IT: Where identity of parties and their creditworthiness is established and unsecured loan was made through account payee cheque, same was to be accepted
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[2013] 36 taxmann.com 429 (Madhya Pradesh)
HIGH COURT OF MADHYA PRADESH
Commissioner of Income-tax-II, Indore
v.
Vaibhav Cotton (P.) Ltd.*
SHANTANU KEMKAR AND PRAKASH SHRIVASTAVA, JJ.
IT APPEAL NO. 16 OF 2012†
AUGUST 28, 2012
Section 68 of the Income-tax Act, 1961 - Cash credits [Loans] - Assessment year 2007-08 - Tribunal on its own independent analysis of matter had reached to factual conclusion about genuineness of unsecured loan transaction and in this process Tribunal had taken note of fact that detailed account of concerned parties were filed by assessee and entries in account were through account payee cheques, source of deposit in bank was not in dispute and identity of parties was established and also creditworthiness of creditors was established - Whether since finding which had been recorded by Tribunal was essentially a finding of fact and since revenue had failed to point out any error or perversity in said finding of fact, order of Tribunal was to be upheld - Held, yes [Paras 4 & 5] [In favour of assessee]
FACTS
| ■ | The Assessing Officer treated an amount of Rs. 3,33,09,596 shown as unsecured loans by the assessee to be non-genuine and creditworthiness of creditor was said to be not proved. Accordingly, the amount of loan was added in the assessee's income. | |
| ■ | In appeal, the Commissioner (Appeals) found that the source of entire funds was established from books of account of creditors and addition made by the Assessing Officer was unsustainable and accordingly, deleted the same. | |
| ■ | The Tribunal dismissed the revenue's appeal by recording that the assessee and creditor had explained each and every entry of inflow of money in bank account and their respective utilization, payment was through A/c payee cheque, the source of each entry was fully proved, identity of the creditors was proved and genuineness of the transaction is held to be proved. Therefore, the Tribunal affirmed the order of the Commissioner (Appeals). | |
| ■ | On appeal : |
HELD
| ■ | On the perusal of the orders passed by the Tribunal, it is found that the Tribunal has elaborately dealt with this issue. The Tribunal by appreciating the material on record has recorded finding of fact to the effect that the genuineness of the transaction is proved. While reaching to the said conclusion, the Tribunal has taken note of the reasoning of the Assessing Officer as well as Commissioner (Appeals) and has also considered the other material on record. The Tribunal on its own independent analysis of the matter has reached to the factual conclusion about the genuineness of the transaction and in this process the Tribunal has taken note of the fact that the detailed account of the concerned parties were filed by the assessee and the entries in the account were through account payee cheques, the source of deposit in the bank was not in dispute and the identity of the parties was established and also that the creditworthiness of the creditors was also established. | |
| ■ | The finding which has been recorded by the Tribunal is essentially a finding of fact. In view of the Division Bench judgment of this Court in the matter of Gyan Chand Anil Kumar v. ITO [2001] 251 ITR 559/[2002] 120 Taxman 842 such a funding is a pure finding of fact which does not involve substantial question of law. The revenue has failed to point out any error or perversity in the said finding of fact. [Para 5] | |
| ■ | Thus, the appeal does not involve any substantial question of law requiring consideration by this Court which is accordingly dismissed. [Para 6] |
CASES REFERRED TO
Gyan Chand Anil Kumar v. ITO [2001] 251 ITR 559/[2002] 120 Taxman 842 (MP) (para 5).
R.L. Jain and Ms. V. Mandlik for the Appellant.
ORDER
Prakash Shrivastava, J. - This appeal under Section 260-A of the Income Tax Act, 1961 is directed against the order of the Income Tax Appellate Tribunal, Bench Indore in ITA No.480/Ind/2010 dated 30th October 2011 for the assessment year 2007-2008.
2. For the relevant assessment year, the assessing officer had treated an amount of 3,33,09,596/- shown as unsecured loans by the assessee to be non genuine and creditworthiness of the creditors was said to be not proved and accordingly the amount of loan was added in the assessee's income. In appeal, the CIT (Appeals) found that the source of entire fund was established from the books of accounts of creditors and it was found that the addition made by the assessing officer in this head was unsustainable and accordingly the same was deleted. The revenue's appeal has been dismissed by the Tribunal by recording the finding that the assessee and creditors had explained each and every entry of inflow of money in bank account and their respective utilisation, the payments were through account payee cheque, the source of each entry was fully proved, the identity of the creditors was proved and the genuineness of the transaction is held to be proved. Accordingly the tribunal affirmed the order of the CIT (Appeals).
