TaxTMI 
TaxTMI 
2018 (8) TMI 2007
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..... In order to prove the identity, creditworthiness and genuineness of the transactions, the commission u/s 131(1)(d) of the I.T. Act, 1961 was issued to the concerned Assessing Officer in Kolkata for making enquiries regarding the identity of the investor companies while examining/ verifying from the books of account and furnish report. The Assessing Officers to whom commission u/s 131(1)(d) were issued have issued summons u/s 131(1) to the directors of the respective companies and in response to the summons, the directors of the respective companies appeared and their statements were recorded by the respective Assessing Officers. The Assessing Officer observed that in most of the cases, the concerned Assessing Officers have not asked any question regarding the activity of the lending companies. Documents regarding the transactions made during the financial year 2013-14 with the assessee firm were furnished. Copies of statement of the directors of these companies were also enclosed with the report. The Assessing Officer observed that in certain cases, the Assessing Officers furnished reports on the basis of Inspector's report and obtained documents from the lending companies and fo....
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....at the funds are being rotated through these companies to give it a colour of genuine transaction which is not the factual position. He noted that only existence and banking transaction does not make the whole transaction of accommodation entries as genuine. From the financial statement of each lending company and computation of income and return of income, the Assessing Officer inferred that there is no genuineness in transaction since they have not done any real business. He, therefore, came to the conclusion that the names of these companies have been utilized by the assessee firm in routing its own money through banking channels. Rejecting the various explanations given by the assessee and relying on certain decisions, the Assessing Officer made addition of Rs. 3,48,50,000/- to the total income of the assessee being the amount received by the assessee from the 20 companies u/s 68 of the I.T. Act. The Assessing Officer similarly disallowed the interest of Rs. 37,94,738/- paid to these companies on account of such loan. 5. Before the ld. CIT(A), the assessee reiterated the same arguments as advanced before the Assessing Officer. It was submitted that the assessee has furnished t....
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....ing grounds :- "1. In the facts and circumstances of the case and in law, Ld. CIT(A) was not justified in confirming the addition of Rs. 3,48,50,000/- made by the AO u/s 68, on account of unsecured loan received by the assessee. The addition made by AO and sustained by CIT(A) is arbitrary, baseless and not justified. 2. Ld. CIT(A) erred in confirming disallowance of Rs. 37,23,402/- out of the disallowance of Rs. 37,94,738/- made by the AO out of the interest account. The disallowance made by AO and sustained by CIT(A) is not justified. 3. The appellant reserves the right to add, amend or alter any of the ground/s of appeal." 8. The ld. Counsel for the assessee strongly challenged the order of the ld. CIT(A) sustaining the addition made by the Assessing Officer. He submitted that during the course of assessment proceedings the assessee had submitted the names and addresses of the lender companies along with their PAN numbers, copy of bank account, balance sheet, profit and loss account etc. The Assessing Officer had issued commission u/s 131(1)(d) to the Assessing Officers of the lender companies who have conducted enquiries from the directors of the lender companies by issue....
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....reditworthiness of the lender companies. The assessee is not required to prove the source of the source. 10. Referring to the decision of the Hon'ble Calcutta High Court in the case of CIT vs. M/s Dataware Private Limited vide ITA No.263 of 2011 order dated 21.09.2011, he submitted that the Hon'ble High Court in the said decision has held that the Assessing Officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. It was held that after getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing Officer shall enquire from the Assessing Officer of the creditor as to the genuineness of the transaction and whether such transaction has been accepted by the Assessing Officer of the creditor. Instead of adopting such course, the Assessing Officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing Officer of the assessee is bound to accept the same as gen....
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....ficer has conclusively proved that these companies are shell companies without doing any genuine business therefore, merely because money has been routed through banking channel, the same cannot be a ground to accept the contention of the assessee. He submitted that the various decisions relied on by the ld. Counsel for the assessee are not applicable to the facts of the present case and are distinguishable. He accordingly submitted that the order of the ld. CIT(A) be upheld and the grounds raised by the assessee should be dismissed. 14. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the ld. CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find during the course of assessment proceedings, the assessee company furnished the name, address, PAN numbers, bank statement, copies of audited profit and loss account etc. of the lender companies to the Assessing Officer on the basis of which the Assessing Officer issued commission u/s 131(1)(d) to the Assessing Officers of the respective lender companies. We find although the concerned Assessing Officer....
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....as to why the unsecured loan totaling Rs. 3,48,50,000/- received from the above companies be not added back to your total income u/s 68 of the Income Tax Act, 1961 and be taxed u/s 115BBE of the Income Tax Act, 1961. For this purpose, your case is fixed for hearing in my office at Mahima Complex, Vyapar Vihar, Bilaspur on 26/12/2016 at 11.00 AM." 16. This shows that the Assessing Officer in the letter addressed to the assessee has accepted the identity of the creditors and genuineness of the transaction, however, in the assessment order he doubts about the genuineness and creditworthiness of the loan creditors. Since the identity of the loan creditors is not in dispute, therefore, the two conditions in terms of section 68 namely identity and genuineness of the transaction in our opinion has been proved. So far as creditworthiness of the loan creditors are concerned, it is an admitted fact that on the basis of various documents submitted by the assessee, the Assessing Officer has issued commission u/s 131(1)(d) to the concerned Assessing Officers of the loan creditors. The concerned Assessing Officers of the loan creditors have conducted enquiries by issuing summons u/s 131 to the ....
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....ept the same as genuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established." 18. We find the Hon'ble Delhi High Court in the case of Kinetic Capital Finance Ltd. (supra) has observed as under :- "7. The Tribunal, in our view, has correctly appreciated the position in law which is that when an unexplained credit is found in the books of account of an assessee the initial onus is placed on the assessee. The assessee is required to discharge this initial onus. Once that onus is discharged, it is for the revenue to prove that the credit found in the books of accounts of the assessee is the undisclosed income of the assessee. In the circumstances obtaining in the present case, in our view, the assessee has discharged that initial onus. The assessee is not required thereafter to prove the genuineness of the transactions as between its creditors and that of the creditors' source of income, i.e., the sub-creditors [See Nemi Chand Kothari vs CIT & Anr. (2003) 264 ITR 254 and judgment of this court in ITA No. 1158/2007 Mod Creations Pvt. Ltd. vs Income Tax Officer decided on 29.08.2007]. 8. The Tribunal is the final....