2019 (12) TMI 92 - HC - Income Tax

Additions u/s 68 - Unsecured loans from non genuine companies - upon physical verification, companies were not found at the given address - HELD THAT - In the present case, the appellant-assessee had explained in assessment proceedings that he had taken loan of Rupees Two Crores from TTPL and a loan of Rupees One Crore from POCPL. As during the course of assessment proceedings, it transpired that the said companies were not genuine. The Inspector, Income Tax, had made verification with regard to genuineness of creditor companies. As per the report of the Inspector, reproduced in the order dated 20.11.2017 passed by the CIT (A), Ajmer, it was found that address of both the companies was same. When the Inspector went to the disclosed addresses of the companies, it was found that the premises was a seven storied old building having many offices and residential flats. The creditor companies were not found at the disclosed addresses. No signboards or letter-boxes in the names of creditor companies were found at the given address. The room was found locked. Inspector had met various persons in the vicinity and no person could state the existence and business activities of both the companies. During the course of arguments, learned counsel for the appellant had stressed that the creditor companies were also being assessed under the Income Tax Act. The documents shown by the learned counsel for the appellant with regard to Income Tax Returns of the creditor companies, filed for the assessment year 2012-13, reveal that addresses of the companies are the same on which verification had been done by the Inspector, Income Tax. Thus, it is evident that the AO had conducted inquiry with regard to assessment proceedings and on inquiry, it transpired that the creditor companies were not genuine. Hence, the burden shifted on the assessee to controvert the material brought on record by the AO. It has been noticed by the Tribunal that the assessee had failed to produce any contrary material to controvert the evidence brought on record by the Assessment Officer. The Tribunal, after elaborately considering the material on record, has rightly dismissed the appeal filed by the appellant-assessee. The judgments relied upon by the learned counsel for the appellant-assessee fail to advance the case of the appellant-assessee as they are not applicable to the facts of the present case.

Summary

Issues:
Challenge to order passed by Income Tax Appellate Tribunal regarding unsecured loans from companies, Burden of proof on genuineness of creditor companies, Failure to produce contrary material to challenge evidence, Reliance on judgments regarding burden of proof and source of income.

Analysis:
The appellant challenged the order passed by the Income Tax Appellate Tribunal regarding unsecured loans from two companies, TTPL and POCPL, totaling Rupees Three Crores. The Assessment Officer held that the loans were not genuine as the creditor companies were not considered genuine business concerns. The appellant argued that the loans were from genuine companies, citing a Supreme Court decision emphasizing the burden of proof on the revenue to establish lack of creditworthiness of creditors. Additionally, a local court decision highlighted that once the existence of the depositor is proven, the burden of proving the source of funds does not extend further.

During assessment proceedings, it was revealed that the creditor companies' addresses were the same and the premises were not found at the disclosed addresses. The Inspector's report stated that the companies were not located, and no business activities were confirmed by individuals in the vicinity. The appellant's counsel pointed out that the creditor companies were also assessed under the Income Tax Act, but failed to provide evidence to counter the findings of the Assessment Officer.

The Tribunal upheld the dismissal of the appeal, noting that the appellant did not produce any contrary material to challenge the evidence presented by the Assessment Officer. The judgments cited by the appellant's counsel were deemed irrelevant to the case at hand. The Tribunal concluded that the burden of proof regarding the genuineness of the loans had not been met by the appellant, leading to the dismissal of the appeal.