Income Tax Appellate Tribunal - Kolkata
Sajjan Kumar Agarwala, Siliguri vs Assessee on 19 March, 2007
आयकर अपीलीय अधीकरण, Ûयायपीठ - "A", कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- A , KOLKATA
[सम¢ ौी बी. आर. िमƣल,् Ûयायीक सदःय एवं ौी सी.
बी. आर. सी. डȣ.
डȣ. राव,
राव, लेखा सदःय ]
Before Shri B.R.Mittal, Judicial Member & Sri C.D. Rao, Accountant Member
आयकर अपील संÉया / ITA No. 1391 (Kol) of 2007
िनधॉरण वषॅ/Assessment Year 2003-04
Sri Sajjan Kr. Agarwala, -वनाम- Income-tax Officer, Ward-1(1),
Siliguri. -Versus- Kolkata.
(अपीलाथȸ/APPELLANT) (ू×यथȸ/RESPONDENT)
&
आयकर अपील संÉया / ITA No. 1455 (Kol) of 2007
िनधॉरण वषॅ/Assessment Year 2003-04
Income-tax Officer, Ward-11(1), -वनाम- Sri Sajjan Kr. Agarwala,
Siliguri. -Versus- Kolkata.
(अपीलाथȸ/APPELLANT) (ू×यथȸ/RESPONDENT)
Assessee by : Sri S.L. Kochar
Department by : Sri A.K.Pramanik
आदे श/ORDER
बी. आर. िमƣल),् Ûयायीक सदःय (B.R.Mittal), बी. आर.
(बी Judicial Member :
These two appeals for assessment year 2003-04, one by the assessee and the other by the Revenue, arise out of the same order of ld. C.I.T.(A), Jalpaiguri dated 19.3.2007. As common issues are involved in these two cross appeals, they are being disposed of by this common order.
2. In this appeal by the assessee, the following grounds are raised :-
"1. That keeping in view the facts that all the loan creditors are income tax assessees, they had confirmed the loan transactions and their respective balance sheet filed along with the relevant returns, reflected those loans, the appeal order of CIT(A) is obviously perverse to that extent.
2. That there is no reason for disallowing the loans subjectively in piecemeal when all other loans are allowed.1
3. That the order of the CIT(A), upholding the addition u/s. 68 of the I.T. Act, 1961 Rs.[70000 +185000 + 30000] i.e. Rs.285000/- out of Rs.[220000 + 385000 + 100000] i.e. Rs.705000 respectively, therefore not justifiable."
3. In the Revenue's appeal, the following grounds are raised :-
"(i) That on the facts and in the circumstances of the case that the Ld. CIT(A), Jalpaiguri erred in deleting the addition of Rs.9,70,000/- on account of bogus loan without considering the creditworthiness of the loan creditors and genuineness of the transactions.
(ii) That on the facts and in the circumstances of the case that the Ld. CIT(A), Jalpaiguri not justified in deleting the addition of Rs.2,00,000/- on account of bogus gift without considering the creditworthiness of the alleged gift doners and genuineness of the transactions.
(iii) That on the facts and in the circumstances of the case that the Ld. CIT(A), Jalpaiguri had failed to note that no prudent person would make such a big loan/ donation to a wealthy person like the assessee.
(iv) That on the facts and in the circumstances of the case that the order of the Ld. CIT(A), Jalpaiguri is devoid of common sense and human probability."
4. We will first deal with the gift of Rs.2,00,000/- claimed to have been received by the assessee from Smt. Minu Agarwal and allowed by the ld. C.I.T.(A), which is contested by the department vide ground No.2 of its grounds of appeal above. 4.1. The facts of the case, in brief, are that the assessee deals in ready-made gold & silver ornaments and novelties under the trade name of M/s. Silver Palace at Siliguri. During the year under appeal, the assessee had accepted voluntary gifts of Rs.50,000/- each on four dates, totalling to Rs.2,00,000/-, from Smt. Mini Agarwal, aged about 21 years old at the relevant time, daughter of cousin sister of the assessee by bankers cheque, who is also assessed to tax. The said donor submitted before the A.O. her Income-tax Returns for A.Ys. 2001-02 to 2003-04 along with statement of accounts. Further, in response to summon u/s. 131, she confirmed having given gift of Rs.2 lakhs to the assessee. However, the A.O. stated that the gift is generally made by a person who is economically sound to a person who is not so sound financially, but the alleged donor cannot be said to be more financially sound than the assessee. He further observed that the said donor neither received any gift from anybody at her marriage ceremony, nor made any such gift to her parents, brothers & sisters, which was against the human probability. In reply to question put by the A.O., the said donor stated that 2 the gift was made to the assessee for his urgency of money. The A.O. also found no justification to buy bankers cheque from the banks at Siliguri when the banking facilities were available at her place of residence at Jalpaiguri. In the light of above, the A.O. treated the said gift of Rs.2 lakhs as assessee's unexplained cash credit u/s. 68 of the Act and added the same to the total income of the assessee.
