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TMI Blog2017 (5) TMI 470X X X X Extracts X X X X X X X X Extracts X X X X ..... antial evidence or not. The role of the AO is not only of prosecutor, rather he is an adjudicator also. It is for the Revenue to provide a platform to the assessee where with the help of statutory powers of the AO, she could explain her position for not visiting her with tax liability. Looking into these facts and circumstances, we are of the view that impugned orders deserves to be set aside because the assessee was not granted sufficient opportunity at the level of the AO. These appeals are remitted to the file of the AO for re-adjudication. The ld.AO shall examine the ledger account of the assessee exhibiting details of loans received by the assessee through account payee cheque, and thereafter he would direct the bank for providing bank statement of the creditor during those periods. He would supply all incriminating materials to the assessee for giving an explanation. The assessee will be at liberty to submit any explanation or details in support of her defence. The observations made by us will not impair or injure the case of the AO and will not cause any prejudice to the defence/explanation of the assessee. All appeals of the assessee are allowed for statistical purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for scrutiny assessment and after hearing the assessee an assessment order was passed under section 143(3) of the Act on 30.12.2009 determining total income of the assessee at ₹ 7,61,190/-. The ld.AO has reopened the assessment and issued a notice under section 148 of the Income Tax Act on 1st March, 2011. Reasons recorded by the AO have been supplied to the assessee and objection raised by the assessee have been adjudicated. Copy of the reasons has been placed on page no.4 5 of the paper book. Such reasons read as under: REASONS FOR ISSUING NOTICE U/S 148 R.W.S. 147 OF THE I.T.ACT, 1961 BINTAL D BAXI, PROP: PARSHWA TRADING CO. AY: 2007-08 During the course of assessment proceedings for the AY 2008-09, it was seen from 3CD report and various details filed by the assessee that the assessee has borrowed an amount of ₹ 73,87,331/- from one Shri Dipin G. Patel (Prop, of M/s Deepak Enterprises) during the FY 2007- 08. To examine the genuineness of transaction and creditworthiness of the lender details were called from lender, M/s Deepak Enterprise. From cross verification, it was seen that M/s Deepak Enterprise, in its return filed for A.Y 2008-09, had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A. No, I have never given loan to Parshwa Trading Co. Q.7. In which year and for how much amount you have given entry to Parshwa Trading Co. ? A. I say it again that I have not given any loan to Parshwa Trading Co., but I have given entry only after taking cash or cheque after charging commission. Q. 8. As you say that you issue cheque, DD or pay order after receiving cheque or cash, then, how much commission you charge for that? A. I charge ₹ 25/- to ₹ 50/-commission for per entry of one lakh. Q. 9. Are you ready for cross examination with Parshwa Trading Co. ? A. Yes, I am ready for cross examination and I will come whenever you call. 4. During the FY 2006-07 relevant to AY 2007-08, the assessee had shown ₹ 30,00,000/- as loan taken from the Deepak Enterprise, Bhavnagar (shown in the audit report of the assessee for the AY 2007- 08), From the discussion in para-3, it is crystal clear that the loan shown by the assessee is not genuine but a dubious method adopted by the assessee to introduce his own undisclosed / untaxed money through back door. In view of this, I have reason to believe that income chargeable to tax has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued on 31.8.2009 which was duly served upon the assessee on 6.9.2009. On scrutiny of the accounts, it revealed to the AO that in form no.3CD report, the assessee has shown loan of ₹ 73,87,331/- from one Shri Dipin G. Patel, proprietor of DE . In order to probe the issue further, the ld.AO has called for information from DE and from perusal of that information it revealed to the AO that DE has not shown any loan advanced to the assessee. The list of sundry debtors and copy of acknowledgment of income-tax return has been reproduced by the ld.AO on page nos.2 and 3 of the assessment order. The AO thereafter made reference to the statement of Dipin G. Patel recorded on 13.12.2010 made under section 131(1) and made addition of ₹ 73,87,331/-. It is a very brief assessment order. The finding of the AO is running into three pages only. For better appreciation of the facts, we would like to take note of the finding recorded by the AO. It reads as under: 3. In order to further examine the case and find out more facts, summons was issued to Shri Dipin Patel, Prop, of M/s Deepak E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. The above makes it crystal clear that the loan of ₹ 73,87,331/- as shown by the assessee not a genuine transaction but a dubious method adopted by the assessee to introduce his own undisclosed / untaxed money through back door. Accordingly, show cause notice dated 10.12.10 was issued to the assessee requesting to show cause as to why the loan of ₹ 73, 87,331/- should not be added back to the income of the assessee as cash credit. 