Income Tax Appellate Tribunal - Mumbai
Shakti Cable Industries, Mumbai vs Assessee on 8 May, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH J' BENCH
BEFORE SHRI B.R.MITTAL(JUDICIAL MEMBER) AND
SHRI RAJENDRA (ACCOUNTANT MEMBER)
ITA Nos.3753, 3754 & 3755/Mum/2008
Assessment Years: 1994-95, 1995-96 & 1996-97
Shakti Cable Industries, ITO Ward 22(3)-2,
C/O. K.G.Shah & Company, Mumbai.
57, D.V.Pradhan Road, Hindu Colony
Lane No.1, Dadar, Vs.
Mumbai-14
PA No.AAAFS 1211 R
(Appellant) (Respondent)
Appellant by : Mrs Ritika Garg
Respondent by: Shri D.S.Sunder Singh
Date of hearing: 8.5.2012
Date of pronouncement: 15 .6.2012
ORDER
Per B.R.Mittal, JM:
The assessee has filed these three appeals for assessment years 1994-95 to 1996-97 against separate orders of ld CIT(A) all dt.27.3.2008. In all these appeals, there are mostly similar facts and identical grounds, save and except that the amounts disputed in A.Y. 1994-95 is Rs.65,33,021 on account of loan transaction and Rs.13,08,010 on account of interest, in assessment year 1995-96 disputed amount is Rs.27,76,867 on account of loan transaction and Rs.13,00,185 on account of interest and in A,Y. 1996-97 disputed amount is Rs.26,90,067 on account of loan transaction and Rs.13,70,375 on account of interest. Hence, we heard these appeals together and dispose off the same by a common order for the sake brevity and convenience.
2. The relevant facts are that assessee is a firm engaged in the business of manufacturing electrical wires, cables and flexible. The assessee filed the original return of income for assessment year 1994-95 declaring total income of Rs.17,361 on 2 ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97 31.10.1994. Subsequently, assessee filed revised return of income declaring loss of Rs.1,87,253 on 25.11.1994. The original assessment was completed under section 143(3) of the Act on 9.12.1996 determining the total loss of Rs.1,87,253. The assessment was reopened by issue of notice u/s.147 r.w.s 148 of the Act dt.15.2.2000. It is relevant to state that AO recorded the reasons before initiating reassessment proceedings; copy of it is placed at page 32 of paper book. In response to notice issued under section 148 of the Act, assessee did not file any return but stated that return earlier filed might be treated as a fresh return.
3. During the course of assessment proceedings, assessee was asked to file details of unsecured loans as per Schedule-E to the balance sheet. However, assessee could not furnish any confirmation apart from filing a statement of loans and interest. Further, assessee stated that the factory was closed down due to huge losses incurred by the assessee and also some of the partners had left India. It was also stated that furnishing of information regarding unsecured loans was not acceptable. The AO has stated that the contention of the assessee was not possible as it was not related to furnishing of information regarding the loans availed and the assessee might have kept detailed identity of all the loan parties to whom interest payments were made. For the assessment year 1994-95, assessee claimed to have made interest payments of Rs.13,08,010. The AO has stated that the amount of loans raised by the assessee during the previous year comes to Rs.68,18,021. The AO also stated that in the absence of any details filed, he had no alternative but to treat the amount of unsecured loans raised during the previous year relevant to assessment year 1994-95 as unexplained capital u/s.68 of the I.T.Act, 1961 and added to the income of the assessee while making the assessment u/s.143(3) r.w.s. 147 of the Act dated 26.3.2002. The AO also disallowed interest of Rs.13,08,010. Thus, the assessment was completed determining the total income of the assessee at Rs.79,38,778 after making addition of Rs.81,26,031 (Rs.68,18,021 + Rs.13,08,010) on account of unsecured loans and interest.
4. Similarly for assessment year 1995-96, assessment was made under section 143(3) r.w. sec 147 of the Act determining total income at Rs.11,25,260 after making 3 ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97 addition of unsecured loans and interest of Rs.45,67,052 (Rs.32,46,867 on account of unexplained loans + Rs.13,20,185 on account of interest) by order dated 26.3.2002.
5. Similarly, for assessment year 1996-97, assessment was made under section 143(3) r.w. 147 of the Act determining total income at Rs.35,29,120 after making addition of unsecured loans and interest of Rs.46,98,442 (Rs.33,28,067 on account of unexplained loans + Rs.13,70,375 on account of interest) by order dated 26.3.2002.
6. Being aggrieved, assessee filed appeals before the first appellate authority disputing initiation of reassessment proceedings as well as additions made by the AO on account of cash credits i.e. unsecured loans and interest u/s.68 of the Act for all these three assessment years under consideration. However, ld CIT(A) by a common order dt.11.6.2002 confirmed the action of the AO regarding initiation of reassessment proceedings as well as additions made by the AO u/s.68 of the Act. It is relevant to state that ld CIT(A) while confirming the action of the AO to initiate reassessment proceedings for all three assessment years under consideration, stated that assessee did not file loans confirmations. Nor names of the creditors appearing in Schedule-E of the balance sheet, their addresses and confirmations were filed. He further stated that assessee did not file any loan confirmations and other details even during the course of regular assessment proceedings and after placing reliance on the decision of Hon'ble apex court in the case of Tax Officer cum Regional Transport Officer vs Durg Transport Co. P. ltd., 85 ITR 156(SC) and the decision of Hon'ble Allahabad High Court in the case of Pradeep Kumar Har Saran Lal v. Assessing Officer, 229 ITR 46(All) held that recourse to reassessment proceedings could not be said to be illegal. In regard to confirmation of bogus loans and disallowance of interest, ld CIT(A) in his order dated 11.6.2002 stated that simply filing of balance sheet and profit and loss account could not be treated as disclosure of material information. Further, the assessee did not file any evidence to prove the genuineness of cash credit in different assessment years. He further stated that despite having been given sufficient opportunity, the assessee could not furnish any confirmatory letters from the creditors but making general submissions that the factory was closed down due to huge losses and some of the partners left the country. Ld CIT(A) also stated that even proper 4 ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97 addresses of the creditors could not be furnished before the AO and thereby no request was made to summon the creditors. Therefore, the identity of the alleged creditors also could not be established in any manner. Ld CIT(A) stated that no basic information was made available with the assessee and was never furnished before the AO despite having been given sufficient opportunities. Ld CIT(A) placed reliance on the decision of Hon'ble Allahabad High court in the case Nanak Chandra Laxman Das v. Commissioner of Income-tax, 140 ITR 151(All), wherein, it was held that where the assessee fails to prove to the satisfaction of the AO the source and nature of the amount of cash credits, he is entitled to draw an inference that the receipts are of income nature. Ld CIT(A) also referred to the decision of Hon'b le apex court in the case of Commissioner of Income-tax v. Durga Prasad More, 72 ITR 807(SC) and stated that once having drawn an inference u/s.68, the AO is not duty bound to locate the exact source of cash credits because all these facts are exclusively within the knowledge of the assessee. Ld CIT(A) also referred to the decision of Hon'ble Allahabad High Court in the case of Jagdish Saran Shukla v. Commissioner of Income-tax, 171 ITR 694(All) and stated that where the assessee does not furnish the addresses, there is no duty on AO to issue summons also. Ld CIT(A) also stated that Hon'ble M.P.High Court held in the case of CIT vs. Shiv Shakti Timbers, 229 ITR 505(MP) that when the credit entries in assessee's book are not satisfactorily explained by proper documentary evidence, the deeming fiction created u/s.68 of the Act will be invited. Ld CIT(A) stated that in order to establish the identity of the creditor and to satisfy the AO that the entry is real and not fictitious, the assessee has to file the confirmation of the creditors but in the case of the assessee, even the confirmations were not filed. He stated that onus is on the assessee to prove the identity, creditworthiness and genuineness of transaction because the source of the credit is within the knowledge of the assessee and section 106 of the Evidence Act requires the assessee and not the department to disclose it and to prove it. Ld CIT(A) also stated that in spite of giving sufficient opportunities to the assessee, even basic requirement of filing confirmatory letters with addresses and PAN No/GIR No. also could not be furnished and, therefore, AO rightly used his discretion to draw an inference that the receipts are of an assessable nature. Ld CIT(A) also placed reliance on the decision of Hon'ble Bombay High Court in the case of Orient Trading Co.Ltd vs. CIT, 49 ITR 723(Bom),wherein, it was held that the AO is entitled to satisfy himself 5 ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97 as to the true nature and source of amounts of cash credits entered in the books of account of the assessee and if he is satisfied that there is no satisfactory explanation as to those entries, he would be entitled to regard them as representing the undisclosed income of the assessee. Ld CIT(A) stated in the above order dated 11.6.2002 that the very first element of proving the cash credit i.e. the identity of the creditors could not be met by the assessee. Accordingly, ld CIT(A) confirmed the additions made by the AO relating to cash credits, inter alia, for all the three assessment years under consideration i.e. A.Ys. 1994-95, 1995-96 and 1996-97 including interest thereon.
