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TMI Blog2019 (10) TMI 303X X X X Extracts X X X X X X X X Extracts X X X X ..... her loan confirmation letter. Thus, the identity of the loan creditor was fully established. Creditworthiness of the loan creditor - From the records, it is seen that in course of hearing no efforts were made to assess the financial position of these businesses on which Assessee had relied on to prove the creditworthiness of the loan creditor. Even in the requisition sent by the AO u/s 133 (6), no details were asked about these businesses. As the Assessee had submitted, as proof, copies of the licenses of the creditor's businesses, the AO should have ascertained the financial position of these businesses to accept or of not accept the proof submitted by the Assessee.On perusal of these documents, we hold that the loan creditor, Smt. Jenita Wallang, was a person of means and had creditworthiness to advance the loan in question to the Assessee . From the records, it is seen that in course of hearing no efforts were made to assess the financial position of these businesses on which Assessee had relied on to prove the creditworthiness of the loan creditor. Even in the requisition sent by the AO u/s 133 (6), no details were asked about these businesses. As the Assessee had s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent : Shri B. L. Purohit FCA Shri Subash Purohit, FCA ORDER PER DR. A. L. SAINI: The captioned appeal filed by the Revenue, pertaining to assessment year 2013-14, is directed against the order passed by the Commissioner of Income Tax (Appeal)-2, Guwahati, which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 (in short the Act ) dated 07/03/2016. 2. Grounds of appeal raised by the Revenue are as follows: 1. On the facts and in the circumstances of the case, the ld. CIT(A) has erred in facts and in law and is also not justified in deleting the amount of ₹ 80,00,000/- added as unexplained credits under section 68 of the Income Tax Act, 1961. 2. On the facts and in the circumstances of the case, the ld. CIT(A) has erred in facts and in law by holding that the amount of ₹ 80,00,000/- was unsecured loan received by the assessee on the basis of additional evidence though objection was raised in the remand report as to its admissibility. 3. For these and such other grounds tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted in support of creditworthiness of Ms. Wallang and genuineness of transaction. Thereupon, a requisition under Section 133(6) of the Act was sent on 20/10/2015 by post to Ms. Wallang on the address 'I, Jaiaw Shyiap, Shillong (Meghalaya)' as mentioned in the confirmation of accounts requiring Ms. Wallang to furnish following details: (i) The amount of loan advanced to M/s Shiva Caps and Closures during F. Y. 2012-2013 and the outstanding balance as on 31/03/2013. (ii) Your relevant bank statement for the period 01/04/2012 to 31/03/2013. (iii) Copy of your balance sheet as on 31/03/2013, if maintained by the assessee. (iv) Why have you advanced interest free loans to M/s Shiva Caps and Closures, Patharkuchi, Sonapur, Kamrup? (v) Whether the same has been repaid to you till date? If yes, please provide date wise details of such repayments. The letter returned undelivered with remarks 'incomplete addressreturn to sender'. The assessee was informed by way of letter dated 02/11/2015 and asked to prove identity creditworthiness of Ms. Wallang and g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the transaction in respect of unsecured loan of ₹ 80 lakh, therefore, he made addition under section 68 of the Act at ₹ 80 lakh. 5. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has deleted the addition made by AO. Aggrieved, the Revenue is in appeal before us. 6. We have heard both the parties and perused the material available on record. We note that the ld. Assessing Officer has observed in the remand report that the assessee had admitted in his statement under section 131 that the assessee had carried the cash and had deposited the same into the bank account of the loan creditor on her behalf. It is also pertinent to mention here that the said loan creditor in her confirmation, as well as affidavit, has duly owned up the said cash deposited into her bank account, was deposited on her behalf by the Assessee and had also confirmed that the cash pertained to her. This position has also been stated by the Ld. AO in the remand report. The said loan creditor had also explained the source of the said cash in her hand and had filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dency, and they should be such as to exclude every hypothesis but the one proposed to be proved. In other words, there must be a chain of evidence so far complete as not leave any reasonable ground for a conclusion consistent with the innocence of the accused and it must be such as to show that within all human probability the act must have been done by the accused. In: Jaharlal Das vs State of Orissa [1991 AIR 1388; 1991 SCR (2) 298]: It may not be necessary to refer to other decisions of this Court except to bear in mind a caution that in cases depending largely upon circumstantial evidence there is always a danger that the conjecture or suspicion may take the place of legal proof and such suspicion however so strong cannot be allowed to take the place of proof. The Court has to be watchful and ensure that conjectures and suspicions do not take the place of legal proof. The Court must satisfy that the various circumstances in the chain of evidence should be established clearly and that the completed chain must be such as to rule out a reasonable likelihood of the innocence of the accused. 8. The ld Counsel submitted that f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o affirmed that she had given the cash to the Assessee for being deposited on her behalf in her bank account. (viii) Along-with the additional evidences filed by the Assessee was an affidavit of the loan creditor, Ms. Janita Wallang, which was not negated by the Ld. AO. 9. Section 68 of the Act, under which the addition has been made by the Assessing Officer, reads as under: 68. 