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TMI Blog2022 (1) TMI 605X X X X Extracts X X X X X X X X Extracts X X X X ..... of the draft assessment order. Nothing as pointed out by the assessee has been taken into consideration. All that has been done by the Assessing Officer is to express doubts as regards the genuineness of the entries. We fail to understand what the Assessing Officer has tried to convey. When a partnership firm says that it received a particular amount in its capital through its partners and the identity of such partners with necessary details is disclosed, any further information in that regard would be asking the assessee to disclose source of the source. Even this part has been taken care of by the firm. In other words, the source of the source has also been disclosed. The relevant aspects as pointed out by the assessee cannot be said to have been looked into from a proper perspective. We don t find any discussion in the impugned assessment order. This is the reason why we are saying that the procedure as contemplated under Section 144B cannot be said to have been duly followed in the case on hand. It is open to the Assessing Officer to undertake further investigation with regard to that individual who has deposited this amount. So far as the responsibility of the assessee-firm is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this application, this Hon'ble Court be pleased to stay operation and implementation of the assessment order passed u/s.143(3) r.w.s. 144B dated 19.04.2021 at Annexure-F and further stay the recovery of demand in pursuance of the notice issued u/s.156 at Annexure-G. D) This Hon'ble Court be pleased to grant any further or other relief as this Hon'ble Court deems just and proper in the interest of justice, and E) This Hon'ble Court be pleased to allow this application with costs against the respondents." 2. The facts, giving rise to this litigation, may be summarized as under; 2.1 The writ applicant came to be incorporated as a partnership firm on 16.12.2017. The partnership firm is engaged in the business of real estate development. It is the case of the firm that it has ten partners. For the year under consideration, as the firm was constituted on 16.12.2017 and had no business activity by that period of time, it filed its return of income on 02.06.2018 at Rs.Nil. 2.2 The case of the writ applicant was selected for scrutiny assessment and, accordingly, notice was issued under Section 143(2) of the Act dated 22.09.2019. The main ground on which the return was selected for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nus of the creditworthiness of the partners in introducing the capital in the assessee firm and also the genuineness and creditworthiness of the other parties from whom funds have been received from the partners. 4.6 In connection with the same for clear understanding, the provisions of Section 68 of the I.T. Act are reproduced as under; "Section 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.' 4.7 From the plain reading of the same, it is seen that the onus is on the assessee to clearly establish the genuineness, nature and sources of the transaction, to prove the identity and creditworthiness of the lenders from whom funds received. The initial catchphrase of the section is "where any sum is found credited in the books of account of the assessee" meaning thereby that Section 68 is attracted where an entry relating to a sum is found to have been credited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50,68,000 6. Kaushik Kanubhai Hirpara 50,68,000 7. Narendrabhai B. Hirpara 4,00,000 8. Ravjibhai K. Patel 17,06,000 9. Sanjaykumar M. Kanani 41,63,000 Total 2,71,75,000 4.11 The amount of ₹ 2,71,75,000/- is treated as unexplained cash credit in the books of the assessee firm and brought to tax under Section 68 r.w.s 115BBE of the Act being unexplained cash credits. Penalty proceedings u/s. 271AAC of the I.T. Act 1961 is initiated separately. 5.1 Subject to the above, the income of the assessee is determined as under; Amount in Rs. Total income as per order u/s.143(1) dated 26.01.2019 Nil Add. Unexplained Cash Credit u/s.68 rws 115BBE-capital introduced as per Para-4 above. 2,71,75,000/- Assessed Total Income 2,71,75,000 2.8 Thus, it appears from the aforesaid that the Assessing Officer took the view that the writ applicant firm, as an assessee, had failed to justify the credit entries appearing in its books of account by not proving the creditworthiness of the parties from whom the capital is shown to have been received. According to the Assessing Officer, although the partners have confirmed as regards the bringing the facts in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause. Sub-section (9) to Section 144B provides that notwithstanding anything contained in any other provision of the Act, the assessment made under sub-section (3) of Section 143 or under Section 144 in the cases referred to in sub-section (2) would be treated as non-est if such assessment is found to be not in accordance with the procedure laid down under Section 144B of the Act. 5. Mr. Shah, in support of his aforesaid submissions, has placed strong reliance on one recent pronouncement of the Bombay High Court in the case of Mantra Industries Ltd. vs. National Faceless Assessment Centre (NFAC or NeAC), reported in (2021) 131 taxmann.com 165 (Bombay), wherein the Bombay High Court thought fit to set aside the impugned assessment order therein as the same was found to be in breach of sub-section (9) of Section 144B and left it for the Assessing Officer to take appropriate steps as he may be advised in accordance with law. Mr. Shah also placed reliance on one another order passed by the Bombay High Court in the case of Milestone Brandcom Private Limited vs. National Faceless Assessment Centre, New Delhi & Anr., Writ Petition (L) No.28212 of 2021, decided on 14.12.2021, wherein a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Supreme Court in the case of Baburam vs. Zila Parishad, AIR 1969 SC 556 makes such position of law abundantly