ORDER
P.K. Bansal, A.M.
1. This appeal has been filed by the Revenue against the order of the CIT(A) dt. 16th Sept., 2004.
2. The first ground relates to the deletion of the addition of Rs. 75,000. The assessee has shown agricultural income at Rs. 2,54,414. It was submitted that the assessee was having 21 acres of agricultural income (sic-land) which was irrigated and from which he got wheat, gram and soyabean. The assessee filed the details of ownership, Khasra Khatoni, etc. The AO estimated the agricultural income at Rs. 1,79,414 and treated Rs. 75,000 to be the income from other sources. When the matter went before the CIT(A), the CIT(A) deleted the addition by observing as under:
I have gone through the records, the written submission of the learned Authorised Representative and the arguments put forward before me. I am inclined to agree with the contention of the learned Authorised Representative. The estimate of agricultural income made by the AO is without any basis. In S. Sarabhaiah Shetty & Sons v. CIT , the Andhra Pradesh High Court has held that where the ITO did not state the basis of his estimate, the estimate is not tenable.
In view of this and in view of the facts and circumstances of the case, I am of the opinion that the estimate of agricultural income made by the AO is not justified. The addition of Rs. 75,000 is accordingly deleted.
3. We have heard the learned Departmental Representative and carefully considered his submission. We do not find any infirmity or illegality in the order of the CIT(A) in deleting the addition of Rs. 75,000 specially when the assessee has shown the agricultural income for the asst. yrs. 1999-2000 and 2000-01 at Rs. 2,71,770 and Rs. 2,98,200. We, therefore, dismiss the ground No. 1.
4. The second (ground) relates to the deletion of addition of Rs. 1.50 lacs. The AO made the addition of Rs. 1.50 lacs which the assessee has shown as credit from one Shri Bhagwandas. The AO noted that the assessee has shown credit from Shri Bhagwandas who was a creditor of Satbhaiya Agro Industries, Tikamgarh in which the assessee is also a partner. Shri Bhagwandas wanted to buy a Maruti car from Patel Motors, Indore, and took up a sum of Rs. 1.50 lacs from Satbhaiya Agro Industries and deposited it with Patel Motors, Indore. However, a sum of Rs. 1.50 lacs was also deposited and this amount was claimed to have been out of his own savings. Due to untimely death of his daughter, Shri Bhagwandas changed his mood and wanted to cancel the booking. In the meantime Shri Babulal Jain was negotiating for the purchase of house property at Indore. He, therefore, needed money and approached Shri Bhagwandas. Shri Bhagwandas directed Patel Motors to pay his booking amount to the assessee which was treated as personal loan to the assessee and accordingly Patel Motors issued cheque of Rs. 3,02,038 to one Shri Brajesh Kumar Kasliwal through cheque No. 717621 dt. 27th Jan., 2001 of Bank of Maharashtra. The AO added the sum of Rs. 1.50 lacs in the income of the assessee. Shri Bhagwandas in his statement has deposed that he gave the money to the assessee. The affidavit of Shri Bhagwandas was also filed. Certificate from Patel Motors for the payment of the money was also filed. When the matter went before the CIT(A). the CIT(A) deleted the addition relying on, the decision of Hon’ble Madhya Pradesh High Court in the case of CIT v. Metachem Industries , in which it was held that if the Department has examined the creditor and the creditor has accepted to have advanced the money to the assessee, there is no reason for making any addition in the hands of the assessee.
5. The learned Departmental Representative relied on the order of the AO while the learned Authorised Representative relied on the order of the CIT(A).
6. We have carefully considered the rival submissions and perused the material on record. We find that the amount has been advanced to the assessec by Shri Bhagwandas through Patel Mortors, Indore. The payment has been received through account payee cheque. Shri Bhagwandas has confirmed it through affidavit. The immediate source of the money advanced to the assessee is covered by the withdrawal of the amount from M/s Patel Motors. The assessee is not required to prove the source of the sources. We, therefore, did not find any illegality or infirmity in the order of the CIT(A) in deleting the addition of Rs. 1.50 lacs and accordingly we confirm the order of the CIT(A) and thus this ground is also dismissed. In the result the appeal of the Revenue stands dismissed.
