Principal Commissioner Of Income Tax – 7 v. Bikram Singh

$~*IN THE HIGH COURT OF DELHI AT NEW DELH+ITA 55/2017 Reserved on: 03[rd]August, 2017Date of decision: 25[th]August, 2017 PRINCIPAL COMMISSIONER OFINCOME TAX – 7 ..... AppellantThrough:Mr.RuchirBhatia,SeniorStandingCounselwithMr.Gaurav Kheterpal, Advocate.versus BIKRAM SINGH ..... Respondent Through:Mr. C. S. Aggarwal, SeniorAdvocatewithMs.PushpaSharma, Advocate. CORAM:JUSTICE S.MURALIDHARJUSTICE PRATHIBA M. SINGH Prathiba M. Singh, J.: JUDGMENT 1. In the present Appeal, the Principal Commissioner of Income Tax - 7,impugns the order dated 19[th]July, 2016 passed by the Income Tax AppellateTribunal (‘ITAT’) in ITA No.5609/Del/2015 for Assessment Year 2011-12. 2. Admit. The following question of law is framed for consideration: “Whether the ITAT was correct in law in deleting the additionunder Section 68 of the Income Tax Act, 1961 in respect offour individuals when the genuineness of the transactions and ITA No.55/2017 the creditworthiness of the said four individuals were inserious doubt?” 3. The Respondent-Assessee filed its return of income for AY 2011-12 on17[th]August, 2011 declaring a total income of Rs.80,45,590/-. During theassessment proceedings, the Assessing Officer, on 13[th]March 2014, madeadditions under Section 68 of the Income Tax Act, 1961 (‘the Act’) to thetune of Rs.3,25,50,000/- in respect of loans/advances received from eightpersons, on the ground that the Assessee was unable to establish the identity,creditworthiness and genuineness of the said persons and transactions. 4. The details of the loans/advances, received by the Assessee, as recordedby the AO, are : 5. In the appeal filed by the Assessee, the Commissioner of Income Tax(Appeals) [‘CITA (A)’], on 7[th]September, 2015, upheld the said additionsmade by the Assessing Officer (‘AO’). 6. The ITAT, in the appeal filed by the Assessee, deleted the additions inrespect of the following four persons: In respect of the remaining four creditors, the ITAT restored the same to thefile of the AO for reconsideration. 7. The Revenue has filed the present appeal challenging the said order ofthe ITAT dated 19[th]July, 2016. Order of the Assessing Officer (‘AO’) 8. The AO on 13[th]March, 2014 passed the assessment order in respect ofeight entries of loans/advances. Prior to the order, a questionnaire dated 10[th]January, 2014 was issued to the Assessee. The Assessee was called upon toproduce the documentary evidence with respect to the said eight persons.Further, the Assessee was asked to produce the persons in order to establishtheir identity and creditworthiness and the sources of the loans, claimed tohave been advanced to the Assessee. Since no documentary evidence oridentificationoraddressesthereof,showingeithertheidentityorcreditworthiness of these persons, was furnished by the Assessee, the AOconcluded“thattheAssesseehassimplyroutedthroughitsown unaccounted/undisclosed funds through the channel of banks in these namesand as such the Section u/s 68 of the Income Tax Act attracts to assess suchamounts in his own hands from undisclosed sources” 9. A brief summary of each of the eight transactions and creditors thereof, asper the AO’s order is as under:per the AO’s order is as under: (i) Shri Amar Singh – Only a letter of confirmation was filed. Nameof the father and address was not given. PAN number was not given.The information requested from Gurgaon Gramin Bank, from wherethe cheque was issued with respect to the compensation from landacquisition, was also not received. The person was not produced.Thus, the identity, creditworthiness and genuineness of Shri AmarSingh were not proved.of the father and address was not given. PAN number was not given.The information requested from Gurgaon Gramin Bank, from wherethe cheque was issued with respect to the compensation from landacquisition, was also not received. The person was not produced.Thus, the identity, creditworthiness and genuineness of Shri AmarSingh were not proved. (i) Shri Amar Singh – Only a letter of confirmation was filed. Nameof the father and address was not given. PAN number was not given.The information requested from Gurgaon Gramin Bank, from wherethe cheque was issued with respect to the compensation from landacquisition, was also not received. The person was not produced.Thus, the identity, creditworthiness and genuineness of Shri AmarSingh were not proved.of the father and address was not given. PAN number was not given.The information requested from Gurgaon Gramin Bank, from wherethe cheque was issued with respect to the compensation from landacquisition, was also not received. The person was not produced.Thus, the identity, creditworthiness and genuineness of Shri AmarSingh were not proved. (ii) Shri Chandan Singh – A confirmation letter of Shri ChandanSingh was filed along with the bank statement. The AO noticed thatthe bank account was opened with a cash deposit of Rs.500/- andhuge amounts of cash was deposited in this account before thecheques of Rs.60, 00,000/- and Rs.50, 00,000/- were issued. The AOconcluded that since the source of cash was unverified and ShriChandan Singh was also not produced, the identity, creditworthinessand genuineness of Shri Chandan Singh was not proved. (iii) Shri Harpreet Singh – No documents were filed by the Assesseeto establish the identity, address etc. Even the PAN number