TaxTMI 
TaxTMI 
TaxTMI 
2020 (9) TMI 1048
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....mine. 3. For that the Ld. CIT(A) erred in confirming the addition made by AO u/s 68 when the identity and creditworthiness of the transaction was proved and the onus of the assessee was discharged. 4. For that on the facts and in the circumstances of the case, the addition was not justified and is liable to be deleted. 5. For that even otherwise the addition is not called for since the shareholding of GRREPL has changed after the alleged statement made u/ s 131 completely and no person who was the shareholder at the time of recording the statement is a shareholder of the company during the relevant year. 3. From a perusal of ground nos. 1 to 5 (supra), it is noted that the sole issue of the assessee is against the action of the Ld. CIT(A) in confirming the impugned addition of Rs. 55 lakhs made u/s. 68 of the Income-tax Act, 1961 ( hereinafter referred to as the 'Act') . 4. Brief facts of the case as noted by the AO are that the assessee is an individual, had filed his e- return of income disclosing total income of Rs. 21,96,040/-. Later on his case was selected for scrutiny through CASS and after serving of statutory notices, the AO observes that the assessee has received ....
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....4-08-2011. Thus according to assessee the receipt of loan from M/s. GRREPL cannot be disbelieved on a statement, which can be termed as mere hearsay. The assessee also brought to the notice of the AO that the assessee had taken a housing loan of Rs. 55 lakhs from M/s. GRREPL for which two (2) properties costing more than Rs. 1.59 crores have been given as securities. According to assessee, the loan amount of Rs. 55 lakhs was to be refunded in 55 quarterly instalments of Rs. 1 lakh/each plus interest @ 10% p.a. It was brought to the notice of the AO that the assessee continues to abide by these terms of the loan agreement and he is paying the installment regularly. It was also brought to the notice of the AO that M/s. GRREPL had given loan of Rs. 55 lakhs to assessee, which is NBFC company registered by the Reserve Bank of India and a certificate to this effect was produced before the AO. The assessee submitted that lender company, M/s. GRREPL has confirmed about this loan transaction to the AO, moreover, brought to the notice of the AO the source of Rs. 55 lakhs, which can be traced as the loan repayment to M/s. GRREPL from M/s. G.K Ispat Ltd, which refunded Rs. 34 lakhs and Rs. 21....
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....cheque. In order to show the creditworthiness of the lender, M/s. GRREPL, the Ld.AR of the assessee drew our attention to the audited profit and loss account and balance sheet P & L account of M/s. G.RREPL as on 31.3.2015, which is placed at pages-8 of the paper book. It reveals that the lender's (M/s GRREPL) gross income was to the tune of Rs. 85,23,684/- for a period between 1.4.2014 to 31-03-2015 and it had shown profit of Rs. 45,14,706/- and it paid income-tax of Rs. 12,16,360/-. The AR also drew our attention to page-11 of the P.B, which shows that M/s. GRREPL has given short term loan and advances against properties at Rs. 10,49,79,372/- . The Ld.AR also drew our attention to the P & L account of M/s. G.R.E.P.L for the period from 1.4.2015 to 31.3.2016 (AY 2016-17) and we note that this lender had income of Rs. 94,08,607/- and had shown profit before tax Rs. 50,13,255/- and paid income tax of Rs. 14,50,450/- and has disbursed advance against property of Rs. 10,49,79,327/- (refer page- 31 of P.B). The Ld. AR also drew our attention to page-52, which is a copy of loan confirmation of accounts given/issued by M/s. GRREPL in respect of said loan which has been given to the assess....
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....do and even the statement if any recorded behind the back of assessee cannot be relied upon by the AO to draw adverse inference against the assessee unless the same is tested on the touch-stone of cross-examination, which action was also not done, so the AO erred in relying on the so called statement of ex-director and therefore the AO's action is un-tenable. We find that since the assessee has discharged his onus by providing the lender's (M/s. GRREPL) identity, credit worthiness and genuineness of the transaction as well as source of source as required under section 68 of the Act, the impugned addition cannot be sustained against the assessee. For coming to such a conclusion, let us discuss section 68 of the Act and some case laws: 6. Section 68 under which the addition has been made by the Assessing Officer reads as under: "68. Where any sum is found credited in the books 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 Assessing Officer, satisfactory, the sum so credited may be charged to income­tax as the income of the assessee of th....
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....the Department to establish the Revenue's case and in order to sustain the addition the Revenue has to pursue the enquiry and to establish the lack of creditworthiness and mere non­compliance of summons issued by the Assessing Officer under section 131, by the alleged creditors will not be sufficient to draw and adverse inference against the assessee. in the case of six creditors who appeared before the Assessing Officer and whose statements were recorded by the Assessing Officer, they have admitted having advanced loans to the assessee by account payee cheques and in case the Assessing Officer was not satisfied with the cash amount deposited by those creditors in their bank accounts, the proper course would have been to make assessments in the cases of those creditors by' treating the cash deposits in their bank accounts as unexplained investments of those creditors under section 69. 7. In the case of Nemi Chand Kothari 136 Taxman 213, (supra), the Hon'ble Guahati High Court has thrown light on another aspect touching the issue of onus on assessee under section 68, by holding that the same should be decided by taking into consideration the provision of section 106....