7. Being aggrieved, assessee filed appeals before the Tribunal being I.T.A. No.4194 to 4196/M/2003. The Tribunal after hearing ld Sr Counsel Shri Arvind Sonde and ld D.R. Shri Durgesh Sumsott passed a common order dated 29.9.2005, copy placed in the paper book of A.Y. 1994-95 at pages 142 to 144. In the said appeals, assessee disputed (i) validity of reopening of assessment u/s.147 and (ii) additions made u/s.68 of the Act for all the three assessment years under consideration i.e. AYs 1994-95 to 1996-97. On perusal of the said order of the Tribunal dated 29.9.2005, it is observed that during the course of hearing, ld Sr. counsel for the assessee, Shri Arvind Sonde opted not to press, the ground relating to reopening of assessment for all the three assessment years under consideration and, accordingly, the said ground was decided against the assessee. However, in respect of addition of Rs. 68,18,021 for A.Y. 1994- 95, Rs.32,46,867 for A.Y. 1995-96 and Rs.33,28,067 for A.Y. 1996-97 made u/s.68 of the Act on account of unexplained borrowed funds, the Tribunal has stated that during the course of hearing, ld counsel for the assessee filed a bunch of evidences comprising of confirmation letters of most of the creditors with a request to admit them as additional evidence as they were not filed either before the AO or ld CIT(A). It was stated before the Tribunal that due to non repayment of unsecured loans, there was tremendous resentment and non co-operation from the borrowers and due to these reasons; assessee could not produce loan confirmations of the parties who had given loan to the assessee. It was urged before the Tribunal that in the interest of justice, the said confirmation letters should be admitted and the matter may be restored back to the file of the AO for verification. In view of above, the Tribunal set aside the orders of authorities below with regard to additions made u/s.68 of the Act and restored the issue 6 ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97 to the file of AO for his re-adjudication after admitting confirmation letters as additional evidence.
8. Pursuant to above order of the Tribunal dated 29.9.2005, it is observed that the Tribunal had confirmed the action of the AO to initiate reassessment proceedings for all the three assessment years and in respect of addition made u/s.68 of the Act in respect of unsecured loans and interest, restored the matter to the file of the AO for re- adjudication.
9. For all these three assessment years under consideration, assessment orders were passed on 28.12.2006.
10. The AO has stated in the assessment order for A.Y. 1994-95 that assessee filed 98 loan confirmations letters out of 145 parties claimed by the assessee. He has stated that as per direction of ITAT, assessee was given ample opportunities to produce the parties. The assessee was asked to produce copies of bank statements and copies of income tax return and particulars of the creditors. AO has stated that since the assessee has not produced the documentary evidence for the same, notice u/s.133(6) of the Act was issued to all the parties where the assessee filed loan confirmation letters. He has stated that only 8 parties, details mentioned in page 7 of the assessment order confirmed and filed details called for stating that they have given loan to the assessee. Thus, the AO accepted genuineness of the loans stated by the said 8 parties aggregating to Rs.2,85,000. He has stated that some of the parties have confirmed the loans without producing the details called for and, therefore, same is not acceptable. AO has stated that some of the parties have not submitted any details and stated their inability to produce the details called for and some of the parties have not responded for the notice issued. The AO has stated that assessee has not produced any of the parties for verification. Since, onus lies on the assessee to prove the genuineness and creditworthiness of the creditors which the assessee failed to prove, the AO after accepting genuineness of loan of Rs.2,85,000 from the said 8 parties, confirmed balance loans which comes to Rs.65,33,021 as unexplained cash credit u/s.68 of the Act. The AO has stated in respect of interest that assessee has not produced any details till 7 ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97 date and in the absence of the same, it is not possible to allow the claim of the assessee in regard to interest and added the said amount of Rs.13,08,010 to the income of the assessee. Being aggrieved, assessee filed appeal before ld CIT(A). It is relevant to state that assessee filed some additional evidences before ld CIT(A) which were admitted by him and sought remand report from the AO. The AO submitted his remand report dated 18.10.2007 and 7.3.2008, copies of which are also placed at pages 18 to 20 and 21 & 22 of PB respectively for A.Y. 1994-95. The contents of the said remand report are also stated by Ld CIT(A) in the impugned order at pages 5 to 10 in para 4.4. Ld CIT(A) after considering the submissions of the assessee and remand report of the AO vide paras 4.5 to 4.7 of the impugned order, confirmed the addition of loan of Rs.65,33,021 for A.Y. 1994-95 which reads as under:
4.5 I have gone through the submission made by the appellant, order of the A.O and the remand report submitted, carefully and it is noticed that during the assessment proceedings, the A.O has given number of opportunities to the appellant to produce parties or confirmation letter along with documentary evidences to prove the genuineness of the loans.
Before me, almost one year period was allowed to produce the documentary evidence to prove the genuineness of loans and time was also allowed after admitting additional evidences to produce these parties and confirmations before the Assessing Officer But the appellant has produced only affidavits of the broker along with list of creditors, In some cases addresses, PA Debit/Credit entries and closing balances were given. But in most of the cases, only names of the parties were given. For example, in page 223, SI. No. I to 12, addresses are not shown. Similarly, in page 237, addresses and PAN details are not provided. In page No. 238 SI. No. 152 to 165, addresses and PAN details were not given, in page No.239 SI. No. 162 to 177 no PAN details were given, in page 240 SI. No. 178 to 189 no addresses were given, in page No. 241 SI: No. 192 to 201 no addresses no PAN details were given, in page No. 242 arid 243, SI. No. 202 to 215 no addresses and PAN details were given. In other pages also only names of the creditors were given and addresses and PAN details were not provided. It shows that the brokers affidavit, who do not know even addresses of the parties from whom he has arranged the loans, seems to have no sanctity.
