TaxTMI 
TaxTMI 
2021 (12) TMI 811
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....called for. 2.1. During the course of assessment proceedings, assessing officer observed that assessee has taken unsecured loans from the following parties: S. No. Name of the party Amount (Rs.) 1. Euro Concept Pvt. Ltd. 2,32,00,000/- 2. Gangotri Exim Pvt. Ltd. 25,00,000/- 3. Shree Bharve Exports Ltd. 88,00,000/- Total 3,45,00,000/- 2.2 The assessee was asked to provide the details of the parties from whom unsecured loans were taken along with confirmations. In response assessee submitted the confirmations and financials of the unsecured lenders wide letter dated 8.11.2016. After perusal of the balance-sheet submitted by the assessee, AO observed that all the lenders have scarce share capital, reserve and surplus, no borrowed funds and did not show any income in their respective return of income. However, he acknowledged that all the lenders have huge trade payables and they've advanced short terms loans to the assessee. In order to verify the identity, credit worthiness and genuineness of the transaction, he issued summons under section 131 of the Act and served on all the lenders requiring their personal attendance. None o....
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.... submitted, the assessee has discharged its onus by submitting the documents as asked by you and it is proved beyond doubt that the assessee has taken the genuine loan from above parties, hence provision of section 68 of the Act is not attract is present case as the assessee has proved the identity, creditworthiness and genuine." 3. After considering the above submissions, assessing officer rejected the submissions of the assessee by relying on the decision of hon'ble Delhi High Court in the case of Nipun Builders & Developers Private Limited (ITA 120/2012), NR Portfolio Private Limited (ITA 1018/2011) and Nova promoters and Finlease (P) Ltd (ITA 342/2011). The assessing officer as observed in show cause notice on the financial strength of the lenders, he completed the assessment with the same observations as made in show cause notice and made the addition under Section 68 of the Act, the whole unsecured loan taken by the assessee during this assessment year to the extent of Rs. 345,00,000/-. 4. Aggrieved assessee preferred an appeal before CIT (A) - 21, Mumbai. Before Ld. CIT(A) assessee filed a detailed submission, for the sake of brevity it is reproduced below: "4....
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.... like your honour to appreciate the fact that your appellant had duly explained the nature and source of the Unsecured Loans received from the said three entities. The appellant had also submitted Confirmations for the same and had also submitted Copy of Financial Statements and Acknowledgement of Return of Income filed of the Said parties, which further substantiates the identity of the persons from whom loan has been received. The Bank Statement of the said parties were also submitted, on perusal of same, it is established that the said party was having sufficient balance to give the said loan which also establishes the creditworthiness of the said party. In view of above, your honour will appreciate the fact that the appellant. as a businessman, had submitted all the details which justifies the genuineness of the said loans received from the said four entities. The appellant had duly discharged its primary onus to justify the genuineness of the said loan transactions. We would like your honour to also appreciate the fact that the Learned A.O. has not pointed out any discrepancy in the details submitted by the appellant. 7. In view of the above submission, we wo....
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.... entries. Therefore, no addition in the instant case could be made in the hands of the assessee-firm on account of the cash credits in the names of its partners" 10. Further we would like to rely on the decision of High Court of Delhi in the case of Oasis Hospitalities (P.) Ltd. The summary of the case is as under: "Section 68 of the Income-tax Act, 1961 - Cash credits - Whether if Assessing Officer doubts genuineness of investors, who had purportedly subscribed to share capital of assessee-company, he may ask assessee into explain nature and source of those sums received by it on account of share capital and burden of proof would be on assessee to provide nature and source of those receipts - Held, yes - Whether this burden of proof can be discharged by assessee by producing PAN card and bank statement of creditor/subscriber showing that it had sufficient balance in its accounts to enable it to subscribe to share capital and thereafter, it is for Assessing Officer to scrutinize same and, in case he nurtures any doubt about veracity of those documents, to probe matter further - Held, yes - Whether opinion of Assessing Officer, for not accepting assessee's expl....
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....on credit, selling them and advancing the loans from the realization of debtors instead of clearing the creditors seems to be very suspicious and abnormal" 14. Your honour will appreciate the fact that, appellant shall not be required to determine the source of the creditor from whom the appellant has received the amount or in other words, source of the source. Your appellant has discharge its obligation to explain the genuineness of the parties. Rather as a businessman, what he could do, has been done. 15. The Learned AO was in possession of the PAN of the parties and their bank details. The learned AO could have issued summons u/s 131/133(6) to bankers of such parties to get the present whereabouts of the said parties. The learned AO failed to disprove the contentions submission. 16. Further, your honour will appreciate the fact that since all the payments have been made through account payee cheque, all the parties are having Bank Accounts, and your honour will appreciate that Banks also have strict KYC rules & regulations for openinq a Bank Account. Thus, it can be said that all the parties from whom purchases have been made are existent, which by any....