or IDproof was not filed and he was also not even produced. ITA No.55/2017 (iv) Shri Om Prakash – No documents to establish the address, PANnumber, source of deposit and ID proof, were filed. Neither was aconfirmation letter filed nor was he produced. (v) Shri Shiv Tej - No documents to establish the address, PANnumber, source of deposit and ID proof, were filed. Neither was aconfirmation letter filed nor was he produced. (vi) Shri Ram Chander – Only a confirmation letter was filed.However, the AO observed that the same was not supported by anyevidence of identification, cheque numbers, sources of income orsources of loan. The person was not produced. (vii) Smt. Sunita – Only a confirmation letter was filed. However, theAO observed that the same was not supported by any evidence ofidentification, cheque numbers, sources of income or sources of loanand even she was not produced. (viii) Shri Virender Yadav – A confirmation letter was produced butno PAN number was mentioned. The AO observed that the bankstatementsrevealthedepositofcashofRs.13,00,000/-andRs.7,00,000/- immediately before the issuance of the cheque in favourof the Assessee. He was also not produced. 10. Thus, in respect of all these individuals, none of whom were producedby the Assessee, the AO concluded that the identity, creditworthiness and ITA No.55/2017 genuineness of the persons could not be established by the Assessee. Thus,the AO added the total sum of Rs.3,25,50,000/- under Section 68 of the Actto the Assessee’s income and also simultaneously initiated penaltyproceedings under Section 271 (1) (c) of the Act. Order of the Commissioner of Income Tax (Appeals) [‘CIT (A)'] 11. In appeal, the CIT (A) issued notice to the Assessee to appear in theproceedings before him. The Assessee then requested for more time toproduce further information and an opportunity to produce the creditors forexamination. For this purpose, the matter was referred by the CIT (A) to theAO for his report. The AO, on 21[st]May, 2015 reported that the statements ofSmt. Sunita, Shri Amar Singh, Shri Ram Chander, Shri Chandan Singh andShri Harpreet Singh were recorded. The remaining three creditors namelyShri Om Prakash, Shri Virender Yadav and Shri Shiv Tej Singh could not beproduced by the Assessee.In respect of Smt. Sunita, no new documentswere filed. In respect of some of the creditors, fresh documents were filedand considered before the CIT (A). 12. The CIT (A) summarised its findings in respect of each of the creditors,as set out below: 12. The CIT (A) summarised its findings in respect of each of the creditors,as set out below: (i) In respect of Shri Amar Singh, the statement reveals that he didnot file any ITR and also did not have a PAN number. His monthlyincome was from Rs.2,000/- to Rs.2,500/-. Though he confirmed thathe has given Rs.50,00,000/- to Mr. Bikram Singh, he could notsupport this by any documentary evidence and he also could not ITA No.55/2017 explain the entries in his bank statement, which was submitted by theAssessee. He submitted a copy of the cheque no.039522 issued bythe Oriental Bank of Commerce dated 18[th]February, 2015 but sincethe transaction was related to AY 2010-11, the CIT (A) held that thischeque has no relevance. Shri Amar Singh, according to the CIT (A)confessed that he did not understand dealings with or working withbanks. (ii) In respect of Shri Ram Chander, he confirmed that he does notfile IT Returns and he does not have a PAN number. His annualincome was Rs.1.75 Lakhs to Rs.1.8 Lakhs. He has no savings. In hisstatement, he stated that he gave Rs.10,00,000/- to Shri BikramSingh, out of the proceeds of sale of land but there was nodocumentary evidence to support the same. He later on claimed thatthe amounts of Rs.18.48 Lakhs and Rs.5.86 Lakhs reflected in hisbank statement came from his sister Vidya. (iii) In respect of Shri Chandan Singh, he was unable to explain anyof the bank entries in his bank statements. In the assessment order forthe AY 2011-12 submitted by him, there was no reference to anyunsecured loan transactions with the Assessee. He claimed that hehad not given loans to anyone except the Assessee. (iv) In respect of Shri Harpreet Singh, in his statement, he stated thathe had no transaction with the Assessee in AY 2010-11. He claimedthat the sum of Rs.3.5 Lakhs was given to the Assessee by his son ITA No.55/2017 Mr. Dakshdeep Singh and the said transaction, being attributed toShri Harpreet Singh, is an inadvertent mistake by the Assessee’sChartered Accountant. 13. The CIT (A) thus held that the transactions with Smt. Sunita lacked ingenuineness and creditworthiness; transaction with Shri Amar Singh wasquestionable as to genuineness and creditworthiness; transactions with ShriRam Chander and Shri Chandan Singh were not genuine; and that theexplanation given by Shri Harpreet Singh showed that the transaction wasdubious and its genuineness was not established. The CIT (A), by orderdated 7[th]September, 2015, concluded as under: “…In respect of all the creditors, it is seen thatthey are advancing huge sums of money to theappellant but the source of income is not clear.There are huge deposits in their accounts but thereis no explanation of the source of deposits. Evenwhere it is stated that the amount advanced is fromthe sale proceeds of land, no details are givenabout the land holding and the copy of agreementetc. Most persons appearing not to be filingreturns.Theircreditworthiness issimply notproved. All are advancing huge sums of money butdetails are not available of their income savingsand expenditures. Thustheidentity,creditworthinessandthegenuineness of transactions are all in doubt….” 