ORDER
R.K. Bali, A.M.
1. This is an appeal by the Revenue against the order dt. 3rd Oct., 1994, passed by learned CIT(A). The Revenue has taken the following grounds :
“1. On the facts and in the circumstances of the case, learned CIT(A) has erred in deleting the addition of Rs. 50,000 made by the AO under Section 68 of IT Act on account of alleged loan raised from Sh. Pawan Kumar.
2. Learned CIT(A) has further erred in deleting the addition of Rs. 40,000 made by the AO under Section 68 on account of alleged loan raised from Sh. Anil Kumar.”
2. As regards grounds No. 1 relating to the action of learned CIT(A) in deleting addition of Rs. 50,000 made by the AO on account of alleged non-genuine loan raised by the assessee from Sh. Pawan Kumar, learned first appellate authority has discussed this issue in paras 3-3.3 of the impugned order as under.
“3. Ground No, 2 is reg. additions totalling Rs. 2,15 lac on account of cash credit of Rs. 50,000 in the name of Sh. Pawan Kumar, Rs. 25,000 in the name of Sh. Jatinder Kumar, Rs. 50,000 in the name of Sh. Sanjiv Kumar, Rs. 40,000 in the name of Sh, Anil Kumar and Rs. 25,000 in the name of Sh. Amrik Singh. Each of them are discussed hereunder separately :
3.1 Sh. Pawan Kumar Bansal—Rs. 50,000
This loan was advanced through cheque drawn on account No. 4983 with State Bank of Patiala. The AO treated this loan as unexplained observing :
“Before issuing the cheques the assessee had made deposits of Rs. 1.10 lac on different date but he could not explain the source of this deposit. Before making these deposits, the credit balance was very negligible. Therefore, it is held that the assessee had failed to prove the credit worthiness of the creditor and hence addition of Rs. 50,000 is made to the income of the assessee under Section 68 of IT Act, 1961.”
3.2. The counsel of the appellant submitted that the loan was advanced by Shri Pawan Kumar Bansal through account payee cheque. He is regular income-tax assessee in Ward-3, Chandigarh, for the last ten years. The observation of the AO that there are credits of Rs. 1.10 lacs on different dates in his bank account is not correct. As a matter of fact there, is credit of Rs. 60,000 because Rs. 40,000 was withdrawn and again deposited before advancing the loan of Rs. 50,000 to the appellant-firm. Out of total credit of Rs. 60,000, credit of Rs. 50,000 on 23rd May, 1991, represents the amount received back from Shri Surinder Singh to whom the said amount was advanced on 17th Dec., 1988. This stands reflected in the balance-sheet of Shri Pawan Kumar. This was received back on 23rd May, 1991, and a chegue for Rs. 40,000 in favour of M/s Anil Trading Company was issued on 25th May, 1991, which was again received back on 9th July, 1991. The chegue was issued in favour of the appellant-firm on 10th July, 1992. The statement of Shri Pawan Kumar was recorded and also copy of bank account was produced. The credits were duly explained. Since the appellant had proved the identity of the creditor, his capacity to advance the loan and genuineness of the transaction, treating the credit as unexplained was not justified especially when the creditor is an assessee in the same ward.
3.3. I have carefully considered the rival submissions and also made reference to the assessment records, It is observed that statement of Shri Pawan Kumar was recorded by the AO and he confirmed having advanced the loan. The AO required Shri Pawan Kumar to explain certain credit entries in his account No. 4983 i.e., Rs. 50,000 on 23rd May, 1991, Rs. 10,000 on 8th July, 1991, Rs. 40,000 on 9th July, 1991 and Rs. 10,000 on 25th Sept., 1991. Shri Pawan Kumar could not explain the source of these deposits immediately and case was adjourned to 24th Jan., 1994, for furnishing copy of account and the source of credits. As per order-sheet entry, Shri Pawan Kurnar attended and furnished photo-copy of his bank account which was examined and placed on record. There is no mention of any unexplained deposits in the name of Shri Pawan Kumar and reference to photocopy of his bank account shows narration “By clearing” against deposit of Rs. 50,000 on 23rd May, 1991.” The name of Shri Surinder Singh stands mentioned in ink. Again, against entry of Rs. 40,000 on 9th July, 1991, the narration is “by clearing” and name of M/s Anil Trading Company stands mentioned. The advance of loan of Rs. 40,000 on 27th May, 1991, is also apparent from the said copy of account. Thus, the observation of the AO that deposits in the account No. 4983 to the extent of Rs. 1.10 lacs were not explained does not appear to be correct. Moreover, in case any further explanation was called for, the same could have been obtained from Shri Pawan Kumar who attended the proceedings on 20th Jan., 1994, as well as on 24th Jan., 1994. The source of deposit of Rs. 50,000, Rs. 40,000 and Rs. 40,000 stands duly explained. The other deposit of Rs. 10,000 on 8th July, 1991, is also through clearing. The advance of Rs. 50,000 was made out of this account on 10th July, 1991. There is no other deposit before this date. In this view of the matter, I am of the opinion that initial onus to explain the source of credit in the name of Shri Pawan Kumar Bansal to the extent of Rs. 50,000 stood discharged by the appellant. No material has been brought on record by the AO to controvert the explanation given which is duly supported by the statement of Shri Pawan Kumar Bansal, its copy of bank account and further explanation regarding the deposits, etc. Therefore, addition of Rs. 50,000 made on this account is held to be not justified and is deleted.”
