The Commissioner Of Income Taxkarnataka (Central), Bangalore v. Sadiq Sheikh,Fr5, 4[Th] Floor, Souza Towers,Opp. Municipal Garden,Panaji-Goa

1 TXA NO.18 & 19-2014 IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO. 18 OF 2014 The Commissioner of Income TaxKarnataka (Central), Bangalore. ... Appellant Versus Sadiq Sheikh,FR5, 4[th] floor, Souza Towers,Opp. Municipal Garden,Panaji-Goa.PAN: & major in age... RespondentMs. Susan Linhares, Advocate for the Appellant.Mr. S. S. Kantak, Senior Advocate along with Mr. Nikhil Pai, Advocatefor the Respondent. AND TAX APPEAL NO. 19 OF 2014 The Commissioner of Income TaxKarnataka (Central),Bangalore.VersusSadia Sheikh,FR5, 4[th] floor, Souza Towers,Opp. Municipal Garden,Panaji-Goa.PAN: & major in age ... Appellant 2 TXA NO.18 & 19-2014 Ms. Susan Linhares, Advocate for the Appellant. Mr. S. S. Kantak, Senior Advocate along with Mr. Nikhil Pai, Advocatefor the Respondent. Coram:-M. S. SONAK & DAMA SESHADRI NAIDU, JJ. Reserved on:- 29th September, 2020Pronounced on:-14thOctober, 2020 JUDGMENT (Per M. S. Sonak, J.): Heard Ms. Susan Linhares, for the appellants and Mr. Kantak,learned Senior Advocate along with Mr. Nikhil Pai for the respondents. 2.The learned counsel state that both these appeals may bedisposed of by a common judgment and order since, the issuesinvolved in both these appeals are virtually identical and also thesubstantial questions of law as framed, are identical. 3.Tax Appeals were admitted on 25.09.2014 on the followingsubstantial questions of law:- (A) Whether on the facts and circumstances of the case, theTribunal was correct in law and not perverse in its findings indeleting the amount of Rs.11,26,50,112/- made by the AssessingAuthority towards unaccounted cash receipts? (B) Whether on the facts and circumstances of the case, theTribunal was correct in law and not perverse in its findings 3 TXA NO.18 & 19-2014 deleting the amount of Rs.8,49,49,888/- made by the AssessingAuthority towards unaccounted cash receipts? 4.The assessees in these appeals are individuals. They are in fact,spouses of one another. Since they were found to be eligible for thebenefits under Section 5A of the Income Tax Act, 1961 (said Act),50% of their income was brought to tax in the hands of the spouse.Hence, there were two separate but identical assessment orders andconsequently, there are these two appeals, which can as well beconsidered and disposed of by a common judgment and order. 5.The assessees filed their return of income declaring total incomeof `7,36,911/- for the year previous to the relevant assessment year. 6.Thereafter, on 25.02.2010, a search was conducted underSection 132 of the said Act in the residential premises of the assesseesat Dona Paula, Goa. The case was then centralized vide theCommissioner's order dated 16.07.2010 and notices dated 20.01.2011under Section 153(A) of the said Act were served upon the assessees on25.01.2011 calling for their returns for the relevant assessment years. 7.After reminders, the assessees filed their returns, again declaringtotal income of `7,36,910/- and agricultural income of `30,000/-. 8.Notices were issued under Section 142(2) and 143(1) of the saidAct to the assessees. The assessing officer (AO) vide order dated 4 TXA NO.18 & 19-2014 29.12.2011 finalized the assessment by adding an amount of`19,76,00,000/- on account of the unaccounted cash receipts fromShri N. Suryanarayana and `30,00,000/- on account of unexplainedinvestments by the assessees. 7.After reminders, the assessees filed their returns, again declaringtotal income of `7,36,910/- and agricultural income of `30,000/-. 8.Notices were issued under Section 142(2) and 143(1) of the saidAct to the assessees. The assessing officer (AO) vide order dated 4 TXA NO.18 & 19-2014 29.12.2011 finalized the assessment by adding an amount of`19,76,00,000/- on account of the unaccounted cash receipts fromShri N. Suryanarayana and `30,00,000/- on account of unexplainedinvestments by the assessees. 9.The assessees, aggrieved by the aforesaid additions to thedeclared income, appealed the assessment order dated 29.12.2011 tothe Commissioner (Appeals), who partly allowed the assessees’ appeal.From out of the addition of `19.76 crores, addition to the extent of`8,49,49,888/- was sustained. However, the addition to the extent of`11.76 crores was deleted. Similarly, the Commissioner (Appeals),sustained the addition of `30 lakhs on account of unexplainedinvestments by the assessees. This is evident from the order dated27.03.2013 made by the Commissioner (Appeals). 