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TMI Blog2012 (11) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... d the rigours of provision of section 269SS, the same cannot be a ground to disbelieve the loan amount – addition deleted Regarding loan from Director – alleged that amount obtained by him from Smt. Priti Mishra does not inspire confidence because she had no sufficient cash balance on those days – Held that:- Amount advanced by Smt. Priti Mishra has been accepted by the CIT(A). Merely because her income is assessed u/s.44AD, the same cannot be a ground to disbelieve the loan obtained from Smt. Priti Mishra by Sri A.K. Mishra who has advanced as loan to the assessee company - in the instant case could have been made in the hands of Sri A.K. Mishra but definitely not in the hands of the assessee company – addition deleted Regarding loan from Sri A.K. Mishra (HUF) - HUF is assessed to tax and the copy of the acknowledgement of income tax Return, computation of income, balance sheet etc. were filed before the AO – Held that:- Creditor has shown profit of Rs. 60,630/- as indirect income and Rs. 89,820 as profit from Mangalam construction - After considering the opening capital and income during the year and the personal drawings during the year the HUF is left with sufficient funds to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the identity of the person remains to be verified - direct the AO to give an opportunity to the assessee to produce the above loan creditor and satisfy the credit worthiness of the loan creditor - appeal filed by the assessee is allowed for statistical purposes. X X X X Extracts X X X X X X X X Extracts X X X X ..... as submitted that such an action on the part of the creditors may have been prompted for complying with the provisions of sec.269SS which specifies that no cash deposits of Rs. 20,000/- or more should be given. The decision of the Pune Bench of the Tribunal in the case of ITO, Wd(5)(1), Pune Vs. Shri Jaynarayan Agarwal in the ITA No.843/PN/97 for A.Y. 1994-95 was brought to the notice of the CIT(A). 7. As regards the observation of the Assessing Officer regarding non production of supporting documents for agricultural income, it was submitted that proof regarding ownership of land in the form of 'Kisan Vahi' issued by the Govt. of U.P. which is equivalent to 7/12 extracts issued in Maharastra was submitted before the Assessing Officer. Similarly, other valid documents in the form of Khasara/Khatuvani giving details of sale of agricultural products were also claimed to have been submitted before the Assessing Officer. However, according to the AR, the same were ignored by the Assessing Officer. It was further pointed out that the Assessing Officer has also doubted the existence of agricultural land holdings by the director of the company, Shri A.K. Mishra and his relatives. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 Mrs. Ram Murty Devi Mishra 1,90,000 1,90,000 4 Mr. Ram Deo Awasthi 90,000 90,000 5 Mr. Ram Avtar Shukla 90,000 90,000 6 V. M. Sangle 2,00,000 2,00,000 7 Avitech Engineering Pvt. Ltd. 50,000 0 8 Virangana Mishra 40,000 40,000 9 Vidhanchandra Mishra 65,000 0 10 Chandrahas Mishra 95,000 95,000 11 Priti Mishra 3,16,000 0 12 Anilkumar Mishra (HUF) 1,00,000 1,00,000 13 Anilkumar Mishra 27,09,680 5,34,680 TOTAL 49,30,680 23,24,680 10. In the case of Virangana Mishra the learned CIT(A) noted that an amount of Rs. 5,50,000/- was outstanding as on 31-03-2005 out of which an amount of Rs. 40,000/- claimed to have been received during this year. He noted that the above loan creditor is a small contractor and the entire amount is shown to have been advanced out of capital built up from 1992-1993 to 2004-2005. The return of income for the assessment year 2005-06 was filed only on 18-12-2007 after the scrutiny proceedings started. The person had no financial capacity to advance Rs. 5,50,000/- which includes Rs. 40,000/- advanced during the year. He therefore disbelieved the credit worthiness of the loan creditor and upheld the addition made by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is hardly left with any saving to advance loan to the assessee company. Rejecting the various explanations given by the assessee, the learned CIT(A) upheld the addition of Rs. 1 lakh on this account on the ground that the assessee failed to prove the credit worthiness of the creditor. 