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TMI Blog2020 (10) TMI 1028X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessees. This question is answered against the Revenue only because we agree with the view taken by the Commissioner (Appeals) that it is only appropriate that this amount is assessed in the hands of the two recipient entities as aforesaid and not the assessee - Decided in favour of assessee. Addition u/s 68 - Unexplained cash credit - HELD THAT:- Even if we were to accept that the assessee by pointing out to Mr. Siraj Sheikh, Vijay Kumar Rao, and M/s. Prasad Properties had discharged the initial burden cast upon them by Section 68 we find that the onus which had shifted upon the Revenue, has been appreciably discharged by the Revenue. This is not a case where the Revenue, halted its probe soon after the so-called sources were indicated by the assessee. Revenue, in these matters, probed further and unearthed quality material to establish that the socalled sources completely lacked the capacity or credit-worthiness to advance such a huge amount of ₹ 8.49 crores to the assessees.Revenue, in these matters, established that there was no genuineness in the transactions sought to be projected on behalf of the assessees. Therefore, the Revenue, in these matters, has dischar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince they were found to be eligible for the benefits under Section 5A of the Income Tax Act, 1961 (said Act), 50% of their income was brought to tax in the hands of the spouse. Hence, there were two separate but identical assessment orders and consequently, there are these two appeals, which can as well be considered and disposed of by a common judgment and order. 5. The assessees filed their return of income declaring total income of ₹ 7,36,911/- for the year previous to the relevant assessment year. 6. Thereafter, on 25.02.2010, a search was conducted under Section 132 of the said Act in the residential premises of the assessees at Dona Paula, Goa. The case was then centralized vide the Commissioner's order dated 16.07.2010 and notices dated 20.01.2011 under Section 153(A) of the said Act were served upon the assessees on 25.01.2011 calling for their returns for the relevant assessment years. 7. After reminders, the assessees filed their returns, again declaring total income of ₹ 7,36,910/- and agricultural income of ₹ 30,000/-. 8. Notices were issued under Section 142(2) and 143(1) of the said Act to the assessees. The assessing officer (AO) vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar from its alleged incorporation. She pointed out that this firm had neither any bank account nor permanent account number (PAN) issued to it. 13. Ms. Linhares submits that the explanation about the huge amount of ₹ 8.49 crores being carried in cash from Chennai to Goa was too fantastic to deserve any credit. She pointed out that there is no explanation as to why this cash was allegedly carried by road for 1046 kms. and thereafter deposited in Goa. She pointed out that it is quite evident that all these transactions could not have been carried out in the normal course of business and therefore, both the assessing officer and Commissioner (Appeals), quite correctly held that the explanation offered by the assessees was far from satisfactory. 14. Ms. Linhares submits that the ITAT by ignoring all this material evidence has accepted the assessees explanation and ordered the deletion of ₹ 8.49 crores added to the income of the assessees. She pointed out that the finding recorded by the ITAT is vitiated by perversity and misconstruction of the provisions of Section 68 of the said Act. She relies on CIT v. M/s. Mussadilal Ram Bharose 1987 (2) SCC 39 in support o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material on record, that this amount of ₹ 11.26 crores or thereabouts was paid by the assessees to the aforesaid two entities and since there is evidence on record that the aforesaid two entities had admitted to the receipt of the said amount, the Commissioner (Appeals), was quite right in taking the view that such amounts are best assessed in the hands of the two entities and not in the hands of the assessees. 20. Ms. Linhares was unable to satisfy us that there was any illegality in the view taken or any perversity in the approach of the Commissioner (Appeals) in so far as the treatment of this amount of ₹ 11.26 crores was concerned. Accordingly, the first substantial question of law needs to be answered against the Revenue and in favour of the assessees. However, by clarifying that such an answer ought not to be construed to mean that the assessees have explained satisfactorily the nature and source of this amount. This question is answered against the Revenue only because we agree with the view taken by the Commissioner (Appeals) that it is only appropriate that this amount is assessed in the hands of the two recipient entities as aforesaid and not the assessees. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 31.07.2013, has rather abruptly concluded that .......therefore, in our opinion, the requirement u/s 68 is proved beyond any doubt by the Assessee. Therefore we are of the view that no addition is required/sustainable . The ITAT, by reference to the rulings in Tania Investment P. Ltd. (supra), Aravali Trading Co. (supra), and Nemi Chand Kothari (supra), has held that if the identity of the creditor is established and the monies are received through banking channel, then, the assessees are not required to prove the source of the source in such matters. 27. According to us, the ITAT, in this case, has grievously erred both on facts as well as in law, in interfering with the well-reasoned analysis reflected in the orders of the AO and Commissioner (Appeals) in these matters. 28. The three circumstances relied upon by the ITAT in the impugned judgment may not be irrelevant circumstances, But they were certainly not the only circumstances on basis of which and by ignoring other numerous circumstances, the ITAT could have abruptly concluded that the assesses had proved the so-called explanation beyond the reasonable doubt for Section 68 of the said Act. 29. In Oceanic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en which Section 68 of the said Act casts upon an assessee, the assessee has to not only establish the identity of the source but also establish at least prima facie the capacity of such source and the genuineness of the transaction. 