Case Law Details

Case Name : M/s. Jindal (India) Textiles Vs I.T.O. Ward 2(2), Surat (ITAT Ahmedabad)
Appeal Number :  I.T.A No. 125/Ahd/2012
Date of Judgement/Order : 09/06/2015
Related Assessment Year : 2006-07
Courts : All ITAT (7645) ITAT Ahmedabad (505)

Brief of the Case

In the case of M/s. Jindal (India) Textiles Vs. ITO the Hon’ble ITAT held that once creditors’ identity, mode of payment and repayment, assessee’s books of accounts proved the impugned credit transactions, it is not appropriate to look through the circumstances and section 68 cannot be invoked.

Facts of the Case

The assessee-firm trades in textile items. The sole question in the present case is that of addition of Rs.11,90,000/- as unexplained cash credit. The assessee obtained these loans from Shri Kailash Chandra Meena in individual capacity as well as that as an HUF to the extent of Rs.7,90,000/- and Rs.4,00,000/-; respectively. The AO sought to verify the identity, genuineness and credit worthiness of these loans and issued notice u/s 131. The said creditor verified to have advanced both the loans. However, the AO inter alia noticed some chinks in the above said deposition regarding the sale purchase of the sarees and other business items, acquisition of the cash amount in question, source of the opening balance and also the fact that his address was same as that of the assessee. He also found that bank account of the said creditor was introduced by Shri Pradeep Agarwal; manager and son of the assesse firm’s partner Shri Ramesh Chandra Agarwal. It further emanated that a cheque of Rs.4 lacs was credited by Shri Meena on 27.03.2006. The same was issued by Shri Pradeep Agarwal (supra). The AO also came to conclusion that Shri Meena’s returns were prima facie bogus in view of the above said discrepancies. He took into consideration all these overwhelming facts on record to treat the impugned deposits in the assessee’s accounts reading Rs.11.90 lacs as unexplained cash credits liable to be added u/s.68 of the Act.

Contention of the Assessee

The Assessee contended the above mentioned loan transaction to be genuine and produced various facts of the case as discussed in details in the CIT(A)’s order (below).


Contention of the Revenue

The Revenue strongly refers to the Assessing Officer’s findings.


Held by CIT(A)

The ld. CIT (A) passed a detailed order and considered the various facts of the case in details as follows:-

Regarding Bank Accounts and Returns:-

The ld. CIT(A) observed that in order to show the loans the creditor had opened two bank accounts (in his own name and in the name of the HUF) on 09-03-2006 i.e. at the fag end of the FY and that various sums were deposited in the said bank accounts on 27th, 28th and 29th March and on the same days cheques of equivalent amounts were issued to the assessee as loans. The returns were filed for the first time. In both the returns Opening Capital Balances were shown along with Salary, business and Interest Income in the Individual’s return and Business and Interest Income in the HUF’s return. However, no supporting documents were filed along with the returns. As per the Ld. CIT(A), the assessee and Shree Meena had given such entries and filed returns and presumed that they had tied up all the loose ends.

Statement of the Creditor:-

The Ld. CIT(A) observed that in the statements given by the creditor, he had given some answers which were in total contradiction with returns filed by him. The creditor had claimed to have been doing business in Saree and Kirana goods, which he claimed to have carried on for just to 7-8 months and the wound it up in end of the year 2005. He could not state as to what sort of business he did, from where did he purchase his goods from and whom did he sold such goods. He claimed to have made purchases of Rs. 14-15 lakhs and made payment in cash from the money which he had got from his Village in Rajasthan. He claimed to have got the money from his father and hence, when asked to explain where his father had got such substantial sum from, he explained that he himself had given it to him. The Ld. CIT(A) held that Shri Kailashchandra Meena, in the presence of the manager, Shri Pradeep Agarwal and the C.A. Shri Dinesh Dwivedi was himself confused about where he got the cash from? How he had carried it? What he did with it? How he bought and sold the goods? How much money he got from the business? How much money he got from the sale of left over stocks? etc.

When it was pointed out that the statements made by Shree Meena were in contradiction with the returns filed, he clearly stated that what was mentioned in the returns was incorrect. However, the AR argued that no such statement had been made by Mr. Meena, what he actually stated was that “what is stated in the statement is correct” and that he never stated that what is stated in returns is not correct. The Ld. CIT(A) held that this is totally a false claim and reproduced the exact statement given by Shree Meena, which is as follows :

“I have gone through the statement recorded today and understood the same. My. C.A. has also explained the same to me. I hereby confirm in presence of my C.A. Shri Dinesh Dwivedi and Manager of M/s Jindal (India) Textile, Shri Pradeep Agarwal, what is stated on the statement is correct and what stated in the return of income for AY 2006-07 is incorrect.”

