TaxTMI 
TaxTMI 
2019 (3) TMI 152
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.... assessee preferred an appeal before the Ld.CIT(A) who was pleased to delete the same. Aggrieved, the Revenue is before us. 3. We have heard both the parties and perused the record. Assailing the action of the Ld. CIT(A), the Ld. DR drew our attention to the assessment order and contended that assessee had raised huge loan from persons (74 numbers) who did not have the means to provide loan to assessee and the AO has dealt with the documents filed by the assessee and was not convinced by the genuineness of the loan, since creditworthiness of the loan creditors could not be substantiated by the assessee. So AO made the addition. However, according to Ld. DR, the Ld. CIT(A) accepted the affidavit of 74 creditors and gave relief to assessee which is erroneous and he wants us to reverse the order of Ld. CIT(A) and uphold AO's order. We note that the assessee had requirement to invest in the closely held group companies in which she was a director and for that she took loans from friends and relatives. We note that some of the loans were bearing interest and balance non-interest bearing as is apparent from perusal of the details of loan creditors placed at page 36 to 38 of paper book....
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....an lenders and ordered addition of the entire loan amount. We note that though there was 74 loan creditors, the AO issued the summons to only 36 creditors out of which as per AO, eleven creditors (para 16 at page 31 of assessment order) appeared and their depositions were recorded by the AO and it was brought to our notice, out of 36 loan creditors, 24 creditors duly replied to the AO wherein they acknowledged giving loan to assessee. 5) We note that when the AO asked the assessee to present on 15.12.2010 eight loan creditors the assessee produced them before the AO and they produced the following documents to prove their identity, creditworthiness and genuineness of the loan transaction with assessee. i) In order to prove their Identity they presented themselves before the AO and have submitted the KYC documents. ii) The evidence for source of transaction could be seen from the Bank Statement, Balance Sheet and all of them were Income Tax Assessee's and have produced their respective income tax return and acknowledgement. iii) Source of fund could be seen from perusal of the Balance sheet filed along with their income tax return. 6. In order to substantiate the loan....
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....require any interference from our part. 9. (a) Before the Ld. CIT(A), the assessee made the following submissions (reproduced at pages 4 & 5 of his order)- "Ground No 1 (Addition of Loan taken during the year of Rs.l,38,23,606/- by the Ld Income Tax Office Without considering the fact that the said loan was to repay the old loan of Rs. 1,37,78,776/-.) In compliance to the notice issued u/s. 143(2) & 142(1) of the Income Tax Act 1961 dated 15.09.2009 and 26.04.2010 respectively written submission dated 07.05.2010 submitted on 15.06.2010 & subsequent submission dated 13.07.2010 and 31.08.2010 were submitted to the assessing officer. (Copy enclosed and marked as "A', "B" & "C") .In reply to our submission a letter dated 2nd September 2010 was received from the Ld Income Tax Officer. The same was explained by the written submission dated 15.09.2010. (Copy enclosed and marked as "D"). As the case was selected under CASS on the basis of AIR information for Share Transaction and Cash Deposit written submission in support of same were submitted on 19.09.2010, 06.12.2010 and 14.12.2010 (Copy enclosed and marked as "E', "F', "G" respectively). In the flag month of the....
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....ted by an Affidavit from each loan creditors along with Income Tax Acknowledgement Receipt, Bank Statement, Balance Sheet & Loan confirmation of the loan creditors. (Copies enclosed and marked as "I") 2. We also submit herewith a summary of Loan repaid till the date year wise against the total loan taken during the Assessment Year 2009-09,where Rs. 70,88,606/- has already been repaid out of Rs. 1,38,23,606/- which constitutes 51.2B % of the loan taken. (Copies enclosed and marked as "J") When Cash creditors are Income Tax assessee, having Bank accounts, and produced Balance Sheet and Affidavit etc.: In Jagdamba Construction Co. V. ITO [2004] 82 TTJ (Jd.) (Trib.) 13, some of the creditors were produced before the A.O. while affidavits of some of them have been produced, Balance Sheet of some of the creditors were also produced wherein the transaction were entered into. Some of the creditors have filed confirmations. Cash creditors being income tax assessee who also had bank accounts, the finding of the A.O. that the creditors were not creditworthy was not justified. The examination by the A.0 of some of the creditors have not revealed any finding adverse the cla....
