Income Tax Appellate Tribunal - Pune
M/S Pentagon Developers,, Pune vs Cit [A] V Pune, Pune on 3 March, 2017
आयकर अपील य अ धकरण] पण
ु े यायपीठ "बी" पण
ु े म
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
BEFORE SHRI ANIL CHATURVEDI, AM
AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं. / ITA No.2394/PUN/2012
नधा रण वष / Assessment Year : 2006-07
M/s. Pentagon Developers, .......... अपीलाथ /
Office No.504, 5th Floor, Ashok
Appellant
Sankul - II, Ashok Nagar,
Range Hills, Road,
Pune - 411007.
PAN No.AAHFP8013B.
बनाम v/s
Dy.Commissioner of Income Tax, .......... यथ /
Circle - 3, Pune.
Respondent
अपीलाथ क ओर से / Appellant by : Shri V.L. Jain
यथ क ओर से / Respondent by : Shri P.S. Naik.
सन
ु वाई क तार ख / घोषणा क तार ख /
Date of Hearing : 08.02.2017 Date of Pronouncement: 03.03.2017
आदे श / ORDER
PER ANIL CHATURVEDI, AM :
This appeal of the assessee is emanating out of the order of Commissioner of Income Tax (A) - II, Pune dated 26.07.2012 for the assessment year 2006-07.
2. The relevant facts as culled out from the material on record are as under :-
2 ITA No.2394/PUN/2012AY.No.2006-07 2.1 Assessee is a partnership firm stated to be engaged in the business of construction and development of residential complexes.
Assessee filed its return of income for A.Y. 2006-07 on 31.10.2006 declaring total income of Rs.1,52,20,610/-. The case was selected for scrutiny and thereafter assessment was framed u/s 143(3) vide order dt.28.11.2008 wherein the income returned by the assessee was accepted. The aforesaid assessment order passed u/s 143(3) was set aside by Ld. CIT-II, Pune u/s 263 vide order dt.30.03.2011 and the AO was directed to look into the aspects contained in the order and revise the assessment. Pursuant to the directions of Ld. CIT-II, Pune, a fresh assessment order was passed u/s 143(3) r.w.s. 263 vide order dt.30.12.2011 and the total income was determined at Rs.1,73,45,540/-. Aggrieved by the order of AO, assessee carried the matter before Ld. CIT(A), who vide order dt.26.07.2012 (in appeal No.PN/CIT(A)/DCIT CIR-3/450/11-12) dismissed the appeal of the assessee. Aggrieved by the order of Ld. CIT(A), assessee is now in appeal before us and has raised the following grounds :
"1. The learned CIT(A) has erred in law and on facts in confirming the addition of Rs.18,25,000/- on account of unexplained cash deposits u/s 68 of the Income Tax Act, 1961.
2. The learned CIT(A) further erred in law and on facts in confirming an addition of Rs.2,99,929/- u/s 40(a)(ia) of the Income Tax Act, 1961."
3. Before us, at the outset, Ld.A.R. submitted that he does not wish to press ground No.2. Considering the aforesaid submission of Ld.A.R., ground No.2 is dismissed as not pressed.