10.Both the assessees as well as the Revenue appealed to the IncomeTax Appellate Tribunal (ITAT) against the order dated 27.03.2013made by the Commissioner (Appeals). The ITAT, by its impugnedorder dated 31.07.2013, allowed the assessees’ appeal and dismissed theappeal instituted by the Revenue. Hence, the present appeals on theaforesaid substantial questions of law. 11.Ms. Linhares, the learned counsel for the Revenue submits thatthe ITAT has misconstrued the provisions of Section 68 of the said Actand the finding recorded by the ITAT reversing the concurrent 5 TXA NO.18 & 19-2014 findings by the assessing officer and the Commissioner (Appeals) isvitiated by perversity. She, therefore, submits that the two substantialquestions of law as raised be answered in favour of the Revenue andagainst the assessees. 12.Ms. Linhares submits that in this case, the ITAT has only takeninto consideration the circumstance that the amount of `8,49,49,888/-was credited by M/s. Prasad Properties into the accounts of theassessees by cheque and further one of the partners of M/s. PrasadProperties had owned up to making such payment to the assessees byway of loan. Ms. Linhares submits that there is overwhelming evidenceon record which establishes beyond reasonable doubt that the firmM/s. Prasad Properties could never have made such a huge payment tothe assessees and the partners of this firm were virtually persons ofstraw. She points out that this firm was never registered and wasdissolved within a period of hardly one year from its allegedincorporation. She pointed out that this firm had neither any bankaccount nor permanent account number (PAN) issued to it. 13.Ms. Linhares submits that the explanation about the hugeamount of `8.49 crores being carried in cash from Chennai to Goa wastoo fantastic to deserve any credit. She pointed out that there is noexplanation as to why this cash was allegedly carried by road for 1046kms. and thereafter deposited in Goa. She pointed out that it is quiteevident that all these transactions could not have been carried out in 6 TXA NO.18 & 19-2014 the normal course of business and therefore, both the assessing officerand Commissioner (Appeals), quite correctly held that the explanationoffered by the assessees was far from satisfactory. 14.Ms. Linhares submits that the ITAT by ignoring all this materialevidence has accepted the assessees’ explanation and ordered thedeletion of `8.49 crores added to the income of the assessees. Shepointed out that the finding recorded by the ITAT is vitiated byperversity and misconstruction of the provisions of Section 68 of thesaid Act. She relies on CIT v. M/s. Mussadilal Ram Bharose –1987(2) SCC 39 in support of her submissions. 6 TXA NO.18 & 19-2014 the normal course of business and therefore, both the assessing officerand Commissioner (Appeals), quite correctly held that the explanationoffered by the assessees was far from satisfactory. 14.Ms. Linhares submits that the ITAT by ignoring all this materialevidence has accepted the assessees’ explanation and ordered thedeletion of `8.49 crores added to the income of the assessees. Shepointed out that the finding recorded by the ITAT is vitiated byperversity and misconstruction of the provisions of Section 68 of thesaid Act. She relies on CIT v. M/s. Mussadilal Ram Bharose –1987(2) SCC 39 in support of her submissions. 15.Mr. Kantak, learned senior advocate for the assessees submitsthat once the assessees indicate the source from whom the amountswere received by cheque and further, such source confirms thepayment, the burden which the law casts upon the assessees is fullydischarged. He submits that thereafter, onus shifts upon the Revenueto establish that nevertheless, the amount represents an unexplainedincome of the assessees. 16.Mr. Kantak submits that in this case, both the assessing officerand Commissioner (Appeals) had raised certain doubts about thesource from which M/s. Prasad Properties may have arranged for theamount of `8.49 crores. He submits that the source of the source is notat all relevant consideration in such matters. If at all, there are any 7 TXA NO.18 & 19-2014 doubts about the source of the source, then, it is for the Revenue, totake out appropriate proceedings against the source and not against theassessees in the present case. Mr. Kantak submits that this error on thepart of the assessing officer and Commissioner (Appeals) was quitecorrectly set right by the ITAT relying upon the decisions in CIT v.Tania Investments P. Ltd. – 322 ITR 394, CIT v. Daulat RamRawatmull – (1973) 3 SCC 133, Aravali Trading Co. v. ITO –187 Taxman.com 338 (Raj), Nemi Chand Kothari v. CIT – 264ITR 254 (Gau). Mr. Kantak, therefore, submits that no substantialquestions of law as framed arise in this matter and both these appealsbe therefore dismissed. 17. The rival contentions now fall for our determination. 