4.6 Secondly, the appellant has argued that summons to 98 parties were served is also not correct because the A.O has issued notices u/s 133(6) to 98 parties where the addresses were provided by the appellant, but only 8 parties have responded. It does not mean that the notices were served in 98 parties. It rather shows that addresses given by the appellant may be incorrect or parties have not responded for submitting 8 ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97 the information. The appellant has further submitted that the A.O has issued summons beyond the period of 6 years and the parties did not have the records beyond the period of six years, which indirectly proves that neither the appellant nor the parties from whom loans are received have any evidences to prove the genuineness of loans. The AO has given reasonable opportunities to the appellant during the assessment proceedings and almost one year time was given to the appellant by this office, but he could not produce any further evidences to justify his claim. There is plethora of judicial decisions of Hon'ble Courts which confirm that burden is on the appellant to prove the source of receipt. It is the primary responsibility of the appellant to establish the identity of the creditor1 creditworthiness and genuineness of the transaction. It is also held that mere mentioning of Income tax file number of creditor will not suffice. Reliance is placed on the following decisions:
i) Roshan Di Hatti Vs CIT (1977) 107 ITR 938 (SC).
ii) Kale Khan Mohammed Hanif Vs CIT (1963) 50 ITR 1 (SC)
iii) V Datchinamurthy Vs AD of Inspection (1984) 149 ITR 341 (Mad)
iv) Income tax Officer Vs Diza Holdings Pvt Ltd (2002) 120 Taxman 539 (Ker)
v) Addl CIT vs Ghailime Stone Co (1983) 144 ITR 140(MP)
vi) Dhansiram Agarwalla Vs CIT (1995) 81Taxman 1 (Gau)
vii) Sumati Dayal Vs CIT (1995) 80 Taxman 89 / 214 ITR 801 (SC)
viii) CIT Vs United Commercial & Industrial Company Pvt Ltd (1991) 187 ITR 596 (Cal)
ix) Oceanic Products Exporting Company vs CIT (2000) 241 ITR 497 (Ker)
x) Addl. CIT vs Bahri Bros Pvt Ltd (1985) 154 ITR 244 (Pat)
xi) CIT vs Precision Finance Pvt Ltd (1994) 121 CTR (Cal) 20.
xii) CIT vs R S Rathore (1995) 212 ITR 390 (Raj)
xiii) CIT vs Korlay Trading Company Ltd (1998) 232 ITR 820 (Cal)
xiv) CIT vs M Ganapathi Mudaliar (1964) 53 ITR 623 (SC)
xv) A Govindrajulu Mudaliar vs CIT (1958) 34 ITR 807 (SC).
4.7 Keeping in view the facts and circumstances, and the above cited judicial pronouncements, it is concluded that the appellant has failed to produce documentary evidences before the A.O or before me to establish the identity, creditworthiness and genuineness of the transactions of loans received. Merely filing of affidavit of the broker with the lenders names cannot be called as confirmation without proving the identity, creditworthiness and genuineness of transaction. A large number of opportunities were provided to the appellant to file the confirmations along with bank statements, mode of payment / receipt i.e. cheque number, date etc and identity and creditworthiness of the creditors of providing so many opportunities, the appellant could not submit any further evidence to prove the genuineness of the loans except taking plea that loans were very old, firm is closed and the creditors are non cooperative. Since the appellant has failed to prove these loans with any documentary evidences, as the onus lies upon him as per the judicial 9 ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97 pronouncements cited above. Therefore, the grounds of appeal are dismissed and the action of the AO is confirmed."
10.1 Ld CIT(A) also confirmed, as mentioned herein above, the disallowance of balance interest of Rs.12,83,560 vide para 5.2 of the impugned order, which reads as under:
"5.2 I have gone through the submission made by the appellant, order and remand report of the Assessing Officer. In the remand report, the A.O has stated that, she has admitted Rs.2,85,000/- as genuineness loans and interest paid to 8 parties amounting to Rs.24,4501- may be allowed. Keeping in view the facts and circumstances that genuineness of loans have been proved in these cases, interest amounting to Rs.24,450/- is allowed. Balance addition of Rs. 12,83,560/- is confirmed as the appellant has failed to prove the identity of the persons to whom interest has been paid-, genuineness of transaction by submitting the details of cheque No., date and amount etc. Since the appellant has not submitted the details as called for relating to cash credits and interest paid, therefore, the ground is dismissed and order of the A.O is confirmed."
10.2 Ld CIT(A) by the impugned order dated 27.3.2008 confirmed the addition of loan of Rs.65,33,021 but in respect of interest, he has allowed deduction of Rs.24,450 relating interest paid to said 8 parties, whose loans of Rs.2,85,000 was admitted as genuine and confirmed balance addition of Rs.12,83,560.
11. Similarly, for A.Y. 1995-96, the AO vide order dated 28.12.2008 has stated that assessee has only filed 102 loan confirmation letters out of 179 parties claimed in the submission filed on account of unsecured loan of Rs.32,46,867. Since the assessee could not produce any documentary evidence for the same, notice u/s.133(6) of the Act was issued to all parties where the assessee filed loan confirmations letters. The AO stated that only 5 persons confirmed with evidence that they had given loan to the assessee, the details of which are mentioned in para 7 of the assessment order for an aggregate sum of Rs.4,70,000. The AO after giving credit of Rs.4,70,000 confirmed the balance amount of Rs.27,76,867 u/s.68 of the Act for the reasons mentioned hereinabove relating to assessment year 1994-95. The AO also confirmed the disallowance of interest of Rs.13,20,185 as the assessee could not furnish any details.
10ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97 Being aggrieved, assessee filed appeal before ld CIT(A). Since the assessee filed additional evidence before ld CIT(A), ld CIT(A) after seeking remand report from the AO as mentioned in para 4.4. of the impugned order and the reasons mentioned hereinabove relating to A.Y. 1994-95, confirmed the action of the AO for an addition of loan of Rs.27,76,867 and disallowance of interest of Rs.13,00,185 out of interest of Rs.13,20,185 made by the AO, after deducting interest of Rs.20,000 on admitted loan of Rs.4,70,000 (wrongly mentioned in the order Rs.4,00,000).
12. Similarly, for A.Y. 1996-97, the AO while making the assessment dated 28.12.2006 has stated that assessee only filed 88 loan confirmation letters out of 148 parties claimed in the submission filed on account of unsecured loan of Rs.33,28,067. Since the assessee could not produce any documentary evidence for the same, notice u/s.133(6) of the Act was issued to all parties where the assessee filed loan confirmations letters. The AO stated that only 7 persons confirmed with evidence that they had given loan to the assessee, the details of which are mentioned in para 7 of the assessment order for an aggregate of Rs.6,38,000. The AO after giving credit of Rs.6,38,000 confirmed the addition of balance amount of loan Rs.26,90,067 u/s.68 of the Act for the reasons mentioned hereinabove relating to assessment year 1994-95. The AO also confirmed the disallowance of interest of Rs.13,70,375 as the assessee could not furnish any details. Being aggrieved, assessee filed appeal before ld CIT(A). Since the assessee filed additional evidences before ld CIT(A), ld CIT(A) after seeking remand report from the AO as mentioned in para 4.4. of the impugned order and the reasons mentioned hereinabove relating to A.Y. 1994-95, confirmed the action of the AO for an addition of loan of Rs.26,90,067 and disallowance of interest of Rs.13,70,375 out of interest of Rs.13,20,185 made by the AO.