4.2. On appeal, the ld. C.I.T.(A) accepted the said gift as genuine and deleted the addition with the following observation :-
"The donor, Smt. Minu Agarwal, has shown the returned income at Rs.81,400/- in the A.Y. 03-04, Rs.81,250/- in the A.Y. 02-03 and Rs.80,950/- in the A.Y. 01-02. Thus, her total returned income is at Rs.2,43,600/- in the A.Y. 03-04, 02-03 and 01-
02. The donor, Smt. Minu Agarwal has gifted to the appellant at Rs.2,00,000/-. In the light of the returned income for the three assessment years as stated above, the creditworthiness of the donor, Smt. Minu Agarwal, is accepted for the gift amount of Rs.2,00,000/-. In view of these findings, the gift at Rs.2,00,000/- from Smt. Minu Agarwal, is accepted as genuine. Therefore, the addition of Rs.2,00,000/- in respect of the gift taken from Smt. Minu Agarwal by the appellant, is deleted."
4.3. At the time of hearing before us, the ld. Departmental Representative supported the order of the A.O. and stated that the A.O. has rightly treated the alleged gift of Rs. 2 lakhs as assessee's undisclosed source of income and added to the total income of the assessee u/s. 68 of the Act. In addition to the above, he also filed a written submission, which is placed on record.
4.4. On the other hand, the ld. A/R of the assessee placed reliance on the order of the ld. C.I.T.(A) on this issue and submitted that the gifts were received through banking channel from Smt. Minu Agarwal, who is assessed to tax. He further submitted that the donor has submitted her PAN details along with copies of income-tax returns and statement of accounts for assessment years 2001-02 to 2003-04. The ld. A/R further submitted that in response to summon u/s. 131 of the Act, the donor appeared before the A.O. and in her deposition before him, she confirmed having given the gift of Rs.2 lakhs to the assessee. Therefore, the A.O. without appreciating the evidences filed before him in support of the gift has wrongly disbelieved the said gift and added the same to the assessee's total income u/s. 68 of the Act and the ld. C.I.T.(A) has rightly deleted the same, which should be upheld. The ld. A/R also filed a written submission before us, which is on record.
