received the said sum from the AR Landcraft LLP. It was also emphasized that the amount received by Sh. Mukesh Khurana from AR Landcraft LLP has been accepted as genuine during the appellate proceedings in the case Sh. Mukesh Khurana where in order of CIT(A) in Appeal No. CIT(A), Kanpur-4/10756/2015-16 dated 27.06.2024, the relevant findings are placed at page no. 67 to 68 and 76 & 79. The same are reproduced as under for ready reference: "It is seen that in entities mentioned at Serial No. 2, 4, 5, 6, 8, 9, 12 & 17 in the table at Page No. 64, there is an advance given by the assessee during the earlier years/during the year which has been returned back. The copies of accounts of all the above said entities are reproduced below: The discussion is as per table below: Sr. No. Name of the e....
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....as submitted. On the issue of unsecured loans which have been squared-off or returned back, the Hon'ble Supreme Court in the case of Assistant Commissioner of Income-tax vs. Gujarat Television (P.) Ltd. reported at [2024] 159 taxmann.com 739 (SC) has held as under: "SLP dismissed against order of High Court that where unsecured loans given to assessee were squared up on same date and nothing remained outstanding at end day, much less at end of financial year, Impugned reassessment proceedings to tax same under section 68 deserved to be quashed" Further, in the Judgment of Hon'ble High Court of Punjab & Haryana in the case of Principal Commissioner of Income-tax, Bathinda vs. Amravati Infrastructures Developers (P.) Ltd. reported at [2020] 117 taxmann.com 152 (Punjab & Haryana), it has been held as under: "Section 68 of the Income-tax Act, 1961-Cash credit (Share Capital) - Assessment year 2009-10 Assessing Officer made addition in hands of assessee-company on account of failure of assessee to prove identity and genuineness of persons who had introduced share capital and on account of failure to prove capacity of loan creditors as well as ....
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.... Further, reliance is also placed on decision of Hon'ble Apex Court in PCIT s. Himachal Fibres Ltd. (2018) 259 Taxmann 5 In which the decision of Hon'ble Delhi High Court was confirmed in case of PCIT vs. Himachal Fibres and it was held under: "In a case where the assessee has furnished all the relevant facts within the knowledge and offered a credible explanation, then the onus reverts to the Revenue to prove that these facts are not correct. In such a case, Revenue cannot draw inference based on suspicion or doubt or perception of culpability etc. Also, reliance is also placed on the order dated 24th August 2022 of Ld. ITAT Mumbai Bench in case of Raw Pressery Pvt. Ltd Vs ACIT [2022] 143 taxmann.com 158 (Mumbai - Trib.) where it was held that: "Where assessee received share premium from founder promoter and had discharged its burden of proving his identity, genuineness and creditworthiness, and both lower authorities could not find any defects or fault therein, addition made under section 68 was directed to be deleted." Further, reliance is also placed on the judgment of Ld. ITAT Chennai D Bench in KP Manish Global ingredients (P) ltd....
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....n this regard, resolutions were also passed by Board of Directors of three creditors - Thus, first appellate authority had returned a clear finding of fact that assessee had discharged its onus of proving identity of creditors, genuineness of transactions and creditworthiness of creditors which finding of fact stood affirmed by Tribunal Revenue had not been able to show any perversity in aforesaid findings of fact by authorities below Whether therefore, Tribunal was right in confirming order passed by Commissioner (Appeals) and holding that no addition could be made under section 68- Held, yes [Paras 21, 23 and 24] [In favour of assessee) The Hon'ble High Court of Patna in the case of Addl. CIT v. Hanuman Aggarwal (1985) 151 ITR 150 (Pat.) has held as under: "It can never be within the exclusive knowledge of the debtor to know the sources of income of the creditor. Once he is supplied the credit that he wants, he is satisfied. Once he has furnished the true identity, the correct address and the correct GIR number of the creditor, fulfils his obligation under the Act. The assessee is not supposed to know the capacity of the money-lender or the cash creditor. It....