4. Ground No.1 is on account of unexplained cash deposits u/s 68.
3 ITA No.2394/PUN/2012AY.No.2006-07
5. It was noticed that assessee had taken loans and advances to the tune of Rs.1,05,75,000/- from various persons which included the receipt from following persons:
Deepa K Adwani Rs.5,00,000/-
Dilip M. Giramkar Rs.4,25,000/-
Madhura Keskar Rs.4,00,000/-
K. Sadhu Thorat Rs.5,00,000/-
To prove the genuineness of transaction of loan from Shri K. Sadhu Thorat, assessee furnished PAN details, confirmation and address details during the course of assessment. It was further submitted that further details could not be submitted on account of non co-operation from Sadhu Thorat. Accordingly, a summon was issued u/s 131 of the Act, wherein various details like copy of PAN, IT Returns, Bank Account from which cheques were issued were called by AO. It is noticed by AO that there was no compliance from Mr.Sadhu Thorat and accordingly, it was held that assessee has not discharged his onus to prove the genuineness of transaction and the creditworthiness of Mr. Sadhu Thorat and accordingly, the amount of Rs.5,00,000/- was treated as undisclosed income of the assessee u/s 68 of the Act. With respect to loan from Shri Dilip M. Giramkar, it was observed that the bank account of Dilip Giramkar reflected few credit entries by cash and his capital account showed a gift Rs.6,00,000/- from his mother-
in-law. AO therefore concluded that neither the assessee nor Dilip Giramkar has been able to prove the genuineness of the transaction and accordingly Rs.4,25,000/- was treated as undisclosed income of the assessee u/s 68 of the Act. In case of receipt of loan from Mrs. 4 ITA No.2394/PUN/2012 AY.No.2006-07 Madhura Keskar, on perusal of bank account, it was noticed that there were cash transactions immediately prior to the transactions of loan given to the assessee. It was also noticed that apart from the entries of receipt in cash and payment of giving loan to assessee, there were hardly any other major deposits in the account and therefore it was concluded that the creditworthiness of Madhura Keskar was not proved and accordingly the amount of Rs.4,00,000/- received from Madhura Keskar was treated as undisclosed income of the assessee u/s 68 of the Act. In case of Deepa K Advani from whom assessee had stated to have taken loan of Rs.5,00,000/-, it was noticed by Revenue that in her bank account that there were cash deposit immediately prior to her giving loan to the assessee and therefore it was concluded that assessee has not been able to prove the creditworthiness of Deepa K Advani and therefore the amount of Rs.5,00,000/- was treated as undisclosed income of the assessee u/s 68 of the Act. Accordingly, addition aggregating to Rs.18,25,000/- was made on account of unexplained cash deposits. Aggrieved by the order of AO, assessee carried the matter before Ld. CIT(A) and the appeal of assessee was dismissed by Ld. CIT(A) by holding as under :
"3.3 During the appellate proceedings, the Ld counsel of the appellant has contended that the Assessing Officer has been provided with the confirmation letters and the bank statements of all the lenders and that all the lenders have submitted their replies in response to the summons u/s 131 except Mr. Thorat and in whose case summons have been served and the PAN details and confirmation are on record. It has thus been submitted that the onus of proving credit u/s 68 is more than discharged by the appellant. It has been also contended that the appellant is not expected to prove the basis of source and it is not the case of the Assessing Officer that the credits in the accounts are amount provided by the appellant and, therefore, it does not lie to the Assessing Officer to infer that the creditworthiness is not proved. The appellant has placed reliance on the following judicial in support:
a) Sarogi Credit Corporation Vs Commissioner of Income Tax (Patna) 103 ITR 344 5 ITA No.2394/PUN/2012 AY.No.2006-07
b) S. Hastimal Vs Commissioner of Income Tax (Mad) 49 ITR 273
c) Commissioner of Income Tax Vs Pragati Co-operative Bank Ltd (Guj) 149 Taxman 149
d) Late Mangilal Agarwal through LRs Vs ACIT 163 Taxman 399
d) Nemi Chand Kothari Vs CIT & ANR 136 Taxman 213
f) Labh Chand Bohra Vs ITO 8 DTR 44 Thus, on perusal of the material on record and application of the facts it becomes clear that the creditworthiness of the persons to have advanced the loans was never proved by the appellant.
The appellant's contention that the confirmation of the loans and identity of the creditors had been filed during the assessment proceedings is not sufficient to justify and prove the genuineness of the transaction. The onus to prove the nature and source of credit is upon the appellant and the filling a mere confirmation letter would not amount to sufficient discharge of the burden placed upon the appellant u/s 68 of the I.T. Act. This is because u/s 68, the appellant has to prove not only the identity of the creditor but has to further prove that the creditor had the requisite capacity to advance the loan and also prove the genuineness of the transaction. The A.O. has made every possible effort to verify the transaction so as to satisfy himself with respect to the genuineness of the transaction but as evident from the material brought on record, in none of the cases wherein the loans have been taxed as unexplained cash credit u/s 68 either as unexplained cash credit u/s 68, either the requisite proof or evidence have not been furnished or any acceptable explanation given by the appellant.
