TMI Blog2021 (10) TMI 215X X X X Extracts X X X X X X X X Extracts X X X X ..... agency to establish his allegation that impugned lenders were 'paper companies' or found indulged in racket of providing 'accommodation entries'. In absence of such material, we cannot take judicial notice about unfounded allegation in respect of these Lender Companies. Hence, reasons mentioned by the assessing officer in his assessment order, is not sufficient for making the addition under section 68. both the nature and source of the lenders were fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the Lenders. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments, subsequent repayment through banking channel, were placed on assessing officer's record. Accordingly all the three conditions as required u/s 68 of the Act i.e. the identity, creditworthiness and genuineness of the transactions were placed before the assessing officer and the onus shifted to assessing officer to disprove the materials placed before him. Without doing so, the addition made by the assessing officer is based on conjectures and surmises, hence cannot be justifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he material on record, are as follows. The assessee before us is a private limited company. The assessee filed its return of income on 27.09.2011 showing loss at ₹ 84,04,112/-.The assessee s return of income was processed u/s 147 of the Act. Later on assessee s case was selected for scrutiny u/s 143(2) of the Act and assessment was framed u/s 143(3) of the Act on 31.03.2014.During the scrutiny proceeding, the Assessing Officer noted that assessee has shown ₹ 2,85,00,000./- against unsecured loan. On further examination of the documents field, it was noticed by the assessing officer that the said amount of ₹ 2,85,00,000/-has been shown under the names of the following alleged lenders: Sl.No. Name and address of the share applicant unsecured loan 1 Samkit Finlease Pvt. Ltd. 25,00,000 2 Harshratna Finance Pvt. Ltd. 25,00,000 3 Samkit Finance Pvt Ltd. 25,00,000 4 Amaravani Exim Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies and directors. In order to verify the correctness, the AO issued commission u/s 131(l)(d) to the DDIT( Inv.), Unit-II(l), Kolkata on 13.03.2014.In his reply the DDIT( Inv.) submitted that Summons u/s 131 of the IT Act could be served upon none of these lenders but one. The findings of Kolkata Investigation Wing indicated that the said companies are merely paper entities operating mainly for providing accommodation entries. Therefore, she stated that assessee has failed to establish the identity, genuineness and creditworthiness of the transactions of the alleged unsecured loans. Based on these facts, she prayed the Bench that order passed by the assessing officer should be upheld. 6.Per contra, Shri Ramesh Malpani, Learned Counsel for the assessee begins by pointing out that during the assessment proceedings, the assessee furnished account confirmations from all the lenders along with copies of Income Tax Return acknowledgments, Bank Statements and audited Financial Statements of all the lenders. By submitting these documents, the assessee has proved the three ingredients of section 68 of the Act, viz: (i) Identity of the depositor; (ii) Genuineness of the transaction; an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tant lis, is, whether assessee company has satisfied the three ingredients of section 68 of the Act, namely:(i) Identity; (ii) Genuineness; and (iii) Creditworthiness, in respect of Lenders/Creditors. Let us, first of all, we should consult the provisions of section 68 of the Act. Section 68 under which the addition has been made by the Assessing Officer reads as under: 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or 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. The phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this case the legislative mandate is not in terms of the words shall be charged to income-tax as the income of the assessee of that previous year . The Supreme Court while interpreting similar phraseology ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he enquiry and to establish the lack of creditworthiness and mere non-compliance of summons issued by the Assessing Officer under section 131, by the alleged creditors will not be sufficient to draw and adverse inference against the assessee. in the case of six creditors who appeared before the Assessing Officer and whose statements were recorded by the Assessing Officer, they have admitted having advanced loans to the assessee by account payee cheques and in case the Assessing Officer was not satisfied with the cash amount deposited by those creditors in their bank accounts, the proper course would have been to make assessments in the cases of those creditors by' treating the cash deposits in their bank accounts as unexplained investments of those creditors under section 69. 10. We note that assessee has submitted following documents and evidences before the lower authorities, in respect of loan transactions with Lenders: (i) Confirmation of Lender companies explaining source of fund with ledger accounts. (ii) Copy of Income Tax Return of Lender Companies. (iii) Balance Sheet and Profit and Loss account of Lender Companies. . (iv) Bank Statements of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Unit were deputed to serve the summons to the Lenders but except for Prime Vyapaar (P) Ltd., summons could not be served due to incomplete addresses of the lenders. Relevant part of the report reads as under:- To investigate the above commission, inspectors attached with this unit were deputed to serve the summon u/s 131 of the IT Act to the companies as mentioned in our commission. But the inspectors were not succeeded to succeed to serve the summon to the companies mentioned in your commission due to insufficient addresses. Name of the companies which were unable to trace out by the inspectors are listed below with the remarks of the inspectors. Per contra, Ld. AO has reproduced the Enquiry Report purportedly received from Kolkata office in para 8.2 of assessment order as under:- To investigate the above commission, inspectors attached with this unit were deputed to serve summons U/s. 131 of the I.T. Act to the companies as mentioned in your commission. But the inspectors were not succeeded to serve the summon to companies as none of the companies were exist in the given address. In the case of Prime Vyapar Pvt. Ltd, wherein summons U/s. 131 was served, none a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... index numbers were in the file of the Revenue. The Revenue apart from issuing summons under S. 131 at the instance of assessee, did not pursue the matter further. The Revenue did not examine the source of income of said alleged creditors to find out they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue so-called alleged creditors. In those circumstances, the assessee could not do anything further.......... The Coordinate Bench of ITAT, Ahmedabad, in the case of ROHINI BUILDERS (supra) has also taken the view that merely because the summons issued to the creditors could not be served or they failed to appear before the AO, loans taken from those creditors could not be treated to be non-genuine. 12. When a question as to the creditworthiness of a creditor is to be adjudicated and if the creditor is an Income Tax assessee, it is now well settled by the decision of the Calcutta High Court that the creditworthiness of the creditor cannot be disputed by the AO of the assessee but the AO of the creditor. In this regards our attention was drawn to the decision of the Hon'ble High Court, Calcutta in the COMMISSIONER OF I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disputed by the Ld. AO. The Ld. AO has not brought on record any finding or report of investigation agency to establish his allegation that impugned lenders were 'paper companies' or found indulged in racket of providing 'accommodation entries'. In absence of such material, we cannot take judicial notice about unfounded allegation in respect of these Lender Companies. Hence, reasons mentioned by the assessing officer in his assessment order, is not sufficient for making the addition under section 68 of the Act. From the details and documentary evidences furnished by the assessee, the identity, creditworthiness and genuineness of all the lenders are clearly established. Section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its undisclosed income. In the facts of the present case, both the nature and source of the lenders were fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the Lenders. The PAN details, bank account statements, audited financial statements and Income Tax ackno ..... X X X X Extracts X X X X X X X X Extracts X X X X
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