TaxTMI 
TaxTMI 
2013 (10) TMI 210
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.... of the Rules. 4. We have heard the ld. Representatives of both the parties, perused the findings of the authorities below and considered the material available on record. 5. The first issue involved in both the cross appeals is addition made u/s. 68 of the IT Act partly deleted and partly sustained by the ld. CIT(A). The Assessing Officer found that there are 16 unsecured loans taken by the assessee from 16 parties in a sum of Rs.37,00,000/-, which remained unexplained. Therefore, the addition of Rs.37,00,000/- was made u/s. 68 of the IT Act. The AO discussed each and every creditor in the assessment order before making the addition. The addition was challenged before the ld. CIT(A) and assessee filed detailed submissions before the ld. CIT(A) supported by evidences and material. The ld. CIT(A) called for the remand report from the AO and thereafter decided the issue. The ld. CIT(A) deleted the addition on account of unexplained credits in respect of seven parties and granted relief to the assessee in a sum of Rs.12,75,000/-, which is under challenge in the departmental appeal. The ld. CIT(A), however, confirmed the addition u/s. 68 of the IT Act in respect of 9 creditors an....
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.... of Hon'ble Rajasthan High Court in the case of Aravali Trading Co. vs. ITO, 8 DTR 99, in which it was held that once the existence of the creditors is proved and such person owned the credits, which are found in the books of account, the assessee's onus stands discharged. He has also relied upon the decision of Allahabad High Court in the case of CIT vs. Pancham Das Jain, 205 CTR 444, in which it was held that provisions of section 68 are not attracted to the amounts representing purchases made on credit. He has also relied upon the order of ITAT, Ahmedabad Bench in the case of Dhiraj R. Rungta vs. ITO in ITA No. 1687/2010. He has, therefore, submitted that all the additions should have been deleted u/s. 68 of the IT Act. The ld. Counsel for the assessee also referred to each and every documents from the paper book to support his contention that burden upon the assessee to prove the genuine credits have been discharged. 7. We have considered the rival submissions and perused the findings of the authorities below. It is well settled law that burden is upon the assessee u/s. 68 of the IT Act to prove identity of the creditors, their creditworthiness and genuineness of the transac....
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....ar before the AO for examination, but it is admitted fact that the assessee did not make any request before the AO for examination of the remaining creditors through the commission and no willingness was shown before the CIT(A) for production of the remaining creditors for examination even at the remand stage in the appellate proceedings. Even during the course of arguments before the Tribunal, the ld. counsel for the assessee did not show his willingness to produce remaining creditors for examination before the AO. It is, therefore, clear that the assessee has failed to produce the remaining creditors for examination by the Revenue Department in order to find out truth in the matter. 9.1 The AO discussed each and every creditor in the assessment order and the crux of the findings of the AO had been that there were very small bank balances in the bank accounts of the creditors and they were having meager income and as such, they were not men of means to advance any loan to the assessee. In the case of Abhay Maheshwari, there was very small balance of Rs.3528/- in his bank account. He was examined on oath and he was not able to give source of cash deposit to the sati....
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.... shown estimated income in their returns of income. Therefore, such balance sheet, cash flow statements etc. would not support the contention of the assessee that genuine credits have been received. The order sheet noted by the AO would also show that the assessee has made no efforts to produce the remaining creditors before the AO. Even in the statement of one of the creditors recorded by the AO, Shri Ambhay Maheshwari, he was not able to explain his source of deposit or advancing loan to the assessee through genuine source. It is well settled law that burden is upon the assessee to prove ingredients of section 68 of the Act by proving identity and creditworthiness of the creditors and genuineness of the transactions. The assessee has, however, failed to prove the creditworthiness of the creditors who were having only meager income. No details of their savings have been filed. The assessee has never shown his willingness to produce the remaining creditors for examination before the AO. Therefore, the genuineness of the transaction could not have been examined by the AO. The smallness of the bank balance in the bank accounts of the creditors prior to issue of cheques would clearly ....
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....gh to establish the identity of the creditors. Mere production of the confirmation letters before the Income-tax Officer would not by itself prove that the loans have been obtained from those loan creditors or that they have credit-worthiness. Held, that, in the instant case, the Tribunal misdirected itself in holding that the transactions were genuine simply because some of the transactions were made by cheques. The assessee had failed to prove the credit-worthiness of the alleged lenders. A number of other assessees had also admitted that loans obtained from these bankers against hundis were not genuine and such hundi loans really represented their own concealed income. The assessee had not discharged its burden of proving that the loans in question were genuine." 10.2 Hon'ble Calcutta High Court in the case of M/s. Precision Finance Pvt. Ltd., 208 ITR 465 held that ""even the loan through bank cannot be accepted as genuine unless the identity and creditworthiness of the creditors are proved. Mere payment of account payee cheque is not sacrosanct nor can it make a nongenuine transaction genuine." 10.3 The Hon'ble Supreme Court in th....