13. Being aggrieved, assessee filed appeals before the Tribunal in respect of all these three assessment years under consideration.
14. As mentioned hereinabove, grounds of appeal for assessment years under consideration are basically same except the amount of additions vary. Therefore, we take up grounds of appeal for assessment year 1994-95 relating to which, 11 ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97 representatives of both the parties made their submissions at length. Subsequently, assessee has filed concise grounds of appeal, which we take into consideration for adjudication.
15. In Ground No.1 of appeal, assessee has disputed the validity of reassessment proceedings.
16. At the time of hearing, attention of ld A.R. was drawn to the earlier order of the Tribunal dated 29.9.2005. The Tribunal at the time of hearing of appeals in the first round dismissed the above ground i.e. relating to disputing validity of reassessment proceedings as ld Counsel of assessee Shri Arvind Sonde opted not to press the said ground. Therefore, it was impressed upon to ld A.R. that the said issue has been concluded by earlier order of the Tribunal and the same cannot be agitated again in the second round of appeal before the Tribunbal. Ld D.R. also submitted that these appeals are arising out of order passed by the Tribunal dated 29.9.2005 by restoring the issue in respect of examining genuineness of loans taken by the assessee and issue relating to initiation of reassessment proceedings by the AO was decided against the assessee by the Tribunal. However, ld A.R. submitted that earlier order was passed by the Tribunal by giving consent by then ld A.R. appearing on behalf of assessee. Ld A.R. Mrs Ritika Garg now appearing on behalf of assessee before us submitted that the submission made by then ld A.R. of assessee before the Tribunal is not binding on the assessee as the said submission was given inadvertently or by mistake. When we stated that we do not agree with ld A.R. now appearing before us and tried to persuade ld A.R. that the said ground of validity of reassessment cannot be agitated before us as the earlier order of the Tribunal dated 29.9.2005 dismissing the ground of appeal relating to initiation of reassessment proceedings still subsists and is binding on us. However, ld A.R. referred to the decision of Hon'ble apex Court in the case of National Thermal Power Co. Ltd vs CIT, 229 ITR 383(SC) and submitted that the reopening of assessment is a question of law and same can be reagitated by the assessee even in the second round of appeal although in the first round of appeal, the Tribunal dismissed the same as ld A.R. Mr Sonde did not press for it. We do not find merit in above submission of ld A.R as the said case of NTPC (supra) does not apply to the issue at hand as in that case Hon'ble 12 ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97 Supreme Court stated that the issue relating to jurisdiction can be raised for the first time in appeal before the Tribunal provided all the facts are on record to correctly assess the tax liability. In the case before us, it is not the issue but the issue is as to whether the same issue can be re-agitated by the assessee before the Tribunal when the Tribunal had already decided it against the assessee. Hence, we reject the applicability of the decision of Hon'ble Supreme Court in the case of NTPC (supra) cited by ld A.R. Attention of ld A.R. was also drawn to the fact that this ground is also not arising out of order(s) passed by ld CIT(A), ld A.R. relied on the decision of Hon'ble Kerala High Court in the case of Smt. Madhu Patani (2009) 18 DTR (Ker) 110 and the decision of ITAT (SB) in the case of Mahindra and Mahindra, 313 ITR 263 (AT) and submitted to us to restore the matter to the file of AO or CIT(A) to consider the validity of reopening of assessment afresh.
17. We have considered the aforesaid cases cited by ld A.R. but they are not relevant to the facts of the case before us. In the case of Smt Madhu Patani (supra), it was held that in 2nd round of appeal, ld CIT(A) was justified in admitting legal grounds against an order passed by him because the said ground was not raised in the first round. However, in the case before us, the said very ground was raised by the assessee in the first round of appeal before the Tribunal and the Tribunal decided the said ground against the assessee. Therefore, it is not the case that assessee has raised this ground for the first time before us. For the same reason also, the decision of ITAT (SB) in the case of Mahindra and Mahindra (supra) is not applicable and is referred to out of context before us. Ld A.R. submitted that even if the ground has been raised in the first round of appeal and was decided against the assessee, the assessee can again raise the same ground in the second round of appeal and referred the case of ITAT Chennai, Third member of Hemal Knitting Industries vs ACIT (2010) 48 DTR (Chennai) 393™. We have gone through the said case carefully. We observe that in the said case, the issue relating to validity of proceedings u/s.147 of the Act was raised for the first time in the second round of appeal before the Tribunal though raised before the CIT(A) and in that context, the Tribunal allowed the assessee to raise the issue relating to validity of proceedings u/s.147 of the Act on the ground that in the first round of proceedings, the said issue had not reached its finality. However, in the case 13 ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97 before us, there is no dispute to the fact that the Tribunal had already passed the order specifically on this very issue in the first round of appeal and now the assessee in the second round of appeal again want this Bench to sit on the decision of the earlier Bench. Therefore, we hold that case relied upon by ld A.R. is not of any assistance to her.
18. In regard to submission of ld A.R. that admission made by ld counsel is not binding on the assessee unless circumstances are such as to give rise estoppels against the assessee and referred to decision of Hon'ble A.P. High Court in the case of Abdul Hameed Khan v. Commissioner of Income-tax, 63 ITR 738 (AP). We have considered the above case of Hon'ble A.P. High court in the case of Abdul Hameed Khan (supra) and observe that the said case is also not relevant to the contention of ld A.R. On the other hand, we observe that assessee never disputed the order passed by the Tribunal dt.29.9.2005 dismissing the ground of the assessee that reassessment proceedings initiated by the AO is not valid. Further, the said order of the Tribunal still subsists and as has been held by various High Courts that the Tribunal has no power to reconsider the finding or information of question which have become final and concluded cannot be reopened. Moreover, the co-ordinate bench cannot sit on the decision of earlier Bench. We are of the considered view that if the assessee was aggrieved by the order of the Tribunal in dismissing ground of appeal in the first found of appeals, the assessee could file further appeal before Hon'ble Jurisdictional High Court if the assessee was of the view that the then ld A.R appearing on behalf of assessee before the Tribunal gave his consent to dismiss the ground against the assessee mistakenly or inadvertently or without taking consent of the assessee. We may state that assessee has taken technical plea to re-agitate the issue which have attained finality in the first round of appeal with an intention to keep the issue alive and to keep it unconcluded. Therefore, we are of the considered view that assessee has no merits as far as ground No.1 of appeal taken by the assessee disputing the validity of reassessment order. Hence, Ground No.1 is dismissed.
19. In Ground No.2 of appeal, assessee has again taken a technical ground that the AO who passed the order did not have jurisdiction in the absence of order u/s.127 of the I.T.Act, 1961. The assessee has taken this ground also for the first time before us.
14ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97 There was no specific submission by the assessee on this ground at the time of hearing of appeal. However, in the synopsis filed, assessee has relied upon the order of Hon'ble Gujrat High Court in the case of Madhu Khurana vs CIT, 47 DTR (Guj) 289 and the order of Hon'ble Calcutta High Court in the case of Kusum Goyal vs ITO (2010) 329 ITR 283 (Cal). It is stated in the synopsis that an opportunity of hearing to the assessee has to be given before transferring the case by passing an order u/s.127(1) of the Act. We observe from the assessment order passed by the AO that in para 5, it is stated that the case was assigned to the AO who has passed order as per notification No...Addl..CIT/Range-22(3)/Notification/06-07 dated 26.7.2006. In this regard, we consider to state Section 127(1) which provides as under:
"(1) The Director General or Chief Commissioner or Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him."
20 On perusal thereon, it is stated that when the case is transferred from one or more AO(s) subordinate to him to any other AO(s) also subordinate to him, reasons are to be recorded and also give a reasonable opportunity of hearing the matter, wherever it is possible to do so. In the case before us, there is no fact placed by the assessee that reasons were not recorded by the concerned Chief Commissioner/Commissioner of Income tax before transferring the jurisdiction from one AO subordinate to him to another AO subordinate to him. Moreover, the AO has specifically mentioned in para 5 of the assessment order that the case is assigned to him as per Notification dt.26.7.2006(supra). Further, this ground is also not arising out of the order of the authorities below. In the absence of any relevant facts placed on record and in the absence of any specific submission made to point out as to whether any prejudice caused to the assessee, we do not find any merit in Ground No.2 of appeal taken by the assessee and, accordingly same is rejected.
15ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97
21. In Ground Nos.3 to 5, assessee has disputed the order of ld CIT(A) in confirming the addition of Rs.65,33,021 on account of unsecured loans.
22. As mentioned hereinabove, the Tribunal in the first round of appeal proceedings, vide order dated 29.9.2005 restored the matter to the file of AO for his re-adjudication in the light of confirmation letters filed by the assessee before the Tribunal after admitting them as additional evidence.
23. At the time of hearing, ld A.R. submitted that the AO while passing assessment orders proceeded on assumption that notices issued u/s.133(6) were served on the loan creditors. Ld A.R. submitted that loans were arranged by broker and the assessee filed an affidavit of the broker Shri Bhojraj Lilaram Raheja confirming that he had arranged loans from different parties, and copy of affidavit is placed at pages 136 to 141 of PB. Ld A.R. submitted that AO failed in his duty to cross examine the broker and not to take cognizance of the said affidavit. Ld A.R. relying on the decision of Hon'ble Supreme Court in the case of Mehta Parikh and Co. v. Commissioner of Income-tax,30 ITR 181(SC) submitted that if the persons who gave affidavits were not cross- examined, it was not open to the Revenue to challenge the correctness of the cash book entries or the statements made in the affidavit. We are of the considered view that said affidavit merely states that he arranged loans from different parties whose addresses are mentioned therein but no supporting evidences have been attached thereto. Since the said broker is not a loan creditor and no evidence is placed on record to substantiate the contents thereof, we are of the considered view that AO was justified not to take cognizance of the said affidavit as it serves no purpose to establish that the loans received by the assessee are genuine nor the said affidavit establishes the identity of the loan creditors.
24. Further, ld A.R. also contended that additions made u/s.68 could be made only upon entries in the books of account and referred the decision of Hon'ble Gauhati High Court in the case of Anand Ram Raitani v. Commissioner of Income-tax, 223 ITR 544(Gau) and decision of ITAT Delhi Bench in the case of Ms Mayawati vs DCIT (2008) 19 SOT 460(Delhi). Ld A.R. also referred the decision of Hon'ble Madras High 16 ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97 Court in the case of CIT vs. Taj Borewells (2007) 291 ITR 232(Mad). Ld A.R. further submitted that assessee filed confirmation letters from 98 loans creditors out of 145 loan creditors and the AO should have examined the said loan creditors and merely issuing of notice u/s.133(6) of the Act is not sufficient. Ld A.R. submitted that when the details were provided by filing confirmation letters, assessee discharged his onus and if the concerned person failed to appear before the AO in response to notice issued, assessee should not be made to suffer for the default of the concerned person(s). In this respect, ld A.R. placed reliance on the following cases:
i) CIT vs. Creative World Telefilms Ltd, 15 Taxman.com 183(Bombay)
ii) CIT vs. Lovely Exports (P)Ltd., 216 CTR (SC) 195
iii) CIT vs. N.P.Garodia (2009) 310 ITR 62(P&H)
iv) CIT vs. Carbo Indl. Holdings Ltd., 244 ITR 422(Cal)
v) CIT vs. Orissa Corporation P. Ltd., 159 ITR 78(Ori)
vi) LIC vs. CIT, 219 ITR 410 (SC)
vii) CIT vs. U.M.Shah, 90 ITR 396(Bom)
viii) Nathu Ram Premchand vs CIT, 49 ITR 561(All)
25. Ld A.R. further submitted that assessee filed confirmation letters and the same were not considered by the authorities below judiciously. She submitted that if the documents filed were not controverted, no adverse inference should be drawn against the assessee. She submitted that even if the loan creditors to whom notices were issued did not respond, AO should have proceeded against the loan creditors to make the additions in their hands and not in the hands of the assessee. She submitted that assessee borrowed money and the requisite details were furnished before the AO but they could not be produced in person as they were not cooperating with the assessee on account of non-payment of loans or interest and, therefore, assessee should not be made to suffer. Ld A.R. further submitted that under section 68, it is provided that if the explanation furnished by the assessee is not, in the opinion of AO, satisfactory, sums so credited may be charged to tax as income of the assessee. She submitted that the word 'may' cannot be interpreted as 'shall' and the addition cannot be made without giving adequate opportunity to the assessee. Ld A.R. submitted that some of the loans were taken by the assessee in earlier years and they were brought forward but the 17 ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97 CIT(A) did not consider the said submissions of the assessee and made the addition aggregating to Rs.65,33,021 which was the closing balance as on 31.3.1994. When a query was raised before ld A.R. as to whether the said plea was taken by the assessee before authorities below, ld A.R. referred to pages 27 to 30 of PB and submitted that out of the said loan, a sum of Rs.20,85,000 was the balance brought forward from prior period. However, ld A.R. could not point out from the statement of facts filed before ld CIT(A) and/or plea taken before the authorities below as to whether the said fact was placed before authorities below or not. In this regard, ld A.R. submitted that she did not handle the matter before the authorities below and, therefore, could not state as to whether the details were furnished or not. Ld A.R. has placed reliance on the following cases to substantiate her above submissions that in the absence of any adverse material brought on record by the department, section 68 cannot be applied to make the addition:
i) Harilal Mannulal vs CIT, 147 ITR 13(MP); ii) CIT vs. Usha Stud Agricultural Farms Ltd; 183 Taxman 277(Del) iii) Shri Vardhman Overseas Ltd vs ACIT, 24 SOT 393(Del) iv) Nuchem Ltd vs DCIT,87 TTJ 166 (Del) v) ITO vs Bansi Lal Gupta, 113 TTJ 898 vi) Ms. Mayawati VS DCIT, 19 SOT 470(Del) vii) Anand Ram Raitani vs CIT ,223 ITR 544(Guj) viii) CIT vs. Taj Borewells,291 ITR 232 (Mad) ix) CIT vs. Creative World Telefilms Ltd,15 Taxman.com. 183(Bom) x) CIT vs. Lovely Exports Pvt Ltd, 216 CTR 195 (SC) xi) CIT vs. N.P.Garodia,310 ITR 62 (P&H)) xii) Jalan Timber vs CIT, 223 ITR 11(Gau) xiii) CIT vs. Rohini Builders, 256 ITR 360(Guj) xiv) DCIT vs. Anil Kumar (1997) 58 TTJ 340 (Del.Trib) xv) CITvs. Dwarkhadhish Investments Pvt Ltd;., 330 ITR 298(Del) xvi) Labh Chand Bohra vs. ITO(2010) 189 Taxman 141 (Raj) xvii) Ami chand Jain vs DCIT, 120 TAXMAN 29 (Del) xviii) Aravali Trading Co. vs. ITO, 220 CTR (Raj) 622 18 ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97
26. Lastly, when a query was raised to ld A.R. as to whether she could produce relevant books of account to substantiate her submission that the loan aggregating to Rs.20,85,000 was brought forward from the earlier years and also the books of account to substantiate her submission that the loans were duly entered in the books of account and the interest was paid, ld A.R. submitted that the case has become old and due to flood which took place in 2005, all the books of account have been destroyed and same cannot be produced. Ld A.R. submitted that if there is substantial lapse of time, assessee should not be made to suffer merely because assessee could not explain the transactions which had taken place before a decade back and placed reliance on the decision of Hon'ble Madras High Court in the case of S. Hastimal vs CIT, 49 ITR 273(Mad). Ld A.R. submitted that the addition made by authorities below is contrary to the provisions of the Act and same should be deleted.
