TMI Blog2024 (1) TMI 423X X X X Extracts X X X X X X X X Extracts X X X X ..... irmations and ledgers showing receipt and refund of loans alongwith TDS details in respect of each of the lenders. We note that the six parties, to whom notices were served, have duly responded and replied with all the requisite details. Where the assessee has filed all the evidences concerning transactions to establish the identity and creditworthiness of the lenders and to prove the genuineness of the transactions and the ld. Assessing Officer has not carried out any further verification, the addition cannot be made in the hands of the assessee. AO must examine the issue in the cases of creditors and make the addition there and not in the hands of the assessee. The assessee has discharged its initial burden and the burden shifted on the AO to enquire further into the matter by filing the evidences, which he failed to do. Accordingly, we set aside the order of ld. CIT(Appeals) and direct the ld. Assessing Officer to delete the addition. Decided in favour of assessee. - Shri Sanjay Garg, Judicial Member And Shri Rajesh Kumar, Accountant Member For the Assessee : Shri Sunil Surana, FCA For the Revenue : Shri Swap an Kumar Bera, JCIT, Sr. D.R. ORDER PER SHRI RAJESH KUMAR, ACCOUNTAN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer made the addition on the basis of statements of three persons namely Shri Abhishek Chokani, Shri Sanjay Kumar Drolia and Shri Praveen Agarwal, which were extracted in the assessment order also. The ld. Assessing Officer simply generalized the statements in the assessment order that loans were received from the paper companies and discussed the modus operandi of these companies in the assessment order. Finally the ld. Assessing Officer, after rejecting the contention of the assessee, added the amount of Rs. 3,57,85,862/- under section 68 of the Act vas unexplained cash credit comprising Rs. 3.40 crores on account of unsecured loans and Rs. 17,85,862/- towards interest expenses paid thereon in the assessment framed u/s 143(3) of the Act dated 13.09.2013. 5. In the appellate proceedings, ld. CIT(Appeals) simply dismissed the appeal of the assessee by upholding the observations of the ld. Assessing Officer as made in the assessment order by passing a cryptic and non-speaking order. 6. The ld. A.R. vehemently submitted before us that during the assessment proceedings, the assessee has filed the loan confirmation letters of the loan creditors, which consists of identity, PANs alo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were recorded under section 131 of the Act but nowhere they were connected with the loan creditors or stated the assessee as beneficiary of the accommodation entries. The ld AR submitted that where the assessee has furnished all the evidences before the AO, the additions cannot be made merely on the ground that loan creditors have not responded the notices issued by the AO and that too on the basis of third party without allowing cross examination. Finally ld. A.R. relied on the decisions of the Hon ble Calcutta High Court in the case of PCIT vs.-Sreeleathers in ITAT/18/2022 in GA/02/2022 dated 14.07.2022 and CIT vs.- Dataware Private Ltd ITAT 263 of 2011 in in GA/2856/2011 dated 21.09.2011. The ld. A.R. also relied on the decision of the Hon ble Calcutta High Court in the case of Crystal Networks vs.- CIT in ITA No. 158/2002 dated 29.07.2010 to support his arguments that that the notices were issued and returned unserved and the assessee filed all the details and evidences qua the loans raised including the names, addresses, balance-sheets, confirmations of the lenders, which were also squared up and ld. Assessing Officer has not made any verification. The ld. A.R. also relied on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , copies of bank statements, loan confirmations and ledgers showing receipt and refund of loans alongwith TDS details in respect of each of the lenders, which are filed in the paper book from pages no. 11 to 718. We also note that the AO issued notices under section 133(6) of the Act to twelve parties which could only be served to six parties and remaining six cases, the notices were returned back unserved. We note that the six parties, to whom notices were served, have duly responded and replied with all the requisite details. The ld. Assessing Officer has made the addition on the basis of the statements of three persons, namely Shri Shri Abhishek Chokhani, Shri Sanjay Kumar Drolia and Shri Praveen Kumar Agarwal and stated that they have arranged the loans from four parties. The ld. Assessing Officer has disbelieved the transactions on the basis of the statements of three persons, who were stated to have arrangedloans four parties mentioned at serial nos. 1, 2 6 and 11 and reached a generalized conclusion even on the remaining parties. The ld. CIT(Appeals) has simply dismissed the appeal of the assessee by passing a very cryptic and non-speaking order. Now the issue before us is w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 4, 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 an inference shows that the amount represents undisclosed income either from a disclosed or an undisclosed source [CIT Versus Mohanakala (P) 5]. The explanation given by the assessee cannot be rejected arbitrarily or capriciously, without sufficient ground on suspicion or on imaginary or irrelevant grounds (Lal Mohan Krishna Lal Paul Versus CIT 6 and Anil Kumar Singh Versu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 tenets of law before invoking his power under Section 68 of the Act. Fortunately, for the assessee, CIT(A) has done an elaborate factual exercise, took into consideration, the creditworthiness of the 13 companies the details of which were furnished by the assessee. More importantly, the CIT noted that all these companies responded