TMI Blog2011 (12) TMI 511X X X X Extracts X X X X X X X X Extracts X X X X ..... to the 8 creditors who were not produced at the time of assessment proceedings. - ITA No 1430/PN/09 - - - Dated:- 23-12-2011 - SHRI I C SUDHIR AND SHRI G.S. PANNU, JJ. For the Appellant: Smt Ann Kapusthama For the Respondent: Shri Nilkhil Pathak ORDER PER G.S. PANNU, AM This appeal by the Revenue is directed against the order of the Commissioner of Income-tax (Appeals)-II, Nashik dated 25.9.2009, which in turn, has arisen from the order of the Assessing Officer dated 30.12.2008 passed under section 143(3) of the Income-tax Act, 1961 (in short the Act ), pertaining to the assessment year 2006-07. 2. The issue raised in this appeal relates to the deletion by the Commissioner of Income-tax (Appeals) of the addition of ₹ 53,75,000/- made by the Assessing Officer on account of unsecured loans. The relevant facts are that the assessee is a company engaged in the business of ginning and pressing of cotton. During the course of assessment proceedings, the Assessing Officer noticed that the assessee had accepted unsecured loans amounting to ₹ 56,75,000/- from 24 individuals, who were mainly agriculturists. The Assessing Officer required the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt payee cheques in the year 2008 when funds became available with the assessee company. The Commissioner of Income-tax (Appeals) further held that without clearly establishing the nexus or collusion of the assessee or their employees in connection with the deposits in the bank accounts, the Assessing Officer could not have drawn any adverse inference in that regard. After analyzing the judicial pronouncements cited by the Assessing Officer as well as the assessee in respect of their respective stands, the Commissioner of Income-tax (Appeals) summed up his findings as follows: In view of the above discussion, it is clear that the appellant was able to establish the ident ity, genuineness and credit-wor thiness of the loan creditors. After considering the totality of the facts, I am of the considered view that the said loans from 23 lenders were reasonably explained by the appellant and the AO is not just if ied in adding the same as unexplained loans. Therefore, the addit ion amounting to ₹ 53,75,000/- made by the AO u/s 68 of the Act is deleted. 4. Before us, the learned Departmental Representative, has submitted that the Commissioner of Income-tax (Appeals) erred i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e revolves around the invoking of section 68 of the Act by the Assessing Officer in order to treat the unsecured loans received from 23 persons amounting to ₹ 53,75,000/- as unexplained. Section 68 of the Act permits an Assessing Officer to treat a sum credited in the account books of an assessee as income if the assessee offers no explanation about the nature and source thereof or the explanation offered by the assessee is not, in the opinion of the Assessing Officer satisfactory. Quite clearly, section 68 of the Act casts an obligation on the assessee to explain the nature and source of the credits appearing in its books of account. It has been judicially well-settled that for the purposes of discharge of such onus, the assessee is required to explain the identity, credit-worthiness of the creditor as also the genuineness of the transaction. 7. In the present case, the Assessing Officer found that the assessee had received loans of ₹ 56,75,000/- from 24 individuals, who were mainly agriculturists. After carrying out a verification exercise, the Assessing Officer treated unsecured loans from 23 persons amounting to ₹ 53,75,000/- as unexplained within the meani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the creditor, the burden shifts on the Assessing Officer to demonstrate that the amounts advanced to the assessee have proximity to the assessee or that such funds are traceable to the assessee itself. The aforesaid proposition is in line with the judgment of the Hon ble Rajasthan High Court in the case of Kanhaialal Jangid v. ACIT (supra) as also 9. In the present case, in so far as 16 persons are concerned, their existence is not in dispute. It is also clear that such persons appeared and admitted advancing of loans to the assessee. It is also clear that such persons explained their sources of income. Apart from blandly dis-believing their capacity, the Assessing Officer has not led any evidence to prove that funds for the impugned credit could be traced to the assessee itself. It will also not be out of place to mention here that all the lenders are agriculturists, who have sold their cotton produce to the assessee company, which is engaged in the business of ginning and pressing of cotton. It is also a stated position that the lenders are not strangers to the assessee company, inasmuch as they are its shareholders. Moreover, it is also found by the Commissioner of Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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