TMI Blog2023 (8) TMI 428X X X X Extracts X X X X X X X X Extracts X X X X ..... y justification from the assessee about the repayment of the loan to the 3rd party including the bearer cheque, we do not find any infirmity in the order of the learned CIT(A) to the extent of his finding with regard to credit of loan from the party namely Ashmi Marketing Pvt. Ltd. The genuineness of the transaction is proved by the fact that the payment to the assessee as well as repayment of the loan by the assessee to the depositors is made by account payee cheques and the interest is also paid by the assessee to the creditors by account payee cheques. Thus we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him with regard to loan credit from the party namely Shri Harish Ambika Prasad. Also the amount was received through banking channel and the same was repaid through banking channel within the period of a month or so. There is no finding of the lower authorities that the amount was not received from the impugned party or repayment of the amount gone to any third party. Therefore, applying the ratio laid down in case of CIT Vs. Rohini Builders [ 2001 (3) TMI 9 - GUJARAT HIGH COURT] the action of the authorities below ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax (Appeals)-2, Vadodara, dated 17/10/2017 arising in the matter of assessment order passed under s. 143 of the Income Tax Act, 1961 (here-in-after referred to as the Act ) relevant to the Assessment Year 2013-2014. 2. The assessee has raised the following grounds of appeal: 1.0 The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the huge additions of Rs. 6,10,38,513/- made on account of unsecured loans received from various parties by treating the same as unexplained under section 68 of the Income Tax Act. 2.0 The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in dismissing the ground relating to initiation of penalty proceedings under section 271{l)(c) of the Income Tax Act, 1961 for the alleged concealment and/or furnishing of inaccurate particulars of income. 3.0 The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming charging of interest under section 234A, 234B, 234C and 234D of the Income Tax Act, 1961. 4.0 The appellant craves leave to add to, alter, delete or modify any of the grounds of appeal either before or at the time of hearing of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to exist and accordingly sustained the addition made by the AO. 7. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 8. The learned AR before us filed paper books running from pages 1 to 41 and contended that all the transactions of the loan were carried out through the banking channel. Similarly, the confirmation from the loan parties were also furnished along with PAN, ITR, bank statement etc. to justify the identity, genuineness of the transaction and creditworthiness of the parties which are available on record. 8.1 It was also contended that the loan from M/s Pooja Garments and Parkash Fortan Softech Ltd. were obtained in the earlier years and therefore the question of invoking the provisions of section 68 of the Act do not arise. Similarly, such loans cannot be made subject to tax under the provisions of section 41(1) of the Act as the conditions specified therein have not been complied with. 9. On the other hand, the learned DR before us vehemently supported the order of the authorities below. 10. We have heard the rival contentions of both the parties and perused the materials available on record. The provision of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidences should not provide a mask to cover the actual transaction or designed in way to present the transaction as true but the same is not. Genuineness of transaction can be proved by submitting confirmation of the party along details of mode transaction but merely showing transaction carried out through banking channel is not sufficient enough. As such, the same (genuineness) should also be proved by circumstantial/ surrounding evidences as held by the Hon ble supreme court in case of Durga Prasad More reported in 82 ITR 540 and in case of Smt. Sumati Dayal reported in 214 ITR 801. 10.3 The last stage comes to verify the creditworthiness of the parties. The term creditworthiness as per Black Law Dictionary refers as: creditworthy, adj. (1924) (Of a borrower) financially sound enough that a lender will extend credit in the belief default is unlikely; fiscally healthy-creditworthiness. 10.4 Similarly in The New Lexicon Webster's Dictionary, the word creditworthy has been defined as under:- creditworthy, adj. of one who is a good risk as a borrower. 10.5 It the duty of the assessee to establish that creditor party has capacity to advance such loan and h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prohibition to make the payment to the 3 rd party on behalf of the loan party but such transaction should be justified based on the documentary evidence. As such, the onus was shifted again upon the assessee after the AO made independent inquiry on the basis of available material and brought new finding. Accordingly, query was raised by the revenue with respect to the repayment of the amount discussed above which was adjusted in the account of Ashmi Marketing Pvt Ltd. But the assessee failed to rebut the above finding or failed to make any satisfactory reply to the authorities below. Accordingly, a doubt arises in the mind about the genuineness of the transaction of the loan shown by the assessee in the books of accounts. 