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TMI Blog2017 (2) TMI 266X X X X Extracts X X X X X X X X Extracts X X X X ..... reason for the CIT(A) to uphold the addition u/s. 68 in relation to the credit appearing in the name of M/s. Ganesh. - Decided in favour of assessee - ITA No.2262/Mum/2014, ITA No.2013/Mum/2014 - - - Dated:- 30-11-2016 - SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER For The Revenue : Shri Mohhamed Rizwan For The Assessee : Shri Vijay Mehta ORDER PER G.S.PANNU, A.M: These are cross-appeals filed by the Revenue and the assessee against the order of CIT(A)-32, Mumbai dated 21/01/2014, pertaining to the Assessment Year 2009-10, which in turn, has arisen from the order passed by the Assessing Officer dated 30/12/2011 under section 143(3) of the Income Tax Act, 1961 (in short the Act ). 2. In both the appeals, the substantive dispute arises from an addition of ₹ 18,57,68,100/- made by the Assessing Officer as unexplained cash credits under section 68 of the Act. Notably, the Assessing Officer treated the credits in the account of three parties as unexplained namely, M/s. Wall Street Capital Markets P. Ltd. (hereinafter referred in short M/s.Wall Street) ₹ 7,00,00,000/- crores, M/s. Ganesh Barter P. Ltd. ( in short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies were not in the nature of any loans but were advances received through banking channels for making investments in Government bonds/securities/mutual funds. The assessee also explained that in the case of M/s. Wall Street, M/s. Novel and M/s. Asian Finance Services, the amounts were repaid as the right kind of investments could not be identified. The assessment order also reveals that in the course of the verification exercise, the Assessing Officer called for information by issuing notices under section 133(6) of the Act to the creditors and also issued commission under section 131(1)(d) of the Act to his counterpart authorities at Kolkatta, who were having jurisdiction over the respective creditors. Notably, apart from referring to such proceedings and the receipt of material, the Assessing Officer has not made any specific adverse comment as to the denial of transaction by any of the parties. Be that as it may, the Assessing Officer held that the transaction of loans received to the extent of ₹ 18,57,68,100/- from three concerns was unexplained within the meaning of section 68 of the Act. The Assessing Officer did not doubt the identity of the creditors but was not sati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointed out that the advances were given without interest and that the explanation of the assessee that transactions were in the nature of advance for investments in mutual funds was only an afterthought because amounts received in the case of M/s. Wall Street and M/s. Novel were not used for the stated purpose of investment in mutual funds, etc. The Ld. Departmental Representative has also pointed out that all the transactions in question have been undertaken by the three creditors only on receipt of funds in their respective bank accounts on the very same day and otherwise the balance in such bank accounts was meagre. 5. On the other hand, in so far as the Departmental appeal is concerned, Ld. Representative for the assessee pointed out that the Assessing Officer has made the addition on mere suspicion although none of the enquiries revealed anything adverse, qua the nature of the amounts received from either M/s. Wall Street or M/s. Novel. In this context, our attention has been drawn to the specific findings recorded by the CIT(A) in sub-paras (xii) to (xxiv) of para 5.7 of his order, which categorically brings out that no addition was maintainable in terms of section 68 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ability of funds in the bank accounts of the creditors, out of which monies have been advanced to the assessee. In our considered opinion, the reasonability and plausibility of the inference drawn by the CIT(A) cannot be doubted. For instance, in the case of M/s. Wall Street, where assessee had received a sum of ₹ 7,00,00,000/- , the charge of the Assessing Officer is that the said concern has not declared any income in its return of income. However, the CIT(A) took note of the fact that the said concern has share holder funds of ₹ 2,62,08,000/-, Reserve and Surplus at the beginning of the year at ₹ 10,53,53,807/- and ₹ 10,56,23,978/- at the close of the year and, therefore, he held that there was creditworthiness available to advance a sum of ₹ 7,00,00,000/- to the assessee. In fact, the CIT(A) also took note of the source of the funds out of which advances were made to the assessee which according to him were raised in the routine course of the activities of the creditors. We find that the Assessing Officer has raised a point that amounts have been advanced to the assessee just after receipt of funds by the creditors in their bank accounts. In this c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee but was not satisfied with the genuineness of the transaction and hence he sustained the ultimate decision of the Assessing Officer to invoke section 68 of the Act. In so far as the finding of the CIT(A) with regard to the identity and capacity of the creditor M/s. Ganesh is concerned, Revenue is not in appeal and, therefore, the only issue before us is as to whether the transaction can be considered as genuine so far as requirements of section 68 of the Act are concerned. 7.1 The relevant findings of the CIT(A) in this regard are contained in subpara (xxv) to (xxxii) of para 5.7 of his order. The CIT(A) has noted the explanation of the assessee that the money was given to the assessee for investment in bonds and mutual funds by the creditor. The Assessing Officer has noted that subsequent to the receipt of such funds from the creditor, the amount was invested by the assessee in its own name in mutual funds, short term income bonds, etc. The CIT(A) also notes that during the subsequent period it has not been shown whether any profit or loss in respect of investments made by using the funds received from M/s. Ganesh was ultimately passed on to the creditor or not. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... val submissions. So far as the issue of credit of ₹ 5,07,68,100/- appearing in the account of M/s. Ganesh is concerned, the only point of dispute before us is as to whether such transaction is genuine, qua the requirements of section 68 of the Act. The CIT(A) has doubted the genuineness for the reason that the assessee had made use of the funds received from M/s. Ganesh in making investment in bonds, etc. in its own name and not in the name of the creditor and that there is nothing to suggest that any profit or loss on such investments have been passed on to the creditor. In our considered opinion, the approach of the CIT(A) in dissecting the transaction and holding it to be ingenuine is quite straight jacketed and myopic. The CIT(A) impliedly suggests that a transaction is to be held as ingenuine, if the money is not returned back when the purpose for which it was given was not achieved. In our considered opinion, the aforesaid approach of the CIT(A) would give weightage to suspicion than the evidence available in order to evaluate the genuineness of a transaction. It is quite well understood in the day-to-day business environment that an advance given to a businessman for t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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