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TMI Blog2017 (8) TMI 1138X X X X Extracts X X X X X X X X Extracts X X X X ..... are yet another example of the constant use of the deception of loan entries to bring unaccounted money into banking channels. This device of loan entries continues to plague the legitimate economy of our country. As seen from the facts narrated above, the transactions herein clearly do not inspire confidence as being genuine and are shrouded in mystery, as to why the so-called creditors would lend such huge unsecured, interest free loans - that too without any agreement. In the absence of the same, the creditors fail the test of creditworthiness and the transactions fail the test of genuineness. - Additions confirmed - Decided in favor of revenue. - ITA 55/2017 - - - Dated:- 25-8-2017 - S. Muralidhar And Prathiba M. Singh, JJ. For the Appellant : Mr. Ruchir Bhatia, SeniorStanding Counsel with Mr. Gaurav Kheterpal, Advocate For the Respondent : Mr. C. S. Aggarwal, Senior Advocate with Ms. Pushpa Sharma, Advocate JUDGMENT Prathiba M. Singh, J. 1. In the present Appeal, the Principal Commissioner of Income Tax - 7, impugns the order dated 19th July, 2016 passed by the Income Tax Appellate Tribunal ( ITAT ) in ITA No.5609/Del/2015 for Assessment Year 2011-12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) Shri Chandan Singh Rs.1,10,00,000/- (iii) Shri Ram Charan Rs.10,00,000/- (iv) Smt. Sunita Rs.98,00,000/- In respect of the remaining four creditors, the ITAT restored the same to the file of the AO for reconsideration. 7. The Revenue has filed the present appeal challenging the said order of the ITAT dated 19th July, 2016. Order of the Assessing Officer ( AO ) 8. The AO on 13th March, 2014 passed the assessment order in respect of eight entries of loans/advances. Prior to the order, a questionnaire dated 10th January, 2014 was issued to the Assessee. The Assessee was called upon to produce the documentary evidence with respect to the said eight persons. Further, the Assessee was asked to produce the persons in order to establish their identity and creditworthiness and the sources of the loans, claimed to have been advanced to the Assessee. Since no documentary evidence or identification or addresses thereof, showing either the identity or creditworthiness of these persons, was furnished by the Assessee, the AO con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter was produced but no PAN number was mentioned. The AO observed that the bank statements reveal the deposit of cash of ₹ 13,00,000/- and ₹ 7,00,000/- immediately before the issuance of the cheque in favour of the Assessee. He was also not produced. 10. Thus, in respect of all these individuals, none of whom were produced by the Assessee, the AO concluded that the identity, creditworthiness and genuineness of the persons could not be established by the Assessee. Thus, the AO added the total sum of ₹ 3,25,50,000/- under Section 68 of the Act to the Assessee s income and also simultaneously initiated penalty proceedings under Section 271 (1) (c) of the Act. Order of the Commissioner of Income Tax (Appeals) [ CIT (A)'] 11. In appeal, the CIT (A) issued notice to the Assessee to appear in the proceedings before him. The Assessee then requested for more time to produce further information and an opportunity to produce the creditors for examination. For this purpose, the matter was referred by the CIT (A) to the AO for his report. The AO, on 21st May, 2015 reported that the statements of Smt. Sunita, Shri Amar Singh, Shri Ram Chander, Shri Chandan Sing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. The CIT (A) thus held that the transactions with Smt. Sunita lacked in genuineness and creditworthiness; transaction with Shri Amar Singh was questionable as to genuineness and creditworthiness; transactions with Shri Ram Chander and Shri Chandan Singh were not genuine; and that the explanation given by Shri Harpreet Singh showed that the transaction was dubious and its genuineness was not established. The CIT (A), by order dated 7th September, 2015, concluded as under: In respect of all the creditors, it is seen that they are advancing huge sums of money to the appellant but the source of income is not clear. There are huge deposits in their accounts but there is no explanation of the source of deposits. Even where it is stated that the amount advanced is from the sale proceeds of land, no details are given about the land holding and the copy of agreement etc. Most persons appearing not to be filing returns. Their creditworthiness is simply not proved. All are advancing huge sums of money but details are not available of their income savings and expenditures. Thus the identity, creditworthiness and the genuineness of transactions are all in doubt . 14. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ITAT concluded that the identity, creditworthiness and genuineness was established and the addition of ₹ 10 lakhs in respect of Shri Ram Chander was deleted. (vi) In respect of Shri Chandan Singh, the ITAT referred to the copy of PAN Card, Voter ID Card and the bank statement, which was submitted by the Assessee. The ITAT held that the identity, genuineness and creditworthiness was established and the addition made to the tune of ₹ 1.10 Crores was deleted. (vii) In respect of Shri Amar Singh, the ITAT referred to the letter of confirmation and Voter ID Card to establish the identity of this creditor. He further referred to the bank statement, which showed a deposit of ₹ 84,44,762/- in his bank account, just before the issuance of cheque of ₹ 50 lakhs to the Assessee. According to the Assessee, this amount was received from the Land Acquisition Officer, Gurgaon in favour of Shri Amar Singh. The ITAT thus deleted the addition of rupees ₹ 50 lakhs in respect of Shri Amar Singh. (viii) In respect of Shri Harpreet Singh, the ITAT referred to the letter issued by him explaining that the loan was given by his son Mr. Dakshdeep Singh vide cheque n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and CIT v. Kamdhenu Steel Alloys Ltd. 361 ITR 220 (hereafter Kamdhenu ). Respondent-Assessee s Submissions 20. Mr. C. S. Aggarwal, learned Senior counsel for the Respondent-Assessee vehemently urged that in this case the Assessee has produced a large number of the documents to establish the identity, creditworthiness and genuineness in respect of each creditor and each transaction. The ITAT rightly deleted four additions, inasmuch as it was convinced about the identity of each of the persons who had appeared before the AO and had made detailed statements. Mr. Aggarwal further submits that apart from the oral statements recorded in respect of each of the creditors, several documents were filed to establish that they were bonafide creditors and that the findings of the AO and the CIT(A), that the Assessee has used these creditors to route his own unexplained money or incomes, was incorrect. Mr. Aggarwal relies upon CIT v. Dwarkadhish Investment Pvt. Ltd. 330 ITR 298 (hereafter Dwarkadhish ) to submit that once the initial onus upon the Assessee is discharged, the onus shifts on the Revenue to challenge the same. Mr. Aggarwal further submits that for any income to be taxed, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the additions in respect of other four creditors has been restored to the file of the AO, has not been seriously challenged by the Revenue. Though ground-G in the appeal has been raised in respect of the said set of creditors, the same was not seriously pressed. Thus, in the present order, the Court is only dealing with the submissions of the Revenue in respect of the deletions of the additions in respect of four of the creditors. 25. The law applicable to transactions of this nature is well settled by this Court in Divine Leasing (supra). Both parties have referred to and relied upon this judgement. This Court, after analyzing the entire law on the subject in the context of Section 68 of the Act, held as under: 16. In this analysis, a distillation of the precedents yields the following propositions of law in the context of Section 68 of the IT Act. The assessee has to prima facie prove (1) the identity of the creditor/subscriber; (2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels; (3) the creditworthiness or financial strength of the creditor/subscriber. (4) If relevant details of the address or P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er dated 12th April, 2014 issued by the Gurgaon Gramin Bank, the bank statement for the period from 1st April, 2008 to 31st March, 2011, a copy of the cheque for ₹ 50,00,000/-, the voter ID Card and a copy of letter dated 15th May, 2015 of the Land Acquisition Officer, Gurgaon, Haryana. A perusal of the bank statement reveals that the account of Shri Amar Singh was opened by a cash deposit of ₹ 1,000/- and there are several sums running into lakhs withdrawn in cash. There is