Income Tax Appellate Tribunal - Chandigarh
Gulshan Verma, Yamunanagar vs Assessee on 14 July, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCHES 'SMC' CHANDIGARH
BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT
ITA No. 350/Chd/2015
(Assessment Year: 2005-06)
Gulshan Verma, Vs. The D.C.I.T.,
Prop.Bhagwati Roadlines, Yamuna Nagar.
Industrial Area,
Yamuna Nagar.
PAN No. AFHPG5820Q
(Appellant) (Respondent)
Appellant by : Shri Rakesh Jain
Respondent by : Shri S.K.Mittal, DR
Date of hearing : 10.07.2015
Date of Pronouncement : 14.07.2015
O R D E R
PER H.L.KARWA, VP :
This appeal filed by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals), Karnal dated 3.3.2014 relating to assessment year 2005-06.
2. The only effective ground raised by the assessee in this appeal reads as under :
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"1. Because the action is under challenge on facts & law, while upholding the addition of Rs.4,25,000/- u/s 68 of the Income Tax Act, 1961 while the identity veracity and genuineness of the transaction is completely satisfactory in accordance with ratio decendi of the judgment of the Hon'ble High Court & Hon'ble Supreme Court."
3. Briefly stated, the facts of the case are that during the course of regular assessment proceedings under section 143(3) of the Income Tax Act, 1961 (in short 'the Act'), the assessee was found to have shown a fresh credit of Rs.4,25,000/- in the books of account outstanding as on 31.3.2005 as unsecured loan in the name of Shri Susheel Shukla. During the course of assessment proceedings, the Assessing Officer required the assessee to prove the genuineness of the transaction. In this regard, the assessee submitted that the amount was obtained from NRE account of the lender maintained with Centurion Bank of Punjab. A photocopy of the bank account was produced before the Assessing Officer. On perusal of the bank account, the Assessing Officer noticed that the said lender had a nil balance as on 1.4.2004. An amount of Rs.4,48,829/- was credited on 18.5.2004 under the narration "By Bill", out of which an amount of Rs.4,25,000/- was given to the assessee on the same day and a sum of Rs.20,000/- was drawn through bearer cheque on 21.5.2004. There was no deposit in the said bank account thereafter till 30.3.2007 and the closing balance remained below Rs.4000/- throughout the subsequent period of about three years. Therefore, the Assessing Officer 3 opined that the assessee failed to discharge the onus to prove the capacity of the lender to advance the loan. Further, the assessee could not produce any confirmation from the said lender. Consequently, the Assessing Officer made the addition of Rs.4,25,000/- under section 68 of the Act. The addition was upheld by the learned CIT (Appeals). When the matter came up in appeal before the Tribunal in ITA No.404/Chd/2009, the Tribunal vide its order dated 11.9.2009 set aside the order of the learned CIT (Appeals) and remanded the matter to the Assessing Officer for considering the issue afresh after obtaining necessary evidence from the assessee with regard to financial capacity of the lender to advance the impugned sum and the genuineness of the transaction. The relevant observations made by the Division Bench of this Tribunal are reproduced hereinbelow :
6. We have considered the rival submissions caref ully. Section 68 of the Act e m p o we r s an Assessing Off icer to c all upon the assessee to ex plain the nature and source of the credits appearing in the b o o k s o f a c c o u n t a n d i f h e i s n o t s a t i s f i e d wi t h t h e explanation f urnished, the unexplained credits are d e e me d t o b e t h e i n c o me o f t h e a s s e s s e e . It is quite we l l s e t t l e d t h a t t h e b u r d e n i s o n t h e a s s e s s e e t o satisf actorily explain the nature and source of the credits appearing in the books of account. It is e q u a l l y we l l s e t t l e d t h a t t h e b u r d e n c a s t u / s 6 8 c a n be said to be discharged if the assessee proves the identity, credit wo r t h i n e s s of the lender and the genuineness of the transaction. I n t h i s c a s e , af t e r c o n s i d e r i n g t h e m a t e r i a l o n r e c o r d , we f i n d t h a t t h e r e is no dispute with regard to the identity of the 4 lender. Admittedly, the loan in question has been received f rom one Shri Sushil Shukla, an NRI and has apparently been received f rom NRE account of the l e n d e r m a i n t a i n e d wi t h C e n t u r i a n B a n k o f P u n j a b .
