• Friday, 11 Apr 2025, 10:59:45 am

Income Tax Act, 1961 – Sections 68, 69C, 132, 153A, 201(1) and 201(1A) - A real estate and recreation company was subjected to search and seizure operations under Sections 132 and 133A, leading to the discovery of certain financial transactions, including unsecured loans and cash expenditures. The Assessing Officer (AO) treated loans amounting to Rs. 4,27,00,000/- and Rs. 87,00,000/- as unexplained cash credits under Section 68, based on statements recorded from third parties during the search. Additionally, interest expenses of Rs. 12,32,671/- were disallowed under Section 69C. The AO also made an addition of Rs. 2,24,10,020/- on account of alleged unexplained expenditures recorded in seized electronic documents. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the additions, holding that the assessee had furnished sufficient documentary evidence to establish the genuineness of transactions. The Revenue challenged the CIT(A)'s findings before the Income Tax Appellate Tribunal (ITAT) - Whether unsecured loans received by the assessee could be treated as unexplained cash credits under Section 68 despite the assessee providing bank statements, loan confirmations, and financial credentials of lenders - Whether mere reliance on third-party statements recorded during search and survey operations, without corroborative evidence, was sufficient to justify additions under Sections 68 and 69C - Whether payments recorded in seized documents could be considered unexplained expenditures under Section 69C when the assessee had denied ownership of the electronic records – HELD - For an addition under Section 68, the Revenue must prove that the creditworthiness, identity, and genuineness of lenders were not established. Since the assessee had provided bank statements, loan confirmations, and ITR details of lenders, the burden shifted to the AO to disprove the evidence. Mere reliance on statements made by third parties in search proceedings, without independent verification or corroborative material, was insufficient to invoke Section 68 - The ITAT reiterated that the burden of proof in cash credit cases does not extend to proving the "source of source," and once primary documentation is provided, the onus shifts to the AO. The AO had failed to conduct further inquiries with the lenders or bring adverse material against them - Regarding the disallowance under Section 69C, ITAT noted that the assessee had denied ownership of the seized electronic records, and no independent corroboration was provided to prove that the transactions belonged to the assessee. The AO’s reliance on assumptions and suspicions was insufficient to sustain the additions - The Tribunal also upheld CIT(A)'s decision that treating part of a loan as genuine while disallowing another part from the same source lacked legal justification - The ITAT relied on Supreme Court and High Court rulings emphasizing that additions cannot be made based on suspicion or unverified third-party statements in search proceedings - The ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s order deleting additions under Sections 68 and 69C, and held that the assessee had satisfactorily discharged its burden of proof

 

2025-VIL-213-ITAT-KOL

 

IN THE INCOME TAX APPEL LAT E TRIBUNAL

“B” BENCH KOLKATA

 

IT(SS)A No. 81,82,86 & 87/KOL/2024

Assessment Year: 2016-17 to 2019-20

 

Date of Hearing: 10.12.2024

Date of Pronouncement: 31.01.2025

 

DCIT, CC-4(1), KOLKATA

 

Vs

 

GOAN RECREATION CLUBS PRIVATE LIMITED

 

Assessee by: Shri Soumitra Choudhury & Shri Pranabash Sarkar, ARs

Revenue by: Shri Abhi j it kundu, DR

 

BEFORE

SHRI RAJESH KUMAR, AM

SHRI PRADIP KUMAR CHOUBEY, JM

 

ORDER

 

Per Bench:

 

These are appeals preferred by the Revenue against the orders of the Commissioner of Income-tax (Appeals), Kolkata-27 (hereinafter referred to as the “Ld. CIT(A)”] dated 08.03.2024, 08.03.2024, 07.05.2024 & 08.05.2024 for the AYs 2016-17 to 2019-20 respectively.

 

02. It appears from the record of the registry that the appeals have been filed by the Revenue after delay of 51 days, in IT(SS)A Nos. 81 & 82/KOL/2024. The ld. DR submitted that in fact the delay is only of 51 days in IT(SS)A Nos. 81 & 82/KOL/2024. For this, a condonation petition has been filed by the ld. DR in IT(SS)A Nos. 81 & 82/KOL/2024. The ld. AR did not raise any objection in condoning the delay. Going over the condonation petition, the delay is hereby condoned and the appeals are taken for hearing.

 

81/KOL/2024 A.Y. 2016-17

 

03. The only issue raised by the Revenue is against the deletion of addition of Rs. 4,27,00,000/-received from M/s Rajputana General Commercial Corporation Private Limited and Rs. 87,00,000/- from Shri Sarju Sharma & M/s Fairland Sales Pvt. Ltd., which were made by the ld. AO by treating the same as unexplained credit u/s 68 of the Act.