14. The CIT (A), after discussing the relevant case law, also upheld thefindings in the report of the AO and held that the explanation furnished bythe creditors and the documents filed do not adequately and sufficientlyexplain the genuineness of the transactions and the Assessee was also not ITA No.55/2017 able to establish the identity and creditworthiness of these persons. The CIT(A) concluded that no source of funds was established by the Assessee forany of these individuals, the amounts credited to the Assessee’s book wereunexplained, and were liable to be added to the income of the Assesseeunder Section 68 of the Act. Order of ITAT 15. The ITAT by order dated 19[th]July, 2016 partly allowed the Assessee’sappeal and deleted the additions in respect of four of the creditors. Thesummary of the conclusions of the ITAT in respect of the eight creditors andthe transactions is set out below: ITA No.55/2017 able to establish the identity and creditworthiness of these persons. The CIT(A) concluded that no source of funds was established by the Assessee forany of these individuals, the amounts credited to the Assessee’s book wereunexplained, and were liable to be added to the income of the Assesseeunder Section 68 of the Act. Order of ITAT 15. The ITAT by order dated 19[th]July, 2016 partly allowed the Assessee’sappeal and deleted the additions in respect of four of the creditors. Thesummary of the conclusions of the ITAT in respect of the eight creditors andthe transactions is set out below: (i) In respect of Smt. Sunita, the ITAT held that additional evidencewas submitted by the Assessee and the same was taken on record.The ITAT observed that Smt. Sunita, being the wife of the Assesseeand her financial affairs having been handled by the Assesseehimself, the identity and creditworthiness of Smt. Sunita wasestablished. Her PAN Card has been filed. By assessing the bankaccounts of Smt. Sunita, the ITAT concluded that the genuinenessand creditworthiness was also established. (ii) In respect of Shri Virender Yadav, the ITAT observed that sincehis PAN card had been submitted by the Assessee, the matterdeserved to be remanded to the AO to pass a speaking order. (iii) In respect of Shri Shiv Tej, the ITAT after relying upon thedocuments, produced by the Assessee, restored the matter to the fileof the AO as he had not been produced before the AO. (iv) In respect of Shri Om Prakash, the Assessee relied upon theletter of confirmation, the PAN card and Voter Identity Card toestablish the identity and also submitted that the AO did not recordthe statement of Shri Om Prakash despite his appearance before theAO. Thus, the ITAT concluded that the matter deserved to berestored to the file of the AO. (v) In respect of Shri Ram Chander, the ITAT referred to theconfirmation letter issued by him, Voter ID Card, the copy of bankstatement and the cheque of Rs. 18.48 Lakhs, which was explainedby him as having been received from his sister Vidya. Thus, theITAT concluded that the identity, creditworthiness and genuinenesswas established and the addition of Rs.10 lakhs in respect of ShriRam Chander was deleted. (vi) In respect of Shri Chandan Singh, the ITAT referred to the copyof PAN Card, Voter ID Card and the bank statement, which wassubmitted by the Assessee. The ITAT held that the identity,genuineness and creditworthiness was established and the additionmade to the tune of Rs.1.10 Crores was deleted. (vii) In respect of Shri Amar Singh, the ITAT referred to the letter ofconfirmation and Voter ID Card to establish the identity of thiscreditor. He further referred to the bank statement, which showed adeposit of Rs.84,44,762/- in his bank account, just before theissuance of cheque of Rs.50 lakhs to the Assessee. According to theAssessee, this amount was received from the Land AcquisitionOfficer, Gurgaon in favour of Shri Amar Singh. The ITAT thusdeleted the addition of rupees Rs.50 lakhs in respect of Shri AmarSingh. (vii) In respect of Shri Amar Singh, the ITAT referred to the letter ofconfirmation and Voter ID Card to establish the identity of thiscreditor. He further referred to the bank statement, which showed adeposit of Rs.84,44,762/- in his bank account, just before theissuance of cheque of Rs.50 lakhs to the Assessee. According to theAssessee, this amount was received from the Land AcquisitionOfficer, Gurgaon in favour of Shri Amar Singh. The ITAT thusdeleted the addition of rupees Rs.50 lakhs in respect of Shri AmarSingh. (viii) In respect of Shri Harpreet Singh, the ITAT referred to theletter issued by him explaining that the loan was given by his son Mr.Dakshdeep Singh vide cheque no. 58913 dated 18[th]June, 2010 drawnon HDFC Bank. He also referred to the confirmation letter given byMr. Dakshdeep Singh. The ITAT noted that the creditworthiness ofMr. Dakshdeep Singh was not established and hence the matter wasrestored to the file of the AO to examine the identity, genuinenessand creditworthiness. However, for statistical purpose, addition ofRs.3,50,000/- in respect of Shri Harpreet Singh was allowed.letter issued by him explaining that the loan was given by his son Mr.Dakshdeep Singh vide cheque no. 58913 dated 18[th]June, 2010 drawnon HDFC Bank. He also referred to the confirmation letter given byMr. Dakshdeep Singh. The ITAT noted that the creditworthiness ofMr. Dakshdeep Singh was not established and hence the matter wasrestored to the file of the AO to examine the identity, genuinenessand creditworthiness. However, for statistical purpose, addition ofRs.3,50,000/- in respect of Shri Harpreet Singh was allowed. 