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2015 (4) TMI 675 - ITAT MUMBAI

2015 (4) TMI 675 - ITAT MUMBAI - TMI - Addition of cash credits u/s 68 of the Income Tax Act, 1961 - Failed to prove credit worthiness of creditors - Disallowance of Interest expenses - Held that:- We notice that the assessee has discharged the initial burden of proof placed upon it u/s 68 of the Act by proving the credit worthiness of all the creditors. As pointed out by Ld CIT(A), the quantum of income declared in the income tax returns is not the sole factor that determine the credit worthine .....

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ses and conjectures without rebutting any of the evidences furnished by the assessee. Hence, we do not find any reason to interfere with the order passed by the Ld CIT(A) in AY 2008-09.

We have earlier noticed that the assessing officer has followed his reasoning given in the assessment order passed for AY 2008-09 to make the addition of creditors u/s 68 of the Act in this year also. However, the Ld CIT(A) has considered the financial statements furnished by the assessee in respect of .....

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on that issue also. - Decided against the revenue. - I.T.A. No.5066/Mum/2011, I.T.A. No.4992/Mum/2012 - Dated:- 31-3-2015 - S/Shri B.R.Baskaran And Sanjay Garg JJ. For the Appellant : Shri Goll Srinivas Rao For the Respondent : Shri R C Jain and Shri Ajay Daga ORDER Per B R Baskaran, AM: Both the appeals filed by the revenue are directed against the orders passed by Ld CIT(A)-26, Mumbai and they relate to the assessment years 2008-09 and 2009-10. Since identical issue is urged in both the appea .....

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rores as on 31.3.2008 as against ₹ 18.03 crores as on 1.4.2007. Hence the AO called for details of fresh loans obtained during the year relevant to the AY 2008-09. The assessee filed confirmation letters obtained from the loan creditors, their respective income tax returns and bank statements relevant to the loan transactions. The AO examined the income tax returns filed by the respective creditors and noticed that each of them is disclosing income at a low level, which is no commensurate .....

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he similar way, the AO examined the income tax returns and bank statements of all other creditors and came to the identical conclusions. The names of the creditors, whose income tax returns were examined by the AO, are given below:- (a) Chintamani Exports (b) B.Ashok Kumar & Co. (c) Yogi Diam (d) Vaishali Gems On examination of the above said creditors, the AO noticed that there were certain common features between them, i.e., they shared same address, there were rotation of funds between th .....

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different ways. On one side, the assessee can bring back his income from undisclosed sources in the form of loans. The assessee will debit interest and claim the same as expenditure and also deduct tax at source and issue a certificate accordingly. On the other side, the creditors will enable utilisation of their bank accounts and introduce the money, belonging to the assessee, in the midst of several other monetary transactions. Accordingly, transactions are structured, conveniently, and for m .....

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of funds given to the assessee stand explained through the financial statements. The Ld CIT(A) also called for a remand report from the AO, but the assessing officer failed to submit the remand report on the financial statements filed by the assessee. Accordingly, the Ld CIT(A) came to the conclusion that the assessee has discharged the primary burden placed upon the assessee u/s 68 of the Act and the assessing officer has failed to rebut the same. Accordingly, the Ld CIT(A) deleted the assessme .....

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im in the appeal relating to AY 2008-09 and consequently deleted the interest disallowance also. 7. We heard the parties and perused the record. It is well settled proposition that the initial burden of proof to prove the cash credits is placed upon the assessee, i.e., the assessee is required to discharge three main ingredients in respect of the cash creditors, viz., the identity of the creditor, the genuineness of the transactions and credit worthiness of the creditor. If the assessee discharg .....

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e genuineness of the loan transactions also stand established. The AO has only doubted about the credit worthiness of the creditors. 8. However, a perusal of the assessment order would show that the assessing officer has doubted about the credit worthiness only on the reasoning that the income declared by each of the creditors was lower and disproportionate to the loan amount given by them. It is pertinent to note that the assessing officer did not examine the financial statements like Balance S .....

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tial piece of evidences contrary to the claim of the appellant. Further, I find that Ld AO has wrongly presumed that appellant has not discharged its onus cast upon it in furnishing required evidences of credits appearing in its books of account. Before coming to the individual reasoning given by the AO in the assessment order, here it is pertinent to mention that appellant has produced 4 cash creditors for their examination and Ld AO has examined them but could not trace out any substantial evi .....

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that his decision is merely on the basis of presumption ignoring the fact that same issue was also under active consideration by the CIT-15, who had issued a notice u/s 263 in respect of AY 2006-07 vide notice no. CIT-15/263/09-10/185 dated 14.7.2009 and while issuing notices he had categorically mentioned about the cash credits, which was remained to be enquired by the Assessing officer, but after receipt of evidence and detailed written submission of the appellant, Ld CIT-15 had dropped the pr .....

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Act. He has further observed that the assessing officer has not brought any material on record to show that the explanation furnished was, in any manner, unsatisfactory or there was no reliable evidence with the assessee. Accordingly, the Ld CIT(A) has given a definite finding that the evidences filed by the assessee remained un-rebutted. Accordingly, by ITA. N o.5 0 6 6 / M um/ 2 0 1 1 and 4 9 9 2 / M / 2 01 2 6 placing reliance on the following case law, the Ld CIT(A) held that the addition ma .....

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s contained in the written submission vide para 8 thereof partywise, I find clear that the A.O has merely disbelieved the credit ignoring the fact of complete discharge of primary onus which lay upon the appellant. Having regard to the papers placed in the Paper Book which was submitted in the course of appeal hearing & referred to by the appellant in the written submissions, I am convinced that the appellant has fully discharged the primary onus which lay upon it. In the course of appeal he .....

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e above creditors out of the cash flow with them which mainly generated from reaslisation of sundry debtors and at the same time they obtained credit facilities for a longer period from their suppliers. The Balance sheet of these loan creditors speak for themselves. Moreover, the AO erred in holding that the capacity to advance loan emanates only from the income that is ultimately disclosed in the return of income but the same also flows from the business which in the present case is from tradin .....

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ations made by Ld CIT(A) would show that the assessing officer did not bring any material on record to rebut the evidences furnished by the assessee:- ….On a perusal of the order sheet (page 4, 5 & 6) which is annexed to the assessment order, it is seen that the A.O has done nothing to rebut the evidence already placed on record by the appellant. He has not even put any leading questions to these loan creditors which establish beyond any shadow of doubt that the A.O was satisfied abou .....

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mp; 2007-08. Further certain creditors did not advance fresh loans during the year under consideration. The Ld CIT(A) also noticed that the assessee has furnished primary evidences in respect of the remaining creditors also in its written submissions. 12. Accordingly the Ld CIT(A) came to the conclusion that the assessee has established the genuineness of the transactions and the credit worthiness of all the loan creditors. The AO had reached certain conclusions in paragraph 22 of the assessment .....

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