Kumar Nirman and Nivesh Pvt. Ltd. v. The Assistant Commissioner of Income-tax, Bangalore
[Citation -2020-LL-0131-105]

Citation 2020-LL-0131-105
Appellant Name Kumar Nirman and Nivesh Pvt. Ltd.
Respondent Name The Assistant Commissioner of Income-tax, Bangalore
Court HIGH COURT OF KARNATAKA
Relevant Act Income-tax
Date of Order 31/01/2020
Assessment Year 2005-06
Judgment View Judgment
Keyword Tags genuineness of transaction • satisfactory explanation • genuine transaction • confirmation letter • evidence on record • material evidence • source of income • source of source • source of fund • lender • unexplained cash credit • identity of creditor
Bot Summary: The Assessing Officer by an order dated 31.12.2017, rejected the explanation furnished by the assessee and made an addition of Rs.55 Lakhs as the same was treated as unexplained cash credits in the hands of the assessee and was added to the income of the assessee. The appeal preferred by the assessee was partly allowed by the Commissioner of Income Tax. Being aggrieved, the assessee as well as the revenue filed appeals before the Income Tax Appellate Tribunal. The Assessing Officer has rightly made an addition of Rs.55 Lakhs in the income of the assessee. The aforesaid decision was referred to division bench of Rajasthan High Court in LABHCHAND BOHRA supra and it was held that assessee cannot be required to prove the source of the source and the fact that the lender has not been able to give satisfactory explanation regarding source of fund lent by him, would not be decisive. In the instant case, the assessee in support of identity, genuineness of transaction and credit worthiness of M/s Bhuwania Bros. The aforesaid decision has no application to the case of the assessee as the case of the assessee pertains to the assessment year 2005-06.


IN HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS 31ST DAY OF JANUARY 2020 PRESENT HON BLE MR. JUSTICE ALOK ARADHE AND HON BLE MR. JUSTICE RAVI V.HOSMANI I.T.A. NO.255 OF 2010 BETWEEN: M/S. KUMAR NIRMAN AND NIVESH PVT LTD REP. BY ITS DIRECTOR SUBRAMANYA HEGDE NO.485/9, 14TH CROSS, 4TH PHASE PEENYA INDUSTRIAL AREA BANGALORE-560058. APPELLANT (By Sri. A. SHANKAR, SR. COUNSEL FOR Sri. M. LAVA, ADV.) AND: ASSISTANT COMMISSIONER OF INCOME TAX OPP. RBI BANK, R.P. BUILDING NRUPATUNGA ROAD, BANGALORE-560001. ... RESPONDENT (By Sri. K.V. ARAVIND, ADV.) --- THIS I.T.A IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961, ARISING OUT OF ORDER DATED 5-3-2010 PASSED IN ITA NO.1010/BNG/2009, FOR ASSESSMENT YEAR 2005-06 PRAYING TO FORMULATE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN. ALLOW APPEAL AND SET ASIDE ORDER PASSED BY ITAT BANGALORE IN ITA 2 NO.1010/BNG/2009, DATED 5-3-2010, IN INTEREST OF JUSTICE AND EQUITY. THIS I.T.A. COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED FOLLOWING: JUDGMENT This appeal under Section 260A of Income Tax Act, 1961 (hereinafter referred to as Act , for short), which has been filed by assessee which pertains to assessment year 2005-06. moot question, which arises for consideration in this appeal is whether assessee who has taken loan is bound to produce source of source. bench of this court by order dated 20.10.2010 had admitted appeal on following substantial questions of law: (i) Whether Tribunal was justified in law in reversing finding of Commissioner of Income Tax (Appeals) addition of Rs.55,00,000/- under Section 68 of Act on facts and circumstance of case? (ii) Whether tribunal was justified in law in holding that 3 appellant has not proved credit inspite of detailed evidences placed before Tribunal on facts and circumstance of case? (iii) Whether Tribunal was justified in law in expecting in expecting appellant to prove source of source and origin of origin of funds of creditor on facts and circumstances of case? (iv) Without prejudice whether Tribunal ought to have remanded matter to file of Assessing Officer when it recorded finding that more facts ought to have been verified on facts and circumstances of case? 2. Facts giving rise to filing of appeal briefly stated are that appellant is company, which is engaged in business of construction. appellant filed its return of income for assessment year 2005-06 and declared total income of Rs.38,11,543/-. return filed by appellant was selected for scrutiny and notice under Section 143(2) of Act was issued. According to 4 assessee, it received sum of Rs.55 Lakhs by way of cash from M/s Bhuwania Bros. Pvt. Ltd. Calcutta on various dates against proposed contract for sale. However, sale could not be finalized on account of some reasons. aforesaid amounts were paid to M/s Bhuwania Bros. Pvt. Ltd., and accounts of M/s.Bhuwania Bros. Pvt. Ltd., also showed repayment of said amount. However, Assessing Officer by order dated 31.12.2017, rejected explanation furnished by assessee and made addition of Rs.55 Lakhs as same was treated as unexplained cash credits in hands of assessee and was added to income of assessee. Being aggrieved, assessee filed appeal. Commissioner of Income Tax (Appeals) by order dated 24.08.2009, added deletion of sum of Rs.55 Lakhs. appeal preferred by assessee was partly allowed by Commissioner of Income Tax (Appeals). Being aggrieved, assessee as well as revenue filed appeals before Income Tax Appellate Tribunal (hereinafter referred to as tribunal for short). tribunal by order dated 05.03.2010, allowed appeal preferred by revenue and dismissed appeal preferred 5 by assessee and maintained order passed by Assessing Officer. In aforesaid factual background, this appeal has been filed. 