5. In response to the show cause notice issued, the assessee filed its written submission on 21.12.10. Relevant portion of assessee's submission is reproduced as under... 1 In absence of ledger copy of our account from the books of Deepak Enterprises we are not in the position to exactly pinpoint the difference and its nature and reasons for the same. We therefore request you to kindly provide us the copy of ledger accounts from the books of M/s Deepak Enterprise. 2. Subject to the above, kindly find enclosed here with the copy of the ledger account of M/s Deepak Enterprises along with the necessary available evidence which includes copy of the bank statements and copy of the ledger accounts of other parties whose a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of cross-examination. It was contended that neither copy of the statement was supplied nor copy of any bank statement or any other material collected from Dipin G. Patel was supplied to the assessee. According to the assessee this statement deserves to be excluded from consideration. The ld.CIT(A) verified the contention of the assessee and found it correct. Therefore, he directed the ld.AO to supply copy of the statement of Shri Dipin G. Patel and also provide an opportunity of cross-examination. The AO was directed to submit a remand report on this aspect. The ld.AO had provided an opportunity of cross-examination, and thereafter, submitted report. The ld.CIT(A) has reproduced the question and answers of the statement of Shri Dipin G. Patel in free English translation. The ld.CIT(A) further observed that in the case of Dipin G. Patel an addition of ₹ 73,87,331/- was made on protective basis on account of unexplained investment being a loan granted to the assessee without disclosing the source. This protective addition was deleted by the ld.CIT(A). The ld.CIT(A) has reproduced complete order of the CIT(A) and such reproduction have been made from page nos.49 to 76 of the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-11. It reads as under: Instead of supplying all the required details you were kind enough to give us copy of two statements of bank of Deepak Enterprise. Though M/s. Deepak Enterprise has accounts in so many (all most near to 10 banks) on our continue perusals you gave us copy of two bank statement is not clearly legible. (1) The first statement is from Yes Bank and the period is 01.06.2009 to 16.06.2009 and (2) The another statement is from Bhavnagar Nagarik Sahkari Bank Ltd. (The period is legible). Though we categorically deny having any hawala business with the Deepak Enterprise and any onus to prove any things from his bank statements which is not backed up by any other evidence we draw the kind attention on the following facts/observations. Our observations: (a) The period and the bank statements are too less tot eh actual volume and time (b) So far transactions of deposits (in our books) are concerned there is volume of ₹ 68741579/- and number of transactions (entries) are 77,while so far transactions of withdrawal are concerned there is volume of ₹ 68741579/- and number of transactions (entries) are 83. While total number of transaction which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 68 of the Income Tax Act contemplates that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof, or the explanation offered by the assessee is not, in the opinion of the AO satisfactory, then the sum so credited in the accounts may be treated as income of the assessee of that previous year. There is no dispute with regard to the fact that the ld.AO found amounts credited in the books of the assessee. The assessee was required to offer an explanation about nature and source of these amounts found to be credited in her books. The assessee submitted that the amounts were taken as loan from DE through account payee cheques. She has disclosed identity of creditors. She has produced ledger account showing receipts of amounts through account payee cheques. The ld.AO verified this aspect and observed that lender has denied advancement of any loan to the assessee. But this denial is in contradiction of documentary evidence i.e. advancement of money to the assessee through account payee cheque. Normally, for explaining the nature and source of credit, an assessee is requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the ld.counsel for the assessee, Shri Dipin G. Patel did not give confirmation and to support version of the assessee in order to save his skin for explaining the source of fund given to the assessee. 