18. At the outset, we may deal with the first substantial question oflaw, which relates to the deletion of the amount of `11,26,50,112/-towards unaccounted cash receipts. This will have to be answeredagainst the Revenue and in favour of the assessees by accepting thereasoning of the Commissioner (Appeals) in his order dated27.03.2013. The Commissioner (Appeals), has not held that thisamount was accounted for by the assessees but the Commissioner(Appeals) has held that no inferences need to be drawn about thisamount simply because there is material on record that this amountwas paid to M/s. Good Earth Developers and M/s. Raj Hospitality Pvt.Ltd. Therefore, the nature of such amounts can be very well assessed 8 TXA NO.18 & 19-2014 in the hands of said recipients and need not be assessed in the hands ofthe assessees. 19. Since, there is material on record, that this amount of `11.26crores or thereabouts was paid by the assessees to the aforesaid twoentities and since there is evidence on record that the aforesaid twoentities had admitted to the receipt of the said amount, theCommissioner (Appeals), was quite right in taking the view that suchamounts are best assessed in the hands of the two entities and not inthe hands of the assessees. 8 TXA NO.18 & 19-2014 in the hands of said recipients and need not be assessed in the hands ofthe assessees. 19. Since, there is material on record, that this amount of `11.26crores or thereabouts was paid by the assessees to the aforesaid twoentities and since there is evidence on record that the aforesaid twoentities had admitted to the receipt of the said amount, theCommissioner (Appeals), was quite right in taking the view that suchamounts are best assessed in the hands of the two entities and not inthe hands of the assessees. 20.Ms. Linhares was unable to satisfy us that there was any illegalityin the view taken or any perversity in the approach of theCommissioner (Appeals) in so far as the treatment of this amount of`11.26 crores was concerned. Accordingly, the first substantial questionof law needs to be answered against the Revenue and in favour of theassessees. However, by clarifying that such an answer ought not to beconstrued to mean that the assessees have explained satisfactorily thenature and source of this amount. This question is answered againstthe Revenue only because we agree with the view taken by theCommissioner (Appeals) that it is only appropriate that this amount isassessed in the hands of the two recipient entities as aforesaid and notthe assessees. 9 TXA NO.18 & 19-2014 upon the application of the provisions of Section 68 of the said Act tothe facts and circumstances as borne out of the record in this case. 22.Section 68 of the said Act, inter alia provides that where any sumis found credited in the books of assessees maintained for any previousyear, and the assessees offer no explanation about nature and sourcethereof or explanation offered by him is, not found to be satisfactory,the sum so credited may be charged to income tax as the income of theassessees of that previous year. Two provisos are dealing with the shareapplication money and venture capital fund, with which we are notconcerned in these appeals. 23.The record, in this case, indicates that hardly any explanation assuch was offered by the assessees when called upon to explain thetransactions leading to the transfer of this huge amount of `8.49 croresinto their bank accounts on 10.03.2007. Even the source was notindicated by the assesses but the same was unearthed by the Revenueby probing the bank accounts and the money trail. 24.The assessees neither cooperated nor were they candid. It is onlyas the probe deepened, the assessees and their alleged sources began tooffer some halfhearted explanations, which, as found by the AO andthe Commissioner (Appeals) were far from satisfactory. The ITAT, in its impugned order dated 31.07.2013, has, 10 TXA NO.18 & 19-2014 however, purported to accept the assessee's' so-called explanation relying almost entirely upon the following three circumstances:- (a) That this amount of `8.49 crores was transferred into theassessees' bank account at Development Credit Bank, PanajiGoa on 10.03.2007. The ITAT regards this as a transferthrough a "normal banking channel". (b) That this amount of `8.49 crores was transferred from out ofthe bank accounts of Siraj Sheikh (assessees' brother/brother inlaw) and Vijay Kumar Rao (assessees' close friend) held in thesame bank. The ITAT has held that the identity of the sourcewas thus established. (c) That the identified sources have confirmed having madethese payments to the assessees.these payments to the assessees. 26.Based almost entirely upon the aforesaid three circumstances and relying almost entirely upon the following three circumstances:- (a) That this amount of `8.49 crores was transferred into theassessees' bank account at Development Credit Bank, PanajiGoa on 10.03.2007. The ITAT regards this as a transferthrough a "normal banking channel". (b) That this amount of `8.49 crores was transferred from out ofthe bank accounts of Siraj Sheikh (assessees' brother/brother inlaw) and Vijay Kumar Rao (assessees' close friend) held in thesame bank. The ITAT has held that the identity of the sourcewas thus established. (c) That the identified sources have confirmed having madethese payments to the assessees.these payments to the assessees. 