TMI Blog2014 (2) TMI 311X X X X Extracts X X X X X X X X Extracts X X X X ..... established that the transaction is genuine and has established the creditworthiness of the loan creditor, in respect of giving loan of Rs.1,00,000/- to the assessee as there was a sufficient credit balance in the bank account of the loan creditor to give loan to the assessee – The addition of Rs. 1,50,000/- is confirmed by the Tribunal. In respect of loan from Shri Kantibhai C. Shah - The said loan was given to the assessee not out of the cheque deposited in his bank account by his loan debtors - Since, the assessee has established that there was sufficient balance in the account of Shri Kirtibhai C.Shah to give loan of Rs.2,50,000/- to the assessee, the assessee has established not only the identity of the loan creditor but also the genuineness of the transactions - The said addition of Rs.2,50,000/- is deleted as the assessee has given requisite explanation with documentary evidence to establish not only the creditworthiness and identity of the loan creditor but has also established the genuineness of the transaction. In respect of loan of 4,00,000/- from Smt. Renudevi Makharia – The lender received the cheque and it was deposited in her account and thereafter loan was gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 68 as income of the assessee. 4. The Assessing Officer has stated that in order to verify the genuineness of the loans, the assessee filed confirmations and the same have been obtained and placed on record. He has stated that notice u/s 133(6) was issued and stated his findings as under: a) In respect of loan from Smt. Damyanti S. Jain , he has stated that she advanced loans of Rs.1,00,000/-(wrongly stated by the Assessing Officer Rs.2,50,000/-) to the assessee. That on perusal of bank statement, it is seen that she deposited in cash of Rs.1,00,000/- prior to issue of cheque in favour of M/s Raj Sales, proprietorship firm of the assessee. He has stated that in the absence of details of cash deposited, the same is treated as income of the assessee u/s 68 of the Income-tax Act. b) In respect of loan from Smt. Renudevi Makharia, the Assessing Officer has stated that she advanced loan of Rs.4,00,000/-. Since no documentary evidence in respect of payment of loan of Rs.4,00,000/- is filed, he treated it as income of the assessee u/s 68 of the Income- tax Act. c) In respect of loan from Shri Nalinbhai Amrutlal Shah, the Assessing Officer has stated that he advanced loan of Rs.2,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheques were issued to assessee's proprietary concern M/s Raj Sales on 09.05.2003. Therefore, the genuineness of the said transaction is not proved. That the total income of Smt. Damyanti S. Jain for A.Y. 2004-05 is Rs.32,210/-. Hence her creditworthiness is also not proved. (ii) In respect of claim of loan of Rs.2,50,000/- from Shri Nalinbhai A. Shah, it is stated that an amount of Rs.1,50,000/- was deposited in cash on 27/03/2004 in bank account of loan creditor Shri Nalinbhai A. Shah and on the same day cheque was issued to the assessee. Further deposit of Rs.1,00,000/- is shown as transferred from the account of family members being saving bank account nos. 8264 and 8297, who deposited cash in their accounts on 29/03/2004 and transferred that amount to the account of the loan creditor. Thereafter the cheque was issued in favour of the assessee's proprietary concern M/s Raj Sales on the same day i.e. 29.03.2004. It is further stated in the remand report that Shri Nalinbhai A. Shah filed a return of income for A.Y. 2004-05 declaring income of Rs.52,560/- and his capital is of Rs.2,58,742/-. Hence, genuineness of the said loan and creditworthiness of Shri Nalinbhai A. Shah coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is in further appeal before the Tribunal. 8. During the course of hearing, the ld. AR reiterated the above facts. In connection with the claim of loan from Smt. Damyanti S Jain, ld. AR referred page 41 of the paper book which is a copy of the confirmation letter given by her directly to the Assessing Officer, as is evident from the stamp appearing on the said letter. He submitted that page no. 43 to 44 is the copy of bank statement evidencing that the said loan was taken by the assessee by an account payee cheque. In respect of loan from Smt. Renudevi Makharia of Rs.4,00,000/-, the ld. AR submitted that she also gave confirmation to the Assessing Officer vide letter dated 29.12.2006 pursuant to notice u/s 133(6) of the Act and a copy of the same is placed at page 45 of the paper book. He further referred page 52 of the paper book confirming the loan to the assessee of Rs.4,00,000/- with the bank details and also the payment of interest to her in respect of the said loan. He further submitted that she received the said amount from an account payee cheque from her debtor and the said cheque was deposited in her account and thereafter the cheque was issued to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of