TXA NO.18 & 19-2014
\nIN THE HIGH COURT OF BOMBAY AT GOA
\nTAX APPEAL NO. 18 OF 2014
\nThe Commissioner of Income Tax
\nKarnataka (Central), Bangalore. … Appellant
\nVersus
\nSadiq Sheikh,
\nFR5, 4th floor, Souza Towers,
\nOpp. Municipal Garden,
\nPanaji-Goa.
\nPAN: AMFPS2073J
\n& major in age … Respondent
\nMs. Susan Linhares, Advocate for the Appellant.
\nMr. S. S. Kantak, Senior Advocate along with Mr. Nikhil Pai, Advocate
\nfor the Respondent.
\nAND
\nTAX APPEAL NO. 19 OF 2014
\nThe Commissioner of Income Tax
\nKarnataka (Central),
\nBangalore. … Appellant
\nVersus
\nSadia Sheikh,
\nFR5, 4th floor, Souza Towers,
\nOpp. Municipal Garden,
\nPanaji-Goa.
\nPAN: AKQPS9076A
\n& major in age … Respondent
\n2 TXA NO.18 & 19-2014
\nMs. Susan Linhares, Advocate for the Appellant.
\nMr. S. S. Kantak, Senior Advocate along with Mr. Nikhil Pai, Advocate
\nfor the Respondent.
\nCoram:- M. S. SONAK &
\nDAMA SESHADRI NAIDU, JJ .
\nReserved on:- 29th September , 2020
\nPronounced on:- 14 th October, 2020
\nJUDGMENT (Per M. S. Sonak, J.):
\nHeard Ms. Susan Linhares, for the appellants and Mr. Kantak,
\nlearned Senior Advocate along with Mr. Nikhil Pai for the respondents.
\n2. The learned counsel state that both these appeals may be
\ndisposed of by a common judgment and order since, the issues
\ninvolved in both these appeals are virtually identical and also the
\nsubstantial questions of law as framed, are identical.
\n3. Tax Appeals were admitted on 25.09.2014 on the following
\nsubstantial questions of law:-
\n(A) Whether on the facts and circumstances of the case, the
\nTribunal was correct in law and not perverse in its findings in
\ndeleting the amount of Rs.11,26,50,112\/- made by the Assessing
\nAuthority towards unaccounted cash receipts?
\n(B) Whether on the facts and circumstances of the case, the
\nTribunal was correct in law and not perverse in its findings
\n3 TXA NO.18 & 19-2014
\ndeleting the amount of Rs.8,49,49,888\/- made by the Assessing
\nAuthority towards unaccounted cash receipts?
\n4. The assessees in these appeals are individuals. They are in fact,
\nspouses of one another. Since they were found to be eligible for the
\nbenefits under Section 5A of the Income Tax Act, 1961 (said Act),
\n50% of their income was brought to tax in the hands of the spouse.
\nHence, there were two separate but identical assessment orders and
\nconsequently, there are these two appeals, which can as well be
\nconsidered and disposed of by a common judgment and order.
\n5. The assessees filed their return of income declaring total income
\nof `7,36,911\/- for the year previous to the relevant assessment year.
\n6. Thereafter, on 25.02.2010, a search was conducted under
\nSection 132 of the said Act in the residential premises of the assessees
\nat Dona Paula, Goa. The case was then centralized vide the
\nCommissioner’s order dated 16.07.2010 and notices dated 20.01.2011
\nunder Section 153(A) of the said Act were served upon the assessees on
\n25.01.2011 calling for their returns for the relevant assessment years.
\n7. After reminders, the assessees filed their returns, again declaring
\ntotal income of `7,36,910\/- and agricultural income of `30,000\/-.
\n8. Notices were issued under Section 142(2) and 143(1) of the said
\nAct to the assessees. The assessing officer (AO) vide order dated
\n4 TXA NO.18 & 19-2014
\n29.12.2011 finalized the assessment by adding an amount of
\n`19,76,00,000\/- on account of the unaccounted cash receipts from
\nShri N. Suryanarayana and `30,00,000\/- on account of unexplained
\ninvestments by the assessees.
\n9. The assessees, aggrieved by the aforesaid additions to the
\ndeclared income, appealed the assessment order dated 29.12.2011 to
\nthe Commissioner (Appeals), who partly allowed the assessees\u2019 appeal.