3. Learned Senior counsel for appellant submitted that Assessing Officer grossly erred in making addition on ground that on perusal of balance sheet, prima facie it appears, that party does not have liquidity to make such huge cash transactions. It is further submitted that Assessing Officer cannot decide liquidity of cash looking into balance sheet, without looking into cash book of parties. It was further submitted that Assessing Officer ought to have appreciated that appellant had identity, genuineness of transactions and credit worthiness of party by producing details before Assessing Officer. It is further submitted that addition made by Assessing Officer is not in accordance with Section 68 of Act as there is no concept of undisclosed income. It is further submitted that Commissioner of R Shivappa, V Lokeshmurthy, P Narasimha Swamy, R Kiran and B.S. Manjunath Tax (Appeals) by considering 6 remand before Assessing Officer rightly held that appellant had proved identity and credit worthiness. It is submitted that tribunal grossly erred in holding that summons issued to M/s Bhuwania Bros. Pvt. Ltd. were not complied with as balance sheet and confirmation letter was filed. It is also urged that tribunal ignored material evidence on record and erred in holding that entries in assessee s books are self serving. It is also urged that tribunal grossly erred in holding that assessee is expected to examine source. In support of aforesaid submissions, reliance has bee placed on following decisions CIT VS. DAULAT RAM RAWATMULL , 87 ITR 349 (SC), LABHCHAND BOHRA VS. ITO , 219 CTR 571 (RAJ), KANHAILAL JANGID VS. ACIT , 217 CTR 354 (RAJ) AND CIT VS. ORISSA CORPORATION , 159 ITR 78 (SC). 4. On other hand, learned counsel for revenue submitted that in order to avoid rigor of Section 68 of Act, assessee is required to prove identity of creditor, genuineness of transaction and credit 7 worthiness of creditor, which has not been done in instant case. It is further submitted that neither original agreement with regard to sale of property nor deed of cancellation of sale has been produced. Therefore, Assessing Officer has rightly made addition of Rs.55 Lakhs in income of assessee. It is also submitted that assessee has failed to prove availability of cash. In support of aforesaid submissions, reliance has been placed by learned counsel for revenue in case of COMMISISONER OF INCOME-TAX VS. P.R.GANAPATHY , (2012) 26 TAXMANN.COM 354 (SC) AND PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL)-1 VS. NRA IRON & STEEL PVT. LTD. , (2019) 412 ITR 161 (SC). 5. In rebuttal learned Senior counsel for assessee has placed reliance on division bench High Court of Madhya Pradesh in ITRNo.22/2018 decided on 07.08.2018. It is further submitted that similar issue was dealt with division bench of Madhya Pradesh High Court and 8 aforesaid decision has been upheld by Supreme Court vide order dated 18,.02.2019 in SLP (civil diary) No.1992/2019. 6. We have considered submissions made on both sides and have perused record. Supreme Court in case of DAULAT RAM RAWATMULL supra has held that person could still be held to be owner of sum of money even though explanation furnished by him regarding source of that money was found to be not correct. It has further been held that onus of proving that transaction was not genuine transaction is on party who claims it to be so. aforesaid decision was referred to division bench of Rajasthan High Court in LABHCHAND BOHRA supra and it was held that assessee cannot be required to prove source of source and fact that lender has not been able to give satisfactory explanation regarding source of fund lent by him, would not be decisive. It has further been held that explanation regarding source of money furnished by lender whose money is lying deposited, has been found to be false. It would be remote and far fetched conclusion to hold that 9 money belongs to assessee. Supreme Court in case of ORISSA COPROATION P. LTD. supra has held that in case assessee gives names and addresses of creditors, revenue has to conduct enquiry and examine source of income of alleged creditors to find out whether they were creditworthy or were such who could advance alleged loans. 7. In backdrop of aforesaid well settled legal principles, facts of case may be seen. In instant case, assessee in support of identity, genuineness of transaction and credit worthiness of M/s Bhuwania Bros. Pvt. Ltd. had supplied copy of balance sheet and profit and loss account to Assessing Officer. appellant had also filed copy of return of income of M/s. Bhuwania Bros Pvt. Ltd. as well as copy of information letter. appellant having proved identity and credit worthiness of party as well as genuineness of transaction had discharged its burden and it was for revenue to conduct enquiry and to prove that transaction in question was not genuine and identity of creditor was not established 10 and it had no credit worthiness. In instant case, revenue has not conducted any enquiry and has failed to discharge its burden. In view of preceding analysis, we answer substantial question of law Nos.(i), (ii) and (iii) in negative and in favour of asssessee and against revenue. 8. So far as reliance placed by learned counsel for revenue in case of NRA IRON STEEL LTD. SUPRA is concerned, suffice to say that aforesaid decision interprets amended Section 68, by which proviso has been added with effect from 01.04.2013. In para 11 of aforesaid decision, Supreme Court has culled out principles where sums of money are credited as share capital / premium. aforesaid decision has no application to case of assessee as case of assessee pertains to assessment year 2005-06. 11 In result, order passed by tribunal dated 24.08.2009 is hereby quashed and appeal is allowed. Sd/- JUDGE Sd/- JUDGE SS Kumar Nirman and Nivesh Pvt. Ltd. v. Assistant Commissioner of Income-tax, Bangalore
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