TaxTMI 
TaxTMI 
2023 (11) TMI 494
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.... the creditworthiness of the person extending loan and genuineness of the transaction and the credits of Rs. 4,50,68,325/- in the books of accounts of assessee therefore the same remained as unexplained credit and in such a situation the Assessing Officer was quite correct and justified in invoking provision of section 68 of the Income Tax Act 1961, (for short the 'Act') and making addition in the hands of assessee. 4. Further drawing our attention towards relevant paras 7 to 7.13 of first appellate order the learned Senior DR submitted that the ld. CIT(A) has incorrectly applied ratio of the various orders & judgments of Hon'ble High Court of Delhi and co-ordinate benches of the Tribunal in paras 7.5 to 7.13 and unreasonably hold that the assessee held discharge onus laid on him u/s. 68 of the Act. The ld. Senior DR submitted that the source of investment by the assessee in property E-14/21, Vasant Vihar Delhi was consisting of a loan from Modern Lotus General Trading LLC (Dubai) amounting to Rs. 4,50,68,325/- and on being show caused by the Assessing Officer the assessee submitted certificate of confirmation of loan and bank account statement of lender but failed to provide the ....
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....ted that the ld. CIT(A) has considered that the assessee has submitted copy of commercial license issued by Dubai Government and copy of passport of proprietor and thereafter only observed that the money has been routed through banking channel without controverting the findings recorded by the Assessing Officer in para 4.3 of assessment order. The ld. Senior DR submitted that there was clear finding of the Assessing Officer that there was cash deposit immediately before the transfer of amount to the assessee and the assessee could not filed agreement or any other document showing the terms and condition of big amount of loan from abroad to the assessee. The ld. Senior DR also submitted that even till date there is no evidence from the assessee to show payment of interest or repayment of loan to the creditor after lapse of many years this again fortifies the findings of the Assessing Officer for making addition u/s. 68 of the Act. 7. On careful consideration of above rival submissions, first of all, from relevant part of assessment order we note that the Assessing Officer made addition in the hands of assessee with following observations and findings:- 4.1 The assessee was asked ....
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....But the assessee has failed to provide the loan agreement in respect of loan from M/s. Modern Lotus General Trading LLC (Dubai), or any agreement to show that the said amount is an advance as submitted in confirmation letter issued by the above entity. Assessee has also not submitted any financials of the above entity to establish its creditworthiness and genuineness of transaction. Moreover on perusal of the bank statement of the above entity, it was observed that there were various cash deposits made, immediately prior to transfer of amount to the Assessee. It raises a strong suspicion on account of the genuineness of the transaction, taking into account that no financials of the entity have been submitted by the assessee in spite of multiple opportunities provided to him over a long span of time. Another fact pertinent to mention here is that assessee has also not provided details of any interest paid or repayment of loan till date. Principle of natural justice was duly followed and assessee was given ample opportunities to prove the creditworthiness of the entity extending loan/advances to the assessee and genuineness of the transaction. In wake of the above findings the nature....
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....y added to income of assessee. Also tam satisfied that the assessee has furnished the accurate particulars of income therefore penalty proceedings us 271(1)(c) is being initiated separately. 8. Further, from careful and vigilant reading of first appellate order, we find that the ld. CIT(A) deleted the addition with following observation and findings:- 7.1 During the year appellant had purchased one residential house property bearing no. E 14/21, Vasant Vihar, New Delhi for a sum of Rs. 22,57,20,000/-. The AO has asked the appellant to submit the source of investment of Rs. 22,57,20,000/- in respect of property purchased. The appellant has submitted that source of investment in property is from sale of house property at Rs. 14,85,00,000/- and balance of Rs. 7,72,20,000/- is for commercial property sold during assessment year 2015-16, interest income and loan taken from M/s Modern Lotus General Trading LLC, 316 Ahmed Al Juma Building, Naif Road, Deira, Dubai. The appellant has shown loan of Rs. 4,50,68,325/- from M/s Modern Lotus General Trading LLC (Dubai). The AO has asked the appellant to provide the supporting documents in support of loan taken from Modern Lotus General Tradi....
