TMI Blog2018 (8) TMI 2007X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer to disprove the same. Merely because these lender companies have done meager business or have declared meager income, the same cannot be a ground to disbelieve their creditworthiness especially when their respective balance sheets show sufficient capital and reserves to advance such loans to the assessee company. The assessee in the instant case , in our opinion, has proved the identity and creditworthiness of the loan creditors and genuine of the transaction. Since the Assessing Officer in the instant case has accepted the identity of the loan creditors and genuineness of the transaction in the letter addressed to the assessee and the concerned Assessing Officers of the loan creditors while giving the report along with their profit and loss account and balance sheet have not given any adverse finding about the creditworthiness of the loan creditors, therefore, considering the totality of the facts of the case, we are of the considered opinion that the assessee in the instant case has discharged the burden cast on it by proving all the three ingredients of provisions of section 68 - Grounds raised by the assessee are allowed. - ITA No.27/RPR/2018 - - - D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that investor companies have submitted documents i.e. audited profit and loss account, bank statement etc. but failed to provide complete details of source of investment and in the statement, the directors have given only the names of the investor companies and amount invested by them in the source company from which the loan has been advanced to the assessee company, which creates serious doubts on the genuineness and clearly indicates that these are nothing but paper/ briefcase/ shell companies which have acted as a part of an artifice to facilitate the introduction of funds into the company under scrutiny. He, therefore, issued a show cause notice dated 22.12.2016 asking the assessee to explain as to why addition should not be made u/s 68 related to unsecured loan received during the year from the 20 companies since creditworthiness and genuineness of the investor companies are not established satisfactorily. 3. The assessee explained that the in response to the letters received u/s 131(1)(d), the companies have confirmed to have given the loan to the assessee company. The documents in respect to those companies have already been received by the Assessing Officer and also all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer had issued commission u/s 131(1)(d) to the Assessing Officers of the respective companies who have examined the directors of those companies and had submitted the report. The lender companies have accepted to have given the loan. Therefore, by merely alleging that the lender companies are shell companies and do not have the creditworthiness is not sufficient to make the addition especially when the Assessing Officer himself has held that the assessee proved the identity of the loan creditors and genuineness of the transactions. It was further submitted that the assessee has paid interest at the rate of 12% per annum on the unsecured loan and tax has been deducted at source on the interest payment and has been duly deposited to the credit of the Central Government. Relying on various decisions assessee submitted that the addition made by the Assessing Officer should be deleted. 6. However, the ld. CIT(A) was also not satisfied with the arguments advanced by the assessee and upheld the action of the Assessing Officer in making the addition on account of unsecured loan and interest thereon. While doing so, he observed that the transferring of fund through banki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings u/s 131(1)(d), the lender companies have filed various documents before their respective Assessing Officers such as loan confirmations, acknowledgement of IT returns, complete balance sheet, copy of bank statement depicting the entries of loan given to the assessee etc. Further, the statements of the directors of the lender companies were recorded by the respective Assessing Officers in which they have categorically confirmed to have given loan to the assessee. He submitted that in the report of the respective Assessing Officer, there is no reservation expressed by any of the Assessing Officer about the identity, genuineness and creditworthiness of the lender companies and the transaction with the assessee. He submitted that the assessee has discharged the burden cast upon it by providing the identity and creditworthiness of the loan creditor and the genuineness of the transaction. The burden has shifted to the Assessing Officer. Although there was a long gap between the reports of the concerned Assessing Officers of the lender companies and the assessment order passed, however, there was no further enquiry by the Assessing Officer to disprove the various documents furnishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been established. 11. Referring to the decision of the Hon ble Delhi High Court in the case of CIT vs. Kinetic Capital Finance Ltd. Vide ITA No.87/2007 order dated 02.09.2011, he submitted that the Hon ble High Court while upholding the order of the Tribunal held that the Tribunal has correctly appreciated the position in law which is that when an unexplained credit is found in the books of account of an assessee the initial onus is placed on the assessee. The assessee is required to discharge this initial onus. Once that onus is discharged, it is for the revenue to prove that the credit found in the books of account of the assessee is the undisclosed income of the assessee. Once the assessee has discharged that initial onus, the assessee is not required to prove the genuineness of the transaction as between its creditor and that of the creditors source of income i.e. the sub-creditors. He also relied on the following decisions :- (i) CIT vs. Metachem Industries, (2000) 245 ITR 160 (MP). (ii) CIT vs. Abdul Aziz, (2012) 251 CTR 58 (C.G.). (iii) DCIT vs. Rohini Builders, (2002) 256 ITR 360 (Guj.). (iv) CIT vs. Jai Kumar Bakliwal, (2014) 366 ITR 217 (Raj.). (v) A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officers have not enquired about the creditworthiness of the lender companies and have merely submitted a report along with the copies of their confirmations, bank statement, audited profit and loss account and the statements of the concerned directors which were recorded u/s 131(1) of the I.T. Act. Since the assessee could not prove the creditworthiness of the loan creditors, the Assessing Officer, invoking the provisions of section 68, made the addition of ₹ 3,48,50,000/- and the interest thereon at ₹ 37,94,738/- which has been upheld by the ld. CIT(A). It is the submission of the ld. counsel for the assessee that the assessee has proved the initial burden cast on it by providing the requisite details and the Assessing Officer has accepted the identity and genuineness of the transactions but is only doubting the creditworthiness of the loan creditors. It is also his submission that when the assessee has submitted the requisite details proving the creditworthiness of the loan creditors and those loan creditors have appeared before their respective Assessing Officer and have confirmed to have given the loan and their statements were recorded by their respective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he directors in their statements recorded u/s 131 have confirmed to have given loans to the assessee company and their bank statements, PAN numbers, audited accounts were also forwarded by the Assessing Officers of the lender companies to the Assessing Officer of the assessee. There is no adverse finding given by the concerned Assessing Officers of the lender companies. We further find that from the date of receipt of the report from the concerned Assessing Officers till the date of finalizing of the assessment order, the Assessing Officer has not made any further efforts to find out that the balance sheets showing creditworthiness of the lender companies and the transactions made through banking channel are false or untrue. The assessee in the instant case, in our opinion, has discharged the onus cast on it and nothing has been brought on record by the Assessing Officer to disprove the same. Merely because these lender companies have done meager business or have declared meager income, the same cannot be a ground to disbelieve their creditworthiness especially when their respective balance sheets show sufficient capital and reserves to advance such loans to the assessee company. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfied with the quality of the evidence placed before it. We find no perversity in the findings, notwithstanding the stray sentence in its order pertaining to service of depositors. In these circumstances, we are not persuaded to upset the findings returned by the Tribunal. In our view no substantial question of law arises for our consideration. The appeal is, accordingly, dismissed. 19. We find the Hon ble Chhattisgarh High Court in the case of Abdul Aziz (supra) has held that where the ld. CIT(A) and the Tribunal has rendered a finding of fact that assessee has proved creditworthiness of creditors, no addition can be made u/s 68, such findings are not liable to be interfered in appeal. The relevant observation of the Hon ble High Court reads as under :- 19. In the case on hand, the CIT (A) has examined all the statements and depositions made by the creditors including their source of income and it was found that the A.O. without having any material on record, contrary to the statements and affidavits filed by the creditors taken a stand that the creditors have failed to prove their creditworthiness and, as such, the transaction was not genuine. The A.O. has not made any ot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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