After hearing the parties to the dispute, I do not find any good ground to interfere with the reasoning and conclusion of learned CIT(A) in deleting the addition. Loan of Rs. 50,000 was received by the assessee by an account payee cheque issued from the account of Sh. Pawan Kumar, loan creditor from SB a/c No. 4983 with State Bank of Patiala. Sh. Pawan Kumar has admitted having advanced loan in his statement recorded by the AO and he is a regular assessee with Ward-3, which is the same ward where the assessee Bhatia Enterprises is being assessed. Sh. Pawan Kumar has also explained deposits in his SB a/c prior to the issue of cheque of Rs. 50,000 favouring the assessee and in any case if the AO was not satisfied with the explanation the correct course open to him was to tax unexplained deposits in SB a/c by Sh. Pawan Kumar in his hands. No addition could have been made in the hands of the assessee because he has discharged the initial onus which lay on him to prove cash credit in terms of Section 68. Accordingly, I will uphold the order of learned CIT(A) in this regard and adjudicate ground No. 1 in favour of the assessee and against the Revenue. Accordingly, ground No. 1 is rejected.
3. Coming to ground No. 2, learned first appellate authority has discussed this issue in paras 3.13-3.15 of the impugned order as under:
“3.13 Shri Ann Kumar–Rs. 40,000
The loan of Rs. 40,000 was received from Shri Anil Kumar. According to the AO, source of deposit of Rs. 20,000 and Rs. 18,000 on 2nd July, 1991, in his bank account No. 14817 with Haryana State Co-operative Bank was not satisfactorily explained. Therefore, holding that Shri Anil Kumar was in a position to advance only a sum of Rs. 10,000 out of his past savings, the source of remaining credit of Rs. 40,000 was treated as not explained.
3.14 The counsel of the appellant submitted that the loan was advanced by the creditor through crossed cheque. The source of Rs. 20,000 was stated to be received form M/s Anil Trading Co. through cheque on 2nd July, 1991, to whom this sum had been advanced as loan on 17th April, 1991, out of bank account No. 14817. Similarly, Rs. 18,000 was received back from M/s Diwan Enterprises which was advanced as loan to the said firm in immediately preceding year through cheque from saving bank account. Copy of account in the books of M/s Anil Trading Co. was also filed. It was stated that the creditor is a regular income-tax assessee with Ward-6, Chandigarh. In view of this explanation, it was argued that genuineness of the loan stands established. Therefore, addition made on this account was not called for.
3.15 I have carefully considered the rival submissions and also made reference to the assessment records. It is observed that statement of Shri Anil Kumar was recorded on 7th Feb., 1994, wherein he explained the source of deposit of Rs. 20,000 and Rs. 18,000. Photo-copy of the bank account is also lying on records. Thus, this supports the contention of the appellant. The advance of loans out of the said account stands recorded in the said bank account of M/s Anil Trading Co. and Diwan Enterprises. Again explanation has been given that the amount of Rs. 20,000 was received from M/s Anil Trading Co. through account payee cheque and this entry appears in the bank account with the narration “through clearing”. Again, there is a cash deposit of Rs. 18,000 stated to have been received from M/s Diwan Enterprises and the bank account duly refelects such advance to M/s Bhatia Enterprises. The AO did not require the appellant or Shri Anil Kumar to furnish any other information in this regard. Considering this fact and keeping in view the information which is already on record, in the form of statement of Shri Anil Kumar and bank account, in my view, the source of deposit of Rs. 20,000 and Rs. 18,000 stood duly explained. The AO did not bring any material on record to controvert or prove the explanation to be not correct. Therefore, there was no justification in treating the credit to the extent of Rs. 40,000 as not explained. With these observations, the addition of Rs. 40,000 made on this account is held to be not justified and is deleted.”
After hearing the parties to the dispute, here also I do not find any justification in interfering with the reasoning and conclusion of learned first appellate authority. Here also, Sh. Anil Kumar creditor is an existing assessee with ITO, Ward-6, and he has admitted having given loan to the assessee by account payee cheque drawn from his SB a/c No. 14817 with the Haryana State Coop Bank. In fact, loan advance by Sh. Anil Kumar to the assessee was an amount of Rs. 50,000 on 17th April, 1999, out of his SB a/c by account payee cheque. When asked to explain the source of credit in his bank account Sh. Anil Kumar explained deposit of two credits of Rs. 20,000 and Rs. 18,000 in the bank account on 2nd July, 1991, as the return of old loans given by him to Anil Trading Co. and Diwan Enterprises. The AO treated these return of loans as non-genuine and as belonging to the assessee, which conclusion was considered erroneous by learned CIT(A). Here also, the assessee has discharged the burden which lay on him in terms of Section 68 by producing the creditor who admitted, having advanced loan to the assessee by account payee cheques and who is a regular assessee. In case the AO doubted credits in the SB a/c of the creditor Sh. Anil Kumar, he ought to have made addition in the hands of the creditor Sh. Anil Kumar and not in the hands of the assessee, Bhatia Enterprises. Accordingly, I will uphold the action of the CIT(A) in this regard and reject ground No. 2 as well.
4. In the result, the appeal is dismissed.