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...., LLC DUBAI to prove the identity of the person giving the loan and the same is also attached herewith as Annexure-9. f) The learned A.O has made addition u/s 68 of the income tax act on the basis of suspicious raised by him as per assessment order as stated in the assessment order as under:- "On perusal of the bank statement of modern lotus general trading LLC, Dubai it was observed there was various cash deposits made immediately prior to transfer of amount to the assessee. It raises a strong suspicious on account of genuineness of transaction taking into account that no financials of the entity have been submitted by the appellant. And the fact is that the appellant has not provided details of interest paid or principal repayment." We further submit as under in respect of above observation. During the course of assessment hearing the appellant had filed the bank Statement of modern lotus general trading LLC, Dubai for the period of 01/04/2015 to 31/03/2016 (Annexure-7) which has not been seen by the learned A.O properly and raised the suspicion without going into the detail of full bank statement because the leaned AO has failed to see the cash withdrawal from bank a....
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....hrough banking channels. The money has been transferred from the account of the creditor directly to the account of the appellant and the appellant has filed his bank statements alongwith the bank advices for the remittance and the FIRC issued by the bank for the remittances. CREDITWORTHINESS AND FINANCIAL STRENGTH OF CREDITORS The Appellant has proved the credit worthiness of the lender by providing bank statement for the whole year and if we look to the volume of the bank which normally seen with the total of Debit transactions and credit transactions and sums of both these transactions works out to more than 334 Cr.as per Annexure - 10 which is in any way sufficient to prove the credit worthiness of the Lender so far as the loan of Rs. 4,50,86, 325 is concerned. It is very-very important to mention here that the bank statement of any organization is primary record to show the financial strength of such organization as compared to profit and loss account and balance sheet as there may be a turnover of crores but such financial statements cannot prove creditworthiness unless such transactions are reflected in the Bank account of such persons. The appellant has fulfill his du....
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....unsecured loans - no doubt for the purpose of establishing or furthering a business, yet they were loans and not trading receipts or loss from expenditure - the other instances attracting Section 41(1). 6) Please refer to the Delhi High court judgment ITA 429/2003 CIT VS SHIV DHOOTI PEARLS & INVESTMENT LTD decided on 21/12/2015. The copy of the judgement is attached herewith as Annexure-12. 8.It has been held that assessee cannot be asked to prove the source of the source of the creditor. 7.3 I have considered the facts of the case, finding of the AO and submissions of the appellant. Appellant has received the loan from M/s Modern Lotus General Trading LLC, Dubai amounting to Rs. 4,50,86,325/-. The appellant has filed the foreign inward remittance certificate issued by the bank confirming the remittances, confirmation of loan issued by Modern Lotus General Trading LLC, bank statement for the period 01.04.2015 to 31.03.2015 issued by Dubal Bank, copy of commercial licenses issued by Govt. of Dubai in the name of Modern Lotus General Trading LLC Dubai & copy of passport of Mod. Shalful Islam owner of Modern General Trading LLC Dubai. The AQ has raised the doubt about the cre....
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....ng the identity of the persons and creditworthiness along with genuineness of the transaction, then it is on revenue to disprove the same and shift the onus on the appellant. The AO has out rightly rejected the evidences furnished by the appellant without establishing falsity of these documents. The personal identity of the investor was proved beyond any doubt and AO has not disputed about the identity of the creditor. The appellant has duly satisfied genuineness of loan transaction by submitting bank statements. Thus AO is not justified treating the unsecured loan received by the appellant during the year under consideration. as unexplained cash credit u/s 68. In the case of CIT vs. Dwarkadhish Investment Pvt. Ltd. (2010) 194 taxman 43 (Del.) Hon'ble Delhi High Court held that "In any matter, the onus of proof is not a static one. Though in section 68 proceedings, the initial burden of proof lies on the assessee, yet once he proves the identity of the creditors/share applicants by either furnishing their PAN numbers or income-tax assessment numbers and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any oth....
