TMI Blog2023 (2) TMI 806X X X X Extracts X X X X X X X X Extracts X X X X ..... venue : Shri R.S. Meel, JCIT) ORDER PER: DR. S. SEETHALAKSHMI, J.M. This appeal filed by the assessee is directed against order of the ld. CIT(A) dated 5-07-2022, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2016-17 wherein the assessee has raised the following grounds of appeal 1. The Ld. AO has erred in law as well as the facts and circumstances of the case in not providing any opportunity to the assessee company with reference to the additions so made in the assessment order which is against the principles of natural justice, therefore the assessment order deserves to be quashed on this primary ground alone and the Ld. CIT(A) has not given any finding thereon. 2. The Ld. AO has erred in law as well as the facts and circumstances of the case in making addition of Rs.36 lacs on account of unsecured loan u/s 68 of IT Act, 1961 inspite of furnishing confirmation of account, balance sheet and copy of return of income and addition made on account of non furnishing of bank statement whereas the said bank account of the cash creditor was seized by the same AO who is the AO of assessee company and was release ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me, the assessee vide letter dt. 11.12.2018 (PB 1-2) furnished the return, balance confirmation ledger account and Aadhar card of Sh. Divesh Goyal to the AO. The AO, however, held that in the computation of income (PB 35-37) Sh. Divesh Goyal has declared business loss at Rs.20,85,522/- and thus his creditworthiness could not be proved. Further his bank statement was also not furnished and thus genuineness of transaction also couldn t be proved. Accordingly, the AO vide order dt. 13.12.2018 passed u/s 143(3) of IT Act and made addition of Rs.36 lacs u/s 68 of IT Act, 1961. He also disallowed interest expense of Rs.50,597/- paid by assessee to Shri Divesh Goyal on the ground that unsecured loan raised from him is not proved. 3.2 Aggrieved by the order of the AO, the assessee in the appellate proceedings filed the documents which were filed by Shri Divesh Goyal to the AO after completion of assessment proceedings. The Ld. CIT(A) called for remand report. The AO submitted his remand report dt. 05.02.2020 (PB 43-44) wherein he stated that since Shri Divesh Goyal has filed the return at loss of Rs.20,85,522/- therefore, his creditworthiness is not proved in view of the decision of Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this case are as under:- -AO issued notices u/s 142(1) to Appellant on 23.08.2018 and 05.10.2018 calling for these details in respect of cash credit of Rs. 36,00,000/-. AQ called for details and supporting documentary evidences in respect of Unsecured loan of Rs.36,00,000/- specifically in notice u/s 142(1) dated 23.08.2018. Copy of bank statement of creditor was also called. These notices were not complied by Appellant. Final notice u/s 142(1) was issued to Appellant on 25.10.2018. In response the Appellant filed details vide letter dated 11.12.2018. -Bank a/c of Dinesh Goyal was attached on 17.10.2018. Prior to that the AO had asked for bank statement of Creditor from Appellant on 23.08.2018 vide notices u/s 142(1). However, the Appellant failed to provide the bank statement inspite of opportunity given and adequate time available. -Notice u/s 133(6) was issued to Dinesh Goyal on 17.10.2018 calling or his bank statement on or before 25.10.2018. Bank a/c of Dinesh Goyal was attached on 23.10.2018. Thus, Dinesh Goyal had a week's available with him from 17.10.2018 to 23.10.2018 to get his bank statement and prepare his submission and file it before the AO on 25.10.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. -The Hon'ble Guwahati High Court in Neni Chand Kothari (2003) in 264 ITR 254 held that merely because the transaction has taken place be cheque is not sufficient to discharge the burden. The assessee has to prove the identity of creditors and genuineness of transaction. d) In view of the above facts it is hereby held that mere filing of confirmation, PAN, ITR of creditor does not establish the creditworthiness of loan transaction when the TR of Creditor does not inspire such confidence. Mere/fact that transaction was made through banking channel does not establish the genuineness of transaction. In view of the facts and respectfully following the judgements as outlined in paras 7.4(a) to 7.4(c) of this order, the addition made by the AO of Rs.36,00,000/- u/s 68 is hereby upheld and confirmed. Ground of Appeal No. 2 is dismissed. 7.5 Ground of Appeal No. 3 Disallowance of Interest of Rs. 50,597/- Since the addition made by the AO of Rs. 36,00,000/- u/s 68 has been as unexplained cash credit, then the interest debited of Rs. 50,597/- also deserves to be disallowed. Ground of Appeal No. 3 is dismissed. 