Establishment of identity of creditor, creditworthiness of creditor and genuineness of transaction
It would depend upon facts of each case whether all the three ingredients to discharge the onus to prove cash credit have been proved by the assessee or not; if an NRI, engaged in business of real estate development with substantial means, decided to invest in real estate in India, genuineness of same cannot be doubted unless there is any evidence to contrary.
ITAT, MUMBAI BENCHES ‘E’, MUMBAI (THIRD MEMBER)
Tulip Hotels Pvt. Ltd.
v.
DCIT
It would depend upon facts of each case whether all the three ingredients to discharge the onus to prove cash credit have been proved by the assessee or not; if an NRI, engaged in business of real estate development with substantial means, decided to invest in real estate in India, genuineness of same cannot be doubted unless there is any evidence to contrary.
ITAT, MUMBAI BENCHES ‘E’, MUMBAI (THIRD MEMBER)
Tulip Hotels Pvt. Ltd.
v.
DCIT
ITA Nos. 6490 & 6491/Mum/2008
November 27, 2009
RELEVANT EXTRACTS:
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5. I have carefully considered the argument of both the sides and perused the material placed before me. It is a settled law that the onus is upon the assessee to prove the cash credit in his books of account. To discharge such onus, the assessee has to prove – (i) the identity of the creditor, (ii) the creditworthiness of the creditor, and (iii) genuineness of transaction. It would depend upon facts of each case whether all the above three ingredients to discharge the onus have been proved by the assessee or not. Before evaluating the evidences produced by the assessee, it is to be mentioned that some evidences were produced by the assessee before the Assessing officer and some were filed before the Income Tax Appellate Tribunal as additional evidences. The learned DR has pointed out that the learned JM has considered the additional evidences, while deleting the addition for cash credit, without allowing any opportunity to the Assessing Officer to cross examine such evidence. In principle I agree with the learned DR that when the Income Tax Appellate Tribunal admits additional evidence, it should allow a reasonable opportunity to the Assessing Officer to examine such additional evidence and to produce any evidence or document in rebuttal of such additional evidence. For this purpose, either the ITAT can call for the Remand Report from the Assessing Officer or may set aside the matter to the Assessing Officer for examination of additional evidence and thereafter re-adjudication. Admittedly, it has not been done by the ITAT in this case. However, being a Third Member, I am required to resolve the difference amongst the Members. In this case, unfortunately, both the learned Members have considered the additional evidence without allowing any opportunity to the Assessing Officer to cross examine such evidence. The learned JM, after considering the additional evidence, is of the opinion that the assessee has been able to discharge the onus of providing the cash credit; while the learned AM, even after considering the additional evidence produced before the ITAT, is of the opinion that the assessee is unable to discharge the onus. The question referred to me is also whether the addition should be deleted or to be confirmed. In the above circumstances, I am left with no alternative but to consider all the evidences, including additional evidence considered by the learned Members of the ITAT and then arrive at the conclusion whether the assessee is able to discharge the onus lay upon him.
6. Regarding identity: At page 28 of the assessee’s paper book there is a certificate by Shri Alliott Hadi Shahid, Chartered Accountant in which he has certified that he personally know Mr. Somendra Khosla since 2000. He has also certified that Shri Somendra Khosla is living in Dubai since the year 2000. His main business in Dubai is development of real estate. At page 30 of the paper book, there is a xerox copy of the passport issued by Government of United Arab Emirates. At page 32 of the paper book, there is a copy of trade licence issued by Government of Sharjah to “Dome Services” in which owners are Shri Somendra Khosla and Sahil Khosla. At page 35 there is a copy of telephone bill in the name of Shri Somendra Khosla. At page 36 of the paper book, there is a copy of electricity and water charges bill issued by Dubai Electricity and Water Authorities. At page 46 there is a health card issued by Ministry of Health, United Arab Emirates in the name of Shri Somendra Khosla. In view of the above evidences, identity of Shri Somendra Khosla is duly established.
7. Regarding the creditworthiness: Shri Alliott Hadi Shadid, Chartered Accountant had issued a certificate, which reads as under:-
“DB: 249:2008
23 September 2008
To Whom It May Concern
This is to confirm that we have personally known Mr Somendra Khosla since year 2000. He is living in Dubai since year 2000.