34.5. We have heard the learned representative of the parties and perused the material placed on record. The undisputed facts relating to this issue are that the donor, Smt. Minu Agarwal, is assessed to income-tax and copies of her Income-tax Returns along with statement of accounts for the assessment years 2001-02 to 2003-04 were submitted to the A.O. The said donor was also examined u/s. 131 by the A.O. and she has confirmed having given gift to the assessee of Rs.2 lakhs on four occasions @ Rs.50,000/- each by banker's cheques. We also observe that as on 01/4/2002, the donor's opening capital was Rs.4,08,212/-. The A.O. doubted about the donor's capacity to accumulate such huge capital and for purchasing banker's cheques on different dates from Siliguri instead of her place of residence at Jalpaiguri. According to him further, it was very unlikely that instead of making gift to his nearest and dearest one, the donor gifted huge amount to the assessee, who was in relation uncle to the donor. The Hon'ble Supreme Court in the case of CIT v. Daulat Ram Rawatmull [87 ITR 349 (SC)] has observed that the onus of proving that the apparent is not real was on the party who claimed it to be so. The revenue could not bring any evidence to show that donor, from whom the gift was received, was non-existent or the gift was bogus. Further, no evidence could be brought on record by the revenue to show that the amounts which were received by the assessee from the donor had actually been received by the donor from the assessee. Therefore, the A.O. could not have treated the said amount of gift as the income derived by the assessee from undisclosed sources. The above position is also supported by the decision of the Hon'ble Gauhati High Court in the case of Nemi Chand Kothari v. CIT [264 ITR 250]. It would be pertinent to mention the observation of their Lordships of Hon'ble Gauhati High Court in the said case while explaining the scope of Sec. 68 of the Act, the relevant portion of which reads as under :-
".... The logical conclusion, therefore, has to be that an inquiry under section 68 need not necessarily be kept confined by the Assessing Officer to the transactions, which took place between the assessee and his creditor but the same may be extended to the transactions, which have taken place between the creditor and his sub-creditor. Thus, while the Assessing Officer is, under section 68, free to look into the source(s) of the creditor and/or of the sub-creditor, the burden on the assessee under section 68 is definitely limited." [ Emphasis given] 4 It was in this context that Hon'ble Gauhati High Court has held that u/s. 68, creditor's creditworthiness has to be judged vis-à-vis transactions, which have taken place between the assessee and the creditor, and it is not the business of assessee to find out source of money of his creditor or genuineness of transactions which took place between creditor and sub-creditor and/or creditworthiness of sub-creditors, for these aspects may not be within special knowledge of the assessee. The observation of their Lordships of Gauhati Court in the said case, to quote, is as under :-
"Since it is not the business of the assessee to find out the source(s) from where the creditor has accumulated the amount, which he has advanced in the form of loan to the assessee, section 68 cannot be read to show that in the case of failure of the sub- creditors to prove their creditworthiness, the amount advanced as loan to the assessee by the creditor shall have to be treated, as a corollary, as the income from undisclosed source of the assessee himself."
The above decision of Hon'ble Gauhati Court was with regard to loan taken by the assessee while the appeal before us is relating to gift received by the assessee. However, in the case of cash credit, the assessee has to prove the identity of the creditor, the creditworthiness of the creditor and the genuineness of the transaction so as to discharge the burden lay upon him. Similarly in the case of gift, the donee has to prove the identity of the donor, the creditworthiness of the donor and the genuineness of the gift so as to discharge the onus. Thus, ingredients which are required to be proved to discharge the onus of proving the cash credit are identical to the ingredients which are required to prove gift. Therefore, the ratio of a decision given in the case of cash credit would be squarely applicable in the case of gift also. In that view of the matter, in our considered opinion, the A.O. was not justified in alleging that the gift was undisclosed income of the assessee. We, therefore, uphold the order of ld. C.I.T.(A) on this issue deleting the addition of Rs.2,00,000/- made to the total income of the assessee u/s. 68 of the Act and ground No.2 of grounds of appeal of the Revenue stands dismissed.
5. The other grounds raised in the Revenue's appeal pertain to deletion of addition of Rs.9,70,000/- on account of bogus loan, whereas the assessee in his grounds of appeal has agitated the sustenance of addition of Rs.2,85,000/- u/s. 68 of the Act by the ld. C.I.T.(A) on account of bogus loan. The facts, in brief, relating to this issue are that during the assessment year under consideration, the assessee has obtained new unsecured loans of Rs.13,05,000/- through A/c. payee cheques from 10 (ten) persons, 5 out of which loan totalling to Rs.12,55,000/- from the following 9 (nine) persons, who are relatives of the assessee and also assessed to tax, was treated by the A.O. as assessee's income from undisclosed sources and thus added the same to the total income of the assessee u/s. 68 of the Act :-
Sl.No. Name of loan creditor Old Balance Loan taken during Relationship (Rs.) (Rs.) the year (Rs.) with assessee 01 Rajendra Kr. Agarwal 6,98,618 2,20,000 Brother 02 Prahlad Kr. Agarwal 7,48,391 3,85,000 Brother 03 Beharilal Agarwal(HUF) 1,50,790 1,00,000 Father 04 Bimla Devi Agarwal 4,00,450 1,00,000 Mother 05 Sushila Devi Agarwal 2,26,418 1,00,000 Wife 06 Sarita Agarwal 2,88,000 50,000 Wife of assessee's brother 07 Rajendra Kr.Agarwal - 1,00,000 Karta is brother (HUF) of assessee 08 Sumit Kr. Agarwal - 1,00,000 Son of assessee's Brother 09 Amit Kr. Agarwal 1,47,140 1,00,000 - do -
Total Rs.12,55,000/-
6. During the course of assessment proceedings, the assessee furnished copies of income-tax returns of each of the above loan creditors along with their respective statement of accounts and balance sheets. Loan confirmations were also furnished to the A.O. Further, in response to notice u/s. 131, all the loan creditors, except Sumit Kr.