26.Based almost entirely upon the aforesaid three circumstances and virtually ignoring all other circumstances emanating from the record,the ITAT, in its impugned order dated 31.07.2013, has rather abruptlyconcluded that ".......therefore, in our opinion, the requirement u/s 68is proved beyond any doubt by the Assessee. Therefore we are of theview that no addition is required/sustainable". The ITAT, by referenceto the rulings in Tania Investment P. Ltd. (supra), Aravali Trading Co.(supra), and Nemi Chand Kothari (supra), has held that if the identityof the creditor is established and the monies are received throughbanking channel, then, the assessees are not required to prove thesource of the source in such matters. 11 TXA NO.18 & 19-2014 on facts as well as in law, in interfering with the well-reasoned analysisreflected in the orders of the AO and Commissioner (Appeals) in thesematters. 28.The three circumstances relied upon by the ITAT in theimpugned judgment may not be irrelevant circumstances, But theywere certainly not the only circumstances on basis of which and byignoring other numerous circumstances, the ITAT could have abruptlyconcluded that the assesses had proved the so-called explanationbeyond the reasonable doubt for Section 68 of the said Act. 29.In Oceanic Products Exporting Co. v. CIT – 241 ITR 497(Ker) it is held that after the enactment of Section 68, the burden isplaced on the assessees to prove a credit appearing in its books ofaccounts. That burden has to be discharged with positive material.When it is contended that a person had advanced money or had givena loan, it has to be established that the person was not a man of strawand had the capacity to give the money. 30.In CIT v. Bikram Singh – 399 ITR 407, it is held that each ofthe three conditions i.e. identity of the creditor, capacity of thecreditor, and genuineness of the transaction had to be fulfilledcumulatively. Merely because the transactions were through bankingchannels, it cannot be said that such transactions were genuine whenthe assessees were not in a position to show the credit-worthiness of the 12 TXA NO.18 & 19-2014 creditors, there was no question of accepting the explanation of theassessees. 31.In CIT v. P. Mohanakala – 291 ITR 278 (SC), it is held thatthe mere furnishing of particulars or the mere fact of payment by anaccount payee cheque or mere submissions of a confirmatory letter bythe creditor, is, by itself, not enough to shift the onus on the Revenue. 32.To the same effect are the observations in Yashpal Goel v. CIT– 310 ITR 75 and Mangilal Jain v. CIT – 315 ITR 105, CIT v.United – 187 ITR 596. To the same effect are the observations in Yashpal Goel v. CIT 12 TXA NO.18 & 19-2014 creditors, there was no question of accepting the explanation of theassessees. 31.In CIT v. P. Mohanakala – 291 ITR 278 (SC), it is held thatthe mere furnishing of particulars or the mere fact of payment by anaccount payee cheque or mere submissions of a confirmatory letter bythe creditor, is, by itself, not enough to shift the onus on the Revenue. 32.To the same effect are the observations in Yashpal Goel v. CIT– 310 ITR 75 and Mangilal Jain v. CIT – 315 ITR 105, CIT v.United – 187 ITR 596. To the same effect are the observations in Yashpal Goel v. CIT 33.Even in Tania Investments P. Ltd. (supra) upon which reliancewas placed by the ITAT and by Mr. Kantak before us, this court hastacitly accepted the legal position that in case of cash credit entries inthe books of account, the assessee has to establish (i) identity of theparty; (ii) capacity, and (iii) the genuineness of the transaction. In thesaid case, the assessee had established the identity and perhaps thegenuineness of the transaction. On the aspect of 'capacity', this courtagreed with the finding of the ITAT in the said case, that books ofaccount of the said party were very much available with the AO. Suchbooks of account itself would indicate the capacity of the party toadvance loans. Therefore, without examining such books of accountthe AO could not have rejected the assessees' explanation. 13 TXA NO.18 & 19-2014 34.Tania Investment P. Limited (supra) is not an authority for theomnibus proposition relied upon by the ITAT and Mr. Kantak. In fact,even this decision accepts that to discharge the burden which Section68 of the said Act casts upon an assessee, the assessee has to not onlyestablish the identity of the source but also establish at least prima faciethe capacity of such source and the genuineness of the transaction. 