Mr. Dharam v. Oral Order

spb/ 15itxa1750-17.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 1750 OF 2017 Mr. Gaurav Triyugi Singh R/at. 3005-A, Oberoi Woods, MohanGokhale Marg, Goregaon (E),Mumbai- 400 063. ... Appellant. V/s. The Income Tax OfÏcer-24(3)(1),having his ofÏce at C-11, 7[th] floor,Pratyakshakar Bhavan, Bandra-KurlaComplex, Bandra (E), Mumbai -51. … Respondent. --- Mr. Dharam V. Gandhi, Advocate for the Appellant.Mr. Sham Walve, Advocate a/w. Mr. Pritesh Chatterjee,Advocate for the Respondent. --- CORAM : UJJAL BHUYAN AND MILIND N. JADHAV,JJ. DATE : JANUARY 22, 2020. ORAL ORDER : 1Heard Mr. D. V. Gandhi, learned counsel forthe Appellant; and Mr. Sham Walve, learned standingcounsel Revenue for the Respondent. 2Considering the subject matter of the appeal,Digitally signedwe are of the view that the same can be disposed ofby Shalikram P.ShalikramBoreyDate:P. Borey2020.01.2817:45:20+0530 spb/ 15itxa1750-17.doc at this stage itself. Consequently, notice is madereturnable forthwith and by consent of the parties,appeal is taken up for final disposal. 3This Appeal has been preferred by theassessee under section 260-A of the Income Tax Act,1961, assailing the legality and correctness of the orderdated 11.05.2017 passed by the Income Tax AppellateTribunal, Mumbai Bench “G”, Mumbai (Tribunal) inIncome Tax Appeal No. 6160/Mum/2016 for theassessment year 2010-11. 4Short point for consideration in this Appeal isthe addition of a sum of Rs. 14 lakhs to the income ofthe assessee by the Assessing OfÏcer under section 68of the Income Tax Act, 1961 (briefly, “the Act”hereinafter), as modified by the Tribunal. 5Assessee is an individual and for theassessment year under consideration, he filed return ofincome disclosing total income of Rs. 17,04,320.00.During the assessment proceedings, Assessing OfÏcerfound that assessee had taken unsecured loan fromamongst others Smt. Savitri Thakur for an amount ofRs. 17,04,320/-. Assessee was asked to submit loanconfirmation as well as copy of the returns of income 2/9 spb/ 15itxa1750-17.doc and bank statements of Smt. Savitri Thakur. Thoughthose were submitted, Assessing OfÏcer was notsatisfied and took the view that genuineness of theloan was not established by the assessee; besides creditworthiness of Smt. Savitri Thakur was found to besuspect. Consequently, the aforesaid amount of Rs.17 lakhs was added back to the total income of theassessee under section 68 of the Act as unexplainedcash credit vide the assessment order dated22.03.2013. 6As against the above, assessee preferredappeal before the Commissioner of Income Tax(Appeals)-42, Mumbai. By order dated 04.07.2016, theAppellate Authority upheld and confirmed the order ofthe Assessing OfÏcer. 7Assessee carried the matter further in appealbefore the Tribunal. Out of Rs. 17 lakhs loan given bySmt. Savitri Thakur to the assessee, Tribunal held thatloan amount of Rs. 3 lakhs was properly explained asassessee had proved genuineness of the transaction,creditworthiness and identity of the creditor. However,regarding the balance amount of Rs. 14 lakhs,Tribunal held that source of the said amount was fullof doubts and explanation provided by the assessee 3/9 spb/ 15itxa1750-17.doc could not be accepted. Accordingly addition of Rs. 14lakhs was upheld while deleting the addition of Rs. 3lakhs vide the order dated 11.05.2017. 8Aggrieved, present appeal has beenpreferred. 9Though a number of questions have beenproposed by the Appellant as substantial questions oflaw, we find that the following question covers thecontroversy in question, which is as under : 3/9 spb/ 15itxa1750-17.doc could not be accepted. Accordingly addition of Rs. 14lakhs was upheld while deleting the addition of Rs. 3lakhs vide the order dated 11.05.2017. 8Aggrieved, present appeal has beenpreferred. 9Though a number of questions have beenproposed by the Appellant as substantial questions oflaw, we find that the following question covers thecontroversy in question, which is as under : Whether on the facts and in the circumstances ofthe case and in law, the Tribunal was justified inupholding the addition in respect of unsecuredloan of Rs. 14,00,000/- under section 68 of theAct, inspite of the fact that the initial onus laiddown on the Appellant was duly discharged ?. 10Submissions made have been considered. 11Regarding Smt. Savitri Thakur, it is seen thatshe had issued cheque payment of Rs. 14 lakhs dated21.07.2009 to the Appellant. Prior to the issuance ofthe cheques, this amount was credited into the bank 4/9 spb/ 15itxa1750-17.doc account of Smt. Savitri Thakur maintained in the StateBank of India, Rae Baraeli Branch. There were threetransfers of Rs. 5 lakhs, Rs. 5 lakhs and Rs. 4 lakhs intothe above account of Smt. Savitri Thakur before issueof cheques by her to the assessee. Smt. Savitri Thakurclaimed that these amounts were received by her asgifts from one Shri Rajendra Bahadur Singh and Smt.Sarojini Thakur. Shri Rajendra Bahadur Singh is thebrother of Smt. Savitri Thakur and Smt. Sarojini Thakuris the sister of Smt Savitri Thakur. Shri RajendraBahadur Singh had gifted Rs. 5 lakhs to Smt. SavitriThakur and Smt. Sarojini Thakur had gifted to Rs. 5lakhs and Rs. 4 lakhs to Smt. Savitri Thakur. Result ofverification and remarks by the Department in respectof Shri Rajendra Bahadur Singh is as under : “The donor had retired in 2003 and claims toearn tuition income of Rs. 1.5 Lacs p.a. and thismoney has been claimed to have been hoardedand kept in cash by him over several years and heclaims that out of this accumulation hedeposited a sum of Rs. 5,00,000/- in cash in hisbank account with SBI Rae Baraeli on 20.07.2009and it was transferred to Savitri Thakur on20.07.2009. The donor has not filed any incometax return.” 