AI Drafter 
TaxTMI 
TaxTMI 
2011 (12) TMI 686
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....respect of the credits u/s. 68 of the Income-tax Act, 1961 ('the Act', hereinafter), effected in the sum of Rs. 176.83 lakhs by the Assessing Officer (AO) vide the assessment order u/s. 143(3) of the Act, since confirmed by the ld. CIT(A) at Rs. 161.325 lakhs along with the proportionate interest on the unexplained credits; the assessee having claimed interest of Rs. 10,76,902/- on the unexplained credits of Rs. 176.83 lakhs. 3. It would be relevant and necessary to recount the background facts of the case. The assessee, an individual in the business of film production and distribution, filed his return of income for the year at a loss of Rs. 67.87 lakhs on 28-11-2003. In the course of the assessment pr....
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....ciers (Rs. 4.60 lakhs), Vijaya Bank (Rs. 5 lakhs) and Sundaram Finance (Rs. 6 lakhs), aggregating to Rs. 15.60 lakhs (wrongly stated in the order as at Rs. 15.50 lakhs), the balance amount was considered by him as not satisfactorily proved. The ld. CIT(A) afforded opportunity to the assessee to meet the remand report, as well as to adduce any further materials toward proving the impugned credits, which the assessee was unable to in spite being given a number of opportunities by him to do so. The confirmation certificates filed did not indicate the exact source from which these amounts were given by the concerned persons. Accordingly, the same were confirmed as income by way of unexplained credit u/s. 68 of the ....
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..... 5. We have heard the parties, and perused the material on record. 5.1 Coming to the facts of the case, the second category of credits, as afore-noted, consists of 13 credits for an aggregate of Rs. 35.68 lakhs. Two creditors, listed at Sl. Nos. 1 & 4 of Table (B) for a total of Rs. 2.88 lakhs, stand already allowed by the AO per the assessment order itself, leaving the balance of Rs. 32.80 lakhs from eleven parties. No document or materials have been admittedly furnished by the assessee in respect of these credits at any stage of the proceedings, including before us. The loans, by all account, outstand even as on date; the only repayment, as we notice is at Rs. 2.50 lakhs to Sibi Avira and Rs. 0.50 lakh....
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....ssessee is in film trade (and which can only be presumed to be known to the lender), which is well known to bear a high level of (business) risk, and the normal presumption would only be, as we also believe it to be - the interest thereon being claimed as business expenditure - that the capital borrowed is to be utilised by the assessee for his said business. Further, this is more so as the creditors, as claimed, and which we have no reason to disbelieve, are regular financiers and bankers, so that they would also be wellaware of such requirements, all of them are regular assessees with the Department and, consequently, well-informed of their statutory obligations. In fact, even admitting the assessee's claim, i.e., for the sake of argument....
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....ference would be that the identity stands proved. As such, there is nothing on record to indicate even a prima facie expression of opinion as regards the capacity of the creditor, i.e., the second aspect on which the AO is obliged by law to satisfy himself. Continuing further, the loans, as it appears, continue to outstand to date. This is flummoxing, particularly in view of the assessee's contention of having no business relationship with these parties, which statement also contradicts its statement of some creditors being financiers and bankers (private). In fact, such parties would be not only be charging and recovering interest, their principal source of income, but also take adequate steps to secure the loan/s as well. On the contra....
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....nable to, by any account, take a view that the same has been satisfactorily proved on the basis of the material on record, including the assessee's conduct. The loans, which represent the stock-in-trade of a financier or the working capital of the businessman, as it appears, continue to outstand for/after years, without paying interest. No reason/s toward the same has been furnished. We highlight this aspect as genuineness is essential condition to be satisfied toward proving a credit in terms of s. 68, so that an inference as to it has necessarily to be drawn on the basis of the available information and the material on record, reckoning the same in its totality. Accordingly, we have no hesitation in recording a finding of fact that the as....