35.In the present matters, the assessees quite reluctantly, may haveindicated, but not established the identity of the source. In any case,the assessees have failed to establish the capacity of the source and thegenuineness of the transaction. Therefore it is clear that TaniaInvestments P. Limited (supra) was quite mechanically relied by theITAT to accept the assessees' so-called explanation in these matters. Itis possible that the ITAT merely went by the headnotes which, attimes, may not accurately represent the ratio of the decision. 36.Similarly, even Nemi Chand Kothari (supra) rendered by learnedSingle Judge of the Gauhati High Court has laid down the followingpropositions, which, support the case of the Revenue than theassessees:- (i) The inquiry under Section 68 need not necessarily beconfined by the Assessing Officer to the transactions, which tookplace between the assessee and his creditor, but that same may beextended to the transactions, which may have taken placebetween the creditor and his sub-creditor; 14 TXA NO.18 & 19-2014 (ii) There can be no doubt that to establish the receipt of cashcredit as required under Section 68, the assessee must satisfythree important conditions, namely, (a)identity of the creditor,(b) the genuineness of the transaction, and (c) financial capacityof the person giving the cash credit to the assessee, i.e., thecreditworthiness of the creditor; (iii)Once, the assessee fulfills the aforesaid two conditions,thereafter there is no further burden upon the assessee toestablish the creditworthiness of the sub creditor or the creditor'screditor. The onus then shifts upon the Revenue. 14 TXA NO.18 & 19-2014 (ii) There can be no doubt that to establish the receipt of cashcredit as required under Section 68, the assessee must satisfythree important conditions, namely, (a)identity of the creditor,(b) the genuineness of the transaction, and (c) financial capacityof the person giving the cash credit to the assessee, i.e., thecreditworthiness of the creditor; (iii)Once, the assessee fulfills the aforesaid two conditions,thereafter there is no further burden upon the assessee toestablish the creditworthiness of the sub creditor or the creditor'screditor. The onus then shifts upon the Revenue. 37.In the present matters, the assessees have failed to discharge theburden of establishing the creditworthiness of the creditors i.e. SirajSheikh and Vijay Kumar Rao. The assessees have miserably failed toestablish the genuineness of the transaction between said Siraj Sheikhand Vijay Kumar Rao on one hand and the assessees on the other. Infact, there is no reference to any transaction between these apparentsources/creditors and the assessees. These apparent sources at one stagechose to call themselves as 'conduits' on behalf of M/s. PrasadProperties to the transaction projected in the agreement dated22.12.2006. If the apparent sources i.e. Siraj Sheikh and Vijay KumarRao are mere conduits as claimed by them, then the creditor or thesource is M/s. Prasad Properties. The burden, therefore, lay upon theassessees to establish the capacity of such source i.e. M/s. Prasad 15 TXA NO.18 & 19-2014 Properties and the genuineness of the transactions with M/s. PrasadProperties. The assessees have failed miserably on both these aspects. 38.In Aravali Trading Co. (supra), the firm of creditors who hadadvanced the amounts to the assessees had not only admitted to themaking of such advances but further, there was material on record toestablish the creditworthiness of such creditors. Such creditors werethemselves taxpayers who had been assessed for income tax for therelevant years. In these factual circumstances, the court held that thecapacity of creditors had been established and therefore the burden wasdischarged. In contrast, in the present matters, neither is the capacityof Siraj Sheikh and Vijay Kumar Rao nor M/s. Prasad Propertiesestablished, even prima facie. The genuineness of the transaction, ifany, is also far from established. The material on record suggests thatthere was no transaction worth the name and the agreement dated22.12.2006 executed on stamp papers dated 03.04.2000 was nothing buta desperate attempt to create a facade. The ruling in Aravali TradingCo (supra) can, therefore, in no manner, assist the assessees in thesematters. 39.Even according to us, merely pointing out to a source and thesource admitting that it has made the payments is not, sufficient todischarge the burden placed on the assessees by Section 68 of the saidAct. If this were so, then, it would be sufficient for assessees, to simplypersuade some credit- less person or entity to own up having made 16 TXA NO.18 & 19-2014 such huge payments and thereby evade payment of property tax on thespecious plea that the Revenue, can always recover the tax from suchcredit- less source, if possible. To discharge the burden which Section68 casts upon assessees, at least some plausible explanation is requiredto be furnished, which must be backed by some reliable evidence. Ifthe circumstances listed above are to be taken into consideration, then,it can hardly be said that the assessees in the present case, hasdischarged the burden which was cast upon it by Section 68 of the saidAct. 