\nFrom out of the addition of `19.76 crores, addition to the extent of
\n`8,49,49,888\/- was sustained. However, the addition to the extent of
\n`11.76 crores was deleted. Similarly, the Commissioner (Appeals),
\nsustained the addition of `30 lakhs on account of unexplained
\ninvestments by the assessees. This is evident from the order dated
\n27.03.2013 made by the Commissioner (Appeals).
\n10. Both the assessees as well as the Revenue appealed to the Income
\nTax Appellate Tribunal (ITAT) against the order dated 27.03.2013
\nmade by the Commissioner (Appeals). The ITAT, by its impugned
\norder dated 31.07.2013, allowed the assessees\u2019 appeal and dismissed the
\nappeal instituted by the Revenue. Hence, the present appeals on the
\naforesaid substantial questions of law.
\n11. Ms. Linhares, the learned counsel for the Revenue submits that
\nthe ITAT has misconstrued the provisions of Section 68 of the said Act
\nand the finding recorded by the ITAT reversing the concurrent
\n5 TXA NO.18 & 19-2014
\nfindings by the assessing officer and the Commissioner (Appeals) is
\nvitiated by perversity. She, therefore, submits that the two substantial
\nquestions of law as raised be answered in favour of the Revenue and
\nagainst the assessees.
\n12. Ms. Linhares submits that in this case, the ITAT has only taken
\ninto consideration the circumstance that the amount of `8,49,49,888\/-
\nwas credited by M\/s. Prasad Properties into the accounts of the
\nassessees by cheque and further one of the partners of M\/s. Prasad
\nProperties had owned up to making such payment to the assessees by
\nway of loan. Ms. Linhares submits that there is overwhelming evidence
\non record which establishes beyond reasonable doubt that the firm
\nM\/s. Prasad Properties could never have made such a huge payment to
\nthe assessees and the partners of this firm were virtually persons of
\nstraw. She points out that this firm was never registered and was
\ndissolved within a period of hardly one year from its alleged
\nincorporation. She pointed out that this firm had neither any bank
\naccount nor permanent account number (PAN) issued to it.
\n13. Ms. Linhares submits that the explanation about the huge
\namount of `8.49 crores being carried in cash from Chennai to Goa was
\ntoo fantastic to deserve any credit. She pointed out that there is no
\nexplanation as to why this cash was allegedly carried by road for 1046
\nkms. and thereafter deposited in Goa. She pointed out that it is quite
\nevident that all these transactions could not have been carried out in
\n6 TXA NO.18 & 19-2014
\nthe normal course of business and therefore, both the assessing officer
\nand Commissioner (Appeals), quite correctly held that the explanation
\noffered by the assessees was far from satisfactory.
\n14. Ms. Linhares submits that the ITAT by ignoring all this material
\nevidence has accepted the assessees\u2019 explanation and ordered the
\ndeletion of `8.49 crores added to the income of the assessees. She
\npointed out that the finding recorded by the ITAT is vitiated by
\nperversity and misconstruction of the provisions of Section 68 of the
\nsaid Act. She relies on CIT v. M\/s. Mussadilal Ram Bharose \u2013
\n1987(2) SCC 39 in support of her submissions.
\n15. Mr. Kantak, learned senior advocate for the assessees submits
\nthat once the assessees indicate the source from whom the amounts
\nwere received by cheque and further, such source confirms the
\npayment, the burden which the law casts upon the assessees is fully
\ndischarged. He submits that thereafter, onus shifts upon the Revenue
\nto establish that nevertheless, the amount represents an unexplained
\nincome of the assessees.
\n16. Mr. Kantak submits that in this case, both the assessing officer
\nand Commissioner (Appeals) had raised certain doubts about the
\nsource from which M\/s. Prasad Properties may have arranged for the
\namount of `8.49 crores. He submits that the source of the source is not
\nat all relevant consideration in such matters. If at all, there are any
\n7 TXA NO.18 & 19-2014
\ndoubts about the source of the source, then, it is for the Revenue, to
\ntake out appropriate proceedings against the source and not against the
\nassessees in the present case. Mr. Kantak submits that this error on the
\npart of the assessing officer and Commissioner (Appeals) was quite
\ncorrectly set right by the ITAT relying upon the decisions in CIT v.