Agarwal and Amit Kr. Agarwal (sl. Nos. 8 & 9 above) who were out of town at the relevant time, appeared before the A.O. and their depositions were recorded by him. The A.O. observed that the loan creditors received gift from 20 persons, who were distant relatives and/or friends of the loan creditors. It was further observed by the A.O. that none of these 20 donors, who were carrying on business of seasonal crops and brokerage of jute, had any bank account and they made the gifts to the loan creditors by bringing cash from their place of residence at Jalpaiguri to Siliguri for purchasing bankers cheques. On examination of statement of accounts and balance sheets of all the loan creditors, the A.O. observed that there was no sufficient opening cash/bank balance as on 01/4/2002 so as to advance the loans to the assessee. He, therefore, held that these loan creditors did not have the creditworthiness to give loans to the assessee and the assessee introduced his unaccounted money in the guise of bogus loan transactions. Accordingly, the loan of Rs.12,55,000/- was added as unexplained cash credit u/s. 68 of 6 the Act relying on the decisions in the cases of Sumati Dayal vs. CIT [214 ITR 801 (SC)] and CIT vs. Precision Finance (P) Ltd. [208 ITR 465 (Cal)].
7. Before the ld. C.I.T.(A) the assessee contended that the assessee filed confirmations given by all the loan creditors along with their income-tax returns, statement of accounts and balance sheets, which showed that all of them had sufficient available fund for advancing loan to the assessee. That all the loan creditors (except Sumit Kr. Agarwal & Amit Kr. Agarwal, who were residing at Bangalore at the relevant time) appeared before the A.O. and confirmed the loan transactions, which were effected by cheques and/or drafts. It was, therefore, contended that the assessee was able to discharge his onus u/s. 68 of the Act to establish the identity of the loan creditors, genuineness of the transactions and creditworthiness of the loan creditors. Reliance in this connection was placed, inter alia, on the following judicial pronouncements :-
Nemi Chand Kothari vs. CIT [264 ITR 250 (Gau)] CIT vs. Orissa Corpn. (P) Ltd. [159 ITR 78 (SC)] Pritam Daftary vs. CIT [195 CTR 304 (Cal)] CIT vs. Piara Singh [124 ITR 40 (SC)] CIT s. Lalchatoorah Tea Co. Ltd. [200 ITR 391 (Cal)] P.K. Sethi vs. CIT [206 CTR 445 (Gau)] 7.1. The ld. C.I.T.(A) asked for remand report from the A.O. on the submissions of the assessee and evidences filed by him and in response, the A.O. sent comments stating that the assessee has filed the return accompanied by loan confirmations. It is also fact that the loan transactions were effected by cheques. It was further stated by the A.O. that as per the assessee the respective balance sheet of the loan creditors showed that all of them have sufficient available fund for advancing loan to the assessee, then the question arises wherefrom the loans were given by those loan creditors if they did not have sufficient cash or bank balances. There were no sufficient earnings of the loan creditors for the year under consideration. The A.O. further reported that the source of the loans were obviously the gifts received by the loan creditors and on examining the bank accounts of the loan creditors it appeared that prior to the date of loan transaction, similar amount of money of the loan amount was found credited in their bank account by drafts/bankers cheques in the form of gift. That except a few cases, none of the 7 donors were close relatives of the loan creditors. The assessee also submitted his reply in respect of the aforesaid remand report of the A.O. and further stated that the assessee has proved the identify of the creditors, their creditworthiness and genuineness of transactions. It was further stated that when the return of income and tax paid thereon by the creditors have been accepted by the respective A.Os as genuine, there was hardly any scope to treat those credit as bogus and thus assessee's income from undisclosed sources.