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....vs. Orissa Corporation P. Ltd (supra), it was also held that the Revenue did not examine source of income of the said alleged creditors when they were assessed to tax to find out whether they were creditworthy. However, in the present case, the authorities below have specifically found that all the creditors were not men of means and as such, their creditworthiness was not proved at all. Therefore, the decision cited by the ld. counsel for the assessee would not support the case of the assessee. 13. Considering the facts and circumstances of the case in the light of findings of the authorities below, we do not find any irregularity or illegality in the orders of the authorities below. We confirm their findings and dismiss the appeal of the assessee on this ground. Concise grounds Nos. 1 & 2 are, accordingly, dismissed." 7.1 The above order of the Tribunal has been confirmed by Hon'ble Allahabad High Court in the case of Smt. Suman Gupta vs. CIT in Income-tax Appeal No. 680 of 2012 dated 07.08.2012 and the appeal of the assessee has been dismissed. Similar issue has been considered by Hon'ble Gujrat High court in the recent decision delivered on 13.03.2013 in the ....
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....aper book filed documents in support of his contention from page 71 to 80, which are copy of the account giving loan through demand draft on 22.10.2005, confirmation of loan amount, PAN card, copy of demand draft, copy of account, bank statement of assessee, copy of return for assessment year 2006-07 of the creditor supported by balance sheet in which loan given to the assessee is mentioned. Copy of bank account of the creditor is filed at page 80 in which there is no immediate cash deposit in his account before giving loan to the assessee and there is an entry of clearing of amount before giving loan. The ld. CIT(A), therefore, on the basis of these evidences and material on record rightly accepted the genuineness of loan. We, therefore, confirm the order of the ld. CIT(A) because sufficient evidences have been filed to prove the genuine loan u/s. 68 of the IT Act. (2). Shri Mukesh Varshney : 9. The ld. CIT(A) on the basis of same reasons as considered in the case of Deepak Varshney, deleted the addition of Rs.1,00,000/- as loan taken by the assessee from this creditor. The assessee similarly has filed all the evidences in respect of the genuine credit in the pa....
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....neness of the transaction has not been established through any evidence. The decision of Hon'ble Allahabad HighCourt in the case of Smt. Suman Gupta vs. CIT (supra) and Gujrat High Court in the case of Blessing Construction (supra) would squarely apply against the assessee. The ld. CIT(A), therefore, was not justified in deleting the addition of Rs.2,75,000/- because the assessee has failed to prove creditworthiness of the creditor and genuineness of the transaction in the matter. We, according set aside and reverse the order of the ld. CIT(A) and restore the order of the AO in making addition of Rs.2,75,000/-. (4). Kumar Trading Co. : 11. The ld. CIT(A) deleted the addition of Rs.5,00,000/- on the reasons that confirmation of the creditor is filed with return of income, PAN card, copy of bank account and that in assessment year 2007-08, similar credit has been accepted by the AO. Therefore, the addition was deleted. The assessee filed documents/evidences in respect of genuine credits from page 194 to 203 of the paper book, which are copy of account showing loan taken on 05.09.2005 through cheque supported by confirmation, PAN, acknowledgment of return of income.....
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....tor to show flow of cash available with the creditor. Thus, there is immediate cash deposit prior to giving of loan to the assessee, but the assessee failed to prove the source of cash available with the creditor. Therefore, the creditworthiness of the creditor has not been proved. The decisions in the case of Smt. Suman Gupta vs. CIT(supra) and Blessing Construction (supra) squarely apply against the assessee. Therefore, the ld. CIT(A) should not have deleted the addition merely on the reasons that the creditor has confirmed giving of credit to the assessee in her statement. Thus, the assessee failed to prove the creditworthiness of the creditor and genuineness of transaction in the matter. We, therefore, set aside and reverse the order of the ld. CIT(A) and restore the order of the AO in making addition of Rs.1,00,000/-. (6). Smt. Neeta Varshney : 13. The ld. CIT(A) deleted the addition of Rs.1,00,000/- following the same reasons as have been given in the case of Smt. Angoori Devi. The assessee filed same type of documents in the paper book from page 154 to 163 of the paper book, which includes the statement of creditor recorded by the AO in the remand proceedi....
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....th balance sheet in respect of the genuine credit. Therefore, the ld. CIT(A) on proper consideration of facts and material on record, rightly deleted the addition of Rs.1,00,000/- because the assessee has been able to prove the genuine credit in the matter. 14.1 We may note here that the AO made additions in the cases because the assessee failed to produce the lenders and that the creditworthiness of the creditors and genuineness of the transactions have not been established and further there are cash deposits in the cases of the some of the lenders before giving loan to the assessee. We have examined each and every case of the creditors in whose cases, the ld. CIT(A) deleted the additions. However, on examination of the material, we find that in some of the cases of the creditors, the assessee has been able to prove creditworthiness and genuineness of the transaction and there is no immediate cash deposit in their accounts. Therefore, the ld. CIT(A) rightly deleted part of additions Merely because the assessee did not produce all the creditors for examination is not sufficient to confirm the additions in the facts and circumstances of the case supported by evidence. Hon'ble Sup....
