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2019 (2) TMI 1537 - AT - Income TaxAddition u/s 68 - genuineness of loan creditors - HELD THAT - As find force in the submission of the assessee that both the loan creditors have expired in the meanwhile and therefore it is not possible on the part of the assessee to produce above two parties. The assessee before the AO had filed the copy of the account of Mrs. Prem Lata for financial year 2001-02 with M/s. R. L. Traders to whom loan was given and such loan was returned to her in February 2002 and thereafter Smt. Prem Lata had extended the loan of ₹ 5 lacs on 27.04.2002 and therefore, the source of Ms. Prem Lata is established. So far as loan from Sh. Shyam Goyal is concerned, the three storey building at New Delhi which was subsequently sold shows that he is a person of means to advance a loan. It is also to be noted that the matter is very old and the lenders are already dead. It is also not in dispute that the loan obtain during the financial year 2002-03 from M/s. Shyam Goyal was returned to him in the year 2003-04 and amount of ₹ 5 lacs obtained from Smt. Prem Lata has been returned to her during financial year 2004-05. In this view of the matter we are of the considered opinion that addition u/s 68 is not justified - decided in favour of assessee.
Issues involved:
- Addition of undisclosed income under section 68 of the IT Act based on unexplained loan - Burden of proof on the assessee to establish creditworthiness of lenders and genuineness of transactions - Failure to produce loan creditors for verification - Assessment of evidence provided by the assessee - Application of legal precedents in determining the burden of proof Detailed Analysis: Issue 1: Addition of undisclosed income under section 68 - The appeal was against the addition of ?7,50,000 as undisclosed income under section 68 of the IT Act based on an unexplained loan received by the assessee. - Original assessment completed under section 153A resulted in the addition due to lack of substantiation regarding the loan's creditworthiness and genuineness. Issue 2: Burden of proof on the assessee - The Assessing Officer required the assessee to prove the genuineness of the transaction and creditworthiness of the lenders regarding the loans received. - Despite providing various documents, including affidavits, confirmations, and bank statements, the assessee failed to adequately substantiate the creditworthiness of the loan creditors and the genuineness of the transactions. Issue 3: Failure to produce loan creditors - The Assessing Officer's attempts to verify the lenders' details through notices and inspections yielded no results, as the lenders were not found at the given addresses. - The failure to produce the loan creditors for verification further weakened the assessee's case regarding the legitimacy of the loans received. Issue 4: Assessment of evidence provided - The CIT(A) upheld the addition made by the Assessing Officer, emphasizing the importance of proving the source of funds received by the assessee. - Legal precedents were cited to support the requirement of proving the identity and creditworthiness of creditors beyond mere transactions through banking channels. Issue 5: Application of legal precedents - The CIT(A) referenced legal cases to assert that mere proof of identity or transactions by cheque is insufficient to satisfy the requirements of section 68. - The burden of proof was deemed to be on the assessee, especially in cases where the genuineness of transactions is in question. Conclusion: - The Tribunal, upon review, found merit in the arguments presented by the assessee's counsel. - Considering the circumstances, including the demise of the loan creditors and the return of the loans in subsequent years, the Tribunal concluded that the addition under section 68 was not justified. - The Tribunal directed the Assessing Officer to delete the addition of ?7,50,000 made under section 68 of the IT Act, thereby allowing the appeal filed by the assessee. This comprehensive analysis highlights the key issues, arguments, evidence, legal precedents, and the final decision of the Tribunal in the legal judgment.
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