- (1.) WE have heard Shri Dhananjay Awasthi, learned counsel appearing for the revenue. Shri Suyash Agrawal appears for the respondent -assessee.
(2.) THIS Income Tax Appeal has been filed with a delay of 2 days. The delay has been sufficiently explained in the affidavit of Shri Lala Ram, Income Tax Inspector, Circle -I, C.I.T. Office, Ghaziabad and is accordingly condoned. The appeal is treated to be filed within limitation. With the consent of parties, it was heard on the following questions of law, as follows: - "(1) Whether on the facts and circumstances of the case the Hon'ble ITAT was justified in deleting the entire addition of Rs. 17, 83, 571/ - by holding that the assessee has proved the identity of the creditors, when the Managing Director of the company was the sole trustee of all these eight trusts and all deposits were made in cash and the trusts instead of utilizing these deposits for the aims and objectives of the trusts, loaned out to the assessee company, which proves that these trusts had no independent identity and acted as a tool in the hands of the assessee -company. (2). Whether on the facts and circumstances of the case the Hon'ble ITAT was justified in holding that the credit worthiness of 8 trusts was established when the source of funds with all of them was not proved by the assessee, which fact is further fortified by ill placed utilization of trust funds. (3) Whether on the facts and circumstances of the case the Hon'ble ITAT was justified in holding that the genuineness of transaction was established when the whole transaction apparently is a colourable device just to hoodwink the revenue. These eight trusts were managed by sole and same trustee, who was also managing and controlling the assessee company and the funds deposited in cash in the trusts were simply taken out by the Managing Director of the assessee company to use in the hands of the company." For the assessment year 2003 -04 the assessee -company filed return declaring income of Rs. 9, 45, 430/ - which was processed under Section 143 (1) of the Income Tax Act, 1961. The case was picked up for scrutiny after the approval given by the Chief Commissioner of Income Tax, Meerut. Notices were issued under Section 143 (2) of the Act, in compliance of which books of account were produced.
(3.) THE AO found that out of unsecured loan of Rs. 31, 77, 839/ - during the year, the loans of Rs. 17, 83, 571/ - were taken from eight different trusts, namely 'Satyam Shivam Sunderam Trust'; 'Lord Shankar Ji Trust'; 'Lord Krishna Ji Trust'; 'Lord Vishnu Ji Trust; 'Lord Ganpati Ji Trust'; 'Goddess Bhawani Ji Trust'; 'Lord Hanuman Ji Trust' and 'Lord Laxmi Ji Trust'. Mr. Rajesh Kumar Agarwal, the director of the company with 28.88% shareholdings in the company, and with his close relatives Mr. Ankur Agarwal and Smt. Urmila Agarwal -the other directors of the company holding shares in the company, had taken loans from these eight trusts. Shri Rajesh Kumar Agarwal the common managing trustee of all these eight trusts is also managing the assessee -company. The AO found that all the cash deposits in bank account of the trusts were out of petty donations received during the year. The last year's cash balance was kept as cash in hand in imprest account with trustee and some loans and advances. It was observed that the amount of cash in hand and petty donations, as shown in the balance sheet and Income & Expenditure account, is not by any means sufficient for advancing unsecured loans to the extent as shown by the assessee/trusts. The cash was kept in imprest account and for loans & advances, no evidence was produced. In absence of books of account, the availability of funds with the trusts to advance the same as unsecured loans to assessee company was not established and thus the assessee failed to prove the capacity and genuineness of the transactions. The AO did not accept the genuineness of the unsecured loans of Rs. 17, 83, 571/ - and added it back to the income of the assessee. The AO also found an adhoc disallowance of Rs. 1, 00, 000/ - on account of machinery repairs with which we are not concerned in this appeal.;