M/S Siddharth Export v. The Assistant Commissioner of Income Tax

1. Exemption allowed, subject to all just exceptions.

2. The application stands disposed of. ITA 917/2019 & CM. APPLs. 46334-46335/2019

3. The present appeal under Section 260A of the Income Tax Act, 1961 (hereinafter the Act) is directed against the common order dated 26.06.2018 (hereinafter the impugned order) passed by the Income Tax Appellate 2019:DHC:5558-DB Tribunal in Appeal (s) No. 7700/2017 for AY-2013-14 and 7752/2017 for AY-2014-15.

4. The appeal is accompanied with an application [CM. APPL. 46334/2019] seeking condonation of gross delay of 445 days in filing the appeal. The grounds and reasons stated in the application seeking condonation of delay are completely bereft of merits. This delay is sought to be justified on account of filing of a misconceived writ petition WP (C) No. 193/2019 to assail the impugned order of ITAT. The said petition was dismissed as withdrawn vide order dated 25.07.2019, whereby, Petitioner was permitted to withdraw the writ petition with liberty to file a statutory appeal accompanied by an application for condonation of delay to challenge the impugned order. The application offers no cogent explanation for the delay in approaching the court, except for narrating the fact of filing of the above noted writ petition, which does not help the petitioner under any circumstances. The writ itself was filed beyond the statutory period of filing the appeal and moreover, the same was withdrawn on the first day of listing and the Appellant cannot vindicate the delay for the above reason. The application thus deserves to be dismissed as it does not disclose any cogent ground or reason for seeking condonation. Nevertheless, we have also heard the counsels on the merits of the case and find no ground to entertain the present appeal for the reasons stated hereinafter.

5. Common facts arising out of the two appeals before the ITAT [ ITA NO. 7700/DEL/2017 & ITA No. 7752/DEL/2017] are that the Appellant - M/s Siddharth Export is a partnership firm, engaged in manufacturing and trading (export) of engineering and automobile spare parts since 2002. The assessee filed its income tax return declaring income of Rs. 44,36,580/- for the AY 2013-14 and Rs. 39,94,420/- for the AY 2014-15.

6. In respect of AY 2013-14, assessee received an unsecured loan of Rs. 26 lacs through three cheques as per details mentioned below:

┌────────────────────────────────────────────────────────────────────────────┐
│

┌──────────────────────────────────────────────────────────────────────────────┐
│  Sl. No.       Chq. No.      Date           Amount        Bank A/C           │
├──────────────────────────────────────────────────────────────────────────────┤
│  1.            649341        31.05.2013     Rs.           Yes Bank, Nagpur   │
│                                             10,00,000/-   A/c          No.   │
│                                                           002890400000072    │
│  2.            649342        05.06.2013     Rs.           Yes Bank, Nagpur   │
│                                             15,00,000/-   A/c          No.   │
│                                                           002890400000072    │
│  3.            649344        12.07.2013     Rs.           Yes Bank, Nagpur   │
│                                             15,00,000/-   A/c          No.   │
│                                                           002890400000072    │
│  4.            649345        12.07.2013     Rs.           Yes Bank, Nagpur   │
│                                             25,00,000/-   A/c          No.   │
│                                                           002890400000072    │
│  5.            649346        23.09.2013     Rs.           Yes Bank, Nagpur   │
│                                             15,00,000/-   A/c          No.   │
│                                                           002890400000072    │
│  6.            649357        05.02.2014     Rs.           Yes Bank, Nagpur   │
│                                             7,00,000/-    A/c          No.   │
│                                                           002890400000072    │
└──────────────────────────────────────────────────────────────────────────────┘

11. The principles which emerge where sums of money are credited as Share Capital/Premium are: i. The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors, and credit-worthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus. ii. The Assessing Officer is duty bound to investigate the creditworthiness of the creditor/ subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of name-lenders. iii. If the enquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit-worthiness, then the genuineness of the transaction would not be established. In such a case, the assessee would not have discharged the primary onus contemplated by Section 68 of the Act.”