\nTania Investments P. Ltd. \u2013 322 ITR 394, CIT v. Daulat Ram
\nRawatmull \u2013 (1973) 3 SCC 133, Aravali Trading Co. v. ITO \u2013
\n187 Taxman.com 338 (Raj), Nemi Chand Kothari v. CIT \u2013 264
\nITR 254 (Gau) . Mr. Kantak, therefore, submits that no substantial
\nquestions of law as framed arise in this matter and both these appeals
\nbe therefore dismissed.
\n17. The rival contentions now fall for our determination.
\n18. At the outset, we may deal with the first substantial question of
\nlaw, which relates to the deletion of the amount of `11,26,50,112\/-
\ntowards unaccounted cash receipts. This will have to be answered
\nagainst the Revenue and in favour of the assessees by accepting the
\nreasoning of the Commissioner (Appeals) in his order dated
\n27.03.2013. The Commissioner (Appeals), has not held that this
\namount was accounted for by the assessees but the Commissioner
\n(Appeals) has held that no inferences need to be drawn about this
\namount simply because there is material on record that this amount
\nwas paid to M\/s. Good Earth Developers and M\/s. Raj Hospitality Pvt.
\nLtd. Therefore, the nature of such amounts can be very well assessed
\n8 TXA NO.18 & 19-2014
\nin the hands of said recipients and need not be assessed in the hands of
\nthe assessees.
\n19. Since, there is material on record, that this amount of `11.26
\ncrores or thereabouts was paid by the assessees to the aforesaid two
\nentities and since there is evidence on record that the aforesaid two
\nentities had admitted to the receipt of the said amount, the
\nCommissioner (Appeals), was quite right in taking the view that such
\namounts are best assessed in the hands of the two entities and not in
\nthe hands of the assessees.
\n20. Ms. Linhares was unable to satisfy us that there was any illegality
\nin the view taken or any perversity in the approach of the
\nCommissioner (Appeals) in so far as the treatment of this amount of
\n`11.26 crores was concerned. Accordingly, the first substantial question
\nof law needs to be answered against the Revenue and in favour of the
\nassessees. However, by clarifying that such an answer ought not to be
\nconstrued to mean that the assessees have explained satisfactorily the
\nnature and source of this amount. This question is answered against
\nthe Revenue only because we agree with the view taken by the
\nCommissioner (Appeals) that it is only appropriate that this amount is
\nassessed in the hands of the two recipient entities as aforesaid and not
\nthe assessees.
\n21. The answer to the second substantial question of law depends
\n9 TXA NO.18 & 19-2014
\nupon the application of the provisions of Section 68 of the said Act to
\nthe facts and circumstances as borne out of the record in this case.
\n22. Section 68 of the said Act, inter alia provides that where any sum
\nis found credited in the books of assessees maintained for any previous
\nyear, and the assessees offer no explanation about nature and source
\nthereof or explanation offered by him is, not found to be satisfactory,
\nthe sum so credited may be charged to income tax as the income of the
\nassessees of that previous year. Two provisos are dealing with the share
\napplication money and venture capital fund, with which we are not
\nconcerned in these appeals.
\n23. The record, in this case, indicates that hardly any explanation as
\nsuch was offered by the assessees when called upon to explain the
\ntransactions leading to the transfer of this huge amount of `8.49 crores
\ninto their bank accounts on 10.03.2007. Even the source was not
\nindicated by the assesses but the same was unearthed by the Revenue
\nby probing the bank accounts and the money trail.
\n24. The assessees neither cooperated nor were they candid. It is only
\nas the probe deepened, the assessees and their alleged sources began to
\noffer some halfhearted explanations, which, as found by the AO and
\nthe Commissioner (Appeals) were far from satisfactory.
\n25. The ITAT, in its impugned order dated 31.07.2013, has,
\n10 TXA NO.18 & 19-2014
\nhowever, purported to accept the assessee’s’ so-called explanation
\nrelying almost entirely upon the following three circumstances:-
\n(a) That this amount of `8.49 crores was transferred into the
\nassessees’ bank account at Development Credit Bank, Panaji
\nGoa on 10.03.2007. The ITAT regards this as a transfer
\nthrough a “normal banking channel”.
\n(b) That this amount of `8.49 crores was transferred from out of
\nthe bank accounts of Siraj Sheikh (assessees’ brother\/brother in
\nlaw) and Vijay Kumar Rao (assessees’ close friend) held in the
\nsame bank. The ITAT has held that the identity of the source
\nwas thus established.
\n(c) That the identified sources have confirmed having made
\nthese payments to the assessees.