U.B.S. Bedi, J.M.
1. Despite having repeated discussion with learned AM and best persuasion of myself, I have not been able to agree with the finding and conclusion as arrived at by my learned Brother, the AM, with respect to ground No. (ii) of Revenue’s appeal and my reasons for being so are given as under.
2. The facts relating to this ground indicate that the assessee had shown Rs. 3,02,038 as credit from Shri Bhagwan Das. In assessment proceeding, it was submitted that Shri Bhagwan Das of Tikamgarh was a creditor to Satbhaiya Agro Industries, Tikamgarh in which the assessee is also a partner. As per assessee, Shri Bhagwan Das wanted to buy a Maruti car from Patel Motors, Indore. He. therefore, took out Rs. 1,50,000 from Satbhaiya Agro Industries and deposited with Patel Motors, Indore. He also deposited another amount of Rs. 1,50,000 with Patel Motors and this amount was claimed as his own savings. However, due to the ultimately demise of daughter of Shri Bhagwan Das, he changed his mood and wanted to cancel the booking. In the meantime Shri Babulal Jain was negotiating for purchase of house property at Indore. He, therefore, needed money and approached Shri Bhagwan Das. Shri Bhagwan Das accordingly instructed Patel Motors to pay his booking amount of Rs. 3,00.000 to Shri Babulal Jain which would be treated as personal loan to the assessee. M/s Patel Motors, Indore accordingly, issued a cheque of Rs. 3,02,038 (including interest) to one Mr. Brajesh Kumar Kasliwal, the seller of house property to the assessee. This amount was given vide cheque No. 717621 dt. 27th Jan., 2001 of Bank of Maharashtra. The AO accepted the loan amount of Rs. 1,50,000 because it was taken out of the books of Satbhaiya Agro Industries. He, however, did not accept the explanation of assessee regarding the balance amount for purchase of house property at Indore and accordingly added the amount of Rs. 1,50,300 to the total income of the assessee. This was contested in appeal and it was vehemently argued that Shri Bhagwan Das had admitted in the statement that he has given money to the assessee and the assessee also has given details through affidavit of Shri Bhagwan Das before the AO. Besides that, a certificate from Patel Motors, Indore detailing the payment was also produced before the AO. According to learned Authorised Representative for the assessee, in view of sufficient evidence in support of the claim, the action of the AO was not justified and therefore, addition of Rs. 1,50,300 should be deleted.
3. Learned CIT(A) while considering and accepting the plea of the assessee has concluded to delete the impugned addition in view of Madhya Pradesh High Court decision as reported in the case of CAT v. Metachem Industries (supra) as per last but one para of the order of CIT(A) which is reproduced as under:
I am inclined to agree with the contention of the learned Authorised Representative. The AO has examined Shri Bhagwan Das in this connection and Shri Bhagwan Das has admitted in his statement that he has given the amount as claimed by the assessee to the seller of the property. In view of this statement, the AO should have accepted the claim of the assessee. In CIT v. Metachem Industries , the Hon’ble Madhya Pradesh High Court has held that if the Department has examined the creditor and the creditor has accepted to have advanced the amount to the appellant, there is no reason of making any addition in the hands of the assessee. The Court further held that in case the Department is not satisfied, it is for the Department to initiate proceedings under Section 69 of the Act in the hands of the creditor. In view of this and in the facts and circumstances of the case, I am of the opinion that the addition of Rs. 1,50,000 is not sustainable and is, accordingly deleted.