3.4 The Punjab and Haryana High Court in the case of Chand Prakash Vij Vs. CIT (2009) 315 ITR 251 (P&H), held that where there is a clear finding of fact that the assessee was not able to furnish a satisfactory explanation for the source of a cash deposited into the savings account, addition of the same is justified. The contention of the appellant that the onus of proving credit u/s 68 is more than discharged is prima facie not correct based on the facts and material brought on record. The credit worthiness of the persons form whom loan have been taken by the appellant cannot be routinely assumed as the required details and evidences in support of the aforesaid unsecured loans have not been furnished as to establish the creditworthiness of the lenders or genuineness of the transaction attributed to them.
3.5 Sec. 68 places the burden of proof on the tax payer to explain the nature and source of any credit found in the books of account. It would be pertinent to mention the case of Mangilal Jain Vs ITO (2009) 315 ITR (Mad), wherein it was held that mere proof of identity of creditor or the fact that the amount is received by cheque, need not always mean that the credit is genuine where the assessee does not have capacity to make advances and there are other circumstances for the inference that the transaction is not genuine, the addition of the amount could be justified.
3.6 In the case of DCIT Vs Phoolmati Devi (2009) 314 ITR (AT) 1 (Del) it was held that documentary evidences are normally accepted as a proof of transaction, but where such evidence is 6 ITA No.2394/PUN/2012 AY.No.2006-07 unbelievable in the light of the test of human probabilities and surrounding circumstances, the rejection such evidence would be justified. In this case the appellant had filed confirmation letters in respect of alleged borrowings by demand draft. Though this had been received by demand drafts, the corresponding amount had been deposited in the depositor bank account in cash just before the issue of bank drafts for the amount of the deposits drawing inference from the cumulative facts, the Tribunal found that the credits merely on the basis of documents admitting the loan should not have been accepted and thus allowed the departmental appeal. The ITAT relied on the rulings of the Supreme Court in the case of CIT Vs Durga Prasad More (1971) 82 ITR 540 (SC) and Smt. Sumati Dayal Vs CIT (195) 214 itr 801 (SC). The Assessing Officer has arrived at the finding that the loan amount being unexplained credit u/s 68 has been arrived after considering the surrounding circumstances and appreciation of the fact objectively and also after considering the evidences adduced before him by the appellant.
3.7 The submission of the appellant has been considered and also the documents submitted during the course of appellate proceedings. The deeming provisions comes into play only when any sum is found credited in the books of the assessee maintained for any previous year for the source and nature of which, either no explanation is offered by the assessee or the explanation offered by the assessee is not satisfactory. Thus section 68 and other related sections gets activated only when any sum is found credited in the books of the assessee as held in the case of Banshidhar Agarwal Panna Vs CIT (1984) 148 ITR 523 (MP). The legal position u/s 68 is that even in a case where the amount is credited in the books of the assessee on the very first day of the accounting year and the explanation offered by the assessee is not accepted, Courts have held that such amount is assessable as the income of the assessee of the accounting year for which the books are maintained u/s 68. It is the assessee who is required to offer an explanation about the nature and source of credit for which an entry is found in the books of account. The language of section 68 shows that its scope is general in nature and is applicable to all credit entries whether they stand in the name of the assessee or in the name of the third party. Under section 68 it is necessary for the assessee to prove prima facie the transactions which result in cash credit in his books of account so that the genuineness of the transaction is proved and if only when the assessee has proper evidence to establish prima facie the aforesaid fact, the onus shifts on to the Revenue.
3.8 Under the deeming provisions of the I.T. Act, 1961, the position is that the mere existence of a credit entry is sufficient to attract the provisions and once the appellant's explanation is not satisfactory, the cash credits are to be charged to tax in an exceptionable manner. It was so held in one of the most landmark cases of the Hon'ble Supreme Court of Sumati Dayal (1995) 214 ITR 801 (SC). From a plain reading of the requisite sections it is evident that when the assessee offers no explanation about the nature and source of the credits, its value could be deemed income of the assessee. An explanation offered, if not accepted is no explanation about the nature and source of the credits, its value could be deemed income of the assessee. An explanation offered, if not accepted is no explanation in law and not only this the legislature while 7 ITA No.2394/PUN/2012 AY.No.2006-07 enacting the deeming provisions of the IT Act falling under section 68, 69 to 69D of the I.T. Act, 1961, has clarified that in case the explanation offered is not satisfactory the value of the unexplained deposits shall be deemed to be the income of the assessee. There can be no general proposition of law applicable to all cases irrespective of the facts and circumstances thereof. One thing which can be said without much hesitation is that the burden is always on the assessee. If an explanation is asked for the taxing authorities to indicate the source of acquisition of a particular asset admittedly owned by the person concerned. The burden cast upon the appellant has not been discharged either at the stage of assessment or during the appellate proceedings by furnishing any acceptable explanation.
