Itxa/786/2016 Of Pr. Commissioner Of Income Tax-27 v. M/S. Parth Enterprises

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 786 OF 2016 Pr. Commissioner of Income Tax-27 .. Appellant v/s. M/s. Parth Enterprises .. Respondent Mr. N.C. Mohanty a/w Ms. Padma Divakar for the appellant None for the respondent CORAM : AKIL KURESHI & M.S. SANKLECHA, J.J. P.C. DATED : 11[th] DECEMBER, 2018. 1.This Appeal under Section 260-A of the Income Tax Act, 1961(the Act) challenges the order dated 10[th] June, 2015 passed by theIncome Tax Appellate Tribunal (the Tribunal). This appeal relates toAssessment Year 2009-10. 2.The Revenue has urged the following question of law for ourconsideration :- “Whether in the facts and circumstances of the case and in law, theTribunal is correct in law by deleting the addition made by the AOon account of bogus unsecured loans u/s 68 of the I.T. Act? 3.The respondent is engaged in the business of builders anddevelopers. It filed its return of the income for the subject assessmentyear declaring income at Rs.7.72 lakhs. The Assessing Officercompleted the assessment by order dated 26[th] December, 2011 underSection 143(3) of the Act determining the income at Rs.3.40 crores.This enhancement of income was essentially on account of the fact thatthe respondent had taken unsecured loans from 90 persons. However,confirmations were filed only in respect 77 persons. This resulted in theAssessing Officer concluding that unsecured loans to the extent ofRs.3.35 crores were hit by Section 68 of the Act. Thus, added to theincome of the respondent assessee. 4.Being aggrieved by the assessment order dated 26[th] December,2011, the respondent filed an appeal to the Commissioner of IncomeTax (Appeals) [CIT(A)]. In appeal, by an order dated 21[st] November,2012, the CIT(A) found that creditworthiness of the parties were notdoubted. On facts, it came to the conclusion that out of 90 parties, loanreflected in the names of 13 parties was hit by Section 68 of the Act.Accordingly, an addition of Rs.36 lakhs was confirmed against theaddition of Rs.3.35 crores made by the Assessing Officer. In regard to the balance of Rs.2.99 crores, the CIT(A) found that the loans weregenuine and therefore not hit by Section 68 of the Act resulting in itsdeletion. 5.Being aggrieved by order dated 21[st] November, 2012, furtherappeals were filed by the assessee as well as respondent to the Tribunal.The Revenue challenged the deletion of Rs.2.99 crores while therespondent challenged the upholding of addition of Rs.36 laksh as beinghit by Section 68 of the Act. The Tribunal after considering the factsrecorded its finding as under :- “5. We had heard the rival submissions and perused the materialbefore us. We find that there were total 90 loan creditors fromwhom unsecured cash credit amounting to Rs.3,35,00,000/- hadbeen introduced in the books of accounts by the assessee, that out ofthe 90 loan creditors confirmations were submitted only in the caseof 77 parties and for the remaining 13 parties confirmation werenot furnished during the assessment proceedings, that during thecourse of appellate proceedings of the remaining loan confirmationwere filed along with other supporting documents that enquirieswere conducted in a few cases, to be precise four in number arebased on the statement given by those parties enquiries undersection 142(2) of the Act, a survey action under section 133A of theIT Act was conducted on 01.12.2011 at the premise of DK by theDDIT (investigation), unit IX(3), Mumbai that his statement wasalso recorded, that in his statement he admitted that he hadprovided entries for loans in lieu of cash received from the assesseeand also explained that the modus operandi is of giving chequesand receiving cash back which were then returned to those partieswhose names are appearing as unsecured creditors in the books ofaccount of the appellant, that DK also stated that all those 18parties were his clients and the job of providing the entries was done in the names for the reason that they were having requisite build upcapital, that he paid a comission of 0.6% by the assessee, that onthe basis of the statement given by DK addition of Rs.89 lacs weremade with regard to 18 parties, that the FAA upheld the addition ofRs.36 lakhs and deleted the remaining addition, that the FAAupheld that interest paid to 14 parties only should be disallowedthat were held to be non-genuine. As stated earlier, the AO did not make any inquiry about 76creditors out of the 77 Creditors. The FAA has given a categoricalfinding of fact that no inquiry was made and hence the additionmade by the AO for those creditors was not justifiable, except