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....that initial onus. The assessee is not required thereafter to prove the genuineness of the transactions as between its creditors and that of the creditors source of income, i.e., the subcreditors [See Nemi Chand Kothari K vs. CIT & Anr. (2003) 264 ITR 254 and judgment of this court in ITA No. 1158/2007 Mod Creations Pvt. Ltd. vs. Income Tax Officer decided on 29.08.2007]" Discharge of burden The intention of law is that unaccounted money should be brought to tax. As per provisions of section 68 of the Act onus is on the person in whose books of account such money has surfaced. If an amount has surfaced in the books of an assessee either In the shape of share application money or a deposit/loan; it is presumed that such money belongs to the person in whose name it has been shown. What is relevant is the identity, creditworthiness of the depositor and genuineness of the transaction. The AO has to be bridge the gap between suspicion and proof to bring home the allegation. There was neither direct nor circumstantial evidence on record to show that the rigors of Section 68 were not satisfied. The Ld. ITAT Kolkata Bench in ITA No. 176/Kol/2023 in the case of M/....
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....s fact finding." 7. So far as the reliance of the Ld. DR on the decision of the Hon'ble Supreme Court in the case of "PCIT v/s NRA Iron & Steel (P) Ltd." (supra) is concerned, we note that the Hon'ble Supreme Court in the said case has taken note of the observations made by the Supreme Court in the "the land mark case of Kale Khan Mohammed Hanif v. CIT [1963] 50 ITR 1 (SC) and Roshan Di Hatti v. CIT [1977] 107 ITR 938 (SC) laid down that the onus of proving the source of a sum of money found to have been received by an assessee, is on the assessee. Once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit-worthiness, then the AO must conduct an inquiry, and call for more details before Invoking Section 68. If the Assessee is not able to provide a satisfactory explanation of the nature and source, of the investments made, it is open to the Revenue to hold that it is the income of the assessee, and there would be no further burden on the revenue to show that the income is from any particular source." Thereafter the Hon'ble Supreme Court in the case of PCIT v/s NRA Iron & Steel (P) Ltd. summed up the pr....
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....n this case." Further, in a case similar to the case of the appellant, the Hon'ble Supreme in the case of Principal Commissioner of Income Tax, Central1 vs. Adeline Construction (P.) Ltd. reported at [2018] 99 taxmann.com 45, held as Section 68 of the Income-tax Act. 1961 Cash credits (Burden of proof) A search in premises of 'B' Group led to survey in premises of assessee herein. Thereupon Assessing Officer completed assessment wherein addition was made to assessee's income under section 68- Commissioner (Appeals) as well as Tribunal deleted said addition holding that relevant enquiry based upon materials furnished by assessee had not been made High Court also found that assessee had discharged onus initially cast upon it by providing basic details which were not suitably enquired into by Assessing Officer - Accordingly, High Court upheld order passed by Tribunal Whether, on facts, SLP filed against order of High Court was to be dismissed Held, yes [Para 4] [In favour of assessee] The Ld. Tribunal Bench of Delhi in the case of ITO vs. Jaidka Woolen & Hosiery Mills Pvt. Ltd. in ITA. No. 5302/Del/2015, has held as under: "There is no finding th....
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....at can be pursued by how wealthy he is. All the formalities, as per the law are made by the assessee and donors as well." Three criteria of Section 68 Section 68 speaks of three criterias of the Identity, genuineness and creditworthiness of the lender for justifying the credit as acceptable. There are plethora of judgments which clarify the extent to which the assessee is supposed to justify the above three criterias. (On identity) The Hon'ble High Court of Mumbai in the case of Orient Trading Company Ltd. vs. CIT 49 ITR 723 held as under: "When the entry stands in the name of the third party and the assessee establishes the identity of the creditor and produces evidence showing that the entry is not fictitious, initial burden lying on the assessee stands discharged; the burden shifts on to the Revenue to show that the entry represented assessee's suppressed Income." (On Capacity) It has been held by the Ld. Mumbai Tribunal Bench in the case of ACIT vs. Krishna Sheet Processors Pvt. Ltd. [2015] 44 CCH 0280 as under: "Where the assessee furnished the bank statements of the loan creditors, evidencing thei....
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.... an amount of Rs. 17.04 crore received from M/s. Evergreen Synfab Pvt. Ltd. by Sh. Mukesh Khurana has been confirmed in the hands of Sh. Mukesh Khurana. The said funds have been further transferred to the accounts of the appellant company. Accordingly, these credits originate from the money which has already been added and taxed in the hands of Sh. Mukesh Khurana. As the same money cannot be taxed twice, the addition made in the hands of the appellant company is deleted. Explanation regarding funds received from Sh. Mukesh Khurana amounting to Rs. 7.5 crore on 30.03.2016 The appellant explained that there was total amount of Rs. 7.5 crore which was received by the appellant from Sh. Mukesh Khurana on 30.03.2016 and relied upon a flow chart which is reproduced at page no. 12-13 of written submissions. From the said flow chart, it was explained that the sum credited in the bank account of appellant was sourced from Sh. Mukesh Khurana who received the said sum from Evergreen Synfab Pvt. Ltd. which in turn received the funds from AR Landcraft LLP. It was also explained that from the flow chart, it is noticed that the amount was rotated multiple times among various ent....
