IT: Where deposits was made with assessee represented booking amount received toward construction and same was done through banking channel and copies of account of depositor were duly filed, section 68 would not apply
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[2016] 71 taxmann.com 275 (Gujarat) 
HIGH COURT OF GUJARAT
Income-tax Officer, Ward 2(3)
v.
Shanti Enterprise*
K.S. Jhaveri AND G.R. UDHWANI, JJ. 
Tax Appeal No.485 of 2008†
JUNE  10, 2016 
Section 68, of the Income-tax Act, 1961 - Cash credit (Deposits) - Assessment year 2000-01 - Assessee partnership firm, engaged in construction of a market in joint venture, had shown receipts of booking deposit - Entries were not found to be genuine by Assessing Officer - However, Tribunal observed that all depositors except one were income-tax assessees and deposits were received through banking channel - Copies of account of each depositor were duly filed - Money represented amounts towards booking received initially through an entity with which assessee formed joint venture of developing project on land which was alloted by Municipal Corporation - Whether provisions of section 68 would not apply - Held, yes [Para 11] [In favour of assessee] 
FACTS
 
■ 	 	The assessee partnership firm was engaged in construction of a market in joint venture. The assessee declared nil income which was processed under section 143(1).	
■ 	 	Later on, the Assessing Officer found that the assessee had shown receipts from booking deposit. Aforesaid entries were not found to be genuine by the Assessing Officer and he issued demand notice. The Assessing Officer determined the total income enhancing income and also directed initiation of penalty proceedings to levy penalty under section 271(1)(c).	
■ 	 	On appeal, the said penalty was set aside partly by the Commissioner (Appeals) in favour of the assessee.	
■ 	 	Further appeal to the Tribunal was dismissed by order.	
■ 	 	On the revenue's appeal:	
HELD
 
■ 	 	The Tribunal has observed that all the aforesaid 23 persons (except one), from whom deposits were received are the income-tax assessees. They are having PAN numbers. The amounts have been received through the banking channels. Copies of accounts of each depositor were duly filed. The assessee has duly explained in respect of each of the depositors and the circumstances under which deposits were received by the assessee. The deposited money represents the amounts towards booking received initially through Siddharth Corporation along with which the assessee has engaged in joint venture of developing the project on the land which was allotted from Surat Municipal Corporation. This is an admitted fact that the assessee has not carried out any business during the year under consideration. No evidence on record has been brought that the assessee had earned income during the year. It is rightly found by the Tribunal that the assessee has duly discharged its burden of proof. In the case of Dy. CIT v. Rohini Builders [2002] 256 ITR 360/[2003] 127 Taxman 523 (Guj.), amounts were received by the assessee by account payee cheques and initial burden of proving the credits was discharged. It is held that the assessee need not prove the source of the credits and the fact that the explanation was not satisfactory would not automatically result in deeming amounts as income of the assessee. Therefore, the view taken by the Tribunal is just and proper and it is not required to be interfered with. In that view of the matter, question posed for our consideration is answered in favour of the assessee and against the department. Accordingly, this Tax Appeal is dismissed.	
CASE REVIEW
 
Dy. CIT v. Rohini Builders [2002] 256 ITR 360/[2003] 127 Taxman 523 (Guj.) (para 11) followed.
CASES REFERRED TO
 
Dy. CIT v. Rohini Builders [2002] 256 ITR 360/[2003] 127 Taxman 523 (Guj.) (para 11).
Sudhir M. Mehta, Adv.  for the Appellant. R.K. Patel, Adv. for the Respondent.
JUDGMENT
 
