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

HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Anil Sharma, Advocate for 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 under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 6.9.2004 passed by the Income Tax Appellate Tribunal, Chandigarh Bench “B”, Chandigarh (hereinafter referred to as “the Tribunal”) 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 has erred in law as well as in fact in upholding the addition of Rs.80,000/- and has failed to consider the reasons as assigned by the Commissioner of Income Tax (Appeals) ordering deletion of the aforesaid addition? ii) Whether the order of Income Tax Appellate Tribunal is based on surmises and conjectures?” ITA No. 125 of 2005 -2-

2. The facts leading to the filing of the present appeal are that the assessment was completed on 30.10.1998 on a total income of Rs.4,70,700/- including an addition of Rs.4,67,300/- on account of 46 creditors being treated as bogus. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [in short “the CIT(A)”] who vide order dated 2.1.2001 held that the Assessing Officer was not justified in treating all the 46 creditors as not genuine merely on the basis of the statements of 9 creditors produced before him. Accordingly, the CIT (A) directed the Assessing Officer to frame fresh assessment after recording the statements of all the 46 creditors. It was pleaded before the CIT (A) that the affidavits of the creditors were produced. The Assessing Officer started assessment proceedings in January, 2003. The first notice was issued to the assessee on

30.1.2003 and fresh assessment was completed on 10.3.2003 and an addition of Rs.4,67,300/- was repeated by the Assessing Officer. The CIT (A) vide order dated 24.11.2003 deleted the entire addition. The CIT (A) while deleting the addition had observed as under:- “3.3 The submissions of the appellant have been considered carefully and I have gone through the Asstt record as well as case laws relied upon the appellant. It is seen that the assessee has duly discharged his onus by filing the affidavits of the creditors from whom the loans were taken. Once the identity of the persons is established before the Assessing Officer and other such evidence are prima facie before him pointing to the fact that the entry is ITA No. 125 of 2005 -3- not fictitious, the initial burden lying on the assessee can be said to have been duly discharged by him. It will not, therefore, before the assessee to explain further as to how or in what circumstances the creditors obtained the money and how or why he came to make advance of the money as a loan to the assessee. Once such identity is established and the creditors, as in the instant case, have pledged their oath that they have advanced the amounts in question to the assessee, the burden immediately shifts on the department. 38 out of 46 are income tax assesses and if the Assessing Officer is not satisfied about the credits, he should have summoned the creditors under section 131 or should have got the same verified from the Assessing Officers with whom they are assessed to tax. After doing this exercise, if the Assessing Officer could have genuine doubts regarding the creditworthiness of the creditor (s), he could have come back to the assessee asking him to justify why the so called loans be not treated as his income. In case of remaining creditors, the affidavits detailing their address and source of income have been filed. The persons, in case of doubt, should have been examined first by the Assessing Officer and then if the Assessing Officer was not satisfied about their creditworthiness, he should have come ITA No. 125 of 2005 -4- back to the assessee asking it to prove the credit worthiness of the so called depositors. This has not been done. Further, it has been brought to my notice that this is a Non Banking finance company whose sole business is collecting deposits and advancing the money to those in need. So it is but natural that the company is not supposed to know about the financial position of the depositors. Again all the amounts have duly been refunded with interest to all except 8 persons who demanded to take back the amounts by cash. These facts have duly been reflected in the books of account. Taking into account all the facts and circumstances of the case as discussed above and various judicial pronouncements, cited supra, I am of the opinion that the Assessing Officer was not justified in considering the cash credits as non-genuine. The addition made by the Assessing Officer is, therefore, ordered to be deleted.”

3. Against the order of the CIT (A), the revenue approached the Tribunal, who vide order dated 6.9.2004 restored the addition of Rs.80,000/-. Hence, the present appeal by the assessee.

5. We have heard learned counsel for the parties. The solitary issue that arises for determination by this Court in this appeal is whether the cash credit of 8 creditors amounting to Rs.80,000/- was genuine or not. ITA No. 125 of 2005 -5-

6. The Assessing Officer came to the conclusion that the cash credits represented the undisclosed income of the assessee and were not genuine. The CIT (A) while partly allowing the appeal deleted the addition on account of cash credits of all 46 creditors. However, on appeal by the revenue to the Tribunal, the Tribunal concluded that the cash credit in respect of 8 creditors was not genuine. The Tribunal on appreciation of evidence came to the conclusion that 8 creditors which were claimed to be genuine by the assessee were not assessed to tax and the amount of deposits had not been explained satisfactorily by them. The CIT(A) was not right in deleting the addition on account of 8 depositors who were not income tax assessees and had demanded back their amount in cash. The onus was upon the assessee to have established satisfactorily the genuineness of these depositors which it failed to discharge. The view taken by the Tribunal is a plausible view on appreciation of evidence. This being a finding of fact in which no error could be pointed out by the learned counsel for the assessee, no ground for interference by this Court is made out.

7. Accordingly, there is no merit in this appeal and the same is hereby dismissed. (AJAY KUMAR MITTAL) JUDGE October 15, 2010 (ADARSH KUMAR GOEL) JUDGE