4. Aggrieved by this order of the learned CIT(A), Department is in appeal and while relying upon AO’s order it was pleaded for setting aside the order of CIT(A) and restoring that of the AO in this regard. It was further submitted by learned Departmental Representative that the assessee has not been able to substantiate claim of the assessee about entire amount taken on credit from Shri Bhagwan Das because he could only establish availability of amount to the extent of Rs. 1,50,000 and balance amount of Rs. 1,50,000 could not be explained by him. Therefore, the AO has correctly made the addition and CIT(A)’s action in deleting the same is not proper and justified. So far as jurisdictional High Court decision in the case of Metachem Industries (supra) is concerned, in that case it has been held that if the explanation given by the assessee is satisfactory, then that entry will not be charged along with the income of the previous year of the assessee but in case the explanation offered by the assessee is not satisfactory or the source offered by the assessee is not proved, then in that case the amount should be taken to be the income of the assessee and decision has been taken on the premise that there was concurrent finding of both the authorities that firm has satisfactorily explained the credit entries in the books of the firm, the addition could not be made in the hands of the firm. But in the instant case amount of Rs. 1,50,000 cannot be said to have been satisfactorily explained, therefore, addition was called for and same has rightly been made by the AO and learned CIT(A) is not justified in deleting the same. It was urged for reversal of the order of learned CIT(A).
5. Learned Counsel for the assessee relied upon the order of the learned CIT(A) and pleaded for confirmation of the impugned order in this regard. It was further submitted that source of receipt of Rs. 3,02,038 was from Shri Bhagwan Das who paid it through M/s Patel Motors, Indore, through cheque and since said creditor has admitted to have paid the entire amount to the assessee and also filed one affidavit to support this, therefore, there was no justification for the AO to make the addition and moreover source of source has not to be explained and learned CIT(A) has rightly deleted the addition while following the decision of Madhya Pradesh High Court in the case of Metachem Industries (supra). It was urged for confirmation of the impugned order.
6. Both the sides have been heard and material on record in the light of precedent relied upon have been gone into. It is undisputed fact there was credit entry of Rs. 3,02,038 in the books of the assessee in the name of Shri Bhagwan Das who is stated to have advanced such amount through account payee cheque having been issued by Patel Motors, Indore on the instruction of Shri Bhagwan Das in the name of Brajesh Kumar Kasliwal, the seller of the house property to the assessee and it is an admitted fact that out of Rs. 3,02,038, Rs. 1,50,000 was withdrawn by the assessee from Satbhaiya Agro Industries and deposited it with Patel Motors, Indore. He deposited another amount of Rs. 1,50,000 with Patel Motors, Indore and this amount was claimed as his own saving. The AO accepted first amount of Rs. 1,50,000 which was withdrawn from Satbhaiya Agro Industries and documentary evidence to that effect was furnished but for balance amount of Rs. 1,50,000, according to the AO, the assessee had not been able to satisfactorily explain the said amount in the absence of documentary evidence or material having been placed on record by Shri Bhagwan Das or the assessee. Now it is to be seen whether such credit of Rs. 1,50,000 which was not accepted by the AO can be added in the income of the assessee or not. Mainly reliance is on the decision of Madhya Pradesh High Court in the case of CIT v. Metachem Industries (supra). Similar issue with regard to introduction of capital by partner in the firm’s account came up for consideration before Jabalpur Bench in the case of Dy. CIT v. Top Up Centre in the cross-appeals in ITA Nos. 203 and 278/Jab/1999 for asst. yrs. 1992-93 and 1993-94 and relevant portion of the order as contained in paras 38 to 44. which dealt with the similar issue, is reproduced as under:
38. As regards second issue, same relates to deletion of addition of Rs. 1,55,000 made by the AO under Section 68 of the IT Act. When confronted to explain the source of the deposit appearing in partner’s capital account, appearing in the books of the firm, the assessee submitted that it was out of the withdrawals from M/s Bahar Enterprises, Bilaspur and partly from repayment received from the LIC but no supporting evidence was filed, so the AO made the addition. However, in appeal proceedings it was contended that the AO without verifying the verifiable facts from the partner and also from M/s Bahar Enterprises, which is also a concern being assessed in this very circle, the impugned addition was made under Section 68 treating it as the unexplained cash credit in the case of the assessee firm, so addition made be deleted.