The only aspect held against the assessee by the CIT(Appeals) is that the assessee has f ailed to furnish any information about the i n c o me of the creditor and the source of the credit appearing in the bank account. No doubt, the assessee cannot be saddled wi t h liability to prove the source of the source. H o we v e r , the duty to substantiate the f inanc ial c ap ac ity of the creditor still re mains on the assessee. In this context, even in the af f i d a v i t , f u r n i s h e d b y t h e c r e d i t o r , t h e r e i s n o me n t i o n o f t h e sources of his i n c o me . Def initely, there is an a v e r me n t t h a t t h e mo n e y h a s b e e n a d v a n c e d o u t o f h i s b a n k a c c o u n t m a i n t a i n e d wi t h C e n t u r i a n B a n k , s o h o we v e r , t h e r e i s n o e v i d e n c e a t a l l wh i c h s h o ws t h e s o u r c e s o f h i s i n c o me o r h i s a b i l i t y o r c a p a c i t y t o advance the impugned amount. When this aspect was conf ronted to the learned counsel for the a s s e s s e e d u r i n g t h e c o u r s e o f h e a r i n g , i t wa s s t a t e d t h a t t h i s s p e c i f i c r e q u i r e me n t w a s n o t a d d r e s s e d t o b y t h e l o we r a u t h o r i t i e s . In any case, according to t h e a s s e s s e e , t h e a mo u n t h a v i n g b e e n a d v a n c e d f r o m a N R E a c c o u n t , wh e r e i n t h e r e m i t t a n c e h a s c o me f r o m abro ad, the s ame suff iciently discharged the onus cast on the assessee.
4. In pursuant to the order of the Tribunal dated 11.9.2009, the Assessing Officer vide his letter dated 26.8.2010 asked the assessee to furnish necessary evidence regarding the financial capacity of the lender and the genuineness of the transaction. The Assessing Officer asked the assessee to furnish the following documents : 5
i) Copy of the I n c o me T ax Return of the l e n d e r f o r t h e r e l e v a n t A s s e s s me n t Y e a r i . e . 2005-06.
ii) Details of the sources of income of the lender.
iii) Copy of the bank accounts of the lender in the country of his residence.
iv) Evidence regarding remittances into the NRE account.
v) Co mplete books of account f or the relevan t year.
5. In response to questionnaire, the assessee has furnished only a copy of income tax return filed by the lender Shri Susheel Shukla for the year 2004, wherein the annual income of 22,201 US Dollar was declared. According to the Assessing Officer, the assessee failed to produce the copy of the bank account of the lender in the country of his residence wherefrom the funds were transferred to his NRE account maintained with Centurion Bank of Punjab in India. The assessee also failed to submit any evidence regarding the remittance into the NRE account. The Assessing Officer held that in the absence of the above documentary evidence, the creditworthiness of the lender is not established. The Assessing Officer concluded that in view of the above and also in view of the facts and circumstances explained in the original assessment order under section 143(3) of the Act dated 20.12.2007, the assessee failed to discharge the onus regarding the financial capacity of the lender Shri Susheel 6 Shukla and added a sum of Rs.4,25,000/- under section 68 of the Act.
6. On appeal, the CIT (Appeals) vide his order dated 3.3.2014 confirmed the addition observing that the assessee had not established the financial capacity of the lender before the Assessing Officer.
7. I have heard Shri Rakesh Jain, learned counsel for the assessee and Shri S.K.Mittal learned D.R. at length and have also perused the materials available on record. In the instant case, the dispute relates to the addition of Rs.4,25,000/- made under section 68 of the Act. Section 68 of the Act reads as under :
"68. Where any sum is f ound credited in the books of an assessee maintained f or any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation off ered by him is not, in the opinion of the Assessing Of f icer, satisf actory, the sum so credited may be charged to i n c o me - t a x a s t h e i n c o me o f t h e a s s e s s e e o f t h a t previous year."
8. It is well settled that in order to discharge the onus under section 68 of the Act, the assessee must prove the following ingredients :
i) T h e i d e n t i t y o f th e c r e d i t o r ,
ii) T h e c a p a c i t y o f t h e c r e d i t o r t o a d v a n c e t h e mo n e y ;
iii) The genuineness of the transaction.