27. On the other hand, ld D.R. supported the orders of authorities below. Ld D.R. further submitted that the plea of the assessee that there was opening balance from the preceding assessment year of Rs.20,85,000 had never been taken by the assessee before authorities below and or in the first round of appeal but has been taken for the first time before the Tribunal. Ld D.R. submitted that such plea was also not taken in the remand proceedings before the AO as well. Ld D.R. further submitted that no evidences have been placed in the form of balance sheet pertaining to A.Y. 1993-94 that there was a closing balance as on 31.3.1993 of Rs.20,85,000 and carried to A.Y. 1994- 95 as alleged by ld A.R. Ld D.R. further submitted that assessee has not filed any bank details of loan creditors to substantiate that the loan transactions were genuine. Ld D.R. submitted that merely filing name of loan creditors and to state that assessee has discharged the onus is not sufficient. Ld D.R. submitted that assessee has failed not only to prove the identity of the creditors but also failed to furnish the creditworthiness as well as genuineness of the loans before the authorities below and also failed to place any details with documents to establish genuineness of loans in the second round of appeal. Ld D.R. further submitted that the contention of the assessee that loan period is more than a decade has no merits particularly when the delay has occurred on the part of the assessee because assessee has not furnished details of the loan creditors since 19 ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97 2000 till date. In this respect, ld D.R. referred the remand proceedings of the AO dt.18.10.2007 and submitted that the AO in his remand proceedings also stated that in spite of giving various opportunities to the assessee to prove the genuineness of the loans and interest paid right from February, 2000 to December, 2006 i.e. reopening of assessment u/s.147 to the date of completion of set aside assessment, details were not offered by the assessee. Ld D.R. further referred remand report dated 7.3.2008 and stated that AO specifically stated that assessee was asked on 30.1.2008 to produce the creditors with supporting documentary evidence but the assessee failed to furnish the same. Ld D.R. submitted that AO was fair and judicious in considering the issue and deleted the loans wherever the details were filed before him to establish the genuineness of loan. Ld D.R. further submitted that merely filing of affidavit from a broker does not establish the genuineness of loan or creditworthiness of loan creditors. Ld D.R. further submitted that the cases relied upon by ld A.R. are not relevant as the assessee failed to discharge his onus in spite of giving repeated opportunities to him that the loan creditors are genuine.
28. We have carefully considered the submissions of ld representatives of parties and orders of the authorities below. We have also considered the cases cited by ld A.R. in support of her submissions. We may state that other cases which were cited by ld A.R at the time of hearing have also been considered. However, we do not consider it necessary to deal with each and every case cited by ld A.R. of the assessee as we have found that some of the cases are not relevant and divergent to the facts and issue which is under consideration in these appeals. Hence, we have not dealt with those cases specifically but taken note thereto.
29. We observe that assessee in the second round of appeal filed 98 confirmation letters out of 145 parties and copies of the same are placed at pages 33 to 135 of PB. We observe that save and except filing said confirmation letters, no bank statement, details of cheque for payment/receipt of loans have been stated in the confirmation letters or filed separately by the assessee. Further, assessee has not filed any confirmation letters from the remaining loan creditors i.e. 47 parties for A.Y. 1994-95. It is a fact that AO in order to satisfy the genuineness of loans, issued notice u/s.133(6) of 20 ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97 the Act and in response thereto only 8 parties filed confirmations alongwith documentary evidence for the aggregate loan amount of Rs.2,85,000 and the AO accepted the genuineness of the said loan. In respect of remaining parties, some of the parties confirmed the loan without producing details or some of the parties did not reply at all. The AO brought the above facts to the notice of the assessee but it is a fact that assessee could not produce any details or any party to establish the genuineness and creditworthiness of the loan creditors. We also observe that assessee took a plea that the said loan creditors were not cooperating on account of loans or interest not being paid and assessee has only filed an affidavit of the broker Shri Bhojraj Lilaram Raheja confirming that he had arranged loans from various parties, details stated in the affidavit, copy of which is placed at pages 136 to 141 of PB. We are of the considered view that the said contention of ld A.R. as well as affidavit filed do not discharge the onus that lay upon the assessee to prove the genuineness of the loans transaction. Merely by taking a plea, the assessee cannot shift the onus on the department. The assessee stated that the loans received by a/c payee cheque but no details of the bank or bank statements were filed by the assessee to substantiate the said contention. Simply filing of confirmation letters does not establish the identity of the loan creditors. As held by Hon'ble Allahabad High Court in the case of Jagdish Saran Shukla(supra) that unless the assessee furnish the addresses, there is no duty on AO to issue summons also. The Hon'ble Bombay High Court in the case of Orient Trading Co.Ltd(supra) held that the AO is entitled to satisfy himself as to the true nature and source of amounts of cash credits entered in the books of account of the assessee and if he is satisfied that there is no satisfactory explanation as to those entries, he would be entitled to regard them as representing the undisclosed income of the assessee. In the case before us, assessee has not only failed to produce the books of account to substantiate the unsecured loans taken by the assessee as per balance sheet, but also at the time of hearing, admitted that assessee could not produce the books of account even if assessee was asked to produce them before us and simply took plea that it is an old matter and books of account have already been destroyed. It is an established fact that onus is on the assessee to establish the source of the credit with sufficient documentary evidence and if the assessee fails to prove the same, the department can draw an adverse inference against the assessee. In this regard, we are supported by 21 ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97 the observation of Hon'ble Supreme Court in the case of Sumati Dayal Vs CIT(supra). On the other hand, it was held by Their Lordships of Hon'ble apex court in the case of A Govindrajulu Mudaliar vs CIT(supra) that Where an assessee fails to prove satisfactorily the source and nature of certain amounts of cash received during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipts are of an assessable nature.
