TaxTMI 
TaxTMI 
2022 (10) TMI 1100
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....ed to establish the creditworthiness of all lenders and identity of five lenders therefore genuineness of transaction remained unexplained ? 2. Whether on the fact and the circumstance of the case and in law, the Ld. CIT(A) was justified in restricting the disallowance on account of business expenses amounting to Rs.83,511/- out of total disallowance of Rs.37,89,020/- without appreciating the facts that the assessee failed to establish with supporting evidences that the expenditure claimed by the assessee is exclusively for the business Purpose? 3. On the facts and circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the assessing officer. 4. It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that of assessing office may be restored to the above extent." 3. Ground No.1 raised by the Revenue relates to addition made on account of unexplained unsecured loan amounting to Rs.5,90,90,000/-. 4. Succinct facts are that during the course of assessment proceedings, the assessing officer examined the details filed by the assessee and observed that assessee has obtained unsecured loans from many persons. Durin....
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....was no genuine need or business exigency to accept such loans, when credit facility was available with assessee from his Bank. Therefore, assessing officer made addition to the tune of Rs.5,95,00,000/-. 7. Aggrieved by the order of the Assessing Officer, the assesse carried the matter in appeal before the ld. CIT(A). During the appellate proceedings, the ld CIT(A) examined the details such as confirmation, Name and Address, PAN and other documentary evidences like copy of Return acknowledgement with computation, Bank Statement with Audited Financial Statement, Profit and Loss account with Balance Sheet, Capital account. Since, the assessee has furnished 'additional evidences' during the appellate proceedings, such as: viz. proof explaining source of the source, repayment of unsecured loan & assessment orders passed in the case of depositors etc. All these evidences were forwarded to assessing officer for his examination and submission of his Remand Report. After going through the remand report and assessee`s reply on remand report, the ld CIT(A) observed that assessee has satisfactorily discharged its primary onus of proving identity, creditworthiness and genuineness of ....
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....hrough the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. We note that assessing officer made addition solely on the reason that depositors, were not physically produced before him. The assessing officer has also raised issue about creditworthiness by citing insufficient capital and meager source of income of depositors. He has also raised doubts about source of money because he noticed that just before issue of cheques to the assessee, the said bank accounts of lenders were irrigated by crediting equivalent amount by transfer/Clearing on the same date. We note that during the appellate proceedings, the assessee has filed following "additional evidences", Viz: (i) Copies of assessment orders of depositors, (ii) Copies of relevant Bank Statements of assessee with Allahabad Bank and SBI for A.Y. 2012-13, (iii) Copy of confirmation of parties along with acknowledgment of Return of Income for A.Y. 2012-13 to prove source of source, (iv) Copy of confirmation of parties of unsecured loans for A.Y. 2014-15 (show....
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....ue that assessee's own money was routed through these layers. (iii) In all the cases, repayment of loans to depositors was made through sales of goods rather than repaying the loan in monetary terms, which itself creates suspicion about the transaction. 13. Thereafter, Ld CIT(A), vide his order sheet dated 14.06.2017, the assessee was directed to produce the following depositors/lenders in person (from whom unsecured loan of in excess of Rs. 1 Crore was received by the assessee: Sr.No. Name Amount of Unsecured Loan (Rs.) 1 Shri Arjanbhai K. Baidaniya (Prop. Baidaniya Corporation) 1 ,50,00,000/- 2 Shri Dinesh Bhikhabhai Desai (Prop. Janvi Thread) 1,25,00,000/- 3 Shri Rukhadbhai h. Katariya (Prop. Gurukrupa Enterprise) 1 ,50,00,000/- The Ld. CIT(A) directed the assessee to produce these above persons before him, between 14.06.2017 to 30.06.2017 without fail with their ID proof and evidences to explain the source of loan from eight (8) persons and its repayment. 14. In order to make compliance of the above direction of ld CIT(A), the assessee produced these above persons on 30.06.2017 before ld CIT(A). That is, the assessee produced ....
