TaxTMI 
TaxTMI 
2015 (12) TMI 1291
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..... 1,01,007 without going into and examining the credit worthiness of M/s. Tuq Credits Ltd. and genuineness of the transaction with reference to availability of funds with the said company? 3. Whether the order of the ITAT is perverse as it ignores the reasons and grounds mentioned by the Assessing Officer for failure of the Assessee and M/s. Tom Investment Limited to furnish details and information with regard to Tuq Credits Limited source of funds available with Tuq Credits Limited genuineness of transaction and credit worthiness of Tuq Credits Ltd. 3. The facts leading to filing of the present appeals are that the Assessee, Shiv Dhooti Pearls & Investment Limited, filed its annual return of income on 29th November 1994 for the AY in question declaring Rs. 13,68,440. The return was accompanied by the tax audit report under Section 44AB of the Act and the audited final accounts. The return was picked up for scrutiny and notices were issued under Section 143 (2) of the Act on 22nd August 1995. 4. In the assessment order dated 28th February 1997 the Assessing Officer ('AO') noted that the Assessee continued to derive its business income, as in the earlier years, from t....
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....re not genuine. Accordingly, a sum of Rs. 38 lakhs as unsecured loan was treated as unexplained income of the Assessee under Section 68 of the Act. A sum of Rs. 1,01,007 shown as interest payable on the said loan was also disallowed as an expenditure. The income of the Assessee was computed as Rs. 52,84,439. 8. An appeal was filed by the Assessee before the Commissioner of Income Tax (Appeals) ['CIT (A)']. By an order dated 24th October 1997 the CIT (A) allowed the Assessee's appeal and held that as long as TIL had confirmed the loan advanced by it to the Assessee, the Assessee had discharged the onus on it under Section 68 of the Act to prove the identity, genuineness and creditworthiness of the creditor. It was further found that repayments had also been made by the Assessee to TIL of the borrowed amount by cheques and tax at source of Rs. 30,171 had been deducted from the interest payment of Rs. 1,31,178. By its letter dated 27th and 31st January 1997 TIL had clarified the facts pertaining to the said loan. The CIT (A) found that the following documents were also placed before the AO: (a) confirmation of account of the Assessee in the books of TIL; (b) copy ....
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....Kothari v. Commissioner of Income Tax (2003) 264 ITR 254 (Gau) and urged that it was incumbent on the Assessee to prove the creditworthiness of TIL which in turn hinged upon the genuineness, identity and credit worthiness of TCL. Mr. Singh submitted that TIL having failed to establish the genuineness and creditworthiness of TCL, the burden shifted to the Assessee to do so. 12. The Court has examined the decision of the Gauhati High Court in Nemi Chand Kothari (supra). Therein the Gauhati High Court referred to Section 68 of the Act and observed that the onus of the Assessee "to the extent of his proving the source whom which he has received the cash credit." The High Court held that the AO had ample 'freedom' to make inquiry "not only into the source(s) of the creditor, but also of his (creditor's) sub-creditors and prove, as a result, of such inquiry, that the money received by the Assessee, in the form of loan from the creditor, though routed through the sub-creditors, actually belongs to, or was of, the assessee himself." Thereafter, the High Court, on a harmonious construction of Section 106 of the Evidence Act and Section 68 of the Act, held as under: "What, thus, ....
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....ess of the transactions, which took between the creditor and sub-creditor and/or creditworthiness of the sub-creditors, for, these aspects may not be within the special knowledge of the Assessee." (emphasis supplied) 13. The above observations, far from supporting the case of the Revenue, does the opposite. In the subsequent decision of this Court in Mod. Creations Pvt. Ltd. v. Income Tax Officer (2013) 354 ITR 282 (Del), the position was clarified by the Court and it was held: "It will have to be kept in mind that Section 68 of the I.T. Act only sets up a presumption against the Assessee whenever unexplained credits are found in the books of accounts of the Assessee. It cannot but be gainsaid that the presumption is rebuttable. In refuting the presumption raised, the initial burden is on the Assessee. This burden, which is placed on the Assessee, shifts as soon as the Assessee establishes the authenticity of transactions as executed between the Assessee and its creditors. It is no part of the Assessee's burden to prove either the genuineness of the transactions executed between the creditors and the sub-creditors nor is it the burden of the Assessee to prove the cr....