The Commissioner Of Income Tax-Ii, Ludhiana v. M/S Amar Chand And Sons

Income-tax Appeal No.243 of 2011 **** IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH Income-tax Appeal No.243Date of decision: 25.11.2011 of 2011 The Commissioner of Income Tax-II, Ludhiana ...Appellant Versus M/s Amar Chand and sons ...Respondent CORAM: HON'BLE MR.JUSTICE HEMANT GUPTA HON'BLE MR.JUSTICE G.S.SANDHAWALIA Present: Ms. Savita Saxena, Sr. Standing Counsel for the appellant. **** G.S.SANDHAWALIA, J. The present appeal is filed by the revenue under Section 260Aof the Income Tax Act, 1961 (hereinafter referred to as “the Act”) againstorder dated 18.10.2010 passed in ITA No.983/CHANDI/2010 for theassessment year 2007-08 by the Income Tax Appellate Tribunal,Chandigarh Bench 'B', Chandigarh. The revenue has contended that thefollowing substantial questions of law arise in the facts of the case:- “1.Whether on the facts and in law, the Hon'ble ITAT waslegally correct in dismissing the appeal of the department byholding that the assessee discharged the onus to prove thegenuineness of the transaction and credit worthiness of thecreditors regarding credits introduced by the creditors though itwas proved beyond doubt that the amounts of commodityprofits earned by the creditors and which were introduced by the creditors to the assessee firm were bogus and theassessee could not explain the source of credits to thesatisfaction of the A.O.? 2. Whether on the facts and in law, the Hon'ble ITAT waslegally correct in dismissing the appeal of the department byholding that there was no evidence on record to prove that theamounts introduced as credits in the account of assessee firmintroduced by the creditors (earned as commodity profits)actually belonged to the assessee firm and, therefore, thesame cannot be treated as unexplained under Section 68?” The department is aggrieved that in appeal the Commissionerof Income Tax (Appeals) has deleted the addition of Rs.33,11,510/- andthe said order has been upheld by the Tribunal. It is the case of thedepartment that the respondent-assessee is a partnership firm engaged inthe business of trading in iron & steel and cycle parts and manufacturingcycle parts, which had taken unsecured loans from 18 persons totalling toRs.72,86,519/- which was noticed by the Assessing Officer on 31.3.2007.Accordingly, the details of the creditors were called for and examined bythe Assessing Officer and confirmation regarding the income tax particularsand mode of advancement of loans were taken into account. TheAssessing Officer, however, came to the conclusion that though the identityof the creditors was proved but he was not satisfied with the creditworthiness and genuineness of the transactions of 15 creditors and, thus,made the addition of Rs.33,11,510/-. It was, however, come on record thatthe creditors are existing income tax payees, who have filed their returnsshowing the mode of advance and their sources and such affairs havebeen accepted by their respective Assessing Officers. Learned counsel for the revenue has urged that the creditworthiness and genuineness of the transactions have been doubted andthe assessee could not explain the source of the credits of his creditors tothe satisfaction of the Assessing Officer. Learned counsel for the revenue has urged that the creditworthiness and genuineness of the transactions have been doubted andthe assessee could not explain the source of the credits of his creditors tothe satisfaction of the Assessing Officer. We feel that the submission is absolutely untenable as theassessee cannot be asked to show credit worthiness of his creditors andthe Assessing Officer of that creditor can add the said amount to theincome of that creditor if he is not satisfied by the explanation given and itis not possible for the assessee to prove the sources of the creditors. Ithas also been recorded as a matter of fact that the amounts have beenreceived by way of banking channel and, therefore, it was for theAssessing Officers of the said creditors to question the said creditors, whowere income tax assesses and in the absence of any evidence, theAssessing Officer could not have treated the said amount as belonging tothe assessee from his undisclosed sources. Thus, from the above facts and circumstances, it will be clearthat no question of law arises for consideration by this Court as contendedby the Revenue and the present appeal is dismissed being bereft of anymerit. (G.S.SANDHAWALIA) Judge November 25, 2011Pka (HEMANT GUPTA) Judge