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2019 (12) TMI 361 - AT - Income TaxAddition u/s 68 - unsecured loans as unexplained cash credit - HELD THAT - In the remand report called for by the Ld. CIT(A), the assessee has filed the necessary evidences in the form of confirmations of the lenders, bank statements, copies of balance sheets, PAN Numbers, ITRs etc. of the lenders. Even the lenders have replied in response to notice issued under section 133(6) of the Act. The copies of ledger accounts and subsequently repayment of loans, loan confirmations, bank statements reflecting the loan given and received back, mode of receipt / payment of loans, details of interest charged and TDS deducted, nature of loan advanced, returns of income filed along with balance sheets, audited reports and PAN numbers with the AO. In respect of Dev Diamond Surat from whom ₹ 55 lakhs were received was sustained by Ld. CIT(A) whereas the loan from the same party in the hands of Smt. Bharti N. Patel was accepted by the AO in the remand report, a copy of which is filed at page No.35 to 39 and the relevant para is 3.1. We have also examined the appellate order passed by the Ld. CIT(A) in the case of Smt. Bharti N. Patel dated 14.02.2018 wherein addition made by the AO qua Dev Diamond Surat of ₹ 50 lakhs was deleted. Even the interest paid on these loans by the assessee after deduction of tax at source were duly allowed as expense by the AO. Under these circumstances, we are not in a position to subscribe and concur with the conclusion of Ld. CIT(A) that these are paper companies and identities of the creditors and genuineness and creditworthiness of the lenders were not proved especially when the information/evidences having been filed by the assessee in the assessment proceedings and remand proceedings and even the lenders have filed all the evidences before the AO which has been admitted by the AO in the remand report. It is nothing but an addition made by the AO and also confirmed by the Ld. CIT(A) on presumption basis. Further, we find that assessee has not been confronted with any information that the said companies were non genuine and paper companies. In the case of Pr. CIT vs. Veedhata Tower Pvt. Ltd. 2018 (4) TMI 1004 - BOMBAY HIGH COURT held that assessee has discharged his onus which has cast upon him in terms of preamended section 68 of the Act by filing the necessary confirmation letters from the creditors, their affidavits, their full addresses and their PANs and it was not necessary to prove the source of source prior to 01.04.2013 as has been held in the case of CIT vs. Gagan Deep Infrastructure Pvt. Ltd. . 2017 (3) TMI 1263 - BOMBAY HIGH COURT wherein it has been held that proviso to section 68 has been inserted to Finance Act, 2012 w.e.f. 01.04.2013 and therefore it would be effective from A.Y. 2013-14 onwards and not earlier assessment years. - Decided in favour of assessee
Issues Involved:
1. Confirmation of addition of ?4,27,00,000/- as unexplained cash credit under section 68 of the Income Tax Act. Detailed Analysis: Issue 1: Confirmation of Addition of ?4,27,00,000/- as Unexplained Cash Credit under Section 68 of the Act Facts and Proceedings: The assessee filed a return of income declaring ?58,08,630/-. During scrutiny, the Assessing Officer (AO) questioned the acceptance of loans from 10 parties totaling ?5,20,00,000/-. The AO found defects in the loan confirmations and concluded that the assessee failed to prove the creditworthiness and identity of the parties and the genuineness of the transactions. Consequently, the AO added the loans as unexplained cash credits under section 68 of the Act. Appellate Proceedings: The Commissioner of Income Tax (Appeals) [CIT(A)] partly allowed the appeal by deleting ?93,00,000/- related to a loan from Smt. Bharti N. Patel, as the AO accepted the correctness of this loan in the remand report. However, the CIT(A) sustained the addition of ?4,27,00,000/- due to doubts about the creditworthiness of the creditors and the genuineness of the transactions. The CIT(A) noted that merely filing documents like PAN cards and bank statements did not prove the identity, creditworthiness, and genuineness of the transactions. Legal Precedents and Observations: The CIT(A) relied on several case laws, including *CIT v. Lovely Exports P Ltd.*, *CIT v. Dwarkadhish Investment (P.) Ltd.*, and *CIT v. Navodaya Castles (P) Ltd.*, which emphasize that the onus shifts to the AO once the assessee provides basic details like PAN and bank account information. The AO is then required to make further inquiries. In this case, the AO issued notices under section 133(6) and analyzed the details, concluding that the loan creditors lacked the capacity to extend such huge amounts and were essentially paper companies. Arguments by the Assessee: The assessee argued that the CIT(A) did not appreciate the facts and evidence on record. The assessee provided various documents, including PAN, loan confirmations, bank statements, and balance sheets. The AO's remand report acknowledged these documents. The assessee contended that the loans were genuine, and the interest paid on these loans was accepted as an expense by the Revenue. The assessee cited the case of *H.R. Mehta vs. ACIT* and *Pr. CIT vs. Veedhata Tower Pvt. Ltd.*, arguing that the AO should have confronted the assessee with any adverse material and provided an opportunity for cross-examination. Arguments by the Revenue: The Revenue supported the CIT(A)'s order, arguing that the assessee failed to satisfy the three ingredients under section 68: identity, creditworthiness, and genuineness. The documents provided by the assessee were incomplete, and the responses to notices under section 133(6) were inadequate. Tribunal's Findings: The Tribunal observed that the assessee had provided necessary evidence, including confirmations, bank statements, and balance sheets. The lenders responded to notices under section 133(6), providing detailed information. The Tribunal noted inconsistencies in the CIT(A)'s approach, particularly regarding the loan from Dev Diamond Surat, which was accepted in another case. The Tribunal held that the addition was made on a presumption basis without confronting the assessee with adverse material. Conclusion: The Tribunal concluded that the assessee had discharged the onus of proving the identity, creditworthiness, and genuineness of the transactions. The Tribunal set aside the CIT(A)'s order and directed the AO to delete the addition of ?4,27,00,000/-. Result: The appeal of the assessee was allowed. Order Pronounced: The order was pronounced in the open court on 21.11.2019.
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