TaxTMI 
TaxTMI 
2019 (6) TMI 1753
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....ed to be in default if the recipient of income (payee), has taken into account the amount received from the payer in computing its income and declared it in the return and has paid due tax on the returned income. We note that this Tribunal has already held that the insertion of second proviso to sec. 40(a)(ia) of the Act as curative in nature and so has retrospective effect w.e.f. 1st April, 2005, being a date from which Sec. 40(a)(ia) of the Act was inserted by the Finance (No. 2) Act, 2004. In view of this, we are of the view that matter needs fresh adjudication in the light of the decisions of the Hon'ble Delhi High Court Decisions in CIT v. Ansal Land Mark Township Pvt. Limited [ITA 160/2015 & 161/2015, dated 26/08/2015], wherein Hon'ble High Court upheld the decision of the Tribunal of Agra Bench in Rajiv Kumar Agarwal v. ACIT that the 2nd proviso to section 40(a)(ia) is curative amendment and has retrospective effect from 01/04/2005: "14. The Court is of the view that the above reasoning of the Agra Bench of ITAT as regards the rationale behind the insertion of the second proviso to Section 40(a) (ia) of the Act and its conclusion that the said proviso is declara....
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....d in order to prove the creditworthiness of M/s. Rashino Vayaapar Pvt. Ltd. who subscribed Rs. 56,00,000/- in the assessee company, it was brought to our notice that the said company had own money, Capital and Reserve to the tune of Rs. 2.51 cr. which is seen from a perusal of page 35 of the paper book. In order to prove the identity and genuineness of M/s. Rashino Vayaapar Pvt. Ltd., I. T. Acknowledgment, bank statement, Balance Sheet, investment list and confirmation of having received share applications have been filed before the AO, which are placed at pages 26 to 47 of the paper book and they have confirmed of the investment pursuant to the notice issued by A.O. Thus the share subscriber M/s. Rashino Vayaapar Pvt. Ltd. has discharged its onus to prove identity, creditworthiness and genuineness of the transactions. In respect of other share subscriber Smt. Ranju Agarwal, we note that she is the wife of the director of the assessee company. Her Balance Sheet has been found placed at page 24 of the paper book which reveals that she had capital of Rs. 17,84,381.61 and had taken loan of Rs. 16,54,285.39 from M/s. Anil Kumar Agarwalla (Firm) thus had an amount of....
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....eir bank statements. The A.O analyzed the creditworthiness of these persons and concluded that they do not have capacity to advance these credits or make such investments. Accordingly, the A.O added Rs. 2,49,94,335/- as unexplained credit u/s 68 of the Act. Aggrieved the assessee preferred an appeal before the ld. CIT (A) who was pleased to delete it. Aggrieved the revenue is before us. 11. After having heard both parties, we note that addition of unsecured loan of Rs. 69,38,824/- received from PBN Steel Pvt. Ltd. and also a sum of Rs. 21,05,011/- received from Pravin Kr. Jain and interest of Rs. 14,11,371/- on unsecured loan totaling Rs. 1,04,55,206/- we note that assessee company had received the loan from its sister concern, PBN Steel P Ltd through banking channel; and also from one of relatives of director, Sri Prabin Kr. Jain, which was also through banking channel. The A.O had served them notices u/s 133(6) and both the persons, in response to the said notices of the A.O had duly submitted all details of loans given to Assessee Company. We note that M/s PBN Steel P Ltd had filed copy of ledger of assessee company in their books, copy of their I.T. ....
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....d their bank statements containing the details of transactions, their I.T returns, filing acknowledgements etc. before the A.O duly accepting the transactions. But the A.O had added back the said sum of Rs. 69,95,500/- [ Total Rs. 2,49,94,335/-] as unexplained credit of the assessee company u/s 68 which had been deleted by ld. CIT(A). We note that section 68 contemplates that the assessee has to give satisfactory explanation about the 'nature and source' of the sum found credited in the books of account and 'the creditworthiness and the genuineness of the transaction'. We note that proof regarding the same had been submitted by assessee company. We note that the A.O had made enquiries by sending notices u/s 133(6) through postal service at the addresses of the creditors, pursuant to which replies were also received from all of them. All the persons had accepted the facts and giving of loans and advances to assessee company. The said loans/advances were duly reflected in their audited accounts/balance sheets filed before the A.O/CIT(A) and before us and has been corroborated with their respective bank statements. We note that all the transactions were made through banking ....
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....consideration the provision of section 106 of the Evidence Act which says that a person can be required to prove only such facts which are in his knowledge. The Hon'ble Court in the said case held that, once it is found that an assessee has actually taken money from depositor/lender who has been fully identified, the assessee/borrower cannot be called upon to explain, much less prove the affairs of such third party, which he is not even supposed to know or about which he cannot be held to be accredited with any knowledge. In this view, the Hon'ble Court has laid down that section 68 of Income-tax Act, should be read along with section 106 of Evidence Act. The relevant observations at page 260 to 262, 264 and 265 of the report are reproduced herein below:- "While interpreting the meaning and scope of section 68, one has to bear in mind that normally, interpretation of a statute shall be general, in nature, subject only to such exceptions as may be logically permitted by the statute itself or by some other law connected therewith or relevant thereto. Keeping in view these fundamentals of interpretation of statutes, when we read carefully the provisions of section 68,....
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....e interpretation of 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 burden of the assessee to prove that the sub creditor had the creditworthiness to advance the cash credit to the creditor from whom the cash credit has been. eventually, received by the assessee. It, therefore, further logically follows that the creditor's creditworthiness has to be Judged vis-a-vis the transactions, which ha....
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....essee from undisclosed source unless there is evidence, direct or circumstantial, to show that the amount which has been advanced by the sub-creditor to the creditor, had actually been received by the sub-creditor from the assessee ...." ********** "Keeping in view the above position of law, when we turn to the factual matrix of the present case, we find that so far as the appellant is concerned, he has established the identity of the creditors, namely, Nemichand Nahata and Sons (HUF) and Pawan Kumar Agarwalla. The appellant had also shown, in accordance with the burden, which rested on him under section 106 of the Evidence Act, that the said amounts had been received by him by way of cheques from the creditors aforementioned. In fact the fact that the assessee had received the said amounts by way of cheques was not in dispute. Once the assessee had established that he had received the said amounts from the creditors aforementioned by way of cheques, the assessee must be taken to have proved that the creditor had the creditworthiness to advance the loans. Thereafter the burden had shifted to the Assessing Officer to prove the contrary. On mere failure on the part ....