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TMI Blog2021 (12) TMI 811X X X X Extracts X X X X X X X X Extracts X X X X ..... sment proceedings, assessing officer observed that assessee has taken unsecured loans from the following parties: S. No. Name of the party Amount (Rs.) 1. Euro Concept Pvt. Ltd. 2,32,00,000/- 2. Gangotri Exim Pvt. Ltd. 25,00,000/- 3. Shree Bharve Exports Ltd. 88,00,000/- Total 3,45,00,000/- 2.2 The assessee was asked to provide the details of the parties from whom unsecured loans were taken along with confirmations. In response assessee submitted the confirmations and financials of the unsecured lenders wide letter dated 8.11.2016. After perusal of the balance-sheet submitted by the assessee, AO observed that all the lenders have scarce share capital, reserve and surplus, no borrowed funds and did not show any income in their respective return of income. However, he acknowledged that all the lenders have huge trade payables and they've advanced short terms loans to the assessee. In order to verify the identity, credit worthiness and genuineness of the transaction, he issued summons under section 131 of the Act and served on all the lenders requiring their personal attendance. None of the lenders appeared before the assessing officer and subsequently as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has taken the genuine loan from above parties, hence provision of section 68 of the Act is not attract is present case as the assessee has proved the identity, creditworthiness and genuine." 3. After considering the above submissions, assessing officer rejected the submissions of the assessee by relying on the decision of hon'ble Delhi High Court in the case of Nipun Builders & Developers Private Limited (ITA 120/2012), NR Portfolio Private Limited (ITA 1018/2011) and Nova promoters and Finlease (P) Ltd (ITA 342/2011). The assessing officer as observed in show cause notice on the financial strength of the lenders, he completed the assessment with the same observations as made in show cause notice and made the addition under Section 68 of the Act, the whole unsecured loan taken by the assessee during this assessment year to the extent of Rs. 345,00,000/-. 4. Aggrieved assessee preferred an appeal before CIT (A) - 21, Mumbai. Before Ld. CIT(A) assessee filed a detailed submission, for the sake of brevity it is reproduced below: "4. At the outset, we would like to submit that the said loan taken by the appellant from the said three entities are genuine loan and the appellant had s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irmations for the same and had also submitted Copy of Financial Statements and Acknowledgement of Return of Income filed of the Said parties, which further substantiates the identity of the persons from whom loan has been received. The Bank Statement of the said parties were also submitted, on perusal of same, it is established that the said party was having sufficient balance to give the said loan which also establishes the creditworthiness of the said party. In view of above, your honour will appreciate the fact that the appellant. as a businessman, had submitted all the details which justifies the genuineness of the said loans received from the said four entities. The appellant had duly discharged its primary onus to justify the genuineness of the said loan transactions. We would like your honour to also appreciate the fact that the Learned A.O. has not pointed out any discrepancy in the details submitted by the appellant. 7. In view of the above submission, we would like to submit that the provision of Section 68 of the Income Tax Act, 1961 cannot be invoked in the present case of the appellant as the appellant duly discharged its primary onus to substantiate the genuinenes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Oasis Hospitalities (P.) Ltd. The summary of the case is as under: "Section 68 of the Income-tax Act, 1961 - Cash credits - Whether if Assessing Officer doubts genuineness of investors, who had purportedly subscribed to share capital of assessee-company, he may ask assessee into explain nature and source of those sums received by it on account of share capital and burden of proof would be on assessee to provide nature and source of those receipts - Held, yes - Whether this burden of proof can be discharged by assessee by producing PAN card and bank statement of creditor/subscriber showing that it had sufficient balance in its accounts to enable it to subscribe to share capital and thereafter, it is for Assessing Officer to scrutinize same and, in case he nurtures any doubt about veracity of those documents, to probe matter further - Held, yes - Whether opinion of Assessing Officer, for not accepting assessee's explanation as being not satisfactory, has to be based on proper appreciation of material and other attending circumstances available on record - Held, yes" 11. We would also like to rely upon the decision of Honble Agra Tribunal in the case of S.K.Jai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount or in other words, source of the source. Your appellant has discharge its obligation to explain the genuineness of the parties. Rather as a businessman, what he could do, has been done. 15. The Learned AO was in possession of the PAN of the parties and their bank details. The learned AO could have issued summons u/s 131/133(6) to bankers of such parties to get the present whereabouts of the said parties. The learned AO failed to disprove the contentions submission. 16. Further, your honour will appreciate the fact that since all the payments have been made through account payee cheque, all the parties are having Bank Accounts, and your honour will appreciate that Banks also have strict KYC rules & regulations for openinq a Bank Account. Thus, it can be said that all the parties from whom purchases have been made are existent, which by any means cannot be doubted. 