TaxTMI 
TaxTMI 
2000 (9) TMI 204
X X X X Extracts X X X X
X X X X Extracts X X X X
....ith their Permanent Account Numbers, Ward, etc. amount advanced to the assessee in the assessment year under consideration, repayment of the loan by the assessee in the year and whether the statement of the creditor was recorded or not and what happened to the summons issue by the AO, are given in a tabular form as under: Sl. No. Name Amount P.A. No. and Ward Repayment in year ending Whether statement recorded Whether summons issued 1. S.D. Desai 60,000 S-824/Wd 3(3) 31-3-1993 Yes NA 2. R.P. Dalal 70,000 Wd-2(8) SRT 31-3-1993 Yes NA 3. C.S. Dalal 50,000 Wd-2(8) SRT 31-3-1993 Yes NA 4. P.N. Shah 50,000 P-830/Wd 1(9) 31-3-1990 Yes NA 5. I.S. Patel 85,000 I-769/Wd 2(1) 31-3-1990 No No 6. Smt. S.B. Shah 50,000 S-971/Wd 2(1) 31-3-1989 Yes NA 7. M.R. Acharya 60,000 M-849/Wd 2(3) 31-1-1990 Yes NA 8. N.K. Shah 60,000 736-N/Wd 2(3) 31-3-1990 No No 9. N.K. Prajapati 70,000 N-425/Wd 1(4) 31-3-1990 No Back 10. Smt. L.J. Modi 60,000 707-L/Wd/(9) 31-3-1990 No No 11. C.D. Prajapati 50,000 C-703/Wd 1(6) 31-3-1990 No No 12. Smt. Dholakiya 60,000 A-999/Wd 2(1) 31-3-1990 No No 13. B.V. Praja....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itted that he received gift from 2 parties and loan from one party, and with this amount he had advanced money to the assessee, but he could not furnish any proof of gift/loan hence his capacity is not proved, therefore, this is treated as unexplained credit. (4) Shri Praful Manilal Shah, Surat: This depositor has deposited with the assessee Rs. 50,000 on 2nd Sept., 1988. On examination he submitted that the deposit was given out of his savings. He could not submit anything as to where the amount was lying immediate before deposited with the assessee. The depositor had old bank account since long and cannot be believed that he would keep money in hand for nothing despite having bank account. Therefore, this credit is not treated as genuine. (5) Shri Ishwarlal Shankeralal Patel, Surat, had deposited Rs. 85,000 on 29th March, 1988. He explained that deposit money had come out of savings and he is doing business of diamond brokerage and out of cash in hand. Immediate source was, however, not explained. He has bank account with Bank of Baroda, Kajimaidan, Surat. He deposited Rs. 85,000 in cash on the same date on which the cheque was issued to the assessee. If he had....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... stated that she has income from embroidery. She is assessed to tax. The deposit was out of her savings. No immediate source was explained as to wherefrom sum of Rs. 60,000 came suddenly. If it was accumulated over a period of time, then nothing was submitted as to where the amount was lying earlier. Therefore, this is treated as unexplained. (11) Prajapati Chhaganlal, Devsheri, Surat, has deposited sum of Rs. 50,000 on 2nd Sept., 1988, with the assessee. He is assessed to tax and having income from diamond brokerage. A draft was purchased in cash and deposited with the assessee but immediate source of such big money was not explained wherefrom it has come. Therefore, this is treated as unexplained. (12) Smt. Anjna Anilkumar Dholakia had deposited sum of Rs. 60,000 with the assessee on 2nd Sept., 1988. She is assessed to tax. She stated that her income was from beauty parlour. It was explained that the deposit was made out of cash in hand. This cannot be believed that she kept cash of Rs. 60,000 in hand for depositing with the assessee on 5th Sept., 1988, though she had bank account since 1986. Therefore, capacity to advance money is not proved and the credi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed to prove the identity and capacity of the creditors/depositors as well as the genuineness of the loan transaction. According to the CIT (A) in this case the assessee has although proved the identity of the creditors/depositors, it has failed to prove capacity of the creditors and genuineness of the credits because according to the learned first appellate authority the creditors were having very meagre source of income and as such they were not having capacity to advance the disputed amounts claimed to have been received by the assessee from the creditors. The CIT (A) also took note of the fact that in some of the cases although the creditors were having bank accounts for the last several years, a cash equivalent to the cheque issued in favour of the assessee was deposited in the bank account of the creditor only a few days before the issuance of cheque by the creditor favouring the assessee. For the aforesaid reasons, the CIT (A) confirmed the addition made by the AO. 5. The assessee is aggrieved and has filed this appeal before the Tribunal. The learned authorised representative of the assessee pleaded that all the 21 credits which were treated by the Departmental authorities ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as been allowed by the AO as a business expenditure. It was submitted that the main basis for making the addition by the AO and confirmation of the same by the CIT (A) is that the depositors who have advanced the loans to the assessee, could not explain the source of cash deposits in their respective bank accounts. It was submitted that the assessee can be asked to prove only the source of the credits in its books of account but it cannot be required to explain the source of the source of cash credits. It was submitted that if the Departmental authorities were not satisfied with the explanation given by the creditors with regard to the cash deposits in their bank accounts, the proper course could have been to tax the unexplained cash deposits in the bank accounts of the creditors as unexplained investments of those creditors under s. 69 in the cases of those depositor who are regular income-tax payers. It was submitted that merely because the creditor's explanation with regard to the cash deposits in their bank accounts is considered by the AO as not satisfactory, no addition could be made in the hands of the assessee by treating the credits as non-genuine. Reliance was placed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ditors were filed under the Amnesty Scheme and were intended only to create evidence that the creditors were income-tax assessees. Accordingly, it was submitted that the Departmental authorities were perfectly justified in treating the amount of Rs. 12,85,000 as the income of the assessee. Reliance was placed on the decision of the Calcutta High Court in the case of Shankar Textile Industries vs. CIT (1978) 114 ITR 689 (Cal) and Prakash Textile Agency vs. CIT (1980) 121 ITR 890 (Cal) and the decision of the Punjab & Haryana High Court in the case of Hari Chand Virender Paul vs. CIT (1982) 30 CTR (P&H) 325 : (1983) 140 ITR 148 (P&H). 7. We have considered the rival submissions and have also gone through the order passed by the AO, the relevant portion of which we have also extracted in para 2 above. The CIT (A) more or less confirmed the addition on the reasoning given by the AO in the assessment order. A perusal of the chart given by us in para 3 above indicates that out of 21 creditors the AO has recorded the statements of only six creditors viz., creditors at Sr. Nos. 1,2,3,4,6 and 7. However, in respect of all the 21 creditors the assessee has furnished their complete....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tend before the AO, cannot be a ground to treat the loans taken by the assessee from those creditors as non-genuine in view of the principles laid down by the Hon'ble Supreme Court in the case of Orissa Corporation. In the said decision the Hon'ble Supreme Court has observed that when the assessee furnishes names and addresses of the alleged creditors and the GIR Numbers, the burden shifts to the Department to establish the Revenue's case and in order to sustain the addition the Revenue has to pursue the enquiry and to establish the lack of creditworthiness and mere non-compliance of summons issued by the AO under s. 131 by the alleged creditors will not be sufficient to draw an adverse inference against the assessee. In the case of six creditors who appeared before the AO and whose statements were recorded by the AO, they have admitted having advanced loans to the assessee by account payee cheques and in case the AO was not satisfied with the cash amount deposited by those creditors in their bank accounts, the proper course would have been to make assessments in the cases of those creditors by treating the cash deposits in their bank accounts as unexplained investments....