7.2. The ld. C.I.T.(A) in his order has discussed in detail the facts in relation to each of the loan creditor, viz. their identity, capacity to advance loan and genuineness of transactions and after considering the submissions of the assessee, A.O.'s assessment order and his subsequent remand report, deleted the addition of Rs.9,70,000/- out of total cash credit of Rs.12,55,000/- and the balance addition of Rs.2,85,000/- was sustained by him with the following detailed observations :-
"I have carefully considered the submission of the appellant along with the documents submitted i.e. the photo copies of the return of income along with the computation of total income, capital account and the balance sheet relevant for the AY 03-04, 02-03 and 01-02 in respect of the cash creditors i.e. Rajendra Kümàr Agarwala, Prahlad Kumar Agarwala, Bimla Devi Agarwala, Biharilal Agarwala (HUF), Sushila Devi Agarwala, Santa Agarwala, Rajendra Kumar Agarwala (HUF), Sumit Kumar Agarwala, Amit Kumar Agarwala and the donor, Smt. Minu Agarwala, in support of his contention in light of the judicial decision i.e. CIT Vs. Piara Singh 124 ITR 40(SC), CIT Vs. Lachatoorah Tea Co. Ltd.200 ITR 391 (Cal), CIT Gujrat Vs. SC Kothari 82 ITR 794, Muralidhar Lahorimal Vs. CIT (2006) 200 CTR 109, Nemichand Kothari Vs CIT & Anr (2001) 185 CTR ( Gou) 635, CIT Vs. Orissa Corporation (P) Ltd. (1986) 159 ITR 89 (SC), Pritam Daftary Vs CIT, (2005) 195 CTR (CaI)304 and P.K. Sethi Vs. CIT( 2006) 206 CTR 445 (Gauhati). And I have also perused the assessment order of the AO.
The cash creditors i.e. Rajendra Kumar Agarwala, Prahalad Kumar Agaiwala, Bimala Dcevi Agarwala, Shshila Devi Agarwala, Santa Agarwala and the Karta of the HUF Beharilal Agarwala(HUF) and Rajendra Kumar Agarwala (HUF) and the donor, Smt. Minu A.garwala, have been examined by the AO. Therefore, the identity of these cash creditors and the donor is proved. Other two cash creditors, Sumit Kumar Agarwala and Amit Kumar Agarwala, have been filing return of income for the year under consideration i.e. AY 03-04 and they have also filed return of income for the two earlier assessment years i.e. 02-03 and 01-02. In view of returns of income of Sumit Kumar Agarwala and Amit Kumar Agarwala, for the AY 03-04, 02-03 and 01-02, their identity is considered to be proved.
The cash creditor, Rajendra Kumar Agarwala, has shown the returned income at Rs.1,32,008/- in the AY 03-04 Rs. 82,615/- in the AY 02-03 and Rs. 73,645/- in the AY 01 -02. Thus, his total returned income is at Rs. 2,88,268/- in the AY 03-04, 02-03 and 01-02. The cash creditor, Rajendra Kumar Agarwala has given loan to the appellant at Rs. 2,20,000/-. In the light of the returned income for the three assessments years as 8 stated above, the creditworthiness of Rajendra Kumar Agarwala, is accepted up to the limit of the loan at Rs.1,50,000/-. In view of these findings, the loan upto Rs. 1,50,000/- from the Rajendra Kumar Agarwal is accepted as genuine. The balance amount of Rs. 70,000/- as loan has been found to be not genuine. Therefore, the addition of Rs. 1,50,000/- in respect of the loan taken from Rajendra Kumar Agarwala by the appellant is deleted. And balance amount of Rs.70,000/- as loan taken from Rajendra Kumar Agarwala, is hereby confirmed.