13. So far as the amount of advance of Rs. 4,90,000/- received from Rohit Dubey the learned CIT(A) while upholding the addition made by the AO noted that the creditor is related to the directors of the company. Identical amount was found to have been deposited in the bank account of the creditor maintained with Bank of Maharastra either on the same day or a few days prior to issue of cheques to the assessee. From the balance sheet filed by the loan creditor along with the return of income for assessment year 2005-06 he observed that cash on hand shown in the balance sheet as on 31-03-2005 was only Rs. 11,429/- which shows that the creditor is not in the habit of keeping huge cash on hand. Further the income declared from contract work has been estimated u/s. 44AD. He noted from the bank account furnished by the assessee that apart from the cash deposit which were utilized for issue of cheques to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs out of which Rs. 1,90,000/- was transferred to the loan account and Rs. 10,000/- was transferred to share capital account. From the affidavit filed in the name of the creditor stating that the amount was advanced out of groceries shop receipts and sale of buffaloes in his native village he observed that the loan creditor has declared income u/s. 44AF and not having a bank account. From the copy of the capital account he observed that out of the income of Rs. 1,55,600/- declared during the year the loan creditor has withdrawn only Rs. 15,000/- for her household expenses. According to the CIT(A) it is highly improbable that out of meager capital of Rs. 2,83,985/- the loan creditor has advanced Rs. 2 lakhs to the assessee company during the year out of which Rs. 1,90,000/- was transferred towards loan account and Rs. 10,000/- was transferred towards the share capital account. He therefore disbelieved the genuineness of the transaction and capacity of the loan creditor and upheld the addition made by the AO. 16. In the case of Sri V.M. Sangle the learned CIT(A) upheld the action of the AO on the ground that the assessee could not produce the above party before the AO for his exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the creditor and stated that the company received Rs. 2 lakhs from Sri V.M. Sangle during the year. In view of the above and in absence of any satisfactory explanation regarding the source of advancing the loan and in absence of any satisfactory explanation as to why they kept such huge amount of cash with them out of their alleged savings from Agricultural income, the learned CIT(A) confirmed the above two additions. 18. As regards the amount of Rs. 95,000/- obtained from Sri Chandrahas Mishra, the learned CIT(A) confirmed the addition made by the AO on the ground that there is some discrepancy in the unsecured loan outstanding as on 31-03-2005 at Rs. 10,95,000/- whereas confirmation letter shows the outstanding at Rs. 15,95,000/-. During the course of appeal proceedings the additional evidences filed by the assessee was rejected by the CIT(A) as inadmissible. Further, he observed that the loan creditor has furnished evidences in support of having earned agricultural income in the form of receipts issued by Cold Storage units for period subsequent to the assessment year in appeal. However, during the appellate proceedings the assessee submitted the enclosures in the form of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that the learned CIT(A) has mentioned that in the absence of bank account extracts the source of loan could not be verified. The ld. Counsel for the assessee submitted that the AO has never asked the creditor to file her bank account. Referring to the decision of Hon'ble Supreme Court in the case of CIT Vs. Orissa Corporation Pvt. Ltd., reported in 159 ITR 78 he drew the attention of the bench to Para 13 of the order and submitted that when the assessee had given the names and addresses of the alleged creditor and when it was in knowledge of the revenue that the said creditor was an income tax assessee and the revenue did not examine the source of income of the said alleged creditor to find out whether the person is credit worthy or not and when there was no effort made to pursue the so called alleged creditor then in that circumstance the assessee could not do anything further. In that premises if the Tribunal came to the conclusion that assessee has discharged the burden that lay on him, then it could not be said that such conclusion was unreasonable or perverse or biased on no evidence. He accordingly submitted that no addition could have been made u/s. 68 in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -06 and has paid tax of more than Rs. 1,08,000/- . TDS during the year was Rs. 1,20,599/-. Therefore, the loan could not have been simply disbelieved. 