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TMI Blog2019 (10) TMI 1072X X X X Extracts X X X X X X X X Extracts X X X X ..... ary income. Thus when the assessee has explained the source of deposit of cash in the bank account then mere fact of deposit in bank cannot be a ground for rejecting the claim. As per the books of account of Ms Neha Jain, the opening cash balance of ₹ 7,61,376/- was not doubted and hence if the cash deposit is less than the said opening cash balance, then the creditworthiness and genuineness of the transaction is duly established. Accordingly, when the identity and creditworthiness of the creditor is established then the genuineness of the transaction cannot be disputed merely because of deposit of cash. In view of the above facts and circumstances as well as the documentary evidence produced by the assessee, the addition made by the AO and sustained by the ld. CIT (A) is not justified and the same is deleted. Addition on account of capital introduced by the assessee - HELD THAT:- On careful consideration and analysis of the details as appearing in the personal balance sheet of the assessee, it is clear that there is a matching of each and every item of the cash balance with in-flow as well as out-flow for each of the years including the assessee s capital balance in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n made by the AO under section 68 of the IT Act on account of loan received from 9 persons. 2. The assessee is an Individual and proprietor of M/s. Leela Kothari. The assessee filed her return of income on 12th September, 2015 declaring total income of ₹ 7,36,940/-. During the course of scrutiny assessment proceedings, the AO noted that the assessee has raised loans from various persons. In order to examine the conditions as provided under section 68, the AO issued notices under section 133(6) to 13 loan creditors. After receiving the response as well as confirmations and other documents including the bank statements of the loan creditors, the AO noted that out of 13 loan creditors, cash has been deposited prior to the issuing cheques to the assessee in case of 9 loan creditors. Thus the AO proceeded to examine the claim of loan and particularly the creditworthiness and genuineness of the transactions in respect of 9 loan creditors. The AO recorded the statements of all the 9 creditors and also called the relevant documents from the banks of the creditors in respect of the deposit slips, withdrawals made by these loan creditors from their respective bank acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itors have confirmed this fact including Shri Manish Chouhan that he was doing all the financial transactions on behalf of the family members. The AO also examined Shri Arvind Ajmera who has also explained that all the transactions in his bank account are done by Shri Narendra Surana, accountant of Shri Renu Jain and, therefore, he was not able to explain all the details of the deposits and withdrawals made from their accounts. The ld. A/R has further submitted that the assessee has also produced the record to show that earlier these loan creditors made investments in M/s. Gandhar Rocktech and M/s. Hemant Sales Corporation and after receiving back the amount from those concerns, they withdrawn the amount from their bank account and the said amount was again deposited in the bank account before giving the loan to the assessee. There is a direct co-relation between the funds withdrawn from the bank account which came in the bank account as money received back from these two concerns i.e. M/s. Gandhar Rocktech and M/s. Hemant Sales Corporation. Thus the amounts deposited in the bank accounts of these loan creditors were actually the amounts withdrawn by them from thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ently deposited in the bank accounts of these loan creditors. Further, all these loan creditors were examined by the AO and they have explained the facts regarding the transactions of withdrawals from the bank account and again deposited the cash in the bank account and thereafter given loan to the assessee. Merely because one of the family members of the loan creditors have done the transactions of deposits and withdrawals will not render the transactions as bogus particularly when this fact was explained that Shri Manish Chauhan, a family member was looking after the financial transactions of all the family members of the loan creditors and, therefore, nothing abnormal in this practice of withdrawing the amount from the bank accounts of his family members and thereafter depositing back the amount on behalf of the family members. Similarly, Shri Arvind Ajmera is neighbor and friend of Shri Manish Chauhan, therefore, in some of the cases he has signed the deposit slips for deposits made in the bank accounts of these loan creditors. The ld. A/R has, thus submitted that the loan which was earlier advanced by these loan creditors to M/s. Gandhar Rockt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has failed to establish the creditworthiness of the loan creditors and since there was a prior cash deposit of equal amount in the bank accounts of all the 9 loan creditors, therefore, the genuineness of the transaction is very much doubted and not proved by the assessee. She has relied upon the orders of the authorities below and submitted that in the statements recorded by the AO under section 131 of the IT Act, the loan creditors have given contradictory statements and were not able to ever explain the transactions of withdrawals and deposits made in their bank accounts. Therefore, the genuineness of the transaction was not proved by the assessee. 