2019 (10) TMI 188 - AT - Income Tax

Unexplained cash credit u/s 68 - genuineness of the transactions - HELD THAT - Onus of proof is not a static one. Though in section 68 of the Income-tax Act, 1961, the initial burden of proof lies on the assessee yet once he proves the identity of the creditors/share applicants by either furnishing their PAN number or income-tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue. Therefore, once the assessee had discharged the primary onus, which was cast upon the assessee, it was incumbent upon the AO to prove on the basis of cogent evidence that the transaction was not genuine. There was no such evidence in assessee s case under consideration. The conclusions of the Assessing Officer and the Commissioner (Appeals) with regard to the genuineness of the transactions were merely based on surmises and assumptions. Thus after taking into consideration the totality of the facts discussed as above and in view of the case laws discussed above, it is well established that the assessee by producing necessary documents viz., ITR Acknowledgements, audited accounts, bank statement copy, PAN Number and confirmations etc has sufficiently established the identity, creditworthiness and genuineness of the loan creditors and interest paid. Therefore, we delete the addition - Decided in favour of assessee.

Summary

Issues Involved:

1. Addition of ?88,59,987/- under Section 68 of the Income Tax Act, 1961, which includes ?50,00,000/- as loan taken and ?38,59,987/- as interest paid on the loan.
2. Verification of the identity, genuineness, and creditworthiness of the loan creditors.
3. Validity of retracted statements by directors of loan creditor companies.
4. Application of Section 68 of the Income Tax Act, 1961.

Detailed Analysis:

1. Addition of ?88,59,987/- under Section 68 of the Income Tax Act, 1961:

The main grievance of the assessee was the addition of ?88,59,987/- made by the Assessing Officer (AO), which included ?50,00,000/- as loan taken from three companies and ?38,59,987/- as interest paid on loans during the assessment year 2014-15. The AO concluded that the loans were taken from bogus companies and added the amount under Section 68 of the Act.

2. Verification of the Identity, Genuineness, and Creditworthiness of the Loan Creditors:

Identity:
The assessee provided details of the loan creditors, all of whom were private limited companies with PAN numbers and income tax returns filed. The companies were:
- Paritosh Electricals Pvt Ltd (?10,00,000/-)
- Ranbhumi Marketing Pvt Ltd (?20,00,000/-)
- Vivek Tracom Pvt Ltd (?20,00,000/-)

Genuineness and Creditworthiness:
The assessee submitted various documents to prove the genuineness and creditworthiness of the transactions, including:
- ITR acknowledgments
- Relevant bank statements
- Audited accounts
- Loan confirmations

For each creditor, the assessee provided detailed explanations and documents showing the source of funds, confirming that the transactions were routed through regular banking channels.

3. Validity of Retracted Statements by Directors of Loan Creditor Companies:

The AO relied on statements from Shri Rajkumar Kothari and Shri Biswanath Basak, who initially claimed that the companies were providing accommodation entries. However, both individuals later retracted their statements, alleging coercion and threats by the Income Tax Department officials. The retraction was supported by affidavits filed before the 1st Class Magistrate.

4. Application of Section 68 of the Income Tax Act, 1961:

Section 68 requires the assessee to explain the nature and source of any sum credited in their books. The assessee must prove:
- Identity of the creditor
- Genuineness of the transaction
- Creditworthiness of the creditor

The Tribunal noted that the assessee had provided sufficient evidence to meet these requirements. The AO and CIT(A) ignored the documents submitted by the assessee and relied solely on the retracted statements.

Judgment:

The Tribunal found that the assessee had successfully proven the identity, genuineness, and creditworthiness of the loan creditors through substantial documentation. The retracted statements of the directors were not considered reliable due to the circumstances under which they were obtained. The Tribunal cited relevant case laws, including judgments from the Hon'ble Delhi High Court, to support its decision.

The addition of ?88,59,987/- (?50,00,000/- as loan and ?38,59,987/- as interest) made by the AO was deleted, and the appeal of the assessee was allowed.

Conclusion:

The Tribunal concluded that the assessee had discharged the primary onus of proving the identity, genuineness, and creditworthiness of the loan creditors. The addition made by the AO under Section 68 was based on assumptions and lacked cogent evidence. Consequently, the appeal of the assessee was allowed, and the addition was deleted. The order was pronounced in the Court on 06.09.2019.