27. As regards the loan of Rs. 40,000/- obtained from Smt. Virangana Mishra the learned counsel for the assessee referring to Paper Book Page Nos. 56 to 66 drew the attention the Bench to the Income tax acknowledgement, computation of total income, balance sheet as on 31-03-2005, profit and loss account for the year ending 31-03-2005, loan confirmation letter etc. He submitted that the loan creditor has appeared before the AO in response to summons u/s. 131, her statement was recorded and she has confirmed to have given the loan of Rs. 5,50,000/- to the assessee company which includes impugned loan of Rs. 40,000 during the year. 28. As regards the loan obtained from Sri Chandrahas Mishra the learned counsel for the assessee drew the attention of the Bench to the affidavit filed by the above person along with his land holding records, Kisan Bahi etc., which is placed at Paper Book Page Nos. 67 to 93. He submitted that the assessee vide letter dated 21-12- 2007 has given the confirmation to the AO stating the reason for giving the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to explain further as to why or in what circumstances the third party obtained money and how or why he came to make a deposit of the same with the assessee. The burden thereafter shifts on to the revenue to show that the entry represented the assessee's suppressed income. The department has to be in possession of sufficient and adequate material in order to reach to such conclusion. 33. Referring to the decision of Hon'ble Gauhati High Court in the case of Sri P.K. Sethi Vs. CIT reported in 286 ITR 319 (Gau) he submitted that when all the creditors are Income tax assessees' before the same ITO and the latter having accepted the genuineness of the loan transactions in the case of the creditors, the cash credits could not be treated as non-genuine in the hands of the assessee. 34. Referring to the decision of Hon'ble Rajasthan High Court in the case of Kanhaialal Jangid Vs. ACIT reported in 217 CTR 354 he submitted that when the assessee filed confirmation from the creditor and produced the creditor before the AO where the creditor affirmed advancement of loan to the assessee, no addition u/s. 68 could be made in the hands of the assessee on the ground that the creditor could no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding Co. Ltd., (supra) has held that when the entry stands in the name of a third party and the assessee satisfies the ITO as to the identity of the third party and also supplies such other evidence which will show, prima-facie, that the entry is not fictitious, the initial burden which lies on him can be said to have been discharged by him and it will not thereafter be for the assessee to explain how or in what circumstances the third party obtained money and how or why he came to make a deposit of the same with the assessee. The burden thereafter shifts on to the revenue to show that the party represented assessee's suppressed income. The department has to be in possession of sufficient and adequate material in order to make addition u/s. 68 of the Income Tax Act. The Hon'ble Gauhati High Court in the case of Nemi Chand Kothari Vs. CIT and Another (supra) has held that once the assessee has disclosed the source from which he has received the loans, the burden stands discharged. It is not the burden of the assessee to show the source (s) of his creditors or to prove the credit worthiness of the sources of the sub creditors. Since in the instant case the assessee has produced the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side the order of the CIT(A) and direct the AO to delete this addition. 40. So far as the loan of Rs. 1 lakh obtained from Sri A.K. Mishra (HUF) we find the HUF is assessed to tax and the copy of the acknowledgement of income tax Return, computation of income, balance sheet etc. were filed before the AO. The creditor has shown profit of Rs. 60,630/- as indirect income and Rs. 89,820 as profit from Mangalam construction. After considering the opening capital and income during the year and the personal drawings during the year the HUF is left with sufficient funds to advance loan of Rs. 1 lakh during the year. In view of the above and in view of our observations while accepting loan from Smt. Anita Singh and Mr. Rohit Dubey, we set-aside the order of the CIT(A) on this issue and direct the AO to delete this addition. 41. So far as the loan of Rs. 2 lakhs obtained from Sri Vishnu Mohan Sangle, we find although various details were furnished before the AO the loan creditor was not produced before him for his verification. Therefore, the identity of the person remains to be verified. Considering the totality of the facts of the case we direct the AO to give an opportunity to the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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