\n26. Based almost entirely upon the aforesaid three circumstances and
\nvirtually ignoring all other circumstances emanating from the record,
\nthe ITAT, in its impugned order dated 31.07.2013, has rather abruptly
\nconcluded that “…….therefore, in our opinion, the requirement u\/s 68
\nis proved beyond any doubt by the Assessee. Therefore we are of the
\nview that no addition is required\/sustainable” . The ITAT, by reference
\nto the rulings in Tania Investment P. Ltd. (supra), Aravali Trading Co.
\n(supra), and Nemi Chand Kothari (supra) , has held that if the identity
\nof the creditor is established and the monies are received through
\nbanking channel, then, the assessees are not required to prove the
\nsource of the source in such matters.
\n27. According to us, the ITAT, in this case, has grievously erred both
\n11 TXA NO.18 & 19-2014
\non facts as well as in law, in interfering with the well-reasoned analysis
\nreflected in the orders of the AO and Commissioner (Appeals) in these
\nmatters.
\n28. The three circumstances relied upon by the ITAT in the
\nimpugned judgment may not be irrelevant circumstances, But they
\nwere certainly not the only circumstances on basis of which and by
\nignoring other numerous circumstances, the ITAT could have abruptly
\nconcluded that the assesses had proved the so-called explanation
\nbeyond the reasonable doubt for Section 68 of the said Act.
\n29. In Oceanic Products Exporting Co. v. CIT \u2013 241 ITR 497
\n(Ker) it is held that after the enactment of Section 68, the burden is
\nplaced on the assessees to prove a credit appearing in its books of
\naccounts. That burden has to be discharged with positive material.
\nWhen it is contended that a person had advanced money or had given
\na loan, it has to be established that the person was not a man of straw
\nand had the capacity to give the money.
\n30. In CIT v. Bikram Singh \u2013 399 ITR 407 , it is held that each of
\nthe three conditions i.e. identity of the creditor, capacity of the
\ncreditor, and genuineness of the transaction had to be fulfilled
\ncumulatively. Merely because the transactions were through banking
\nchannels, it cannot be said that such transactions were genuine when
\nthe assessees were not in a position to show the credit-worthiness of the
\n12 TXA NO.18 & 19-2014
\ncreditors, there was no question of accepting the explanation of the
\nassessees.
\n31. In CIT v. P. Mohanakala \u2013 291 ITR 278 (SC) , it is held that
\nthe mere furnishing of particulars or the mere fact of payment by an
\naccount payee cheque or mere submissions of a confirmatory letter by
\nthe creditor, is, by itself, not enough to shift the onus on the Revenue.
\n32. To the same effect are the observations in Yashpal Goel v. CIT
\n\u2013 310 ITR 75 and Mangilal Jain v. CIT \u2013 315 ITR 105, CIT v.
\nUnited \u2013 187 ITR 596 .
\n33. Even in Tania Investments P. Ltd. (supra) upon which reliance
\nwas placed by the ITAT and by Mr. Kantak before us, this court has
\ntacitly accepted the legal position that in case of cash credit entries in
\nthe books of account, the assessee has to establish (i) identity of the
\nparty; (ii) capacity, and (iii) the genuineness of the transaction. In the
\nsaid case, the assessee had established the identity and perhaps the
\ngenuineness of the transaction. On the aspect of ‘capacity’, this court
\nagreed with the finding of the ITAT in the said case, that books of
\naccount of the said party were very much available with the AO. Such
\nbooks of account itself would indicate the capacity of the party to
\nadvance loans. Therefore, without examining such books of account
\nthe AO could not have rejected the assessees’ explanation.
\n13 TXA NO.18 & 19-2014
\n34. Tania Investment P. Limited (supra) is not an authority for the
\nomnibus proposition relied upon by the ITAT and Mr. Kantak. In fact,
\neven this decision accepts that to discharge the burden which Section
\n68 of the said Act casts upon an assessee, the assessee has to not only
\nestablish the identity of the source but also establish at least prima facie
\nthe capacity of such source and the genuineness of the transaction.
\n35. In the present matters, the assessees quite reluctantly, may have
\nindicated, but not established the identity of the source. In any case,
\nthe assessees have failed to establish the capacity of the source and the
\ngenuineness of the transaction. Therefore it is clear that Tania
\nInvestments P. Limited (supra) was quite mechanically relied by the
\nITAT to accept the assessees’ so-called explanation in these matters. It
\nis possible that the ITAT merely went by the headnotes which, at
\ntimes, may not accurately represent the ratio of the decision.
