9911796707
TMI Blog2022 (10) TMI 1100X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that if assessee and creditors both have shown amount in their income tax return, no addition u/s 68 can be made if the returns of creditors have been accepted by Income Tax Officer - the case of creditor has been accepted by the department. Therefore, we note that all three parameters as laid down u/s 68 of the Act, i.e. (i) Identity of the depositors; (ii) Genuineness of the transactions; and (iii) Creditworthiness of the depositors, have been fulfilled by the assessee in respect of all the seven (7) depositors except in the case of Smt. Rekhdben Bodra, Prop. Gurukrupa Enterprise to the extent deposited by cash (in her Bank A/c) which remained unexplained and therefore, the assessing officer is not justified in treating the entire amount of loans received by the assessee as unexplained cash credits u/s 68 of the Act, therefore, ld CIT(A) deleted the addition of Rs.5,90,90,000/- and sustained the addition of Rs.4,10,000/-.That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue are dismissed. CIT(A) restricting the disallowance on acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose? 3. On the facts and circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the assessing officer. 4. It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that of assessing office may be restored to the above extent. 3. Ground No.1 raised by the Revenue relates to addition made on account of unexplained unsecured loan amounting to Rs.5,90,90,000/-. 4. Succinct facts are that during the course of assessment proceedings, the assessing officer examined the details filed by the assessee and observed that assessee has obtained unsecured loans from many persons. During the proceedings the assessee has submitted documents in support of his claim of unsecured loan. The summary of unsecured loans obtained by the assessee is mentioned by the assessing officer at para No.4.10 of the assessment order, which is reproduced below: The assessing officer discussed each lender in assessment order vide page No.2 to 7 of assessment order. Then after, assessing officer issued show cause notice dated 13.03.2013 to the assessee to explain the identity, creditworthiness and genuineness of the transaction. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er rejected these documents and evidences and held that there was no genuine need or business exigency to accept such loans, when credit facility was available with assessee from his Bank. Therefore, assessing officer made addition to the tune of Rs.5,95,00,000/-. 7. Aggrieved by the order of the Assessing Officer, the assesse carried the matter in appeal before the ld. CIT(A). During the appellate proceedings, the ld CIT(A) examined the details such as confirmation, Name and Address, PAN and other documentary evidences like copy of Return acknowledgement with computation, Bank Statement with Audited Financial Statement, Profit and Loss account with Balance Sheet, Capital account. Since, the assessee has furnished 'additional evidences' during the appellate proceedings, such as: viz. proof explaining source of the source, repayment of unsecured loan assessment orders passed in the case of depositors etc. All these evidences were forwarded to assessing officer for his examination and submission of his Remand Report. After going through the remand report and assessee`s reply on remand report, the ld CIT(A) observed that assessee has satisfactorily discharged its prima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be upheld. 11. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. We note that assessing officer made addition solely on the reason that depositors, were not physically produced before him. The assessing officer has also raised issue about creditworthiness by citing insufficient capital and meager source of income of depositors. He has also raised doubts about source of money because he noticed that just before issue of cheques to the assessee, the said bank accounts of lenders were irrigated by crediting equivalent amount by transfer/Clearing on the same date. We note that during the appellate proceedings, the assessee has filed following additional evidences , Viz: (i) Copies of assessment orders of depositors, (ii) Copies of relevant Bank Statements of assessee with Allahabad Bank and SBI for A.Y. 2012-13, (iii) Copy of confirmation of parties along with acknowledgment of Return of Income for A.Y. 2012-13 to prove source of source, ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loans entries in the balance sheet of these parties which supports the stand of revenue that assessee's own money was routed through these layers. (iii) In all the cases, repayment of loans to depositors was made through sales of goods rather than repaying the loan in monetary terms, which itself creates suspicion about the transaction. 13. Thereafter, Ld CIT(A), vide his order sheet dated 14.06.2017, the assessee was directed to produce the following depositors/lenders in person (from whom unsecured loan of in excess of Rs. 1 Crore was received by the assessee: Sr.No. Name Amount of Unsecured Loan (Rs.) 1 Shri Arjanbhai K. Baidaniya (Prop. Baidaniya Corporation) 1 ,50,00,000/- 2 Shri Dinesh Bhikhabhai Desai (Prop. Janvi Thread) 1,25,00,000/- 3 Shri Rukhadbhai h. Katariya (Prop. Gurukrupa Enterprise) 1 ,50,00,000/- The Ld. CIT(A) directed the assessee to produce these above persons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (creditor) owns the entry, then the burden of the assessee is discharged and it is open for the assessing officer to undertake further investigation with regard to that individual who has deposited the amount. In this legal background and factual matrix of this case, it can be safely concluded that assessee has successfully discharged its primary burden by submitting various details/ evidences during assessments proceedings and later on during appellate proceedings. 15. The ld CIT(A), then explained the provisions of section 68 of the Act, stating section 68 provides for fulfillment of three (3) basic conditions viz: (i) Identity of the depositor; (ii) Genuineness of the transaction; and (iii) Creditworthiness of the depositor. Further, the primary onus to prove the fulfillment of these three conditions lies on the assessee. In the present case, it is an undisputed fact that during the course of assessment proceedings, the assessee has furnished the complete details of the depositors like their name, address and PAN and also furnished documentary evidences, like confirmation, acknowledgement of return of income, balance sheet, Profit and Loss account, capital account and b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing officer. No adverse view can be taken for non-compliance of summons issued u/s 131 of the Act by the assessing officer because there could be numerous reasons for non-compliance of summons. This per se cannot give rise to doubt about 'identity' when department has assessed them under scrutiny and depositors have proper ID proofs (PAN and, Voter ID). Therefore, ld CIT(A) held that assessee has proved identity . 