16 TXA NO.18 & 19-2014 such huge payments and thereby evade payment of property tax on thespecious plea that the Revenue, can always recover the tax from suchcredit- less source, if possible. To discharge the burden which Section68 casts upon assessees, at least some plausible explanation is requiredto be furnished, which must be backed by some reliable evidence. Ifthe circumstances listed above are to be taken into consideration, then,it can hardly be said that the assessees in the present case, hasdischarged the burden which was cast upon it by Section 68 of the saidAct. 40.Now coming to the perversity in the findings of fact that theexplanation furnished by and on behalf of the assessees was acceptable,reference is necessary to some of the circumstances which emanatefrom the record in these matters. These circumstances were consideredin some details by the AO and Commissioner (Appeals). Even theITAT, has not disbelieved any of these circumstances but the ITAT, hassimply ignored or bypassed all such circumstances by observing thatthe Revenue was not entitled to inquire into the source of the source.Some of such circumstances which emanate from the record are asfollows: (a) Mr. Siraj Sheikh (brother/brother-in-law of the assesses)and Mr. Vijay Kumar Rao, (a close friend of the assessees) arenot at all clear about their precise role in this transactioninvolving the amount of `8.49 crores;and Mr. Vijay Kumar Rao, (a close friend of the assessees) arenot at all clear about their precise role in this transactioninvolving the amount of `8.49 crores; 17 TXA NO.18 & 19-2014 (b)At one stage, they refer to themselves as the source of thisamount but at another stage, they claim to be mere “conduits”or “facilitators” for the transfer of this amount of `8.49 croresfrom M/s. Prasad Properties to the assessees; (c) Mr. Siraj Sheikh and Mr. Vijay Kumar Rao have notproduced even shred of evidence to establish even prima facietheir capacity to raise such a huge amount of `8.49 crores.There is no explanation as to how this amount became payableto them by M/s. Prasad Properties on 10.03.2007, when, on03.04.2006 i.e. hardly a year ago, they had allegedly invested anamount of `10,000/- each to the capital of the firm M/s. PrasadProperties; (d)There is no clarity as to whether this amount of `8.49`8.498.49crores was a “loan” or an “investment” by M/s. Prasad Propertiesto or with the assessees; There is no clarity as to whether this amount of `8.49`8.498.49 (e)In either case, there is no explanation on the issue ofrepayment of this huge amount of `8.49 crores or about thesecurities to secure repayment of such amount; (f)The ledger accounts maintained by M/s. Prasad Propertiesat Chennai indicated that Mr. Siraj Sheikh made a cashwithdrawal of `6,30,00,000/- and Mr. Vijay Kumar Rao made acash withdrawal of `2,20,08,700/-. However, Mr. Siraj Sheikh 18 TXA NO.18 & 19-2014 deposited an amount of `2,19,50,000/- in his bank account atGoa and Mr. Vijay Kumar Rao deposited an amount of`6,30,00,000/- in his bank account at Goa. Both these amountswere deposited in cash. This discrepancy is never explained andestablishes the extent to which the ledgers came to be fabricated; (g)The firm M/s. Prasad Properties was constituted on03.04.2006 and dissolved on 29.03.2007 i.e. hardly within thesame financial year; (h)Though, the assessees would like the Revenue to believethat M/s. Prasad Properties was dealing in crores of rupees, therecord establishes that M/s. Prasad Properties had neither anyPAN card in its name nor did M/s. Prasad Properties ever filedany returns of income; (i)That though the firm M/s. Prasad Properties was supposedto be dealing in transactions involving crores of rupees, it didnot even have a bank account in its name i.e. at Chennai orGoa; (g)The firm M/s. Prasad Properties was constituted on03.04.2006 and dissolved on 29.03.2007 i.e. hardly within thesame financial year; (h)Though, the assessees would like the Revenue to believethat M/s. Prasad Properties was dealing in crores of rupees, therecord establishes that M/s. Prasad Properties had neither anyPAN card in its name nor did M/s. Prasad Properties ever filedany returns of income; (i)That though the firm M/s. Prasad Properties was supposedto be dealing in transactions involving crores of rupees, it didnot even have a bank account in its name i.e. at Chennai orGoa; (j)The assessees had relied upon only four documents insupport of their so-called explanation. The first was thePartnership Deed dated 03.04.2006 which was typed on stamppaper of 20.03.2002; second, the agreement dated 22.12.2006,which was typed on stamp paper dated 03.04.2000; third, the 19 TXA NO.18 & 19-2014agreement inter se between the partners