Rajesh Bhatia, Delhi vs Assessee

Shri Rajesh Bhatia Vs. DCIT, Central Circle-17, Near Kamla Nagar, New Delhi. New Delhi.

(PAN AAHPB 6307 N)

(Appellant) (Respondent)

Date of Hearing : 02.07.2015 Date of Pronouncement : 24.07.2015

Assessee by : Sri K.R. Manjani, Advocate Respondent by: Sri Vikram Sahay, Sr. D.R.

ORDER

PER CHANDRA MOHAN GARG, JUDICIAL MEMBER

1. This appeal by the assessee has been directed against the order of the

CIT(A)-IV, New Delhi dated 26.02.2013 in Appeal No. 137/12-13 for AY 2002-

03. ITA No. 2021/Del/2013

2. The sole ground raised by the assessee in this appeal reads as under:-

"Learned CIT(A) has erred on facts as well as in sustaining addition of Rs.700,000/- in respect of two loans. Inspite of the fact that loans are through banking channel, from existing assessee, returned through bank, creditors are not related and their identity is not in doubt."

3. Briefly stated the facts giving rise to this appeal are that the Assessing

Officer has made an addition of Rs.3,50,000/- u/s 143(3) of the Income Tax Act,

1961 (for short the 'Act') dated 28.12.2007 on account of unexplained loans.

The assessee filed an appeal before the CIT(A) and the first appellate authority

vide his order dated 05.02.2010 enhanced the addition to Rs.7,00,000/- . The

assessee took the matter before the ITAT Delhi 'F' Bench and the Tribunal by

order dated 03.11.2010 set aside the matter and restore it back to the file of the

AO for making de novo assessment after providing due opportunity of hearing to

the assessee. In pursuance to the direction of the Tribunal, the Assessing Officer

again conducted reassessment proceeding and passed an ex-parte order making

an addition of Rs.7,00,000/- on account of loans from Smt. Radha Goyal and

Shri Om Prakash Gupta sons (HUF).

4. Aggrieved assessee again filed an appeal before the CIT(A), which was

also dismissed by passing the impugned order. Now, the empty handed assessee

is before this Tribunal in the second round of litigation with this second appeal

raising sole ground as reproduced hereinabove.

2 ITA No. 2021/Del/2013

5. We have heard the arguments on both the sides and carefully perused the

relevant material placed on record. The Ld. counsel of the assessee reiterating

its arguments before the authorities below submitted that the assessee filed

confirmations of Smt. Radha Goyal and Shri Om Prakash Gupta sons (HUF)

along with their bank payee slip dated 15.10.2001 & 12.01.2002 respectively

and copy of cheque issued by Shri Om Prakash Gupta & Sons (HUF) in favour

of the assessee. The Ld. counsel further contended that the assessee has also

filed confirmation of Bank statement of the assessee in the ICICI Bank, where

the cheque of said loan, amounts were deposited at the time of receipt of loan

and the assessee also filed photocopies of the assessee's bank statement of the

Bank of Rajasthan Ltd. from which impugned loans were returned through

cheques to the respective creditors. The Ld. counsel also pointed out that the

assessee also filed his affidavit dated 17.12.2009 supporting the facts and

circumstances in which loans were taken and returned to the respective

creditors, therefore, the Assessing Officer was not correct in making addition in

this regard and the CIT(A) was unjustified in upholding the same.

6. Ld. counsel for the assessee pointed out that the confirmations and all

relevant bank statements and copies before the AO, but the AO insisted to

present creditors in person which was not possible as Shri Om Prakash Gupta

died before assessment proceeding and Smt. Radha Goyal, was old cancer lady

died in October, 2011. Ld. counsel submitted that summons issued by the AO

3 ITA No. 2021/Del/2013

during the reassessment proceeding could not be complied because both the

creditors were died and the AO was properly informed about their legal heirs

who could be summoned for the purpose. The Ld. counsel further pointed out

that the summon issued to the legal heirs were not complied which is not fault of

the assessee. Ld counsel also pointed out that in the confirmation PAN number

and addresses of both the creditors were submitted and the AO could have

verified the amount of loan from their respective creditor record about

verification. The Assessing Officer proceeded to make addition in the similar

line which was done during the original assessment proceeding.

7. Ld counsel of the assessee has placed reliance on the various decisions of

the Hon'ble jurisdictional High court of Delhi in the case of CIT Vs.