39. The CIT(A) while considering and accepting the plea of the assessee deleted the entire addition by observing as per para 2.1 of his order which reads as under:
I find that the addition made by the AO is unsustainable because where the funds clearly emanate from the partners either by way of cheque or it is possible to prove the advance of the amount by the partner of the firm, the burden of proof and assessibility in such cases are matters which can be considered only in the partner’s hands. The deposits in the partner’s account was explained with reference to the copy of account from M/s Bukhari Enterprises, Bilaspur, which is a concern being assessed to tax in the same circle. In the presence of this, the impugned addition made by the AO is highly unsustainable on facts and in the law. In the decision reported in Surendra Mohan Seth v. CIT and Madhya Pradesh High Court’s decision in CIT v. Shiv Shakti Timbers , it has been clearly held that if a deposit appears in the books of the firm in the name of the partner, addition on account of unexplained deposit could be considered under Section 69 in the case of the partner and not under Section 68 in the case of the firm. In view of the above the impugned addition made by the AO being unsustainable on facts and in law is deleted.
40. Aggrieved by this order, the Revenue is in further appeal and while relying upon the AO’s order it was pleaded for setting aside the order of the CIT(A) and restoring that of the AO. It was further pleaded that since the assessee has not been able to explain the source of credit amount appearing in the partner’s account appearing in the books of the firm, therefore, addition could rightly be made in the hands of the firm and learned CIT(A) is not justified in deleting the same. Whereas learned Counsel for the assessee relied on the order of the CIT(A) and pleaded for confirmation of the same. It was next submitted that case of the assessee is covered by Madhya Pradesh High Court decision relied upon by learned CIT(A) and further case of Madhya Pradesh High Court reported in CIT v. Metachem Industries , CIT v. Jaiswal Motor Finance , Surendra Mohan Seth v. CIT , CIT v. Shiva Sales Corporation to plead that the addition in the hands of the firm cannot be made when credit entries are there in the capital account of the partner’s in the books of the firm.
41. After having heard both the sides and considering the material on record in the light of precedents relied upon, I find it appropriate to deal with the legal contention raised by learned Counsel for the assessee that no addition could be made in the hands of the firm under Section 68 of the amounts introduced in the name of the partners. Section 68 of the IT Act, 1961 provides that where any sum is found credited in the books of account for any previous year and the assessee offers no explanation about the nature and source thereof or the explanation so offered is not satisfactory in the opinion of the AO, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. Unless, the assessee satisfactorily explains the genuineness of the credit entries appearing in its books of account, the AO is entitled to make the addition under Section 68. It is a trite law that the onus is heavily cast on the assessee under Section 68 with regard to the satisfactory explanation on the following three ingredients:
(a) identity of the creditor;
(b) his capacity to advance; and
(c) the genuineness of the transaction.
