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TMI Blog2022 (7) TMI 477X X X X Extracts X X X X X X X X Extracts X X X X ..... party which can be proved based on evidences. As such the identity of a party can be established by furnishing the name, address and PAN detail, bank details, ITR etc. The next stage comes to verify the genuineness of the transaction. Genuineness of transaction refers what has been asserted is true and authentic. A genuine transaction must be proved to be genuine in all respect not merely on a piece of a paper. The documentary evidences should not be used as a mask to cover the actual transaction or designed in a way to present the transaction as true but same is not. Genuineness of transaction can be proved by submitting confirmation of the party along details of mode of transaction but merely showing transaction carried out through banking channel is not sufficient. We are conscious about the fact that the provisions of Section 68 of the Act are deeming provisions which implies that there are certain transactions which are not the income of the assessee but these are deemed as income under the relevant provisions of the Act. Thus, we have to see the deeming provisions beyond the facts available on record. However, the question arises for the adjudication whether only the credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir employees could not submit regular and routine details during the I.T. assessment proceedings or they could not hire consultant to do their ordinary I.T. work of furnishing of details. 1.4 That the Ld. C1T(A) erred in law by not appreciating that the assessee already had the benefit of the auditor who had audited its accounts and, therefore, his service would have been available. 2. The Ld. CIT(A) erred in law and on facts in deleting the addition made on account of unexplained cash credit u/s 68 of the I.T. Act, 1961 amounting to Rs.78,50,469/- though the assessee was not able to prove the genuineness of these transactions. 3. The Ld. CIT(A) erred in law and on facts in deleting the addition made on account of unexplained Unsecured loan of Rs.47,50,000/- though the assessee was not able to establish the identity, credit worthiness and genuineness that the same was procured from Shermeen S. Memon. 4. The Ld.CIT(A) erred in law and on facts in deleting the addition made by the AO of Rs.15,67,530/- (being difference in Cash and Bank Balance). 5. The Ld.CIT(A) erred in law and on facts in deleting the addition made by the AO of Rs.1,58,36,099/- (being difference in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Rule 46A of the Income Tax Rule should be accepted. 6. The AO in remand report objected the admission of additional evidences and contend that there were sufficient opportunity provided to the assessee to file necessary documents and explanation during the assessment proceeding but the assessee without any cogent reason failed to comply the notices issued upon it. The explanation furnished by the assessee for non-cooperation during the assessment proceeding and filing of additional evidence is not covered under the provision of Rule 46A of the Income Tax Rule. 7. In rejoinder the assessee reiterated its submission made earlier in this regard. 8. The learned CIT-A after considering the facts in totality accepted the additional evidences furnished under rule 46A of the Income Tax Act Rules by observing as under: On consideration of entire facts it is observed that the Appellant has submitted all the necessary evidences in support of its claim during the course of Appellate Proceedings and requested to admit the same before passing Appellate Order. It is observed that though there was non-compliance on part of appellant LLP, the reasonable cause is submitted wherein it is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties and perused the materials available on record. It is an admitted fact that the learned CIT-A has called for the remand report from the AO. However, the AO in the remand report objected on the admission of the additional evidences filed by the assessee before the learned CIT-A. However, we note that the learned CIT-A admitted the additional evidences filed by the assessee after placing reliance on the judgment of Hon'ble Gujarat High Court in the case of CIT vs. Kamlaben Sureshchandra Bhatti 44 taxmann.com 459 wherein it was held as under: 3. With respect to first issue of admission of additional evidence, we notice that the CIT [A] recorded that the notice of hearing issued by the Assessing Officer on 31st October 2011 was received by the assessee on the date of hearing itself. It was therefore that the assessee could not produce necessary evidence on such date. When subsequently, he attended the office of the Assessing Officer on 25th November, 2011 with necessary evidence, he learnt that the order of assessment was already passed on 21st November, 2011. It was on this ground that the CIT [A] permitted additional evidence to be produced before him. While doing so, he also c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee submitted that she is wife of one of partner namely Samir Memon. 16.2 The AO in remand with respect to loan of Rs. 78,50,469/- credited from 7 person which were squared during the year found that proof of filing of ITR by one of lender namely M/s DR Fabrics from whom loan amount of Rs. 45,688/- credited was not submitted. Further on perusal of ITR of remaining 6 lenders it was found that income declared were not incommensurate with the amount of loan provided. Thus, the assessee failed to establish the credit worthiness of the lender. With regard to the loan from Smt. Shermeen Samir Menon, there was not found any deficit but raised doubt on low income declared by her. 16.3 The assessee in rejoinder submitted that the AO without pointing any defect in the preliminary document and without conducting enquiring or bringing contrary materials doubted the credit worthiness of the lender. It was the onus of the AO to conduct enquiry to bring contrary materials on record. But the AO merely observing that income declared by the lender is less than the amount advanced reached to the conclusion which is wrong and arbitrary as credit worthiness of the person not merely depends o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depositor is not available cannot be accepted. So far as loan received from D.R. Fabrics is concerned, it is observed that during the year appellant has taken very meagre loan of Rs. 45,688. The appellant ; has taken loan of Rs.4.96 lacs in earlier assessment year and this entire loan was repaid in current year. When AO is not disputing the opening balance and repayment made in current year, loan taken during the year which is representing only interest payment, cannot be subject matter of addition under