TaxTMI 
TaxTMI 
2019 (6) TMI 1253
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....dition to above, Id. CIT(A) failed to appreciate that the allegation of AO about enquiries about address of company is found wrong beside there is no material against the mass evidences/material placed on record and accepted other loans Id. AO failed to discharge the shifted onus lay upon him even after remanding case twice. 3. That in addition to above, learned CIT(A) failed to appreciate that loans was taken long before the start of activities hence neither there was any possibility to have earned so much of income and failed to follow the ration of apex / jurisdictional courts etc. on the issue. 4. That without prejudice to above and without any dilution in above grounds but in alternative, learned CIT(A) failed to follow the ratio of jurisdictional/other courts holding that provisions of s. 68 has no applicability where deemed income u/s 68 is applied for charitable purposes. 2. The brief facts of the case shows that the assessee is a charitable trust assessed as Association of Persons, running an educational institute, filed its return of income on 12.10.2010 showing total income of Rs. Nil. 3. During the course of assessment proceedings, it was found t....
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....ned unsecured loans u/s 68 of the Act and application of section 11/12 of the Act. 11. The facts of the case, submissions made by the appellant, remand report of the AO and rejoinder of the appellant have been considered. The appellant is a society which is not registered u/s 12Aof the Act during the year under consideration. The AO has required the appellant to prove identity, creditworthiness‟ 'and genuineness in respect of above unsecured loans. The appellant has received loan of Rs. 30 lac from M/s Atoll Vyapaar Pvt. Ltd., registered at 19, Ilnd Floor, Main Building, R.N. Mukerjee Road, Calcutta. Similar loans have been raised in the case of Society for Institute of Professional Studies for 2010-11 where trustees are common with the appellant and being assessed with the same AO. It was found by the AO that its director is Sh. Sunil Kumar Gupta whose address as per the ROC/MCA records is 234, DDA Office Complex, Jhandewalan Extension, New Delhi. The AO has issued notice u/s 131 of the Act on 16-04-2012 in the case of Sh. Sunil Kumar Gupta in the case of Society for Institute of Professional Studies to verify the unsecured loans taken by the a....
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....Rs. 37989/- for AY- 2010-11. From its balance sheet as on 31-03-2010 it is noted that it has shown share capital of Rs. 33.56 lac with huge premium of Rs. 7.81 crore. The available funds have been parked into unquoted shares investments and loans advances from which there is no income. In the profit & loss account it has shown petty interest receipts of Rs. 78082/- with net profit of Rs. 37989/-. It has no fixed asset. The loan has been repaid on 02-04-2014 without paying any interest and much after the completion of the assessment proceedings on 15-03-2013. From the above analysis, it is noted that the above entity is not doing any real business activities to support the availability such large funds of getting share capital, huge share premium at their disposal to make such investment with the appellant. This entity has been found to be a paper company. In the view of the above facts, it is noted that identity, creditworthiness and genuineness of the above entity is not established from the above documents and results of enquiries made by the AO. The above entity has been found to have been existing only on papers without having any real or physical worth to support the ....
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....gh Court in the case of Navodaya Castle Pvt. Ltd. in ITA No.320/2012 that certificate of incorporation, PAN etc. are relevant for the purpose of identification but have their limitation when there is evidence and material to show that the subscriber was a paper company and not a genuine investor. The SLP against the ruling of the Hon‟ble High Court has been dismissed by the Hon‟ble Supreme Court. Further, it has been held by Hon‟ble Delhi High Court in the case of Youth Construction Pvt. Ltd. 357 ITR 197 (Delhi) that mere proof of identity without genuineness and creditworthiness is not enough. Further, it has been held by the Hon‟ble Delhi High Court in the case of N.R. Portfolio Pvt. Ltd. 87 DTR 0162 (Del) that the onus to prove the three factum is on the assessee as the facts are within his knowledge. Mere furnishing names address and PAN particulars or relying on entries in the ROC website is not enough. If upon verification or during the proceedings, the AO cannot contact the share applicant or information becomes unverifiable or there are further doubts in pursuit of such details, onus shifts back to the assessee to explain the same. The relevant part ....