5/9 11.1.Similarly in respect of Smt. Sarojini Thakur,result of verification and remarks by the Departmentis as under : “This donor has ostensibly retired from service in2007 and she has deposited cash of Rs.9,00,000/- in her bank with SBI, Rae Baraeli on18.07.2009 before issuing two cheques to SavitriThakur. She has not filed any return of incomeadmittedly from A.Y. 2008-09. She also claims toreceive agricultural income of Rs. 1.5 lacs p.a.which is claimed to be kept in cash with her sinceseveral years.” 12At this stage, it would be apposite to advertto section 68 of the Act, relevant portion of which readsas under : “68.Where any sum is found credited in thebooks of an assessee maintained from anyprevious year, and the assessee offers noexplanation about the nature and source thereofor the explanation offered by him is not, in theopinion of the Assessing OfÏcer, satisfactory, thesum so credited may be charged to income -taxas the income of the assessee of that previousyear. …...…....” 6/9 12.1.From a reading of section 68, as extractedabove, it is seen that if an amount is credited in thebooks of an assessee maintained from any previousyear and the assessee offers no explanation about thenature and source thereof or the explanation offeredby him is not, in the opinion of the Assessing OfÏcer,satisfactory, the sum so credited may be charged toincome tax, as the income of the assessee of therelevant previous year. 6/9 12.1.From a reading of section 68, as extractedabove, it is seen that if an amount is credited in thebooks of an assessee maintained from any previousyear and the assessee offers no explanation about thenature and source thereof or the explanation offeredby him is not, in the opinion of the Assessing OfÏcer,satisfactory, the sum so credited may be charged toincome tax, as the income of the assessee of therelevant previous year. 13Section 68 of the Act has receivedconsiderable attention of the courts. It has been heldthat it is necessary for an assessee to prove primafacie the transaction which results in a cash credit inhis books of account. Such proof would include proofof identity of the creditor, capacity of such creditor toadvance the money and lastly, genuineness of thetransaction. Thus, in order to establish receipt of creditin cash, as per requirement of section 68, the assesseehas to explain or satisfy three conditions, namely : (i)identity of the creditor; (ii) genuineness of thetransaction; and (iii) credit-worthiness of the creditor. 14In Principal Commissioner of IncomeTax vs. Veedhata Tower Pvt. Ltd., (2018) 403 ITR 7/9 spb/ 15itxa1750-17.doc 415 (Bom), this court has held that assessee is onlyrequired to explain the source of the credit. There isno requirement under the law to explain the source ofthe source. In the instant case, there is no dispute asto the identity of the creditor. There is also no disputeabout the genuineness of the transaction. That apart,the creditor has explained as to how the credit wasgiven to the assessee. Thus assessee had dischargedthe onus which was on him as per the requirement ofsection 68 of the Act. What the Assessing OfÏcer heldwas that sources of the source were suspect i.e., hesuspected the two sources Shri Rajendra Bahadur Singhand Smt. Sarojini Thakur of the source Smt. SavitriThakur. 15In view of discharge of burden by theassessee, burden shifted to the revenue; but revenuecould not prove or bring any material to impeach thesource of the credit. Though Mr. Walve, learnedstanding counsel, has pointed out that the creditor hadno regular source of income to justify theadvancement of the credit to the assessee, we are ofthe view that the assessee had discharged the onuswhich was on him to explain the three requirements,as noted above. It was not required for the assesseeto explain the sources of the source. In other words, he 8/9 spb/ 15itxa1750-17.doc was not required to explain the sources of the moneyprovided by the creditor Smt. Savitri Thakur i.e. ShriRajendra Bahadur Singh and Smt. Sarojini Thakur. 16Considering the above, we are of the viewthat the Tribunal was not justified in sustaining theaddition of Rs. 14 lakhs to the total income of theassessee as undisclosed cash credit under section 68of the Act. 17Consequently, finding of the Tribunal to theabove extent is set aside. The question framed isanswered in favour of the assessee and against theRevenue. 18Appeal is accordingly allowed but with noorder as to cost. (MILIND N. JADHAV, J.) (UJJAL BHUYAN, J.) ….. 9/9