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.... that cash of Rs.2,25,000/- has been deposited in her bank account on 08.11.2005, i.e., before giving of loan to the assessee. Prior to that, the bank balance in her account was merely in hundreds only (not fully legible). No evidences have been filed to support the source of her income and availability of funds. No regular books of account have been maintained by the creditor. Therefore, the decisions in the cases of Smt. Suman Gupta vs. CIT(supra) and Blessing Construction (supra) squarely apply against the assessee. The ld. CIT(A), therefore, rightly confirmed the addition of Rs.2,25,000/-. (2). Krishna Gopal :- 16. The ld. CIT(A) confirmed the addition of Rs.4,00,000/- because the copy of bank account and Income-tax return were not filed. Therefore, identity as well as creditworthiness of the creditor is not proved. The assessee, however, in the paper book has filed several documents in respect of the genuineness of the transaction from pages 81 to 92 of the paper book, which are copy of ledger account showing giving of loan to the assessee through demand draft on 22.10.2005, supported by confirmation, copy of demand draft, copy of the account, copy of IT ret....
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....ng the addition of Rs.2,00,000/-. (4). M/s. Prakash & Co. : 18. The ld. CIT(A) on the same reasoning confirmed the addition of Rs.2,00,000/-. The assessee filed supporting documents in the paper book from pages 108 to 114 of the paper book to show that the loan was given through demand draft on 22.10.2005, which is supported by confirmation, confirmation of account and the creditor is assessed to tax supported by copy of the demand draft and no copy of bank account has been filed to prove the creditworthiness of the creditor. In the absence of sufficient evidences available on record, we are of the view that the assessee failed to prove creditworthiness of the creditor and genuineness of the transaction in the matter. The ld. CIT(A), therefore, correctly confirmed the addition of Rs.2,00,000/-. (5). Smt. Niramal Kumari : 19. The ld. CIT(A) confirmed the addition of Rs.1,50,000/- in this case. The assessee filed supporting documents from page 115 to 123 of the paper book. Copy of ledger account is filed to show loan as given on 01.03.2006 through cheque supported by copy of cheque, ledger account, election card and bank account. There are no cas....
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....hrough cheque on 01.10.2005 and the same is supported by confirmation by the creditor who is also assessed to tax as PAN is given in the confirmation. In the confirmation, it is specifically stated that the loan amount was returned in two installments i.e., on 11.02.2006 cheque of Rs.3,00,000/- and on 21.02.2006 cheque of Rs.2,00,000/- have been issued by the assessee in favour of the creditor. Thus, whole amount is squared up during the assessment year itself. The assessee has allowed interest on the credit for the short period in a sum of Rs.22,685/-. Copy of bank account of the assessee is also filed in the paper book to prove that the assessee has returned the amount of loan in two installments to the creditor on the dates mentioned in the confirmation. Thus, the source of giving of loan is banking channel as well as return of loan amount in the same financial year is also through banking channel. The copy of acknowledgement of return of the creditor along with balance sheet of the assessee / creditor is filed in the paper book to show that interest due on the aforesaid credit in a sum of Rs.22,685/- has been disclosed to the Revenue department. Thus, the assessee on the basis ....
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.... the loan amount is also returned by the assessee in the same financial year through banking channel. Thus, the assessee has been able to prove the identity of the creditor, their creditworthiness and genuineness of the transaction in the matter. The ld. CIT(A) should not have confirmed the addition. We accordingly set aside the orders of the authorities below and delete the addition of Rs.5,00,000/-. 24. Considering the above discussion, as discussed in the cases of various creditors, we find that the assessee has been able to prove the creditworthiness of the creditors and genuineness of the transactions in certain cases of the creditors, for which the additions have been deleted. However, in other cases, the assessee failed to prove the creditworthiness of the creditors and genuineness of the transaction, for which the additions have been sustained. In the result, the appeal of the assessee is partly allowed. 25. The second issue in the departmental appeal is regarding deletion of addition of Rs.7,01,635/-. The AO found that during the year under consideration, the assessee has shown sundry creditors in a sum of Rs.35,36,042/-. The assessee was required to file confirmatio....
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....e assessee maintained proper books of account which have not been doubted. Therefore, sundry creditors should not have been disallowed by the AO. All the papers were filed at the appellate stage which were subjected to examination by the AO, in which no doubt has been raised by the AO, since the ld. CIT(A) admitted the additional evidences at appellate stage. There is no violation of Rule 46A of the IT Rules in the matter. 27. We have considered the rival submissions. The assessee filed confirmation and other material on this issue before the ld. CIT(A) at the appellate stage, upon which the ld. CIT(A) called for the remand report from the AO. The AO did not doubt the genuineness of the confirmation and material filed on record, but he has merely pointed some difference in two of the cases and objected to the admission of the additional evidences because same were not filed at the assessment stage. The ld. CIT(A) considering the remand report of the AO correctly found that the AO has not questioned these evidences on merit. The ld. CIT(A) also rightly held that these are admissible being relevant to a judicious assessment. Hon'ble Punjab & Haryana High Court in the case of Kulde....