 

04. The facts in brief are that the assessee filed the return of income on 03.10.2019 declaring total income at Rs. 8,14,38,270/-. A search and seizure action u/s 132 of the Act and survey operation u/s 133A of the Act was conducted on 10.08.2018 and subsequent dates on Shri Sarju Sharma group of cases. The assessee being one of the group concerns and was covered in the search operation. Notice u/s 153A of the Act was issued and served upon the assessee which was replied by the assessee by filing the return of income on 15.03.2019, declaring the same income and loss as were declared in the return of income filed originally u/s 139(1) of the Act. Thereafter, the statutory notices were duly issued and served upon the assessee. The assessee filed the necessary evidences as called for by the ld. AO. During the assessment proceedings, the ld. AO observed that the assessee company has taken unsecured loan from M/s M/s Rajputana General Commercial Corporation Private Limited amounting to Rs. 4,27,00,000/-. The assessee has paid interest to the said lender during the year of Rs. 12,32,671/-. The ld. AO noted in Para 9.1 of the assessment order that a search and survey operation u/s 132 of the Act was conducted in the case of Shri Sanjeev Kejriwal on 26.10.2017 and during the course of search his statement was recorded on oath u/s 132(4) of the Act on 26.10.2017, wherein he stated that he was engaged in the Jama kharchi and accommodation entries business in lieu of commission and named M/s Rajputana General Commercial Corporation Private Limited therein. The ld. AO on the basis of such statement observed that the lender M/s Rajputana General Commercial Corporation Private Limited is a shell company engaged in the activity of providing accommodation entries to the beneficiaries. Accordingly, show cause notice was issued to the assessee as to why the loan given by the said entity should not be treated as unexplained cash credit u/s 68 of the Act along with interest of Rs. 12,32,671/- paid to the said lender as unexplained expenditure u/s 69C of the Act. Finally, the ld. AO observed that the assessee has failed to prove the identity, creditworthiness of the lender and the genuineness of the transactions and accordingly added Rs. 4,27,00,000/- u/s 68 of the Act to the income of the assessee as unexplained cash credit. Similarly, the interest, paid to the said party of Rs. 12,32,671/- was also added to the income of the assessee as unexplained expenditure u/s 69C of the Act.

 

05. In the appellate proceedings, the ld. CIT (A) deleted the addition after taking into consideration the contentions and submissions and documentary evidences filed by the assessee and deleted the addition of Rs. 4,27,00,000/-.While deleting the addition, the ld. CIT (A) noted in Para 7.2 that M/s Rajputana General Commercial Corporation Private Limited has sent financials to the extent of such unsecured loans to the assessee. The ld. CIT (A) further noted that both in the assessment proceedings as well as in the appellate proceedings, the assessee has submitted all the relevant details and documents in support of identity and creditworthiness and genuineness of the transactions by providing relevant bank statements, copies of ledger , loan confirmation and other financial credentials of the lender company i.e. ITR, Acknowledgement, audited balance sheet, statement of source of funds, etc however, the ld. AO only relied on the statements recorded during the search operation. While deleting the addition, the ld. CIT (A) relied on the decisions of ld. CIT vs. Harjeev Aggarwal 290 CTR (Del) 263, CIT v. Sri Ramdas Motor Transport Ltd (1999) 238 ITR 177 (AP), Pr. CIT vs. Best Infrastructure (India) 397 ITR 82 (Del). Finally, the ld. CIT (A) held in Para 7.24 that the assessee has proved the identity and creditworthiness of the lender and genuineness of the transactions by furnishing all the details and documents before the ld. AO as well as in the appellate proceedings and thus, the ld. AO conclusion is not tenable and can not be accepted.

 

06. After hearing the rival contentions and perusing the materials available on record, we find that during the assessment proceedings, the assessee has filed the loan confirmation, ITR, audited financial , statement ,statements of sources of funds of the lender M/s Rajputana General Commercial Corporation Private Limited, which were also filed before the CIT (A) and before us. Copies of these evidences/ documents are placed at page no. 234 to 270 of the paper book. Therefore, we find that the assessee has discharged its onus/ burden by filing the necessary documents/ evidences from the third party and mere reliance by the ld. AO on the statements recorded during the search is not sufficient to treat the loan taken as unexplained cash credit. Moreover, the addition cannot be made on the basis of the third party statement without there being any corroborating material on the record and the case of the assessee find force from the decision of the CIT vs. Harjeev Aggarwal (supra) and PCIT vs. Best Infrastructure (India) (supra), which have been followed by the ld. CIT (A) while deleting the addition. We also note that the assessee has filed necessary evidences and AO has not done anything to further examine the issue.The case of the assessee find support from the decision of Hon’ble Apex court in the case of CIT Vs Orissa Corporation 159 ITR 78(SC) wherein it has been held that where assessee has furnished all the information, details and evidences relating to the creditors then the AO can not made addition merely on the basis that summons were not complied. Therefore, we do not find any infirmity in the order of the ld. CIT (A) and uphold the same by dismissing the appeal of the Revenue. Ground no.1 of the Revenue’s appeal is dismissed.

