2009 (11) TMI 971 - HC - Income Tax

Addition u/s 69 - assessee had taken loan from two parties - heavy cash having been deposited in the account of lending Company before issuance of cheques to the assessee - tailor made entires in the books as well as bank accounts - Failure of the assessee to produce the Director of the lending Company for examination - HELD THAT - Addition was made only for the ground that the Director of lender company was not produced before the revenue. But facts remains that so far as the identity of the lender is concerned, it cannot be questioned because it is a public limited Company and is regularly assessed to income tax having PAN. Therefore, in our considered view, onus is discharged by the assessee by producing necessary evidence. The source of source cannot be examined in view of law laid down in the case of Commissioner of Income Tax (Central), Calcutta Vs. Daulat Ram Rawatmull, 1972 (9) TMI 9 - SUPREME COURT . No merit in the grounds raised by the revenue in regard to addition. Unsecured loan from Ms. Pallavi Agarwal during the financial year - Matter was remanded to the Additional Commissioner of Income Tax with a copy to the AO. In her bank account, all credit and debit entries were explained with supporting evidence. Confirmation from her, her account details, return of income details, details of loan returned were also furnished. When it is so, then no interference is required in the impugned order of the Tribunal.

Issues:
1. Addition of Rs. 25,05,000 under Section 69 of the Income Tax Act, 1961.
2. Addition of Rs. 10,15,000 as undisclosed income.
3. Failure to produce Director of lending Company for examination.
4. Discharge of onus under Section 68 of the Act.
5. Applicability of legal precedents - K.L. Agarwal Vs. CIT, Sumati Dayal Vs. CIT.
6. Examination of source of source.

Analysis:
1. The case involved the Commissioner of Income Tax appealing against the Lucknow Bench of the Income Tax Appellate Tribunal's order for the assessment year 2004-2005. The assessee had shown an income of Rs. 17,08,470, but the assessment was completed at Rs. 53,69,430 due to additions made under Section 69 of the Act. The Assessing Officer questioned the source of investments made by the assessee, leading to the addition of Rs. 25,05,000. The Tribunal and High Court found that the onus was discharged by the assessee as the lender, a public limited company, was regularly assessed to income tax and had a PAN. The addition was deemed unjustified.

2. Another addition of Rs. 10,15,000 was made as undisclosed income related to an unsecured loan from Ms. Pallavi Agarwal. The Assessing Officer concluded that Ms. Agarwal, a student at the time, had no prior business relationship with the assessee. However, the Appellate Authority and Tribunal found that all transactions were explained with supporting evidence, including bank details and return of income details. The High Court upheld this finding, stating no interference was required.

3. The failure to produce the Director of the lending Company for examination was a key point raised by the revenue. However, the High Court noted that the identity of the lender, being a public limited company regularly assessed to income tax, was established by the necessary evidence produced by the assessee. Citing legal precedent, the Court found that the onus was effectively discharged, and the addition of Rs. 25,05,000 was deemed unwarranted.

4. The discharge of onus under Section 68 of the Act was a crucial aspect in this case. The High Court emphasized that the identity of the lender was not in question, as it was a public limited company regularly assessed to income tax. Therefore, the onus was considered to be fulfilled by the assessee through the evidence provided, leading to the dismissal of the revenue's grounds for addition.

5. Legal precedents such as K.L. Agarwal Vs. CIT and Sumati Dayal Vs. CIT were cited by the revenue to support their arguments. However, the High Court, after careful consideration of the facts and applicable law, found no merit in the revenue's contentions and dismissed the appeal accordingly.

6. The examination of the source of source was an important aspect in this case. The High Court referred to the law laid down in Commissioner of Income Tax (Central), Calcutta Vs. Daulat Ram Rawatmull to emphasize that the identity of the lender, being a public limited company regularly assessed to income tax, was sufficient to discharge the onus. Therefore, no further examination of the source of source was deemed necessary, leading to the dismissal of the appeal.

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