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2019 (10) TMI 303 - AT - Income TaxUnexplained credits u/s 68 - identity, creditworthiness and genuineness of the loan transaction - HELD THAT - The addition has been made only on the basis of suspicion without looking into the totality of the facts and surrounding circumstances and without the basis of any evidence. As rightly mentioned in his assessment order by the Ld. AO, three things viz. identity of the creditor, creditworthiness of the creditor and genuineness of the transaction have to be proved to treat a loan as genuine. Identity - It is an uncontroverted fact that Smt. Jenita Wallang was not a new creditor. The Assessee had taken loans from her in earlier years and outstanding balance of such loans, as on 01/04/2012, was ₹ 29,50,000/-. In the earlier years for which assessment u/s 143(3) had been made, no adverse finding had been given in respect of the said loan. The requisition letter under Section 133 (6), sent by the AO, by speed post, was duly delivered to the creditor and she had duly sent the reply to the said letter by post. The loan creditor also holds a PAN which was duly quoted by her in her loan confirmation letter. Thus, the identity of the loan creditor was fully established. Creditworthiness of the loan creditor - From the records, it is seen that in course of hearing no efforts were made to assess the financial position of these businesses on which Assessee had relied on to prove the creditworthiness of the loan creditor. Even in the requisition sent by the AO u/s 133 (6), no details were asked about these businesses. As the Assessee had submitted, as proof, copies of the licenses of the creditor's businesses, the AO should have ascertained the financial position of these businesses to accept or of not accept the proof submitted by the Assessee.On perusal of these documents, we hold that the loan creditor, Smt. Jenita Wallang, was a person of means and had creditworthiness to advance the loan in question to the Assessee . From the records, it is seen that in course of hearing no efforts were made to assess the financial position of these businesses on which Assessee had relied on to prove the creditworthiness of the loan creditor. Even in the requisition sent by the AO u/s 133 (6), no details were asked about these businesses. As the Assessee had submitted, as proof, copies of the licenses of the creditor's businesses, the AO should have ascertained the financial position of these businesses to accept or of not accept the proof submitted by the Assessee.On perusal of these documents, we hold that the loan creditor, Smt. Jenita Wallang, was a person of means and had creditworthiness to advance the loan in question to the Assessee. Genuineness of the transaction - AO has not directly verified the loan creditor or the other documentary evidences, such as the copies of the VAT returns of the proprietary concern of the loan creditor, details of deposits in the bank statement of the loan creditor, factum of the loan creditor being a bona fide tribal person, genuineness of the sale deed etc. despite being given an opportunity to do so.To prove the creditworthiness of Smt. Jenita Wallang the Assessee had furnished copies of the licenses of her Bottling plant and Bonded Warehouse business issued by the Govt. of Meghalaya. The fact of giving of the above loan was also confirmed by Smt. Wallang directly to the ITO in response to ITO's letter sent to her for this purpose.Smt. Wallang has PAN Number and loan has been given by account payee cheque. The assessee had duly proved the identity of Smt. Jenita wallang, her creditworthiness and the genuineness of the loan transaction.It is an uncontroverted fact that Smt. JenitaWallang was not a new creditor. The Assessee had taken loans from her in earlier years and outstanding balance of such loans, as on 01/04/2012, was ₹ 29,50,000/-. In the earlier years for which assessment under Section 143(3) had been made, no adverse finding had been given in respect of the said loan. We note that assessee has proved all the three ingredients viz identity, creditworthiness and genuineness of the loan transaction of ₹ 80,00,000/- given by the loan creditor, Smt. Jenita Wallang to the assessee. Hence, assessee has discharged his primary onus u/s 68.That being so, we decline to interfere with the order of Id. C.I T.(A) in deleting the aforesaid addition. His order on this addition is therefore, upheld and the grounds of appeal of the Revenue are dismissed.
Issues Involved:
1. Deletion of ?80,00,000/- added as unexplained credits under Section 68 of the Income Tax Act, 1961. 2. Admissibility of additional evidence provided by the assessee. Issue-Wise Detailed Analysis: 1. Deletion of ?80,00,000/- added as unexplained credits under Section 68 of the Income Tax Act, 1961: The Revenue contested the deletion of ?80,00,000/- added as unexplained credits under Section 68 by the Assessing Officer (AO). The AO had questioned the identity, creditworthiness, and genuineness of the loan transaction from Ms. Jenita Wallang to the assessee. The AO noted discrepancies in the bank statements and the fact that the cash deposited to clear the loan cheques was done by the assessee himself. The AO concluded that the assessee could not prove the creditworthiness of Ms. Wallang and the genuineness of the loan transaction. The Commissioner of Income Tax (Appeal) [CIT(A)] deleted the addition, which led to the Revenue's appeal before the ITAT. The ITAT examined the facts and found that the AO's conclusion was based on suspicion rather than material proof. The ITAT highlighted that the loan creditor, Ms. Wallang, had provided confirmation and an affidavit owning up the cash deposits, explaining the source of funds, and submitting VAT returns showing significant turnover from her business. The ITAT emphasized that suspicion, however strong, cannot replace material proof, citing the Hon'ble Supreme Court's judgment in Hanumant and Another vs. The State of Madhya Pradesh. The ITAT noted that the assessee had discharged his primary onus under Section 68 by proving the identity, creditworthiness, and genuineness of the loan transaction. The loan was received through account payee cheques, and the creditor was not new, with loans from her being scrutinized in previous assessments. The ITAT found that the AO had not adequately verified the loan creditor's financial position or the documentary evidence provided. The ITAT concluded that the addition was made on the basis of suspicion and irrelevant material, which cannot be sustained, citing the Hon'ble Supreme Court's judgment in CIT (Central) Calcutta vs. Daulatram Rawatmull. 2. Admissibility of additional evidence provided by the assessee: The Revenue argued that the CIT(A) erred by admitting additional evidence regarding the unsecured loan without addressing objections raised in the remand report. The ITAT, however, found that the additional evidence, including the creditor's affidavit and VAT returns, was crucial to establishing the creditworthiness and genuineness of the loan. The ITAT observed that the AO had not directly verified the loan creditor or the documentary evidence despite the opportunity to do so. The ITAT upheld the CIT(A)'s decision to admit the additional evidence, emphasizing that the assessee had provided sufficient proof to discharge the primary onus under Section 68. The ITAT concluded that the assessee had proved the identity, creditworthiness, and genuineness of the loan transaction, and the Revenue's appeal lacked merit. Conclusion: The ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s order to delete the addition of ?80,00,000/- under Section 68. The ITAT found that the assessee had adequately proved the identity, creditworthiness, and genuineness of the loan transaction and that the AO's addition was based on suspicion and irrelevant material. The ITAT emphasized the need for material proof over suspicion and upheld the admissibility of the additional evidence provided by the assessee.
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