20. A Division Bench of the Bombay High Court in the case of Orient Trading Co. Ltd vs Commissioner of Income Tax (Central), Calcutta, 1962 SCC OnLine Bom 175 held as under: “When cash credits appear in the accounts of an assessee, whether in his own name or in the name of third parties, the Income-tax Officer is entitled to satisfy himself as to the true nature and source of the amounts entered therein, and if after investigation or inquiry he is satisfied that there is no satisfactory explanation as to the said entries, he would be entitled to regard them as representing the undisclosed income of the assessee. When these credit entries stand in the name of the assessee himself, the burden is undoubtedly on him to prove satisfactorily the nature and source of these entries and to show that they do not constitute a part of his business income liable to tax. When, however, entries stand not in the assessee's own name, but in the name of third parties, there has been some divergence of opinion expressed as to the question of the burden of proof. In Radhakrishna Behari Lal v. Commissioner of Income-tax, the Patna High Court held that though when the cash credits stood in the assessee's name the burden of proof was upon him to show that the receipts were not of an income nature, the position was different in regard to sums which were shown in the assessee's books in the names of third parties. In the latter kind of cases the onus of proof was not upon the assessee to show the sources or nature of the amount of the cash credit, but the onus shifted on to the department to show by some material that the amount standing in the name of the third party did not belong to him but belonged to the assessee. This view was not accepted by the Andhra Pradesh High Court, where a contrary view was taken. In M. M. A. K. Mohideen Thamby & Co. v. Commissioner of Income-tax, that court held, dissenting from the Patna view, that with regard to the credit entries in the names of partners as well as credit entries in the names of third parties appearing in the accounts of the partnership, the burden is on the assessee to explain the entries and show positively their nature and sources. In the absence of a satisfactory explanation, it is open to the department to infer that the moneys belonged to the assessee and represented his suppressed income. The same view was also taken in another case of the same High Court in Raghava Reddi v. Commissioner of Income-tax. We are ourselves in agreement with the view taken by the Andhra Pradesh High Court in Raghava Reddi v. Commissioner of Income-tax and Mohideen Thamby & Co. v. Commissioner of Income-tax. We agree respectfully with the view expressed by Subba Rao C.J. (as he then was) in Raghava Reddi v. Commissioner of Income-tax, at page 948 of the report, which was as follows: "We do not think that the question of burden of proof can be made to depend exclusively upon the fact of a credit entry in the name of the assessee or in the name of a third party. In either case, the burden lies upon the assessee to explain the credit entry, though the onus might shift to the Income-tax Officer under certain circumstances. Otherwise a clever assessee can always throw the burden of proof on the income-tax authorities by making a credit entry in the name of a third party either real or pseudonymous."

21. The plea of the Appellant that on filing of the bank statement and PAN details, the burden stood discharged or that it shifted on to the revenue is tenuous and is not correct. The credit worthiness of the transaction cannot be said to be proved merely on the strength of the bank statement or identity of the creditor. The assessee did not produce the income tax return of the lender or any confirmation. The purported confirmation has been found to be only a copy of unsigned account of the creditor. The source of funds has also not been explained. The judgment relied upon by the Appellant - Mod Creations Pvt. Ltd. (supra) is distinguishable on facts and circumstances, as in the said case, there was sufficient material on record including the tax returns, an affidavit stating the source of funds and an affidavit confirming that monies have been advanced to the assessee to prove the credit worthiness of the creditors and the genuineness of the transaction. In the current case, however, the assessee has failed to produce the tax returns of the creditor or any other material to show the creditworthiness. Thus, the credit worthiness and the genuineness of the transaction cannot be said to have been proved so as to shift the onus on the revenue. The stand of the Appellant that since the alleged transaction is made through normal banking channels, it is sufficient to prove the genuineness of the transaction and the credit worthiness of the creditor, cannot be accepted. The identity as well as the credit worthiness of the creditor must be proved. The credit reflected in the bank account of Ms. Jasmine Kochhar Kapoor, is not explained, as a result her credit worthiness is not proved.

22. In view of the above facts, we do not find any infirmity in the impugned order. The findings of fact are against the Appellant, as held concurrently by all the tax authorities. The Appellant has not raised any question of law much less substantial question of law. The present appeal is dismissed both on the ground of limitation as well as on merits as no question of law arises for our consideration under Section 260A of the Act. The pending applications, if any, are also disposed of.

SANJEEV NARULA, J VIPIN SANGHI, J OCTOBER 24, 2019 nk