Case Law Details

Case Name : ITO Vs M/s Riddhi Siddhi Corporation (ITAT Ahmedabad)
Appeal Number : ITA No. 2248/Ahd/2012
Date of Judgement/Order : 20/02/2017
Related Assessment Year : 2009-10
Courts : All ITAT (5374) ITAT Ahmedabad (383)

On going through the above discussion the fact is undisputed that assessee has filed the details of names, addresses, Permanent Account Number (PAN), bank statement, income-tax returns and financial statements of all the alleged loan creditors and no anomaly or mistake has been observed by the Revenue authorities except for the low or nil income shown during the year. Further no enquiry has been conducted in any of the loan creditor so as to disprove the evidences and documents placed by assessee with respect to proving identity, creditworthiness and genuineness of the loan creditor. In the course of proceedings before us, we examined two of the loan creditors namely Ranjana Suraj Bhojavani and Hemaben Virumal Miterani from whom loan of Rs. 28,00,000/- & Rs. 19,70,000/- respectively was taken during the year. These two amounts were the two highest amount among 24 loan creditors, with the help of ld. Authorised Representative we went through the confirmations a/c. bank statement, income-tax return and balance sheet of these two creditors and observed that no cash was deposited before the issue of cheque to the assessee and the transactions were entered through account payee cheques only wherein some funds came through third party into the account of loan creditor and thereafter account payee cheques of loan amount were given to the assessee. From the records of these two parties we were satisfied that assessee has substantial evidences to prove the identity, genuineness and creditworthiness as envisaged in the provisions of section 68 of the Act. We further observe that similar details of bank statement, income-tax return and financial statement along with confirmation were placed on record with respect to all other 22 parties. We find it pertinent to observe the lucid finding of Hon. Jurisdictional High Court in the case of Commissioner of Income Tax vs. Ranchhod Jivabhai Nakhava (supra) adjudicating similar issue and almost similar facts wherein Hon. Court observed as follows :-

“After hearing Mrs. Bhatt, the learned advocate appearing on behalf of the appellant and after going through the materials on record, we are unable to accept her contention that in this case the Revenue has discharged its onus and it was for the assessee to further prove the genuineness and creditworthiness of the creditors.

In our view, once the assessee has established that he has taken money by way of accounts payee cheques from the lenders who are all income tax assessees whose PAN have been disclosed, the initial burden under Section 68 of the Act was discharged. It further appears that the assessee had also produced confirmation letters given by those lenders.

Once the Assessing Officer gets hold of the PAN of the lenders, it was his duty to ascertain: from the Assessing Officer of those lenders, whether in their respective return they had shown existence of such amount of money and had further shown that those amount of money had been lent to the assessee. If before verifying of such fact from the Assessing Officer of the lenders of the assessee, the Assessing Officer decides to examine the lenders and asks the assessee to further prove the genuineness and creditworthiness of the transaction, in our opinion, the Assessing Officer did not follow the principle laid down under Section 68 oflhe Income Tax Act.

If on verification, it was found that those lenders did not disclose in their income tax return the transaction or that they had not disclosed the aforesaid amount, the Assessing Officer could call for further explanation from the assessee to prove the genuineness of the transaction or creditworthiness of the same. However, without verifying such fact from the income tax return of the creditors, the action taken by the Assessing Officer in examining the lenders of the assessee was a wrong approach. Moreover, we find that those lenders have made inconsistent statement as pointed out by the Commissioner of Income Tax (Appeals) and in such circumstances, we find that both the Commissioner of Income Tax (Appeals) and the Tribunal were justified in setting aside the deletion as the Assessing Officer, without taking step for verification of the Income Tax Return of the creditors, took unnecessary step of further examining those creditors. If the Assessing Officers of those creditors are satisfied with the explanation given by the creditors as regards those transactions, the Assessing Officer in question has no justification to disbelieve the transactions reflected in the account of the creditors. In other words, the Assessing Officer had no authority to dispute the correctness of assessments of the creditors of the assessee when a co-ordinate Assessing Officer is satisfied with the transaction.

We thus, find that in the case before us the Tribunal below rightly set-aside the deletion made by the Assessing Officer, based on erroneous approach by wrongly shifting the burden again upon the assessee without verifying the Income Tax return of the creditors. The position, however^ would have been different if those creditors were not income tax assessees or if they had not disclosed those transactions in their income tax returns or if such returns were not accepted by their Assessing Officers.*