no explanation, whatsoever, as to why a sum of ₹ 50,00,000/- would be given as loan/advance to the Assessee in the absence of any loan agreement either specifying the interest charged on the loan or any security offered in respect of the loan. In the statement of Shri Amar Singh, there was nothing to justify the giving of such a loan to the Assessee. The CIT (A) had noticed that the monthly income of Shri Amar Singh was in the range of ₹ 2,000/- to ₹ 2,500/-. He could not produce any documentary evidence to explain the entries in his bank statement. In the case of Shri Amar Singh there was nothing on record to displace the findings of the CIT (A) and his financial strength was clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r where this person is being referred to as Ram Chander in different places. His voter ID card described him as Ram Chander S/o Shri Bhagwana whereas the letter of confirmation purportedly signed by him refers to him as Ram Chander S/o Bhagwant Sahai. The bank statement produced for the period from 1st April, 2008 to 31st March, 2011 shows deposits and withdrawals in cash. He also tried to change his explanation. While in his oral statement, he stated that the amount of ₹ 10,00,000/- was given to Shri Bikram Singh out of the proceeds of sale of land, he later claimed that the amounts of ₹ 18,48,750/- and ₹ 5,86,000/- came from his sister, Vidya. The identity and genuineness is in severe doubt in the case of Shri Ram Chander/Ram Charan and the fact, that his annual income was between ₹ 1.75 Lakhs to ₹ 1.8 Lakhs and he also does not even file an ITR and does not have a PAN number, clearly points to the irrefutable conclusion that the entire transaction was not genuine and the identity of Shri Ram Chander/Ram Charan was also dubious. 32. Insofar as Smt. Sunita is concerned, she is the wife of the Assessee and from her statement, it is clear that she ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , whose statement was recorded and that there was an admitted supply of goods against which the payment was made. Thus, the facts are clearly distinguishable. 37. The Assessee further relied upon Mukundray Shah (supra) to argue that there can be no interference when the Tribunal has given findings of fact. However, the Supreme Court in the said case held that the finding of the Tribunal was not perverse, as the concept of giving deemed dividend, under consideration in the said case, was rightly considered by the Tribunal, which ought not to be disturbed. The said judgment deals with deemed dividend under Section 222 (e) of the Act and since the two companies had merged, the accumulated profits of one would be taken into the merged account. The facts of the said case have no correlation, whatsoever, with the present case. 38. The judgement in Daulat Ram (supra) relied upon by Mr. Agarwal, was concerned with a case where the Department could not establish either the source or the recipient of the fixed deposit of ₹ 5,00,000/-. In those circumstances, the Supreme Court held that the onus to prove that the apparent is not the real is on the party as who claims it to be so. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceeds of sale of the land but thereafter it was claimed by him that the money had come from her sister Vidya. Such contradictions clearly render all these transactions dubious. The ITAT could not have, merely because the payments were through cheques, held that the transactions were genuine. The ITAT erred in simply accepting the explanation of the Assessee qua the four transactions. The ITAT, clearly, did not follow the binding precedent in Divine Leasing (supra), which in no uncertain terms requires that the authorities are duty bound to investigate the creditworthiness of the creditors, subscribers and the genuineness of the transactions. Thus the ITAT did not merely give findings of fact but misapplied the law. Hence the authorities CIT Madras vs. S. Nelliappan (1967) 66 ITR 722 (SC), CIT Orissa vs. Orissa Corporation Pvt. Ltd. 159 ITR 78 (SC), CIT Vs. Gun Nidhi Dalmia (1987) 168 ITR 282 (Del) do not support the Assessee's case. The Assessee has failed to discharge his initial burden as the explanation given by the Assessee and the four individuals does not appear to be credible. 42. There is no dispute to the proposition that the source of the source need not be seen a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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