TaxTMI 
TaxTMI 
2025 (4) TMI 1651
X X X X Extracts X X X X
X X X X Extracts X X X X
....t confronted to the appellant. 3. That on facts and in law the CIT(A) erred in arbitrarily and illegally assuming the power to enhance u/s 251. 4 That on facts and in law the CIT(A) has erred in upholding addition u/s 68 of the Act of Rs 2,21,50,000/- being closing balance of loan account due to Mr Virender Kumar Gupta. 5. That on facts and in law the CIT(A) has erred in holding that: (a) Creditworthiness of Mr Virender Kumar Gupta to advance loan of Rs 2,21,50,000/- is not established, (b) Transaction of loan was not genuine. (c) Accommodation entries were given to appellant by Mr Virender Kumar Gupta (d) Cash was paid by appellant to Mr Virender Kumar Gupta who in turn issued cheque's to appellant. 6. Without Prejudice, on facts and in law the CIT(A) has erred in holding that alleged addition u/s 68 is not chargeable to tax as "Income From Other Sources". That the appellant prays for leave to add, alter, amend and/or vary the ground(s) of appeal at or before the time of hearing. 3. Representatives of both the sides were heard at length. Case records carefully perused and relevant documentary e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessee company along with bank statement and copy of their ITR through their counsel. Subsequently, the parties at sr. no. 1,2 and 3 also personally appeared before the AO and confirmed the transaction. 9. The party at Sr. no 4 however, Varinder Kumar Gupta (hereinafter referred to as VKG) submitted ledger account of the assessee company along with bank statement and copy of his ITR through their counsel. The said VKG also submitted his audited Balance sheet audited by Pankaj Man Singh & co. The ledger account of MPG in the books of VKG showed the assessee MPG had a credit balance of an amount of Rs. 2,21,50,000/- receivable from the assessee MPG. 10. The Assessing Officer, to verify the genuineness of the confirmation above submitted by VKG, further issued notice under 133(6) to Shri Pankaj Sharma, CA of Pankaj Man Singh & co, who is the auditor of VKG for confirmation of balance sheet audited by his firm. To the surprise of the AO, the audited balance sheet of VKG as 31.03.2013, submitted by the Auditor Pankaj Sharma, duly signed by both VKG and Pankaj Sharma, did not reflect any amount receivable from MPG, the assessee. Thereafter, the AO made further enquiries from the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lance sheet with all annexure to the AST Module of the Income Tax Department vide which it became clear that there was no such amount shown by Sh. Virender Kumar Gupta as receivable from M/s MPG at 31.03.2013. 14. The Assessing Officer finally concluded that it is apparent from the above that VKG was under influence of the relationship with M/s MPG and the transaction was made through the banking channel to hide the unaccounted/undisclosed transactions with MPG. 15. The Assessing Officer, to verify the assessee statement that its transaction with VKG was in normal course of business, further found that the assessee is in the business of software designing and is IT related company whereas VKG is engaged in the business of Grain Merchant & Commission Agent. The Assessing Officer further examined u/s 131 of the Act, Sh. Surinder Kumar Gupta (brother of Sh. Virender Kumar Gupta) and Sh. Nikhil Garg (nephew of Sh. Virender Kumar Gupta) who confirmed in their statement on 18.03.2016 u/s 131 of Income Tax Act, 1961 that they did not have any business relationship with MPG. The AO therefore, concluded that the transaction cannot be done in normal course of business activity, Accordi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....te Limited during the year under consideration is factually incorrect" 19. The ld AR thereafter referred to the legal propositions as under: (i) When entire loan has been repaid back to Mr Gupta on 23-02- 2015 and all transactions (even return of opening balance of Rs 61 lakh) are through bank and the identity of parties could not be disputed, addition u/s 68 is therefore to be deleted. (Refer PCIT vs Ambe Tradecorp (P) Ltd reported in 290 Taxman 471(Guj) (ii) Once addition is made in hands of the creditor which is an income tax payee then too the source of loan stands explained. (Refer Dev Darshan Designs (P) Ltd reported in (2024) 162 taxmann.com 793(Kol) (iii) There is no burden upon the assessee to prove the source of source qua the creditor. However, the AO has power and freedom to make enquiry from creditor or his sub-creditor and prove as a result of such enquiry that money received in form of loan in unexplained money of the ' assessee '. This burden has not been discharged by the AO. (Refer CIT vs Dhooti Pearls & Investment reported in 237 Taxman 104(Del) copy enclosed at pages 131 to 136 of PB-relevant at paras 12 to 14) (iv)....