17. The Learned AO failed to appreciate the fact that, it is the duty of the AO to enforce attendance of a witness if his evidence is material. Thus, it the AO does not exercise his power to call the witness and examine him, he cannot treat the deposit in the name of the witness as assessee's suppressed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee filed during the course of assessment proceedings all the details like loan confirmation letters from the creditors, PAN of the creditors, bank statement of the creditors and the assessee, form no. 16 qua TDS on Interest, profit and loss account and balance sheet including the ledger account of the creditors and the ITR etc. Moreover, the loan creditors also appeared before the A.O. in response to notice issued under section 133(6) of the Act and filed confirmations before the AO that loans were actually given to assessee. From all these details and facts on record, we find that the assessee has discharged its onus cast upon it by filing all the necessary details as called for by the AO to corroborate the transactions of borrowing the money and thereby satisfied all the three ingredients i.e. creditworthiness of the creditors, genuineness of the transactions and creditworthiness of the creditors have been established by the assessee. So much so that the loan creditors in response to the notice issued under section 133(6) appeared before the AO and confirmed the that they have given interest bearing loans to the assessee on which TDS have been deducted and paid and form n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of witness as assessee's income. The catch- note of the said judgment is reproduced as under: Section 131 of the Income-tax Act, 1961 /Corresponding to section37(1) of the Indian Income-tax Act, 1922] - Discovery, production of evidence, power regarding - Assessment ear 1948-49 - While completing assessment ITO noticed a credit entry in name of 'B' in books of assessee HUF - Assessee was given dasti summons to produce "B' but 'B' refused to accept it - No steps as provided under order/XVI, rule 10 of Civil Procedure Code, 1908, for appearance of witness were taken by ITO for appearance of "B' Whether, on facts, income-tax authorities were not justified in fastening blame at door of assessee and disbelieving his version that amount entered in his account books was deposit made by "B' on ground that former had failed to produce latter - Held, yes Whether, therefore sum credited to account of B' was not income of assessee and, as such, was not liable to assessment under Act - Held, yes Similar view has been held by Hon. Allahabad High Court in the case of Munnala/Murlidhar v. Commissioner of Income Tax [1971] 79 ITR 540. 23. We would like to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d creditors were income-tax-assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further. 26. We would further like to rely on the decision of High Court of Delhi in the case of Commissioner of Income Tax vs. Shiv Dhooti Pearls & Investment Ltd. the summary of case is as follows : Section 68 of the Income-tax Act, 1961 - Cash credit (Burden of Proof) - Assessment year 1994-95 - Whether in terms of section 68, assessee is liable to disclose only source(s) from where he has himself received credit and it is not burden of assessee to show source(s) of his creditor nor is it burden of assessee to prove creditworthiness of sources) of sub-creditors - Held, yes - Whether, however, Assessing Officer has ample "freedom' to make inquiry 'not only into sour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and considering the totality of the circumstances of the case and submissions made by the AR. I have gone through the decisions relied upon by the AR and the Remand Report of the AO and also the documents filed by the AR supporting the genuineness of the loan transactions, identity, source and the creditworthiness/capacity of both the parties. In the case of the appellant, all the necessary details regarding loan have been field before the AO, the lender has confirmed the loan transaction. It can also be seen that in the case of Nikuni Eximp (supra), the Hon'ble High Court held that merely on the basis of suspicion because the sellers and canvassing agents have not been produced before the AO, shall not result in addition and in the case of M/s Reliance Corporation v. ITO, the ITAT, Mumbai has under the similar facts of the present case deleted the addition made u/s.68 of the Act. Nothing contrary has been brought on record by the AO." 6.10 In view of facts and circumstances of the case, the decision of Hon. Gujarat High Court decision in case of Commissioner of Income Tax v. Apex Therm Packaging (P.) Ltd [2014] 222 Taxman 125, wherein it has been held that Where name, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan transactions. He heavily relied on the findings of Ld. CIT(A). 8. Considered the rival submissions and material on record. We notice that assessee has taken unsecured loans from the 3 parties and submitted all the relevant documents in support of proving the identity, creditworthiness and genuineness of the transaction. It is fact on record that assessee has submitted relevant confirmations from all the parties and the transactions involving unsecured loans from the above said parties are only through banking channels. The assessing officer does not deny the fact that assessee has submitted all the relevant documents and also the transactions were only through banking channels. However, in assessment order he observed that all the 3 lenders does not have sufficient profit and means of share capital to lend the money to the assessee, however he acknowledges that all the 3 lenders have sufficient funds by means of sundry creditors which was generated through business operation. It is fact on record that all the 3 lenders have sufficient means to lend the money to the assessee and also assessee has filed the confirmations from all the parties. However, assessing officer further ..... X X X X Extracts X X X X X X X X Extracts X X X X
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