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M/s. Rajsadan Overseas Sales (P) Ltd. Versus Deputy Commissioner of Income-tax, Siliguri

2015 (11) TMI 175 - ITAT KOLKATA

Unsecured loans added as unexplained cash credit u/s. 68 - Held that:- AO had not taken meagre bank balances as the sole criterion for judging creditworthiness of these loan creditors but creditworthiness of the loan creditors is based on examination of all the relevant facts emanating from their I. T. Returns, Computation of total income, Balance Sheets, Bank Accounts statements recorded u/s.131 etc. The contention of the Ld. Counsel for the assessee that necessary documentary evidences in supp .....

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creditworthy enough to advance the loan amounts. If the assessee has not been able to prove the creditworthiness of the loan creditors, the cash credits are liable to be treated as unexplained and added back under u/s.68 of the Act. To sum up, the creditworthiness of the loan creditors must be proved beyond doubt by the assessee to substantiate the claim of receipt of unsecured loan from them. In this case, the assessee has failed to prove the creditworthiness of the five loan creditors and ther .....

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43(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) for AY 2008-09 vide its order dated 29.12.2010. 2. The only issue in this appeal of assessee is against the order of CIT(A) confirming the addition of ₹ 7,00,000/- made by AO on account of unsecured loans as unexplained cash credit u/s. 68 of the Act. For this, assessee has raised following sole ground: For that on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in confirming the additi .....

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₹ 1,30,000/- ii) Madhulika Sharma ₹ 1,50,000/- iii) Vandana Sharma ₹ 6,00,000/- iv) Subhas Jain ₹ 2,00,000/- v) Phoolchand Jain ₹ 1,00,000/- vi) Phoolchand Sarwogi ₹ 1,00,000/- vii) Softy Jain ₹ 1,00,000/- viii) Pannadevi Jain ₹ 2,00,000/- On verification of income tax returns, balance sheet and bank statement of the loan creditors filed by the assessee, the AO observed that the loan creditors mentioned in Sl. No. (i) to (iii) are the family membe .....

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n the same day cheques were issued to the assessee. Hence, the AO observed that the sources of income of these loan creditors do not justify their creditworthiness. He also observed that the income shown in their returns does not justify and substantiate their claim of advancing interest free loans to the assessee company. It was also observed that there were no substantial transactions made in their bank account during the year. Hence, the claim of advancing interest free loans by these five lo .....

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n of the Ld. AR and also perused the assessment order. As mentioned in the assessment order, the assessee company had claimed receipt of unsecured loan to the tune of ₹ 15,80,000/- from eight loan creditors. On perusal of the documentary evidences produced by the assessee, the Assessing Officer found the claim of receipt of unsecured loans from three loan creditors viz. Amar Singh Sharma, Madhulika Sharma and Vandan Sharma out of eight loan creditors as genuine. The Assessing Officer found .....

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ourse of appellate proceedings documentary evidences relating to the unsecured loan from five loan creditors Phool Chand Jain, Panna Devi Jain, Subhash Jain, Softy Jain and Phool Chand Saraogi (HUF) produced before the Assessing Officer were submitted along with the written submission dated 15.03.2012. On examination of the Bank Accounts of these loan creditors it is found that in all occasions equivalent amounts of cash were deposited in the Bank Accounts on the same day cheques were issued to .....

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ccounts from which loan cheques were issued to the assessee company. There were no substantial transactions made in their Bank Accounts during the whole year. The claim of advancing interest free loans by these five loan creditors to the assessee company is not acceptable in view of the fact that they are not financially well off and their creditworthiness is not proved beyond doubt. The Assessing Officer has rightly highlighted the incongruities and contradictions in the statements recorded u/s .....

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ansaction e.g. as in Shankar Industries Vs. CIT (Cal) 114 ITR 689, Nanak Chandra Laxman Das Vs. CIT (Cal) 140 ITR 151, Hari Chand Virender Paul Vs. CIT (P&H) 140 ITR 148, CIT Vs. Biju Patnaik (SC) 160 ITR 674, ITO Vs. Sky jet Aviation (P) Ltd. (ITAT, Ahd- TM) 71 ITD 95, CIT Vs. Precision Finance P. Ltd. (Cal) 208 ITR 465, Oriental Wire Industries (P) Ltd. Vs. CIT (Cal) 131 ITR 688, Malabar Agricultural Co. Ltd. Vs. CIT (Ker) 229 ITR 548, Roshan De Hatti Vs. CIT (SC) 107 ITR 938, C. Kant & .....

