TaxTMI 
TaxTMI 
2014 (9) TMI 703
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.... been submitted in the shape of the affidavit, bank statement. In these circumstances, we find that the Ld. Commissioner of Income Tax (Appeals)'s action in deleting the addition is justified. Hence, we do not find any infirmity or illegality in the order of the Ld. Commissioner of Income Tax (Appeals) and hence, we uphold the same". 2. The following substantial question of law was framed by this Court on 26.03.2012: "Whether the Income Tax Appellate Tribunal was right in dismissing the appeal of the Revenue upholding deletion of addition of Rs. 28,00,000/- under Section 68 of the Income Tax Act, 1961". 3. The relevant facts, as emerged from the Assessment order dated December 28, 2007, are that the respondent assessee, i.e., M/s. T.S. Kishan & Co. Ltd., (hereinafter referred to as 'respondent assessee), filed its return of income declaring a loss of Rs. 44,70,307/-. The return was processed under Section 143(1) of the Act and thereafter, a notice was issued under Section 143(2) of the Act, initiating scrutiny assessment proceedings. 4. The Assessment officer vide its order dated December 28, 2007, assessed the total loss of Rs. 16,70,307/-, while reducing the returned loss by ....
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....cured loans credited in the books of account of the assessee during the FY 2004-05 is treated as undisclosed income u/s 68 of the IT Act, 1961." 5. On appeal filed by the assessee, CIT(A) has framed two issues, first being whether the Assessing Officer has erred in law and on facts and was justified in treating unsecured loans of Rs. 28,00,000/- as income of the assessee, and the second being the initiation of penalty proceedings u/s 271(1)(c). 6. CIT(A) vide its order dated September 01, 2010, allowed the above appeal. The findings of the CIT(A) are reproduced hereunder: "10. In view of the above, the identity of both the parties i.e. M/s Sheela Textile and Rajesh Upadhyaya & Co stands proved. 11. The Ld. AO has obtained the bank statements of both the parties. From the bank statement it is clear evident that the loan amount is flowing from the above bank accounts of the parties to the account of the assessee by account payees cheque only. Similarly, the repayments by the assessee from its bank account with the Indian Overseas bank are flowing back to both the parties account with Bank of Baroda by account payee cheques only. While issuing the cheques to the assessee, both the....
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....s almost for 10 years now. The address as given by the assessee is same as has been mentioned in the bank account opening form and all the parties do exist even today at these address though it has been denied to the inspectors who had gone for the inspection. 15. The genuineness of the transaction is proved by the fact that the money has been received by the assessee from the bank account of the lenders by account payee cheque only as evident from the bank statement of both the parties and assessee. A certificate from the bank has also been submitted before the AO which is forming a part of the affidavit submitted by the assessee. In view of above it is prayed that the appeal of the assessee may kindly be allowed by deleting the addition of Rs. 28 lacs on account of unexplained credits u/s 68 of Income Tax Act." 8. I have gone through the assessment order and the detailed written submissions filed by the AR in this regard. 9.1 The assessee has shown receipt of Rs. 28,00,000/- as loans from the following two parties: 1. Sheela Textiles Rs. 5,00,000/- 2. Rajesh Kumar Upadhaya & Co. Rs. 23,00,000/- 9.2 The AO disbelieved the credits on the grounds that identity and creditworthin....
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.... note of the fact that no credible evidence in respect of these firms was brought on record to establish their identity, genuineness of the transaction and credit worthiness of such firms. d. The Tribunal as well as CIT(A) erred in relying upon the affidavit filed by the assessee which was a self serving evidence and placing too much reliance on the bank statement produced of the firms to prove identity and genuineness. 10. Mr.Sanjeev Sabharwal, learned counsel for the appellant-Revenue would submit that the assessee has failed to discharge the onus in proving the identity, genuineness of the transactions and creditworthiness of the parties. According to him, the Assessing Officer has rightly treated the income from other sources and made an addition. He would further state that the CIT(A) and the Tribunal have not appreciated the facts in proper prospective while concluding in favour of the assessee. According to him, the finding of the CIT(A) and the Tribunal that the assessee has repaid the loan in subsequent year was without ascertaining whether interest was paid by the assessee for the loans; the reliance placed by the CIT(A) on the affidavit of the assessee which is a self-....
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....cts and circumstances of each case. Whether the initial onus is discharged or not that has to be ascertained from the materials on record. Once the initial onus is discharged, the onus shifts on the Revenue. Then, it is for the Revenue to act on it and until it comes to a finding that the explanation is insufficient and unsatisfactory, it could either ask for further explanation or could come to a decision on the basis of such material, but it is also a necessity or incumbent on the taxing authority to discharge their duty before fastening liability on the assessee. Therefore, when the materials are placed before it, the Revenue is duty bound to look into the same. 15. In the present case, it is seen insofar as the identity is concerned, the assessee could not produce the PAN Number of both the parties. The Assessing Officer, using his power under Section 131 of the Act, had called upon the bankers of the parties to produce the necessary particulars. The banks could only produce the account opening forms and bank statements of the parties. We do not think that the efforts made by the Assessing Officer and the fact that he was able to procure the bank statement would justify the fi....
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....essee to prove the identity of the creditors, their creditworthiness and genuineness of the transactions. Mere furnishing of particulars is not enough. It was found, in that case, on enquiry by the ITO that the assessee was not traceable and there was no such file. The first ingredient as to the identity was not established. Similar view was taken by the same High Court in the case of CIT Vs. Korley Trading Co. Ltd., [1998] 232 ITR 820 (Cal) wherein, the High Court held the creditors should be identified; there should be creditworthiness, genuineness of the transactions. The furnishing of income tax file number is not enough to prove the genuineness of cash credit. 17. We also note in agreement the judgment of this Court as relied upon by Mr. Sanjeev Sabharwal in support of his case in CIT Vs. Oasis Hospitalities (Pvt.) Ltd (supra), wherein, this Court has held as under: "11. It is clear from the above that the initial burden is upon the Assessee to explain the nature and source of the share application money received by the Assessee. In order to discharge this burden, the Assessee is required to prove: (a) Identity of shareholder; (b) Genuineness of transaction; and (c) Credi....