2020 (8) TMI 439 - AT - Income Tax

Addition u/s 68 - Unexplained cash credit - identity and credit worthiness of the loan creditor and genuineness of the transactions - HELD THAT - Onus is always on the assessee to substantiate with evidence to the satisfaction of the AO regarding the identity and credit worthiness of the loan creditor and genuineness of the transaction. In the instant case, no doubt, the assessee has filed some papers/documents before the AO. Assessee company failed to produce the directors of M/s Baldev Promoters Pvt. Ltd., and Shri Raju Khan. The source of Shri Raju Khan to extend such huge amount was also not substantiated. We deem it proper to restore the issue to the file of the AO with a direction to give one more opportunity to the assessee to substantiate with evidence to his satisfaction regarding the identity and credit worthiness of the loan creditors and the genuineness of the transaction. The assessee is hereby directed to produce the Managing Director/Director of M/s Baldev Promoters Pvt. Ltd. and Shri Raju Khan before the AO for his examination. The AO shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.

Issues Involved:

1. Addition of ?90,00,000 as unexplained cash credit under Section 68 of the Income Tax Act from M/s Baldev Promoters Pvt. Ltd.
2. Addition of ?25,00,000 as unexplained cash credit under Section 68 of the Income Tax Act from Shri Raju Khan.
3. Non-admission of additional evidence by CIT(A) under Rule 46A of the Income Tax Rules.
4. Levy of interest under Sections 234B and 234C of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Addition of ?90,00,000 as unexplained cash credit from M/s Baldev Promoters Pvt. Ltd.:

The Assessing Officer (AO) questioned the identity, creditworthiness of M/s Baldev Promoters Pvt. Ltd., and the genuineness of the transaction involving ?90,00,000. The AO found discrepancies in the documents, such as mismatched photographs of the director, Shri Gulab Chand Verma, and the non-production of the director for verification. The AO also noted frequent transfers in the company's bank account and insufficient income to justify the loan. The CIT(A) sustained the addition made by the AO.

The assessee argued that the loan was repaid, and interest was paid on the loan. Various documents, including income tax returns, audited accounts, and bank statements, were submitted to substantiate the identity and creditworthiness of the loan creditor. The assessee contended that the mismatch in photographs was irrelevant and that the frequent transfers were regular business transactions.

2. Addition of ?25,00,000 as unexplained cash credit from Shri Raju Khan:

The AO also added ?25,00,000 received from Shri Raju Khan, citing a failure to establish his identity and creditworthiness. The AO found that Shri Raju Khan was not found at the given address, and no interest was paid on the loan. The CIT(A) sustained this addition as well.

The assessee argued that the additional evidence, including an affidavit from Shri Raju Khan and a purchase deed evidencing the source of funds, was crucial for adjudicating the issue. The assessee contended that the AO did not provide sufficient time to submit these documents and that the CIT(A) should have admitted the additional evidence.

3. Non-admission of additional evidence by CIT(A) under Rule 46A:

The assessee contended that the CIT(A) erred in not admitting additional evidence under Rule 46A, which was crucial for adjudicating the issues raised in the appeal. The additional evidence included an affidavit from Shri Raju Khan and a purchase deed evidencing the source of funds.

4. Levy of interest under Sections 234B and 234C:

The assessee also challenged the levy of interest under Sections 234B and 234C of the Income Tax Act, which was confirmed by the CIT(A).

Tribunal's Decision:

The Tribunal noted that the onus is on the assessee to substantiate the identity, creditworthiness of the loan creditor, and the genuineness of the transaction. Although the assessee filed some documents, it failed to produce the directors of M/s Baldev Promoters Pvt. Ltd. and Shri Raju Khan for verification. The Tribunal deemed it proper to restore the issue to the file of the AO, directing the assessee to produce the necessary individuals for examination and provide sufficient evidence to substantiate the claims. The AO was instructed to decide the issue as per law after giving due opportunity of being heard to the assessee.

Conclusion:

The appeal filed by the assessee was allowed for statistical purposes, and the case was remanded to the AO for a fresh examination of the evidence and proper adjudication of the issues. The Tribunal emphasized the need for the assessee to produce the necessary individuals and documents to substantiate the identity, creditworthiness, and genuineness of the transactions.

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