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n be assessed even if transaction is through cheques as held in CIT Vs. Precision Finance P. Ltd (Cal) 208 ITR 465, K.C.N. Chandrasekhar Vs. ACIT (ITAT, Bang) 66 TTJ 355 and CIT Vs. United Commercial & Industrial Co. (P) Ltd. (Ca!) 187 ITR 596. In the instant case, the assessee has failed to prove the creditworthiness of these five loan creditors. It is necessary for the assessee to prove prima-facie the genuineness of the transactions with identity of the creditor and' his capacity. Onl .....

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ness of these five loan creditors and genuineness of the transactions. The contention of the AR that the very fact that statements u/s.131 were not recorded in the case of Smt. Softy Jain, Smt Panna Devi Jain and Phool Chand Saraogi (HUF) implies that the A.O. was satisfied with their creditworthiness and genuineness of the loan transactions is not acceptable. The A.O. was courteous enough not to call the lady members of the family of Shri Phool Chand Jain and Shri Subhash Jain. It may be clarif .....

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on examination of all the relevant facts emanating from their I. T. Returns, Computation of total income, Balance Sheets, Bank Accounts statements recorded u/s.131 etc. The contention of the AR that necessary documentary evidences in support of the claim of receipt of unsecured loan from the loan creditors were produced before the A.O. and the assessee has discharged its duty properly and therefore it was for the A.O. to verify the documents before treating the loans as not genuine is also devoi .....

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ctions. If the assessee has not been able to prove the creditworthiness of the loan creditors, the cash credits are liable to be treated as unexplained and added back under u/s.68 of the I.T. Act, 1961. Some of the case laws are relating to share application money and are not relevant. The AR has not cited any such case law where even without the satisfaction of the Department in respect of the creditworthiness of the loan creditors the addition of unexplained cash credit u/s.68 of the Act has b .....

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. and the addition of ₹ 7,00,000/- as unexplained cash credit u/s.68 of the I.T. Act, 1961 is confirmed. Aggrieved, assessee is now in appeal before us. 5. We have heard rival submissions and gone through facts and circumstances of the case. We find from the facts of the case that the assessee has failed to prove the creditworthiness of these five loan creditors. It is necessary for the assessee to prove prima-facie the genuineness of the transactions with identity of the creditor and his .....

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d in the Bank Accounts on the same day cheques were issued to the assessee. Due to the deposit of equivalent amounts of cash just on the day of issuance of cheques to the assessee, the genuineness of the transactions comes within the sphere of doubt and is therefore not proved beyond doubt. The sources of income of these loan creditors do not justify their creditworthiness. The income shown in their Returns does not justify and substantiate their claim of advancing interest free loans to the ass .....

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ncongruities and contradictions in the statements recorded u/s.131 of Shri Phool Chand Jain and Shri Subhash Jain. The inference drawn by the Assessing Officer of these five loan creditors not being creditworthy on the basis of analysis of the documentary evidences produced before him and the incongruities noticed in the statements recorded u/s.131 of Shri Phool Chand Jain and Shri Subhash Jain is justified. We find that the AO has tabulated the information in relation to bank statements filed b .....

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eposit of ₹ 2,00,000/- on 29.01.2008 Transfer of ₹ 25,000/- and ₹ 1,75,000/- by cheque No. 110024-25 on 29.01.2008 Phool Chand Jain No. 1276395847 of Central Bank of India, Siliguri Branch Cash deposit of ₹ 1,00,000/- on 24.01.2008 Transfer of ₹ 1,00,000/- by cheque No. 079229 on 24.01.2008 Panna Devi Jain No. 1276417603 of Central Bank of India, Siliguri Branch Cash deposit of ₹ 2,00,000/- on 24.01.2008 Transfer of ₹ 2,00,000/- by cheque No. 121566 on 2 .....

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