16. Thus, the ITAT deleted the following additions qua Shri. Amar Singh, Shri. ChandanSingh, Shri. Ram Chander, and Smt. Sunita.deleted the following additions qua Shri. Amar Singh, Shri. ChandanSingh, Shri. Ram Chander, and Smt. Sunita. restored the additions with respect to Shri. Virender Yadav, Shri. OmPrakash, Shri. Shiv Tej Singh, and Shri. Harpreet Singh, to the AO forreconsideration.restored the additions with respect to Shri. Virender Yadav, Shri. OmPrakash, Shri. Shiv Tej Singh, and Shri. Harpreet Singh, to the AO forreconsideration. ITA No.55/2017 17. The Revenue is in appeal challenging the ITAT’s order. Submissions of the Appellant-Revenue 18. Mr. Ruchir Bhatia, learned Senior Standing Counsel for the Revenuesubmits that though initially the Assessee failed to establish the identity,creditworthiness and genuineness of the creditors before the AO, later on theAssessee made an effort to file some additional documents to establish theidentity and creditworthiness in respect of some of the transactions.However, according to Mr. Bhatia, the genuineness of the transactions hasnot been established. 19. Mr. Bhatia relies upon the settled precedents to submit that in suchcases, in respect of each transaction, the identity, creditworthiness andgenuineness of the creditor has to be established beyond any pale of doubtby the Assessee.It was his submission that the genuineness, having notbeen established, the deletion of these additions, that too by the ITAT,cannot be sustained. Mr. Bhatia submits that the onus is on the Assessee toestablish that each transaction is a loan and that this initial onus on theAssesseehasnotbeendischarged.HereliesuponParimisettiSeetharanamma v. Commissioner of Income Tax (1965) 57 ITR 532(hereafter ‘Parimisetti’) and Commissioner of Income Tax v. Daulat RamRawatmull 87 ITR 349 (hereafter ‘Daulat Ram’).Mr. Bhatia took theCourt through each of the transactions and the documents filed by theAssessee to defend the deletions made by the ITAT and submitted that thegenuineness of each transaction is in severe doubt. He also relied upon CIT ITA No.55/2017 Page 12 of 25 v. Divine Leasing & Finance Ltd. (2008) 299 ITR 268 (Del) (hereafter‘Divine Leasing’) and CIT v. Kamdhenu Steel & Alloys Ltd. 361 ITR 220(hereafter ‘Kamdhenu’). Respondent-Assessee’s Submissions ITA No.55/2017 Page 12 of 25 v. Divine Leasing & Finance Ltd. (2008) 299 ITR 268 (Del) (hereafter‘Divine Leasing’) and CIT v. Kamdhenu Steel & Alloys Ltd. 361 ITR 220(hereafter ‘Kamdhenu’). Respondent-Assessee’s Submissions 20. Mr. C. S. Aggarwal, learned Senior counsel for the Respondent-Assesseevehemently urged that in this case the Assessee has produced a large numberof the documents to establish the identity, creditworthiness and genuinenessin respect of each creditor and each transaction. The ITAT rightly deletedfour additions, inasmuch as it was convinced about the identity of each ofthe persons who had appeared before the AO and had made detailedstatements. Mr. Aggarwal further submits that apart from the oral statementsrecorded in respect of each of the creditors, several documents were filed toestablish that they were bonafide creditors and that the findings of the AOand the CIT(A), that the Assessee has used these creditors to route his ownunexplained money or incomes, was incorrect. Mr. Aggarwal relies uponCIT v. Dwarkadhish Investment Pvt. Ltd. 330 ITR 298 (hereafter‘Dwarkadhish’) to submit that once the initial onus upon the Assessee isdischarged, the onus shifts on the Revenue to challenge the same.Mr.Aggarwal further submits that for any income to be taxed, the burden lies onthe Revenue to establish that the transactions were not genuine. In thesubmission of Mr. Aggarwal, a mere suspicion, conjecture or surmise is notsufficient and the fact, that there were cash credits in the accounts of thesecreditors, does not raise any presumption against the Assessee. Finally, Mr.Aggarwal submits that the appreciation of evidence being a question of fact, there being no question of law on perversity and the sources beingexplained, the appeal does not merit to be entertained. He relies on CIT,Kolkata v. Mukundray K. Shah 290 ITR 433 (hereafter ‘Mukundray Shah’)in this behalf. 21. Mr. Aggarwal also relies upon Kamdhenu (supra), CIT v. Shiv DhootiPearls and Investment Ltd. 237 TAXMAN 104 (hereafter `Shivdhooti') andDwarkadhish (supra), Sarogi Credit Corporation vs. CIT 103 ITR 344,Additional Commissioner of Income Tax vs. Hanuman Agarwal 151 ITR150, Addl CIT vs. Bahri Bros.(P) 154 ITR 244, CIT vs. Ram Narain Goel[1997] 224 ITR 180, Smt. Neelamben Gopaldas Agrawal vs. ITO [2015] 57taxmann.com 176 (Guj), to submit that it is settled law that the source of thesource need not be explained. 