clear. Ms. Raval would submit that in Titaghur Paper Mills Co. Ltd. vs. State of Orissa, AIR 1983 SC 603, the appellant therein had pleaded that there was violation of principles of natural justice and the impugned order was without jurisdiction, yet the Supreme Court held that the writ applicant should avail his alternative remedy of appeal. Thus, according to Ms. Raval, it is well settled that when an alternative and equally efficacious remedy is open to the litigant, he should be required to pursue that remedy and not invoke a special/equitable jurisdiction of the High Court to issue a prerogative writ. The second contention canvassed by Ms. Raval is that it is wrong to assert that the impugned assessment order is an exact reproduction of the draft assessment order without considering the stance of the writ applicant. Ms. Raval would submit that the Assessing Officer made himself very clear that he is not convinced with the genuineness of the entries in the ledger account of the firm. She would submit that although the firm might have said that it received a part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d down under this section; (iv) the National Faceless Assessment Centre shall assign the case selected for the purposes of faceless assessment under this section to a specific assessment unit in any one Regional Faceless Assessment Centre through an automated allocation system; (v) where a case is assigned to the assessment unit, it may make a request to the National Faceless Assessment Centre for- (a) obtaining such further information, documents or evidence from the assessee or any other person, as it may specify; (b) conducting of certain enquiry or verification by verification unit; and (c) seeking technical assistance from the technical unit; (vi) where a request for obtaining further information, documents or evidence from the assessee or any other person has been made by the assessment unit, the National Faceless Assessment Centre shall issue appropriate notice or requisition to the assessee or any other person for obtaining the information, documents or evidence requisitioned by the assessment unit; (vii) the assessee or any other person, as the case may be, shall file his response to the notice referred to in clause (vi), within the time specified therein or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said income or sum, and send a copy of such order to the National Faceless Assessment Centre; (xv) the assessment unit shall, while making draft assessment order, provide details of the penalty proceedings to be initiated therein, if any; (xvi) the National Faceless Assessment Centre shall examine the draft assessment order in accordance with the risk management strategy specified by the Board, including by way of an automated examination tool, whereupon it may decide to- (a) finalise the assessment, in case no variation prejudicial to the interest of assessee is proposed, as per the draft assessment order and serve a copy of such order and notice for initiating penalty proceedings, if any, to the assessee, along with the demand notice, specifying the sum payable by, or refund of any amount due to, the assessee on the basis of such assessment; or (b) provide an opportunity to the assessee, in case any variation prejudicial to the interest of assessee is proposed, by serving a notice calling upon him to show cause as to why the proposed variation should not be made; or (c) assign the draft assessment order to a review unit in any one Regional Faceless Assessment Centre, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecifying the sum payable by, or refund of any amount due to, the assessee on the basis of such assessment; (b) in any other case, send the response received from the assessee to the assessment unit; (xxiv) the assessment unit shall, after taking into account the response furnished by the assessee, make a revised draft assessment order and send it to the National Faceless Assessment Centre; (xxv) the National Faceless Assessment Centre shall, upon receiving the revised draft assessment order,- (a) in case the variations proposed in the revised draft assessment order are not prejudicial to the interest of the assessee in comparison to the draft assessment order or the final draft assessment order, and- (A) in case the revised draft assessment order is in respect of an eligible assessee and there is any variation prejudicial to the interest of the assessee proposed in draft assessment order or the final draft assessment order, forward the said revised draft assessment order to such assessee; (B) in any other case, finalise the assessment as per the revised draft assessment order and serve a copy of such order and notice for initiating penalty proceedings, if any, to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Why do we say that the impugned assessment order in the present case could be termed as non-est?. We have read and re-read the draft assessment order and also the impugned assessment order. Mr. Shah is right in his submission that the impugned assessment order is nothing but an exact reproduction of the draft assessment order. Nothing as pointed out by the assessee has been taken into consideration. All that has been done by the Assessing Officer is to express doubts as regards the genuineness of the entries. We fail to understand what the Assessing Officer has tried to convey. When a partnership firm says that it received a particular amount in its capital through its partners and the identity of such partners with necessary details is disclosed, any further information in that regard would be asking the assessee to disclose source of the source. Even this part has been taken care of by the firm. In other words, the source of the source has also been disclosed. 15. Section 68 of the Income Tax Act reads thus; "68. Cash Credits:- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate action under Section 69 of the Act against the person who has not been able to explain the investment. 