3.9 Section 110 of the Evidence Act is material in this respect which stipulates that when the question is whether any person is the owner of anything of which he/she has shown to be in possession, the onus of proving that he/she is not the owner, is on the person who affirms that he/she is not the owner. In other words, it follows from a well settled principle of law that normally, unless contrary is established tile always follows possession. It was also held so in the case of Chuharmal Vs. CIT (1998) 72 ITR 250 (SC). In a recent judgment the Punjab & Haryana High Court in the case of Surinder Kumar Vs ITO (2010) 326 ITR 21, on similar facts the action of the A.O., was upheld. It was concluded that the findings of fact recorded by the A.O., CIT (A) as well as Tribunal that fixed deposit with bank was assessee's unexplained income which could be added to taxable income, cannot be held to be perverse and no question of law arise.
3.10 Sec. 68 comes into play only when any sum is found credited in the books of account of the assessee maintained for any previous year for the source and nature of which either no explanation is offered by the assessee or the explanation offered by the assessee is not satisfactory. Under Sec. 68, it is the assessee who is required to offer an explanation about the nature and source of credit, for which an entry is found, thus the initial onus is on the appellant to explain the nature and source of cash credit whether they stand in the assessee's account or in the account of a third party and such explanation has to be to the satisfaction of the AO, it was so held in the Apex court decision of Kale Khan Mohammad Hanif Vs CIT (1963) 50 ITR 1 (SC) under Sec.68, it is necessary for the assessee to prove prima facie the transaction which results in a cash credit in his books of account. In the present case the appellant has not been able to prima facie prove the transaction itself, and thus the genuineness of the transaction remained to be explained. Only when the appellant has proper evidence to establish prima facie the aforesaid facts then the onus would have shifted to the Assessing Officer. If the prima facie inference on the fact is that the assessee's explanation is probable, the onus will shift to the Revenue. Though the confirmatory letters were accepted as evidence, however, the onus does not get discharged merely by such confirmatory evidences as found in CIT Vs United Commercial and Industrial Co. (P) Ltd. (1991) 187 ITR 596 (Cal) nor is the fact that the amount s received by way of account payee cheques. Such evidence is not sacrosanct as was pointed out in CIT Vs Korlay Trading Co. Ltd. (1998) 232 ITR 820 (Cal).
3.9 So far as the case laws relied upon by the appellant are concerned, they do not apply to the facts of the present case 8 ITA No.2394/PUN/2012 AY.No.2006-07 and, therefore, are distinguishable on fact. The ratio of the decisions of several High Courts and Tribunal discussed above clearly applied to the facts of the present case, which are more recent than the case laws relied upon by the appellant.
3.10 In view of the above facts, the addition made by the Assessing Officer is upheld and the ground of appeal No. 1 raised by the appellant is liable to be dismissed."
Aggrieved by the order of Ld. CIT(A), assessee is now in appeal before us.
