AI Drafter 
TaxTMI 
TaxTMI 
2025 (4) TMI 739
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....Rs. 21,03,970/-. The return was taken for scrutiny assessment and the Assessing Officer found unsecured loans received by the assessee from (i) Subhrekha Vyapar Pvt. Ltd., (ii) S.K. Stock Dealers Pvt. Ltd. and (iii) Slow and Sound Electronics Pvt. Ltd. which are all Kolkata based paper or shell companies. Therefore the AO called upon the assessee to prove the genuineness of the loan transactions. In response, the assessee filed documentary evidences namely account confirmations, ITR acknowledgements, bank statements and balance sheets of the three lender companies. The loans were received through banking channels and repaid by way of RTGS within a short period of one month as follows: Loan Creditors Loan Amount & Date Loan Repaid & Date Subhrekha Vyapar Pvt. Ltd. 15,00,000/- 17/10/2014 17-11-2014 7,00,000 18-11-2014 8,00,000 Slow and Sound Electronics Pvt. Ltd. 55,00,000/- 17/10/2014 15-11-2014 52,00,000 17-11-2014 3,00,000 S.K. Stock Dealers Pvt. Ltd. 20,00,000/- 17/10/2014 17-11-2014 16,50,000 18-11-2014 3,50,000 2.1. However when the Assessing Officer made verification through Kolkata Office, summons could be served on the....
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....d. If the identity of the creditors had not been established, consequently the question of establishment of the genuineness of the transactions or the creditworthiness of the creditors did not and could not arise. The Tribunal did not apply its mind to the facts of this particular case and proceeded on the footing that since the transactions were through the bank account, accordingly, it is to be presumed that the transactions were genuine. It was not for the Income-tax Officer to find out by making investigation from the bank accounts unless the assessee proves the identity of the creditors and their creditworthiness. Mere payment by account payee cheque is not sacrosanct nor can it make a non-genuine transaction genuine. In that view of the matter, the question before us is answered in the negative and in favour of the Revenue." As the identity of the lender companies was not traceable, the identity of the creditors had not been established. Therefore, the submission of the appellant cannot be accepted as the AO has brought on record, concrete findings that the transactions of the appellant are bogus as discussed. The mere production of bank statements, contract notes et....
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....3. Your Appellant further submits that Assessing Officer has gathered information and evidences at the back of your Appellant, copy of which was not supplied though fully relied in passing Assessment Order. The Assessing Officer also did not give a chance of abutting the data and or Cross Examining the witness such evidence relied, therefore the entire addition based on such evidence is against principle of natural justice and requires to be deleted as held by Supreme Court in case of Andaman Timber Industries vs. Comm. Of Central Excise CA No.4228 of 2006. 4. Without prejudice and in the alternative your Appellant submits that if at all any addition is liable to be added u/s. 68 then it being related and entirely connected with business of your Appellant only Net Profit is required to be added as held by several judgements. 4. Heard rival submissions at length and perused the materials available on record. In response to the show cause notice, the assessee vide its reply dated 20-12-2017 submitted that the assessee firm had procured a huge order from newspaper supplier due to which assessee required funds of Rs. 90 lakhs for the purpose of purchasing material.....
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....the ground of Investigation Report, the unsecured creditors are shell companies and not responded to the notices issued u/s. 133(6) of the Act treated his entire unsecured loans as not genuine and not explained to the satisfaction. The Assessing Officer also held that the lender companies showed meagre income in the ITR cannot be the reasons for making addition in the hands of the assessee. 4.3. The fact that these creditors shown low income does not imply that they could not advance money to anyone. The financial affairs are not in the control of the assessee and the assessee has nothing to do with the balance sheet or financials or directors of these companies. The assessee having done the transaction through banking channel and also repaid the loan within a period of 30 to 32 days within the same financial year, then the addition made u/s. 68 is liable to be deleted as held by the very recent judgment of the Jurisdictional High Court in the case of PCIT vs. Merrygold Gems (P.) Ltd. [2024] 164 taxmann.com 764 wherein it was held as follows: "Section 68 of the Income-tax Act, 1961 Cash credit (Scope of provision) Assessment year 2016-17 Assessing Officer made addition ....
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.... non-genuine, he has not made any addition on account of interest claimed paid by the assessee in relation to those cash credits, which has been claimed as business expenditure and has been allowed by the Assessing Officer. It is also pertinent to note that in respect of some of the creditors the interest was credited to their accounts/paid to them after deduction of tax at source and information to this effect was given in the loan confirmation statements by those creditors filed by the assessee before the Assessing Officer. Thus it is clear that the assessee had discharged the initial onus which lays on it in terms of section 68 by proving the identity of the creditors by giving their complete addresses, GIR numbers/permanent accounts numbers and the copies of assessment orders wherever readily available. It has also proved the capacity of the creditors by showing that the amounts were received by the assessed by account payee cheques drawn from bank accounts of the creditors and the assessee is not expected to prove the genuineness of the cash deposited in the bank accounts of those creditors because under law the assessee can be asked to prove the source of the credits in its b....