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TMI Blog2014 (9) TMI 602X X X X Extracts X X X X X X X X Extracts X X X X ..... f the creditor and genuineness of the transaction - the assessee has not proved any of the three thing - Except giving the name of the alleged creditors he has not proved any of the three imperative factors - Documents called for by the AO were the evidences that could have tilted the scales of the weighing machine, if furnished, in favour of the assessee - all the evidences and circumstances are totally against the assessee and he has put himself in an indefensible position by not providing the evidences to the AO. From the date of receipt of loan till date of hearing, the assessee has not produced the basic documents - it is not clear as to whether the bank accounts of the creditors were the NRI accounts or not - FAA has mentioned that it was not explained to him as how and when these advances were made or whether the money was sent through bank channels - The finding of fact given by the FAA has not been challenged by the assessee by filing an application u/s.154 of the Act before him - Thus, it becomes a final finding - It is also a fact that for a period of eight years the advances received by the assessee from both the creditors were not returned, as observed by the FAA - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.12.2009, u/s.143(3) Act r.w.s.254 of the Act. We will like to reproduce the order of the Tribunal: Having regard to the details and evidences filed in respect of Shri Chandulal Patel, the findings of the Ld. CIT(A), cannot be sustained and hence, the same are reversed. However, in respect of other cash creditors indicated in this ground of appeal, the issue is restored to the file of AO, for fresh examination of the same, in the light of the statement etc. to be recorded, on production of such cash creditors and any other relevant evidence filed by the assessee. Having regard to the fact situation of the case, and the meet the ends of natural justice, it becomes imperative to offer the assessee opportunity to produce the parties.The assessee is directed to produce the parties as contended. Accordingly, the order of the Ld.CIT(A) in respect of such cash creditors, is set-aside and restored to the file of A.O. The A.O. is directed to adjudicate the issue in question, in accordance with law, after affording reasonable and proper opportunity to the assessee. 2. Before proceeding further, it will be useful to understand the background of the matter. Return for the year under con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 009 along with proof of their identity (original documents), copy of their bank statements for the respective period and their I.T. Return,Computation, Capital A/c and Balance Sheet for the relevant period. Please note that this being the final opportunity provided to you, if you fail to utilize the same, addition of ₹ 61 lacs shall be made in your hands as unexplained cash credit u/s 68 of the I.T. Act, 1961. 2.2. As no parties were produced before the AO during the period 01.12.2009-24.12.2009, so, he held that disallowance could be made only on the fact that the assessee had produced the parties. But, to be 'utmost fair' to the assessee, he decided to consider the documents submitted before him. In the cases of PC and PE he held that in the original proceedings the assessee had not filed the confirmation of those parties nor had supplied their addresses,that third party verification could not be carried out, that in the set-aside proceedings the assessee had furnished the confirmation letters of both the entities, that it was not clarified as to who had signed the said confirmations, that no PAN/GIR were mentioned, that documentary evidences like bank stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of ₹ 9,00,000/- from PC towards the sale of premises in one of the projects,that the deal could not materialise and he refunded the money through cheque, that the amount was reflected in the bank statement of the assessee, that he had repaid the sums within the same FY. and no addition could be made u/s.68 of the Act, that it was not a loan but an was an advance received in relation to the sale of the property in the normal course of its business,that the assessee had produced the affidavit of Nitin Reshamwala, who was a real estate agent and was the link between the assessee and PC, that the affidavit gave complete details of the agent, his PAN Number, address and the detail of the transaction and address of PC. In the affidavit the agent had also stated that he handed over two cheques amounting to ₹ 6,00,000/- and ₹ 3,00,000/ in the month of June, 1995 and July 1995 respectively and those were refunded by the assessee to PC vide two cheques amounting to ₹ 7,00,000/- and ₹ 2,00,000/- in the month of February 1996 and March, 1996 respectively. It was argued that the credentials and the genuineness of the transaction were entirely proved by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e addition on the ground that the assessee had failed to produce the parties in the time provided in the set-aside proceedings, that Ashok Mehta and Ajay Shah were non-residents, that they could not travel to India. 3.2. After considering his submissions and the order of the AO,the FAA held that the assessee had claimed that he had received loan from PC of ₹ 9,00,000/- and from PE of ₹ 7,00,000/-, that before the AO confirmations of PC and PE were filed along with an affidavit of broker, Nitin Reshanwala, that copies of the bank statements as well as the copies of income-tax returns of both the parties were not filed, that the genuineness of the credits of ₹ 9 lakhs and ₹ 7 lakhs from PC and PE respectively were not proved, that the certificates furnished by the said parties were on printed letter heads and signed by the proprietor of each concern,that the letter heads used in both cases were very unusual, that the addresses given on the letter heads were incomplete and details of excise or sales tax registration were not given,that the letter heads did not specify the time of business of those two parties, that the identity of the creditors and their cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t