16. On the other hand, the ld.DR pointed out that the assessee should have given direct evidence in support of her version. She cannot blame Revenue for her failure for fulfilling ingredients contemplated under section 68 of the Income Tax Act. As observed earlier that section 68 requires the assessee to submit evidence giving identity of the creditors, his credit-worthiness and genuineness of the transaction. In the present appeals no doubt the assessee has fulfilled some of the conditions, viz. she has disclosed identity. She has disclosed genuineness of the transaction to some extent, as loans were taken through banking channel. But she failed to prove credit-worthiness of the creditors. We would have no hesitation in concurring with the ld.Revenue authorities under normal circumstances, but after going through the replies given by Shri Dipin G. Patel, in his cross-examination and the manner AO has investigated the issue persuaded us not to concur with the ld.Revenue auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash, please tell when those transactions were made ? Ans: Not fit to be answered. Q.No.7. As per you, you are doing the transactions on commission, Please tell whether the commission is deducted when the cash is paid or it is charged separately ? Ans: Commission was taken Q.No. 8. We have made the financial transactions for so many years through cheques did you record them in your books of accounts.? : Yes. Q.No.9. Are you prepared to present all the records, diaries, vouchers and any other records for verification.? Ans: CPU, Vouchers etc. were seized by the Department. Q.No.10 At present where are those records ? If the same have been seized by the Income-tax Department did you got the copies of those records ? Please tell of how much period and what records are lying in the Income-tax Department. ? If those records lying in the department, did you have any objection in furnishing of the copies of those records to me? Ans: Answer is given in the question above. Q.No. 11 We have made the financial transaction with you and we have not made any entry business, while as per you, you have done the business of accommodation entry. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made the financial transactions legally or illegally. But you have planned . in such a way that if you are caught for the benami fund transactions then you would shirked from the responsibility by involving the other party with malafide intentions. If you have any proof in this regard, produce the same. Ans: This is not related to business. 18. A perusal of the reply to the question would indicate that on all vital points deponent either gave vague replies or did not reply. Providing of an opportunity to cross the witness is not a mere formality. It is an exercise to elicit favourable facts from witness or to impeach credibility of testifying witness to lessen the weight of unfavourable testimony. If in the light of the reply given in the cross-examination, examination- in-chief recorded by the AO under section 131(1) of Shri Dipin Patel behind the back of assessee is appreciated then, it would give a doubt about deposition of this witness. He could not give specific replies relating to the transaction. Particularly, we would like to put emphasis on reply to question nos.13, 14, 19 and 20 extracted (supra). If his statement is appreciated as whole then, it is not worth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .CIT(A) s action could be appreciated. But, it is to be seen in the context that when a creditor turn hostile, then whether an assessee should be given an opportunity to prove his case with the help of circumstantial evidence or not. The role of the AO is not only of prosecutor, rather he is an adjudicator also. It is for the Revenue to provide a platform to the assessee where with the help of statutory powers of the AO, she could explain her position for not visiting her with tax liability. 21. Looking into these facts and circumstances, we are of the view that impugned orders deserves to be set aside because the assessee was not granted sufficient opportunity at the level of the AO. These appeals are remitted to the file of the AO for re-adjudication. The ld.AO shall examine the ledger account of the assessee exhibiting details of loans received by the assessee through account payee cheque, and thereafter he would direct the bank for providing bank statement of the creditor during those periods. He would supply all incriminating materials to the assessee for giving an explanation. The assessee will be at liberty to submit any explanation or details in support of her defence. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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