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9. After the assessee has adduced the prima facie evidence, the onus shifts to the Department. In the instant case, there is no dispute with regard to the identity of the lender. Now, the case of the Revenue is that the assessee failed to prove the financial capacity (creditworthiness) of the lender and genuineness of the transaction. In this case, the assessee had submitted a certificate from the Manager of HDFC Bank, Limited, Near Nirankari Bhawan, Jagadhri Road, Yamunanagar (Centurion Bank of Punjab merged into HDFC Bank Limited). The bank has certified that Shri Susheel Shukla S/o Shri Sudama Shukla, holder of NRE Account No.77SB1351960 had transferred Rs.4,25,000/- through cheque No.295291 to the SB Account No.02101000161760 of Shri Gulshan Kumar Verma S/o Shri Angrej Lal from his NRE Account on 18.5.2004. The bank has also certified that the Centurion Bank of Punjab merged into HDFC Bank Ltd. The assessee has also produced a bank statement of Centurion Bank of Punjab before the authorities below to demonstrate that Shri Susheel Shukla has transferred Rs.4,25,000/- vide cheque No.295291 to Shri Gulshan Verma. The assessee has also produced confirmation letter in the form of affidavit of Shri Susheel Shukla s/o Shri Sudama Shukla duly attested by Mr.Thomas Breen, Notary Public State of Maryland, wherein Shri Susheel Shukla has stated that he is resident of 7056 Hanover pkwy city, Greenbelt State Maryland, Pin-#20770 U.S.A. He has also confirmed having given interest free loan for Rs.4,25,000/- to the assessee by cheque No.295291 on 18.5.2004 from his NRE Account No.77SB1351960 maintained 8 with Centurion Bank of Punjab, India. There is no dispute that Shri Susheel Shukla is maintaining NRE Saving Account No.1351960 with Centurion Bank of Punjab since 2004. The account was opened with initial deposit of USD 10,000, the amount i.e. Rs.4,48,829/- was credited to the account on 18.5.2004. The Centurion Bank of Punjab has issued a certificate to this effect on 12.12.2007 that the amount of Rs.4,48,829/- came in NRE Account of Shri Susheel Shukla from USA where Shri Susheel Shukla was staying. The Assessing Officer raised the objection that the assessee failed to file copy of the bank account of the lender in the country of his residence from where the funds have been transferred to his NRE Account in Centurion Bank of Punjab in India. In my opinion, the above objection of the Assessing Officer is irrelevant particularly when the Centurion Bank of Punjab has certified that a sum of Rs.4,48,829/- (10,000 US Dollar) has been credited on 18.5.2004 under the narration "By Bill", wherein the remittance has come from abroad i.e. U.S.A. Further, the Assessing Officer has admitted that the assessee has submitted copy of return of income of Shri Susheel Shukla for the year 2004. As per the said return , Shri Susheel Shukla has declared an income of 22,201/- US Dollar under the head (Col.No.vii) "wages, salary, tips, etc. As per the said return, at the relevant time Shri Susheel Shukla was employed with V Paul Associates INC 1010 Rockville Pike Suit 206, Rockville MD 20852.
10. There is no dispute that the lender Shri Susheel 9 Shukla had NRE Bank Account with Centurion Bank of Punjab in India. It is also amply clear from the records that the loan amount has been advanced from a NRE Account, wherein the remittance has come from abroad, i.e. Bank of America, Soverna Park U.S.A. Shri Susheel Shukla has submitted an affidavit in order to confirm that he has given deposit of Rs.4,25,000/- to the assessee by account payee cheque. The said sum is appearing in the Bank Account of the assessee. The lower authorities have not doubted the authenticity of the aforesaid affidavit. The only objection of the Revenue is that in the said affidavit the lender has not disclosed his source of income. The lower authorities have admitted this fact that the lender was residing in U.S.A. The assessee has furnished a photocopy of passport of Shri Susheel Shukla. There is no dispute that the signature on passport and affidavit is that of Shri Susheel Shukla. Keeping in view that the transactions are through banking channels and there is no material on record to prove the contrary, I have no hesitation in holding that the assessee had discharged the burden of proving the genuineness of the cash credit. Under the law, the amount of Rs.4,25,000/- cannot be treated as the income from undisclosed sources of the assessee, when there is neither direct nor circumstantial evidence on record to hold that the said amount actually belonged to or was owned by the assessee. As regards the creditworthiness of the lender, I may point here that the Assessing Officer admitted that the assessee had submitted a copy of I.T.R. filed in U.S.A. by Shri Susheel Shukla for the period 1.1.2004 to 31.12.2004 relevant 10 to assessment year 