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.... 2007-08) when the alleged loan has been claimed. In other words income and monetary affairs stated in return of income of Loan Creditors for the A. Y. 2008-09 (relevant to F. Y. 2007-08) were not verified and examined by the Income Tax Department. (viii). In view of the above findings, the genuineness of loan transactions and creditworthiness of loan creditors was not proved beyond doubt and the explanations offered by the assessee could not be accepted as satisfactory. Accordingly, there was correct finding in the assessment order that the amount on account of unsecured loan claimed for the sum of Rs. 1,38,23,606/- was from bogus loan creditors and the same was correctly added to the total income of the assessee as undisclosed income from unexplained source of income. (c) The Ld. CIT(A) held as under vide para 3 of his order- "I have examined the Assessing Officer observations with conclusion vis-a-vis the appellant's observations with conclusions. It is noticed that in the case of all the 74 loan creditors, the notices U/S 133(6) were served and replies to the same in response were was received by the Assessing Officer. In these replies the loan creditors h....
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....ncome of the assessee from undisclosed sources, then the burden of proof is upon the Assessing Officer and he has to bring the necessary evidence on record, either by direct evidence or indirect/circumstantial evidence that money which the assessee received from the creditor actually belong to and was owned by the assessee herself/ himself'. (d) The ld.CIT(A) also took note of the order of the Tribunal in assessee's own case for A.Y. 2007-08 which were also on similar facts wherein the addition was ordered to be deleted the to the tune of Rs. 21,45,000/-. 10. We note from a perusal of the copy of depositions reproduced by the A.O. and the documents filed like affidavit, bank statement, Balance Sheet, income tax return, acknowledgement, PAN details of loan creditors and loan confirmation, final accounts, which documents are in the file of department, the assessee discharged the onus on her to prove the identity, creditworthiness and genunity of the lenders. We note that all of the loan lenders have admitted on oath in their respective Affidavits that they have given loan to the assessee. (i) In most of the cases, the loan amount advanced by the loan creditors is e....
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....hat family friends advance money in case of necessity. And, moreover, we note that in some cases advances were not made interest free. E. The fact that the I.T. Returns of the loan creditors were not scrutinised, cannot be used against the assessee since it is the department who decides which cases are to be scrutinised. (h) Since we are adjudicating the assessment for AY 2008-09, the following cases are relied upon where it was held that source of source need not be proved. It has been held in these cases that it is not the assessee to find out the source from where the creditor has accumulated the loan amount which has been advanced to the assessee. (a) Nemichand Kothari's case 264 ITR 254 (Gau) (b) Jalan Timbers' case 223 ITR 11 (Gau) G) In the assessee's own case for A.Y.: 2007-08, similar addition made by the A.O. and confirmed by CIT(A) was deleted by the Tribunal in ITA No. 26771K0112013; order dated 15.7.2014 (copy annexed at SI. No. 2) It was held by the tribunal as under- "The Id Counsel of the assessee submitted that the assessee has submitted all the relevant details of the loan creditors. Their confirmation has also....
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....ditors along with affidavit in sample basis placed from pages 178 to 319 of paper book. The Ld. AR pain stackingly took us through each of the loan creditors details of which are enclosed in the paper book. We note that out of 74 loan creditors only few creditors have given loan to assessee in excess of Rs. 3 lakhs. 90% of the loan creditors ranged from Rs. 15,000/- to Rs. 2,00,000/-. And the assessee has repaid an amount of Rs. 70,88,606/- which comes to 51.28% of the loan taken from the lenders. We note that out of this total loan creditors, old loan creditors who lent the assessee was to the tune of Rs. 27,62,000/-. We note that out of 74 loan creditors, the AO issued summons u/s. 131 to 35 lenders and out of which 11 appeared before the AO and their depositions were recorded by the AO and out of which 24 responded to the summon u/s. 131 by filing replies and confirmed the loan transaction with the assessee. Affidavits, ITR acknowledgment, Balance Sheet, bank statement has been filed by the assessee. Even if the AO had any doubt about the creditworthiness of the lender/creditors then he should have undertaken the exercise as spelled out by the Hon'ble Calcutta High Court in C....