 

07. The issue raised in ground no.2 is against the deletion of Rs. 87,00,000/- by the ld. CIT (A) as made by the ld. AO on account of unexplained cash credit u/s 68 of the Act.

 

08. The facts in brief are that during the course of assessment proceedings, the ld. AO observed that investigation wing is found that assessee has received unsecured loans from the following entities

 

i. Its director Sarju Sharma of Rs.75,00,000/- on 02.11.2015.

 

ii. M/s Fairland Sales Pvt. Ltd. of Rs.50,00,000/- on 07.12.2015.

 

iii. M/s Fairland Sales Pvt. Ltd. of Rs.25,00,000/- on 08.12.2015

 

09. According to the ld. AO, these three loans were the end result of three distinct cash trails which were initialized with cash deposits in different third-party companies and therefore, held that these were nothing but shell companies as they were controlled and operated by Shri Pradip Kumar Aggarwal and Shri Anup Seth, who were entry operator. During the course of assessment proceedings, a show cause notice was issued to the assessee as to why the source of cash deposited in the bank account of third parties should not be treated as assessee’s own money. Thereafter the ld. AO found the reply filed by the assessee as unsatisfactorily and untenable and by relying on the findings of the investigation wing and statements recorded of the aforesaid persons during search operation came to the conclusion that Rs. 87.00 lacs received remained unexplained and was accordingly added to the income of the assessee out of the above loans from two parties of Rs. 1,50,00,000/-.

 

010. In the appellate proceedings, the ld. CIT (A) deleted this addition by observing and holding as under:-

 

“6.2. Discussion & decision: 6.2.1. I have gone through the assessment order as well as the submission of the assessee. On examining the same, it is observed that a search & seizure operation u/s 132 of the Act was conducted on the assessee on 10.08.2018. On perusal of the documents on record, it was noticed by the investigation wing that the assessee had received three unsecured loans from the following entities:

 

1) Its director Sarju Sharma of Rs.75,00,000/- on 02.11.2015.

 

2) M/s Fairland Sales Pvt. Ltd. of Rs.50,00,000/- on 07.12.2015.

 

3) M/s Fairland Sales Pvt. Ltd. of Rs.25,00,000/- on 08.12.2015.

 

Post search proceedings had also revealed that these three said loans are the end result of three distinct cash trails which were initialized with cash deposits in different third-party companies. The investigation wing had also contended that the said companies are nothing but shell companies as they were controlled and operated by one Pradeep Kumar Agarwal & one Anup Seth who are entry operators. During the assessment proceedings, vide show cause notices, the assessee was asked to explain the source of the said cash deposits in the bank account of the said third parties. However, on receiving non-satisfactory reply from the end of the assessee, the AO had relied on the findings of the investigation wing and the statements recorded of the aforesaid two persons during the search operation. Based on the findings, the AO formed his opinion that part of the said unsecured loans i.e., Rs.87,00,000/- are bogus and belongs to assessee’s own undisclosed income routed through different layers of shell companies and added back the same to the total income of the assessee u/s 68 of the Act. The AO has added Rs.87,00,000/- out of Rs.1,50,00,000/- of loans received.

 

6.2.2. It is relevant to mention here that as per the provisions of section 68 of the Act, the assessee is liable to prove the creditworthiness, genuineness and identity of the source of the said unsecured loans. However, the assessee need not to prove the source of the source of the source etc. The source of the loans has already been proved by the assessee by submitting all the relevant details and documents in respect of the said lending companies. Hence, the onus of proving the loans genuine have already been discharged by the assessee. However, the AO had not considered the same and sticked to the issue of cash deposits in the third-party proprietorship concerns who are involved in such kind of business where huge cash were generated and were deposited in the bank accounts in a day-to-day manner. As an instance, the AO had suspected that in the cash trail no.1, the terminal entity where the cash of Rs.15,00,000/- was alleged to be deposited which were received by the director of the assessee company i.e., Mr. Sarju Sharma, is M/s Naxalbari Flour and Rice Mill Pvt. Ltd. It is noteworthy to mention that the said entity was involved in the business of flour and rice mill where huge cash were usually generated and they regularly deposit the said cash in their bank account to use the same in their business. The assessment has already been made in the said entity by the jurisdictional AO without any adverse remark on its cash deposit.