onecase. It is said that in the matters related to section 68 burden ofproof cannot be discharged to the hilt-such matters are decided onthe particular facts of the case as well as on the basis ofpreponderance of probabilities. Credibility of the explanation, notthe materiality of evidences, is the basis for deciding the casesfalling under section 68. The assessee had produced all therequired documentary evidences and discharged its onus as far asthose 76 creditors are concerned. The AO did not make any furtherinquiry. So, in our opinion, order of the FAA does not suffer fromany legal infirmity. In case of remaining 14 (JVA and 13 creditorsabout whom the assessee filed details before the FAA) creditors theFAA had rightly held that it had failed to discharge the initialburden. In matters regarding cash credit, the onus of proof is not astatic one – the initial burden of proof lies on the assessee. Amountappearing in the books of a/cs of the assessee is considered a proofagainst him. But, if it produces evidences about identity,genuineness and credit worthiness of the lender onus of proof shiftsagain to the Revenue. In the matter before us, the FAA-afterconsidering the remand report and reply of the assessee – found thatthe assessee had failed to discharge the burden cast upon it by theprovisions of section 68 of the Act. All those creditors were filingbelow taxable return and there was dispute about deduction oftaxes as well as form no.15G/H. She has specifically held that ithad not proved the genuineness and credit worthiness of the lenders.The assessee did not ask for cross examination of DK. In ouropinion, the so-called retraction by him also of no help to theassessee. He is a professional and he very well knew as to whatstatement he had given. Withdrawing the same after a period ofnine months, without assigning any reason for retraction, goes against him and the assessee. Neither DK nor the assessee hasdenied their acquaintances with VB. All these surroundingcircumstances, in our opinion strengthen, the stand taken by theFAA. So, confirming her order, we decide the effective ground ofappeal against the assessee with regard to the creditors who hadadvance Rs.36 lacs to it. In our opinion, the FAA had rightlyrestricted the interest disallowance. against him and the assessee. Neither DK nor the assessee hasdenied their acquaintances with VB. All these surroundingcircumstances, in our opinion strengthen, the stand taken by theFAA. So, confirming her order, we decide the effective ground ofappeal against the assessee with regard to the creditors who hadadvance Rs.36 lacs to it. In our opinion, the FAA had rightlyrestricted the interest disallowance. 6.While deciding the appeal of the assessee we have held thatthe FAA had rightly deleted the addition of Rs.2.99 crores. The AOhad made no effort to verify the details filed by the assessee beforehim. He could have at least made preliminary inquiry about them.He made inquiry about the persons directly and on the basis of suchinquiry made an addition of Rs.3.55 crores. The provisions ofSection 68 do not permit such action – on the basis of specificinquiry general additions cannot be made. Hon'ble RajasthanHigh Court in the case of R S Rathore (supra) has clearly laid downthe said principle. No discrepancy was found by the AO in thedocuments filed by the assessee. Therefore, upholding the order ofthe FAA, we decide the first limb of the first ground of appealagainst the AO. Second part of the first ground deals with deletionof interest amount of Rs.40.37 lakhs. While deciding the appealfiled by the assessee, we have upheld the decision of the FAA inrestricting the interest disallowance. Second ground of appeal isalso decided against the AO.” 6.Mr. Mohanty, learned Counsel appearing for the Revenue reliesupon the order of the Assessing Officer to contend that this appealwould require admission. 7.We find that there are concurrent finding on facts rendered by the CIT(A) and the Tribunal holding that only Rs.36 lakhs can be addedto the declared income and the balance amount of Rs.2.99 crores was not hit by section 68 of the Act. This finding is premised on the factthat no enquiry was made in respect of 76 creditors out of 77 creditorsand the respondent had provided required documentary evidence inrespect of the 76 creditors. Thus, these are essentially finding of factand the view taken by the Tribunal is a possible view on these facts. Inview of the above, the question as proposed does not give rise to anysubstantial question of law. Thus, not entertained. 8.Accordingly, appeal is dismissed. No order as to costs. (M.S. SANKLECHA, J.) (AKIL KURESHI, J.)