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....ess of the transaction and creditworthiness of the creditor stands discharged in all cases is payment is made through banking channels. Whether or not onus is discharged depends upon facts of each case. It depends on whether the two parties are related or known to each; the manner or mode by which the parties approached each other, whether the transaction was entered into through written documentation to protect the investment, whether the investor professes and was an agnel investor, the quantum of money, creditworthiness of the recipient, the object and purpose for which payment/investment was made etc. These facts are basically and primarily in knowledge of the assessee and it is difficult for revenue to prove and establish the negative. Certificate of incorporation of company, payment by banking channel, etc cannot in all cases tantamount to obvious. What is unmistakably visible and apparent, cannot be spurred by formal but unreliable pale evidence ignoring the patent and what is plain and writ large. 32. In view of the aforesaid discussion the substantial question of law framed in the two appeals is answered in favour of appellant-Revenue and against the Resp....
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....ndent analysis of the documents to arrive at the conclusion that the appellant has failed to prove identity, creditworthiness and genuineness in respect of unsecured loan as discussed above. The appellant has been required by the AO to produce the Director of Atoll Vyapaar during the assessment proceedings on 12- 03-2013. However, no compliance has been made. As per the requirement of section 68 of the Act, onus has been shifted back on the appellant by confronting the appellant on the basis of adverse findings as a result of enquiries conducted to verify the genuineness of documents submitted by the appellant and about non-existence of company at the address given by the appellant. The documents furnished by the appellant have thus remained unverifiable. Therefore, the appellant has failed to discharge the onus cast upon it u/s 68 of the Act to explain the credits. The various adverse observations made above in the cases of this alleged depositor entity is corroborating to infer that their identity, genuineness and creditworthiness has not been proved. 16. The appellant has relied upon the fact that these loans have been repaid in the subsequent years. However, this fact ....
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....e is eligible for exemption u/s 11/12 of the Act. The AR has relied upon the decision of CIT vs. Uttranchel Welfare Society (supra) and Hon‟ble ITAT, Delhi in the case of Dayanand Pushpa Devi Charitable Trust ITA No.3848/Del/2009. The appellant has not submitted any evidence that it is registered u/s 12A/12AA of the Act for the year under consideration. Therefore, this submission is not based upon documentary evidence without prejudice to this, It is noted that in the case of Uttranchel Welfare Society the unverified donations of Rs. 96.5 lac added by the AO u/s 68 of the Act were already a part of income & expenditure account and were declared as income in the hands of the assessee whereas in the present case unverified loans which have been added by the AO u/s 68 of the Act are not part of income & expenditure statement of the appellant The said decision has been given by the Hon‟ble Allahabad High Court after considering the ratio of Hon‟ble Delhi High Court in the case of DIT vs. Keshav Social & Charitable Foundation in which it has been held that section 68 has no application in a case where the assessee has disclosed the donations as its income. Further, it ....
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.... authorities have failed to appreciate that the loan was taken long before the start of the activities, hence, there was any possibility of the trust having earned so much of income and therefore, the addition cannot be made in the hands of the assessee u/s 68 of the Act. He further relied upon the following judicial precedents for each of the above arguments as under:- "A. Where loan is supported with confirmation/ITR etc. and loan is received and refunded back the. banking channel - Can‟t be added in the hands of assessee u/s 68: CIT V Rahul Vineet Traders[2014] 41 taxmann.com 86 (All) 01-03 CIT V Kapoor Chand Mangesh Chand[2013]38 taxmann.com 239 (AIL) 04-05 CIT v ABT ITD. (2015)370 ITR 159 (Madras) 06-06 B. Where loan is supported with confirmation/ITR/address and loan is received th. banking channel and no cash is deposited in depositor a/c-Onus discharged. AO may add in the hands of depositor or has to conduct enquiry to bring material to reject loan CIT V Shalimar Buildwell Pvt. Ltd. [2013] 40 taxmann.com 285 (All) 07-09 CIT VSURENDRA CHAND BANSAL [2014) 42 TAXMANN.COM 201 (ALL) 10-10 CIT S. Kamaljeet Singh....
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....repayment of the loan by the cheque is not excuse to establish that the provision of section 68 of the Act does not apply. He referred to the provision of section 68 of the act and stated that it does not say that if the loan is repaid provisions of section 68 does not apply. He further relied upon the decision of the coordinate bench in ITA No. 4778/Del/2013 dated 08.03.2019 where the addition u/s 68 in the hands of that assessee is confirmed. He further referred to the decision of the Hon'ble Supreme Court in case of NRA Iron and Steel Co. and the decision of the Hon'ble Delhi High Court in case of NDR Promoters Pvt. Ltd. On the issue of making addition when the activities of the trust has not started, He stated that during the year the assessee has already started its activities and constructed building on the land purchased and further obtained unsecured loan of Rs. 70 lakhs, which clearly shows that assessee has setting up its activities therefore, it cannot be stated that assessee has not carried out its activities during the year. He further stated that the trust is registered by 12.01.2009 and has already commenced its activities, therefore it has made applicatio....