22. Mr. C. S. Aggarwal further urges that findings of fact ought not to beinterfered with at this stage and the question whether the credits wereproperly explained or not being questions of fact, the same cannot bereappreciated by this Court. He relies upon CIT Vs. Orissa CementCorporation 159 ITR 78 and CIT Vs. Gun Nidhi Dalmia 168 ITR 282. 23. Mr. Aggarwal vehemently urges that even where a question of law hasbeen formulated, under Section 260A, the Court can still hold that noquestion of law arises as held in CIT vs. Peoples General Hospital Ltd[2013] 356 ITR 65. Lastly, Mr. Aggarwal submits that the Appeal has nobasis in as much as not question as to the perversity in the ITAT's order haseither been raised or pleaded and thus the appeal is not liable to be ITA No.55/2017 Page 14 of 25 entertained. He relies upon Patnaik & Co. Ltd. vs. CIT 161 ITR 65 and CITvs. Bhageeratha Engg. Ltd. 199 ITR 12 (SC) in support of his submissions. Analysis and Reasoning 23. Mr. Aggarwal vehemently urges that even where a question of law hasbeen formulated, under Section 260A, the Court can still hold that noquestion of law arises as held in CIT vs. Peoples General Hospital Ltd[2013] 356 ITR 65. Lastly, Mr. Aggarwal submits that the Appeal has nobasis in as much as not question as to the perversity in the ITAT's order haseither been raised or pleaded and thus the appeal is not liable to be ITA No.55/2017 Page 14 of 25 entertained. He relies upon Patnaik & Co. Ltd. vs. CIT 161 ITR 65 and CITvs. Bhageeratha Engg. Ltd. 199 ITR 12 (SC) in support of his submissions. Analysis and Reasoning 24. In the present appeal, the Revenue has only challenged the impugnedorder of the ITAT to the extent of deletions made by the ITAT in respect ofShri Amar Singh, Shri Chandan Singh, Shri Ram Chander (sic Ram Charan)and Smt. Sunita. The impugned order, to the extent that the additions inrespect of other four creditors has been restored to the file of the AO, has notbeen seriously challenged by the Revenue. Though ground-G in the appealhas been raised in respect of the said set of creditors, the same was notseriously pressed. Thus, in the present order, the Court is only dealing withthe submissions of the Revenue in respect of the deletions of the additions inrespect of four of the creditors. 25. The law applicable to transactions of this nature is well settled by thisCourt in Divine Leasing (supra). Both parties have referred to and reliedupon this judgement. This Court, after analyzing the entire law on thesubject in the context of Section 68 of the Act, held as under: “…16. In this analysis, a distillation of the precedentsyields the following propositions of law in the context ofSection 68 of the IT Act. The assessee has to prima facieprove (1) the identity of the creditor/subscriber; (2) thegenuineness of the transaction, namely, whether it hasbeen transmitted through banking or other indisputablechannels; (3) the creditworthiness or financial strength ofthe creditor/subscriber. (4) If relevant details of theaddress or PAN identity of the creditor/subscriber are furnished to the Department along with copies of theShareholders Register, Shared Application Forms, ShareTransfer Register etc. it would constitute acceptableproof or acceptable explanation by the assessee. (5) TheDepartment would not be justified in drawing an adverseinference only because the creditor/subscriber fails orneglects to respond to its notices; (6) the onus would notstand discharged if the creditor/subscriber denies orrepudiates the transaction set up by the assessee norshould the AO take such repudiation at face value andconstrue it, without more, against the assesee. (7) TheAssessingOfficerisduty-boundtoinvestigatethecreditworthinessofthecreditor/subscriberthegenuineness of the transaction and the veracity of therepudiation….” 26. In Divine Leasing (supra), on the question of burden of proof, the Courtrelied upon CIT v. Musaddilal Ram Bharose, (1987) 165 ITR 14, to holdthat the initial burden is upon the Assessee to show the absence of fraud andthis is not discharged by the Assessee tendering an incredible and fantasticexplanation. The Court also held that every explanation given by theAssessee need not be accepted. 27. In Kamdhenu (supra), this Court categorically held that the initialburden lies on the Assessee to establish the identity of the shareholders, thegenuineness of the transaction and the creditworthiness of the shareholders.It is only after the initial burden is discharged that the onus shifts to theRevenue. This Court in Kamdhenu (supra) referred to CIT v. SophiaFinance, 205 ITR 98 which had held to the same effect. The Divine leasing(supra) and Sophia Finance (supra) judgments were reiterated by this Court in Dwarkadhish (supra). Thus, the law in relation to Section 68 iswell settled. 27. In Kamdhenu (supra), this Court categorically held that the initialburden lies on the Assessee to establish the identity of the shareholders, thegenuineness of the transaction and the creditworthiness of the shareholders.It is only after the initial burden is discharged that the onus shifts to theRevenue. This Court in Kamdhenu (supra) referred to CIT v. SophiaFinance, 205 ITR 98 which had held to the same effect. The Divine leasing(supra) and Sophia Finance (supra) judgments were reiterated by this Court in Dwarkadhish (supra). Thus, the law in relation to Section 68 iswell settled. 