His main business in Dubai, UAE is development of real estate. Together with his son Mr Sahil Khosla, he is developing many projects in Dubai. A list of real estate assets owned in Dubai is attached.
Together with his son, Mr Sahil Khosla, he owns a commercial trading company called Domee Services FZC, PO Box 48972, Dubai, UAE. We have been auditing the accounts of the company since year 2000 onwards. Besides Domee Services FZC, he owns other commercial companies operating in Dubai.
This certificate has been issued upon the request of Mr Somendra Khosla”.
10. From the above, it is proved beyond doubt that Shri Somendra Khosla is in the business of development of real estate. He is the President of the real estate company known as ‘New World Real Estate’ (NWRE) . The turnover of the company for the year 2006 was 1.1 billion which would be more than Rs.1,300 crores approximately in Indian rupee. The value of the properties owned by Shri Somendra Khosla and his family members in the year 2008 was 46.78 million US dollars which would be more than Rs.200 crores in Indian rupee. His monthly telephone / electricity bills are approximately Rs.50,000/- per month. The amount advanced by Shri Somendra Khosla for acquisition of 99 years leasehold right in the property being developed by assessee company was Rs.4.78 crores and Rs.1.02 crores in the accounting years relevant to the assessment years 2004-05 and 2005-06 respectively. When the turnover of the company of Shri Somendra Khosla is more than Rs.1,300 crores and the value of personal assets owned by him and his family members is more than Rs. 200 crores, it can by no stretch of imagination be said that Shri Somendra Khosla is not creditworthy for investment of approximately Rs.5 crores for acquisition of a property in India.
22. Considering the totality of the above facts namely that Shri Somendra Khosla is a NRI, he is in the business of development of real estate and he is a man of substantial means, in my opinion, if he has decided to invest in the real estate in India, the genuineness cannot be doubted unless there is any evidence to the contrary. The Revenue has doubted the genuineness merely on the basis of presumption and suspicion ignoring the documentary evidences produced by the assessee, which establish the genuineness of transaction.
23. In view of the above, in my opinion, the assessee has duly established the identity of the creditor, creditworthiness of the creditor and also genuineness of the transaction. Thus, the onus of proving the cash credit which lays upon the assessee is duly discharged. Accordingly, I answer question no.1 in favour of the assessee and hold that the addition of Rs.4,78,12,403/- and Rs.1,02,91,176/- made and confirmed by the lower authorities under section 68 of the Income Tax Act are liable to be deleted.
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RELEVANT EXTRACTS:
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5. I have carefully considered the argument of both the sides and perused the material placed before me. It is a settled law that the onus is upon the assessee to prove the cash credit in his books of account. To discharge such onus, the assessee has to prove – (i) the identity of the creditor, (ii) the creditworthiness of the creditor, and (iii) genuineness of transaction. It would depend upon facts of each case whether all the above three ingredients to discharge the onus have been proved by the assessee or not. Before evaluating the evidences produced by the assessee, it is to be mentioned that some evidences were produced by the assessee before the Assessing officer and some were filed before the Income Tax Appellate Tribunal as additional evidences. The learned DR has pointed out that the learned JM has considered the additional evidences, while deleting the addition for cash credit, without allowing any opportunity to the Assessing Officer to cross examine such evidence. In principle I agree with the learned DR that when the Income Tax Appellate Tribunal admits additional evidence, it should allow a reasonable opportunity to the Assessing Officer to examine such additional evidence and to produce any evidence or document in rebuttal of such additional evidence. For this purpose, either the ITAT can call for the Remand Report from the Assessing Officer or may set aside the matter to the Assessing Officer for examination of additional evidence and thereafter re-adjudication. Admittedly, it has not been done by the ITAT in this case. However, being a Third Member, I am required to resolve the difference amongst the Members. In this case, unfortunately, both the learned Members have considered the additional evidence without allowing any opportunity to the Assessing Officer to cross examine such evidence. The learned JM, after considering the additional evidence, is of the opinion that the assessee has been able to discharge the onus of providing the cash credit; while the learned AM, even after considering the additional evidence produced before the ITAT, is of the opinion that the assessee is unable to discharge the onus. The question referred to me is also whether the addition should be deleted or to be confirmed. In the above circumstances, I am left with no alternative but to consider all the evidences, including additional evidence considered by the learned Members of the ITAT and then arrive at the conclusion whether the assessee is able to discharge the onus lay upon him.