Unless these three conditions are satisfied, the AO is entitled to proceed under Section 68. From the perusal of Section 68, it will be clear that there is no exception restricting its application to the credit standing in the partner’s capital account. Therefore, Section 68 is to be applied in the same manner on the partners of the firm as on the outside loans. It is no doubt true that Section 69 provides for making addition on account of unexplained investment and accordingly if a partner has invested any money in the firm, which is not properly explained, the addition can be made in his hands under Section 69. But simply because Section 69 empowers the AO to make the addition in the hands of the partners on account of unexplained investment made in the firm, this in itself does not debar the AO in making the addition under Section 68 in the hands of the firm for lack of satisfactory explanation in regard to the credit entries appearing in the books of the firm on account of capital contributed by the partners. A conjoint reading of these two sections brings to light that the AO is empowered to apply any of these two sections i.e. if he is making the assessment of the firm, he can make addition under Section 68 and if he is making assessment of the partners, he can make addition under Section 69 for lack of satisfactory explanation given by the assessee. Of course, having made the addition under Section 68 in the hands of the firm, the AO cannot again make the similar addition under Section 69 in the hands of the same partner and vice versa. It is, therefore, apparent insofar as the provisions of Section 68 are concerned that the partners do not stand in any different position visa-vis other unsecured loans and if the plea advanced on behalf of the assessee is accepted then it would mean that the onus under Section 68 stands discharged only on establishing the identity of the depositors and the other two conditions, namely, the capacity of the depositor and the genuineness of the transactions have become meaningless. I am afraid that this is not the purport and intention of the legislation behind Section 68. Learned Authorised Representative mainly relied on Madhya Pradesh High Court decision in the case of CAT v. Metachem Industries (supra) in which it was held that the cash credits in the names of the partners in the books of account were not assessable under Section 68 in the hands of the firm. It is also found that the said decision is based on the case of Sundar Lal Jain v. CIT . On perusal of the decision of the Hon’ble Allahabad High Court it is noted that the same was delivered in the context of an addition made in the hands of the partner in his individual status. The issue was whether in the hands of the partner the addition was required to be made under Section 68 or 69. Their Lordships observed that Section 68 was applicable wherein credit was found in the books of the assessee for which the AO was not satisfied with the explanation given by the assessee. It was also noted that when the assessment of partner was being considered and the partner was not maintaining any books of account, the addition was called for only under Section 69. This judgment is a pointer to the fact that when the assessment of the assessee (partner) is taken up, the addition on account of unexplained capital contribution in the firm is required to be made under Section 69 and not under Section 68. Obviously no addition under Section 68 was made in that case in the hands of the partner for capital invested in the firm for the reasons that Section 68 is applicable only in respect to the credit entries appearing in the books of the assessee. It is further noted that the Hon’ble Madhya Pradesh High Court in the case of CIT v. Shiv Shakti Timbers has laid down that in the absence of sufficient explanation given by the assessee towards the credit entries appearing in the capital accounts of the partners, the addition was required to be made in the hands of the firm under Section 68. This decision was not brought to the notice of the Hon’ble High Court in the latter case of CIT v. Metachem Industries (supra), which was also delivered by the same Hon’ble High Court Judge. The entire legal position was considered along with both the decisions of the jurisdictional High Court.
42. After making a threadbare analysis of the issue, it was finally held that there are no fetters on the powers of the AO to make the addition under Section 68 if the credit entries appearing in the account of the partners are not satisfactorily explained. I find that similar view was taken in CIT v. Kishorilal Santoshilal (1995) 129 CTR (Raj) 450 : (1995) 216 ITR 9 (Raj) and the Delhi Bench of the Tribunal in the case of Multi Chemicals v. Asstt. CIT (2001) 73 TTJ (Del) 124 : (2001) 76 1TD 367 (Del). In view of the aforementioned discussion, I am satisfied that there is no force in the submission of the learned Authorised Representative that the AO is precluded from making the addition in the hands of the assessee firm under Section 68 on account of capital contributed by the partners if same remains satisfactorily explained.