 

6.2.3. Further, in cash trail no.2, the terminal entities where the cash of Rs.69,00,000/- was alleged to be deposited in the bank accounts of M/s Jeen Fashion & M/s Bhawani Fashion, who are retail cloth traders, and from whom after so many layers of bank channels amounts were received by M/s Fairland Sales Pvt. Ltd. to extend to the assessee as a loan.

 

6.2.4. Further, in cash trail no.3, the terminal entities where the cash of Rs.60,00,000/- was alleged to be deposited in the bank accounts of M/s Om Sainath Enterprises & M/s Catholic traders and from whom after so many layers of bank channels amounts were received by M/s Fairland Sales Pvt. Ltd. to extend to the assessee as a loan.

 

6.2.5. It is noteworthy to mention that the said entities were involved in the business of flour and rice mill, cloth trade etc. where huge cash were usually generated and they regularly deposit the said cash in their bank account to use the same in their business. In the cash trail no.1, the total loan was Rs.75,00,000/-, but the AO had only considered only Rs.15,00,000/- based on the cash trail at the 8 th layers. However, the cash deposited bank account belongs to a rice miller who deposits huge cash every day. It is pertinent to mention here that the AO has confined himself Rs.15,00,000/-, but there is no clearcut proof that the said Rs.15,00,000/- deposited by the rice miller belongs to the assessee. Similarly, in other two cash trails also, the loan and addition made are two different amounts. For instance, in the cash trail no.2, the addition was made Rs.47,00,000/-. However, the cash deposited trail amount is Rs.60,00,000/-. and in the cash trail no.3, the addition was made of Rs.25,00,000/- , but the cash deposit at the terminal entities was Rs.60,00,000/-. Here, the AO has agreed part of the loan received from director Shri. Sarju Sharma Rs.60,00,000/- is genuine and Rs.15,00,000/- is only added as bogus. In the case of M/s Fairland Sales Pvt. Ltd., out of Rs.75,00,000/- loan, only Rs.72,00,000/- was added as bogus loan. The remaining Rs.3,00,000/- is treated as genuine loan.

 

6.2.6. It is relevant to mention here that the assessee is responsible to prove the genuineness of the lender party and not beyond that. In the present case, the assessee has proved the genuineness of its creditors. The AO agreed partly the genuineness of the loan creditors and partly disagreed and added back as assessee’s unaccounted money. This type of partial confirmations is imbalanced justification in dealing with the loan creditors.

 

6.2.7. It is pertinent to mention that as per the provisions of section 68 of the Act, if the creditworthiness, genuineness and identity of the creditors from whom the said loan was taken was unable to be established by the assessee, then the said provisions will be invoked. However, in the present case, the assessee had provided all the required details and documents in respect of the lender companies to prove the aforesaid 3 ingredients of verification i.e., creditworthiness, genuineness and identity of the said creditors. The assessee had also submitted relevant bank statements depicting mode of receipt of the said loans and had also established the fact that as soon as the loans were received, the same were utilized in the assessee’s regular course of business. It is also evident from the submission of the assessee that these lender companies are registered with ROC & MCA and have been regularly filing their audited financials with them.

 

6.2.8. Furthermore, it is observed from the submissions of the assessee that all the loan creditors are assessed to Income Tax regularly. For an instance, one of the said the creditors Shri Sarju Sharma had already been assessed by his jurisdictional AO for the subjected AY without having any adverse remark on extending the alleged loan of Rs.75,00,000/-. It is noticed that the AO, apart from issuing notices under Section 133(6) to the creditors, did not pursue the matter further. He did not examine the source of income of the alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the alleged creditors. The assessee had placed its reliance in the following judicial pronouncements in support of its averments:

 

a) In the case of ‘CIT v. Lovely Exports Pvt. Ltd. [2008] 216 CTR 195 (SC)’, the Hon’ble Apex Court had held the following:

 

“If the share application money is received by the assessee-company from alleged bogus shareholders, whose names are given to the Assessing Officer, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of assessee-company.

