TMI Blog2014 (9) TMI 703X X X X Extracts X X X X X X X X Extracts X X X X ..... have not been proved, their creditworthiness not established and genuineness of transactions not demonstrated - CIT(A) and the Tribunal have committed an error in not properly approaching the issue which fell for their consideration out of the findings rendered by the AO - they have committed substantial error of law in interfering with the order of the AO without any proper basis – thus, the order of the Tribunal is set aside and the matter is remitted back to the AO – Decided in favour of revenue. - ITA No. 1270/2011 - - - Dated:- 16-9-2014 - Sanjiv Khanna And V. Kameswar Rao,JJ. For the Appellant : Mr. Sanjeev Sabharwal, Sr. Standing Counsel/Sr. Advocate with Mr. Ruchir Bhatia, Ms. Swati Thapa, Advocates For the Respondent : Mr. Ved Jain, Advocate with Ms. Pranjal Srivastava, Advocate ORDER V. Kameswar Rao, J. 1. This appeal by the Revenue under Section 260A of the Income Tax Act, 1961 (Act, for short) pertains to assessment year 2005-06 and emanates from order dated June 14, 2011 passed by the Income Tax Appellate Tribunal, Delhi ( Tribunal , for short) in ITA No. 4938/DEL/2010, whereby the Tribunal while dismissing the appeal filed by the Revenue, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were taken by cheque and the amount of loan was repaid by cheque in the next year i.e. FY 2005-06. The assessee sought time to try again in contacting the aforesaid firms. Proceedings were adjourned to 28.12.2007. 6. On 28/12/2007, the assessee filed an affidavit in which he provided the particulars of loan obtained by cheque and also returned by cheques. I have considered the affidavit as well as other submissions made by the assessee in this regard. But, the fact remains that the assessee has not discharged the onus cast upon it to identify the persons and prove their creditworthiness of having advanced the loan to the assessee. This is the requirement of law as per the provisions contained in Sec. 68 of the IT Act, 1961. 7. Hence, reference is invited to the recent decision of Hon ble Delhi High Court in the case of CIT Vs Himalaya International Ltd., in which Hon ble Court has held vide its order dated 30.07.2007 that if the Assessing Officer harbours doubts of the legitimacy of any subscription, he is empowered, nay duty-bound to carry out thorough investigation u/s 68 of the IT Act, 1961. The assessee has to prima facie prove (1) the identity of the credit/subscriber ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee showing receipt and repayment of loans, confirmation from the assessees bank for the repayment of loans and other supporting documents. 13. In a recent Judgment, Honorable Delhi High Court in the case of CIT v/s Dwarkadhish Investment Pvt. Ltd. ITA 9011/2010 dated August 2, 2010 (2010) 6 Taxmann.com 84 (delhi) (A Copy of the order is attached herewith as Annexure IV) held that though in Section 68 proceedings, the initial burden of proof lies on the assessee yet he once proves the identity of the creditors/share applicants by either furnishing their PAN or Income Tax assessment no. and shows the genuineness of transaction by showing money in his books either by way of account payee cheque or by draft or by any other mode than the onus of proof would shift to the revenue. It was also held that just because creditor/share applicant could not be found at address given, and it would not give Revenue right to invoke section 68. Moreover, it was held that it is a settled law that the assessee need not to prove the source of source . 14. In this case of the assessee though it is not able to provide the PAN of the Parties who have lent the money but had been able to pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO is not upheld. 7. Aggrieved by the order dated September 01, 2010 passed by the CIT(A), the Revenue filed ITA No. 4938/Del/2010 before the Tribunal i.e. Income-Tax Appellate Tribunal, New Delhi, wherein the issue raised by the Revenue was that whether the Ld. CIT(A) erred in deleting the addition of ₹ 28,00,000/- on account of unexplained receipts of unsecured loans. 8. The Tribunal vide its order dated June 14, 2011, dismissed the appeal of the Revenue while justifying the findings found by the CIT(A) in its order. The relevant finding of the order passed by the Tribunal are hereunder: 6. We have heard the rival contentions in light of the material produced and precedent relied upon. We find that assessee has duly submitted that the loans were received by the cheque and were paid in subsequent assessment years and necessary, evidence in this regard has also been submitted in the shape of the affidavit, bank statement. In these circumstances, we find that Ld. Commissioner of Income Tax (Appeals) s action in deleting is justified. Hence, we do not find any infirmity or illegality in the order of the Ld. Commissioner of Income Tax (Appeals) and hence, we uphold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee with regard to the transactions. He would further state that the genuineness of the loan of ₹ 42,05,000/- which was also arranged by Mr. Bharat Kaushik has been accepted by the Assessing Officer and there was no reason for the Assessing Officer to reject loans for ₹ 28 lakhs. 12. Having heard the learned counsel for the parties, before we deal with the rival submissions, the position of law is as under: 13. Section 68 of the Income Tax Act, 1961 ( Act in short), empowers the Assessing Officer to treat the income credited in the books of accounts of the assessee for any previous year if there is no plausible explanation by the assessee about the nature and source of such income or if the explanation given is not satisfactory. Once it is explained, it is for the Assessing Officer to consider the same and form an opinion about the genuineness of the whole transactions. Such an opinion must be based on cogent evidence i.e. material produced by the assessee. In A.Govinda Rajulu Mudaliar Vs. CIT, [1958] 34 ITR 807 (SC), it was held that it is not necessary for the department to adduce evidence to show from which sources the income was derived and as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng him. His presence definitely would have thrown light on the identity of the parties. We also note, at the same time, the Assessing Officer should have invoked Section 131 of the Act to ensure his presence. The parties who had given loans of ₹ 28 lacs namely Sheela Textile and Rajesh Upadhyaya Co. were not produced. That apart, we note the Account Numbers being 51706, 51921 are in close proximity and have been opened around the same time. It is surprising that the bank had not even cared to seek the complete details of the parties at the time of the opening of the account like their PAN Number. It is also not disputed by the learned counsel for the assessee that the assessee had not paid any interest to the parties for advancing such huge loans. It has also come on record that the parties were not known to the assessee so as to oblige the assessee by advancing interest free loan of substantial amounts. The purpose for which the loans were taken, have not been spelt out by the assessee in his affidavit or otherwise. The Paying back of the so called loans by way of an Account payee cheque is not conclusive, moreso, if the aspects narrated above, are considered cumulative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proved. Other documents showing the genuineness of transaction could be the copies of the shareholders register, share application forms, share transfer register, etc. 14. As far as creditworthiness or financial strength of the credit/subscriber is concerned, that can be proved by producing the bank statement of the creditors/subscribers showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. This judgment further holds that once these documents are produced, the Assessee would have satisfactorily discharge the onus cast upon him. Thereafter, it is for the AO to scrutinize the same and in case he nurtures any doubt about the veracity of these documents to probe the matter further. However, to discredit the documents produced by the Assessee on the aforesaid aspects, there has to be some cogent reasons and materials for the AO and he cannot go into the realm of suspicion. 18. The CIT(A) and the Tribunal, in our view, have committed an error in not properly approaching the issue which fell for their consideration out of the findings rendered by the Assessing Officer. In such a situation, it has to be held that they have committed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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