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 him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. The phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this case the legislative mandate is not in terms of the words shall becharged to income-tax as the income of the assessee of that previous y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tling plant and the bonded warehouse businesses of Smt. Jenita Wallang, the loan creditor. According to the Ld. Counsel of the Assessee, these two documents issued by the State Government of Meghalaya were valid documents to prove that the creditor owned these lucrative businesses. The Counsel Further submitted that after the submission of the above documents the AO had directly issued a requisition under Section 133(6) to the creditor and in that requisition he could have asked for copies of Sales-tax/VAT returns of these businesses and also the copies of the bank accounts of these businesses, which would have shown that the loan creditor had a huge turnover in these businesses. The Counsel further submitted that the AO had deputed his Inspector for an inquiry in the bank through which the transaction of loan was carried out and so if the AO was not satisfied about the proof submitted by the Assessee, he could instruct his inspector to ascertain the financial position of the loan creditor through local inquiry before concluding that the creditor has no creditworthiness. To prove this contention, the Counsel submitted the copies of VAT returns of the proprietary firm of the loan cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, and which was submitted to the AO was found wrong when compared with the bank statement of the said account, as obtained by the AO from the Bank, and ii. There was a balance of only ₹ 5.59 lakhs in the said account and, for clearance of the loan cheques, the cash deposited in the said account was deposited by the Assessee himself. Regarding these reasons cited by the AO, the Ld. Counsel submitted as hereunder: (1) The action of the A.O. in treating the genuine loan of ₹ 80 Lakhs taken by the Assessee from Smt. Jenita Wallang is based merely on suspicion, surmises and conjectures. (2) As recorded in the Facts of the case above, it was for business exigency that the Assessee had taken this loan. For your kind perusal copy of Shiva Caps Balance Sheet as at 31-03-2012 and NEDFi's account statement is enclosed herewith which show that the Assessee had huge loan of NEDFi which had become overdue. It was to run his business and repay installment of NEDFi, that the Assessee had taken this private loan because no further loan could be availed from NEDFi or any other Bank. The A.O's presumption that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NEDFi loan due to losses in his industrial undertaking. He had, therefore, approached his long-time family friend and business associate Smt. JenitaWallang for the said loan. Since the loan could not have been taken in cash, as per I.T. provisions, the Assessee took cheques from Smt. Wallang and to conclude the transaction urgently, he specifically took cheques of her SB account at Amerigog where he himself has his account. Since there was no balance in the said account and since the banks do not accept cash deposits exceeding ₹ 50,000/- in outside branches especially in SB Accounts, the Assessee took cash from Smt. Wallang and deposited the same in her said SB account.The above fact was duly explained by the Assessee to the AO during his personalappearance. The AO could have confirmed this fact further from Smt. Jenita Wallang. But he did not do so and simply on his guesswork, suspicion, surmises and conjectures treated the genuine loan as the income of the Assessee under Section 68 of the I.T. Act. 12. We note that the action of the AO, being based on extraneous and irrelevant material,totally ignoring the relevant material cannot be sustained as held by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 133 (6), to the AO, that she had given the loan of ₹ 80 lakhs to the Assessee free of interest. 13. We note that ld AO had doubts about the genuineness of the loan, despite the aforesaid reply of the loan creditor, the AO should have summoned the creditor under Section 131 for further verification as held by the Hon'ble Patna High Court in the case of Additional CIT vs. Hanuman Agarwal [(1985) 151 ITR 150 (Patna)]. In this regard the following observations of the Hon'ble Patna High Court are quite relevant: The revenue on its part did not summon the creditor under Section 131 of the Act. It took no steps to verify the statement of the assessee. Thus after the assesse filed the confirmatory letter with the correct name and address of the creditor and the GIR number as well, in my opinion the onus immediately shifted on the department which was not discharged by the department.Theassessee is not supposed to know the capacity of the money - lender or the cash creditor. It is within the exclusive domain or the dark trusses of the minds of the creditors to know as to whether and how their sources of income are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional High Court's judgement in the case of Tolaram Daga Vs. CIT (1965) 59 ITR 632 (Gauhati) is quite relevant and applicable. In this judgment the Hon ble Court has held as under:- It would appear that the accounts of the firm which had been produced in the case had been accepted and acted upon by the Department and no serious challenge had been made to their genuineness or that they were kept regularly in the course of business. That being the case, the accounts are relevant and afford prima facie proof of the entries and the correctness thereof under section 34 of the Evidence Act, so that where a deposit is found to have been made by a third party in the accounts of the firm, that entry is prima facie proof that amount in question was deposited by the person in whose name the deposit stands. To require the firm of the individual partners to go further and adduce proof of the sources from which the deposits in question appearing in the accounts in the name of third parties were derived by them, would be placing a burden on the firm as well as the partners, which is not required or justified by law. 15. To Conclude, we note that the loan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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