 

b) In the case of ‘Commissioner of Income-Tax vs. Shiv Dhooti Pearls & Investment Ltd. [2016] 237 Taxman 104 (Delhi)’, the Hon’ble Delhi High Court had held the following:

 

“12. ……What follows, as a corollary, is that it is not the burden of the Assessee to prove the genuineness of the transactions between his creditor and sub-creditors nor is it the burden of the Assessee to prove that the sub-creditor had the creditworthiness to advance the cash credit to the creditor from whom the cash credit has been, eventually, received by the Assessee. It, therefore, further logically follows that the creditor's creditworthiness has to be judged vis-a-vis the transactions, which have taken place between the Assessee and the creditor, and it is not the business of the Assessee to find out the source of money of his creditor or of the genuineness of the transactions, which took between the creditor and subcreditor and/or creditworthiness of the sub-creditors, for, these aspects may not be within the special knowledge of the Assessee.

 

………….

 

15. In view of the legal position explained in the above decisions, the Court holds that as far as the present case is concerned, the Assessee has indeed discharged its onus of proving the creditworthiness and genuineness of the lender (TIL). There was no requirement in law for the Assessee to prove the genuineness and creditworthiness of the sub-creditor, which is in this case was TCL

 

c) The Hon’ble Supreme Court in the case of ‘CIT vs Orissa Corporation Pvt Ltd 159 ITR 78 (SC)’ held as follows:

 

“13. In this case the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were the income-tax assessees. Their index number was in the file of the revenue. The revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further.”

 

d) The Hon’ble Agra Tribunal in the case of ‘S.K. Jain vs ITO (2004) 2 SOT 579 (Agra)’ had observed as under:

 

“The creditors have confirmed that they have advanced loan to the assessee. In most of the cases, transactions have been routed through bank account. Therefore, asking source of such deposits will amount to asking source of the source which is not permitted under the law as held by the Hon’ble High Court of Patna in the case of Sarogi Credit Corpn. vs. CIT 1975 CTR (Pat) 1: (1976) 103 ITR 344 (Pat) and the decision of the Ahmedabad Bench of the Tribunal in the case of Rohini Builders vs. Dy. CIT (2002) 76 TTJ (Ahd) 521 : (2001) 117 Taxman 25 (Ahd)(Mag).”

 

e) The Hon’ble Guwahati High Court in the case of ‘Nemi Chand Kothari vs CIT 136 Taxmann 213’ had held the following:

 

“Once the assessee had established that he had received the said amounts from ‘N’ and ‘P’ by way of cheques, the assessee must be taken to have proved that the creditors had the creditworthiness to advance the loans. Thereafter, the burden had shifted to the Assessing Officer to prove the contrary. On failure on the part of the creditors to show that their sub-creditors had creditworthiness to advance the said amounts to the assessee, these amounts as a corollary, could not have been and ought not to have been, under the law, treated as the assessee’s income from the undisclosed sources, when there was neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or were owned by, the assessee. Therefore, the Assessing Officer had failed to show that the amounts, which had come to the hands of the creditors from the hands of sub-creditors, had actually been received by the sub-creditors from the assessee. In the absence of any such evidence on record, the Assessing Officer could not have treated the said amounts as income derived by the assessee from undisclosed sources. The Tribunal seriously fell in error in treating the said amounts as income derived by the assessee from undisclosed sources merely on the failure of the sub-creditors to prove their creditworthiness.”

 

f) In the case of ‘CIT vs Shalimar Buildwell Pvt Ltd (2014) 2020 Taxman 138 (All)’ where the following was held by the Hon’ble jurisdictional High Court:

 

“No additions on account of unsecured loans can be made when identity of the party is proved and more so when the amount is received through proven banking channels.”

 

g) in the case of ‘Dy.CIT vs. Rohini Builders [2002] 256 ITR 360/[2003] 127’, The Hon’ble Gujrat High Court has held the following:

 

“The onus of the assessee (in whose books of account credit appears) stands fully discharged if the identity of the creditor is established and actual receipt of money from such creditor is proved. In case, the assessing officer is satisfied about the source of ‘cash deposited in the bank accounts of the creditors’, the proper course would be to assess such credit in the hands of creditors (after making due enquiries from such creditor).”

 

h) The Hon’ble ITAT Pune in the case of ‘Prashant Pratap Ahir vs ACIT ITA No. 1954/PUN/2018’ held that “addition u/s 68 of the IT Act merely on the basis of presumption or suspicion without any corroborated evidence is unsustainable.”

 

i) The Hon'ble High Court, Calcutta in the ‘CIT-Ill, Kolkata vs. Dataware Private Limited ITAT No. 263 of 2011 Date: 21st September, 2011’ wherein the Court held as follows:

 

"In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness" of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness" of transaction through account payee cheque has been established.

