TaxTMI 
TaxTMI 
2016 (11) TMI 325
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....xplain the genuineness of loan and also to establish the identity and creditworthiness of the creditors. The assessee explained that during the relevant year, the assessee received unsecured loans amounting to Rs. 26.02 crores. The assessee received funds from two companies, namely Ved Investments Ltd. and Niranwal Credit and Holding Pvt. Ltd. and that this fact was also evident from its bank account. The receipt of loan was recorded in the books of the assessee in the name of Flair and Wisdom, pursuant to request letters issued to the assessee by Ved Investments Ltd. and Niranwal Credit and Holding Pvt. Ltd., asking the assessee to record the loans in Flair and Wisdom's names in view of the respective schemes of amalgamation. The AO, however, observed that the assessee had failed to establish the genuineness of the transactions. He observed that though the loan was appearing in the name of Flair Engineering Pvt. Ltd. and Wisdom Engineering Pvt. Ltd., however, these two companies had been floated for rotating the accommodation entries in question. The directors of the said companies were men of meager means. Further, the claim of the assessee that such amount of Rs. 26.02 crore was....
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....PAN, amalgamation request letters, Ledger Accounts, financials, grouping of assets and liabilities and the scheme of amalgamation of all parties involved in the loan transaction. Even the parties had responded to notices issued u/s 133(6)of the Act. In respect of loan taken from Ved/Wisdom amounting to Rs. 16.02 crores, the assessee explained that the name of the assessee was not reflected in the balance sheet of Ved in view of the letter received by the assessee from Ved, counter signed by Wisdom, wherein Ved requested the assessee to record the loan transaction in the name of Wisdom due to the impending amalgamation between Ved and Wisdom. Further, the paying party viz. Ved had received funds from 4 companies viz. Aim Infrastructure Pvt. Ltd., Powerlinks Projects & Engineering Pvt. Ltd., Relish Infrastructure Pvt. Ltd. and Shiny Infrastructure Pvt. Ltd., which in turn was further paid to the assessee. Since Ved was to be amalgamated with Wisdom, the balance in the accounts of these four parties along with the balance in the account of the assessee was transferred to the account of Wisdom, which has been reflected in the Grouping of assets and liabilities of both these companies. ....
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.... is discharged when the assessee proves the identity of creditors, creditworthiness/capacity of creditors and the genuineness of the transactions. He has further contended that courts have consistently held that where the assessee submits the name, address, PAN and confirmation of the creditors, the onus under section 68 of the Act gets discharged and no addition can be made. The Ld. Counsel relied upon various case laws to stress that where the assessee who is the recipient of an unsecured loan, furnishes the PAN of its creditors, confirmations issued by the creditors affirming the grant of loan, their income tax returns/acknowledgement of filing income tax returns, bank statements and balance sheets (wherein all corresponding transactions were recorded), he is considered to have successfully discharged his onus under section 68 of the Act and notwithstanding non-appearance of the creditors, no addition can be made under the said section. Further that where the books of accounts of the creditors recorded the corresponding entries of credits, the books of accounts itself would indicate capacity of the party to advance loan and there was no further need for the assessee to prove cap....
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....the rival contentions and have also gone through the records. The Assessing Officer (hereinafter referred to as the AO) in this case has treated the transactions of loan by the assessee as sham transactions for the two reasons i.e. non establishment of the genuineness of transactions and secondly for not proving the creditworthiness of the creditors. So far as the genuineness of the transactions is concerned, as submitted by the Ld. A.R., all the funds were transferred to the assessee through banking channel, confirmation from the respective parties have also been filed, the parties have responded to the summons issued under section 133 of the Act by the AO, their PAN number and copy of income tax returns have also been submitted. The amount advanced to the assessee has also been reflected in their books. The more peculiar fact is that there was no cash deposited in the accounts of the creditors. The creditors have also explained their source. The assessee has also produced evidences regarding the amalgamation of the Ved Investments and Trading Company Pvt. and Niranwal Credit and Holding Pvt. into Wisdom Engineering Pvt. Ltd. and Flair Engineering Pvt. Ltd. respectively. The as....
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....rs also. He has invited our attention to a table to show that an amount of Rs. 10 crores had been advanced by Niranwal Credit and Holding Pvt. to the assessee. The said Niranwal Credit and Holding Pvt. had amalgamated with Flair Engineering Pvt. Ltd. and further that the source of this Rs. 10 crores was the amount received from Sulabhya Engineering Pvt. Ltd. Similarly, an amount of Rs. 16.02 crores was advanced to the assessee by Ved Investments and Trading Company Pvt. which has amalgamated with Wisdom Engineering Pvt. Ltd. The assessee has also explained the source of credits in the account of Ved Investments. Though the AO had made thorough investigations but the AO could not establish a link that the money had actually travelled from the assessee to the creditors or even to their source companies. Under such circumstances, so far as the creditworthiness of the creditors of the assessee was concerned, the same is established on the file. When the assessee has proved that the money has been credited to the account of assessee through banking channel, through legal entities who are assessed to income tax and their assessment has also been completed under scrutiny assessment procee....