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....within the knowledge of any person, the burden) of proving that fact is upon him. " ******** What, thus, transpires from the above discussion is that white section 106 of the Evidence Act limits the onus of the assessee to the extent of his proving the source from which he has received the cash credit, section 68 gives ample freedom to the Assessing Officer to make inquiry not only into the source(s)of the creditor but also of his (creditor's) sub­creditors and prove, as a result, of such inquiry, that the money received by the assessee, in the form of loan from the creditor, though routed through the sub­creditors, actually belongs to, or was of, the assessee himself. In other words, while section 68 gives the liberty to the Assessing Officer to enquire into the source/source from where the creditor has received the money, section 106 makes the assessee liable to disclose only the source(s) from where he has himself received the credit and IT is not the burden of the assessee to prove the creditworthiness of the source(s) of the sub­creditors. If section 106 and section 68 are to stand together, which they must, then, the interpretation of section 68 are to sta....
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....nt, which he advances, as loan, to the assessee is that so far as an assessee is concerned, he has to prove the genuineness of the transaction and the creditworthiness of the creditor vis­a­vis the transactions which had taken place between the assessee and the creditor and not between the creditor and the sub­ creditors, for, it is not even required under the law for the assessee to try to find out as to what sources from where the creditor had received the amount, his special knowledge under section 106 of the Evidence Act may very well remain confined only to the transactions, which he had' with the creditor and he may not know what transaction(s) had taken place between his creditor and the sub­creditor... " ********** "In other words, though under section 68 an Assessing Officer is free to show, with the help of the inquiry conducted by him into the transactions, which have taken place between the creditor and the sub­creditor, that the transaction between the two were not genuine and that the sub­creditor had no creditworthiness, it will not necessarily mean that the loan advanced by the sub­creditor to the creditor was income of the assess....
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.....) their lordships, on the issue of discharge of assessee's onus in relation to a cash credit appearing in his books of account, has observed and held as under:- "4. The Tribunal has recorded a finding that the assessee has discharged the onus which was on him to explain the nature and source of cash credit in question. The assessee discharged the onus by placing (i) confirmation letters of the cash creditors; (ii) their affidavits; (iii) their full addresses and GIR numbers and permanent account numbers. It has found that the assessee's burden stood discharged and so, no addition to his total income on account of cash credit was called for. In view of this finding, we find that the Tribunal was right in reversing the order of the AA C, setting aside the assessment order." 9. We also take note of the decision of the Hon'ble High Court, Calcutta in the case of S.K. Bothra & Sons, HUF v. Income-tax Officer, Ward- 46(3), Kolkata 347 ITR 347 wherein the Court held as follows: "15. It is now a settled law that while considering the question whether the alleged loan taken by the assessee was a genuine transaction, the initial onus is always upon the assessee and if no ex....
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....explanation was accepted by the Income­tax Officer. He further contended that when the Tribunal has relied on the entire judgment of the Commissioner of Income­tax (Appeals), therefore, it was not proper to take up some portion of the judgment of the Commissioner of Income­tax (Appeals) and to ignore the other portion of the same. The judicial propriety and fairness demands that the entire judgment both favourable and unfavourable should have been considered. By not doing so the Tribunal committed grave error in law in upsetting the judgment in the order of the Commissioner of Income­tax (Appeals). 9. In this connection he has drawn our attention to a decision of the Supreme Court in the case of Udhavdas Kewalram v. CIT [19671 66 ITR 462. In this judgment it is noticed that the Supreme Court as proposition of law held that the Tribunal must In deciding an appeal, consider with due care, all the material facts and record its finding on all the contentions raised by the assessee and the Commissioner in the light of the evidence and the relevant law. 10. We find considerable force of the submissions of the learned counsel for the appellant that the Tribunal has mer....
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....in the light of the evidence as found by the Commissioner of Income­tax (Appeals). We also found no single word has been spared to up set the fact finding of the Commissioner of Income­tax (Appeals) that there are materials to show the cash credit was received from various persons and supply as against cash credit also made. 13. Hence, the judgment and order of the Tribunal is not sustainable. Accordingly, the same is set aside. We restore the judgment and order of the Commissioner of Income­tax (Appeals). The appeal is allowed. 11. When a question as to the creditworthiness of a creditor is to be adjudicated and if the creditor is an Income Tax assessee, it is now well settled by the decision of the Calcutta High Court that the creditworthiness of the creditor cannot be disputed by the AO of the assessee but the AO of the creditor. In this regards our attention was drawn to the decision of the Hon'ble High Court, Calcutta in the COMMISSIONER OF INCOME TAX, KOLKA TA-Ill Versus DATAWARE PRIVATE LIMITED ITAT No. 263 of 2011 Date: 21st September, 2011 wherein the Court held as follows: "In our opinion, in such circumstances, the Assessing officer of the assessee c....