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2023 (11) TMI 789 - AT - Income TaxAddition u/s 68 - unexplained unsecured loan - capacity/creditworthiness of creditor - creditor being non-filer of income tax returns (ITR) - HELD THAT:- On a careful consideration, we find the assessee has filed three documents to AO which are un-disputably accepted by both AO and CIT(A), namely (i) A/c confirmation, (ii) Bank Pass-Book and (iii) PAN card. The A/c confirmation is duly signed by creditor and contains full address as well as PAN of creditor. Thus, the identity of creditor is duly proved by these primary documents. Bank Pass Book clearly shows that the creditor received a sum through clearing and the loan was given to assessee out of it. Therefore, the capacity/creditworthiness of creditor to give loan to assessee is proved. The creditor has given loan to assessee out of proceeds held in Bank A/c from clearing of cheque and not from his income. Therefore, it is prima facie wrong to judge the capacity/creditworthiness of creditor with his income. Regarding non-filing of income-tax return by creditor, the point is well decided in Metachem Industries [1999 (9) TMI 21 - MADHYA PRADESH HIGH COURT] where it has been categorically held “Whether that person is an income-tax payer or not or from where he has brought this money is not the responsibility of the firm”. The last element of genuineness of loan is also established by the Bank Pass-Book which clearly reflects that the loan has been taken through banking channel and there is no involvement or flow of cash. Thus, all elements of section 68 are satisfied. Regarding the contention of revenue that the assessee has not paid any interest, the same is fully corroborated by the A/c Confirmation acknowledged by the creditor which does not contain any entry of interest payment. Obviously, the assessee has received interest-free loan from creditor. Lastly, we also find sufficient merit in the contention of Ld. AR that the assessee has discharged primary burden cast upon it and still if the AO was not satisfied, he could very well make enquiry or field enquiry from/of the creditor. AO has not done any enquiry, much less field-enquiry, from/of creditor and fastened the tax liability upon assessee by treating the loan as unexplained without any basis. This approach of AO is not acceptable as decided by Hon’ble Delhi High Court in Gangeshwari Metal [2013 (1) TMI 624 - DELHI HIGH COURT] Even this approach does not get support from NRA Iron [2019 (3) TMI 323 - SUPREME COURT]. Thus addition made/confirmed by lower authorities is not sustainable. Decided in favour of assessee.
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