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....ked to prove the identity, creditworthiness of this party as well as genuineness of the transaction. Assessee submitted the copy of the account of the above party, its return of income, bank statement of this lender vide letter dated 14.03.2013. The ld AO found that income shown the return of income of the lender is only Rs. 37989/-. Further, the bank account submitted by the lender was only for the part of the year from 09.03.2010 to 12.03.2010. he noted that there was a heavy debit and credit in the bank statement which did not commensurate with the return of income of the assessee, he therefore, asked the assessee to produce the directors of the lender company which the assessee neither produce before the ld AO nor before the ld CIT(A). Therefore, the ld AO got the enquiry conducted and found that the company does not exist at the given address. The ld AO further noted lender has also given loan to an another trust Society For Institute And Professional Studies for FY 2010-11 which is having common trustees as of the assessee and assessed by the same AO. In that case also lender was fond to be nonexistent but a paper company as its directors were not traceable. Summons u/s 13....
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.... sheet of the company itself shows it is having net worth of Rs. 8.18 cores as share capital and reserves and surpluses, but is locked in advances and investment of the identical amounts in private limited company. The lenders which has an asset base of Rs. 8.18 crores has earned a meager income of Rs. 37000/- and the income tax payable for Assessment Year 2009-10 is a meager sum of Rs. 108/- and Rs. 11739/- for the current year. Further this company does not have a fixed asset of single rupee. Further, the balance sheet produced before the lower authorities was also not accompanied with the schedules and the profit and loss account but a stray paper giving the list of various loans and advances etc was given . For example the assessee has not produced schedule 5, 6 and 4 attached with the balance sheet. It has not also produced the profit and loss account of the above company. It has not shown that bank balance and cash on hand company was having. Balance sheet does not show in which bank the lender company was having its accounts. Therefore, we are of the view that assessee has failed to produce the annual accounts of the above company. Merely producing stray list of advances wit....
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....case the ld AO has conducted the enquiry, confronted the assessee and directed the assessee to produce the directors which were not complied with. Therefore that decision does not help the case of the assessee. 14. Further the decision cited by the learned authorised representative that addition u/s 68 cannot be made for unapproved donation et cetera were some are utilized for charitable purposes relying on the decision of 364 ITR 398 of honourable above High Court. The fact of that case does not apply in the present case before us as assessee has not received any donation but has received unsecured loan. Therefore the reliance placed by the assessee on that decision is incorrect and hence rejected. 15. The learned authorised representative has also stated that non-production of the depositors are not following the source of source cannot result into the addition u/s 68 of the income tax act. We have carefully considered the several decisions relied upon by the learned authorised representative and found that the facts of those cases are not applicable to the present case as in the present case the assessee has failed to prove the identity, creditworthiness of the depositor a....
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....s of an assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. The section only gives a statutory recognition to the principle that cash credits which are not satisfactorily explained might be assessed as income. The section enacts that if a sum is found credited in the books of an assessee maintained for any previous year (which might be different from the financial year), the cash credit might, in cases where it is assessed as undisclosed income, be treated as the income of that previous year, and the financial year may not be taken as the previous year for such a cash credit even if the undisclosed income was not found to be from the assessee's regular business for which the books were maintained. The cash credit might be assessed either as business profits or as income from other sources. Under the 1922 Act, where a large amount of cash was found credited on the very first day of the accounting year....
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....essee is misplaced. 19. Despite the above decision of Honourable Supreme court in case of Orissa Corporation Limited ( Supra) categorical holding that provision of section 68 of The Income tax Act applies even if the sum is credited on the first day of the commencement of the business, even otherwise we deal with the various judicial precedents raised by the ld Authorized Representative. 20. The first judicial precedents is of the Hon'ble Allahabad High Court In CT V Lal Mohar 88 Taxmann.com 260 ( All) , firstly above the decision has not considered the decision of the Hon'ble Supreme Court in 159 ITR 78. Further the facts show that in that particular case the sum of Rs. 9232000/- was explained to have been received from the constituents of the AOP in cash. In the present case the same is not received from the constituents but from an outside party, identity of which it has not been proved by the assessee. In those case it was also noted that no material or evidence have been produced on record by the revenue to rebut the evidence produce by the assessee. In the present case before us the revenue has conclusively proved that the amount of loan taken by the assessee is ....