2009 (3) TMI 1012 - AT - Income Tax

Summary

Issues involved: The Revenue challenged the first appellate order deleting the addition of Rs. 33,24,137 including interest made by the AO u/s 68 of the Act.

Details of the Judgment:

1. Identification of creditors and genuineness of transactions: The AO rejected the claimed loan of Rs. 32,80,000 from 13 persons, stating that the confirmations filed were not duly signed. However, the assessee contended before the CIT(A) that the confirmations were duly signed, supported by affidavits, PAN copies, ledger copies, and IT return acknowledgments. The CIT(A) called for a remand report, where the AO confirmed that the creditors had indeed given the loans. The CIT(A) observed details such as bank balances and discussed the credibility of the creditors. Citing various legal precedents, including recent decisions by the jurisdictional High Court, it was held that once the identity of creditors is established and they confirm the credit, the burden shifts to the Revenue to disprove the transaction. The Court emphasized that the capacity of the lender to advance money need not be established by the assessee, as that would amount to proving the source of the source, which is not required. The Tribunal upheld the CIT(A)'s decision, stating that the assessee had discharged its onus, and the addition u/s 68 could not be sustained without evidence that the source of the creditor's deposit came from the assessee.

2. Legal Precedents: The Tribunal referred to several legal precedents, including decisions by the jurisdictional High Court, to support its decision. These included cases such as CIT vs. Shree Barkha Synthetics Ltd., Shankar Industries vs. CIT, CIT vs. First Point Finance Ltd., CIT vs. P. Mohanakala & Ors., Labh Chand Bohra vs. ITO, Kanhaialal Jangid vs. Asstt. CIT, and Aravali Trading Co. vs. ITO. These cases highlighted the importance of establishing the identity of creditors, obtaining confirmations, and shifting the burden of proof to the Revenue to disprove the transaction.

3. Conclusion: The Tribunal upheld the first appellate order, dismissing the Revenue's appeal and rejecting the ground challenging the deletion of the addition made by the AO u/s 68 of the Act. The appeal was ultimately dismissed based on the findings and legal principles discussed in the judgment.