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....sessee has borrowed the money and total outstanding including the interest as on 31.3.2010 were amounting to Rs. 1.29.04.231/-. The case of the assessee was re-opened upon receiving the information from DGIT(Inv), Mumbai that the assessee was one of the beneficiary of the said accommodation entries provided by Mr. Bhanwarlal Jain and group. We find from the record that the assessee filed during the course of assessment proceedings all the details like loan confirmation letters from the creditors, PAN of the creditors, bank statement of the creditors and the assessee, form no. 16 qua TDS on Interest, profit and loss account and balance sheet including the ledger account of the creditors and the ITR etc. Moreover, the loan creditors also appeared before the A.O. in response to notice issued under section 133(6) of the Act and filed confirmations before the AO that loans were actually given to assessee. From all these details and facts on record, we find that the assessee has discharged its onus cast upon it by filing all the necessary details as called for by the AO to corroborate the transactions of borrowing the money and thereby satisfied all the three ingredients i.e. creditworth....
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.... this juncture, we would also like to refer to Hon. Allahabad High Court's decision in case of Nathu Ram Premchand V. Commissioner of Income Tax [19631 49 ITR 561 wherein it was held that It is the duty of the A. O. to enforce attendance of a witness if his evidence is material. Thus, if the A.O. does not exercise his powers to call the witness and examine him, he cannot treat the deposits in the name of witness as assessee's income. The catch- note of the said judgment is reproduced as under: Section 131 of the Income-tax Act, 1961 /Corresponding to section37(1) of the Indian Income-tax Act, 1922] - Discovery, production of evidence, power regarding - Assessment ear 1948-49 - While completing assessment ITO noticed a credit entry in name of 'B' in books of assessee HUF - Assessee was given dasti summons to produce "B' but 'B' refused to accept it - No steps as provided under order/XVI, rule 10 of Civil Procedure Code, 1908, for appearance of witness were taken by ITO for appearance of "B' Whether, on facts, income-tax authorities were not justified in fastening blame at door of assessee and disbelieving his version that amount entered in hi....
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....quired. This view has been upheld by the Hon'ble Delhi Tribunal in the case of Mrs. Ranjana Katyal VS ACIT (2008) 1 DTR (Del) (Trib) 24 and Pankaj Sawhney Vs ITO (2004) 3 SOT 1 (Del) 25. The Hon'ble Supreme Court in the case of CIT Vs Orissa Corporation (P) Ltd. 159 ITR 78 (SC) held as follows: "13. In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax-assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further. 26. We would further like to rely on the decision of High Court of Delhi in the case of Commissioner of Income Tax vs. Shiv Dhooti Pearls & Investment Ltd. the summary of case is as follows : Sect....
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....x Act 1961. Should you in any event resolve to take an adverse and detrimental view appertaining to the issues involved in this appeal proceeding than that canvassed by us as explicated supra, you are hereby specifically requested to afford an opportunity to us to displace the same. 5. After considering the detailed submissions, Ld. CIT(A) deleted the addition made by the assessing officer under section 68 of the Act with the following observations: "6.9 I have carefully examined the facts and considering the totality of the circumstances of the case and submissions made by the AR. I have gone through the decisions relied upon by the AR and the Remand Report of the AO and also the documents filed by the AR supporting the genuineness of the loan transactions, identity, source and the creditworthiness/capacity of both the parties. In the case of the appellant, all the necessary details regarding loan have been field before the AO, the lender has confirmed the loan transaction. It can also be seen that in the case of Nikuni Eximp (supra), the Hon'ble High Court held that merely on the basis of suspicion because the sellers and canvassing agents have not been produced b....
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....ssing officer, according to him it is not proper. 7. On the other hand Ld. AR brought to our notice page 8 of the paper book to submit that it is the 2nd year of operation for the assessee and in this year assessee has incurred the loss, he submitted that in the initial years of operation it is normal to incur huge loss and subsequently assessee will recover the initial investments made during initial stages of the operation. He submitted that assessee has diligently filed all the relevant documents in support of the unsecured loan transactions. He heavily relied on the findings of Ld. CIT(A). 8. Considered the rival submissions and material on record. We notice that assessee has taken unsecured loans from the 3 parties and submitted all the relevant documents in support of proving the identity, creditworthiness and genuineness of the transaction. It is fact on record that assessee has submitted relevant confirmations from all the parties and the transactions involving unsecured loans from the above said parties are only through banking channels. The assessing officer does not deny the fact that assessee has submitted all the relevant documents and also the transactions were ....