28. Applying the settled law to the present case, the facts narrated abovereveal that the Assessee was unable to discharge the initial onus cast uponhim. A review of the documents filed on record, as also findings of theCIT(A) and the AO, reveal that the genuineness of the transactions and thecreditworthiness of the creditors is seriously in issue and the findings of theITAT are contrary to the settled law. 29. In the case of Shri Amar Singh the documents that were submitted bythe Assessee, were a letter of confirmation dated 20[th]March, 2014, a letterdated 12[th]April, 2014 issued by the Gurgaon Gramin Bank, the bankstatement for the period from 1[st]April, 2008 to 31[st]March, 2011, a copy ofthe cheque for Rs.50,00,000/-, the voter ID Card and a copy of letter dated15[th]May, 2015 of the Land Acquisition Officer, Gurgaon, Haryana.Aperusal of the bank statement reveals that the account of Shri Amar Singhwas opened by a cash deposit of Rs.1,000/- and there are several sumsrunning into lakhs withdrawn in cash. There is no explanation, whatsoever,as to why a sum of Rs.50,00,000/- would be given as loan/advance to theAssessee in the absence of any loan agreement either specifying the interestcharged on the loan or any security offered in respect of the loan. In thestatement of Shri Amar Singh, there was nothing to justify the giving ofsuch a loan to the Assessee. The CIT (A) had noticed that the monthlyincome of Shri Amar Singh was in the range of Rs.2,000/- to Rs.2,500/-. Hecould not produce any documentary evidence to explain the entries in his ITA No.55/2017 Page 17 of 25 bank statement. In the case of Shri Amar Singh there was nothing on recordto displace the findings of the CIT (A) and his financial strength was clearlynot established. Thus, the deletion by the ITAT of the entry ofRs.50,00,000/- is contrary to law and the findings of the CIT (A) qua thistransaction deserve to be upheld. 30. The Assessee claimed that Shri Chandan Singh had given an amount ofRs.1,10,00,000/- to the Assessee and the documents, in respect of thistransaction, are a letter of confirmation, copy of the bank statement, PANcard, voter ID Card, ledger account for the period from 1[st]April, 2010 to 31[st]March, 2011, ITR for AY 2011-12 and the order of the assessment for AY2011-12. The documents, filed by the Assessee in respect of Shri ChandanSingh, do not inspire any confidence to support a transaction to the tune ofRs.1,10,00,000/-, inasmuch as, the bank statement reveals that while theaccount was opened with a deposit of Rs.500/-, huge amounts of cashdeposits to the tune of Rs.50 Lakhs, Rs.30 Lakhs, Rs.20 Lakhs and Rs.10Lakhs have been made into the said account. The Income Tax Computationattached to the Income Tax Return does not reveal any unsecured loans. Infact, the documents filed by Shri Chandan Singh establish that thetransaction was not even disclosed to the income tax authorities by him.Thus, the AO and the CIT (A) came to the correct conclusion that thisamount deserves to be added to the income of the Assessee. This Court findsthat the genuineness of this transaction has not been established by theAssessee. The ITAT has ignored the evidence on record and did not evenexamine the genuineness of the transaction or the financial strength of thecreditor as required in law. Merely because the transaction was by payments ITA No.55/2017 Page 18 of 25 ITA No.55/2017 Page 18 of 25 through cheque, the ITAT presumes them to be genuine. A creditor whoopens a bank account with just Rs. 500/-, depositing huge sums of cash intothe account and then lending a sum of Rs. 1,10,00,000/- to the Assessee,without any agreement, interest payment or security, is `fantastic' and`incredible' to say the least. The ITAT ignored vital and tell-tale evidencewhich showed that the transaction was far from being genuine. The Assesseehad clearly failed to discharge the onus cast upon him qua this creditor. 31. Insofar as Shri Ram Chander is concerned, first, there is a doubt as to hisactual identity as whether he is Ram Chander or Ram Charan. The Assesseehas produced a confirmation letter where this person is being referred to asRam Chander in different places. His voter ID card described him as RamChander S/o Shri Bhagwana whereas the letter of confirmation purportedlysigned by him refers to him as Ram Chander S/o Bhagwant Sahai. The bankstatement produced for the period from 1[st]April, 2008 to 31[st]March, 2011shows deposits and withdrawals in cash.He also tried to change hisexplanation. While in his oral statement, he stated that the amount ofRs.10,00,000/- was given to Shri Bikram Singh out of the proceeds of saleof land, he later claimed that the amounts of Rs.18,48,750/- andRs.5,86,000/- came from his sister, Vidya. The identity and genuineness isin severe doubt in the case of Shri Ram Chander/Ram Charan and the fact,that his annual income was between Rs.1.75 Lakhs to Rs.1.8 Lakhs and healso does not even file an ITR and does not have a PAN number, clearlypoints to the irrefutable conclusion that the entire transaction was notgenuine and the identity of Shri Ram Chander/Ram Charan was alsodubious. ITA No.55/2017 32. Insofar as Smt. Sunita is concerned, she is the wife of the Assessee andfrom her statement, it is clear that she has no knowledge of any of thetransactions being conducted through her bank account. Her letter ofconfirmation was filed by the Assessee along with a copy of her PAN card,the bank statement, a copy of passport and ITR for AY 2011-12. The AOhad rightly concluded that her sources of income were not established andher ITR reveals the gross total income of Rs.1,69,144/-. The amount shownas loan/advance to the Assessee of Rs.98,00,000/- is totally lacking anysupport from the documents placed on record by the Assessee. The merefact that these were cheque payments does not necessarily mean that thesehad to be held as being genuine. The ITAT grossly erred in holding that, justbecause Smt. Sunita was the wife of the Assessee and her PAN card wasfiled, the genuineness of the transaction was established. There was noanalysis by the ITAT as to her financial strength to lend such a huge amountto the Assessee. 