dated 22.01.2007,which was typed on stamp paper dated 20.03.2002; and fourththe Deed of Dissolution dated 29.03.2007 typed on stamppaper dated 20.03.2002. Again, there is no explanation as towhy these documents were typed on stamp paper of the year2000-2002 when the documents were allegedly prepared in2006-07; (k)Mr. A. Manohar Prasad claimed that `8.49 crores weretransported in cash in a shooting vehicle by road for a distanceof over 1046 km. from Chennai to Goa. No details of thevehicle number etc. were furnished; (l)If ultimately, this amount of `8.49 crores was to be paidthrough banking channels to the assessees, there is noexplanation as to why this amount was not deposited in a bankin Chennai and thereafter transferred into the bank account ofthe assessees; (m)The explanation offered by Mr. A. Manohar Prasad wasthat Mr. Sadiq Sheikh had promised him a 40% discount in theland transaction if payments were made in cash. This is notsomething which is reflected in the agreement dated22.12.2006, which is the document relied upon by the parties.In any case, if this was so, there is no explanation as to why thehuge amount was deposited in the bank account of Mr. Siraj 20 TXA NO.18 & 19-2014 Sheikh and Mr. Vijay Kumar Rao and thereafter transferred intothe bank account of the assessees; (n)There are absolutely no documents to secure this loan orinvestment of `8.49 crores executed by the assessees in favour ofM/s. Prasad Properties. The only lame explanation offered byMr. A. Manohar Prasad was that Mr. Sadiq Sheikh had orallyconfirmed the repayment and had already shown him theproperty belonging to his family. (o)There are no documents to indicate whether interest, ifany, was payable on this loan of `8.49 crores. There are nodocuments to indicate the return which M/s. Prasad Propertieswas to expect on this huge investment of `8.49 crores. 41.If the ITAT were to have considered the aforesaid circumstances,which, according to us, the ITAT was duty-bound to, we are quite surethat the ITAT would not have, nevertheless, found the so-calledexplanation of the assessees acceptable or in compliance with theprovisions of Section 68 of the said Act. Rather we are inclined tobelieve, that the ITAT too, would have found the so-called explanationof the assessees too fantastic to deserve any acceptance. In MussadilalRam Bharose (supra), the Hon'ble Supreme Court has cautionedagainst acceptance of any 'fantastic' or 'unacceptable' explanations intax matters. 21 TXA NO.18 & 19-2014 41.If the ITAT were to have considered the aforesaid circumstances,which, according to us, the ITAT was duty-bound to, we are quite surethat the ITAT would not have, nevertheless, found the so-calledexplanation of the assessees acceptable or in compliance with theprovisions of Section 68 of the said Act. Rather we are inclined tobelieve, that the ITAT too, would have found the so-called explanationof the assessees too fantastic to deserve any acceptance. In MussadilalRam Bharose (supra), the Hon'ble Supreme Court has cautionedagainst acceptance of any 'fantastic' or 'unacceptable' explanations intax matters. 21 TXA NO.18 & 19-2014 42. In Mussadilal Ram Bharose (supra), the Hon'ble SupremeCourt agreed with the view taken by the Full Bench of the Patna HighCourt in the case of CIT v. Nathulal Agarwala & Sons – 153 ITR292 (Pat), which reiterated that the onus to discharge the presumptionraised by the explanation to Section 271(1)(c) was on the assessees andit was for him to prove that the difference between the returnedincome and the assessed income did not arise from any fraud or grossor willful neglect on his part. The court should come to a clearconclusion whether the assessees had discharged the onus or rebuttedthe presumptions against him. The Full Bench emphasized that as tothe nature of the explanation to be rendered by the assessees, it wasplain on the principle that it was not the law that the moment any'fantastic or unacceptable' explanation was given, the burden placedupon him would be discharged and the presumption rebutted. Afterspecifically adverting to these observations of the Full Bench, theHon'ble Apex Court observed as follows:- “We agree. We further agree that it is not the law that any andevery explanation by the assessees must be accepted. It must bean acceptable explanation, acceptable to a fact-finding body.” 43.In this case as well the assessees want the fact-finding authoritiesto believe that this amount of `8.49 crores credited into their accountswas indeed sourced from Siraj Sheikh and Vijay Kumar Rao and M/s.Prasad Properties. This explanation is purported to be backed by some4 documents of absolutely dubious origins executed in the year 2006-07 but on stamp papers of the year 2000-02 for which there is no 22 TXA NO.18 & 19-2014 explanation whatsoever. This firm M/s. Prasad Properties was allegedlyfounded on 03.04.2006 and