\n36. Similarly, even Nemi Chand Kothari (supra) rendered by learned
\nSingle Judge of the Gauhati High Court has laid down the following
\npropositions, which, support the case of the Revenue than the
\nassessees:-
\n(i) The inquiry under Section 68 need not necessarily be
\nconfined by the Assessing Officer to the transactions, which took
\nplace between the assessee and his creditor, but that same may be
\nextended to the transactions, which may have taken place
\nbetween the creditor and his sub-creditor;
\n14 TXA NO.18 & 19-2014
\n(ii) There can be no doubt that to establish the receipt of cash
\ncredit as required under Section 68, the assessee must satisfy
\nthree important conditions, namely, (a)identity of the creditor,
\n(b) the genuineness of the transaction, and (c) financial capacity
\nof the person giving the cash credit to the assessee, i.e., the
\ncreditworthiness of the creditor;
\n(iii) Once, the assessee fulfills the aforesaid two conditions,
\nthereafter there is no further burden upon the assessee to
\nestablish the creditworthiness of the sub creditor or the creditor’s
\ncreditor. The onus then shifts upon the Revenue.
\n37. In the present matters, the assessees have failed to discharge the
\nburden of establishing the creditworthiness of the creditors i.e. Siraj
\nSheikh and Vijay Kumar Rao. The assessees have miserably failed to
\nestablish the genuineness of the transaction between said Siraj Sheikh
\nand Vijay Kumar Rao on one hand and the assessees on the other. In
\nfact, there is no reference to any transaction between these apparent
\nsources\/creditors and the assessees. These apparent sources at one stage
\nchose to call themselves as ‘conduits’ on behalf of M\/s. Prasad
\nProperties to the transaction projected in the agreement dated
\n22.12.2006. If the apparent sources i.e. Siraj Sheikh and Vijay Kumar
\nRao are mere conduits as claimed by them, then the creditor or the
\nsource is M\/s. Prasad Properties. The burden, therefore, lay upon the
\nassessees to establish the capacity of such source i.e. M\/s. Prasad
\n15 TXA NO.18 & 19-2014
\nProperties and the genuineness of the transactions with M\/s. Prasad
\nProperties. The assessees have failed miserably on both these aspects.
\n38. In Aravali Trading Co. (supra) , the firm of creditors who had
\nadvanced the amounts to the assessees had not only admitted to the
\nmaking of such advances but further, there was material on record to
\nestablish the creditworthiness of such creditors. Such creditors were
\nthemselves taxpayers who had been assessed for income tax for the
\nrelevant years. In these factual circumstances, the court held that the
\ncapacity of creditors had been established and therefore the burden was
\ndischarged. In contrast, in the present matters, neither is the capacity
\nof Siraj Sheikh and Vijay Kumar Rao nor M\/s. Prasad Properties
\nestablished, even prima facie. The genuineness of the transaction, if
\nany, is also far from established. The material on record suggests that
\nthere was no transaction worth the name and the agreement dated
\n22.12.2006 executed on stamp papers dated 03.04.2000 was nothing but
\na desperate attempt to create a facade. The ruling in Aravali Trading
\nCo (supra) can, therefore, in no manner, assist the assessees in these
\nmatters.
\n39. Even according to us, merely pointing out to a source and the
\nsource admitting that it has made the payments is not, sufficient to
\ndischarge the burden placed on the assessees by Section 68 of the said
\nAct. If this were so, then, it would be sufficient for assessees, to simply
\npersuade some credit- less person or entity to own up having made
\n16 TXA NO.18 & 19-2014
\nsuch huge payments and thereby evade payment of property tax on the
\nspecious plea that the Revenue, can always recover the tax from such
\ncredit- less source, if possible. To discharge the burden which Section
\n68 casts upon assessees, at least some plausible explanation is required
\nto be furnished, which must be backed by some reliable evidence. If
\nthe circumstances listed above are to be taken into consideration, then,
\nit can hardly be said that the assessees in the present case, has
\ndischarged the burden which was cast upon it by Section 68 of the said
\nAct.