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....doing so in the light of the documents filed the creditworthiness of the lenders/creditors cannot be doubted. However, while scrutinizing each creditor's net worth and income they drew and money lent, we note that on sample basis we note that the lender Shri Ajit Singh had a capital account balance of Rs. 19,85,272/- and he has given Rs. 3,00,000/-to assessee. Likewise, capital account balance was exceeding Rs. 4 lakhs in most of the lenders cases, except a few and those lenders have given only Rs. 20,000/- like Arup Maity. We note that the Ld. CIT(A) has taken note that the loan lenders had filed their KYC documents to prove identity, bank statement, Balance Sheet, Income Tax Return and acknowledgment, Affidavit from loan creditors, loan confirmation and when the fact was that out of total loan amount of Rs. 1,38,23,606/-, the assessee had paid back Rs. 70,88,606/-. These facts were taken into consideration by the Ld. CIT(A) to give relief to assessee. So we sustain the action of ld CIT(A) except that of Rs. 5 lakhs. Before us the Ld. AR of the assessee failed to substantiate the money lent by Mohan Prasad Khemka to the tune of Rs. 5 lakh which addition is sustained since asses....
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.... to sundry creditors have been claimed during the period of whole year in sums less than Rs. 20000/- in cash. 15. In view of the above, it is concluded that the assessee has manufactured the transaction of exhibition sale of sarees to introduce her unaccounted income of Rs. 17,21,870/- in accounts. Accordingly, the sum of Rs. 17,21,870/- was correctly found to be unexplained in the course of assessment proceedings and the same was added to the total income of the assessee as income from undisclosed source of income. The Ld. CIT(A) has deleted the additions vide para 7 of his order at page 14 of by observing as under:- "As regards, the other addition of Rs. 17,21,870/- made by the AO, the relevant factual matrix emerges that the assessee has sold sarees worth Rs. 17,21,870/- as a going concern in an exhibition during the F.Y. 2007-08 which was held between 13th April to 15th April 2007. The Assessing officer had accepted a similar sale made in the preceding financial year 2006-07, and no additions were made in that year in this particular aspect while reopening the case for that year. For this assessment year, it is seen that the appellant had submitted all the original sal....
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.... etc. and without rejecting the books of account of the assessee as prescribed by law cannot disallow the entire sale consideration offered by the assessee only on the suspicion that assessee cannot have raised this sale consideration within 3 days of exhibition. For disbelieving this claim of assessee when supported by materials, the AO has to bring any evidence/material to show that there was no evidence of exhibition at all as claimed to have been conducted by assessee or no purchase/sales happened in such an exhibition. We note that in the remand report, the AO has made some general observations affirming the action of his predecessor but has not found any infirmities in the accounts, documents submitted and confirmations received from sundry creditors. Adverse view cannot be taken if no infirmity is found by the AO when the assessee who was engaged in the business of finance/insurance/shares, ventured into the business of trading of sarees. It was brought to our notice that last year also assessee had shown income from sale of sarees which has not been disputed. We are of the opinion that no adverse view can be drawn when there is no infirmity can be pointed out, when transact....
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....ook. From a perusal of the same, it is apparent that the assessee has substantial receipts from sale of sarees in Exhibition under - Date Amount 13.04.2007 7,18,900/- 14.04.2007 6,20,070/- 15.04.2007 3,82,900/- 20. This, according to Ld. AR proves the source of payment by the proprietor concern to the proprietor assessee and does not want us to interfere in the order of Ld. CIT(A). We note that the Ld. CIT(A) after taking into consideration the aforesaid facts took note that assessee had withdrawn Rs. 12 lakhs from her proprietary concern which had cash of Rs. 17,21,870/- from sale of sarees, which has been disbelieved by the AO on suspicion and surmises, so when he [Ld. CIT(A)] having accepted the assessee's sale consideration of Rs. 17,21,870/- from sale of sarees from exhibition in earlier grounds, which action of Ld. CIT(A) having been upheld by us, the assessee's explanation of withdrawing Rs. 12 lakhs from proprietary concern M/s. Jyothi Consultancy Services which had fund with it is a plausible explanation supported by cash flow statement (supra). So the action of Ld. CIT(A) in deleting Rs. 12 lacs is confirmed. 21. Ground No. 4 and....