stood dissolved on 29.03.2007 i.e. withina single financial year. This firm had neither any bank account nor anyPAN card. This firm has never filed any return of income nor paid anyincome tax. All this even though this firm and its partners includingSiraj Sheikh and Vijay Kumar Rao claim to have transacted thebusiness of 'crores of rupees'. Above all, this explanation furnished onbehalf of the assessee involves transportation by road from Chennai toGoa (a distance of over 1046 km.) a cash stash of `8.50 crores. This isexactly what the Hon'ble Apex Court refers to as 'any fantastic orunacceptable explanation'. Yet, the ITAT, by virtually ignoring all thesecircumstances and further by applying incorrect legal principles, haschosen to accept such fantastic and unacceptable explanation put forth,not by the assessees themselves but on behalf of the assessees. 44.In these matters, even if we were to accept that the assessees, bypointing out to Mr. Siraj Sheikh, Vijay Kumar Rao, and M/s. PrasadProperties had discharged the initial burden cast upon them by Section68 of the said Act, we find that the onus which had shifted upon theRevenue, has been appreciably discharged by the Revenue. This is nota case where the Revenue, halted its probe soon after the so-calledsources were indicated by the assessees. The Revenue, in these matters,probed further and unearthed quality material to establish that the so-called sources completely lacked the capacity or credit-worthiness toadvance such a huge amount of `8.49 crores to the assessees. Further, 44.In these matters, even if we were to accept that the assessees, bypointing out to Mr. Siraj Sheikh, Vijay Kumar Rao, and M/s. PrasadProperties had discharged the initial burden cast upon them by Section68 of the said Act, we find that the onus which had shifted upon theRevenue, has been appreciably discharged by the Revenue. This is nota case where the Revenue, halted its probe soon after the so-calledsources were indicated by the assessees. The Revenue, in these matters,probed further and unearthed quality material to establish that the so-called sources completely lacked the capacity or credit-worthiness toadvance such a huge amount of `8.49 crores to the assessees. Further, 23 TXA NO.18 & 19-2014the Revenue, in these matters, established that there was nogenuineness in the transactions sought to be projected on behalf of theassessees. Therefore, the Revenue, in these matters, has discharged theonus, assuming that such onus had indeed shifted upon the revenue.Again, this is an aspect, which was ignored by the ITAT. 45.The finding recorded by the ITAT in these matters is basedupon the wholly erroneous view of law and perversity on account ofignoring completely, vital and relevant circumstances emanating fromthe record. Such a finding can be interfered in an appeal underSection 260A of the said Act. The legal position is quite settled thatwhere the findings arrived at by the Tribunal are based upon the whollyerroneous view of the law or are vitiated by perversity, a substantialquestion of law indeed arises and is required to be addressed in anappeal under Section 260A of the said Act. If at all, any authority isnecessary for this proposition, then reference can be usefully made toNemi Chand Kothari (supra) relied upon by the assessees themselves.Even otherwise, this position is settled in several rulings including CITv. Antartica Investment Pvt. Ltd. - 262 ITR 493; Bhola Shankar ColdStorage P. Ltd. v. Joint Commissioner of Income-Tax – 270 ITR 487;and Hindusthan Tea Trading Co. Ltd. vs Commissioner of Income Tax– 263 ITR 289. 46.Therefore, for all the aforesaid reasons, we answer the secondsubstantial question of law in favour of the Revenue and against the 24 TXA NO.18 & 19-2014 assessees. As a consequence, we reverse the order of ITAT and restore the order made by the Commissioner (Appeals) in these matters. 47.These appeals are accordingly disposed of by making thefollowing order: (a) The first substantial question of law is answered against the Revenue and in favour of the assessees. However, we clarify thatsuch an answer is not to be construed as acceptance of assessees'explanation in respect of the amount of `11.26 crores. We haveonly agreed with the reasoning of the Commissioner (Appeals) inhis order dated 27.03.2013 that it is only appropriate that thisamount is assessed in the hands of the two recipients and not inthe hands of the assessees; (b)The second substantial question of law is answered infavour of the Revenue and against the assessees and the ITAT'sorder dated 31.07.2013 is set aside and the order of theCommissioner (Appeals) dated 27.03.2013 is hereby restored,insofar as the addition of the amount of `8,49,49,888/- to theassessees' income. 48.The two appeals are disposed of accordingly. There shall be noorder as to costs. DAMA SESHADRI NAIDU, J. ss M. S. SONAK, J.