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TMI Blog2023 (6) TMI 875X X X X Extracts X X X X X X X X Extracts X X X X ..... ned accordingly. CIT(A) was justified in deleting the addition on account of interest paid by the assessee to the loan creditors. Decided against revenue. - I.T.A. No. 10/Asr/2020 - - - Dated:- 16-6-2023 - Dr. M. L. Meena, Accountant Member And Sh. Anikesh Banerjee, Judicial Member For the Appellant : Sh. Ashwani Kalia, CA For the Respondent : Dr. Vedanshu Tripathi, Sr. DR ORDER PER DR. M. L. MEENA, AM: The captioned appeal has been filed by the Revenue against the order dated 17.10.2019 passed by the Ld. Commissioner of Income Tax (Appeals)-1, Amritsar in respect of AY 2014-15, arising out of the assessment order passed by the Dy. Commissioner of Income Tax, Circle- 3, Amritsar. 2. The Revenue has raised the following grounds of appeal: 1. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A)-1, Amritsar was justified in deleting the addition of Rs. 1,75,00,000/- made by the Assessing Officer on account of on account of unexplained cash credits without appreciating the detailed reasons recorded by him in the assessment order. 2. Whether on the facts and circumstances of the case and in law, the Ld CIT(A)-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal regarding deletion of addition of Rs. 1,75,00,000/- made by AO on account of unexplained cash credit without appreciating the facts of the case. 4. Briefly the facts as per record are that during the scrutiny assessment proceeding, the AO noted that assessee is misusing its account of KCC premium (cash credit) ltd for money laundering by depositing the unexplained cash into that account and further issuing cheques from that account to other persons. AO considered the net income of all lands (25 acre as owner and other 25 acre on contract), income of Rs 12,50,000/- @ Rs 50000/- per acre as stated by his brother Sh. Sukhdeep Singh (although Amandeep stated to have hardly any income) was worked out on own land and Rs 2,00,000/- from entire land on contract of 25 acre @ maximum stated at Rs 8000/- acre and thus total net income was worked out at Rs 14,50,000/- When Sh. Amandeep Singh had deposited Rs 2.07 crore in his account (Rs 1.07 crore extra loan given to the assessee) and which is not explained, therefore the AO concluded that amount of cash of Rs 1 crore converted into loan is remained unexplained. 4.1 Similarly, in the case of Sh Sukhdeep Singh, Ajnala, the AO observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee, the AO held that both the assessee and relevant persons failed to prove the genuineness of transaction and creditworthiness of the payee. Further, the AO stated that in their statements the depositors have not given any reason for withdrawing cash and redepositing the same. It is a fact that cash available with the depositors being withdrawn by them from their KCC limit was used by them to give advance. The AO held that assessee has failed to prove creditworthiness and genuineness of transaction and source of deposit of cash in lump sum before issuing cheques to the assessee. Accordingly, the AO added back Rs. 1,75,00,000/- to the total income of the assessee. 5. The assessee being aggrieved with the Assessment Order, went in appeal before the Ld. CIT(A) who has granted relief to the assessee by observing as under: Decision:- In the year under consideration the appellant had received unsecured loans of Rs. 1,00,00,000/- from Sh Amandeep Singh, Amritsar and Rs. 75,00,000/- from Sh Sukhdeep Singh, Amritsar. For the reasons discussed by the AO in the assessment order and whose salient points are stated above, the AO held that the said unsecured loans were unexplained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the bank. The AO had considered the net agriculture income of Sh Amandeep Singh from the all the lands namely 25 acres as owner and 25 acres on contract and computed the net agriculture income @ 50,000/- per acre as stated by his brother Sh. Sukhdeep Singh at Rs 12,50,000/- and added Rs. 2,00,000/- from entire land on contract of 25 acres @ Rs 8,000/- per acre. Therefore, the AO concluded that Sh Amandeep Singh and his brother are misusing the said KCC premium account for money laundering by depositing unexplained cash into the KCC premium account and issuing cheques from that account to the assessee. In support of his ground of appeal the