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TMI Blog2013 (9) TMI 433X X X X Extracts X X X X X X X X Extracts X X X X ..... itor M/s Prahlad Trading Pvt. Ltd. as unexplained cash credit u/s 68 of the Act without bringing any adverse material on record. What is relevant in the context of unexplained cash credit u/s 68 is the explanation of the assessee in respect of the source of relevant cash credit - The funds for giving the amount in question were generated by the concerned creditor M/s Prahlad Trading Pvt. Ltd. from an independent source which was not even part of circular transactions alleged by the A.O. and this being so, the genuineness of the relevant cash credit cannot even otherwise be doubted on the basis of circular transactions as alleged by the A.O. As already observed by us, sufficient evidence was produced by the assessee to establish the identity and capacity of the concerned creditor as well as the genuineness of the relevant transactions and the onus in terms of section 68 to explain the said cash credit having been duly discharged by the assessee - Treating the said cash credit as unexplained u/s 68 of the Act is not justified - Deleted the addition and allowed the appeal of the assessee – Decided in favor of Assessee. - ITA No. 845/Mum/2011 - - - Dated:- 21-6-2013 - P M Jagta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the genuineness of the relevant transaction. He, therefore, treated the amount of Rs. 2,19,50,000/- received by the assessee from M/s Prahalad Trading Pvt. Ltd. as unexplained cash credit u/s 68 of the Act and added the same to the total income of the assessee in the assessment completed u/s 143(3) of the Act vide an order dated 15-12-2008. 3. Against the order passed by the A.O. u/s 143(3) of the Act, an appeal was preferred by the assessee before the ld. CIT(A) disputing the addition of Rs. 2,19,50,000/- made by the A.O. u/s 68 of the Act. Before the ld. CIT(A), the following documents were filed by the assessee as additional evidence seeking admission thereof under Rule 46-A of the Income Tax Rules, 1962:- SR Particulars 1. Prahlad Trading Pvt. Ltd. Bank Statements for the period 1.4.2005 30-03-2006 showing Chq. Cleared on account of amount given to Rubaina Porperties Pvt. Ltd. of Rs. 2,18,50,000/-. 2. Xerox copy of the ODCDS issued by Prahlad Trading Pvt. Ltd. issued to Kenex Exports P. Ltd. for Rs. 3,10,00,000/- 3. Return filing proof of Prahlad Trading Pvt. Ltd. for A.Y. 2006- 07 4. Lette ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e were thus no sufficient funds available with the concerned creditor for the transactions creating a doubt about his creditworthiness. He also noted that the concerned entities were found to be involved in financial irregularities thereby creating doubts about their credentials as well as creditworthiness. The A.O. also analysed certain transactions entered into between different entities and held on such analyses that if in between entities receipts and payments are cancelled, the transaction would appear to be the one made by the entities with itself. 5. The observations made by the A.O. in his remand report were confronted by the ld. CIT(A) to the assessee with an opportunity to offer its comments. In reply, it was reiterated on behalf of the assessee that the evidence brought on record by it was sufficient to establish the identity and capacity of the concerned creditor as well as the genuineness of the relevant transaction. It was submitted on behalf of the assessee that any person could be a director in more than one company and all the bank accounts of the different entities involved in the transactions being fully verifiable, there was no reason to doubt the genuineness ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuation in case of Swehan Enterprises which creates illusion of funds. Appellant admits that there is no overdraft facility and hence this is not possible. Further, one of the directors of assessee company is having office address as Enarai Finance Ltd. which is involved in financial irregularities directors of which defaulted from public and is common authorized signatory for the entity involved in modus operandi as above. Accordingly, the creditworthiness of these entitles is not proved. In view of these facts and the detailed discussion made by the A.O. in the remand report as quoted above, I am of the considered opinion that the A.O. was justified in making addition of Rs. 2,19,50,000/- . Aggrieved by the order of the ld. CIT(A), the assessee has preferred this appeal before the Tribunal. 