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TMI Blog2023 (12) TMI 929X X X X Extracts X X X X X X X X Extracts X X X X ..... -, which was processed under section 143(1) of the Act. The case of the assessee was selected for compulsory scrutiny and accordingly statutory notices were duly issued and served upon the assessee. It is pertinent to state that survey under section 133A of the Act was conducted on the assessee on 20.11.2015. The ld. Assessing Officer accordingly called upon the assessee to furnish necessary evidences in support of unsecured loans taken by the assessee from different parties amounting to Rs. 3,95,00,000/-. The ld. Assessing Officer also issued notices under section 133(6) of the Act to eight parties in order to verify the identity, genuineness and creditworthiness of the loan creditors. The ld. Assessing Officer also issued summons under section 131 of the Act on 12.11.2018 to eight parties as mentioned on paras no. 4 to 7. A letter was also issued to the assessee on 13/12/2018 to produce the abovementioned parties in the office of Assessing Officer on 16/12/2018 for cross examination. However, none appeared in response to the summons issued. Thereafter again summons were issued but none of the parties or their Directors appeared for personal examination in response to the summons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts filed by the appellant. Merely due to non-appearance of lenders the learned AO made addition to total income. 5.5. I have perused the records submitted by the appellant and find them in order. It is a settled position that due to non-appearance of third-party lender; the appellant cannot be responsible and punished by enhancing total income. In this regard reliance is placed on judicial pronouncement of Hon'ble SC in case of DCIT.v. Rohini Builders (2002)- [SLP fe002] 254 ITR (St.)] wherein it is held that" 'Failure of the loan creditors to make personal appearance is no ground to hold that the transactions were not genuine and/or the creditworthiness of the loan creditors is not proved". 5.6. In view of the above, it is reasonable to conclude that the amount credited by the way of loan from third parties is genuine and reliance can be placed on following judicial pronouncements- Nimbus (India) Ltd. Vs DCIT (ITAT Delhi) ITA Nos. 929 & 930/Del/2019 The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed before the Ld Assessing Officer. Accordingly, all the three conditions as required u/s. 68 of the Act i.e., the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ender can be proven. The appellant has filed all the necessary documents of the lenders to prove the genuineness. 5.10. In view of the above findings and judicial pronouncements, I am of the considerate view that once the nature of transaction is established, provisions of section 68 shall not be invoked. In the underlined case the loans taken by appellant are repaid as well therefore, there is no net credit to the books of the appellant. Therefore, the addition made by the learned AO for Rs3,95,000/- is deleted. 5.11. Accordingly grounds 1 to 4 of appellant are allowed". 5. The ld. D.R. contended before the Bench that the order passed by the ld. CIT(Appeals) is incorrect and has overruled the fact that the assessee has failed to produce these parties despite specifically called upon to do so by issuing various communications by the ld. Assessing Officer. The ld. D.R. submitted that the summons issued to the parties under section 131 of the Act to prove the genuineness of transactions, identity of parties and the parties too have responded to the notices and replied to the summons issued under section 131 of the Act without their personal appearance. The ld DR stated that al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.09.2011 (Calcutta High Court); (ii) DCIT -vs.- Rohini Builders [2002] 256 ITR 360 (Guj.), order dated 19.03.2001; (iii) CIT -vs.- Orissa Corporation Pvt. Limited [1986] 159 ITR 78 (SC), judgment dated 19.03.1986. The ld. A.R., therefore, prayed that the order passed by the ld. CIT(Appeals) after taking into consideration the evidences filed by the assessee as well as by these lenders is very reasoned and speaking one and, therefore, the same may kindly be affirmed by dismissing the appeal of the Revenue. 7. We have heard the rival contentions and perused the relevant material placed before us. Undisputedly the assessee has raised loans from eight parties aggregating to Rs. 3,95,00,000/-. As per the direction of the ld. Assessing Officer, the assessee filed all the necessary evidences comprising addresses, names, PANs, Bank statements, loan confirmations, details of Directors, financials of the lenders etc. Besides we note that the notices issued under section 133(6) of the Act to all lenders were also responded by the parties confirming the transactions by filing the necessary evidences. In our opinion the failure of the loan creditors to make personal appearance is not a g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has furnished the copies of returns filed by the creditors with the Department along with their statement of income. All the loans were received by the assessee by account payee cheques and the repayments of loans have also been made by account payee cheques along with the interest in relation to those loans. It is rather strange that although the Assessing Officer has treated the cash credits as non-genuine, he has not made any addition on account of interest claimed/paid by the assessee in relation to those cash credits, which has been claimed as business expenditure and has been allowed by the Assessing Officer. It is also pertinent to note that in respect of some of the creditors the interest was credited to their accounts/paid to them after deduction of tax at source and information to this effect was given in the loan confirmation statements by those creditors filed by the assessee before the Assessing Officer. Thus it is clear that the assessee had discharged the initial onus which lays on it in terms of section 68 by proving the identity of the creditors by giving their complete addresses, GIR numbers/permanent accounts numbers and the copies of assessment orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year." 9. The phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this, case the legislative mandate is not in terms of the words "shall be charged to income-tax as the income of the assessee of that previous year". The Supreme Court while interpreting similar phraseology used in section 69 has held that in creating the legal fiction the phraseology employs the word "may" and not "shall". Thus the un satisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the assessee as held by the Supreme Court in the case of CIT v. Smt. P. K. Noorjahan [1999] 237 ITR 570. 10. Thus taking into conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken from M/S Knavsukh Trading Pvt. Ltd in the earlier year has been added u/s 68 of the Act which was rightly deleted by the ld CIT(A) on the ground that loan was not taken in the current year. We also note that the said lender's name was struck off from MSC and AO simplicitor held that liability on account of loan has ceased but ld CIT(A) correctly adjudicated the issue by holding that mere removal of name of the lender from MCA would not absolve the assessee from the liability to repay the loan. It was also held by ld CIT(A) that provisions of section 41(1) were not applicable to the instant case. Considering these facts and circumstances we are inclined to uphold the order of ld CIT(A) by dismissing the appeal of the revenue. 13. The second issue raised by the revenue is against the deletion of addition of Rs. 48,14,701/- by the ld. CIT(Appeals) as made by the ld. Assessing Officer by rejecting the interest paid on the unsecured loans of Rs. 3,95,00,000/- raised in A.Y. 2016-17. Since we have already allowed the appeal of the assessee by holding that the unsecured loans were genuine and therefore consequentially, the interest paid on the said unsecured loans during the year is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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