TaxTMI 
TaxTMI 
2019 (10) TMI 303
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.... the amount of Rs. 80,00,000/- was unsecured loan received by the assessee on the basis of additional evidence though objection was raised in the remand report as to its admissibility. 3. For these and such other grounds that may be urged at the time of hearings, the Hon'ble ITAT may please set aside the order of the ld. CIT(A) and restore the order of the Assessing Officer. 3. Brief facts qua the issue are that the assessee is engaged in the business of manufacturing caps and closures, pet bottles, jars etc. in the name and style of his manufacturing unit M/s Shiva Caps & Closures, Patharkuchi, Sonapur, Kamrup. The assessee has shown net loss of Rs. 58,17,677/- from his manufacturing unit. During the assessment proceedings, the assessee explained to AO that the manufacturing unit suffered loss due to high interest payment,sluggish demand, competition, high material cost, depreciation,electricity charges etc. The assessee is a director in M/s Shiva Bottles Pvt. Ltd and earns salary income. The assessee also earns interest income.The assessing officer,on perusal of balance sheet and other details, noticed that the assessee has taken fresh unsecured loan of Rs. 80,0....
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....ss of Ms. Wallang and genuineness of transaction on 10/11/2015. The assessee was further informed that in case of non-compliance, part compliance, incomplete compliance or unsatisfactory explanation, the sum of Rs. 80,00,000/- credited to assessee's account shall be charged to income-tax under Section 68 of the Act. 4. In response, the assessee filed a written reply before AO on 10/11/2015, which is reproduced as follows: "1) The creditor Jenita Wallang is not new creditor. There as opening balance of Rs. 29,50,000/- of her loan which was taken in earlier years. My assessments for last two- three years were regularly completed under Section 143(3) during which the loan transaction with this creditor was duly scrutinized. 2) For this year also, I have already submitted confirmation letter from the creditor. The new loan was also taken by Account Payee Cheques. This fact is duly supported by the confirmation letter where the respective cheque numbers by which the new loan was taken have been duly given. The loan cheques were deposited in my firm's A/c with SBI, Amerigog. 3) For your verification, I am submitting herewith copy of my firm's above b....
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....n the entire consideration on account of sale of her co-owned property was received by her in cash from the purchaser and a copy of the corresponding sale deed of the loan creditor was also filed by the Assessee as additional evidence. We note that the loan creditor had claimed, in her affidavit, that she is a tribal and not required to furnish the income tax return. 7. Based on the factual position narrated by us in para 6 above, and in the sequence of the events as noticed above, we find no hesitation in holding out that suspicion, however strong, cannot be substituted for material proof in support of the findings from the AO. The AO should act in a judicial manner, proceed with a judicial spirit and come to a judicial conclusion. The AO is required to act fairly as a reasonable person and not in an arbitrary or capricious manner. The assessment made should have enough material and it should stand on its own legs. The basis for addition cannot only be the suspicion that the cash belonging to the loan creditor has been deposited on her behalf by the Assessee himself in the bank account of the loan creditor. The impugned addition cannot be sustained merely on the basis of such s....
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.... (ii).That the Assessee had duly discharged his primary onus qua the identity, creditworthiness and genuineness of the fresh loan of Rs. 80,00,000/- received by the Assessee from one of his existing loan creditors. (iii). That the said loan creditor was not a new loan creditor, in-fact, the loans taken by the Assessee from the said loan creditor have been considered in the preceding assessment years, the assessment whereof had been completed under Section 143(3) of the Act. There is no denial or negation of the said contention of the Assessee by the Ld. AO either in the order impugned or even in the remand report. (iv) That the notice under Section 133(6) was issued by the Ld. AO directly to the loan creditor. (v).That, in response to his notice under Section 133(6) of the Act, the said loan creditor had directly duly confirmed to the Ld. Assessing Officer the fresh loan given by her to the Assessee. (vi).That the Ld. AO, on account of being dissatisfied on the account of purported observations qua the discrepancy in the bank statement of the loan creditor or of the factum of the cash belonging to the loan creditor having been deposited ....
