TaxTMI 
TaxTMI 
2020 (10) TMI 405
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....n 14A. (ii) Mismatch in the amount paid to the related persons under section 40A(2)(b) reported in Audit Report and ITR. 3.1. During the course of assessment proceedings, it was noticed that the assessee has received unsecured loans from the following parties as per the details mentioned below : Name of the lender Address of the lender PAN Amount received [in Rs.] Ambashree Infratech (P) Ltd., 85, Metacalf Street, 2nd Floor, Kolkata, West Bengal. AAKCA4144N 59,00,000/- Blockdeal Dealcom (P) Ltd., 27A, Weston Street, Kolkata, West Bengal. AAECB9457B 27,00,000/- Unifour Commosale (P) Ltd., 85, Metacalf Street, 2^nd Floor, Kolkata, West Bengal. AABCU4645B 30,00,000/- Total -- -- Rs. 1,16,00,000/- 3.2. In order to verify the genuineness of the transactions, letters under section 133(6) were issued to the parties. But the letters sent to M/s Unifour Commosale (P) Ltd. and M/s Ambashree Infratech (P) Ltd., were received back as reported by the postal authorities "Not Known." The letters were issued at all addresses as available on ROC. However, reply in respect of M/s. Blockdeal Dealcom (P) Ltd., was received b....
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....s are suspect as there are evidences contrary to the same and in support, the assessee has provided copies of assessment orders of the alleged companies in question for different assessment years. (iii) The assessee suo motu vide letter dated 30.11.2017 has provided confirmation along with assessment particulars and bank statement from all the parties to whom commissions were issued and also letters from the said companies confirming that Inspectors from the different charges contacted for verification and in response to the same they have provided the desired documents. (iv) The assessee must be given right of cross examination of the Inspectors, who visited the premises of the lender companies. 3.4. The A.O. after examining the material on record noted that the burden is upon the assessee to prove ingredients of section 68 of the Income Tax Act, 1961. The A.O. as regards doubting the report of the Inspector and suo motu confirmation filed by the creditors observed that the said documents have been provided by the parties suo motu to the assessee which have been filed by assessee before him. The A.O. noted that Inspector of the Department have verified the fac....
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....py of their ITR for the assessment year under appeal, their audited accounts, confirmations, bank statements, confirmation of the return of the loan in subsequent assessment year 2016-2017, Copy of MCA to show the Company Board has shown them working actively as well as copy of the assessment orders for the A.Ys 2013-2014 and 2014-2015. He has also referred to the replies filed by the creditor in response to the summons issued by the A.O. Learned Counsel for the Assessee, therefore, submitted that since the impugned amount have been repaid to the creditors in the subsequent assessment year and A.O. did not disallow the interest paid to the creditor in assessment year under appeal and the TDS deducted and paid to the Revenue Department of such interest have not been doubted, therefore, there were no justification for the A.O. to make the addition. The initial burden upon the assessee to prove the ingredients of section 68 of the Income Tax Act have been discharged by the assessee. He has submitted that A.O. merely relied upon the report of the concerned A.Os. of Kolkata based on enquiry conducted by the Inspector at Kolkata. But, despite asking, the A.O. has not provided copy of ....
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.... record. In this case the A.O. noted that in assessment year under appeal, assessee has received unsecured loans from three creditors as reproduced above in a sum of Rs. 1.16 crores. Initially the letters sent under section 133(6) of the I.T. Act to these three creditors were not served upon two parties. The A.O, in such circumstances, issued Commission under section 131 of the Income Tax Act, 1961 to the Kolkata A.Os. because all the three creditors were situated in Kolkata. The A.O. requested the concerned A.Os. of Kolkata to examine the genuineness of the transaction, identity of the creditors and their creditworthiness. It was also requested to make local enquiry by examining the Directors of the creditor companies. The concerned A.Os. of the Kolkata submitted the report before the A.O. based on the report of the Inspector, in which, it was intimated that the summons under section 131 of the I.T. Act, 1961, could not be served upon the two creditors and in case of one creditor though they have filed submissions and documents, but, the Director of the Investor Company did not appear for examination. The assessee-company, in its reply before the A.O, sought for copy of the report....
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.... available on record for consideration is whether burden upon the assessee under section 68 of the Income Tax Act, 1961 have been discharged for proving the identity of the creditors, their creditworthiness and genuineness of the transaction in the matter shall have to be considered. It is not in dispute that assessee filed documentary evidences before A.O. in respect of the genuine credits which consists of copy of the ITR of the creditors along with their assessment orders under section 143(3) of the I.T. Act, 1961, their audited balance-sheet, their confirmations to confirm the receipt of the loan, bank statement, bank statement and confirmation of subsequent year to show loans have been repaid. The assessee paid interest on these loans and deducted TDS. All these documentary evidences have not been doubted by the A.O. Thus, the documentary evidences on record clearly established that all the creditors are assessed to tax and are existing assessees. Thus their identity have been established. All the creditors have confirmed giving loan to the assessee which is repaid in subsequent year and were subjected to interest. The A.O. did not disallow the interest paid on these loans ....
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.... or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such could arise. The High Court was, therefore, right in refusing to refer the questions sought for." 7.3. Decision of Hon'ble Gauhati High Court in the case of CIT vs. Nemi Chand Kothari reported at (2003) 264 ITR 254 (Gauhati.) in which it has been held as under : "Under section 68 of Income Tax Act creditor's creditworthiness has to be judged vis-à-vis transactions, which have taken place between assessee and creditor, and it is not business of assessee to find out source of money of his creditor or genuineness of transactions, which took place between creditor and sub-creditor and/or creditworthiness of sub-creditors for these aspects may not be within special knowledge of assessee." 7.4. Decision of Hon'ble Gujrat High Court in the case of DCIT vs. Rohini Builders (2002) 256 ITR 360 (Gujrat) in which it was held as under : "Assessee had discharged initial onus by providing identity of the creditors by giving their complete address, GIR numbers/permanent account numbers and copies of....
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....sion of Hon'ble jurisdictional High Court in the case of CIT vs. Vrindavan Farms Pvt. Ltd., etc. ITA.No.71 of 2015 dated 12th August, 2015 (Del.), in which it was held as under : "The sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their return of income. It was observed by the ITAT that the AO had not undertaken any investigation of the veracity of the documents submitted by the assessee, the departmental appeal was dismissed by the Hon'ble High Court. 7.8. Decision of Hon'ble jurisdictional High Court in the case of Divine Leasing & Finance Ltd., 299 ITR 268, in which it was held as under : "No adverse inference should be drawn if shareholders failed to respond to the notice by A.O." 7.9. Decision of Hon'ble Delhi High Court in the case of CIT vs. Winstral Petrochemicals P. Ltd., 330 ITR 603, in which it was held as under : "Dismissing the appeal, that it had not been disputed that the share application money was received by the assessee-company by way of account payee cheques, through normal banking channels. Admittedly, copies of application for allotment of shares were also provided to the Assessing....