  1. We further observe that Co-ordinate Bench in the case of ITO vs. Arihant X-ray & Sonography Clinic (P) Ltd. (supra) adjudicating similar issue allowed assessee’s claim observing as follows :-
  2. We have heard the parties and considered the rival submissions. Admittedly, Smt. Vimlaben S. Shah is an ] income-tax assessee, her address and P.A. number were given along with passbook of the depositor. She also /attended before the AO and explained that she had received gift from Shri Vinod Shah, whose address, P.A. / number bank passbook and copies of IT returns, were also given. Similarly, the identity of Dr. Asim V. Shah was / proved, he appeared before the AO, his copy of contra accounts were produced, the address, P.A. number and copies of IT returns were also furnished. In these circumstances, in our opinion, the CIT(A) was justified in allowing the claim of the assessee and the matter stands covered by the Gujarat High Court (decision) in the case of CIT vs. Rohini Builders (2003) 182 CTR (Guj) 373 : (2002) 256 ITR 360 (Guj) wherein the Court placing reliance on the decisions of the Supreme Court in the cases of CIT vs. Orissa Corporation (P) Ltd. (1986) 52 CTR (SC) 138 : (1986) 159 ITR 78 (SC) and CIT vs. Daulat Ram Rawatmul! 1972 CTR (SC) 411 : (1973) 87 ITR 349 (SC), deleted the addition by observing that the Tribunal found that the assessee had discharged the initial onus which lay on it in terms of s. 68 by proving the identity of the creditor and complete address, GIR number/PA number and the copies of assessment orders wherever readily available, that it had also proved the capacity of the creditor showing the amounts were received by the assessee by account payee cheque drawn from the creditors and the assessee was not expected to prove the genuineness of the cash deposits in the bank accounts of those creditors because under law the assessee can be asked to prove the source of the credits in its books of account but not the source of the source. We, accordingly, allow the claim of the assessee by upholding the order of the CIT(A).

In the result, the appeal stands dismissed.

We further observe that in the case of ACIT vs. M/s Amik Printers (supra) Tribunal has decided similar issue by observing as under :-

5. With the assistance of Ld. representatives, we have gone through the record carefully. Section 68 of the Act contemplates that where any sum is found credited in the books of an assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the AO, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year. No doubt, credit entries are available against the names of 13 persons in the books of assessee, therefore, he is supposed to explain the source of deposits in the books. Section 68 of the Act puts an obligation upon the assessee to prove identity of the creditor, his creditworthiness and genuineness of the transaction. In order to discharge the onus cast upon the assessee, he has filed names and address, PAN no., copy of bank account, copy of income tax return for the corresponding periods of the creditors. The l_d. First Appellate Authority has called for a remand report from the AO. Ld. CIT(A) has examined the facts of individual creditor in seriatim. Ld. CIT(A) on an analysis of the facts was not satisfied with regard to the creditworthiness as well as genuineness of the transaction qua four creditors and confirmed the additions.

6. The grievance of the revenue is that no discussion has been made as far as five creditors are concerned namely Suresh Lalchand, R. V. Finance, Mohanlal Rochiram (HUF), Menghiben Dulhanomal Pritmani and Pinki Rameshchandra Pritmani We find that as far as approach of Ld. First Appellate Authority is concerned, it is in consonance with the requirement provided in section 68. There is no confusion in the mind of First Appellate Authority while analyzing the detail of each creditor. Ld. First Appellate Authority is of the opinion that identity of creditor has to be proved. Similarly, the transaction has to be proved as genuine as well as creditors should be creditworthiness. While examining the detail of the first creditor namely Gurumukhdas Dulhanomal A Pritmani, Ld. First Appellate Authority has observed that money was paid through account payee cheque. Shri Gurumukhdas Dulhanomal A Pritmani had not received any money from the assessee before issuance of a cheque to the assessee. He was a income tax payer and the copy of the return was also submitted. It is pertinent to mention that there are 13 creditors. Ld. CIT(A) has confirmed the addition qua four, meaning thereby, additions have been deleted qua 9 creditors. Revenue is challenging the deletion qua five creditors only. The grievance of the revenue is that discussion was not made by the Ld. First Appellate Authority with respect to five. In our opinion, when Ld. First Appellate Authority has made observation about 13 creditors then it is to be appreciated that Ld. First Appellate Authority must have a glance on all the details. It is the Assessing Officer who did not make specific objections to the details submitted by the assessee, in his remand report in respect of these five creditors. Therefore, after going through the order of Ld. CIT(A), we are of the view that Ld. CIT(A) has appreciated the facts in right perspective and no interference is called for. This appeal is devoid of any merit. It is dismissed.

Respectfully following the judgment of Hon. Jurisdictional High Court and the decisions of the Co-ordinate Bench referred above, and discussion made in the preceding paragraphs and examining the facts of the case in the light of above decisions, we are of the view that assessee has in its permissible limit has proved beyond doubt the identity, genuineness and creditworthiness of the loan creditors and it could not be disputed by the Revenue at any stage nor any enquiry was made in case of any other loan creditor, which could disprove the evidence placed by assessee. We therefore, find no reason to interfere with the order of ld. Commissioner of Income Tax(A) deleting the impugned addition on account of unexplained cash credit of Rs. 1,20,21,020/-. We accordingly, dismiss this ground of Revenue.

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Category : Income Tax (28059)
Type : Judiciary (12301)
Tags : ITAT Judgments (5554) Section 68 (228)

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