43. Now adverting to the facts of the present case, it is noted that an amount of Rs. 1,55,000 was found credited in partner’s capital account appearing in the books of account of the assessee firm and when assessee was confronted to explain the source of deposits, it was submitted that the same is out of withdrawals from M/s Bahar Enterprises and partly from repayment received from LIC but no supporting evidence was filed despite opportunity given and AO made the addition. However, CIT(A) deleted the impugned addition by holding that addition could not be made under Section 68 even if it is unexplained deposit which could be considered under Section 69 in the case of the partner. Keeping in view the detailed discussion as held in foregoing para and in the light of the decision cited, I am of the considered view that such action of learned CIT(A) is unwarranted and uncalled for, as such is unsustainable. My view is further fortified by Jabalpur Bench decision in the case of ITO v. Nand Builders in ITA No. 319/Jab/1997 dt. 25th Jan., 2002. So far as Punjab & Haryana High Court decision as relied by learned Authorised Representative is concerned, there are distinguishable features as the assessee, in the case in hand, has failed to prove the credit, whereas in the case before Punjab & Haryana High Court partners had surrendered particular income and credited the same in firm’s account so ratio of that decision cannot be said to be applicable to the present case.
44. Since no fresh factual position having been brought into my notice, I am satisfied that AO was justified in making the addition and CIT(A)’s action in deleting the same was not warranted at all. As such while accepting this ground of appeal of the Revenue, I vacate the order of learned CIT(A) and restore that of the AO.
7. As is seen from the discussion and conclusion as drawn by Jabalpur Bench in the above case, the decision in the case of Metachem Industries (supra) was duly considered along with the decision of Allahabad High Court as reported in Sundar Lal Jain v. CIT as considered and relied upon another decision of Madhya Pradesh High Court as reported in CIT v. Shiv Shakti Timbers , which decision, has been given by same Division Bench of Hon’ble High Court who gave the decision in the case of Metachem Industries (supra) and considering other related case law, it has been held that until amount found entered in the books of account of the assessee is satisfactorily explained by the assessee, same could always be added in the income of the assessee under Section 68 of the Act.
In the instant case, the assessee has not been able to satisfactorily explain the source of amount of Rs. 1,50,000 out of Rs. 3,02,038 advanced by Shri Bhagwan Das inasmuch as that said creditor has stated before the AO that amount of Rs. 1,50,000 was given out of agricultural income but Shri Bhagwan Das could not give kind of land, whether irrigated or not. details of the agricultural produce, details of receipts and expenses, or the copies of Khasra were not produced. The AO noted that Shri Bhagwan Das is 81 years old and his all the sons are in service in distant cities and if agricultural work is being done by servants, then after considering their expenses and the expenses incurred on irrigation, seed procurement and other related expenses, and taking into account that, in Tikamgarh District, for so many years, there being no good crop, how could he, after meeting the expenditure, save any money and according to the statement of Shri Bhagwan Das, his money lending business has also stopped from 1990 and his only source of income is agriculture but still he has to take something from his sons in order to make both the ends meet. So far as creditor’s bank account is concerned, the AO has noted that this was opened by the assessee on 14th Feb., 1996 and from the date of opening of the bank account till 9th Dec, 2000, there are equal number of deposits and withdrawals (23 transactions each) and except for one transaction of Rs. 50,000, other transactions range from Rs. 100 to Rs. 500 and on 12th Dec, 2000, said creditor deposited Rs. 1,00,000 and on 14th Dec, 2000, he further deposited Rs. 50,300 and issued cheque on 5th Feb., 2000 for Rs. 1,50,000 and prior to these transactions Rs. 2,500 was deposited on 5th Oct., 2000. Since the assessee was having bank account and was depositing certain amount regularly so there was no point of not depositing the agricultural income in the bank account and why same was kept in the home chest especially when he is 81 years old and to keep such an amount at home is not secure. Said creditor was issued notices in this regard to explain his position not only once but on two occasions but he did not respond, neither any clarification was given by the Authorised Representative of the assessee before the AO, but he insisted upon acceptance of the amount of Rs. 1,50,300. The AO, while considering McDowell’s case, treated this to be a colourable device and was of the opinion that the amount actually belongs to Babulal Jain and not to Shri Bhagwan Das and added the same to the income of the assessee and learned CIT(A) without considering and discussing the factual aspect or other details in this regard, has just deleted the addition and to my kind such action of learned CIT(A) is unwarranted and uncalled for. Therefore, in the light of discussion held and relevant decision of this Bench as reproduced above and earlier decision of this Bench as noted in the said decision (namely ITO v. Nand Builders) and in the absence (of) no fresh factual position having been brought into the notice of the Bench, I am satisfied that since assessee has not been able to satisfactorily explain such credits, so AO was justified in making the addition and CIT(A)’s action in deleting the same was not warranted at all. As such while accepting the appeal of the Revenue, I vacate the order of learned CIT(A) and restore that of the AO in this regard. So far as conclusion of learned AM with respect to ground No. (i) is concerned, I fully agree with the same.
