AI Drafter 
TaxTMI 
TaxTMI 
2020 (12) TMI 627
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....hout verifying the cash book for the F.Y. 213-14 relating to A.Y. 2014-15. 4. Any other grounds that may be urged at the time of hearing." 3. Facts of the case in brief are that the assessee-company is engaged in the business of dealing Yamaha motorcycles, filed its return of income for the A.Y. 2015-16 on 30/09/2015 admitting business loss of Rs. 59,05,890/-. The AO has completed the assessment u/sec. 143(3) on 07/12/2017 by determining the loss at Rs. 48,23,653/- and he made various additions. One of the additions which is contested before us is of Rs. 2,06,50,000/- received from Sri Bandaru Srinivasa Rao u/sec. 68 of the Act. In the assessment order, the AO has noted from the balance sheet that the assessee had obtained unsecured loan of Rs. 2,06,50,000/- from Sri Bandaru Srinivasa Rao during the year. The AO has asked the assessee to furnish the necessary documentary evidence in support of the genuineness of the said unsecured loan. In response to it, the assessee has furnished confirmation letter of the creditor, copy of return of income of the creditor for the A.Y. 2015-16, copy of ledger account of the assessee in the books of the creditor and copies of bank stat....
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....k accounts only. It was stated that the creditor had also explained the source for advancing the loan in his confirmation letter. The assessee has requested that if at all further information is required regarding creditworthiness, the creditor may be examined by the AO under the provisions of section 131 of the Act. Accordingly, the AO issued summons to the creditor u/sec. 131 of the Act and recorded his sworn statement on 03/11/2017. The creditor in his statement stated that the loan was advanced to the assessee out of opening cash balance available as on 01/04/2014, income received during the year, loans taken from banks and unsecured loans taken from others. However, the creditor stated that he did not immediately have the details of the specific source for each cash deposit made in the bank accounts prior to issue of cheques to the assessee towards the loan and that the same will be furnished subsequently. In the assessment order the AO observed that the creditor did not furnish the said details subsequently and therefore the creditor did not have documentary evidence for the opening cash balance and other sources explained by him in his statement. Accordingly, he concluded th....
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..... 50.00 lakhs during the year. The amount of outstanding at the end of the year is amounting to Rs. 1,56,50,000/-. The assessee furnished confirmation of the creditor Sri Bandaru Srinivasa Rao and also copy of income of the creditor for the A.Y. 2015-16, copy of the ledger account of the assessee in the books of the creditor, copies of the bank account statements in respect of accounts held with Karur Vysys Bank and Axis Bank from which cheques were issued to the assessee towards the loan. From the above it is very clear that the assessee has proved the identity of the parties, genuineness of the transaction, creditworthiness of the creditor. However, the AO has a doubt about the creditworthiness of the creditor and asked the assessee to establish the creditworthiness of the creditor. The assessee submitted before the AO that the amount was received through banking channels and confirmation letter also filed and submitted that the creditor is having source of income, the same is advanced to the assessee if at all want to examine, 131 may be issued to the creditor. The AO issued 131 summon to the creditor by calling explanation in respect of creditworthiness of the transaction. Befo....
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....d the facts of the case, the assessment order and the written submission of the assessee The assessee had shown receipt of unsecured loan of Rs. 2,06,50,000/- during the year from Shri Bandaru Srinivasa Rao The assessee has also shown repayment of the loan to the extent of Rs. 50,00,000/-'during the year The amount of loan outstanding at the end of the year amounted to Rs. 1,56,50,000/-, Though the assessee furnished the confirmation letter of the creditor Shri Bandaru Srinivasa Rao with regard to the unsecured loan of Rs. 2,06,50,000/- obtained from him during the year along with copy of the return of income of the creditor for A.Y. 2015-16, copy of the ledger account of the assessee in the books of the creditor and copies of bank account statements of the creditor in respect of accounts held with Karur Vysya Bank and Axis Bank from which the cheques were issued to the assessee towards the loan, the AO held that the creditworthiness of the creditor was not satisfactorily established since the creditor did not furnish the documentary evidences with regard to opening cash balance available with him and the loans obtained by him Which Were explained to be the sources for the loan....
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....ver the creditor in view of the fact that the creditor has filed his return of income for the relevant assessment year and his case for the said assessment year has been taken up for scrutiny by his AO. 15. On careful examination of the facts of the case, it is seen that the AO was satisfied regarding the identity of the creditor and the genuineness of the loan transaction based on the examination confirmation letter of his return of income and the copies of his bank account statements. However, the AO was not satisfied regarding the creditworthiness of the creditor since the creditor did not furnish the documentary evidences with regard to opening cash balance available with him and the loans obtained by him which were explained to be the sources for the loan advanced to the assessee apart from the incomes earned by him during the year from salary, rents and sale of flats and the creditor did not furnish the details of immediate source in respect of each cash deposit made in his bank accounts prior to issue of cheques to the assessee towards the loan. 16. In this connection, it is noticed that the AO of the assessee addressed a letter dated 06.11.2017 to the ITO,....