18. In the aforesaid context, we may refer to and rely upon a very lucid and irudit judgment of the Gauhati High Court in the case of Nemi Chand Kothari vs. Commissioner of Income Tax & Ors., reported in (2004) 136 Taxman 213 (Gau), wherein the Division Bench of the Gauhati High Court has explained the meaning and scope of Section 68. We quote the relevant observations as under; "13. While interpreting the meaning and scope of Section 68, one has to bear in mind that normally, interpretation of a statute shall be general, in nature, subject only to such exceptions as may be logically permitted by the statute itself or by some other law connected therewith or relevant thereto. Keeping in view these fundamentals of interpretation of statutes, when we read carefully the provisions of Section 68, we notice nothing in Section 68 to show that the scope of the inquiry under Section 68 by the Revenue Department shall remain confined to the transactions, which have taken place between the assessee and the creditor nor does the wording of Section 68 indicate that Section 68 does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... editor, (ii) genuineness of the transaction, and (iii) financial capability of the person giving the cash credit to the assessee, i.e., the creditworthiness of the creditor. 16. What, thus, transpires from the above discussion is that while Section 106 of the Evidence Act limits the onus of the assessee to the extent of his proving the source from which he has received the cash credit, Section 68 gives ample freedom to the Assessing Officer to make inquiry not only into the source(s) of the creditor, but also of his (creditor's) sub-creditors and prove, as a result, of such inquiry, that the money received by the assessee, in the form of loan from the creditor, though routed through the sub-creditors, actually belongs to, or was of, the assessee himself. In other words, while Section 68 gives the liberty to the Assessing Officer to enquire into the source/sources from where the creditor has received the money, Section 106 makes the assessee liable to disclose only the source(s) from where he has himself received the credit and it is not the burden of the assessee to show the source(s) of his creditor nor is it the burden of the assessee to prove the creditworthiness of the so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell as the creditworthiness of a creditor have to be adjudged vis-a-vis the transactions, which he has with the assessee. The reason why we have formed the opinion that it is not the business of the assessee to find out the actual source or sources from where the creditor has accumulated the amount, which he advances, as loan, to the assessee is that so far as an assessee is concerned, he has to prove the genuineness of the transaction and the creditworthiness of the creditor vis-a-vis the transactions, which had taken place between the assessee and the creditor and not between the creditor and the sub-creditors, for, it is not even required under the law for the assessee to try to find out as to what source or sources from where the creditor had received the amount, his special knowledge under Section 106 of the Evidence Act may very well remain confined only to the transactions, which he had with the creditor and he may not know what transaction(s) had taken place between his creditor and the sub-creditor. No such additional burden can be placed on an assessee, which is not envisaged by Section 106 of the Evidence Act. The Revenue/Assessing Officer, however, remains free to show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndisclosed source ; but if there is no direct evidence in this regard, then, the indirect or circumstantial evidence has to be conclusive in nature and must, in such circumstances, unerringly point to the assessee as the person from whom the money had actually flown to the hands of the sub-creditor and, then, routed through the hands of the sub-creditor to the hands of the creditor. For this purpose, the circumstantial evidence has to be not only consistent with the hypothesis that the money belonged to the assessee, but that this hypothesis must also be inconsistent with the hypothesis that none other than the assessee owned the said money. If the conclusion be that the money received, as loan, by the assessee may or may not belong to him or if the possibility exists that the money received, as loan, by the assessee may not belong to him, then, in none of such two cases, the loan amount can be conclusively treated as income from undisclosed source of the assessee inasmuch as for assessing the money as income of the assessee from undisclosed source, there must be clinching evidence to show that the money actually belonged to none but the assessee himself. If no such clinching evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m, would be placing a burden on the firm as well as the partners, which is not required or justified by law. For ought we know, in most cases it may well-nigh be impossible for the firm or the partners to know or determine the sources from which the money deposited with them had been realised by the depositors,.... The enquiry as to the source from which this amount was acquired or obtained by Smt. Munni Devi Daga may, perhaps, be relevant in an investigation into the assessment to be made regarding her income and when determining the correctness of the return submitted by her. But the mere fact that the petitioner was unable to satisfy the authorities as to the source from which Smt. Munni Devi Daga derived the monies which she deposited with the firm cannot, in our opinion, be used against the petitioner. The Tribunal, therefore, was not justified in either demanding this proof or in drawing an adverse inference against the assessee on his failure to produce the same." (emphasis is supplied)" 19. The relevant aspects as pointed out by the assessee cannot be said to have been looked into from a proper perspective. We don't find any discussion in the impugned assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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