contention of the appellant is that both the depositors are primarily agriculturist and were having Kissan Credit Card Limit of Rs. 98,00,000/- and Rs. 75,00,000/- respectively with Kotak Mahindra Bank. It was explained that balance in the saving account of Sh Amandeep Singh was by way of transfer from his Kissan Credit Card Premium Account. As regards availability of cash for deposit in the KCC premium account, it was explained that cash was available with the depositors out of cash withdrawals from KCC account earlier and from the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Rs. 50,00,000/- on 27.06.2013 and 29.06.2013 respectively were stated to be from cash withdrawn from KCC cash credit account of Sh. Amandeep Singh in Kotak Mahindra Bank. The copy of the KCC premium account of Sh Amandeep Sirtgh in Kotak Mahindra Bank as above reveals the following cash^ withdrawals and cash deposits upto 17.06.2013. Date Transaction Withdrawal (Dr) Deposits(Cr) 02/05/2013 Self 30,00,000/- 06/05/2013 Self 37,00,000/- 08/05/2013 Self 2,00,000/- 10/05/2013 Cash deposit 37,00,000/- 11/05/2013 Cash deposit 13,00,000/- 14/05/2013 Cash self 15,00,000/- 15/05/2013 Self 7,00,000/- 17/05/2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 15.06.2013 as above, Sh. Amandeep Singh would have utilized about 30% of his gross agriculture receipts of the year for agriculture expenses i.e. the gross agriculture expenses of Sh. Amandeep Singh during the year under consideration would be 30% of Rs. 35,71,428/- or Rs. 10,71,428/-. The yearly agriculture expenditure would be Rs. 10,71,428/- for earning gross receipts of Rs. 35,71,428/-. However the agriculture expenditure of Sh. Amandeep Singh during 01.04.2013 to 15.06.2013 i.e. for 2 months of the year would have been Rs. 2,23,214/- only. In the cash flow statement of Sh. Amandeep Singh during the period 01.04.2013 to 20.02.2014 submitted during appeal proceedings has shown agriculture receipts of Rs. 18,35,907/- in the period 01.04.2013 to 17.06.2013 out of gross agriculture receipts during the said period from 01.04.2013 to 20.02.2014 of Rs. 55,35,649/- i.e. 33% percent of gross receipts. In the same ratio, the agriculture receipts of Sh. Amandeep Singh in the period 01.04.2013 to 17.06.2013 is upheld at 33% of Rs. 35,71,428/- or Rs. 11,78,571/-, which amount was available with him for deposit in the KCC premium cash credit account during the year under con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank earlier from where he had withdrawn this amount. The said loan amount of Rs 22,5^,000/- was taken over by Kotak bank by paying to HDFC bank amount of Rs 22,50,000/- on 30.1.2013. This is apparent from the narration of the entry on 30.1.2013 in the bank statement of Kotak Mahindra Bank KCC account under consideration, filed with his written submissions. This amount of Rs 22,50,000/- was thus available with the appellant and therefore the same has been included in the opening cash balance as on 1.4.2013. In addition there were also agriculture receipts in respect of sale of paddy crop of the season which was also available as cash in hand. Thus opening cash in hand of Rs 31,01,679/- is fully justified. The above explanation of the appellant of the opening cash in hand as on 1.4.2013 was considered. The copy of statement of KCC premium cash credit account of Sh. Amandeep Singh in Kotak Mahindra Bank available on record was perused which revealed a debit entry of Rs 22,50,000/- on 30.1.2013 with narration take over payment to HDFC bank manimajra branch, Manimajra . This payment was therefore the takeover of the loan amount of Sh. Amandeep Singh of Rs 22,50,000/- by paying to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 17.06.2013 i.e. immediately before depositing cash of Rs. 50,00,000/- and Rs. 50,00,000/- in his KCC premium cash credit account in Kotak Mahindra Bank on 26.06.2013 8s 29.06.2013 respectively was as under- i. Opening cash in hand Rs. 19,76,679/- * ii. Receipts of agriculture Rs. 11,78,571/- iii. Receipts of vegetables animal fodder Rs 5,00,000/- iv. Cash withdrawals from KCC premium CC a/c Rs. 67,16,786/- Total cash available = Rs. 103,72,036 /- as on 17.06.2013^ Therefore, Sh. Amandeep Singh had cash in hand available at more than Rs. 1 crore as on 17.06.2013 immediately before depositing cash of Rs. 50,00,000/- and Rs. 50,00,000/- in his KCC premium cash credit account in Kotak Mahindra Bank on 26.06.2013 85 