 

We find that both the Commissioner of Income Tax (Appeal) and the Tribunal below followed the well-accepted principle which are required to be followed in considering the effect of Section 68 of the Act and we thus find no reason to interfere with the concurrent findings of fact recorded by both the authorities.”

 

j) The Hon’ble Supreme Court of India in ‘Sreelekha Banerjee V. CIT (1963) 49 ITR (SC) 112’ had held that “if the explanation shows that the receipt was not of an income nature, the Department cannot act unreasonably and reject the explanation to hold that it was income. The Department cannot by merely rejecting unreasonably a good explanation, convert good proof into no proof”.

 

k) In the case of ‘Khandelwal Construction Vs CIT 227 ITR 900 (Gauhati)’, the Hon’ble jurisdictional High Court had held as under:

 

“the amount of cash credits could not be included in the total income of the assessee because the Assessing Officer had not made proper enquiry. Therefore, u/s 68, the onus is on the assessee to offer explanation where any sum is found credited in the books of account. This is not the case where assessee has not provided relevant details. In this case the assessee has discharged its onus by filing the documents for which Ld. Assessing Officer has not pointed any discrepancy. There is no material with the Ld. Assessing Officer to prove the funds received by the assessee as non-genuine and no belief can be formed merely on the basis of assumptions, presumptions, surmises and conjectures.”

 

l) The Hon’ble Calcutta High Court in the case of ‘Hindustan Tea Trading Co. Limited v. CIT 263 ITR 289 (Kol)’, had held that

 

But once sufficient material is produced and explanation is given, the onus is discharged and shifted on the Revenue. Having regard to the materials, it might ask for further materials from the assessee or it might come to a conclusion on the materials so produce as it might in law arrive at. Once the materials are there, it is incumbent on the Assessing Authority to inquire into the same. It cannot over look one or other materials nor can it undertake a halfhearted enquiry”

 

(n) In the case of ‘Commissioner of Income Tax V. Diamond Products Limited (2009) 177 Taxmann 331 (Delhi)’, the following has been held by Hon’ble High Court of Delhi:

 

We have heard the learned Counsel for the appellant and have examined the findings returned by the Tribunal as well as those returned by the Commissioner of Income-tax (Appeals) and find ourselves to be in agreement with the conclusions arrived at by the Tribunal. The Assessing Officer is not permitted to examine the source of the source once the assessee has been able to establish that the transaction with his creditors is genuine and that the creditors identities and creditworthiness have been established. In this case, this had been done, therefore, it was not open to the Assessing Officer to make the addition of Rs. 23,00,000 after entering upon an examination of the source of the source. Consequently, we feel that no interference is called for on this conclusion in the impugned order passed by the Tribunal. The Tribunal has correctly applied the law on the facts determined by it. No substantial question of law arises on this aspect of the matter”.

 

6.2.9. Reliance was also placed by the assessee in the following judicial pronouncements in respect of its contention:

 

a) The Hon’ble ITAT, Ahmedabad, in the case of ‘DCIT vs. A.S.Shah, ITA No.945/Ahd/2018, 02/08/2023’, held the following:

 

The unsecured loan availed was repaid in the next financial year to the creditor namely Smt. Hansaben M. Patel through cheque payments and the bank statement also filed before the Lower Authorities. Therefore, we are of the considered opinion, the provisions of section 68 do not attract in the above transaction and thereby we uphold the order passed by the Ld. CIT(A) deleting the addition made u/s. 68 of the unsecured loans availed from Smt. Hansaben M. Patel. The so-called unsecured loan was given by Account Payee cheques and also repaid by the assessee in the next financial year through banking channels. The recovery proceedings u/s. 226(3) initiated against Mukesh J. shah was also dropped by the A.O. Therefore, the provisions of section 68 do not attract of the loan transactions between the assessee M/s. Savitaben Mangaldas Trust and Shri Mukesh J. Shah. Therefore, the addition on this account is also liable to be deleted and the grounds raised by the Revenue is devoid of merits.”

 

b) In the case of ‘CIT v. S. Kamaljeet Singh [2005] 147 Taxman 18 (All.)’, the Hon’ble jurisdictional High Court on the issue of discharge of assessee's onus in relation to a cash credit appearing in his books of account, has observed and held as under:-

 

"4. The Tribunal has recorded a finding that the assessee has discharged the onus which was on him to explain the nature and source of cash credit in question. The assessee discharged the onus by placing (i) confirmation letters of the cash creditors; (ii) their affidavits; (iii) their full addresses and GIR numbers and permanent account numbers. It has found that the assessee's burden stood discharged and so, no addition to his total income on account of cash credit was called for. In view of this finding, we find that the Tribunal was right in reversing the order of the AAC, setting aside the assessment order."