10.8 The Hon ble Supreme Court in the case of CIT vs. P. Mohanakala reported in 291 ITR 278 while dealing with scope of provision of the section 68 of the Act held if a sum credited in the books of account of the assessee then the assessee is required to explained the nature and sources of such credit and such explanation should be proper and reasonable. The AO after application of mind and verification found that the explanation offered by the assessee is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d itself constitutes a prima facie evidence against the assessees, viz., the receipt of money, and if the assessees fail to rebut the said evidence, the same can be used against the assessees by holding that it was a receipt of an income nature. In the instant case, the authorities concurrently found the explanation offered by the assessees unacceptable. The authorities upheld the opinion formed by the Assessing Officer that the explanation offered was not satisfactory. The assessees did not take the plea that even if the explanation was not acceptable, the material and attending circumstances available on record did not justify the sum found credited in the books to be treated as a receipt of an income nature. The burden in this regard was on the assessees. No such attempt had been made before any authority. [Para 21] 10.9 In view the above, we find that the AO on the basis of material supplied by the assessee made independent inquiry with banks and brought evidences that the repayment shown to the loan party actually has gone to someone else and accordingly raised the question with regard to the genuineness of loan. But the assessee failed to rebut the finding of the AO befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him with regard to loan credit of Rs. 8 lakh from the party namely Shri Harish Ambika Prasad. (C) III- Kaushalya Ben 10.11 The assessee shown receipt of loan amounting to Rs. 7 Lakh dated 7th April 2012 from Smt. Kaushalya Ben which was repaid by the assessee in the month of May 2012. All the transactions were carried out through banking channel. However, the lower authorities treated the same as unexplained credit for the following reason: i. Confirmation letter not signed ii. Copy of ITR, bank statement and other details of Smt. Kaushalya ben were not furnished to establish genuineness and credit worthiness. iii. The notice issued under section 133(6) of the Act was not responded. 10.12 In this regard, we note that the amount was received through banking channel and the same was repaid through banking channel within the period of a month or so. There is no finding of the lower authorities that the amount was not received from the impugned party or repayment of the amount gone to any third party. Therefore, in our considered view and applying the ratio lai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amount obtained by such person or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income- tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not; or (b) the successor in business has obtained, whether in cash or in any other manner whatsoever, any amount in respect of which loss or expenditure was incurred by the first-mentioned person or some benefit in respect of the trading liability referred to in clause (a) by way of remission or cessation thereof, the amount obtained by the successor in business or the value of benefit accruing to the successor in business shall be deemed to be profits and gains of the business or profession, and accordingly chargeable to income-tax as the income of that previous year. Explanation 1. For the purposes of this sub-section, the expression loss or expenditure or some benefit in respect of any such trading liability by way of remission or cessation thereof shall include the remission or cessation of any liability by a unilateral ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity in the earlier years. It was not disputed that the assessee had paid interest at 6 per cent over a period of 10 years to KJC. In respect of that interest, the assessee never got deduction under section 36(1)(iii ) or section 37. Further, Toolings constituted capital asset and not stock-in-trade. Therefore, section 41(1) was not applicable. Secondly, assuming for the sake of argument that the assessee had got deduction on allowance, even then section 41(1) was not applicable because such deduction was not in respect of loss, expenditure or trading liability. [Paras 8 9] 10.18 The case law relied upon by the learned CIT(A) are distinguishable from the facts of the case of the assessee on hand. As such, in those cases there was finding on record that the assessee was allowed deduction on the amount in question in past years whereas no such information available on record in the case of appellant assessee. Therefore, we are not in agreement with the case law relied by the AO/ ld. CIT-A. Thus, in view of the above and considering the facts in totality, we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him on account of outs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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