\n40. Now coming to the perversity in the findings of fact that the
\nexplanation furnished by and on behalf of the assessees was acceptable,
\nreference is necessary to some of the circumstances which emanate
\nfrom the record in these matters. These circumstances were considered
\nin some details by the AO and Commissioner (Appeals). Even the
\nITAT, has not disbelieved any of these circumstances but the ITAT, has
\nsimply ignored or bypassed all such circumstances by observing that
\nthe Revenue was not entitled to inquire into the source of the source.
\nSome of such circumstances which emanate from the record are as
\nfollows:
\n(a) Mr. Siraj Sheikh (brother\/brother-in-law of the assesses)
\nand Mr. Vijay Kumar Rao, (a close friend of the assessees) are
\nnot at all clear about their precise role in this transaction
\ninvolving the amount of `8.49 crores;
\n17 TXA NO.18 & 19-2014
\n(b) At one stage, they refer to themselves as the source of this
\namount but at another stage, they claim to be mere \u201cconduits\u201d
\nor \u201cfacilitators\u201d for the transfer of this amount of `8.49 crores
\nfrom M\/s. Prasad Properties to the assessees;
\n(c) Mr. Siraj Sheikh and Mr. Vijay Kumar Rao have not
\nproduced even shred of evidence to establish even prima facie
\ntheir capacity to raise such a huge amount of `8.49 crores.
\nThere is no explanation as to how this amount became payable
\nto them by M\/s. Prasad Properties on 10.03.2007, when, on
\n03.04.2006 i.e. hardly a year ago, they had allegedly invested an
\namount of `10,000\/- each to the capital of the firm M\/s. Prasad
\nProperties;
\n(d) There is no clarity as to whether this amount of `8.49
\ncrores was a \u201cloan\u201d or an \u201cinvestment\u201d by M\/s. Prasad Properties
\nto or with the assessees;
\n(e) In either case, there is no explanation on the issue of
\nrepayment of this huge amount of `8.49 crores or about the
\nsecurities to secure repayment of such amount;
\n(f) The ledger accounts maintained by M\/s. Prasad Properties
\nat Chennai indicated that Mr. Siraj Sheikh made a cash
\nwithdrawal of `6,30,00,000\/- and Mr. Vijay Kumar Rao made a
\ncash withdrawal of `2,20,08,700\/-. However, Mr. Siraj Sheikh
\n18 TXA NO.18 & 19-2014
\ndeposited an amount of `2,19,50,000\/- in his bank account at
\nGoa and Mr. Vijay Kumar Rao deposited an amount of
\n`6,30,00,000\/- in his bank account at Goa. Both these amounts
\nwere deposited in cash. This discrepancy is never explained and
\nestablishes the extent to which the ledgers came to be fabricated;
\n(g) The firm M\/s. Prasad Properties was constituted on
\n03.04.2006 and dissolved on 29.03.2007 i.e. hardly within the
\nsame financial year;
\n(h) Though, the assessees would like the Revenue to believe
\nthat M\/s. Prasad Properties was dealing in crores of rupees, the
\nrecord establishes that M\/s. Prasad Properties had neither any
\nPAN card in its name nor did M\/s. Prasad Properties ever filed
\nany returns of income;
\n(i) That though the firm M\/s. Prasad Properties was supposed
\nto be dealing in transactions involving crores of rupees, it did
\nnot even have a bank account in its name i.e. at Chennai or
\nGoa;
\n(j) The assessees had relied upon only four documents in
\nsupport of their so-called explanation. The first was the
\nPartnership Deed dated 03.04.2006 which was typed on stamp
\npaper of 20.03.2002; second, the agreement dated 22.12.2006,
\nwhich was typed on stamp paper dated 03.04.2000; third, the
\n19 TXA NO.18 & 19-2014
\nagreement inter se between the partners dated 22.01.2007,
\nwhich was typed on stamp paper dated 20.03.2002; and fourth
\nthe Deed of Dissolution dated 29.03.2007 typed on stamp
\npaper dated 20.03.2002. Again, there is no explanation as to
\nwhy these documents were typed on stamp paper of the year
\n2000-2002 when the documents were allegedly prepared in
\n2006-07;
\n(k) Mr. A. Manohar Prasad claimed that `8.49 crores were
\ntransported in cash in a shooting vehicle by road for a distance
\nof over 1046 km. from Chennai to Goa. No details of the
\nvehicle number etc. were furnished;
\n(l) If ultimately, this amount of `8.49 crores was to be paid
\nthrough banking channels to the assessees, there is no
\nexplanation as to why this amount was not deposited in a bank
\nin Chennai and thereafter transferred into the bank account of
\nthe assessees;
\n(m) The explanation offered by Mr. A. Manohar Prasad was
\nthat Mr. Sadiq Sheikh had promised him a 40% discount in the
\nland transaction if payments were made in cash. This is not
\nsomething which is reflected in the agreement dated
\n22.12.2006, which is the document relied upon by the parties.
