M/S Nayyar Hire Purchase (P) Limited v. The Assistant Commissioner Of Income Tax

ITA No. 125 of 2005 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 125 of 2005 Date of Decision: 15.10.2010 M/s Nayyar Hire Purchase (P) Limited ....Appellant. Versus The Assistant Commissioner of Income Tax ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Anil Sharma, Advocate for Mr. Amit Jhanji, Advocate for the appellant.Mr. Amit Jhanji, Advocate for the appellant. Ms. Urvashi Dhugga, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.This appeal has been preferred by the assessee underSection 260A of the Income Tax Act, 1961 (in short “the Act”) againstthe order dated 6.9.2004 passed by the Income Tax Appellate Tribunal,Chandigarh Bench “B”, Chandigarh (hereinafter referred to as “theTribunal”) in ITA No. 121/Chandi/2004, for the assessment year 1993-94, raising following substantial questions of law:- “i)Whether the Income Tax Appellate Tribunal haserred in law as well as in fact in upholding theaddition of Rs.80,000/- and has failed to consider thereasons as assigned by the Commissioner of IncomeTax (Appeals) ordering deletion of the aforesaidaddition?erred in law as well as in fact in upholding theaddition of Rs.80,000/- and has failed to consider thereasons as assigned by the Commissioner of IncomeTax (Appeals) ordering deletion of the aforesaidaddition? ii)Whether the order of Income Tax Appellate Tribunalis based on surmises and conjectures?”is based on surmises and conjectures?” 2.The facts leading to the filing of the present appeal are thatthe assessment was completed on 30.10.1998 on a total income ofRs.4,70,700/- including an addition of Rs.4,67,300/- on account of 46creditors being treated as bogus. Feeling aggrieved, the assessee filedan appeal before the Commissioner of Income Tax (Appeals) [in short“the CIT(A)”] who vide order dated 2.1.2001 held that the AssessingOfficer was not justified in treating all the 46 creditors as not genuinemerely on the basis of the statements of 9 creditors produced beforehim. Accordingly, the CIT (A) directed the Assessing Officer to framefresh assessment after recording the statements of all the 46 creditors.It was pleaded before the CIT (A) that the affidavits of the creditors wereproduced. The Assessing Officer started assessment proceedings inJanuary, 2003. The first notice was issued to the assessee on30.1.2003 and fresh assessment was completed on 10.3.2003 and anaddition of Rs.4,67,300/- was repeated by the Assessing Officer. TheCIT (A) vide order dated 24.11.2003 deleted the entire addition. TheCIT (A) while deleting the addition had observed as under:- “3.3The submissions of the appellant have beenconsidered carefully and I have gone through theAsstt record as well as case laws relied upon theappellant. It is seen that the assessee has dulydischarged his onus by filing the affidavits of thecreditors from whom the loans were taken. Once theidentity of the persons is established before theAssessing Officer and other such evidence are primafacie before him pointing to the fact that the entry is “3.3The submissions of the appellant have beenconsidered carefully and I have gone through theAsstt record as well as case laws relied upon theappellant. It is seen that the assessee has dulydischarged his onus by filing the affidavits of thecreditors from whom the loans were taken. Once theidentity of the persons is established before theAssessing Officer and other such evidence are primafacie before him pointing to the fact that the entry is not fictitious, the initial burden lying on the assesseecan be said to have been duly discharged by him. Itwill not, therefore, before the assessee to explainfurther as to how or in what circumstances thecreditors obtained the money and how or why hecame to make advance of the money as a loan to theassessee. Once such identity is established and thecreditors, as in the instant case, have pledged theiroath that they have advanced the amounts inquestion to the assessee, the burden immediatelyshifts on the department. 38 out of 46 are income taxassesses and if the Assessing Officer is not satisfiedabout the credits, he should have summoned thecreditors under section 131 or should have got thesame verified from the Assessing Officers with whomthey are assessed to tax. After doing this exercise, ifthe Assessing Officer could have genuine doubtsregarding the creditworthiness of the creditor (s), hecould have come back to the assessee asking him tojustify why the so called loans be not treated as hisincome. In case of remaining creditors, the affidavitsdetailing their address and source of income havebeen filed. The persons, in case of doubt, shouldhave been examined first by the Assessing Officerand then if the Assessing Officer was not satisfiedabout their creditworthiness, he should have come back to the assessee asking it to prove the creditworthiness of the so called depositors. This has notbeen done. Further, it has been brought to my noticethat this is a Non Banking finance company whosesole business is collecting deposits and advancingthe money to those in need. So it is but natural thatthe company is not supposed to know about thefinancial position of the depositors. Again all theamounts have duly been refunded with interest to allexcept 8 persons who demanded to take back theamounts by cash. These facts have duly beenreflected in the books of account. Taking intoaccount all the facts and circumstances of the caseas discussed above and various judicialpronouncements, cited supra, I am of the opinion thatthe Assessing Officer was not justified in consideringthe cash credits as non-genuine. The addition madeby the Assessing Officer is, therefore, ordered to bedeleted.” 3.Against the order of the CIT (A), the revenue approachedthe Tribunal, who vide order dated 6.9.2004 restored the addition ofRs.80,000/-. Hence, the present appeal by the assessee. 4.We have heard learned counsel for the parties. 5.The solitary issue that arises for determination by this Courtin this appeal is whether the cash credit of 8 creditors amounting toRs.80,000/- was genuine or not. 3.Against the order of the CIT (A), the revenue approachedthe Tribunal, who vide order dated 6.9.2004 restored the addition ofRs.80,000/-. Hence, the present appeal by the assessee. 4.We have heard learned counsel for the parties. 5.The solitary issue that arises for determination by this Courtin this appeal is whether the cash credit of 8 creditors amounting toRs.80,000/- was genuine or not. 6.The Assessing Officer came to the conclusion that the cashcredits represented the undisclosed income of the assessee and werenot genuine. The CIT (A) while partly allowing the appeal deleted theaddition on account of cash credits of all 46 creditors. However, onappeal by the revenue to the Tribunal, the Tribunal concluded that thecash credit in respect of 8 creditors was not genuine. The Tribunal onappreciation of evidence came to the conclusion that 8 creditors whichwere claimed to be genuine by the assessee were not assessed to taxand the amount of deposits had not been explained satisfactorily bythem. The CIT(A) was not right in deleting the addition on account of 8depositors who were not income tax assessees and had demandedback their amount in cash. The onus was upon the assessee to haveestablished satisfactorily the genuineness of these depositors which itfailed to discharge. The view taken by the Tribunal is a plausible viewon appreciation of evidence. This being a finding of fact in which noerror could be pointed out by the learned counsel for the assessee, noground for interference by this Court is made out. 7.Accordingly, there is no merit in this appeal and the same ishereby dismissed. (AJAY KUMAR MITTAL) JUDGE October 15, 2010gbs (ADARSH KUMAR GOEL)JUDGE