TMI Blog2022 (4) TMI 1387X X X X Extracts X X X X X X X X Extracts X X X X ..... t the sum from his personal savings to buy the immovable property. Unexplained unsecured loan u/s.68 in respect of loan taken from lenders - The assessee though has been able to establish the identity of creditors / lenders, but has not been able to establish their creditworthiness. The Courts have taken a consistent position that the assessee is expected to establish proof of identity of creditors, capacity of creditors and genuineness of creditors in order to discharge onus cast on assessee. Mere production of parties or confirmation from parties will not suffice, unless the assessee is also able to substantiate their creditworthiness i.e. ability to advance the sum to the assessee. Assessee has not been able to establish the creditworthiness of lenders nor has he been able to establish the genuineness of transaction. The lenders could not produce bills of agricultural produce, landholdings have been found to be insufficient to enable the lenders giving loan ranging from ₹ 11 lakhs to ₹ 15 lakhs to the assessee, the lenders are residing in mud houses, the lenders have granted loan in cash, land owned by the lenders are under charge of concerned banker against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 5. The learned CIT(A) has erred in law and on facts of the case in confirming action of the Id. AO in levying interest u/s.234A/B/C of the Act. 6. The learned CIT(A) has erred in law and on facts of the case in confirming action of the Id. AO in initiating penalty u/s.271(l)(c) of the Act. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal. 3. Brief facts of the case are that during the year under consideration the appellant purchased several pieces of land for total investment of ₹ 2,09,61,840/-. When asked to explain the source of the same, the appellant submitted that he had taken unsecured loans from relatives and friends and partly made investment from his savings from agricultural income. The assessee submitted list of fifteen persons before Ld. Assessing Officer, from whom the assessee had taken loan taken in cash. In order to establish the identity and creditworthiness of the credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision u/s.68 of the Act and further an amount of ₹ 21,11,440/- which also remains to be justified convincingly . The assessee has failed to explain source of ₹ 2,09,61,440/- (i.e unsecured loan of ₹ 1,88,50,000/- + unexplained source of ₹ 21,11,440/- = ₹ 2,09,61,440/-) as per section u/s.68 of the I.T. Act. Penalty proceedings u/s. 271(l)(c) of the Income tax Act, 1961 is initiated for concealment of income/ furnishing inaccurate particulars of income. (Addition of ₹ 2,09,61,440/-) 4. In appeal against the assessment order, the Ld. CIT(A) gave part (minor) relief of ₹ 8,95,200/- based on the agricultural income declared by the assessee in his return of income and confirmed the balance additions by holding that the creditworthiness of the lenders does not stand established. While dismissing the assessee s appeal, Ld. CIT(A) observed as below: In view of this it is clear that the identity of the creditors is not in doubt. Regarding creditworthiness of the creditors and genuineness of transaction of giving loans to the appellant, it is seen that before the AO all the creditors submitted that they had given loan to the appellant. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ite difficult to believe that such persons can advance loans of amounts ranging between ₹ 11,00,000/- to Rs, 15,00,000/-. Further, no bills for any sale of agricultural products were submitted by these persons. Further, as per the submissions of these creditors themselves, they have no other source of income other than agriculture income from their land. In view of discussion above, it is quite clear that though the identity of the creditors is established, however, the creditworthiness of these creditors and genuineness of transactions regarding loans of ₹ 1,88,50,000/- is not established at all. Accordingly, addition made on account of unsecured loans of ₹ 1,88,50,000/- treated as unexplained cash credit u/s 68 of the Act is upheld. This ground of appeal is rejected. .. The appellant also filed copy of Form 6 regarding land held by the appellant and his mother. The appellant also filed copy of Form 7/12 giving detail of land held and the crops grown on the same. All the above documents were filed as additional evidence. A perusal of the above documents shows that the appellant has considerable land holdings. In view of this the AO was not justi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh of ₹ 20,78,300/- on demise of his father and invited our attention to pages 249-250 of Paper-Book. He further submitted the assessee has been earning agricultural income of about 3 to 4 lakhs per annum for last several years and invited our attention to pages 251-252 of Paper-Book in support of the above contention. Therefore, it is evident that the assessee has sufficient past savings to the tune of ₹ 21,11,440/- from agricultural income. Hence, Ld. CIT(A) ought to have deleted the entire addition of ₹ 21,11,440/- rather than restricting it to ₹ 12,16,240/- after giving set-off of agricultural income of ₹ 8,95,200/- earned during the impugned year. In response, Ld. Departmental Representative placed reliance on the observations of Ld. CIT(A) and assessment order in their respective orders. 6. We have heard the rival contentions and perusal the material on record. We shall first deal with the issue whether learned CIT(A) has erred in the facts of the case in confirming the addition made by the AO to the extent of Rs, 12,16,240/- as unexplained cash credits u/s.68 of the Act. In our view, the assessee has been able to reasonably demonstrate that h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since Tribunal ignored vital fact emanating from record that said creditors had not produced evidence to establish their capacity to raise such a huge amount, its order was to be set aside . The facts of the case were that the Assessing Officer made certain addition owing to unaccounted cash receipts on ground that assessee failed to establish identity and creditworthiness of creditors from whom he had received a huge amount of ₹ 8.49 crores. On appeal, Tribunal accepted assessee's explanation that said amount was transferred into its bank account from out of bank accounts of his brotherin- law and a close friend and, further, that said creditors confirmed to have made payment to assessee. On basis of above, Tribunal held that identity of source was thus established and requirement of section 68 was proved beyond any doubt by assessee and, therefore, addition made by Assessing Officer was not sustainable . High Court held that since Tribunal ignored vital facts emanating from record that said creditors had not produced evidence to establish their capacity to raise such a huge amount and also that they were not clear about their precise role in transaction involving sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the creditworthiness of the creditors. 7.7 The Delhi ITAT in the case of Anandtex international (P.) Ltd. v. ACIT [2022] 137 taxmann.com 146 (Delhi - Trib.) held that where assessee received share application money and claimed that same was invested by its director by taking advance from a company P, however assessee failed to establish creditworthiness of share applicant or genuineness of transaction, AO was justified in making additions under section 68 and concluding that assessee routed its own money in books of account through conduit of investor companies. 7.8 Now, in the instant facts, in our view, the assessee has not been able to establish the creditworthiness of lenders nor has he been able to establish the genuineness of transaction. The lenders could not produce bills of agricultural produce, landholdings have been found to be insufficient to enable the lenders giving loan ranging from ₹ 11 lakhs to ₹ 15 lakhs to the assessee, the lenders are residing in mud houses, the lenders have granted loan in cash, land owned by the lenders are under charge of concerned banker against loan taken by them, the lenders are first time lenders who have given ..... X X X X Extracts X X X X X X X X Extracts X X X X
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