\nIn any case, if this was so, there is no explanation as to why the
\nhuge amount was deposited in the bank account of Mr. Siraj
\n20 TXA NO.18 & 19-2014
\nSheikh and Mr. Vijay Kumar Rao and thereafter transferred into
\nthe bank account of the assessees;
\n(n) There are absolutely no documents to secure this loan or
\ninvestment of `8.49 crores executed by the assessees in favour of
\nM\/s. Prasad Properties. The only lame explanation offered by
\nMr. A. Manohar Prasad was that Mr. Sadiq Sheikh had orally
\nconfirmed the repayment and had already shown him the
\nproperty belonging to his family.
\n(o) There are no documents to indicate whether interest, if
\nany, was payable on this loan of `8.49 crores. There are no
\ndocuments to indicate the return which M\/s. Prasad Properties
\nwas to expect on this huge investment of `8.49 crores.
\n41. If the ITAT were to have considered the aforesaid circumstances,
\nwhich, according to us, the ITAT was duty-bound to, we are quite sure
\nthat the ITAT would not have, nevertheless, found the so-called
\nexplanation of the assessees acceptable or in compliance with the
\nprovisions of Section 68 of the said Act. Rather we are inclined to
\nbelieve, that the ITAT too, would have found the so-called explanation
\nof the assessees too fantastic to deserve any acceptance. In Mussadilal
\nRam Bharose (supra), the Hon’ble Supreme Court has cautioned
\nagainst acceptance of any ‘fantastic’ or ‘unacceptable’ explanations in
\ntax matters.
\n21 TXA NO.18 & 19-2014
\n42. In Mussadilal Ram Bharose (supra) , the Hon’ble Supreme
\nCourt agreed with the view taken by the Full Bench of the Patna High
\nCourt in the case of CIT v. Nathulal Agarwala & Sons \u2013 153 ITR
\n292 (Pat), which reiterated that the onus to discharge the presumption
\nraised by the explanation to Section 271(1)(c) was on the assessees and
\nit was for him to prove that the difference between the returned
\nincome and the assessed income did not arise from any fraud or gross
\nor willful neglect on his part. The court should come to a clear
\nconclusion whether the assessees had discharged the onus or rebutted
\nthe presumptions against him. The Full Bench emphasized that as to
\nthe nature of the explanation to be rendered by the assessees, it was
\nplain on the principle that it was not the law that the moment any
\n‘fantastic or unacceptable’ explanation was given, the burden placed
\nupon him would be discharged and the presumption rebutted. After
\nspecifically adverting to these observations of the Full Bench, the
\nHon’ble Apex Court observed as follows:-
\n\u201cWe agree. We further agree that it is not the law that any and
\nevery explanation by the assessees must be accepted. It must be
\nan acceptable explanation, acceptable to a fact-finding body.\u201d
\n43. In this case as well the assessees want the fact-finding authorities
\nto believe that this amount of `8.49 crores credited into their accounts
\nwas indeed sourced from Siraj Sheikh and Vijay Kumar Rao and M\/s.
\nPrasad Properties. This explanation is purported to be backed by some
\n4 documents of absolutely dubious origins executed in the year 2006-
\n07 but on stamp papers of the year 2000-02 for which there is no
\n22 TXA NO.18 & 19-2014
\nexplanation whatsoever. This firm M\/s. Prasad Properties was allegedly
\nfounded on 03.04.2006 and stood dissolved on 29.03.2007 i.e. within
\na single financial year. This firm had neither any bank account nor any
\nPAN card. This firm has never filed any return of income nor paid any
\nincome tax. All this even though this firm and its partners including
\nSiraj Sheikh and Vijay Kumar Rao claim to have transacted the
\nbusiness of ‘crores of rupees’. Above all, this explanation furnished on
\nbehalf of the assessee involves transportation by road from Chennai to
\nGoa (a distance of over 1046 km.) a cash stash of `8.50 crores. This is
\nexactly what the Hon’ble Apex Court refers to as ‘any fantastic or
\nunacceptable explanation’. Yet, the ITAT, by virtually ignoring all these
\ncircumstances and further by applying incorrect legal principles, has
\nchosen to accept such fantastic and unacceptable explanation put forth,
\nnot by the assessees themselves but on behalf of the assessees.