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.... the income of the assessee as held by the Supreme Court in the case of CIT v. Smt. P. K. Noorjahan [1999] 237 ITR 570. We note that against the said decision of Hon'ble Gujarat High Court the special leave petition filed by the Revenue has also been dismissed by the Hon'ble Apex Court. 10. We note that the addition has been made only on the basis of suspicion without looking into the totality of the facts and surrounding circumstances and without the basis of any evidence. As rightly mentioned in his assessment order by the Ld. AO, three things viz. identity of the creditor, creditworthiness of the creditor and genuineness of the transaction have to be proved to treat a loan as genuine. The loan taken by the Assessee from Smt. Jenita Wallang, which has been treated as his income under Section 68 by the AO, is examined in the light of the above ingredients as follows: First, the identity:It is an uncontroverted fact that Smt. Jenita Wallang was not a new creditor. The Assessee had taken loans from her in earlier years and outstanding balance of such loans, as on 01/04/2012, was Rs. 29,50,000/-. In the earlier years for which assessment under Section 143(3) had been ma....
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....he loan creditor, as per the VAT returns, is as hereunder: Period , From Period To Turnover 01/04/2012 30/06/2012 188139473 01/07/2012 30/09/2012 151682370 01/10/2012 31/12/2012 204840384 01/01/2013 31.03.2013 218636304 Total Turnover 763298531 From the records, it is seen that in course of hearing no efforts were made to assess the financial position of these businesses on which Assessee had relied on to prove the creditworthiness of the loan creditor. Even in the requisition sent by the AOunder Section 133 (6), no details were asked about these businesses. As the Assessee had submitted, as proof, copies of the licenses of the creditor's businesses, the AO should have ascertained the financial position of these businesses to accept or of not accept the proof submitted by the Assessee.On perusal of these documents, we hold that the loan creditor, Smt. Jenita Wallang, was a person of means and had creditworthiness to advance the loan in question to the Assessee . Third, the genuineness of the transaction: The Ld. AO has held in his assessment order that the loan transaction was not genuine and he had strong reasons for ....
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....'s bank account, was deposited by the assessee himself. As far as the alleged wrong bank statement is concerned, the Assessee could not have any knowledge about the same. Statements are obtained by the staff of the creditors. The alleged wrong bank statement might have been a mix up at the bank level which the staff did not notice. However, when the loan cheques clearance is duly reflected in the creditor's and the Assessee's respective bank accounts, any mistake in the bank statement cannot be a reason to conclude that the loan was not genuine. Regarding the deposit of cash by the Assessee in the loan creditor's account, the Assessee had stated on oath, before the AO, that he was given cash by the loan creditor Smt. JenitaWallang for depositing the same in her bank account as there was no balance in her account to honour the loan cheques. The AO, in his assessment order, has surmised that this could not have happened because, according to him, the cash could have well been deposited at Shillong in this age of Core Banking. However, in surmising this, he forgot that in business dealings in real life this is quite usual and not at all abnormal. The Assessee was in ....
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....r to prove the genuineness of the loan transaction and confirming the fact that she had given the cash to the Assessee for depositing in her account. It is clear that the Assessee had filed, before the AO, creditor's loan confirmation letter and subsequently on requisition under Section 133(6), the creditor had clearly accepted that she had given the loan of Rs. 80 lakhs to the Assessee. Regarding deposit of cash in her account, the Assessee in his statement on oath had stated that since he was in urgent need of fund he had taken the loan cheques of the creditor's account at bank branch where he himself had an account and since there was no sufficient fund in the said account the creditor gave him cash to deposit in the said account which he did and deposited the cheques in his account which were cleared and credited in his account.To verify whether the Assessee's account with NEDFi was overdue the same have been examined by ld CIT(A).All the accounts of the Assessee with NEDFi were actually overdue and the Assessee had deposited funds in these accounts only after clearance of the cheques from Smt. JenitaWallang's in his account. Smt. Jenita Wallang had accepted ....
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....on 68 of the IT Act nor on general principle, it can be said that once the existence of the persons in whose names credits are found in the books of the assessee is proved and such persons own such credits with the assessee still the assessee is to further prove the source from which the creditors could have acquired money to be deposited with him. The fact that the depositors explanation about the sources where from they acquired the money is not acceptable to the A.O., it cannot be presumed that the deposits made by such creditors is the money of the assessee himself. There is no warrant for such presumption." 14.Before us, ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and the same is not being repeated for the sake of brevity.We note that in the assessment order no doubt has been expressed regarding the Assessee's books of account which were regularly maintained and audited books. It is apparent that except this loan transaction, the books of account of the Assessee have been accepted in to-to and when this has been done, the Ld. Counsel relied on the jurisdictional High Court's....