3.3 During the course of hearing, the ld. AR of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.7.10 crores Rs.5.47 crores From the above table, creditworthiness of Sh. Divesh Goyal is evident. Only because in the year under consideration, he has declared business loss of Rs.20.85 lacs which cannot lead to an inference that he had no creditworthiness to give loan to assessee more particularly when in AY 2017-18 he has declared gross total income of Rs.12,03,800/- (PB 40-41). The Ld. CIT(A) in spite of having all the documents evidencing the genuineness of transaction and creditworthiness of Sh. Divesh Goyal has confirmed the addition only for the reason that bank account of Sh. Divesh Goyal was not filed to the AO before completion of assessment proceedings. This cannot be a basis for confirming the addition more particularly when the AO who attached the bank account, could have called such bank statement from the banker, such bank statement was otherwise available before him in remand proceedings and no discrepancy has been pointed out by the lower authorities in the bank statement and other documents available before them. Hence, the addition confirmed by Ld. CIT(A) is unjustified and uncalled for. The Ld. CIT(A) at Pg 16, Para ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und in the books of the account of assessee were added in the income of the assessee. The additions made in the income of the assessee of the aforesaid account are directed to be deleted and demand notice to be accordingly modified. There shall be no order as to costs. Kanhaialal Jangid Vs. ACIT 217 CTR 354 (Raj.) (HC) The jurisdictional HC while deleting the addition u/s 68 of the Act held as follows:- 5. The question No. 1 relates to disallowance on account of cash credits found in the books of the assessees. Rs. 16,000 was alleged to have been borrowed to have been by Sri Devendra Sankhla and Rs. 16,000 was allegedly borrowed from one Ramulal. Assessee has produced the confirmation letters from both the creditors and has also produced Sri Devendra Sankhla before the AO. Sri Devendra Sankhla on being produced before the AO, affirmed that he had given in advance a sum of Rs. 16,000 to the assessee. However, the explanation of the assessee about the receipt of Rs. 16,000 from Devendra Sankhla was rejected on the ground that on inquiry from Devendra Sankhla the creditor could not satisfactorily explain source wherefrom whether he could have advanced Rs. 16,000, looking to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cerned, there is no doubt about initial burden being on the assessee. So far as third requirement is concerned, obviously if the explanation is not satisfactory, then it is added. Then fourth requirement is that the firm has to establish that the amount was actually given by the lender. Fifth requirement is about genuineness and regularity in maintenance of the accounts, obviously of the assessee, and it is not the finding, that the accounts were not regularly maintained. Then sixth requirement is that if the explanation is not supported by any documentary or other evidence, then the deeming fiction created by s. 68 can be invoked. In the present case, so far as 6th requirement is concerned, it is very much there in existence, inasmuch as the amount has been advanced by account payee cheques, through bank, and is duly supported by documentary evidence, as well as the evidence of the two lenders, and that satisfies the 2nd requirement also, about the discharge of burden on the part of the assessee to prove identity and genuineness of the transaction. So far as capacity of the lender is concerned, in our view, on the face of the judgment of Hon ble Supreme Court, in Daulat Ram s case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce sheets of the creditors and also supplied all their particulars to evidence that the money given to the assessee had been shown in the respective balance sheets of the creditors and that the creditors who were called by the AO did affirmed the fact of giving money and explained the source of same. Tribunal also found that the circumstances of deposit of cash in the bank accounts of some of the creditors before giving cheques to the company by itself, would not lead to the conclusion that the money was deposited by the assessee company. Therefore, it was held that there is no reason to enter into a factual inquiry so as to appreciate evaluate the evidence over again. Thus the ld. AR further submitted that assessee has credited interest of Rs.50,597/- to Divesh Goyal on which TDS of Rs.5,060/- was deducted. As explained supra, the loan taken from Divesh Goyal is genuine, therefore, the disallowance of interest confirmed by CIT(A) be directed to be deleted. Hence, addition/ disallowance confirmed by CIT(A) should be directed to be deleted. 3.4 On the other hand, the ld. DR relied upon the orders of the lower authorities. 3.5 We have heard both the parties and perused th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rores (PB 33) Gross Profit Rs.1.38 crores (PB 27) Rs.90.47 lacs (PB 33) Net Profit Rs.48.82 lacs (PB 27) Rs.5.78 lacs (PB 33) Loans Advances Rs.7.10 crores (PB 26) Rs.5.47 crores (PB 32) Hence, the creditworthiness of Sh. Divesh Goyal is evident from the details mentioned hereinabove and only because in the year under consideration he has declared business loss of Rs.20.85 lacs which cannot lead to an inference that he had no creditworthiness to give loan to assessee more particularly when in AY 2017-18 he has declared gross total income of Rs.12,03,800/- . Hence, taking into consideration the above facts and circumstances of the case, it is found that the assessee has made full efforts to establish the creditworthiness of the creditors by filing his return and balance sheet for the last two years. Once the assesse had discharged the initial onus then the burden shifts on the Department to counter the facts brought on record by the assessee which could not be controverted by the ld. DR during the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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