Section 68 of the Act only on the ground that return of income qf depositor is not available. It is observed that major loan is received from M.P. Traders for Rs.51,68,781. The appellant has made frequent transactions with this concern which include receipts and payments at multiple level and when AO is accepting entire repayment to be correct, addition under Section 68 cannot be made only for credits appearing in bank account when other details are already on record of AO which are sufficient to prove the genuineness of the transactions as envisaged in Section 68 of the Act. Thus in the light of above facts and decision of Jurisdictional High Court as well as Supreme Court it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hiness of the parties and genuineness of the transactions were furnished. As per the learned AR, the impugned amount of loan cannot be treated as unexplained cash credit as provided under section 68 of the Act. The learned AR vehemently supported the order of the learned CIT-A. 21. We have heard the rival contentions of both the parties and perused the materials available on record. The provision of section 68 of the Act fastens the liability on the assessee to provide the identity of the lenders, establish the genuineness of the transactions and creditworthiness of the parties. These liabilities on the assessee were imposed to justify the cash credit entries under Section 68 of the Act by the Hon'ble Calcutta High Court in the case of CIT Vs. Precision Finance (P) Ltd. reported in 208 ITR 465 wherein it was held as under: "It was for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. On the facts of this case, the Tribunal did not take into account all these ingredients which had to be satisfied by the assessee. Mere furnishing of the particulars was not enough. " 21.1 Now first we proceed to understand the ide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome tax return, etc. From the above, there remains no doubt that the identity of the loan parties is not in disputed, as it has been proved beyond doubt. 21.7 With respect to the genuineness of transaction, we note that the assessee has submitted that all the transaction are carried out through banking channel and in support has furnished the copy of bank statement showing the transaction and the same were transferred out of fund available in the bank account. It is also pertinent to note the AO on remand report does not doubt the genuineness of fund available in the bank of the lender. In the given facts and circumstances, the genuineness of the transaction cannot be doubted, 21.8 Coming to the third condition the creditworthiness of the lender. The AO held that the credit worthiness of the lender has not been established merely on the basis that income declared by the lender are not incommensurate to the amount of loan advance by them. We are of the considered view that amount of income declared in return of income may be important ingredient to decide the creditworthiness but same solely cannot be a criteria. It is quite possible that one party in particular has earned less ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus, we have to see the deeming provisions beyond the facts available on record. However, the question arises for the adjudication whether only the credit entries should only be considered for the purpose of cash credit entries as provided under section 68 of the Act after ignoring the debit entries. To our mind the debit entries cannot be set aside for determining the income of the assessee. 21.11 In view of the above, we are of the opinion that, once repayment of the loan has been established based on the documentary evidence, the credit entries cannot be looked into isolation after ignoring the debit entries despite the debit entries were carried out in the year or later years. Thus, in the given facts and circumstances, we hold that there is no infirmity in the order of the Ld. CIT-A. Hence, the ground of appeal of the revenue is hereby dismissed. 22. Next issue raised by the Revenue is that the learned CIT-A erred in deleting the addition of Rs. 15,67,530/- being difference in Cash & Bank balance and Rs. 1,58,36,099/- being differences in current liabilities balances. 23. The AO found that as per the audit report for immediate previous assessment year the closing balance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce on the ground that there is difference of Rs.15,67,530/- between closing cash and Bank Balance as on 31/03/2015 and opening balance of cash and bank account as per audited annual accounts for A.Y. 2016-17. During the course of Appellate Proceedings the Appellant has submitted grouping in support of audited annual accounts. On consideration of entire facts it is observed that the Current Account with HDFC bank which was previously shown under the head Cash and Bank Balance has been reclassified and the same has been regrouped under the head other current liabilities. Thus there is no difference in opening cash and Bank balance as per audited annual accounts of the Appellant for the year under consideration and there is merely reclassification of HDFC overdraft account under the head of Other liabilities which was shown under the head Cash and Bank Balance in Audited accounts of previous year. The same facts have been accepted by Assessing Officer in remand report and it was observed that there is no difference in closing and opening cash and bank balance and there is merely re-classification of accounts. In the light of above facts it is held that the j addition towards differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore we are not repeating the same for the sake of brevity. 30. On the other hand learned AR vehemently supported the order of the learned CIT-A. 31. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset we note that the AO in his remand report has submitted that the addition made in the assessment proceedings as discussed above is liable to be deleted. The relevant extract of the remand report reads as under: (iii) On perusal of above argument and details submitted by the assessee, it is observed that balance of "Current account with HDFC bank" of Rs. 15,67,530/- was included in "cash and bank balance" in groupings for A.Y. 2015-16 (Refer page 87 of paper book). However, while finalising accounts of A.Y. 20 16- 17 "Current account with HDFC bank" of Rs. 15,67,530/- was reclassified under the head "Current Liabilities" (Refer page 56 of paper book). In view of same, it is observed that there is no difference in opening and closing balance of cash account and whatever difference was noticed during the course of assessment proceedings was merely due to re-classification of accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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