TMI Blog2012 (1) TMI 283X X X X Extracts X X X X X X X X Extracts X X X X ..... irst issue for consideration relates to deleting the addition of ₹ 74,45,000/- made by the Assessing Officer under sec. 68 of the Act. The facts of the case stated in brief are that during the year under consideration the assessee received unsecured loans of ₹ 74,45,000/- from the following persons:- 1. Smt. Krishna Devi Rs.16,00,000/- 2. Smt. Pankhuri Aggarwal Rs.21,70,000/- 3. Shri Rohit Gupta Rs. 7,40,000/- 4. Shri Ram Kishore HUF Rs. 9,00,000/- 5. Shri Mohit Gupta Rs.20,35,000/- The AO required the assessee to establish identity of creditors, genuineness of transactions and creditworthiness of creditors in respect of above mentioned persons. The assessee filed confirmations, copies of accounts, copies of acknowledgement of returns of income for Assessment Year 2007- 08 and copies of bank statements in respect of the creditors. The Assessing Officer issued summons under sec. 131 to S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000 (fresh addition during the subject year) d) Shweta Aggarwal ₹ 90,000 (fresh addition during the subject year) These details are borne out from submissions dated 12.3.2009 as filed by assessee before Assessing Officer during assessment proceedings, vide point no. 13, inter-alia stating as The chart containing the details of unsecured loans taken during the relevant period is enclosed in the prescribed format as per point no 20 of the questionnaire . The random attempt by the Assessing Officer in making the additions pertaining to select unsecured loans where similar pattern of evidence is on record for all the parties / lenders besides being inconsistent, in my view is also not in conformity with the legal position on the subject and therefore the same becomes untenable in law. 7.2 Be that as it may, as regards additions for loans obtained by assessee from Mr. Ram Kishore HUF (Rs. 9,00,000) and Rohit Gupta (Rs. 7,40,000), where same have been completely identified as genuine on part of the assessee / appellant, by tendering their (lender s) bank statements (from where assessee got the loan by account payee cheque) and ITR s copy along with their confirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ok volume II pages 1 to 67 containing the details submitted before the Assessing Officer during assessment proceedings. 7.4 Accordingly addition made by Assessing Officer on account of alleged unexplained cash credits being unsecured loans taken from aforesaid lenders, is hereby deleted in its entirety. Therefore, grounds of appeal no. 2 3 are allowed in full. (Relief: ₹ 74,45,000/-) 5. Before us, the learned Sr. Departmental Representative submitted that the assessee has not discharged primary onus. The Assessing Officer issued summons under sec. 131 in three cases. The cash creditors are family members of the assessee. They have given general reply in respect of specific enquiries made by the AO. It was also submitted that on perusal of bank statements, it can be seen that the amounts have been credited in their accounts from common bank as is seen from the cheque numbers. Therefore, the funds have been transferred in their accounts from a common fund. The onus was on the assessee to prove the capacity of the creditors. He placed reliance on the decision of Hon ble Rajasthan High Court in the case of Kamal Motors vs. CIT, 131 Taxman 155 (Raj.). The learned Sr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to Revenue. 7. We have heard both the parties and gone through the material available on record. We have gone through the order of the learned CIT(A) carefully. The learned CIT(A) after examining the facts has come to the conclusion that in their statements recorded on oath, no adverse comment was made by any of the lenders as far as loan given to the assessee is concerned. Three parties to whom summons were issued appeared before the AO, filed their statements of affairs, income-tax details and explanation as to their source of lending etc. Smt. Krishna Devi, Ms Pankhuri Aggarwal and Shri Mohit Gupta are assessed to tax and they are family members of the assessee. Since the creditors have given confirmation, proved their identity and creditworthiness, in our considered view, no addition can be made under sec. 68 of the Act. As regard the addition in case of Shri Ram Kishore HUF and Shri Rohit Gupta, the AO has made addition without bringing material on record. Therefore, the addition made in respect of loans received from them is without application of mind and contrary materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 and decision of Hon ble Madras High Court in the case of CIT vs. NEPC India Ltd, 303 ITR 271. 10. The learned AR of the assessee on the other hand, submitted that the assessee has obtained unsecured loan. The rate of interest in respect of unsecured loan is always high as compared to rate of interest on secured loans. The assessee has deducted tax at source while making the payment. The creditors have admitted the interest income in their returns of income, which has been assessed in their hands. Therefore, disallowance of interest could not be made under sec. 40A(2)(b) of the Act. 11. We have heard both the parties and gone through the material available on record. The assessee had paid interest @ 18% to family members whereas accordingly to the AO, the fair rate of interest applicable during the relevant period was 12%. It is true that in case of unsecured loans, the rate of interest is always higher than secured loans. The AO however, has not carried out any exercise in order to prove that excessive rate of interest has been paid by the assessee to family members. Moreover, the lenders have admitted the interest amount in their returns of income. Therefore, in our consid ..... 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