\n44. In these matters, even if we were to accept that the assessees, by
\npointing out to Mr. Siraj Sheikh, Vijay Kumar Rao, and M\/s. Prasad
\nProperties had discharged the initial burden cast upon them by Section
\n68 of the said Act, we find that the onus which had shifted upon the
\nRevenue, has been appreciably discharged by the Revenue. This is not
\na case where the Revenue, halted its probe soon after the so-called
\nsources were indicated by the assessees. The Revenue, in these matters,
\nprobed further and unearthed quality material to establish that the socalled
\nsources completely lacked the capacity or credit-worthiness to
\nadvance such a huge amount of `8.49 crores to the assessees. Further,
\n23 TXA NO.18 & 19-2014
\nthe Revenue, in these matters, established that there was no
\ngenuineness in the transactions sought to be projected on behalf of the
\nassessees. Therefore, the Revenue, in these matters, has discharged the
\nonus, assuming that such onus had indeed shifted upon the revenue.
\nAgain, this is an aspect, which was ignored by the ITAT.
\n45. The finding recorded by the ITAT in these matters is based
\nupon the wholly erroneous view of law and perversity on account of
\nignoring completely, vital and relevant circumstances emanating from
\nthe record. Such a finding can be interfered in an appeal under
\nSection 260A of the said Act. The legal position is quite settled that
\nwhere the findings arrived at by the Tribunal are based upon the wholly
\nerroneous view of the law or are vitiated by perversity, a substantial
\nquestion of law indeed arises and is required to be addressed in an
\nappeal under Section 260A of the said Act. If at all, any authority is
\nnecessary for this proposition, then reference can be usefully made to
\nNemi Chand Kothari (supra) relied upon by the assessees themselves.
\nEven otherwise, this position is settled in several rulings including CIT
\nv. Antartica Investment Pvt. Ltd. – 262 ITR 493; Bhola Shankar Cold
\nStorage P. Ltd. v. Joint Commissioner of Income-Tax \u2013 270 ITR 487;
\nand Hindusthan Tea Trading Co. Ltd. vs Commissioner of Income Tax
\n\u2013 263 ITR 289.
\n46. Therefore, for all the aforesaid reasons, we answer the second
\nsubstantial question of law in favour of the Revenue and against the
\n24 TXA NO.18 & 19-2014
\nassessees. As a consequence, we reverse the order of ITAT and restore
\nthe order made by the Commissioner (Appeals) in these matters.
\n47. These appeals are accordingly disposed of by making the
\nfollowing order:
\n(a) The first substantial question of law is answered against the
\nRevenue and in favour of the assessees. However, we clarify that
\nsuch an answer is not to be construed as acceptance of assessees’
\nexplanation in respect of the amount of `11.26 crores. We have
\nonly agreed with the reasoning of the Commissioner (Appeals) in
\nhis order dated 27.03.2013 that it is only appropriate that this
\namount is assessed in the hands of the two recipients and not in
\nthe hands of the assessees;
\n(b) The second substantial question of law is answered in
\nfavour of the Revenue and against the assessees and the ITAT’s
\norder dated 31.07.2013 is set aside and the order of the
\nCommissioner (Appeals) dated 27.03.2013 is hereby restored,
\ninsofar as the addition of the amount of `8,49,49,888\/- to the
\nassessees’ income.
\n48. The two appeals are disposed of accordingly. There shall be no
\norder as to costs.
\nDAMA SESHADRI NAIDU, J. M. S. SONAK, J.<\/p>\n","protected":false},"excerpt":{"rendered":"
If the ITAT were to have considered the aforesaid circumstances, which, according to us, the ITAT was duty-bound to, we are quite sure that the ITAT would not have, nevertheless, found the so-called explanation of the assessees acceptable or in compliance with the provisions of Section 68 of the said Act. Rather we are inclined to believe, that the ITAT too, would have found the so-called explanation of the assessees too fantastic to deserve any acceptance. In Mussadilal Ram Bharose 1987(2) SCC 39, the Hon’ble Supreme Court has cautioned against acceptance of any ‘fantastic’ or ‘unacceptable’ explanations in tax matters<\/p>\n