to the notices issued under Section 133 (6) of the Act which fact has not been denied by the assessing officer. On going through the records and the net worth of the lender co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra):- After hearing the learned Advocate for the appellant and after going through the materials on record, we are of the view that no substantial question of law is involved in this appeal. Both the Commissioner of Income Tax (Appeal) and the Tribunal below have in details considered the fact that the share application money was paid by account payee cheque, the creditor appeared before the Assessing Officer, disclosed its PAN number and also other details of the accounts but in spite of that the Assessing Officer did not enquire further from the assessing officer of the creditor but in stead, himself proceeded to consider the profit and loss account of the creditor and opined that he had some doubt about the genuineness of such account. In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness of the transaction and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suance of summons none of the creditors turned up and even some cases summons returned back with the endorsement made by the postal authority no such person concerned was found . In view of such circumstances the ITO disbelieved the case of cash credit under Section 68. Hence the claim of deduction was disallowed. The matter was taken to appeal and the Commissioner of Income-tax(Appeals) after going through the evidence and materials on record came to fact finding that there are sufficient materials to hold that the said cash credit received by the assessee was genuine and these were received as against the supply of bidi. During the same Assessment Year or subsequent Assessment Year the necessary challans, vouchers and other confirmatory letters were also considered by the CIT (Appeals). After analyzing everything the CIT (Appeals) accepted the explanation and also evidence of creditworthiness of the creditors. Hence relief was granted. Revenue being aggrieved by the said decision approached the learned Tribunal who came to fact finding that the CIT (Appeal) has erroneously held that the summons were issued after assessment was done. Only on that ground it was held that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mining of all other materials and documents viz., confirmatory statements, invoices, challans and vouchers showing supply of bidi as against the advance. Therefore, the attendance of the witnesses pursuant to the summons issued in our view is not important. The important is to prove as to whether the said cash credit was received as against the future sale of the product of the assessee or not. When it was found by the CIT (Appeal) on fact having examined the documents that the advance given by the creditors have been established the Tribunal should not have ignored this fact finding. Indeed the Tribunal did not really touch the aforesaid fact finding of the CIT (Appeal) as rightly pointed out by the learned counsel. The Supreme Court has already stated as to what should be the duty of the learned Tribunal to decide in this situation. In the said judgment noted by us at page 463, the Supreme Court has observed as follows :- The Income-tax Appellate Tribunal performs a judicial function under the Indian Income-tax Act. It is invested with authority to determine finally all questions of fact. The Tribunal must, in deciding an appeal, consider with due care all the material facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee. No doubt the Act places the burden of proof on the taxpayer. 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 confirmations, the assessee has discharged the initial burden and, therefore, the burden shifts on the Assessing Officer to examine the source of the credit 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 concerning the cash credit, the Assessing Officer should consider it objectively before he decides to accept or reject it. Where the assessee furnishes full details regarding the creditors, it is up to the Department to pursue the matter further to locate those creditors and examine their creditworthiness. While drawing the inference, it cannot be assumed in the absence of any material that there have been some illegalities in the assessee s transaction. Held, dismissing the appeal, that the allegations against the assessee were in respect of thirteen transactions. The Assessing Officer issued a show-cause notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with Ministry of Corporate Affairs, having PAN and had filed return of income as well. Further creditworthiness of the transaction is proved with the fact that they have been carried through banking channel and sufficient funds were available with the loan creditors to explain the amount of loan given and the genuineness of the transaction is proved with the fact that the assessee company is carrying out regular business activity and the loan was obtained at commercial rate of interest which was also repaid at a later date in subsequent year, interest was paid on the loans and tax at source has been deducted and duly reflected by the loan creditor in their income tax return. Therefore, we fail to find any justification in the action of ld. AO invoking the provisions of Section 68 of the Act. We, thus, set aside the finding of ld. CIT(A) and delete the addition of Rs. 25,00,000/- made u/s 68 of the Act . 9. In all the aforesaid decisions, it has been held by the Hon ble Courts and also by the Coordinate Bench of this Tribunal, where the assessee has filed all the evidences concerning transactions to establish the identity and creditworthiness of the lenders and to prove the genuin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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