Dwarkadhish Investment P. Ltd. 330 ITR 298 (Del.) and submitted that once

assessee proves the identity of the creditors either by furnishing their PAN

number of income tax assessment number and shows the genuineness of

transaction by showing money in his books either by account payee cheque or

by draft or by any other mode, allowing confirmations and bank records then the

onus to prove that the impugned loans are not genuine, onus shift to the

Revenue. Ld. counsel further pointed out that in the aforesaid circumstances of

the case, the assessee discharged his onus but the Assessing Officer rejected the

entire sustainable evidence of the assessee on the threshold without making any

further enquiry from the assessment record of the respective creditors and

4 ITA No. 2021/Del/2013

proceeded to make the impugned addition, which cannot be held as in

accordance with law.

8. Ld. Departmental Representative (DR) pointed out that during the

reassessment proceedings, assessee did not file any confirmation, bank account

and other relevant evidences in support of impugned loans and the summons

were issued to the creditors on 25.03.2011 and to their legal heirs on 14.12.2011

but there was no compliance of these summons. The Ld. DR supporting the

action of the AO submitted that in this situation AO had no option to make

addition u/s 68 of the Act when the assessee failed to prove creditworthiness of

the respective creditors and genuineness of the transaction. The Ld. DR

supported the impugned order and submitted that the CIT(A) right in upholding

the addition made by the AO during the reassessment proceeding. On careful

consideration of above submission, at the very outset, we observe that the

CIT(A) upheld the addition with the following observations:-

"5. I have carefully considered the submissions of Id. AR and perused the order passed by the AO. I find that the Hon'ble Tribunal has set aside the matter for making denovo assessment. In compliance of the same, the AO provided various opportunities to the appellant to adduce the primary evidences like confirmation letter, bank statement, Income Tax Return and also asked the appellant to produce the depositors. However, inspite of repeated opportunities, the appellant failed to discharge its primary onus in the form of production of confirmation letter, bank statement of the depositors, their Income Tax Returns etc. The AO also asked the appellant to produce the depositors which was not done. The AO issued summons to the creditors on 25.3.2011 and to their legal heir on 14.12.2011 which remained uncomplied. The AO confronted this fact to the assessee on 5 ITA No. 2021/Del/2013

22.12.2011 that the summons issued by him have not been complied to which the appellant stated that they have no power to enforce their attendance. This submission of the appellant is not acceptable as the depositors were appellant's witnesses and not of the AO. Section 68 casts an obligation on the assessee who claims to have received cash credits to discharge the identity of the creditor, creditworthiness of the creditors and genuineness of the transaction. These 3 requirements are cumulative and if any of these conditions is not fulfilled, the amount can be added u/s 68. In the case under consideration, the appellant has failed to discharge its onus of establishing the identity of the creditor, creditworthiness of the creditor and genuineness of the transaction, inspite of repeated opportunities given by the AO. The submission that the undersigned may issue summons is devoid of any merit as the AO has already issued/ summons to the depositors as well as their legal representatives which was n01j complied. The AO has also brought this fact to the notice of the appellant to which it was submitted that the appellant has no power to enforce the attendance. Therefore, asking the undersigned again to issue the summons is a very strange submission of the appellant. Considering the facts and circumstances of the case, I hold that the appellant has failed to discharge its onus cast upon him u/s 68 to prove the identity of the creditor, credit worthiness of creditor and genuineness of transaction to the satisfaction of the AO. Therefore, I do not find any infirmity in the order passed by the AO. The addition of Rs. 7,00,000/- made u/s 68 by the AO is hereby confirmed. Ground of appeal is rejected."

9. In view of above, from the operative part of the assessment order as well

as impugned order of the CIT(A) as reproduced hereinabove, we note that the

authorities below mainly stressed on the personal attendance of the said

creditors Smt. Radha Goyal and Shri Om Prakash Gupta and the Ld. DR has not

disputed this fact that these creditors had died before completion of

reassessment proceedings on 29.12.2011. In this situation, when the notices

issued by the AO to the legal heirs of the said creditors remained uncomplied.

The assessee cannot be held at fault. In this situation, the Assessing Officer was

6 ITA No. 2021/Del/2013

bound to consider confirmations, copies of the bank records of the assessee

receiving and returning the loans and also submissions and explanation of the

assessee stating facts and circumstances of the receipt and repayment of loans.