The cash creditor, Prahlad Kumar Agarwala, has shown the returned income at Rs.1,19,680/- in the AY 03-04, Rs.1,22,518/- in the AY 02-03 and Rs.1,23,911/- in the AY 01-02. Thus, his total returned income is at Rs.3,66,109/- in the AY 03-04, 02-03 and 01-02. The cash creditor, Prahalad Kumar Agarwala has given loan to the appellant at Rs.3,85,000/-. In light of the returned income for the three assessments years as stated above, the credit-worthiness of Prahalad Kurnar Agarwala, is accepted up to the limit of the loan at Rs. 2,00,000/-. In view of these findings, the loan up to Rs. 2,00,000/- from the Prahalad Kumar Agarwala is accepted as genuine. The balance amount of Rs. 1,85,000/- as loan has been found to be not genuine. Therefore, the addition of Rs. 2,00,000/- in respect of the loan taken from Prahalad Kumar Agarwala by the appellant is deleted. And balance amount of Rs.1,85,000/- as loan taken from Prahalad Kumar Agarwala, is hereby confirmed.
The cash creditor, Bimala Devi Agarwala, has shown the returned income at Rs. 1,40,770/- in the AY 03-04, Rs. 89,287/- in the AY 02-03 and Rs. 82,820/- in the AY 01-02. Thus, her total returned income is at Rs. 3,12,877/- in the AY 03-04, 02-03 and 01-02. The cash creditor, Bimla Devi Agarwala has given loan to the appellant at Rs. 1,00,000/-. In light of the returned income for the three assessments years as stated above, the creditworthiness of Bimala Devi Agarwala, is accepted for the loan amount of Rs, 1,00,000/-. In view of these findings, the loan up to Rs.1,00,000/- from the Bimala Devi Agarwal is accepted as genuine. Therefore, the addition of Rs.1,00,000/- in respect of the loan taken from Bimala Devi Agarwala by the appellant is deleted.
The cash creditor, Beharilal Agarwala (HUF), has shown the returned income at Rs. 53,032/-. In the AY 03-04, Rs. 52,723/- in the AY 02-03 and Rs. 52,102/- in the AY 01-02. Thus, its total returned income is at Rs. 1,57,857/- in the AY 0 3-04, 02-03 and 01 -02. The cash creditor, Beharilal Agarwala (HUF) has given loan to the appellant at Rs. 1,00,000/-. In light of the returned income for the three assessments years as stated above, the creditworthiness of Beharilal Agarwala (HUF), is accepted up to the limit of the loan at Rs. 70,000/-. In view of these findings, the loan up to Rs. 70,000/- from the Beharilal Agarwal (HUF) is accepted as genuine. Therefore, the addition of Rs. 70,000/- in respect or the loan taken from Beharilal Agarwala (IIUF), by the appellant is deleted. And balance amount of Rs. 30,000/- as loan taken from Beharilal Agarwala (HUF), is hereby confirmed.
The cash creditor, Sushila Devi Agarwala, has shown the returned income at Rs. 1,00,633/- in the AY 03-04, Rs, 98,589/- in the AY 02-03 and Rs.1,40,040/- in the AY 01-02. Thus, her total returned income is at Rs. 3,39,262/- in the AY 03-04, 02-03 and 01-02. The cash creditor, Sushila Devi Agarwala has given loan to the appellant at Rs. 1,00,000/-. In light of the returned income for the three assessments years as stated above, the creditworthiness of Sushila Devi Agarwala, is accepted for the loan amount of Rs.1,00,000/-. In view of these findings, the loan upto Rs.1,00,000/- from Sushila 9 Devi Agarwal is accepted as genuine. Therefore, the addition of Rs.1,00,000/- in respect of the loan taken from Sushila Devi Agarwala by the appellant is deleted.
The cash creditor, Sarita Agarwala, has shown the returned income at Rs. 81,528/- in the AY 03-04, Rs. 81,368/- in the AY 02-03 and Rs. 75,268/- in the AY 01-
02. Thus, her total returned income is at Rs. 2,38,164/- in the AY 03- 04, 02-03 and 01-
02. The cash creditor, Sarita Agarwala has given loan to the appellant at Rs. 50,000/-. In light of the returned income for the three assessments years as stated above, the creditworthiness of Santa Agarwala, is accepted for the loan amount of Rs.50,000/-. In view of these findings, the loan up to Rs. 50,000/- from the Sarita Agarwal is accepted as genuine. Therefore, the addition of Rs. 50,000/- in respect of the loan taken from Sarita Agarwala by the appellant is deleted.
