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TMI Blog2019 (10) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 20,00,000/- and (iii). Vivek Tracom Pvt Ltd, Rs. 20,00,000/- and interest paid on loan amounting to Rs. 38,59,987/- during the A.Y.2014-15. Since both the issues are interlinked therefore, we adjudicate them together. 3. Brief facts qua the issue are that the assessee is a partnership firm engaged in the business of wholesale dealing in electrical goods. The assessee had e-filed its return of income on 27.09.2014 declaring a total income of Rs. 42,95,100/-. Thereafter, the assessee's case was selected for scrutiny through CASS and notices u/s 143(2) and 142(1) of the Act were issued. During the course of assessment proceedings, for verification of the loans taken by the assessee, summons u/s 131 of the Act, 1961 dated 07.11.2016 were issued to the following parties: Sr. No. Name of Company Loan taken (in Rs.) Interest paid (in Rs.) 1. M/s Divya Electronics Pvt Ltd 6,50,000 2. M/s Maheshwari Merchants Pvt. Ltd. 2,50,000 3. M/s Rajshree Developers Enterpreneurs Pvt. Ltd 2,50,000 4. M/s Vivek Barter pvt Ltd 1,00,000 5. M/s Stardox Vinimay Pvt Ltd 4,99,569 6. M/s Raina Vyapar Pvt Ltd 1,86,344 7. M/s Tanjor Vani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which he replied to were not recorded in the statement as per his version and he was pressurized and forced to admit that he was involved in providing accommodation entries to Banktesh Group in spite of the fact that he specifically opposed the same. He also submitted that the persons sitting around him at the time of recording the statement continuously created pressure on him by passing various comments that search would be conducted against him, his professional career would be ruined, his family would be brought on the road. After all this he was forced to sign the statement without even reading the contents. He stated that he was also forced to write certain sentences in his own handwriting as dictated by the officer and he was also threatened with the fact that he would have to face dire consequences if he retracted his statements. Therefore he submitted that in this situation being mentally upset and confused about what to do he had filed the retraction of his statement after 10 days. Thereafter, it was brought to our notice that in compliance to the summons issued by Assessing Officer u/s 131 of the Act, 1961, Shri Rajkumar Kothari appeared before him on 25.11.2016 and exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year." A bare reading of Section 68 of the Income Tax Act, 1961, suggests that for a sum so credited to be charged to income-tax, as the income of the assessee of the previous year by the A.O., the following have to be present: i) there has to be an amount credited in the books maintained by the assessee ; ii) such credit has to be a sum of money received during the previous year; and iii) either a) the assessee offers no explanation about the nature and source of such credits found in the books or b) the explanation offered by the assessee, in the opinion of the Assessing Officer, is not satisfactory. Thus, it is clear from above that in order to establish the receipt of the sum as unexplained cash credit, as required under Section 68 of the Income-tax Act, 1961, the assessee must satisfy three conditions, viz., (i)identity of the creditor, (ii) genuineness of the transaction, and (iii) creditworthiness of the creditor. All these three conditions laid down as above are being discussed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ITR Acknowledgement and Audited accounts of Vivek Tracom Pvt Ltd is being enclosed at pages 91 to 112 of the paper book. As regards the source of Rs. 20,00,000/- it is submitted that Vivek Tracom Pvt Ltd had received interest on loan from the following companies: a. Samridhhi Investments Co Pvt Ltd Rs. 4,06,110/- b. Chandan Mal Raijada Rs. 90,247/- c. Vineet Enterprises Rs. 19,971/- d. Ujjal Business and Investment Pvt Ltd Rs. 1,80,493/- Apart from the above-mentioned interest received by Vivek Tracom, it had also received an amount of Rs. 10,00,000/- from Amco Electrical Eng Co. on account of refund of loan given to them earlier. In support of the aforesaid, confirmation of accounts of all the said parties are enclosed at pages 117 to 122 of the paper book. Thus, with the submission of these documents showing the source of source of funds and the fact that all the transactions took place through proper banking channels, the genuineness, creditworthiness and identity of the transaction stands duly proven. 2. Paritosh Elcctricals Pvt Ltd We note that the assessee had taken a loan of Rs. 10,00,000/- from Paritosh Electricals Pvt Ltd during the relevant year through pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red all of the said documents submitted before them and they merely relied upon the statement of Shri Raj Kumar Kothari without considering the fact that it was retracted by him before the 1st Class Magistrate ( a copy enclosed at pages 9 to 12 of thep/b) from which it is evident that the DDIT had acted against the principles of law by threatening and coercing the said Shri Raj Kumar Kothari to give false statements. The DDIT had also acted in violation of law by dictating the statements and making the witness (Shri Raj Kumar Kothari) sign on it forcefully without even letting him read the contents of the statement. When these facts were recorded in the retraction statement of Shri Raj Kumar Kothari and submitted before the Ld CIT(A), the Ld CIT(A) erred in completely ignoring all these facts mentioned. Furthermore, the facts as enumerated above clearly show that even otherwise the original statement without taking into account the retraction has no bearing on the present case since all the funds which formed the source of funds for giving the loan to the assessee were existing funds of the loan giving companies and were not new funds introduced to give any alleged accommodation en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... past years. The loans were not received during the year and therefore the A.O. could not have examined their genuineness during the year. Furthermore, the A.O. has nothing to examine their genuineness even otherwise and has simply relied on the retracted statement of Shri Rajkumar Kothari to draw his conclusion. Therefore addition made by Assessing Officer in respect of interest paid is hereby deleted. 11. At the cost of repetition, we state that the assessee had filed with the Ld CIT(A) the bank statements, audited accounts and loan confirmations of the entities concerned. Hence, the assessee has successfully proven the genuineness, identity and creditworthiness of the transactions. In such a scenario, when all the documents have been submitted and the facts of the case clearly explained, there is no room for any doubt with regard to the identity and creditworthiness of the parties and genuineness of the transactions, as noted above, for that we rely on judgment of the Hon'ble Delhi High Court in case of Commissioner of Income-tax v. Lovely Exports P. Ltd reported in [299 ITR 268] wherein it was held as follows: "In the case of a company the following are the propositions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for the Assessing Officer and he cannot go into the realm of suspicion. " On appeal: "Held, dismissing the appeal, that the assessee had filed copies of PAN, acknowledgment of filing Income-tax returns of the companies, their bank accounts statements for the relevant period but had not produced the directors of the companies. The addition made by the Assessing Officer could not be sustained as the primary onus was discharged by the assessee. The Assessing Officer had not investigated whether the modus operandi by the entry operator discussed by the Investigation Wing existed in the case or not. Even the bank statements as claimed by the Assessing Officer revealed that the assessee had received cheques from the shareholders. " 12. We note that the onus of proof is not a static one. Though in section 68 of the Income-tax Act, 1961, the initial burden of proof lies on the assessee yet once he proves the identity of the creditors/share applicants by either furnishing their PAN number or income-tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would ..... X X X X Extracts X X X X X X X X Extracts X X X X
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