29.06.2013 respectively. Therefore it is held that Sh. Amandeep Singh is creditworthy to deposit Rs 50,00,000/- and Rs. 50,00,000/- in his KCC premium cash credit account in Kotak Mahindra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vating and managing the land and his brother Sh. Amandeep singh was dealing with the accounts. Therefore Sh. Amandeep Singh was in a better position to explain the actual income derived from the lands taken on lease by him and his brother jointly of 35 acre from Sh. Baljit Singh. As explained by Sh. Amandeep Singh in his statement recorded by the undersigned on 13.9.2019 that he looked after the financial matters and his brother Sh. Sukhdeep Singh was not aware at all of the financial matters and accounting. And that it was unbelievable that the income from leased lands was only Rs 8000/- per acre. Sh. Amandeep singh had also stated in his statement recorded by the undersigned and 13.9.2019 that on the agriculture land taken on lease the income is the same as in the case of own lands which to his mind was between Rs 65000/- to Rs 70000/- per acre out of which Rs 18000/- to Rs 20000/- per acre was paid as leased charges and the balance was their income. The land taken on lease is not barren land but fully irrigated with power connection and having tubewell and also having canal water facilities. Therefore he implied that he had grown the same main crops as on the agriculture land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Deposits(Cr) 6.5.2013 Cash deposit 37,00,000 7.5.2013 Cash deposit 6,00,000 10.5.2013 Cash withdrawal 37,00,000 17.6.2013 Cash withdrawal 30000/- It was stated by Sh. Amandeep Singh in his statement recorded by the AO in the assessment proceedings that he had withdrawn cash from his KCC premium -cash credit account during F.Y. 2013-14 for agriculture purposes and after utilizing the same, he had deposited the unused amount back in the same KCC premium cash credit account. In this regard statement of Sh. Amandeep Singh was recorded by the undersigned on 13.09.2019 and he was confronted on this statement. He was asked to explain the purpose of cash withdrawals of Rs. 126,40,000/- between 01.04.2013 to 17.06.2013 from the said KCC premium cash credit account and he replied that there was hardly any e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly for meeting the agriculture expenses of agriculture operations performed by him during the year under consideration. In his statement recorded by the undersigned in appeal proceedings Sh. Amandeep Singh had stated that these withdrawals were basically with the intention to purchase land and when the deal did not materialize, he re-deposited the amount of unused cash withdrawal in the KCC premium cash credit account. I agree with this explanation of Sh. Amandeep Singh for reasons given above that such huge cash withdrawals by no stretch of imagination was for agriculture operations in this period. In the period 01.04.2013 to 17.06.2013 the net cash available with Sh. Sukhdeep Singh after deducting Rs. 239,465*/- on account of expenditure incurred for agriculture operation during this period' as discussed above was only Rs. (37,00,000 + 30000 - 239,465 )- Rs. 34,90,535/-. The above cash flow statement reveals cash deposits of Rs 37,00,000/- and Rs 6,00,000/- on 6.5.2013 and 7.5.2013 respectively whose source as per cash flow statement is the opening cash in hand of Rs 93,67,697/- as on 1.4.2013 and the agriculture receipts of Rs 15,31,192/-. The source of cash in hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14.8.2012 5,00,000/- 13,00,000 16.8.2012 11,00,000/- 24,00 ,000 24.8.2012 8,00,000 16,00,000 27.8.2012 2,00,000/- 18,00,000 29.8.2012 6,50,000/- 24,50,000 27.9.2012 25000 24,75,000 29.11.2012 20,00,000/- 44,75,000 5.12.2012 18,00,000 26,75,000 6.12.2012 16,50,000 43,25,000 6.12.2012 1,30,000/- 44,55,000 7.01.2013 20,000 44,75,000 Therefore Sh. Sukhdeep singh had at best availability of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account in Kotak Mahindra Bank on 28.06.2013 8s 02.07.2013 respectively as jrer recast cash flow statement of Sh. Sukhdeep Singh for FY 2013-14 was as under- Date Particulars debit credit Balance 1.4.2013 Opening balance 55,77,730 55,77,730 20.4.2013 Agriculture receipt 335,415 5913145 24.4.2013 Agriculture receipt 402,498 6315643 26.4.2013 Agriculture receipt 457,864 6773507 1.5.2013 Agriculture receipt 335,415 