The cash creditor, Rajendra Kumar Agarwala (HUF), has shown the returned income at Rs.1,07,816/- in the AY 03-04 Rs. 85,600/- in the AY 02-03 and Rs. 53,000/- in the AY 01-02. Thus, its total returned income is at Rs. 2,46,416/- in the AY 03-04, 02-03 and 01-02. The cash creditor, Rajendra Kurnar Agarwala (HUF) has given loan to the appellant at Rs.1,00,000/-. In light of the returned income for the three assessments years as stated above, the creditworthiness of Rajendra Kumar Agarwala (HUF), is accepted for the loan amount of Rs.1,00,000/-. In view of these findings, the loan up to Rs.1,00,000/- from the Rajendra Kumar Agarwal (HUF) is accepted as genuine. Therefore, the addition of Rs.1,00,000/- in respect of the loan taken from Rajendra Kumar Agarwala (HUF) by the appellant, is deleted.
The cash creditor, Sumit Kumar Agarwala, has shown the returned income at Rs. 79,929/- in the AY 03-04, Rs.81,110/- in the AY 02-03 and Rs. 50,327/- in the AY 01-02. Thus his total returned income is at Rs. 2,11,366/- in the AY 03-04, 02-03 and 01-02. The cash creditor, Sumit Kumar Agarwala has given loan to the appellant at Rs. L,00,000/-. In light of the returned income for the three assessments years as stated above, the creditworthiness of Sumit Kumar Agarwala, is accepted for the loan amount of Rs. 1,00,000/-. In view of these findings, the loan up to Rs. 1,00,000/- from the Sumit Kumar Agarwal, is accepted as genuine. Therefore, the addition of Rs. 1,00,000/- in respect of the loan taken from Sumit Kumar Agarwala, by the appellant, is deleted.
The cash creditor, Amit Kumar Agarwala, has shown the returned income at Rs. 78,744/- in the AY 03-04 Rs. 78,580!- in the ÀY 02-03 and Rs.78,165/- in the ÀY 01-
02. Thus, his total returned income is at Rs. 2,35,489/- in the ÀY 03-04, 02-03 and 01-
02. The cash creditor, Amit Kumar Agarwala has given loan to the appellant at Rs. 1,00,000/-. In light of the returned income for the three assessments years as stated above, the creditworthiness of Amit Kumar Agarwala, is accepted for the loan amount of Rs. 1,00,000/-. In view of these findings, the loan up to Rs. 1,00,000/- from Amit Kumar Agarwal is accepted as genuine. Therefore, the addition of Rs.1,00,000/- in respect of the loan taken from Amit Kumar Agarwala, by the appellant, is deleted."
8. Being aggrieved with the said order of ld. C.I.T.(A), the assessee is in appeal for sustenance of addition of Rs.2,85,000/- and the department also is in appeal against deletion of addition of Rs.9,70,000/- made u/s. 68 of the I.T. Act.
109. At the time of hearing before us, the learned representatives of the parties made submissions in line with their respective written submission filed before us. We have carefully considered their submissions and gone through the material placed before us. It is undisputed fact that all the loan creditors, except two, appeared in person before the A.O. in response to notice u/s. 131 of the Act and they have duly confirmed the transaction. In respect of other loan creditors, viz., Sri Sumit Kr. Agarwal & Amit Kr. Agarwal, they could not appear themselves in response to 131 notice because of their absence from the town at the relevant. Copies of I.T. Returns for three consecutive assessment years, i.e. A.Ys. 2001-02 to 2003-04, statement of accounts, balance sheets and confirmation of loan of each of the 9 (nine) loan creditors were furnished before the A.O. The A.O. doubted the creditworthiness of these loan creditors because, according to him, the opening cash and bank balance of the creditors did not permit for advancing loan to the assessee. Further, the loan creditors received gift from 20 distant relatives allegedly to cover up the loan given to the assessee, who did not have any bank account and they brought cash to purchase bankers cheque in favour of the loan creditors. He thus concluded that the loan creditors did not have any creditworthiness to give loans to the assessee. We, however, observe from the appellate order that the returns of income of each of the nine loan creditors for assessment years 2001-02 to 2003-04 and tax paid for such assessments have been accepted by the department. Therefore, in our considered opinion, once the returned income of the loan creditors, wherein the gifts received by them have been shown, has been accepted by the department, we fail to understand how in that situation the transaction of the loan creditor with the assessee can be said to be non-genuine and assessee's income from undisclosed sources. It has been held by Hon'ble Gauhati High Court in the case of P.K. Sethi vs. CIT [286 ITR 318 (Gau)] that when all the creditors were income-tax assesses before the same ITO and the latter having accepted the genuineness of loan transactions in the case of the creditors, the cash credits could not be treated as non-genuine in the hands of the assessee. As stated above, in the case before us, all the nine loan creditors are assessed to tax and their return of income for assessment years 2001-02 to 2003-04 have been accepted by the department. Further, the department could not bring on record any conclusive evidence to establish the doubt of the A.O. that assessee's own money has 11 routed through the loan creditors. Therefore, the action of the A.O. in rejecting the loan transaction in its entirety was not justified.