5. We have considered the rival submissions as well as the relevant material on record. In order to verify the claim of loans taken by the assessee, the AO issued summons under section 133(6) to 13 persons as recorded in para 3.2 of the assessment order as under :- 1. Sh. Hemant Kothari 2. Ms Sarita Parakh 3. Sh. Arvind Ajmera 4. Sh. Akshay Ajmera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 Sh. Arvind Ajmera 22.09.2014 9,75,000/- 22.09.2014 9,75,000/- 6 Sh. Akashay Ajmera 22.09.2014 9,75,000/- 22.09.2014 9,75,000/- 7 Sh. Sunil Chouhan 22.09.2014 05.12.2014 4,00,000/- 4,00,000/- 22.09.2014 05.12.2014 4,00,000/- 4,00,000/- 8 Smt. Rekha Chouhan 05.12.2014 6,00,000/- 05.12.2014 6,00,000/- 9. Ms Neha Jain 16.09.2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncurring with the reasoning of the AO. It is pertinent to note that out of the 9 loan creditors, 6 loan creditors are family members as under :- Name of person Date of advance Amount advanced Smt. Shashi Chauhan 05.12.2014 ₹ 9 lacs Smt. Priyanka Chauhan 02.12.2014 ₹ 8 lacs Sh. Inder Singh Chauhan 02.12.2014 ₹ 2 lacs Inder Singh Chauhan HUF 22.09.2014 ₹ 2 lacs Smt. Rekha Chauhan 05.12.2014 ₹ 6 lacs Sh. Sunil Chauhan 22.09.2014 05.12.2014 ₹ 4 lacs ₹ 4 lacs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24.07.2014 ₹ 8,09,100 Manish Chauhan 02.12.2014 ₹ 8 lacs Manish Inder Singh Chauhan 24.07.2014 ₹ 4,57,800 Manish Chauhan 02.12.2014 ₹ 2 lacs Manish Inder Singh Chauhan HUF 24.07.2014 ₹ 10,68,400 Manish Chauhan 22.09.2014 ₹ 2 lacs Manish Rekha Chauhan 24.07.2014 ₹ 10,00,000 Manish Chauhan 05.12.2014 ₹ 6 lacs Arvind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , this entire exercise has not brought on record any material or fact that the cash deposited in the bank accounts of the creditors belong to the assessee and, therefore, it is a case of round tripping of unaccounted income of the assessee in the shape of unsecured loans. At the most, the enquiry conducted by the AO establish the fact that the transactions are carried out through the relative on behalf of the loan creditors and further the loan creditors were not fully aware about all the transactions carried out in their bank accounts. However, this fact does not lead to the conclusion that the assessee s own unaccounted income was used for deposit of cash in the bank accounts of the loan creditors and was received back in the garb of unsecured loans. The assessee has produced the source of the cash deposited in the bank accounts of these loan creditors by showing the earlier transactions of the loans given by these loan creditors to M/s. Gandhar Rocktech in the month of March, 2013 and the said loan was received back by these loan creditors in the month of July, 2014 and subsequently the amounts were withdrawn by the loan creditors. When the loans were given to the assessee, thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Name of creditor Date of withdrawal Amount withdrawn Name of person withdrawing the amount Date of cash deposit Amount of cash deposited Name of person depositing the cash Arvind Ajmera 04.08.2014 ₹ 10 lacs Manish Chauhan 22.09.2014 ₹ 9.75 lacs Manish Akshay Ajmera 04.08.2014 ₹ 10 lacs Manish Chauhan 22.09.2014 ₹ 9.75 lacs Manish In the cases of these two loan creditors, the amounts withdrawn from the bank accounts in the month of August 2014 also represent the repayment of the loan by M/s. G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly, when the identity and creditworthiness of the creditor is established then the genuineness of the transaction cannot be disputed merely because of deposit of cash. In view of the above facts and circumstances as well as the documentary evidence produced by the assessee, the addition made by the AO and sustained by the ld. CIT (A) is not justified and the same is deleted. Ground No. 2 is regarding the addition of ₹ 14,25,000/- on account of capital introduced by the assessee. 6. During the year under consideration, the assessee has introduced capital total aggregating to ₹ 14,25,000/- from the month of April, 2014 to February, 2015. When the AO asked the assessee to explain the source of the said amount, the assessee submitted that it is out of opening cash balance as on 01.04.2014 available with the assessee in her personal balance sheet. The AO rejected the claim of the assessee on the ground that for the assessment year 2014-15 the assessee has filed return of income declaring income under section 44AD showing Nil cash balance and, therefore, the personal balance sheet submitted by the assessee was not accep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the personal balance sheet of the assessee, it is clear that there is a matching of each and every item of the cash balance with in-flow as well as out-flow for each of the years including the assessee s capital balance in the proprietorship concern M/s. Leela Kothari. These documents were produced by the assessee before the authorities below and particularly when the ld. CIT (A) referred all these details to the AO for verification and to submit the remand report then in the absence of finding any discrepancy or irregularity in the details given in the personal capital account and balance sheet of the assessee along with the balance sheet of the proprietorship concern, the rejection of the claim merely because the personal balance sheet was not part of the assessment record is not justified. Once the assessee has established the availability of the opening cash balance of more than ₹ 44 lacs as on 1st April, 2014, then the source of introduction of capital of ₹ 14,25,000/- is duly explained and established and the same is deleted. 10. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 21.10.2019. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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