K.S. Jhaveri, J. - By filing this appeal, the revenue has challenged the order dated 15.6.2007 passed by the Income Tax Appellate Tribunal, Ahmedabad, in ITA No. 3573/Ahd/2004, whereby the Tribunal allowed the appeal filed by the assessee and dismissed the appeal filed by the revenue.
2. The assessee is a partnership firm engaged in construction of textile market known as "Millenium Market". The assessee filed return of income on 19.10.2000 for the Assessment Year 2000-01 declaring 'nil' income. Said return was processed under Section 143 (1) of the Income Tax Act, 1961 (for short, "the Act"). Thereafter, the Assessing Officer, issued notice under Section 148 of the Act for reopening assessment. After the return was filed, notice under Section 143 (2) of the Act was issued and, thereafter notice under Section 142 (1) of the Act was also issued. In response to the said notice, the representative of the assessee attended the hearing before the Assessing Officer from time to time and submitted details, which were called for by the Assessing Officer. The Assessing Officer, after considering the details submitted on behalf of the assessee and determined total income of the assessee at Rs. 1,45,00,000/- vide order dated 29.4.2004. The Assessing Officer also directed initiation of penalty proceedings to levy penalty under Section 271 (1)(c) of the Act.
3. Being aggrieved by the said order dated 29.4.2004, the assessee preferred an appeal before the CIT (A), which was partly allowed vide order dated 29.04.2004 in favour of the assessee.
4. Feeling aggrieved by order of CIT (A) deleting the addition of Rs. 1,45,00,000/- made by Assessing Officer, the assessee preferred an appeal before the Income Tax Appellate Tribunal being ITA No. 3573/Ahd/2004.
5. By order dated 15.6.2007, Tribunal dismissed the appeal filed by the revenue. Therefore, present appeal is preferred by the department.
6. At the time of admitting present appeal, this Court has framed following question of law:—
"Whether, on the facts and in the circumstances of the case and in law, the Income Tax Appellate Tribunal is right in deleting the addition made by the Assessing Officer on account of unexplained credits of Rs. 1,45,00,000/- in the names of 19 creditors?"
7. From the record, it emerges that during the course of assessment proceedings for the Assessment Year 2000-2001, it was noticed that the assessee had shown receipts from booking deposit, out of which Rs. 1,55,50,000/- had been received from the following persons:— 
Sr. No. 	Name of the person 	Amount in Rs. 	Date of deposit 	
1	Ashoka Diamond	5,75,000	20.07.1999	
2	Bhartibhai Vaghjibhai Vora	6,00,000	20.07.1999	
3	Bhanwarlal K. Nama	5,55,000	20.07.1999	
4	Bharat Gems	5,30,000	20.07.1999	
5	Chinubhai R. Shah	6,00,000	20.07.1999	
6	Chunilal B. Savalia	5,00,000	20.07.1999	
7	Chandrakant C. Soni	5,50,000	20.07.1999	
8	Dhara Gems	5,00,000	20.07.1999	
9	Ganesh N. Prajapati	5,60,000	20.07.1999	
10	Heena Diamond	5,00,000	20.07.1999	
11	Hirabhai Dalichand Patel	5,60,000	20.07.1999	
12	Jaysukh S. Mehta	5,50,000	20.07.1999	
13	Jayantilal T. Mehta	5,90,000	20.07.1999	
14	Jayantibhai Kalubhai Patel	55000	20.07.1999	
15	Jignesh M. Doshi	5,50,000	20.07.1999	
16	K.P.Diamond	5,70,000	20.07.1999	
17	Kailshbhai Tulsibhai Patel	5,30,000	20.07.1999	
18	Manisha Synthetics	35,00,000	20.07.1999	
19	Mahendra Chandulal Doshi	5,00,000	20.07.1999	
20	Pravinbhai Dhanjibhai Kubadia	5,50,000	20.07.1999	
21	Rameshbhai B. Patel	5,50,000	20.07.1999	
22	Rahul Gems	5,50,000	20.07.1999	
23	S.P. Enterprise	5,50,000	20.07.1999	
	Total	1,55,50,000		
8. Aforesaid entries were not found to be genuine and, therefore, the Assessing Officer directed to issue demand notice and challan and to charge interest under Section 234B of the Act. He also directed to issue penalty notice under Section 271 (1) (c) of the Act.
9. Mr. Sudhir Mehta, learned counsel for the appellant contended that amount which has been referred to in the table given above is the source of income of the assessee and, therefore, the Assessing Officer, after giving elaborate reasons, directed to initiate the proceedings as above. He also submitted that the Assessing Officer has discussed the evidence with regard to all these 23 entries, therefore, the Tribunal could not have passed the impugned order in favour of the assessee.
10. Mr. R.K. Patel, learned advocate for the respondent-assessee supported the impugned order and submitted that the Tribunal has not committed any error while passing the impugned order.
11. We have heard both the learned counsel and perused the record. We have also gone through the impugned order. The Tribunal has observed that all the aforesaid 23 persons, except Shri Kailashbhai Tulsibhai Patel, from whom deposits were received are the income tax assessees. They are having PAN numbers. The amounts have been received through the banking channels. Copies of accounts of each depositor were duly filed. The assessee has duly explained in respect of each of the depositors and the circumstances under which deposits were received by the assessee. The deposited money represents the amounts towards booking received initially through M/s.Siddharth Corporation along with which the assessee has engaged in joint venture of developing the project on the land which was allotted from Surat Municipal Corporation. This is an admitted fact that the assessee has not carried out any business during the year under consideration. No evidence on record has been brought that the assessee had earned income during the year. It is rightly found by the tribunal that the assessee has duly discharged its burden of proof. In the case of Dy. CIT v. Rohini Builders [2002] 256 ITR 360/[2003] 127 Taxman 523 (Guj.), amounts were received by the assessee by account payee cheques and initial burden of proving the credits was discharged. It is held that the assessee need not prove the source of the credits and the fact that the explanation was not satisfactory would not automatically result in deeming amounts as income of the assessee. Therefore, in our view, the view taken by the Tribunal is just and proper and it is not required to be interfered with. In that view of the matter, question posed for our consideration is answered in favour of the assessee and against the department. Accordingly, this Tax Appeal is dismissed.
sb 

*In favour of assessee.
†Arising out of order of Tribunal in IT Appeal No. 3533/Ahd./2004, dated 15-6-2007.