2004, wherein annual income of 22,201 U.S. Dollar had been declared. A copy of return is available in assessment records of the assessee, which was produced during the course of proceedings before this Bench. It is relevant to observe here that both the authorities below have not questioned this document i.e. I.T.R. submitted by Shri Susheel Shukla. The officer who has framed the assessment of the assessee is Assessing Officer as well as Investigating Officer. He has not given any comments as regards the genuineness of the I.T.R. filed by Shri Susheel Shukla. The learned CIT (Appeals) has also not offered his views on this document. Thus, it can be concluded that the Revenue has accepted this document as genuine. In this return , Shri Susheel Shukla has declared annual income of 22,201 U.S. Dollars for the year 2004. The source of income is shown from wages, salary, tips, etc. As per the said return, Shri Susheel Shukla was employed with firm namely V Paul Associates INC 1010 Rockville Pike Suit 206, Rockville MD 20852. Employers' EIN No. is 52-178748 and Phone No. is 301- 315-9172. As per the said return , the total tax to be paid was 1,784 U.S. Dollars. There is no dispute that Shri Susheel Shukla was residing in U.S.A. since long. Considering the above, financial capacity of the lender to pay 10,000 U.S. Dollars can not be doubted. In view of the decision of Hon'ble Gauhati High Court in the case of Nemi Chand Kothari Vs. CI T, 264 I TR 254, a creditor's creditworthiness has to be judged vis-à-vis transaction, which has taken place between the assessee and the creditor and, it is not the business of the assessee to find out 11 the source of money of his creditor or genuineness of the transaction. The relevant observations made by the Hon'ble Gauhati High Court read as under:
" A person may have f unds f rom any source and an assessee, on such inf ormation received, may take loan f rom such a person. I t i s n o t t h e b u s i n e s s of the assessee to f ind out wh e t h e r the source or sources from wh i c h the creditor had agreed to a d v a n c e t h e a m o u n t s we r e g e n u i n e o r n o t . If a creditor has, by any undisclosed source, a particular a m o u n t o f mo n e y i n t h e b a n k , t h e r e i s n o l i m i t a t i o n under the law on the part of the assessee to obtain such a mo u n t of mo n e y or part thereof from the c r e d i t o r , b y wa y o f c h e q u e i n t h e f r o m o f l o a n a n d i n such a c ase, if the creditor f ails to s atisf y as to ho w he had actually received the said amount and h a p p e n e d t o k e e p t h e s a me i n t h e b a n k , t h e s a i d a m o u n t c a n n o t b e t r e a t e d a s i n c o me o f t h e a s s e s s e e from undisclosed source. In other wo r d s , the g e n u i n e n e s s a s we l l a s t h e c r e d i t wo r t h i n e s s o f a creditor have to be adjudged vis-à-vis the t r a n s a c t i o n s , wh i c h h e h a s wi t h t h e a s s e s s e e . The r e a s o n wh y we h a v e f o r me d t h e o p i n i o n t h a t i t i s n o t the business of the assessee to f ind out the actual source or sources from wh e r e the creditor has a c c u mu l a t e d the a mo u n t , wh i c h he advances, as loan, to the assessee is that so far as an assessee is concerned, he has to prove the genuineness of the t r a n s a c t i o n a n d t h e c r e d i t wo r t h i n e s s o f t h e c r e d i t o r vis-à-vis the transactions, wh i c h had taken place b e t we e n the assessee and the creditor and not b e t we e n t h e c r e d i t o r a n d t h e s u b - c r e d i t o r s , f o r , i t i s not even required under the law f or the assessee to t r y t o f i n d o u t a s t o wh a t s o u r c e o r s o u r c e s f r o m wh e r e the creditor had received the amount, his s p e c i a l k n o wl e d g e u n d e r s e c t i o n 1 0 6 o f t h e E v i d e n c e 12 Act may very we l l remain conf ined only to the t r a n s a c t i o n s , wh i c h h e h a d wi t h t h e c r e d i t o r a n d h e m a y n o t k n o w wh a t t r a n s a c t i o n ( s ) h a d t a k e n p l a c e b e t we e n h i s c r e d i t o r a n d t h e s u b - c r e d i t o r . No such additional burden can be placed on an assessee, wh i c h is not envisaged by section 106 of the Evidence Act."
11. Considering the entire facts and circumstances of the present case and also keeping in view the observations of the Hon'ble Gauhati High Court referred to above, I am of the opinion that no addition is required to be made in the hands of the assessee under section 68 of the Act. Therefore, the impugned addition is deleted.
13. In the result, the appeal of the assessee stands allowed.
Order pronounced in the open court on this 14th day of July, 2015.
Sd/-
(H.L.KARWA) VICE PRESIDENT Dated : 14 t h July, 2015 *Rati* Copy to: The Appellant/The Respondent/The CIT(A)/The CIT/The DR.
Assistant Registrar, ITAT, Chandigarh 13