35. In the present matters, the assessees quite reluctantly, may have indicated, but not established the identity of the source. In any case, the assessees have failed to establish the capacity of the source and the genuineness of the transaction. Therefore it is clear that Tania Investments P. Limited (supra) was quite mechanically relied by the ITAT to accept the assessees' so-called explanation in these matters. It is possible that the ITAT merely went by the headnotes which, at times, may not accurately represent the ratio of the decision. 36. Similarly, even Nemi Chand Kothari (supra) rendered by learned Single Judge of the Gauhati High Court has laid down the following propositions, which, support the case of the Revenue than the assessees:- (i) The inquiry under Section 68 need not necessarily be confined by the Assessing Officer to the transactions, which took place between the assessee and his creditor, but that same may be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lished, even prima facie. The genuineness of the transaction, if any, is also far from established. The material on record suggests that there was no transaction worth the name and the agreement dated 22.12.2006 executed on stamp papers dated 03.04.2000 was nothing but a desperate attempt to create a facade. The ruling in Aravali Trading Co (supra) can, therefore, in no manner, assist the assessees in these matters. 39. Even according to us, merely pointing out to a source and the source admitting that it has made the payments is not, sufficient to discharge the burden placed on the assessees by Section 68 of the said Act. If this were so, then, it would be sufficient for assessees, to simply persuade some credit- less person or entity to own up having made such huge payments and thereby evade payment of property tax on the specious plea that the Revenue, can always recover the tax from such credit- less source, if possible. To discharge the burden which Section 68 casts upon assessees, at least some plausible explanation is required to be furnished, which must be backed by some reliable evidence. If the circumstances listed above are to be taken into consideration, then, it can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d an amount of ₹ 6,30,00,000/- in his bank account at Goa. Both these amounts were deposited in cash. This discrepancy is never explained and establishes the extent to which the ledgers came to be fabricated; (g) The firm M/s. Prasad Properties was constituted on 03.04.2006 and dissolved on 29.03.2007 i.e. hardly within the same financial year; (h) Though, the assessees would like the Revenue to believe that M/s. Prasad Properties was dealing in crores of rupees, the record establishes that M/s. Prasad Properties had neither any PAN card in its name nor did M/s. Prasad Properties ever filed any returns of income; (i) That though the firm M/s. Prasad Properties was supposed to be dealing in transactions involving crores of rupees, it did not even have a bank account in its name i.e. at Chennai or Goa; (j) The assessees had relied upon only four documents in support of their so-called explanation. The first was the Partnership Deed dated 03.04.2006 which was typed on stamp paper of 20.03.2002; second, the agreement dated 22.12.2006, which was typed on stamp paper dated 03.04.2000; third, the agreement inter se between the partners dated 22.01.2007, which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arose (supra), the Hon'ble Supreme Court has cautioned against acceptance of any 'fantastic' or 'unacceptable' explanations in tax matters. 42. In Mussadilal Ram Bharose (supra), the Hon'ble Supreme Court agreed with the view taken by the Full Bench of the Patna High Court in the case of CIT v. Nathulal Agarwala Sons 153 ITR 292 (Pat), which reiterated that the onus to discharge the presumption raised by the explanation to Section 271(1)(c) was on the assessees and it was for him to prove that the difference between the returned income and the assessed income did not arise from any fraud or gross or willful neglect on his part. The court should come to a clear conclusion whether the assessees had discharged the onus or rebutted the presumptions against him. The Full Bench emphasized that as to the nature of the explanation to be rendered by the assessees, it was plain on the principle that it was not the law that the moment any 'fantastic or unacceptable' explanation was given, the burden placed upon him would be discharged and the presumption rebutted. After specifically adverting to these observations of the Full Bench, the Hon'ble A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ished that there was no genuineness in the transactions sought to be projected on behalf of the assessees. Therefore, the Revenue, in these matters, has discharged the onus, assuming that such onus had indeed shifted upon the revenue. Again, this is an aspect, which was ignored by the ITAT. 45. The finding recorded by the ITAT in these matters is based upon the wholly erroneous view of law and perversity on account of ignoring completely, vital and relevant circumstances emanating from the record. Such a finding can be interfered in an appeal under Section 260A of the said Act. The legal position is quite settled that where the findings arrived at by the Tribunal are based upon the wholly erroneous view of the law or are vitiated by perversity, a substantial question of law indeed arises and is required to be addressed in an appeal under Section 260A of the said Act. If at all, any authority is necessary for this proposition, then reference can be usefully made to Nemi Chand Kothari (supra) relied upon by the assessees themselves. Even otherwise, this position is settled in several rulings including CIT v. Antartica Investment Pvt. Ltd. - 262 ITR 493; Bhola Shankar Cold Sto ..... X X X X Extracts X X X X X X X X Extracts X X X X
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