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....h the ledger account to substantiate the source of cash deposit. The assessee vide note sheet entry dated 13.11.2024 was asked to submit the copy of bank account along with the cashbook for the period 01.04.2015 to 31.03.2016. The Appellant in response to the above submitted that the copy of cashbook along with the relevant bank statements have duly been submitted during the course of assessment proceedings before AO vide reply dated 17.02.2023 vice acknowledgement number 958716451170223. From the cashbook enclosed with reply dated 18.11.2024, it has been noticed that the there is a sufficient cash in hand in the cashbook as on 21.03.2016, thus the contention of the appellant that the cash doner of as deposited out of regular sources is acceptable. The relevant page of the cash book is scanned below for ready reference: From the above, it is apparent that the assessee had available cash in hand before the same was deposited in the bank account of the assessee. The Hon'ble High Court of Gujarat in the case of Principal Commissioner of Income-tax vs. Vishal Exports Overseas Ltd. reported at [2024] 164 taxmann. com 286 (Gujarat) has held as under: "Where....
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....le for the assessee to keep Rs. 15,000 unutilized for a period of two years. He should have given the assessee an opportunity to substantiate his assertion as to the source, of his capital outlay. Since the Commissioner also did not approach the problem in this manner, it could not be said that he exercised his revisional jurisdiction judicially and properly." Further, the Ld. Tribunal Bench of Lucknow in the case of Shri. Pawan Agarwal vs. Dy. CIT in ITA No. 374/LKW/2013 has held as under: "5. Having carefully examined the orders of the lower authorities in the light of the rival submissions, we find that the Assessing Officer has made addition on the basis AIR information. Though cash flow statement was furnished before him, but he has not looked into while making the addition; whereas the Id. CIT(A) has examined all the entries in the cash flow statement, which is available on record. In the cash flow statement, the movement of cash was disclosed and it is evident that on all dates whenever cash was deposited in the bank, the assessee was having sufficient cash balance. Nothing has been brought on record to demonstrate that the cash withdrawn by the assessee wa....
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....ed by the revenue. The fact that the Assessee did not explain the reasons for withdrawal of cash from his bank account cannot be the basis to hold that the source of deposit of cash was not explained by the Assessee. The legal position in this regard is that if the deposit of money in the bank account is preceded by withdrawal of money from the very same bank account, then the source of funds is prima facie demonstrated or explained by the Assessee. The Honorable Karnataka High Court in the case of S. R. Ventakaratnam Vs CIT, Karnataka1 & Others 127 ITR 807 has held that once the Assessee discloses the source as having come from the withdrawals made on a given date from a given bank, it was not open to the revenue to examine as to what the Assessee did with that money and cannot chose to disbelieve the plea of the Assessee merely on the surmise that it would not be probable for the Assessee to keep the money unutilized. The decision of the Hon'ble Karnataka High Court supports the plea of the assessee. It is seen that the cash deposits in the bank account are preceded by withdrawal from the very same bank account. I am of the view that the ratio laid down in the aforesaid judgm....
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....ear 2015-16. The factual position is hardly any different regarding further sum of Rs.7.5 crores received by Sh. Khurana which also stands held as taxable in the CIT(A)'s very order. 10. Be that as it may, it is thus clear that the assessee has received its impugned loan sum for Sh. Khurana who has already been assessed in the relevant financial year and the preceding assessment year; as the case may be, and, therefore, any further addition herein would amount to an instance of double addition only. Learned counsel further clarifies at the end that all these are group entities assessed in the same jurisdiction all along. We thus deem it appropriate to refer to the hon'ble Gujarat high court's decision in Tax Appeal No.1180 of 2018 PCIT Vs. Gyscoal Alloys Ltd., dated 1st October, 2018 that section 68 unexplained cash credits addition in an instance involving group entities and directors etc. assessed in the same jurisdiction who satisfy the corresponding three limbs of identity, genuineness and creditworthiness, is not sustainable in law. We accordingly conclude in light of the CIT(A)'s comprehensive findings having discussed both the relevant facts as well as law at length that ....