TMI Blog2022 (7) TMI 747X X X X Extracts X X X X X X X X Extracts X X X X ..... le to produce the details before the CIT(A) who had in our view rightly appreciated the facts and circumstances of the case. As pointed out earlier, the assessing officer brushed aside the explanation offered by the assessee by stating that merely filing PAN details, balance sheet does not absolve the assessee from his responsibilities of proving the nature of transactions. It is not enough for the assessing officer to say so but he should record reasons in writing as to why the documents which were filed by the assessee along with the reply dated 22.12.2017 does not go to establish the identity of the lender or prove the genuineness of the transaction or establish the creditworthiness of the lender. In the absence of any such finding, we have to hold that the order passed by the assessing officer was utterly perverse and rightly interfered by the CIT(A). Tribunal re-appreciated the factual position and agreed with the CIT(A). The tribunal apart from taking into consideration, the legal effect of the statement of Ashish Kumar Agarwal also took note of the fact that the notices which were issued by the assessing officer under Section 133 (6) of the Act to the lenders where dul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 142(2) was issued and the case was discussed with the authorized representative of the assessee. The assessee is a firm involved in the business of trading/ retailing of footwear and other leather and non-leather accessories. The Assessing Officer on examination of the assessment records noticed that during the year under consideration the assessee had received unsecured loans from various companies and the names of 13 such companies were furnished and it was alleged that those companies were the paper companies having no worth. The assessee was directed to show cause on the said issue in respect of one such company. By letter dated 22.12.2017, the assessee informed the Assessing Officer that all transactions with one of such company namely, M/s. Fast Glow Distributors Pvt. Ltd. were made through banking channels. To establish the identity of the lender the assessee enclosed the copy of their PAN card, the income tax acknowledgement, copy of bank statement, certificate of incorporation, master data from the register of companies and proof to show that the notice under Section 133(6) of the Act was duly served on the lender. As regards the creditworthiness, they enclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has received an unexplained loan by routing unaccounted money. The Assessing Officer placed reliance on the decision in the case of CIT Versus Nipun Builders and Developers (2013) 350 ITR 407 (Del), wherein it has been held that the Assessing Officer has to adopt a reasonable approach when the initial onus on the assessee stands discharged. Ultimately, the Assessing Officer concludes that those lender companies are artificial and the transactions are not genuine. Thus, the unsecured loans availed by the assessee, were considered to be the assessee s own funds and they being unsecured cash credit was added back to the assessee s income. Penalty proceedings were to be initiated separately. Aggrieved by such order, the assessee preferred appeal before the Commissioner of Income Tax (Appeals), 09, Kolkata [CIT (A)]. Before the Appellate Authority, the Assessee contended that the Assessing Officer failed to take note of the genuineness of the transactions and failed to consider the documents which were placed before him to establish the identity and the creditworthiness of the lenders and the genuineness of the transactions. Further, with regard to the statement of Mr. Ashish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere the assessee has been referred to in the statement given by Shri Ashish Kumar Agarwal and, therefore, making an addition based on such statement is illegal. Further it was contended that no show-cause notice was issued before making the addition of the amounts received by the assessee as unsecured loan as the show-cause notice dated 20.12.2017 had called for explanation only in respect of the loan received from M/s. Fast Glow Distributors which was explained by submitting documents. Therefore, the Assessing Officer has travelled beyond the show-cause notice issued to the assessee. The CIT (A) perused the evidence in the nature of document and details produced by the assessee before the Assessing Officer and on examination of those documents held that the loan transactions have been squared off in the same year and therefore, it cannot be assumed and presumed that the loans are in the form of accommodation entry. Further, the CIT (A) notes that interest had been paid at 12% in most cases and tax has been deducted at source. Further, the replies received by the Assessing Officer to the notice issued under Section 133(6) of the Act was also held to be very relevant and from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, reasonable and acceptable explanation as regard the amount credited in the books maintained by the assessee. No doubt the Income Tax Act places the burden of proof on the tax payer. However, this is only the initial burden. In cases where the assessee offers an explanation to the credit by placing evidence regarding the identity of the investor or lender along with their conformations, it has been held that the assessee has discharged the initial burden and, therefore, the burden shifts on the Assessing Officer to examine the source of the credit so as to be justified in referring to Section 68 of the Act. After the Assessing Officer puts the assessee on notice and the assessee submits the explanation with regard to the cash credit, the Assessing Officer should consider the same objectively before he takes a decision to accept or reject it. In Srilekha Banerjee Ors. Versus CIT (1963) 49 ITR 112, it was held that if the explanation given by the assessee shows that the receipt is not of income nature, the department cannot convert good proof into no proof or otherwise unreasonably reject it. On the other hand, if the explanation is unconvincing, the same can be rejected and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions and the effect of a case of money laundering under the relevant Act is markedly different. Therefore, the assessing officer should have desisted from using such expression when it was never the case that there was any allegations of money laundering. Paragraph 5.4 and 5.5 of the assessment order are all personal perception and opinion of the assessing officer which needs to be ignored. Much reliance was placed on the statement of Shri Ashish Kumar Agarwal, which statement has been extracted in full in the assessment order and it cannot be disputed that there is no allegation against the assessee company in the said statement. There is no evidence brought on record by the assessing officer to connect the said entry operator with the loan transaction done by the assessee. Therefore, the statement is of little avail and could not have been the basis for making allegations. The assessing officer ignored the settled legal principle and in spite of the assessee having offered the explanation with regard to the loan transaction, no finding has been recorded as regards the satisfaction on the explanation offered by the assessee. Therefore, the assessing officer ignored the basic tene ..... X X X X Extracts X X X X X X X X Extracts X X X X
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