Reference Under Section 255(4) of the it Act
Since there is difference of opinion on one issue between the Members constituting the Bench who have heard this appeal, therefore, following point of difference is being formulated for nomination of Third Member as envisaged under Section 255(4) by the learned President Tribunal:
Whether confirmation of order of learned CIT(A) in deleting the addition of Rs. 1,50,000 made by the AO under Section 68 of IT Act is justified or his order deserves reversal ?
G.D. Agrawal, Vice President
1. Due to difference of opinion amongst the Members of Jabalpur Bench the Hon’ble President, Tribunal, nominated me as Third Member under Section 255(4) of the IT Act, referred the following question to me:
Whether confirmation of order of learned CIT(A) in deleting the addition of Rs. 1,50,000 made by the AO under Section 68 of IT Act is justified or his order deserves reversal?
2. The facts of the case are that the assessee had shown Rs. 3,02,038 as credit from Shri Bhagwan Das. In assessment proceeding, it was submitted that Shri Bhagwan Das of Tikamgarh was a creditor of Satbhaiya Agro Industries, Tikamgarh, in which the assessee is also a partner. As per assessee, Shri Bhagwan Das wanted to buy a Maruti car from Patel Motors, Indore. He, therefore, took out Rs. 1.50 lacs from Satbhaiya Agro Industries and deposited with Patel Motors, Indore. He also deposited another amount of Rs. 1.50 lacs with Patel Motors and this amount was claimed as his own savings. However, due to the untimely demise of daughter of Shri Bhagwandas, he changed his mood and wanted to cancel the booking. In the meantime Shri Babulal Jain was negotiating for purchase of house property at Indore. He, therefore, needed money and approached Shri Bhagwan Das. Shri Bhagwan Das instructed Patel Motors to pay his booking amount of Rs. 3 lacs to Shri Babulal Jain (assessee). M/s Patel Motors, Indore, accordingly, issued a cheque of Rs. 3,02,038 (including interest) to one Shri Brajesh Kumar Kasliwal, the seller of the house property to the assessee. This amount was given vide cheque No. 717621 dt. 27th Jan., 2001 of Bank of Maharashtra. The AO accepted the loan amount of Rs. 1.50 lacs because it was taken out of books of Satbhaiya Agro Industries. He however, did not accept the explanation of assessee regarding the balance amount for purchase of house property at Indore and accordingly added the amount of Rs. 1,50,300 to the total income of the assessee.
3. On appeal the CIT(A) deleted the addition on the ground that Shri Bhagwan Das i.e. the creditor appeared before the AO and in his statement he has admitted the loan given to the assessee. He has also relied upon the decision of the Hon’ble jurisdictional High Court in the case of CIT v. Metachem Industries .
4. The Revenue aggrieved with the order of CIT(A) filed appeal before the Tribunal.
5. The learned AM agreed with the order of CIT(A) while learned JM reversed the order of CIT(A) and sustained the addition of Rs. 1.50 lacs made by the AO.
6. At the time of hearing before me learned Departmental Representative heavily relied upon the order of the AO as well as the JM and he stated that the onus to prove the identity, creditworthiness and the genuineness of the transaction is upon the assessee. The assessee has not been able to discharge the onus and therefore, the addition was rightly made by the AO and rightly sustained by learned JM. He stated that the order of learned JM may be sustained.
