TaxTMI 
TaxTMI 
2019 (10) TMI 303
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....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. 80,00,000/- from Ms. Jenita Wallang during the relevant previous year. The a....
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....pliance, 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 bank account. The four loan cheques have been duly reflected in this account. 4) In the confirmation letter, the creditor's PAN has been given. 5) Furth....
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....led 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 suspicion and certain assumed probabilities. It is a clear case where the Assessee had duly discharged his primary onus as casted under Section 68 of the Act. As regards the observation that susp....
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....(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 by the Assessee himself in the bank account of the loan creditor, on her behalf, had chosen not to examine the said loan creditor. (vii).That even during the remand proceedings, there is no finding from the Ld. AO that the said loan creditor was not a ....
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....;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 made, no adverse finding had been given in respect of the said loan. Further, the requisition letter under Section 133 (6), sent by the AO, by speed post, was duly delivered to the creditor and she had duly sent the reply to the said letter by post. The loan creditor also holds a PAN ....
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....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 doing so. The reasons which cited by the AO for arriving at this conclusion, as per the assessment order, are hereunder: i. The bank statement of the bank account through which the loan transaction was carried on, and which was submitted to the AO was found wrong when compared with the bank statement of the sa....
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....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 urgent need of funds to salvage his credit with NEDFi, since he was unable to repay the installments of his NEDFi loan due to losses in his industrial undertaking. He had, therefore, approached his long-time family friend and business associate Smt. JenitaWallang for the said loan. Since the loan could not have been taken in cash, as per I.T. provisions, the Assessee ....
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....khs 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 in her reply, sent by post in response to requisition under Section 133 (6), to the AO, that she had given the loan of Rs. 80 lakhs to the Assessee free of interest. 13. We note that ld AO had doubts about the genuineness of the loan, despite the aforesaid reply of the loan creditor, the AO should have summoned the creditor under Section 131 for further verification as hel....
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....t 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 judgement in the case of Tolaram Daga Vs. CIT (1965) 59 ITR 632 (Gauhati) is quite relevant and applicable. In this judgment the Hon'ble Court has held as under:- "It would appear that the accounts of the firm which had been produced in the case had been accepted and acted upon by the Department and no serious challenge had been made to their genuineness or that they were kept regularly in th....