TMI Blog2001 (8) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... ash credits mentioned above, the assessee filed confirmation from the creditors confirming the loans. The assessee also requested the AO to issue summons under s. 131 to these creditors. The AO also issued summons to these creditors. Sushil Kumar and Shri Ashok Kumar Agarwal also appeared. In their statement, they also confirmed having advanced the loans to the assessee. Shri Sushil Kumar in his statement confirmed that his source of income wherefrom he advanced the loans, was from writing the books of accounts and money-lending business. He confirmed that the loan of Rs. 50,000 given to the assessee by cheque was met out of the income of Rs. 10,000 derived from writing books of accounts, Rs. 15,000 by selling furniture of the shop, Rs. 24,500 by taking loan from others. When he was questioned as to whether there was any evidence for sale of furniture and the income from writing the books of accounts, he confessed that he did not have any evidence for the same. The AO further examined the copy of bank a/c furnished by Shri Sushil Bansal. He observed that Shri Bansal issued the cheques of Rs. 50,000 on 22nd May,1987. But on that date, Shri Bansal did not have much amount in his bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the assessee to prove the identity and creditworthiness of the creditors as well as genuineness of the transaction. The assessee has failed to prove the credit-worthiness of the creditors as well as genuineness of the transaction. He also observed that Smt. Rajani Bansal did not appear, so the loan could not be corroborated. He also observed that certain loans exceeding Rs. 10,000 in cash are claimed to have been obtained, by the assessee, but the same was in violation of the provisions of s. 269SS of the Act. The assessee is in appeal before us against the findings of the CIT(A). 2.6. It is argued by the learned counsel that onus was on the assessee to prove the identity and creditworthiness of the creditor as well as the genuineness of the transaction. The assessee has satisfied all the three conditions which lay on it. In this connection, the learned counsel stated that confirmation from all the creditors was furnished before the AO. The addresses of the creditors was also furnished along with the return of income. Two of the creditors namely, Shri Sushil Bansal and Shri Ashok Kumar Agarwal appeared before the AO and their statements were recorded. Though Smt. Rajani Bansal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e because there was a deposit of Rs. 25,000 in his bank a/c, a day before he gave the loan to the assessee. It was argued that when Shri Ashok Agarwal was questioned about the sources of deposit in the bank a/c, he has stated that the deposits in his bank a/c represented the refund of amount from various debtors to whom the advances were made in the earlier years. The AO had observed that Shri Ashok Kumar Agarwal failed to give the names of these debtors from whom the amount was received back. The learned counsel stated that such observation made by the AO was far from truth. He stated that in his statement recorded before the AO. Shri Ashok Agarwal has stated that he can tell the names of these debtors after seeing the bill book. From such statement made, how the AO presumed that the creditor was not disclosing the names of its debtors was not understandable. It was stated that by filing confirmation where the creditor was being assessed to tax and the transaction was by cheque, the creditor also confirmed the loan by his presence before the AO. The onus of the assessee has been discharged, which was cast on it under s. 68 of the Act. It was stated that once the assessee had disch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the onus was on the assessee to prove the identity and creditworthiness of the creditors as well as the genuineness of the transaction. In case, merely a confirmation is filed, it was not sufficient to discharge the burden cast on the assessee. Reliance was placed on the decision reported in (1983) 140 ITR 151 (All). He argued that onus was on the assessee to prove creditworthiness of the creditors. In all the cases, there have been deposits in the respective bank a/cs of the creditors just a day or two before advancing loan to the assessee. This amply proves that the creditors were not financially sound to advance the loan to the assessee. So, the creditworthiness of the creditors remained to be proved. It was further argued that even if all the three creditors were being assessed to the income-tax, the income declared by them proves that hardly they can save money out of which the advances can be made to the assessee. He, therefore, pleaded that addition sustained by the CIT(A) deserves to be upheld. 2.12. We have considered the rival submissions. Admittedly the onus is on the assessee to prove the identity and creditworthiness of the creditors as well as genuinene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is on the Revenue to pursue the matter with the creditors. Hon'ble Orissa High Court in the case of Baishnab Charan Mohanty had observed as under: "When a question arises as to whether a cash credit appearing in the books of account of an assessee has to be accepted or to be rejected and addition to be made in accordance with s. 68 of the IT Act, 1961, the assessee is required to establish the identity of his creditors, the capacity of the creditor to advance the money and the genuineness of the transaction. If the assessee establishes the aforesaid three preconditions, then it would be for the Department to disprove the same." 2.14. In view of the ratio laid down in the cases reported/mentioned above, we hold that the assessee had discharged its initial burden of proving the identity and creditworthiness of the creditor as well as genuineness of the transaction. Now, the burden shifts on the Revenue to disprove the contentions of the creditors. For disapproving it, sufficient and adequate material has to be brought in by the AO. This observation was made by Hon'ble Patna High Court in the case of Saroagi Credit Corpn. 2.15. The only apparent reason for rejecting the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut by their personal presence, the creditors have been assessed to tax, the transactions taking place through cheques, there was no occasion to treat the loans from the above three creditors as non-genuine. We therefore, delete the addition under s. 68 of the Act made/sustained by AO/CIT(A). 3. Ground No. 6 raised by the assessee relates to the confirmation of the addition representing interest on the above loans. As we have already held the loans to be genuine, we direct the AO to allow the deduction of interest on such loans. This ground of appeal is, therefore, allowed. 4. Ground Nos. 7 to 10 relate to the addition on account of difference in the value of machinery found during the course of search as well as addition on account of low withdrawal for household expenses. All these issues were involved in the petition filed by the assessee before the Settlement Commission. We, therefore, direct the AO to consider the findings of the Settlement Commission in its order dt. 28th Feb., 1997, and examine the additions made by him accordingly. These grounds of appeal are decided with above directions. 5. In the result, the appeal directed by the assessee is partly allowed. - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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