TaxTMI 
TaxTMI 
2019 (2) TMI 799
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....red loan depositors. The AO after examining the information received from the depositors observed that their deposit amount was much higher than their return of income and in some cases they were having very low average bank balances and before issuing cheque, cash deposits were made in the bank accounts. The assessee was asked to file further details to prove the genuine credits. The AO after careful observation of the submissions filed by the assessee considered the unexplained credits as under: S. No. Name of Depositor Loan taken during the year Observation 1. Smt. Sashi Lata Bhargav 7,00,000/- Return Income-Rs. 1,88,792/-. Source of credit entry dated 17.06.2010 of Rs. 7,08,870/- (before 2/3 days of cheque issued) was not explained. 2. Smt. Kamini Ahluwalia 9,00,000/- Return Income- Rs. 1,83,983/- Source of credit entry dated 27.08.2010 of Rs. 1,60,000/-, dated 28.08.2010 of Rs. 1,00,000/- and dated 30.08.2010 (before 2/3 days of cheque issued) were not explained. 3. Shri Prateek Ahluwalia 5,50,000/- Return Income- Rs. 69,112/- Source of credit entry dated 20.10.2010 (before 2/3 days of cheque issued) was not explained. 4. Shri Sarin Kumar 8,00,000/....
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....d confirmation with copy of the account with acknowledgement of return. There is a fresh credit received through banking channel which is supported by bank statement. In the case of M/s C.S. Sethi & Sons, it was explained that it is assessed to tax and filed confirmation along with acknowledgement of return of income. The creditor has opening credit balance of Rs. 18,41,912/- and has sufficient balance in the account which is supported by bank statement. In the case of M/s G.S. Sethi & Sons, it was explained that it is assessed to tax and filed confirmation along with acknowledgement of return of income. The creditor has opening credit balance of Rs. 34,72,705/- and credit is received through banking channel which is supported by bank statement. Assessee, therefore, submitted that assessee proved identity of the creditors, their creditworthiness and genuineness of the transaction in the matter. Assessee relied upon several decisions to prove that genuine credits have been received. The assessee also relied upon decision of the Gujarat High Court in the case of DCIT vs. Rohini Builders 256 ITR 360 in which it was held that assessee cannot be asked to prove source of the source. As r....
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....ders 256 ITR 360. He has submitted that mere low returned income of the creditor is no ground to doubt the transaction with the assessee. He has relied upon order of ITAT Delhi 'G' Bench in the case of M/s Topline Buildtech Pvt. Ltd. vs. DCIT, ITA No. 6507/Del/2017 dated 13.04.2018. He has relied upon order of ITAT Delhi 'E' Bench in the case of ACIT vs. Smt. Meenu Chauhan, ITA No. 1886/Del/2010 dated 29.10.2010 and order of ITAT Delhi 'D' Bench in the case of DCIT vs. Landmark Exim Pvt. Ltd., ITA No. 3773/Del/2011 dated 23.05.2014. He has submitted that there is no evidence on record that the amount in question came from the coffer of the assessee. He has, therefore, submitted that additions may be deleted. 8. On the other hand, Ld. DR relied upon the orders of the authorities below and submitted that none of the creditor appeared before AO. No source of income have been filed. Both the Sethis are connected with the assessee but failed to appear before the AO, therefore, additions may be confirmed. 9. We have considered the rival submissions and perused the material available on record. 9.1. ITAT Delhi 'G' Bench in the case of M/s Topline Buildtech Pvt. Ltd. vs. DCIT (supra) he....
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.... disallow interest paid on such loans. Both the creditors are unrelated and independent parties. In the case of M/s. Marry Gold Overseas Limited the amount have been returned in subsequent year and in the case of other creditor M/s. Maple Technologies Ltd., the assesseecompanywritten back the amount in subsequent year and shown its income. Therefore, it would amount to double addition in assessment year under appeal. It is well settled law that assessee-company cannot be asked to prove source of the source. Even then the Director of both the companies in his statement confirmed that source of giving loans to the assessee-company was advanced return by M/s. Divine Infracon Pvt. Ltd.However, the A.O. did not believe the explanation of the creditor because copy of the Rent Agreement was not filed. The A.O. has summoned both the creditors under section 131 of the I.T. Act in order to verify the genuineness of the transaction in the matter. The A.O. may ask the creditor to explain the source but assessee-company cannot be asked to explain the source of the source. Since Shri Hitesh Garg was summoned as witness of the Department and in case, he did not produce the Rent Agreement subseque....
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....by way of cheques from the creditors which was not in dispute. Once the assessee had established these, the assessee must be taken to have proved that the creditor had the creditworthiness to advance the loans. Thereafter, the burden had shifted to the Assessing Officer to prove the contrary. The failure on the part of the creditors to show that their sub-creditors had creditworthiness to advance the said loan amounts to the assessee, could not, under the law be treated as the income from undisclosed sources of the assessee himself when therewas neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or were owned by, the assessee. The Assessing Officer failed to show that the amounts, which had come to the hands of the creditors from the hands of the subcreditors, had actually been received by the subcreditors from the assessee. Therefore, the Assessing Officer have treated the said amounts as income derived by the assessee from undisclosed sources." 14.3. The Hon'ble Delhi High Court in the case of CIT vs. Value Capital Services Pvt. Ltd., (2008) 307 ITR 334 (Del.) in which it was held as under: "Dismissing the appeal, that the ....
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....he assessee can be asked to prove the source of the credits in its books of account but not the source of the source. Thus taking into consideration the totality of the facts and circumstances of the case, and, in particular the fact that the Assessing Officer had not disallowed the interest claimed/paid in relation to these credits in theassessment year under consideration or even in the subsequent years and tax had been deducted at source out of the interest paid/credited to the creditors, the Tribunal held that the Departmental authorities were not making the addition of Rs. 12,85,000. On appeal to the HighCourt : Held, that considering the facts and circumstances of the case narrated by the Tribunaland the law explained by it, the appeal was liable to be dismissed." 14.5. The Hon'ble Supreme Court has dismissed the Special Leave Petition filed by the Revenue against this Judgment reported in (2002) 254 itr (St.) 275. 15. The decisions relied upon by the Learned Counsel for the Assessee squarely apply to the facts and circumstances of the case. Thus, the assessee-company proved the identity of the creditors, their creditworthiness and genuineness of the transaction in t....
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.... creditors for examination on oath. No evidence has been brought on record, if the amount in question came from the coffer of the assessee. There is no dispute that AO accepted the identity of the creditors. These facts, therefore, show that assessee has been able to prove the creditworthiness and genuineness of the transaction in the cases of the creditors namely Smt. Shashi Lata Bhargav, Shri Prateek Ahluwalia, Shri Sarin Kumar, M/s T.S. Sethi & Sons, M/s C.S. Sethi & Sons and M/s G.S. Sethi & Sons. Thus, additions in their cases cannot be made in the hands of the assessee. We, accordingly, set aside the orders of the authorities below and delete the addition in the cases of these creditors mentioned at sl. No. 1,3,4, 5,6 & 7. The disallowance of interest is also deleted. 12. However, in the case of Smt. Kamini Ahluwalia-(2), it is not in dispute that prior to giving loan to the assessee there were cash deposits of the equivalent amount of the credit in her bank account. There were insufficient bank balances in her account for giving loan to the assessee. In case of credit entry of Rs. 3 lakhs on 12.11.2010 cash was deposited for clearance of the cheque on 15.11.2010. These fact....