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the initial onus cast by section 68 of the Act, the assessee has to establish (1) identity, (2) creditworthiness and (3) genuineness of the transaction and all the conditions are to be fulfilled cumulatively. Once the assessee proves all these three things cumulatively, his primary onus is discharged and the onus is shifted to the AO to prove otherwise. 22. Facts on records show that the assessee has shown in its balance sheet as on 31.03.2013, an unsecured loan of Rs. 5,73,80,000/-. Of these loans, the dispute is only with respect to Rs. 2,21,50,000/- received from VKG. The Assessing Officer found from the enquiry and investigation that the said VKG in response to summon dated 09.02.2016, confirmed the transaction with M/s MPG vide his letter dated 16.02.2016 by furnishing a fabricated copy of his audited balance sheet. 23. To prove that the loan are not satisfactorily explained as genuine, the AO made further enquiry with the auditor Sh. Pankaj Sharma, CA u/s 133(6) of Income Tax Act, where he found from the audited balance sheet of VKG as on 31.03.2013, duly signed by both VKG and Pankaj Sharma, CA, that there was no such amount shown by VKG as receivable from M/s MPG as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ready added in the hands of MPG. 29. We further find that the assessee has taken a defense that as the amount advanced by VKG has been returned back in subsequent year by 23.02.2015, hence the genuineness of the loan is established and therefore the same cannot be taxed. Further, as the parties advancing loan to MPG have responded to notices, their identities are established. Moreover, the transactions are certified by the bank, hence the genuineness of transaction is established relying on PCIT vs Ambe Tradecorp (P) Ltd reported in 290 Taxman 471(Guj). 30. We find that in the instant case, facts are distinguishable from the facts of the case of Ambe Tradecorp. In the instant case, though the lender (VKG) has confirmed the loan transaction with the assessee MPG by showing a ledger account and audited balance sheet, yet VKG in scrutiny assessment of his own case, taking support of another set of audited balance sheet, strongly contested any loan being extended to the assessee MPG. In the instant case the lender himself has denied any loan advanced to the assessee when his own case was scrutinized u/s 143(3)/147. Thus, as against the facts of Ambe Tradecorp case, though the ide....
X X X X Extracts X X X X
X X X X Extracts X X X X
....veals that there were huge amount of cash deposits in the bank account of VKG. In these circumstances, the creditworthiness of VKG to advance interest free loan amounting to Rs. 2.21 crores is also not established. The assessee's argument that the fact that the said loan was repaid by the MPG in a period of 3 to 4 years, establishes its genuineness, also does not hold water when the transactions are tested on the principle of creditworthiness and genuineness of transaction. It is highly improbable that a person would give huge amount of loan amounting to Rs. 2.21 crores without any agreement, interest payment or security, and in the words of Hon'ble Delhi Court is 'fantastic' and 'incredible' to say the least. VKG not attending the summons, having huge cash deposits in his bank account, vehemently denying extending loan to MPG during his own assessment proceedings, fabricating his own audited balance sheet are vital and telltale evidence which showed that the transaction was far from being genuine. The Assessee had clearly failed to discharge the onus cast upon him qua this creditor. 34. The transactions in the instant case are yet another example of the constant....