33. The AO and the CIT (A) rightly concluded that in respect of all thetransactions, the identity, creditworthiness and genuineness are in doubt. 34. In fact, the Assessee was unable to discharge the onus cast on him inrespect of any of the four creditors and the transactions thereof and hencethe onus did not shift to the Revenue, as held in Divine Leasing (supra). 35. The Assessee relied upon Lalchand Bhagat Ambica Ram v. CIT, Biharand Orrisa 37 ITR 288 (hereafter ‘Lalchand Bhagat’) to contend that amere suspicion, conjecture or surmise is not sufficient to deem a transaction ITA No.55/2017 Page 20 of 25 as not being genuine. The analysis of the AO and the CIT (A) as also thedocuments produced in fact point to the fact that the transactions are notgenuine. The statements of the creditors and the documents produced do notleave anything to suspicion but point to the certainty of the transactionsbeing not genuine. Each of the creditors did not have the financial strengthto part with such huge sums of money and the transactions, as revealed fromchronology of opening of bank accounts, deposits of cash and then the loantransaction, establish lack of genuinity. 35. The Assessee relied upon Lalchand Bhagat Ambica Ram v. CIT, Biharand Orrisa 37 ITR 288 (hereafter ‘Lalchand Bhagat’) to contend that amere suspicion, conjecture or surmise is not sufficient to deem a transaction ITA No.55/2017 Page 20 of 25 as not being genuine. The analysis of the AO and the CIT (A) as also thedocuments produced in fact point to the fact that the transactions are notgenuine. The statements of the creditors and the documents produced do notleave anything to suspicion but point to the certainty of the transactionsbeing not genuine. Each of the creditors did not have the financial strengthto part with such huge sums of money and the transactions, as revealed fromchronology of opening of bank accounts, deposits of cash and then the loantransaction, establish lack of genuinity. 36. The Assessee also relied upon Sona Electric Co. v. CIT 152 ITR 507(hereafter ‘Sona Electric’) to argue that mere suspicion is not enough.However, in this case the Court appears to have been persuaded to hold infavour of the Assessee as the Assessee was not allowed to cross-examine thewitness, whose statement was recorded and that there was an admittedsupply of goods against which the payment was made. Thus, the facts areclearly distinguishable. 37. The Assessee further relied upon Mukundray Shah (supra) to arguethat there can be no interference when the Tribunal has given findings offact. However, the Supreme Court in the said case held that the finding ofthe Tribunal was not perverse, as the concept of giving deemed dividend,under consideration in the said case, was rightly considered by the Tribunal,which ought not to be disturbed.The said judgment deals with deemeddividend under Section 222 (e) of the Act and since the two companies hadmerged, the accumulated profits of one would be taken into the merged account. The facts of the said case have no correlation, whatsoever, with thepresent case. 38. The judgement in Daulat Ram (supra) relied upon by Mr. Agarwal, wasconcerned with a case where the Department could not establish either thesource or the recipient of the fixed deposit of Rs.5,00,000/-. In thosecircumstances, the Supreme Court held that “the onus to prove that theapparent is not the real is on the party as who claims it to be so.” This casehas no application in the facts of the present case, as here the Assessee hasfailed to discharge the initial burden upon him after producing the creditorsand documents in support of its case. The source of the funds and therecipient is known in the present case. 39. In Parimisetti (supra), it was held that every receipt cannot be taxed asan income and the burden lies upon the department to show that the receiptis within the taxing provision. When an exemption is claimed, the onus toprove that income is exempted, lies on the Assessee. 40.InsofarasthisCourtisconcerned,DivineLeasing(supra),Dwarkadhish (supra) and Kamdhenu (supra) settles the law under Section68 of the Act beyond any pale of doubt. The question of law has to bedetermined on the basis of the ratio laid down in Divine Leasing (supra) andthereafter in Dwarkadhish (supra) and Kamdhenu (supra). Going by thefactors laid down in Divine Leasing (supra), this Court holds that theidentity of the four creditors namely Shri Amar Singh, Shri Chandan Singh,Shri Ram Chander and Smt. Sunita has been established. However, the ITA No.55/2017Page 22 of 25 genuineness of the transactions, though through the banking channels, hasnot been established. The creditworthiness of these creditors and theirfinancial strength has also not been established. 