Cheques issued to Open Bank Accounts and the Address of the Creditor:-

Shri Meena stated that the 15 lakhs cash that he got from Rajasthan, he had kept with Shri Pradeep Agarwal until the time of opening the bank accounts, and that, Shri Agarwal had helped him to open the bank accounts. It is also interesting to note that the cheques deposited in the two bank accounts were also issued by Shri Pradeep Agarwal, who was the son of one of the partners and, also the manager of the firm. There is no relationship established between Shri Meena and Shri Agarwal for Shri Meena to entrust him with the sum of Rs 15 lakhs. It is also not explained why Shri Agarwal gave him the cheques which he deposited in the bank accounts. The cheques were issued by Shri Agarwal from his account no. 2597 in his capacity as the prop, of M/s Manisha Textiles. He had issued two cheques of Rs 4 lakhs each to the individual and to the HUF, and both the cheques were deposited in the respective bank account on 27-03- 2006 and 28-03-2006.

Also of interest is the fact that Shri Kailashchandra Meena had given his address in both the returns of income as 151, Ajanta Shopping Centre, Ring Road, Surat, which is the address of the Assessee.

Conclusion Drawn by the Ld. CIT(A):-

Thus, after observing and discussing the above facts the Ld. CIT(A) concluded as follows:

“Thus, the statement of Shri Meena recorded by the AO u/s 131 of the Act completely exposed the modus operand adopted by the Assessee, and the manner in which the transactions were deliberately structured to give them an appearance of authenticity and genuineness. When confronted by the AO, the manger of the firm and Shri Meena sought to weave a story which however had several loop holes and poor logic, since it was only a story and not the correct narration of facts.

6.7 It has also been argued without any effect that the AO did not ask the Assessee to produce the books of account or any document in support of what had been shown in the returns of income of Shri Meena and his HUF, such as a salary certificate. The fact remains that since the Assessee had made a claim of having received loans totalling Rs 11,90,000/- the onus was entirely on it to produce and bring on record all relevant documents, including the books of account, in support of such claim. It was not the assessment proceedings of Shri Meena, and therefore, it was not incumbent on the AO to ask the Assessee to produce the salary certificate of Shri Kailashchandra Meena.

6.8 The AR has relied upon several case-laws to justify its claim. However, the facts relating to cash credits are different every time and there is no fixed formula which can be applied. There can be no rule of law to judge the genuineness of cash credits, and therefore, the ratio of a decided case cannot applied across the board to all cases of cash credits. The facts speak for themselves and the same have been discussed in details and reiterated in the aforesaid paragraphs. The facts of the case clearly establish and confirm the AO’s finding that neither Shri Meena nor his HUF had the requisite creditworthiness to give loans totalling Rs.11,90,000 to the Assessee. The claim of the Assessee was absolutely bogus. The explanation sought to be furnished was unsubstantiated and hence, was false and not bonafide. The provisions of section 68 was therefore, clearly attracted. The addition of the sum of Rs.11,90,000 as unexplained cash credits is therefore, confirmed.

Held by ITAT

The Hon’ble ITAT held that there is no dispute that the amount in question has been credited in the assessee’s bank account through cheque transfers. There is also no issue about identity of the creditors i.e. Shri Kailash Chandra Meena (Individual and HUF). The assessee’s books of accounts with regard to these two creditors are also placed on record. All these payments are duly recorded therein. The sole question in the instant appeal is that of genuineness/creditworthiness of the transactions in the view of the facts narrated in the CIT(A)’s order. The Hon’ble ITAT disagreed with the findings of the AO and stated as follows:

The creditors’ bank statements maintained with the United Bank of India duly proved these loan payments as well as repayments thereof. For instance, the assesse obtained sums of Rs.4 lacs, Rs.1 lac and Rs.2,90,000/- on 27, 28 & 29th March, 2006; respectively. Thereafter, it transferred sums of Rs.4 lacs and Rs.3,90,000/- by the very banking channel in the account of Shri Meena/individual. Similarly, the HUF’s bank statement reveals the assessee to have obtained a sum of Rs.4 lacs on 28.3.2006 and repaid the same on 28.6.2006. The Revenue is unable to controvert this factual position.

It refers to the common address of the assessee as well as that of Shri Meena (supra). There is no quarrel about the same. However, the fact also remains that there can be any number of assessees under a single roof. This itself cannot be a ground to invoke section 68 of the Act in absence other corroborative factors.

Be that as it may, once creditors’ identity, mode of payment and repayment, assessee’s books of accounts proved the impugned credit transactions, we do not find appropriate to look through the circumstances.

The Hon’ble ITAT held that the Hon’ble jurisdictional High Court (2014) 45 151 (Guj.) Pratapbhai Virjibhai Patel vs. ITO has upheld a co-ordinates bench order in ITO vs. Counter force ITA No.1636/Ahd/2009 deleting a similar addition on the basis of repayment of the impugned credits and supportive ledger account. It reiterated that facts of the present case also do not seem different than those decided by their lordships.

The Hon’ble ITAT also relied on other case laws namely (2014) 42 473 (Guj.) CIT vs. Apex Therm Packaging Pvt. Ltd. and (2012) 21 159 (Guj.) CIT vs. Ranchhod Jivabhai Nakva  wherein it was held that when there is no dispute about identity of the creditors, their pan cards, copy of income tax returns, balance sheet, profit and loss accounts are on record along with their cross objections, such an addition does not hold ground.

Thus, the Hon’ble ITAT drew support from the above said orders and deleted the impugned addition of unexplained cash credit u/s 68 amounting to Rs. 11,90,000/-

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