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....rimary burden by submitting various details/ evidences during assessments proceedings and later on during appellate proceedings. 15. The ld CIT(A), then explained the provisions of section 68 of the Act, stating section 68 provides for fulfillment of three (3) basic conditions viz: (i) Identity of the depositor; (ii) Genuineness of the transaction; and (iii) Creditworthiness of the depositor. Further, the primary onus to prove the fulfillment of these three conditions lies on the assessee. In the present case, it is an undisputed fact that during the course of assessment proceedings, the assessee has furnished the complete details of the depositors like their name, address and PAN and also furnished documentary evidences, like confirmation, acknowledgement of return of income, balance sheet, Profit and Loss account, capital account and bank statement of the depositors. Thus, by furnishing these details and documentary evidences, the assessee has discharged the primary onus cast upon it to fulfill the three vital conditions as prescribed u/s 68 of the Act. Therefore, ld CIT(A) held that since, the primary onus u/s 68 has been discharged by the assessee, the loan received by it ca....
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....AN and, Voter ID). Therefore, ld CIT(A) held that assessee has proved 'identity'. 17. About second condition, that is, genuineness of transaction, the assessing officer has held that genuineness of transaction has not been proved by the assessee, because business expediency (assessing officer has used the word exigencies) of loans was not explained especially when credit facility from bank was available to the assessee. It has been also observed by assessing officer that just before issue of cheques to assessee, these depositors have either equivalent some deposits through Transfer/clearing or even by cash (but no instance given). On this basis, assessing officer held that these loans as bogus and even declared that these loans are nothing but his own unaccounted income generated by inflating expenses and bringing the same into the books of accounts in the guise of cash credits. As against this, the assessee has contended that the various documentary evidences submitted before the assessing officer clearly proves the genuineness of the transactions. We note that ld CIT(A) has considered all the documentary evidences which were even furnished before the assessing officer during t....
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....ld CIT(A) on 30.06.2017 in presence of present assessing officer and have duly confirmed the impugned loan transactions, source and repayment thereof. Having done so, there remains no doubt about genuineness of transactions. Therefore, considering the facts and documentary evidences, the ld CIT(A) was of the view that the 'genuineness of the transactions clearly stands proved by the assessee with supporting documentary evidences'. Further, the documentary evidences filed before assessing officer and before ld CIT(A) very clearly show that the loans were given through account payee cheques by the depositors to the assessee and same are duly reflected in the respective balance sheet of the depositors and assessee. The acceptance of these loans was through banking channel which is evident from the respective bank statements. Repayment of loans has been made by "Sale of goods" which is duly reflected in their Trading account as purchases. All the depositors have confirmed these transactions and assessing officer has no contrary evidences to disprove the genuineness of the claim. Therefore, in view of these facts, the ld CIT(A) held that second condition of section 68 regarding the ....
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....heir Balance Sheet. There is nothing objectionable or abnormal which can give rise to any doubt about genuineness transactions between assessee and creditor as well as between Creditor and Sub-creditor. Based on these facts, ld CIT(A) held that assessee has proved creditworthiness of the depositors. 19. We note that assessee has produced all the corroborative and direct and indirect evidences to prove the nature and source of deposits. The assessing officer has simply rested his conclusion on interpretation drawn by him based on incomplete enquiry and lack of cogent evidence. It is apparent that none of the creditors has denied that loan was not given by him/her and funds have been transferred from his/her account through baking channel. The documentary proof coupled with personal attendance of three depositors (major) is sufficient to prove identity. Regular assessment orders u/s 143(3) have been passed in case of all the depositors wherein their source of funds by way of income or loans have been examined by respective assessing officer. There is nothing on record to support the contention of the assessing officer that it was assessee's own money routed though unsecured lo....