17. About second condition, that is, genuineness of transaction, the assessing officer has held that genuineness of transaction has not been proved by the assessee, because business expediency (assessing officer has used the word exigencies) of loans was not explained especially when credit facility from bank was available to the assessee. It has been also observed by assessing officer that just before issue of cheques to assessee, these depositors have either equivalent some deposits through Transfer/clearing or even by cash (but no instance given). On this basis, assessing officer held that these loans as bogus and even declared that these loans are nothing but his own unaccounted income generated by inflating expenses and bringing the same into the books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. All these depositors have time and again confirmed these transactions by submitting necessary evidences/confirmation in response, to notice u/s 133(6) of the Act. As pointed out earlier, three of the depositors (having given loan above Rs. 1Crore) namely S/Shri Arjanbhai K. Baldaniya, Dineshbhai B. Desai and Rukhadbhai H. Katariya have even appeared before ld CIT(A) on 30.06.2017 in presence of present assessing officer and have duly confirmed the impugned loan transactions, source and repayment thereof. Having done so, there remains no doubt about genuineness of transactions. Therefore, considering the facts and documentary evidences, the ld CIT(A) was of the view that the 'genuineness of the transactions clearly stands proved by the assessee with supporting documentary evidences . Further, the documentary evidences filed before assessing officer and before ld CIT(A) very clearly show that the loans were given through account payee cheques by the depositors to the assessee and same are duly reflected in the respective balance sheet of the depositors and assessee. The acceptance of these loans was through banking channel which is evident from the respective bank statements. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f loans amount being assessee's own money or loan transactions being stage managed is also based on conjectures. The ld CIT(A) called for relevant evidences in respect of Subcreditors and noted that source was either by way of payment towards saleproceeds or by way of loans. Such transactions have come through banking channels and loans have been duly found reflected in their Balance Sheet. There is nothing objectionable or abnormal which can give rise to any doubt about genuineness transactions between assessee and creditor as well as between Creditor and Sub-creditor. Based on these facts, ld CIT(A) held that assessee has proved creditworthiness of the depositors. 19. We note that assessee has produced all the corroborative and direct and indirect evidences to prove the nature and source of deposits. The assessing officer has simply rested his conclusion on interpretation drawn by him based on incomplete enquiry and lack of cogent evidence. It is apparent that none of the creditors has denied that loan was not given by him/her and funds have been transferred from his/her account through baking channel. The documentary proof coupled with personal attendance of three depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easily verified advance booking amounts paid to assesseebuilder; if some of them did not appear, transactions could not be held to be nongenuine. We note that not only, the lenders are assessed to tax, they have explained the source'' of the money lent to the assessee by providing necessary evidence. There is nothing doubtful has been observed by ld CIT(A). Once, the lender has owned up the transaction and explained the source of fund then if assessing officer has source suspicion, then action if needed be taken should be taken in the case of lender who is assessed to tax. Therefore, even the 'source of source' is found properly explained and no cash was found deposited in the respective Bank accounts before issue of cheque to the assessee except in case of Smt. Rekhaben R. Bodra of Rs.4,10,000/-. Therefore, action of the assessing officer is neither sustainable on facts nor in law. 21. We note that assessee even filed cross-confirmation and details with regard to repayment of loans which have been furnished before ld CIT(A) vide letter dated 20.01.2017. On verification of cross-confirmation Ledger accounts of depositors, it is proved that goods sold/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome with final accounts of Lenders wherein transactions have been duly found reflected. Lenders have been regularly assessed to tax. In the case of all the lender; assessment u/s. 143(3) for AY.2012-13 have been completed in Surat I.T department. Thus, creditworthiness has been duly examined by the department under scrutiny. Copies of relevant assessment orders have been filed before ld CIT(A). Hon'ble Gauhati High Court in the case of Jalan Timber Vs. CIT 223 ITR 11 has held that if assessee and creditors both have shown amount in their income tax return, no addition u/s 68 can be made if the returns of creditors have been accepted by Income Tax Officer. As discussed above, the case of creditor has been accepted by the department. Therefore, we note that all three parameters as laid down u/s 68 of the Act, i.e. (i) Identity of the depositors; (ii) Genuineness of the transactions; and (iii) Creditworthiness of the depositors, have been fulfilled by the assessee in respect of all the seven (7) depositors except in the case of Smt. Rekhdben Bodra, Prop. Gurukrupa Enterprise to the extent of Rs.4,10,000/- deposited by cash (in her Bank A/c) which remained unexplained and therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objected to the observations made by the assessing officer. The assessee has contended that the assessee produced all the registers (original) before assessing officer wherein no defect has been pointed out by the assessing officer except address of workers. It has been contended that law does not prohibit making payment by CASH to workers. The assessee has also pointed out that in the immediate preceding year, book results were duly accepted under scrutiny assessment. Further, during the year in spite of increase in turnover, the cost of employee benefit has reduced even in absolute terms. 26. Based on these facts, ld CIT(A) noted that arguments of assessee has a significant force. The assessing officer has simply made ad-hoc disallowance on mere conjectures surmises for the reason that payments to workers: was done by cash and salary register was not containing details about address of workers. There is no allegation that claim of expense was bogus or not supported by evidence. The assessing officer has made disallowance @ 5% on ad-hoc and suspicion basis on the basis, that address of employees not given in Register and payment was made by CASH. It is true that there is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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