interest, copy of it is placed at 66 page of the paper book. 9. The ld. AR further submitted that the said loans were repaid in subsequent assessment years by account payee cheques. He further submitted that the assessee paid interest on the said loans and the said interest was allowed by the department in the assessments made u/s 143(3) of the Act. The ld. AR submitted that the assessee filed requisite details not only establishing the identity of the loan creditors but also filed requisite documents to explain the genuineness of the transactions that the loan were taken by account payee cheques. He further submitted that all the loan creditors were assessed to tax, hence their creditworthiness was established by the assessee. He further submitted that the assessee is not required to prove/to establish source of source of the loan creditors and to substantiate his submission claim placed reliance on the following cases. a). Decision of Hon'ble Bombay High Court in the case of Orient Trading Company Ltd. vs. CIT 49 ITR 723. b). Decisions of Hon'ble Delhi High Court in the case of CIT vs. Dwarikadhish Investment (P.) Ltd. [2010 194 taxmann 43] and CIT vs. Diamond Products L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orities below and the submissions of ld. Representatives of the parties. There is no dispute to the fact that the assessee is required to establish not only the identity of the loan creditors but also to prove genuineness of the loan transactions as well as creditworthiness of the loan creditors. We agree with the ld. DR that merely because the transactions have taken place through banking channels, is not sufficient to establish that the loans taken by the assessee are genuine. The onus is on the assessee to prove the nature and source of the amount found credited in the books of the assessee. The Hon'ble Kerala High Court in the case of ITO vs. Diza Holding (P) Ltd. (supra) has held that furnishing of particulars is not enough and the payment by way of account payee cheque is also not conclusive. It is a fact that the assessee is not required to prove the source of source of the amount found credited in the accounts of loan creditors as held by the Hon'ble Delhi High Court in the case of Dwarik Dwarikadhish Investment (P.) Ltd. (supra) and CIT vs. Diamond Products Ltd. (supra). The Hon'ble Allahabad High Court has also held in the case of Zafa Ahmad Khan Co. vs. CIT [2013 30 ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relatives and family members but there is no details placed on record. For the reasons mentioned in respect of the loan of Smt. Damyanti S. Jain, we are of the considered view that the loan of Rs.1,50,000/- which was given out of cash deposit in the bank account of the loan creditor cannot be considered as genuine loan as the assessee has not placed any document on record to prove the creditworthiness of the loan creditor in respect thereof. However, in respect of loan of Rs.1,00,000/- which was given to the assessee on 29/03/2004, we observe that the said loan was given by Shri Nalinbahi A. Shah to the assessee after transferring of two amounts of Rs.50,000/- from another account and therefore the assessee cannot be expected to go into the origin of origin of the transfer of the said amount in the account of the loan creditor from another account to establish the genuineness of the loan transaction. Such loan of Rs.1,00,000/- has not been given to the assessee out of cash deposit by the loan creditor. We are of the considered view that in respect of said loan of Rs.1,00,000/- given by Shri Nalinbhai A.Shah the cases relied upon by ld. DR are not applicable. On the other hand the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above facts nor the Assessing Officer has brought any material on record that the said cheque of Rs.4,00,000/- received by her and deposited in her account was not genuine cheque. Further she has also confirmed of giving loan to the assessee and the said loan was stated to be returned by the assessee by account payee cheque; as contended before us. Considering the above facts and material on record, we hold that the assessee has established not only the creditworthiness and identity of the said loan creditor Smt. Renudevi Makharia but has also established genuineness of the transaction. Hence, we delete the said addition of Rs. 4,00,000/- as the said loan is genuine loan and the assessee has furnished the requisite documents in regard thereto. 14. In view of above, we hold that the assessee has been able to establish with documentary evidence the genuineness of the loan aggregating to Rs.7,50,000/-(Rs.1,00,000 in respect of Nalinbhai Shah, Rs.2,50,000/- in respect of Kirtibhai C.Shah and Rs.4,00,000/- in respect of Smt. Renu Devi Makharia) and therefore we delete the addition of Rs. 7,50,000/- out of the total addition of Rs.10,00,000/- by allowing ground no.1 of the appeal tak ..... X X X X Extracts X X X X X X X X Extracts X X X X
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