10. We may point out that in the confirmation/certificate issued by respective

creditors Smt. Radha Goyal and Shri Om Prakash Gupta & Sons available at

pages 2 and 4 of the assessee's paper book we clearly observe that these

confirmations also contain PAN number, respective ward details of the

Assessing Officers of the creditors and in this situation the Assessing Officer

could have verified or cross check these transactions from the respective

assessments records of the creditors from their respective AO and this exercise

has not been conducted by the AO or by the CIT(A). In this situation, we are

inclined to hold that the authorities below ignored all relevant documents

including confirmation bank statement of the assessee showing receipt of loan as

well as repayment of loans through banking channels, which were placed by the

assessee before the authorities below during the second round of proceeding

which were held in pursuance to the direction of the Tribunal in the order dated

03.11.2010 (Supra).

11. From papers and documents submitted by the assessee specially copy of

statement of accounts of the ICICI Bank available at pages 6 & 7 we clearly

observe that the assessee receipt loans of Rs.3,50,000/- from Smt. Radha Goyal

on 15.10.2001 and from Shri Om Prkash Gupta HUF on 15.01.2002 during FY 7 ITA No. 2021/Del/2013

2001-02. From copies of the Bank statement of the assessee in the Bank of

Rajasthan Ltd. Kamla Nagar, Delhi Branch available at page 8 of the assessee

paper book we note that the loan of Smt. Radha Goyal was returned through

cheque no.403425, which was debited to the bank account of the assessee on

04.11.2004 and in similar manner, the assessee also returned loan from Shri Om

Prakash Gupta through cheque no. 403427, which was debited to the assessee's

bank account on 23.11.2004. From the affidavit of the assessee sworn on

17.12.2009 available at pages 9 and 10 of the assessee's paper book we observe

that the assessee also submitted details and addresses of the respective creditors

before the AO.

12. On the basis of foregoing discussion, we reach to a conclusion that the

authorities below ignored vital sustainable and acceptable evidence and assessee

showing genuineness of the transaction and creditworthiness of the respective

creditors Smt. Radha Goyal and Shri Om Prakash Gupta (HUF) which were

rejected at the threshold without any consideration by the authorities below,

without any further verification from the respective assessment records of the

alleged creditors, whereas the assessee submitted their PAN numbers, addresses

and details of their assessment ward and AO during reassessment proceeding. In

this situation, we respectfully follow the ratio laid down by the Hon'ble

Jurisdictional High Court of Delhi in the case of CIT Vs. Dwarkadhish

Investment P. Ltd. (supra) wherein their lordship held that the assessee submits

8 ITA No. 2021/Del/2013

the identity of the creditors by either furnishing PAN number of Income Tax

assessment number and other relevant details showing genuineness of the

transaction and creditworthiness of the creditors and money in the books of

accounts of the assessee has been entered through banking channel, then the

onus of proof would shift to the Revenue.

13. In the present case, in view of above noted facts and circumstances and

contains of documents submitted by the assessee, we have no hesitation to hold

that the assessee discharge his onus establishing genuineness of the transaction

and creditworthiness of the respective creditors and the Assessing Officer only

stressed upon the personal presence of the creditors who had died before

completion of reassessment proceeding. The AO and the CIT(A) have not

undertaken any verification or examination from the assessment records of the

respective creditors as per details and documentary evidence submitted by the

assessee in the confirmation in the form of PAN number and assessment ward

details. In this situation, addition u/s 68 of the Act cannot be made without

demolishing the explanation and affidavit submitted by the assessee and without

discharging the onus which was shifted by the AO after submission of

explanation and all relevant documents by the assessee.

14. Finally, on the logical analysis of the facts and circumstances of the case

and on the basis of foregoing discussion, we hold that the addition made by the

AO and upheld by the CIT(A) during the second round of proceeding cannot be 9 ITA No. 2021/Del/2013

held as sustainable and in accordance with letters and sprit of Section 68 of the

Act specially when the assessee has shown by substantial evidence that the loans

have been returned to the respective creditors then the addition u/s 68 of the Act

cannot be held as correct and justified and thus we set aside the impugned order

and direct the AO to delete the impugned addition. Accordingly sole ground of

the assessee is allowed.

15. In the result appeal of the assessee is allowed.

Stay Application No.215/Del/2014 for AY 2002-03

16. Since by the earlier part of this order, we have allowed the appeal of the

assessee for AY 2002-03, deleting the impugned addition, therefore, the stay

application of the assessee becomes infructuous and we dismiss the same.

The decision is pronounced in the open court on 24th July, 2015.

Sd/- Sd/- (J.S. REDDY) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 24th July, 2015. Aks/- Copy forwarded to:

1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi

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