9.1. Now let us consider the addition sustained and confirmed by the ld. C.I.T.(A) on the facts and circumstances given above. Out of the total addition of Rs.12,55,000/- made u/s. 68 of the Act, the ld. C.I.T.(A) deleted the addition of Rs.9,70,000/- and sustained the same to the extent of Rs.2,85,000/- as per table below :-
Sl.No. Name of Creditor Loan Accepted by Sustained by
Amount C.I.T.(A) CIT(A)
01 Rajendra Kr. Agarwala 2,20,000 1,50,000 70,000
02 Prahlad Kr. Agarwala 3,85,000 2,00,000 1,85,000
03 Bimla Devi Agarwala 1,00,000 1,00,000 Nil
04 Beharilal Agarwala 1,00,000 70,000 30,000
05 Sushila Devi Agarwala 1,00,000 1,00,000 Nil
06 Sarita Agarwala 50,000 50,000 Nil
07 Rajendra Kr. Agarwala (HUF) 1,00,000 1,00,000 Nil
08 Sumit Kr. Agarwala 1,00,000 1,00,000 Nil
09 Amit Kr. Agarwala 1,00,000 1,00,000 Nil
TOTAL 12,55,000 9,70,000 2,85,000
We observe that the ld. C.I.T.(A) after considering the returned income of each of the above nine cash creditors for assessment years 2001-02 to 2003-04, found their creditworthiness at sl. Nos. (3), (5) to (9) above to justify the genuineness of loan advanced by them to the assessee totalling to Rs.9,70,000/-. In the same way, the ld. C.I.T.(A) partially sustained the addition totalling to Rs.2,85,000/- in respect of cash creditors appearing at sl. Nos. (1), (2) & (4) above. After considering the facts of the case and evidence on record, we do not find any reason to interfere with the said conclusion of ld. C.I.T.(A). In the above circumstances of the case, in our opinion, the ld. C.I.T.(A) has rightly deleted the addition of Rs.9,70,000/- and sustained the balance addition of Rs.2,85,000/-. In view of the above the grounds taken by the assessee as well as the department on this issue are dismissed.
10. In the result, the appeals of the assessee and the department both are dismissed.
यह आदे श खुले Ûयायालय मɅ सुनाया गया है This order is pronounced in the open Court on 30.09.2010.
Sd/- Sd/-
सी.
सी.डȣ.
(सी डȣ.राव)
राव लेखा सदःय ौी बी
(ौी बी.. आर.
आर. िमƣल)् Ûयायीक सदःय
(C.D.Rao), Accountant Member (B.R.Mittal), Judicial Member
(तारȣख)
तारȣख) Date: 30 -09-2010
12
आयकर अपील संÉया / ITA Nos. 1391 & 1455 (Kol) of 2007
आदे श कȧ ूितिलǒप अमेǒषतः-
Copy of the order forwarded to:
1. Sri Sajan Kr. Agarwala, C/o. M/s. Silver Palace, Mangaldeep Building, Hillcart Road, Siliguri.
2I.T.O., Ward - 1(1), Siliguri
3. The CIT(A)-Jalpaiguri
4. The CIT, Jalpaiguri 5 DR, ITAT, Kolkata Benches, Kolkata 6 Guard file.
स×याǒपत ूित/True Copy, आदे शानुसार/ By order,
(dkp)
उप पंजीकार/Deputy Registrar.
13