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....) - Assessment year 2002-03 - Where assessee proved identity of creditors by either furnishing PAN or income-tax assessment number and other relevant details showing genuineness of transaction and creditworthiness of creditors and transaction in books of account of assessee had been made through banking channel, addition under section 68 could not be made." 7.8 In the case of ACIT Vs Vikrant Puri [2017] 82 taxmann.com 48 (Delhi - Trib.) Hon'ble ITAT, Delhi held that "Section 68 of the Income-tax Act, 1961 - Cash credit (Loan) - Assessment year 2007-08 - Where assessee had furnished name, address and PAN of creditor and genuineness of transaction and creditworthiness of creditor was also fully established, addition made on account of loan taken from said creditor was to be deleted." 7.9 In the case of ITO Vs A I developer (P.) Ltd. [2017] 83 taxmann.com 57 (Delhi - Trib.) Hon'ble ITAT Delhi held that "Section 68 of the Income-tax Act, 1961 - Cash credit (Loan) - Assessment year 2007-08 - Where assessee had filed names, address, details etc., of all loan creditors and even filed their confirmation as on date, addition on account of unsecured loan was to be deleted. 7....
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....tor has received the money, Section 106 makes the Assessee liable to disclose only the source(s) from where he has himself received the credit and it is not the burden of the Assessee to show the source(s) of his creditor nor is it the burden of the Assessee to prove the creditworthiness of the source(s) of the sub-creditors. If Section 106 and Section 68 are to stand together, which they must, then, the interpretation of Section 68 has to be in such a way that it does not make Section 106 redundant. Hence, the harmonious construction of Section 106 of the Evidence Act and Section 68 of the Income Tax Act will be that though apart from establishing the identity of the creditor, the Assessee must establish the genuineness of the transaction as well as the creditworthiness of his creditor, the burden of the Assessee to prove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transactions, which have taken place between the Assessee and the creditor. What follows, as a corollary, is that it is not the burden of the Assessee to prove the genuineness of the transactions between his creditor and sub-creditors nor is it the burd....
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....t establishing falsity of these documents. Once the burden has shifted on the revenue then it is on the Assessing Officer to be establish that explanation submitted or document furnished by the assessee were false or non-genuine. Income tax records were also furnished. The personal identities of these investors were proved beyond any doubt. Assessing Officer had not taken any step to further verify the creditworthiness of these investors. No efforts were made to pursue these investors. No addition can be made on the basis of assumptions and presumptions. No document can be disregarded or ignored without proving otherwise." 7.13 Considering the above facts and decisions of the judicial authorities, addition made by the A is not sustainable. The appellant has furnished confirmation, copy of bank account, passport, commercial license etc. in order to establish identity, creditworthiness and genuineness of transaction in respect of the depositor whom appellant has procured unsecured loan during the year amounting to Rs. 4,50,68,325/-. Thus AO is not justified in treating the unsecured loan as unexplained cash credit u/s 68 and addition made by the AO at Rs. 4,50,68, 325 / - is hereb....
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....er of amount to the assessee which raises a strong suspicion on the genuineness of transactions and thus the creditworthiness of the creditor was also not found to be acceptable by the Assessing Officer. 11. The Assessing Officer provided multiple opportunities to the assessee over long span of time but the assessee could not filed any financial of the creditor which also goes against the explanation of assessee. The Assessing Officer also noted that the assessee has also not provided details of any interest paid or repayment of loan till the date of passing of order. The Assessing Officer noted that principles of natural justice were duly followed and the assessee was given ample opportunities to prove the creditworthiness of the creditors extended loan/advance to the assessee and genuineness of transaction. With these observations the Assessing Officer concluded that as per scheme of section 68 of the Act the burden of proof is on the assessee to prove the genuineness of credit transaction in his books of accounts along with capacity and creditworthiness of creditor and the assessee has failed to discharge the onus to prove the creditworthiness of the person extending loan to hi....