7108922 6.5.2013 Kotak Mahindra bank 37,00,000 3408922 7.5.2013 Kotak Mahindra bank 6,00,000 2808922 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile computing cash in hand as on 1.4.2013). In the written submission filed in appeal proceeding, the appellant had submitted onv the query to explain the source of Rs 50,00,000/- in the fund flow statement 0^8,8.2012 in the case of Sh. Sukhdeep Singh, that Sh. Sukhdeep Singh had withdrawn Rs 49,99,800/- from his Kisan Credit Card Account in Kotak Mahindra bank on the internal foreclosure of his Kisan Credit Card account. The bank had debited this amount^ to the account of Sh. Sukhdeep singh as payment of this amount. The amount so withdrawn from the bank was also available with Sh. Sukhdeep singh which has been shown in the fund flow statement. The copy of bank account of Sh. Sukhdeep Singh with Kotak bank starting from 6.8.2012 has already been filed on the basis of which fund flow statement was prepared. Considering the above explanation of the appellant and in absence of any evidence that the said cash was not available with Sh. Sukhdeep singh on 1.4.2013, it is considered that Sh. Sukhdeep Singh had availability of cash of at least Rs (75,00,000 - 71,76,769) = Rs 3,23,231/- out of cash withdrawn on 6.8.2012 on internal foreclosure to re-deposit cash to this extent in his K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with Kotak Mahindra Bank. (iii) The land holding in the hands of above two depositors is 25 acres and 23 acres (approx) respectively. In addition to above they were cultivating 25 acres and 35 acres respectively on lease. (iv) The AO required the assessee to explain the source of money in the hands of the above two depsotiros which was given to the appellant. (v) It was explained to the AO that Amandeep Singh and Sukhdeep Singh had advanced the amount out of their saving a/c with Kotak Bank. It was further explained to the AO that balance in the saving a/c of above creditors had arisen was by way of transfer from their Kissan Credit Card premium A/c. Copies of their saving bank accounts and Kissan Cash Credit A/c are enclosed. (vi) The AO further required the assessee to explain the source of balance in KCC A/cs of the two depositors. It was explained to the AO that cash was available with the depositors out of cash withdrawls from KCC A/cs earlier. Copies of the KCC limit A/cs of the two depositors were submitted before the AO. The loan creditors were also having huge agriculture income. (vii) The confirmations of the above two depositors were filed with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tements were filed. The assessee had deducted tax at source on interest paid to them. The AO had absolutely no doubt as to the identity of the depositors. Genuineness of the transaction -------------------------------------------- The main objection of the AO is that the transaction of deposit from the two parties is not genuine on the ground that both the depositors had deposited cash in their KCC accounts far in excess of their KCC limit and secondly they had deposited cash in their KCC A/c just two days before the issue of cheques to the assessee. In rebuttal to the same we submit as under:- As regards the excess deposit of cash in the their KCC A/c by the depositors it is submitted that each and every deposit in the KCC limit a/c is fully justified as they had sufficient cash balance in hand out of withdrawls made from the KCC limit A/c. It was the rotation of the same amount as they had huge KCC limit. The loan creditors also had huge cash earnings from agriculture available with them for making the deposit in the bank. The AO while making the above observation has conveniently ignored the withdrawls made from the KCC Limit A/c by the two depositors. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f investment in the share capital of an assessee company which was held as not genuine by the Hon ble high Court on the ground that the investor had deposited cash in his bank a/c for issuing cheques for investment in the share capital of appellant company and the investor did not have its own profit making apparatus and it simply rotated money through bank and the bank did not reflect their credit worthiness or genuineness of the transaction. The High Court has further observed that the appellant company did not pay any dividend or interest to the investors and the profit motive normal in the case of investment was entirely absent. The High Court further observed that any person who would invest or give loan would certainly seek return or income as consideration. From the reading of the above judgement it will be appreciated that the same is distinguishable from the present case. Here the creditworthiness and genuineness of transactions stand proved beyond any doubt. The source of deposit of cash by the depositors in their bank account stand proved beyond any reasonable doubt as the depositors had sufficient cash in hand which was withdrawn from the bank. Moreover, the deposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sit in the KCC premium account, it was explained that cash was available with the depositors out of cash withdrawals from KCC account earlier and from the sale produce of agriculture land as Sh. Amandeep Singh was the owner of 25 acres of agriculture land and had taken 25 acre on lease from Sh. Harpal Singh. 9. It is seen that Sh. Amandeep Singh deposited Rs. 50,00,000/- in his KCC premium cash credit account on 27.06.2013 and immediately transferred an amount of Rs. 50,00,000/- on 28.06.2013 to his saving bank account in Kota Mahindra Bank. Likewise, Sh. Amandeep Singh deposited Rs. 50,00,000/- in his KCC premium cash credit account in Kotak Mahindra Bank on 29.06.2013 and transferred Rs. 25,00,000/- and Rs. 25,00,000/- on 01.07.2013 and 02.07.2013 respectively therefrom to his savings bank account in the same bank. Thereafter, Sh. Amandeep Singh transferred amounts of Rs. 40,00,000/-, Rs. 30,00,000/- and Rs. 30,00,000/- on 28.06.2013, 04.07.2013 and 05.07.2013 respectively to Smt. Raj Rani Arora from his said savings bank account in Kotak Mahindra Bank. The LD. CIT (A) has discussed at length the gross receipts of the Sh. Amandeep Singh from sale of agriculture produce during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Rs. 25,00,000/- in his KCC premium cash credit account in Kotak Mahindra Bank as on 28.06.2013 and 02.07.2013 respectively as per the recasted cash flow statement of Sh. Sukhdeep Singh for FY 2013-14 as above. Therefore, as per recast cash flow statement of Sh. Sukbdeep Singh for FY 2013- 14 as above, Sh. Sukhdeep singh had cash availability of Rs 66,26,769/- as on 30.5.2013, out of which he had deposited cash of Rs 50,00,000/- as on 28.6.2013 in his KCC account in Kotak Mahindra bank. Therefore, it is held that Sh. Sukhdeep singh has creditworthy to deposit cash of Rs 50,00,000/- in his KCC account in Kotak Mahindra bank on 28.6.2013 and thus, the CIT(A) is justified in deleting the addition of Rs 50,00,000/-. Sh. Sukhdeep singh had also deposited cash of Rs 25,00,000/- in his said KCC account in Kotak Mahindra bank on 2.7.2013 which was met to the extent of Rs 16,26,769/- out of cash in hand as per recast cash flow statement of FY 2013-14 / as above and the net income of Sh. Sukhdeep Singh from the sale of animal fodder and vegetables grown between April 2013 to june 2013 after harvest of wheat was accepted to the tune of Rs 5,50,000/-; cash withdrawn of Rs 323,231/- on 6.8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the finding of the Ld. CIT(A) to the facts on record and accordingly, the impugned order of the Ld. CIT(A) is sustained on the issue of loan cash creditors. 15. In the next issue, the department has challenged deletion of disallowance of interest of Rs. 1182945 paid to these two loan creditors on account of unexplained credits. 16. The AO observed that assessee had claimed excessive interest of Rs 11,82,945/- payable on capital borrowed from Sh. Amandeep Singh and Sh. Sukhdeep Singh. Thus, the Assessing Officer added back the amount of Rs 11,82,945/-on account of interest claimed against unsecured loans creditors. The Ld. CIT(A) has observed that while adjudicating the ground of appeal no. 1 the addition of Rs. 1,75,00,000/- on account of credits from Sh. Amandeep Singh and Sh. Sukhdeep Singh have been allowed by holding these loan creditors as stands explained genuine and the decision of the Ld. CIT(A) is deleting the said addition on merits is sustained by us. It is evident from the record that the appellant was paying interest to the loan creditors @ 12% PA on the borrowings and since the interest amount was paid to them after deducting TDS, therefore the addition of R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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