30. Ld A.R. submitted that the AO should have enforced the attendance of loan creditors by exercising his power under the I.T.Act and if the loan creditors did not appear before him, the AO should draw adverse inference against them and to make addition in their hands. We are of the considered view that in the facts of the case before us, said contention of assessee has no merits. On the other hand, assessee is shifting his onus on the AO to summon the parties and examine to ascertain the genuineness of loan when admittedly no document has been filed by the assessee to prove not only the identity but also failed to establish creditworthiness of the loan creditors as well as genuineness of loans except filing confirmations of 98 parties out of 145 parties and an affidavit from the broker that he arranged loans for the assessee without any document. We are of the considered view that onus shifts on the department only when assessee discharges his onus establishing prima facie that loan creditors were genuine and also filing the sufficient documents to substantiate the same. The decision of Hon'ble Orissa High Court in the case of Orissa Construction Corporation P. Ltd., (supra) is a case where the AO took no action to verify the conduct and enquiry into the addresses about the creditors furnished by the assessee including their PAN No. but in the case before us, assessee has not filed primary documents to establish the genuineness of the loans in spite of giving various opportunities.
31. Further, we have also considered the cases cited by the assessee before us (supra) and we hold that said cases are not relevant to the case of the assessee. We consider it necessary to specifically discuss the following cases relied by ld A.R.
(a) In the case of Harilal Mannulal vs CIT (supra), we find that sum was found credited in the books of account of the assessee maintained and 22 ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97 the requisite details to substantiate the same were made available before the department unlike in the case before us, where no documentary evidence has been filed by the assessee except confirmation letters in respect of 98 parties out of 145 parties. Therefore, the said case is not relevant to the facts of the case before us.
b) In the case of CIT vs. Usha Stud Agricultural Farms Ltd (supra), we find that cash credit was appearing in the books of the assessee over past 4 to 5 years and there was no fresh credit entry pertaining to relevant assessment year for which addition u/s.68 was made. Considering the above fact, we hold that said case is of no assistance to the assessee because it is well established that genuineness of the loans could be examined in the year in which they were credited to the account of the assessee. In the case before us, assessee has credited the loan amounts in the assessment year 1994-95 and therefore, department is within its right to examine the genuineness of the loans on the basis of documents to be field by the assessee but assessee has admittedly not filed any supporting documents save and except confirmation letters of 98 parties and, therefore, assessee has not discharged the requisite onus to establish the genuineness of loans. Similarly the case of Shri Vardhman Overseas Ltd , 24 SOT 393(Delhi) is not applicable for the reasons as mentioned hereinabove.
c) In the case of Nuchem Ltd vs DCIT (supra), the amount was brought forward from earlier year and not in the relevant assessment year.
d) Similarly in the case of Bansi Lal Gupta (supra), the old credit balance were brought forward from the assessment year 1995-96 and, therefore, it was held that the said loans could not be the subject matter of addition u/s.68 of the Act for A.Y. 2001-02. Therefore, this case is not relevant to the facts of the case before us.
23ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97
e) in the case of Ms. Mayawati (supra), we observe that this was a case where gifts were received and the identity of the donors as well as their creditworthiness was not in dispute. Moreover, gifts were received by A/c payee cheques and donors had also confirmed the gifts. Considering the above fact, it was held that when AO had not doubted the identity of the donors, he could not draw adverse inference that the gifts were not genuine. In the case before us, assessee has failed to prove the creditworthiness as well as genuineness of the loan creditors and, therefore, reliance placed by the assessee on the above case is not relevant.
f) In the case of Anand Ram Raitani (supra) the addition was made based on the book entry of somebody's books and not on the assessee's books of account and in that context, it was held that the amount cannot be added as undisclosed in the hands of the assessee u/s.68 of the Act. The facts of the above case are not applicable to the facts of the case under consideration as in this case, addition has been made based on the entry appearing in the balance sheet of the assessee and assessee has not disputed that the assessee has taken unsecured loans from 145 parties in the assessment year under consideration. However, assessee has failed to establish the identity of the loan creditors as well as the genuineness of loans. No documents have also been placed in spite of giving repeated opportunities to the assessee. Therefore, this case is not applicable to the case of the assessee.
g) Similarly, the case of Taj Borewells (supra) is not applicable to the fact of the case as in that case, assessee established the creditworthiness of the loan creditors unlike the case before us.
h) In the case of Creative World Telefilms Ltd (supra), assessee had given address of the shareholders, therefore, it was held AO could not treat share capitals is bogus in the absence of any investigation.
24ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97
i) Similarly the case of Lovely Exports Pvt Ltd (supra), is a case of share application. The assessee proved that the amount was received by cheque and disclosed the particulars of the shareholders and in that context, it was held that the addition could not be made in the hands of the assessee.
j) Further, the case of N.P.Garodia(supra) is not applicable to the facts of the case. In the case before us, the assessee has not filed any bank statement, particulars of banks evidencing that the assessee received amount by cheque, as made available in above case relied upon. Hence, we observe that the assessee will not get any benefit from the said judgment while placing reliance.
k) Similarly cases of Jalan Timber vs CIT, Rohini Builders, Anil Kumar, Dwarkadhish Investments Pvt Ltd, Labh Chand Bohra, Ami Chand Jain and Aravali Trading Co (supra) are not applicable to the facts of the case before us as in those cases the assessee established the identity of the creditors and filed requisite documents but the AO without making any enquiry made the addition. In that context, it was held that addition made u/s.68 is not justified. Further, in the case before us, as mentioned hereinabove, assessee has not filed ay evidence/ document to establish the genuineness of the transactions as well as creditworthiness of the loan creditors and, therefore, AO was within his right to hold that the loans shown by the assessee are not genuine.
l) The case of S. Hastimal vs CIT (supra), is not applicable to this case as in that case, assessee furnished requisite details of loans taken and the delay had occurred not on account of the fault of the assessee. Therefore, it was held by Their Lordships that after the lapse of a decade, an assessee should not be placed upon the rack and called upon to explain not merely the origin and source of a capital contribution but the origin of origin and source of source as well. In the case before us, it 25 ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97 is not the position that department has asked for to prove the source of source and the origin of origin of the loans. The department has asked the assessee to prove the identity and creditworthiness of loan creditors. The assessee has failed to establish the identity as well as creditworthiness of the loan creditors and also the genuineness of the loans has not been accepted. Moreover, assessee has also not placed on record any document save and except filing of confirmation letters from some of the parties to establish the creditworthiness of the loan creditors and genuineness of the transaction. As mentioned hereinabove, the delay is also occurred not on account of the department but because assessee has not cooperated the department to produce the requisite documents. The department has been following up the matter with assessee since February, 2000 to produce the documents for establishing the genuineness of loans taken by the assessee but assessee failed to produce any documents before the department as well as before us in spite of getting number of opportunities. We observe considering the sequence of events and the orders of authorities below that it is not the fault of the department for such lapse but the assessee has taken the department for granted in not furnishing the requisite details and to allow the AO to exercise his own input to find out whether the loans taken by the assessee are genuine or not.
3.1 We at the cost of repetition state that the cases cited by ld A.R. are not relevant to the facts of the case of the assessee before us and ld A.R. has cited the cases by picking up the facts which are incomplete and has placed reliance thereon. It is well settled principle laid down by the various Courts including the Hon'ble Supreme Court in the case of Sun Engineering, (198 ITR 297) that it is neither desirable nor permissible to pick out a word or sentence from the judgment divorced from the context of the question under consideration and treat it to be the complete law declared by the Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which are before the Court.
26ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97 A decision of the Court takes its colour from the questions involved in the case in which it is rendered and while applying the decision to a later case, the Courts must carefully try to ascertain the true principle laid down by the decision.
31.2 In view of above and considering the facts and circumstances of the case, we hold that ld CIT(A) is justified in confirming action of AO to hold that the said loans of Rs. 65,33,021 are not genuine but is income of the assessee u/s.68 of the Act. We may state that assessee has not produced any evidence before us that the loan aggregating to Rs.2,85,000 is brought forward from earlier year. Therefore, we find ourselves unable to give any direction to authorities below to delete the said amount out of addition made of Rs.65,33,021 treating as undisclosed income of the assessee u/s.68 of the Act. Accordingly, Ground Nos.3 to 5 of concise ground taken by the assessee are rejected by confirming the order of ld CIT(A) to treat the unsecured loan of Rs.65,33,021 as income of the assessee from undisclosed source.
32. In respect of Ground No.6 of appeal, assessee has disputed the disallowance of interest of Rs.12,83,560 (wrongly mentioned in ground of appeal as Rs.13,70,375).
33. During the course of hearing, ld A.R. submitted that the said payment of interest also includes the interest paid to bank and, therefore, the disallowance of entire interest on the presumption that the loans were not genuine is not justified. To substantiate her submission, ld A.R. referred to page 2 of PB which is a copy of Profit and loss account debiting the amount of Rs.13,08,010.21 under the head "interest to bank and others". Ld A.R. further referred page 31 of PB and submitted that interest paid to bank is of Rs.7,62,592 and the interest paid to unsecured creditors was Rs.5,45,418. However, ld A.R. could not furnish any documentary evidence of payment of interest to bank aggregating to Rs.7,62,592. It is relevant to state that AO considered the loans aggregating to Rs.2,85,000 as genuine and correspondingly, ld CIT(A) allowed the payment of interest of Rs.24,450 thereon and confirmed the disallowance of interest of Rs.12,83,560 out of disallowance of interest made by AO of Rs.13,08,010.
27ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97
34. Be that as it may, and considering the fact that in the profit and loss account, assessee has shown total interest of Rs.13,08,010 under the head "interest paid to bank and others", we are of the considered view that it will be justifiable to accept the said contention of the assessee that interest paid to bank of Rs.7,62,592 is genuine although there is no evidence to support the said contention of the assessee. Hence, we hold that the interest paid on the unsecured loans creditors in the assessment year 1994-95 is Rs.5,45,418 (Rs.13,08,010 - Rs.7,62,592). Further, out of the said interest paid to the unsecured creditors, we also consider it reasonable to delete the addition of Rs.24,450 in respect of loan aggregating to Rs.2,85,000 which is treated as genuine by the authorities below. Accordingly, the disallowance of interest comes to Rs.5,20,968(Rs.5,45,418 - Rs.24,450) and addition of it is confirmed. Hence, ground No.6 of concise ground is allowed in part.
35. Now we take up appeals for assessment years 1995-96 and 1996-97 being I.T.A. No.3754 & 3755/M/2008, respectively.
37. At the time of hearing, ld representatives of parties submitted that the facts and main issues involved are identical to A.Y. 1994-95, which was argued heard at length. We have considered and disposed of the grounds of appeal of A.Y. 1994-95 by a detailed order hereinabove. In both the assessment years also, assessee has filed concise grounds of appeal.
38. In Ground No.1 of both appeals, assessee has disputed the order of ld CIT(A) on reassessment proceedings. For the reasons mentioned hereinabove in paras 17 & 18 for A.Y. 1994-95, we reject ground No.1 of both appeals for both the assessment years i.e. 1995-96 and 1996-97.
39. In Ground No.2, assessee has stated that the Income tax officer did not have requisite jurisdiction in absence of an order u/s.127. This issue has also been considered by us hereinabove in para 20 and for the reasons mentioned therein, we reject ground No.2 for both the assessment years i.e 1995-96 and 1996-97.
28ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97
40. In Ground Nos.3 to 5 for both the assessment years, assessee has disputed the order of ld CIT(A) in confirming the addition of Rs.27,76,867 for A.Y. 1995-96 and Rs.26,90,067 for A.Y. 1996-97 u/s 68 of the Act.
41. Since the facts for both the assessment years in respect of above grounds are similar to A.Y. 1994-95, which we have dealt with hereinabove in paras 28-31, and for the reasons mentioned therein, we uphold the order of ld CIT(A) in confirming the aforesaid addition of R Rs.27,76,867 for A.Y. 1995-96 and Rs.26,90,067 for A.Y. 1996- 97 u/s 68 of the Act by rejecting ground Nos.3 to 5 of appeal for both the assessment years under consideration.
42. In Ground No.6 of both the appeals, assessee has disputed the order of ld CIT(A) in confirming the disallowance of interest on the above disallowance of loans. It is relevant to state that for A.Y. 1995-96, assessee has stated the disallowance of Rs.13,70,375 which is not factually correct as the amount of interest which has been disallowed by ld CIT(A) is Rs.13,00,185 out of disallowance of Rs.13,20,185 made by the AO. It is relevant to state that ld CIT(A) has allowed the relief of Rs.20,000 in respect of loan of Rs.4,70,000 (wrongly appears to be mentioned Rs.4,00,000) which has been considered as genuine by the AO and hence, balance interest of Rs.13,00,185 has been confirmed for A.Y. 1995-96. Further for A.Y. 1996-97, interest which has been confirmed is Rs.13,00,375. It is relevant to state that on perusal of profit and loss account for A.Y. 1995-96, there is no mention in respect of interest paid of Rs.13,20,185.46 also includes interest for bank loan as well. Similarly for A.YT. 1996- 97, on perusal of page 2 of PB, which contains copy of profit and loss account, the interest debited is Rs.13,70,375.99 and does not mention that this interest includes interest paid to bank. Further, this was also not the plea of the assessee in the ground of appeal taken before us. Accordingly, no such break-up is placed in file. Hence, the entire interest claimed by the assessee appears to have been paid for the unsecured loans taken by the assessee which has been confirmed by us as income of the assessee from undisclosed sources as the assessee has failed to prove the genuineness of the loan transaction. In view of above, we uphold the order of ld CIT(A) for both the assessment years i.e. 1995-96 and 1996-97 for disallowance of interest of Rs.13,00,185 29 ITA Nos.3753, 3754 & 3755/Mum/2008 Assessment Years: 1994-95, 95-96 & 96-97 and Rs.13,70,375 by rejecting ground No.6 of appeal taken for both the assessment years.
43. In the result, appeal for A.Y. 1994-95 is allowed in part and whereas appeals for assessment years 1995-96 and 1996-97 are dismissed.
Pronounced in the open court on 15th June, 2012
Sd/- Sd/-
(RAJENDRA) (B.R. MITTAL)
Accountant Member Judicial Member
Mumbai, Dated 15th June, 2012
Parida
Copy to:
1. The appellant
2. The respondent
3. Commissioner of Income Tax (Appeals),XXII, Mumbai
4. Commissioner of Income Tax, 11 , Mumbai
5. Departmental Representative, Bench 'J' Mumbai
//TRUE COPY// BY ORDER
ASSTT. REGISTRAR, ITAT, MUMBAI