3. Learned counsel appearing for the appellant submitted that the CIT (Appeals) as well as ITAT were not justified in deleting the addition made by the assessing officer on this account since creditworthiness of the concerned parties was not proved.
4. Having heard the learned counsel for appellant and on the perusal of the orders passed by the Tribunal, it is found that the Tribunal has elaborately dealt with this issue. The Tribunal by appreciating the material on record has recorded finding of fact to the effect that the genuineness of the transaction is proved. While reaching to the said conclusion, the Tribunal has taken note of the reasoning of the assessing officer as well as CIT (Appeals) and has also considered the other material on record. The Tribunal on its own independent analysis of the matter has reached to the factual conclusion about the genuineness of the transaction and in this process the Tribunal has taken note of the fact that the detailed account of the concerned parties were filed by the assessee and the entries in the account were through account payee cheques, the source of deposit in the bank was not in dispute and the identity of the parties was established and also that the creditworthiness of the creditors was also established. The Tribunal in this regard has held as under:-
"11. We have considered the rival contentions, carefully gone through the orders of the authorities below and also decisions relied on by lower authorities in their respective orders as well as relied on by the Id. Authorized Representative and Id. CIT DR during the course of hearing before us in the context of factual matrix of the case. From the record, we found that assessee company is carrying on business in cotton and brokerage of cotton. The loan was received from the close relatives/friends of the Director of the assessee company. To prove the genuineness of credit balance in the account of Saurabh Cotton and Sharda Agencies, the assessee had filed copy of accounts and Bank account of creditors. The assessee and creditor have explained each and every entry of inflow of money in the bank account and their respective utilization. The assessee has also filed detailed copy of account of M/s. Karthik Trading Company and M/s. Rai Enterprises from whom these creditors received money in their Bank account. The assessee company has filed detailed copies of accounts of all the four parties with the assessee company alongwith the copy of account of the assessee company in their books and so also copies of their bank accounts with narration against each entry.
12. After going through all these accounts, we found that entries in the account of all these four parties and those in the books of the assessee were through account payee cheques. All these entries were clearly reflecting rotation of funds from one concern to another and that too by account payee cheques. Source of deposit in bank was not in doubt. All these concerns are regular income tax payers and have filed confirmations in respect of their accounts with the assessee company. The source of each of these entries were fully proved. The statement of the creditors was also recorded by the Assessing Officer by calling them u/s 131 wherein they have owned the funds given to the assessee company, their relation with the Director of the assessee company and the source of funds in their respective Bank account. The AO in its order itself has observed inflow of funds in respective dates in the Bank account and out flow of the same out of the sufficient balance in their Bank account. Proprietor of both the concerns Shri Hashtimal Jain and Shri Rajendra Kumar Chhajed in their statement accepted the amount of advances given by them to the assessee. There is no dispute to the well settled legal proposition that in case of cash credit not only identity and genuineness of the loan transaction is required to be proved but at the very same time, creditworthiness of loan creditor is equally important to be proved. With regard to the identity of the creditors, we found that both the creditors are income tax payers and copies of their assessment orders for the past three years have been filed to prove their identity and they also personally appeared before the AO and their statement was also recorded. The genuineness of the transaction stand proved by the personal appearance of the creditor and their acceptance in respect of their credits appearing in the books of the assessee and the loan was given out of their Bank account. The creditworthiness of creditors are proved by their regular books of account which indicated that all entries in their accounts have travelled through bank account through account payee cheques. The respective deposit in the Bank account was also verified by the Assessing Officer. By filing various details, these creditors have proved their capacity to advance these loans. The detailed finding recorded by the Id. CIT(A) has not been controverted by the Department by bringing any positive material on record, which clearly establishes the fulfilment of all the three ingredients of cash credit. Accordingly, no interference is required in this part of the CIT(A)'s order".
5. The aforesaid finding which has been recorded by the Tribunal is essentially a finding of fact. In view of the Division Bench judgment of this Court in the matter of Gyan Chand Anil Kumar v. ITO [2001] 251 ITR 559/[2002] 120 Taxman 842 such a finding is a pure finding of fact which does not involve substantial question of law. Learned counsel for appellant has failed to point out any error or perversity in the said finding of fact.
6. Thus, the appeal does not involve any substantial questions of law requiring consideration by this Court which is accordingly dismissed.
Regards
Prarthana Jalan
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