6. Before us, Ld.A.R. reiterated the submissions made before AO and Ld. CIT(A) and further pointed to the submissions which are reproduced by Ld. CIT(A) in his order. From the aforesaid submissions made before Ld. CIT(A) he submitted that in case of Shri K. Sadhu Thorat, assessee had furnished his PAN details, confirmation and address details, the bank statement which reflected the entries of the loan transaction. Since there was non-cooperation from Mr. Sadhu Thorat, assessee had requested AO to issue notice u/s 133 to him, which remained un-complied. With respect to the addition of the loan received from Dilip M. Giramkar, he submitted that he is a partner of the firm. The assessee had furnished copy of PAN card, address, copy of IT returns, his bank statement, his statement of accounts and ledger extracts and the capital account before the AO. With respect to Madhura Keskar, assessee had submitted account form, copy of PAN card, bank statements and ledger extracts and in response to the summons issued by the AO, she had confirmed that loans were given by her to the assessee and the loans were out of her own fund. With respect to the loan from Deepa K. Advani, it was submitted that assessee had furnished the accounts forms, copy of PAN, copy of IT returns, bank statement and ledger extract and further in response to summons, she had confirmed of giving unsecured loans to the 9 ITA No.2394/PUN/2012 AY.No.2006-07 assessee and which were duly recorded in her accounts. The Ld.A.R. therefore submitted that the assessee has discharged the initial burden of proof and once the onus has been discharged and the onus shifts on the Revenue. He further submitted that it is a settled law that assessee is not required to prove the 'source of source'. He also placed reliance on the decision in the case of CIT Vs. Dwarakadish Investment P. Ltd (2010) 330 ITR 298 (Del) and the decision of Bombay High Court in Orient Trading Co. Ltd., Vs. CIT (Bom) 49 ITR 723. He also relied on Sarogi Credit Corporation Vs. CIT 103 ITR 344 (Patna), Nemi Chand Kothari Vs. CIT and another 136 Taxman 213 (Gau) and Labh Chand Bohra Vs. ITO 8 DTR 44 (Raj). He therefore submitted that the addition be deleted. Ld.D.R. on the other hand supported the order of AO and Ld. CIT(A) and further placed reliance on the decision in the case of Y.M. Singla Vs. CIT reported in (2015) 56 Taxmann.com 17 (SC).
7. We have heard the rival submissions and perused the material on record. The issue in the present case is with regard to addition u/s 68 of the Act of the amounts of loans received by the assessee. It is an undisputed fact that to prove the identity and source of the deposits from the 4 parties, assessee has furnished the copy of PAN Cards, copy of bank account, copy of IT returns before the AO. In case of Dilip M. Giramkar, Madhura Keskar and Deepa K. Advani in response to the summons issued by the AO, the lenders had confirmed of having advanced loan to the assessee. In case of K. Sadhu Thorat in response to the summons issued u/s 133, there was no compliance by Shri Sadhu Thorat. Considering the fact that assessee has furnished the PAN copy, copy of bank account, IT statements, we are 10 ITA No.2394/PUN/2012 AY.No.2006-07 of the view that assessee has discharged the initial onus cast upon the assessee to prove the cash credit. Once the assessee has discharged the initial onus, the burden shifts on the Revenue to show as to why the assessee's submission could not be accepted and why it must be held that the entry appearing in the name of third party still represented the income of the assessee from suppressed sources. U/s 68 of the I.T. Act, 1961 assessee has to prove three conditions, i.e., i) identity of the creditor, ii) the capacity to such creditor to advance money and iii) genuineness of the transactions. As all the aforesaid conditions are proved, the burden shifts on the Revenue to prove that the amount belongs to assessee. Further various High Courts have held that assessee cannot be asked to prove the 'source of source' or the 'origin of origin' and for this proposition, we draw support from the decision in the case of Sargoi Credit Corporation Vs. CIT 103 ITR 344 (Patna) and CIT Vs. Dwarkadish Investment P. Ltd., (2010) 330 ITR 298 (Delhi). Considering the totality of the aforesaid facts, we are of the view that in the present case the assessee had fully discharged its initial onus on proving the cash credits and in such a situation, the addition u/s 68 of the Act in the present case was un-called for. We therefore direct the deletion of addition made by the AO. Thus, the grounds of the assessee is allowed.
8. In the result, the appeal of the assessee is partly allowed.
Order pronounced on the 3rd day of March, 2017.
Sd/- Sd/-
(VIKAS AWASTHY) (ANIL CHATURVEDI)
या यक सद य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER
पण
ु े Pune; दनांक Dated : 3rd day of March, 2017.
Yamini
11
ITA No.2394/PUN/2012
AY.No.2006-07
आदे श क" # त%ल&प अ'े&षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. CIT-II, Pune.
4. CIT(A)-III, Pune.
5 #वभागीय &त&न'ध, आयकर अपील य अ'धकरण, "बी" / DR, ITAT, "B" Pune;
6. गाड, फाईल / Guard file.
आदे शानस ु ार/ BY ORDER,स // True Copy // // True Copy // सहायक रिज12ार/ Assistant Registrar, आयकर अपील य अ'धकरण ,पुणे / ITAT, Pune.