40.InsofarasthisCourtisconcerned,DivineLeasing(supra),Dwarkadhish (supra) and Kamdhenu (supra) settles the law under Section68 of the Act beyond any pale of doubt. The question of law has to bedetermined on the basis of the ratio laid down in Divine Leasing (supra) andthereafter in Dwarkadhish (supra) and Kamdhenu (supra). Going by thefactors laid down in Divine Leasing (supra), this Court holds that theidentity of the four creditors namely Shri Amar Singh, Shri Chandan Singh,Shri Ram Chander and Smt. Sunita has been established. However, the ITA No.55/2017Page 22 of 25 genuineness of the transactions, though through the banking channels, hasnot been established. The creditworthiness of these creditors and theirfinancial strength has also not been established. 41. An analysis of the above facts shows that none of these four individualshave the financial strength to lend such huge sums of money to theAssessee, that too without any collateral security, without interest andwithout a loan agreement. The mere establishing of their identity and thefact that the amounts have been transferred through cheque payments, doesnot by itself mean that the transactions are genuine. The AO and the CIT(A) have rightly held that the identity, creditworthiness and the genuinenessare all in doubt. Moreover, the Court notes that that these amounts have beenadvanced to the Assessee without any explanation as to their relationshipwith the Assessee, the reason for the payment of such huge amounts, as alsowhether any repayments have, in fact, been made. There are contradictionsin the explanation given by the Assessee and the statements recorded bythese four individuals, which are irreconcilable. For example, in the case ofShri Ram Chander/Ram Charan, he had initially stated that he had givenRs.10,00,000/- out of the proceeds of sale of the land but thereafter it wasclaimed by him that the money had come from her sister Vidya. Suchcontradictions clearly render all these transactions dubious. The ITAT couldnot have, merely because the payments were through cheques, held that thetransactions were genuine.The ITAT erred in simply accepting theexplanation of the Assessee qua the four transactions. The ITAT, clearly, didnot follow the binding precedent in Divine Leasing (supra), which in nouncertain terms requires that the authorities are duty bound to investigate the ITA No.55/2017 Page 23 of 25 creditworthiness of the creditors, subscribers and the genuineness of thetransactions. Thus the ITAT did not merely give findings of fact butmisapplied the law. Hence the authorities CIT Madras vs. S. Nelliappan(1967) 66 ITR 722 (SC), CIT Orissa vs. Orissa Corporation Pvt. Ltd. 159ITR 78 (SC), CIT Vs. Gun Nidhi Dalmia (1987) 168 ITR 282 (Del) do notsupport the Assessee's case. The Assessee has failed to discharge his initialburden as the explanation given by the Assessee and the four individualsdoes not appear to be credible. 42. There is no dispute to the proposition that the source of the source neednot be seen as held in Shiv Dhooti (supra) and the other cases relied uponby the Assessee. The ITAT has erred in its approach towards dealing withthe transactions and has incorrectly held that the Assessee has discharged hisonus merely because the money was advanced through the bankingchannels. The ITAT has ignored all the contradictions and has ignoredglaring circumstances such as Shri Amar Singh, not even being an Income-taxAssessee,inholdingthatthetransactionsaregenuineandcreditworthiness is established. The explanation for advancing the loans isclearly contradictory in respect of two of the creditors. To accept suchexplanations would in effect result in turning a blind eye as has been doneby the ITAT, to transactions which clearly lacked bona fides. Thus, theITAT’s order is erroneous and contrary to law and is accordingly, set aside. 43. The transactions in the present appeal are yet another example of theconstant use of the deception of loan entries to bring unaccounted moneyinto banking channels. This device of loan entries continues to plague the 43. The transactions in the present appeal are yet another example of theconstant use of the deception of loan entries to bring unaccounted moneyinto banking channels. This device of loan entries continues to plague the ITA No.55/2017 Page 24 of 25 legitimate economy of our country. As seen from the facts narrated above,the transactions herein clearly do not inspire confidence as being genuineand are shrouded in mystery, as to why the so-called creditors would lendsuch huge unsecured, interest free loans - that too without any agreement. Inthe absence of the same, the creditors fail the test of creditworthiness and thetransactions fail the test of genuineness. The findings of the CIT (A) areupheld and the order of the ITAT dated 19[th]July, 2016 is set aside to theextent of the deletion of four entries. The deletions made in respect of thetransactions of the Assessee with Shri Amar Singh, Shri Chandan Singh,ShriRamCharan/RamChanderandSmt.SunitatothetuneofRs.50,00,000/-,Rs.1,10,00,000/-,Rs.10,00,000/-andRs.98,00,000/-,respectively, are liable to be added back to the returned income of theAssessee for the relevant AY, under Section 68 of the Act. 44. The appeal is allowed in the above terms. PRATHIBA M. SINGH, J S. MURALIDHAR, J August 25, 2017dk ITA No.55/2017