 

c) The Hon’ble High Court, Calcutta in the case of ‘S.K. Bothra & Sons, HUF v. Incometax Officer, Ward-46(3), Kolkata 347 ITR 347’ wherein the Court held as follows:

 

“15. It is now a settled law that while considering the question whether the alleged loan taken by the assessee was a genuine transaction, the initial onus is always upon the assessee and if no explanation is given or the explanation given by the appellant is not satisfactory, the Assessing Officer can disbelieve the alleged transaction of loan. But the law is equally settled that if the initial burden is discharged by the assessee by producing sufficient materials in support of the loan transaction, the onus shifts upon the Assessing Officer and after verification, he can call for further explanation from the assessee and in the process, the onus may again shift from the Assessing Officer to assessee.

 

16. In the case before us, the appellant by producing the loan-confirmation-certificates signed by the creditors, disclosing their permanent account numbers and address and further indicating that the loan was taken by account payee cheques, no doubt, prima facie, discharged the initial burden and those materials disclosed by the assessee prompted the Assessing Officer to enquire through the Inspector to verify the statements.

 

d) In the case of ‘CIT vs. Y.K. Gupta [2014] 46 (HC), the Hon’ble Gujrat High Court’ held the following:

 

18. As mentioned hereinabove, we had called for the original file, which had revealed new, valid and tangible information supporting Assessing Officer's opinion received from DCIT, Kolkata, based on the material found during the search by the CBI, where Basant Marketing Pvt. Ltd. is said to be a dummy company of one Shri Arun Dalmia. What has been emphasized by the learned Senior Counsel appearing for the petitioner is that the Assessing Officer had attempted to fill in the gap by terming the amount received from Basant Marketing Pvt. Ltd. as "accommodation entry", which she could not have done without further inquiry/ verification. Yet another contention emphasized by the learned Senior Counsel is that the post notice correspondence made after the reasons recorded could not have added anything which was lacking in the reasons themselves. He urged that in absence of any statement given by any Director of Basant Marketing Pvt. Ltd. stating that the assessee received and obtained accommodation entry in the form of loans and advances, the reasons lack basis. The Director Mr. Dalmia of Basant Marketing Pvt. Ltd. as contended also does not reveal anywhere and, therefore, it is premature on the part of the Assessing Officer to so record the reasons. It is further urged that the affidavit of Rishabh Dalmia stating on oath that the loan transactions with the petitioner are genuine for having been carried out only through cheques, prima facie vindicates that the entire exercise is based on suspicion.”

 

e) In the case of ‘CIT, Dehi vs. Ms. Mayawati, 338 ITR 563 (Del), 03/08/2011’, the Hon'ble Delhi High court held the following:

 

"The capacity of any person does not mean how they earn monthly or annually but the term capacity is a wide term and that can be pursued by how wealthy he is. All the formalities, as per the law are made by the assessee and donors as well."

 

6.2.10. In light of the aforesaid judgements, as well as examining the assessee’s submission and considering the assessee’s contention, it is noticed that the appellant assessee has discharged its onus by providing the details of the aforesaid loan creditor, relevant ledgers, respective bank statements as well as confirmation letters from the creditor to verify the veracity of the loan taken. Moreover, the said loan creditor has also declared its source of investment in the assessee company in the confirmation letter and the AO hasn’t brought any evidence on record which can prove the aforesaid loan as bogus and as assessee’s own money routed through the loan creditors in the form of unsecured loans. Moreover, on perusal of the assessment record, it is found that total amount as received by the assessee company as unsecured loan from these two creditors namely Mr. Sarju Sharma & M/s Fairland Sales Pvt. Ltd. were Rs.1,50,00,000/-. However, the AO had only treated the part of the said loan i.e., Rs.87,00,000/- as bogus. That illustrates the remaining portion of the loan as received by the said two creditors proved as genuine by the AO. Hence, treating part of received amount genuine and the other part as non-genuine is not logical. Hence, the AO’s observation in this respect is not acceptable and the corresponding addition of Rs.87,00,000/- is liable to be deleted. Therefore, these grounds of appeal raised by the assessee are allowed.”