7. On the other hand the learned Counsel for the assessee has supported the order of learned CIT(A) as well as learned AM. He stated that the creditor, namely, Shri Bhagwan Das, appeared before the AO and in his statement has admitted the loan given to the assessee. He has also explained the source of such loan. He further submitted that the creditor initially had deposited the money for purchase of Maruti car. When he cancelled the booking the amount which was refundable to Shri Bhagwan Das was directly paid by M/s Patel Motors to Shri Brajesh Kumar Kasliwal, the seller of the house property to the assessee. Thus the immediate source of the money is explained by the assessee. The assessee is not required to explain the source of the sources. In support of the contention he relied upon the following decisions:
(1) Anil Rice Mills v. CIT ;
(2) Murlidhar Lahorimal v. CIT .
8. I have carefully considered the arguments of both the sides and perused the material placed before me. I find that learned AM has recorded the following finding:
We have carefully considered the rival submission and perused the materials on record. We find that the amount has been advanced to the assessee by Shri Bhagwan Das through Patel Mortors, Indore. The payment has been received through account payee cheque. Shri Bhagwandas has confirmed it through affidavit. The immediate source of the money advanced to the assessee is covered by the withdrawal of the amount from M/s Patel Motors. The assessee is not required to prove the source of the sources. We, therefore, did not find any illegality or infirmity in the order of the CIT(A) in deleting the addition of Rs. 1.50 lacs and accordingly we confirm the order of the CIT(A) and thus this ground is also dismissed.
9. After considering the arguments of both the sides, facts of the case and legal position, I entirely agree with the above finding of learned AM. The creditor, namely, Shri Bhagwan Das had deposited a sum of Rs. 3 lacs with M/s Patel Motors for purchase of Maruti car. The source of such deposit was Rs. 1.50 lacs withdrawn by him from M/s Satbhaiya Agro Industries and remaining Rs. 1.50 lacs was out of his own savings. The booking of Maruti car was cancelled by Shri Bhagwan Das and a sum of Rs. 3,02,038 (including interest) was due to Shri Bhagwan Das. The assessee was in negotiation for purchase of property from Shri Brajesh Kumar Kasliwal. He therefore, requested for loan to Shri Bhagwan Das and on the request of the assessee, Shri Bhagwan Das instructed M/s Patel Motors to issue cheque to Shri Brajesh Kumar Kasliwal. Thus the initial deposit by Shri Bhagwan Das was for purchase of Maruti car with M/s Patel Motors. The amount borrowed by the assessee was the sum realized by Shri Bhagwan Das on the cancellation of the Maruti car. Thus the source of the money borrowed by the assessee has been properly explained. While taking this view I derive support from the decision of the Hon’ble Allahabad High Court in the case of Ami Rice Mills v. CIT (supra) as well as Hon’ble Gujarat High Court in the case of Murlidhar Lahorimal v. CIT (supra). Their Lordships of Hon’ble Allahabad High Court as well as Hon’ble Gujarat High Court have held that the assessee cannot be asked to prove the source of the source. Shri Bhagwan Das appeared before the AO and in his statement affirmed having advanced the money to the assessee. He is around 81 years of age and has agricultural income. The amount has been paid by M/s Patel Motors by cheque directly to Shri Brajesh Kumar Kasliwal. In view of above facts, the identity of the creditor, namely Shri Bhagwan Das, his creditworthiness, as well as the genuineness of transaction are duly proved.
10. In view of the above, I am of the opinion that the learned AM was justified in confirming the order of learned CIT(A). The matter will now go to the Division Bench for passing the order as per majority view.
C.D. Rao, A.M.
11. Hon’ble Vice President (KZ) Shri G.D. Agrawal being Third Member after hearing the parties has concurred with the view expressed by the learned AM. In consonance with the majority view, the appeal of the Department stands dismissed.