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.... lender has owned up the transaction and explained the source of fund then if assessing officer has source suspicion, then action if needed be taken should be taken in the case of lender who is assessed to tax. Therefore, even the 'source of source' is found properly explained and no cash was found deposited in the respective Bank accounts before issue of cheque to the assessee except in case of Smt. Rekhaben R. Bodra of Rs.4,10,000/-. Therefore, action of the assessing officer is neither sustainable on facts nor in law. 21. We note that assessee even filed cross-confirmation and details with regard to repayment of loans which have been furnished before ld CIT(A) vide letter dated 20.01.2017. On verification of cross-confirmation Ledger accounts of depositors, it is proved that goods sold/given as repayment of loan by the assessee have been shown by them as "purchases" and Loan A/cs have been squared up in F.Y. 2013-14 (A.Y.2014-15). Return of Income acknowledgement with Final accounts have also been filed reflecting goods purchased/sold in their Trading accounts. Hence, repayment of loan is proved by documentary evidences. Hon`ble High Court of Gujarat in the case of Ay....
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.... CIT(A). Hon'ble Gauhati High Court in the case of Jalan Timber Vs. CIT 223 ITR 11 has held that if assessee and creditors both have shown amount in their income tax return, no addition u/s 68 can be made if the returns of creditors have been accepted by Income Tax Officer. As discussed above, the case of creditor has been accepted by the department. Therefore, we note that all three parameters as laid down u/s 68 of the Act, i.e. (i) Identity of the depositors; (ii) Genuineness of the transactions; and (iii) Creditworthiness of the depositors, have been fulfilled by the assessee in respect of all the seven (7) depositors except in the case of Smt. Rekhdben Bodra, Prop. Gurukrupa Enterprise to the extent of Rs.4,10,000/- deposited by cash (in her Bank A/c) which remained unexplained and therefore, the assessing officer is not justified in treating the entire amount of loans received by the assessee as unexplained cash credits u/s 68 of the Act, therefore, ld CIT(A) deleted the addition of Rs.5,90,90,000/- and sustained the addition of Rs.4,10,000/-.That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. His order on this addition....
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....preceding year, book results were duly accepted under scrutiny assessment. Further, during the year in spite of increase in turnover, the cost of employee benefit has reduced even in absolute terms. 26. Based on these facts, ld CIT(A) noted that arguments of assessee has a significant force. The assessing officer has simply made ad-hoc disallowance on mere conjectures & surmises for the reason that payments to workers: was done by cash and salary register was not containing details about address of workers. There is no allegation that claim of expense was bogus or not supported by evidence. The assessing officer has made disallowance @ 5% on ad-hoc and suspicion basis on the basis, that address of employees not given in Register and payment was made by CASH. It is true that there is no legal requirement as per IT Act for the assessee to keep a complete record of employees and also no restriction by making payment by CASH. Generally, workers do not have Bank accounts, so employer has to make payment by CASH. Therefore, ld CIT(A) noted that such ad-hoc disallowance is not sustainable in the eyes of law, especially when no such disallowance was made in A.Y. 2011-12 under scrutiny a....
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....1,500 + Rs.83,511). We do not find any infirmity in the conclusion reached by the ld CIT(A), hence we approve and confirm the findings of ld CIT(A). 28. In the result, ground No.2 raised by the Revenue is dismissed. 29. In combined Result, appeal filed by the Revenue is dismissed. Order is pronounced in the open court on 29/09/2022 by placing the result on the Notice Board as per Rule 34(5) of the Income Tax (Appellate Tribunal) Rule 1963. ============= Document 1 Sr. NAME INITIAL INCOME No LOAN AMOUNTS INCOME Yearly CAPITAL withdraw al 1. Baldaniya Initial capital: 50,000 1,50,00,000 1,50,00,000 5,01,558 Nil 5,51,558 Corporation (Arjunbhai K. Baldaniya) 2. Dineshbhai Initial capital 19,20,376 1,25,00,000 9,68,330 100000 48,55,679 Bhikhabhai Desai Gift Received From Father: 5,23,000 Gift Received From mother: 4,77,000 Gift Received From brother: 6,50,000 Agricultural Income 21,000 LIC Refund: 26,249 : Document 2 3. Gurukrupa Enterprise (Rekhaben Initial 1,14,02,117 capital Bank Interest Received: R. Bodra) 2,234 Interest on Partner 14,0....