 

011. After hearing the rival contentions and perusing the materials available on record, we find that the assessee has furnished the full details in respect of Sri Sarju Sarma and M/s Fairland Sales Pvt. Ltd. comprising ITR, Audited financial statements, bank statement, statement of source of funds, copy of orders passed u/s 143(3)/ 154 of the Act. We note that even the confirmations were filed from both these parties. and notices issued u/s 133(6) of the Act were also replied and even in the assessment order passeds u/s 143(3) of the Act in the case of lenders, no addition was made. We note that the addition has been made by the ld. AO only on the basis of the investigation wing and statements recorded of the three parties. The ld. CIT (A) has passed a very reasoned and speaking order and followed a series of decisions of various high courts and tribunal while deciding the issue. Therefore, we do not find any infirmity in the order of the ld. CIT (A) and dismiss the appeal of the Revenue on this ground by upholding the order of ld. CIT(A).

 

012. The appeal in IT(SS) A No. 81/KOL/2024 of the Revenue is dismissed.

 

82/KOL/2024 for A.Y. 2017-18

 

013. The issue raised in ground no.1 is against the deletion of addition of Rs. 2,50,00,000/- received from M/s Rajputana General Commercial Corporation Private Limited, which was made by the ld. AO on account of being bogus and being assessee’s own money rooted through said entity.

 

014. Since, we have already decided a similar issue in ground no.1 in IT(SS)A No. 81/KOL/2024 and the above decision would apply mutatis mutandis to this appeal of Revenue in IT(SS)A No.82/KOL/2024 as well. Hence, the appeal of Revenue in IT(SS)A No. 1426/K/2024 is dismissed.

 

015. The issue raised in ground no.2 is against the order of ld. CIT (A) estimating the income at 10% of the total expenditure of Rs. 2,24,10,020/-.

 

016. The facts in brief are that during the course of search operation, the search team found and seized material marked as GRC/12 from the premises of the assessee. On perusal of page no. 23 to 34 of the seized materials bearing of identical mark GRC-12, the ld. AO observed that the said document named as ‘Adjustment Miscellaneous account covering the period from 01.07.2016 to 26.01.2017 with two columns namely ‘IN’ and ‘OUT’. It was also noticed by the ld. AO that total credits as reflected in the IN column were Rs. 2,69,21,970/- with closing balance reflected at (Rs. 6,10,58,540/-). The ld. AO observed that the said account represented the records of various expenses which were incurred in cash. The assessee refused and denied the pen drive seized from the casino premises and claimed that it was not aware about the transactions recorded in the pen drive and were not part of its record. The ld. AO finally noted in Para no. 9.1 that the amount reflected in different column of page no.23 to 34 of GRC-12, totaling to Rs. 2,24,10,020/- were unexplained expenditure incurred in cash and added the same to the income of the assessee.

 

017. In the appellate proceedings, the ld. CIT (A) estimating the income at 10% of the total amount on the ground that the ld. AO added the amount on the basis of seized document marked as GRC-12 by holding that the addition was only made on the basis of presumption and assumption and without there being any reasoned basis. The ld. CIT (A) also noted that the time and again the assessee has itself denied about that the pen drive and the transactions contained therein. Under these circumstances, we are of the view that the estimation made by the ld. CIT (A) is very reasonable and fair and need no interference at our end. Accordingly, we upheld the order of ld. CIT (A) on this issue by dismissing the ground no. 2 of the appeal.

 

018. The issue raised in ground no.3 is against the order of ld. CIT (A) on account of treating the interest expenses of Rs. 91,38,415/- of M/s Rajputana General Commercial Corporation Private Limited as genuine which was treated as bogus by the AO. Since, we have already accepted the loan taken from M/s Rajputana General Commercial Corporation Private Limited as genuine in IT(SS)A no. 81 and 82/KOL/2024, therefore, this ground being consequential to our decision taken in ground 1 in IT(SS)A No. 81 and 82/KOL/2024. Accordingly, we upheld the order of ld. CIT (A) by dismissing the ground no.3.

 

019. The Revenue’s appeal in IT(SS)A No. 82/KO/2024 is dismissed.

 

IT(SS)A No. 86 & 87/KOL/2024 for A.Y. 2018-19 and 19-20

 

020. The issue raised in ground no.1 of IT(SS)A Nos. 86 & 87/KOL/2024, are similar to ground no.3 of IT(SS)A No. 82/KOL/2024, wherein we have upheld the order of ld. CIT (A) by holding that interest payment to M/s Rajputana General Commercial Corporation Private Limited is genuine and accordingly, our decision in ground no. 3 in ITA No. 82/KO/2024 would apply mutatis mutandis to these appeals of Revenue in IT(SS)A No.86 & 87/KOL/2024 as well. Hence, the appeals of Revenue are dismissed.

 

021. In the result, all the appeals of the Revenue are dismissed.

 

Order pronounced in the open court on 31.01.2025.

 

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