2014 (2) TMI 373 - AT - Income Tax

Deletion made u/s 68 of the Act Loan made to creditor - Held that - The necessary details and confirmations from the person namely Mr. Abdul H. Gazdar, who advanced loans to the assessee company, were duly produced and brought on record and the source of money of said creditor Mr. Aamir Gazdar was duly proved on the file - The CIT(A) observed that the assessee had successfully explained the name, complete addresses, identity, PAN details, credit worthiness and genuineness of transactions between the assessee company and its immediate creditor Mr. Aamir Gazdar - The creditor Mr. Aamir Gazdar had further explained the source of money by way of loans, gifts received from various persons whose PAN, income details had been furnished - the assessee company could not be forced to adduce more evidence which was beyond the control of the assessee company - The CIT(A) has held that the assessee company has not only proved the genuineness of the transaction but also the credit worthiness and source of money of its creditor Mr. Aamir Gazdar and also further confirmations as of loan as well as genuineness of transaction of the source of creditor of creditor namely Mr. Abdul H. Gazdar there was no infirmity in the order of the CIT(A) Decided against Revenue.

Summary

Issues:
- Appeal against deletion of addition under section 68 of the Income Tax Act
- Assessment of creditworthiness of loan creditor

Analysis:
1. Deletion of Addition under Section 68 of the Income Tax Act:
The appeal was filed by the Revenue against the order of the CIT(A) regarding the deletion of the addition of Rs.35 lakhs made by the Assessing Officer (AO) into the income of the assessee under section 68 of the Income Tax Act. The AO had raised concerns about the loan raised by the assessee from Mr. Aamir Gazdar, questioning the creditworthiness of the creditor. Despite furnishing confirmation letters, PAN details, and income tax details of Mr. Aamir Gazdar, the AO summoned him for further examination. Mr. Aamir Gazdar admitted to advancing the loan and explained that the funds were received as gifts from his brother, Mr. Abdul H. Gazdar. The AO, unsatisfied, requested assessment particulars and creditworthiness details of Mr. Abdul H. Gazdar, a UK resident. Due to the lack of evidence, the AO taxed the amount in the hands of the assessee under section 68.

2. Assessment of Creditworthiness of Loan Creditor:
In the appeal, the CIT(A) noted that Mr. Aamir Gazdar adequately explained the source of funds in his possession and provided evidence of the source of funds from his brother, Mr. Abdul H. Gazdar. Documentation including confirmation letters, bank statements, and an affidavit from Mr. Abdul H. Gazdar were submitted to prove the legitimacy of the transaction. The CIT(A) found the evidence presented by the assessee to be sufficient in establishing the receipt of gifts and loans. He emphasized that the assessee cannot be compelled to provide evidence beyond its control, especially when dealing with a person like Mr. Abdul H. Gazdar, whose information was not readily available. The CIT(A) concluded that the assessee had successfully demonstrated the creditworthiness and genuineness of the transactions, leading to the deletion of the additions made by the AO.

3. Judgment:
After hearing both parties and examining the records, the Tribunal upheld the CIT(A)'s decision, stating that the assessee had proven the genuineness of the transaction, the creditworthiness of Mr. Aamir Gazdar, and the source of funds from Mr. Abdul H. Gazdar. The Tribunal found no fault in the CIT(A)'s well-reasoned order and dismissed the Revenue's appeal, affirming the deletion of the addition under section 68 of the Income Tax Act.