7. The ld. Counsel for the assessee submitted that the confirmation letter of the concerned creditor M/s Prahlad Trading Pvt. Ltd. (supra) was filed by the assessee before the A.O. during the course of assessment proceedings. He invited our attention to the copy of the said confirmation placed on record at page No. 29 to 31 of his paper book to point out that all the relevant details such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leged circular transactions ignoring that the source of the said amount was explained by the concerned creditor M/s Prahlad Trading Pvt. Ltd. as money received towards OFCD from M/s Kenex Exports which was given by M/s Kenex Exports P. Ltd. out of its own funds and the same was refunded by M/s Prahlad Trading Pvt. Ltd. to them on redemption of OFCD on the redemption in the year 2010. He contended that all the objections raised by the A.O. as well as the ld. CIT(A) are not relevant to decide the issue regarding unexplained cash credit u/s 68 of the Act and the assessee having discharged the onus to establish the identity and capacity of the concerned creditor as well as genuineness of the transaction, there is no case to invoke the provisions of section 68 of the Act to add the amount in question as unexplained cash credit. He took us through the voluminous documentary evidence filed before the ld. CIT(A) to demonstrate that the said evidence is sufficient to show that the onus lay on the assessee was satisfactorily discharged in terms of section 68 of the Act and there being nothing brought on record by the A.O. or the ld. CIT(A) to find fault therein except the so called allegatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell as the total amount of Rs. 3,10,00,000/- paid to Prahlad Trading Pvt. Ltd. towards application money for OFCD. In our opinion, this documentary evidence produced by the assessee was sufficient to discharge the initial onus that lay on the assessee in terms of section 68 of the Act to prove the identity and capacity of the creditor as well as genuineness of the transaction and there was no justification in the action of the A.O. in treating the amount in question received by the assessee from the concerned creditor M/s Prahlad Trading Pvt. Ltd. as unexplained cash credit u/s 68 of the Act without bringing any adverse material on record. 11. It is a settled position of law that the initial onus to explain the cash credit in terms of section 68 of the Act is on the assessee and once the same is discharged by the assessee, it is shifted to the Revenue and unless certain adverse material is brought on record by the A.O. by making further enquiry, provisions of section 68 of the Act cannot be invoked to treat the relevant cash credit as unexplained. In the case of Kalyan Memorial and Charitable Trust vs. CIT, 121 ITD 525 (Agra) (T.M.), it was held that the assessee by filing eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and the same are already listed by us in the foregoing portion of this order. The said additional evidence being relevant to decide the issue relating to the addition u/s 68 of the Act was admitted by the ld. CIT(A) U/R 46-A of the Income Tax Rules, 1962 by passing a speaking order and the same was forwarded by him to the A.O. calling for the later s remand report thereof. The copies of the documents filed by the assessee as additional evidence before the ld. CIT(A) are placed on record before us in the paper book filed by the assessee and the ld. counsel for the assessee has taken us through the said documents to demonstrate the flow of funds received by the assessee. As shown by him from the copy of assessee s bank statement, the amount in question was received by the assessee from M/s Prahlad Trading Pvt. Ltd. by A/c payee cheques and the same was credited to the regular bank account maintained by the assessee in IndusInd Bank, Nariman Point Branch, Mumbai. The said amount was received by the assessee for making investment in Swehan Enterprises wherein it was a partner. The ld. counsel for the assessee has also taken us through the bank statement of M/s Prahlad Trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . What is relevant in this context is the explanation of the assessee in respect of the source of relevant cash credit. It is observed in this regard that the amount in question was received by the assessee from M/s Prahlad Trading Pvt. Ltd. and the source of funds in the hands of the said creditor was the amount of Rs. 3,10,00,000/- received from M/s Kenex Exports Pvt. Ltd. towards application money for OFCD. As established by the assessee on evidence, OFCDs were actually issued by M/s Prahlad Trading Pvt. Ltd. to M/s Kenex Exports Pvt. Ltd. and the same were redeemed only after five years i.e in the year 2010 when the amount of OFCD was returned by M/s Prahlad Trading Pvt. Ltd. to M/s Kenex Exports Pvt. Ltd. The investment in OFCD of M/s Prahlad Trading Pvt. Ltd. was made by M/s Kenex Exports Pvt. Ltd. out of their own funds and it is not the allegation of the A.O. that the said amount was received by M/s Kenex Exports Pvt. Ltd. as part of circular transactions. The funds for giving the amount in question thus were generated by the concerned creditor M/s Prahlad Trading Pvt. Ltd. from an independent source which was not even part of circular transactions alleged by the A.O. and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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