6. Regarding identity: At page 28 of the assessee’s paper book there is a certificate by Shri Alliott Hadi Shahid, Chartered Accountant in which he has certified that he personally know Mr. Somendra Khosla since 2000. He has also certified that Shri Somendra Khosla is living in Dubai since the year 2000. His main business in Dubai is development of real estate. At page 30 of the paper book, there is a xerox copy of the passport issued by Government of United Arab Emirates. At page 32 of the paper book, there is a copy of trade licence issued by Government of Sharjah to “Dome Services” in which owners are Shri Somendra Khosla and Sahil Khosla. At page 35 there is a copy of telephone bill in the name of Shri Somendra Khosla. At page 36 of the paper book, there is a copy of electricity and water charges bill issued by Dubai Electricity and Water Authorities. At page 46 there is a health card issued by Ministry of Health, United Arab Emirates in the name of Shri Somendra Khosla. In view of the above evidences, identity of Shri Somendra Khosla is duly established.
7. Regarding the creditworthiness: Shri Alliott Hadi Shadid, Chartered Accountant had issued a certificate, which reads as under:-
“DB: 249:2008
23 September 2008
To Whom It May Concern
This is to confirm that we have personally known Mr Somendra Khosla since year 2000. He is living in Dubai since year 2000.
His main business in Dubai, UAE is development of real estate. Together with his son Mr Sahil Khosla, he is developing many projects in Dubai. A list of real estate assets owned in Dubai is attached.
Together with his son, Mr Sahil Khosla, he owns a commercial trading company called Domee Services FZC, PO Box 48972, Dubai, UAE. We have been auditing the accounts of the company since year 2000 onwards. Besides Domee Services FZC, he owns other commercial companies operating in Dubai.
This certificate has been issued upon the request of Mr Somendra Khosla”.
10. From the above, it is proved beyond doubt that Shri Somendra Khosla is in the business of development of real estate. He is the President of the real estate company known as ‘New World Real Estate’ (NWRE) . The turnover of the company for the year 2006 was 1.1 billion which would be more than Rs.1,300 crores approximately in Indian rupee. The value of the properties owned by Shri Somendra Khosla and his family members in the year 2008 was 46.78 million US dollars which would be more than Rs.200 crores in Indian rupee. His monthly telephone / electricity bills are approximately Rs.50,000/- per month. The amount advanced by Shri Somendra Khosla for acquisition of 99 years leasehold right in the property being developed by assessee company was Rs.4.78 crores and Rs.1.02 crores in the accounting years relevant to the assessment years 2004-05 and 2005-06 respectively. When the turnover of the company of Shri Somendra Khosla is more than Rs.1,300 crores and the value of personal assets owned by him and his family members is more than Rs. 200 crores, it can by no stretch of imagination be said that Shri Somendra Khosla is not creditworthy for investment of approximately Rs.5 crores for acquisition of a property in India.
22. Considering the totality of the above facts namely that Shri Somendra Khosla is a NRI, he is in the business of development of real estate and he is a man of substantial means, in my opinion, if he has decided to invest in the real estate in India, the genuineness cannot be doubted unless there is any evidence to the contrary. The Revenue has doubted the genuineness merely on the basis of presumption and suspicion ignoring the documentary evidences produced by the assessee, which establish the genuineness of transaction.
23. In view of the above, in my opinion, the assessee has duly established the identity of the creditor, creditworthiness of the creditor and also genuineness of the transaction. Thus, the onus of proving the cash credit which lays upon the assessee is duly discharged. Accordingly, I answer question no.1 in favour of the assessee and hold that the addition of Rs.4,78,12,403/- and Rs.1,02,91,176/- made and confirmed by the lower authorities under section 68 of the Income Tax Act are liable to be deleted.
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