established, that the assessee could not produce these two persons either before the AO or before him i.e. FAA, though it is averred that they would be visiting India Accordingly, the action of the AO in adding back those amounts was confirmed by the FAA, holding that the assessee had failed to establish identity,creditworthiness of the parties and genuinity of the transaction, that the entire loans/ advances taken from those parties had to be treated as unexplained cash credits.He also held that the assessee had committed before the ITAT that he would be able to produce the creditors, that in the case of PC and PE it was claimed that these were prospective clients,that it is impossible to produce those parties at short notice when assessee had interacted with them fifteen years ago. In this regard the FAA held that for the explanation to be plausible and be accepted other factors had to be considered,that the two letters purported to have been written by these parties do not contain their full addresses,that evidences like their PAN, assessment details or bank details from where they had given the cheques were filed, that the onus was on the assessee to prove genuineness of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir statement. We find that 'in the interest of justice' the assessee was offered an opportunity to produce parties and to produce relevant documentary evidences' before the AO. Over the years law regarding cash credits have evolved and has taken a definite shape.So,before proceeding further,we would like to mention a few important aspects of the law; culled out from the decisions of the Hon'ble Court; with regard to Sec.68 and same can be enumerated as under: i). Provisions of the Section 68 can be invoked when following three conditions are satisfied- first when there is credit of amounts in the books maintained by the assessee and secondly such credit has to be a sum of money during the previous year iii) either the assessee offers no explanation about the nature and source of such credits found in the books or the explanation offered by the assessee, in the opinion of the AO, is not satisfactory. It is only then that the sum so credited may be charged to income-tax as the income of the assessee. ii). Assessee has to establish identity and creditworthiness of the creditor as well as the genuineness of the transaction.All the three ingredients are cumula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the cases falling under the section. ix). Confirmatory letters or A/c. payee cheques do not prove that the amount in question is properly explained for the purpose of section 68 of the Act. In other words money coming by way of bank cheques and being paid through the process of banking transaction are not by itself of any consequence for deciding the cash credit issue. x). Contents of section 68,may be divided into two parts-(a) It requires the assessee to explain the sum found credited in the books of the assessee about the nature and source thereof. This part only requires the assessee to disclose the source from which the money has been received by him. This does not require the assessee to disclose the source of that source, i.e., the source from which the donor or investor has received the money which has been invested. (b) It consists of offering an explanation which is satisfactory in the opinion of the AO. What explanation would be considered satisfactory and how much of details should be furnished to make the explanation satisfactory normally depend upon the facts. xi). But, the doctrine of source of source or origin of origin cannot be applied universally,witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between the entry providers and incriminating evidence, the mere filing of permanent account numbers,acknowledgment of income-tax returns of the entry providers and bank account statements,is not sufficient to discharge the onus on the assessee. (361 ITR 258). xiv). A conclusion regarding creditworthiness or otherwise of a person is essentially one of fact. 5.1. Here, we would like to refer to the case of Pushp Trading Co., delivered by the Hon'ble Delhi High Court (190 ITR 618). In that matter certain cash credits were assessed as the assessee's income for a particular year. The original assessment was set aside on the ground that the assessee had not been granted full opportunity and wanted further opportunity to substantiate its claim that the cash credits were genuine. A fresh assessment was passed after 14 years treating the cash credits as the assessee's income. Tribunal held that the assessee was not able to produce any evidence to establish the genuineness of the cash credits and also rejected the assessee's reference application. On an application for calling for a reference before the High Court, it was contended on behalf of the assessee that, after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produce the proof of their identity, copy of their bank statements for the respective period, their I.T.Returns, Computations of income,Capital A/cs and Balance Sheets.As stated earlier he furnished a certificate of a real estate broker, what was the locus standi of the broker vis-a-vis the creditors is not known. At the time of the original assessment question about the creditworthiness of PC and PE had arisen and the FAA had pointed about the glaring discrepancies of the letter heads of both the parties.In these circumstances he had ample time from the date of receiving the order of the FAA to the date of notice of the AO issued during set aside proceedings to collect the evidence that could prove his claim. But, he did not avail that opportunity. In our opinion, if a person who has been forewarned about consequences of travelling without a ticket, boards the train then he cannot avoid the ensuing results of his act. In the cases of cash credits primary onus is on the assessee to prove the three basic ingredients-identity and creditworthiness of the creditor and genuineness of the transaction. In the case before us, the assessee has not proved any of the three thing. Except givi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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