2021 (7) TMI 298 - AT - Income Tax

Addition u/s 68 - Director did not attend the assessment proceedings, ignoring all the direct evidences furnished by the assessee in support of its claim that the initial burden has been discharged by it - HELD THAT - Merely because the Director of the lender company could not attend the assessment proceedings cannot be the basis for brushing aside the clinching direct evidences brought on record by the assessee. We find that the transactions have been made through banking channel. The entries are duly reflected in the bank accounts of both the parties i.e. the lender and the borrower. We also find that the lender company i.e. M/s Arti Securities and Services Ltd has furnished its complete Income tax details alongwith documents furnished by it to the Registrar of Companies. It is not the case of the AO that the assessee has purchased cheque by paying cash nor it is the case of any accommodation entry, nor there is any allegation or suspicion on the documentary evidences furnished by the assessee which are part of the record. The only reason we find is the non-appearance of the Director before the AO In a case where a sum is credited in the books of account of the assessee, the assessee could discharge its onus by proving three things, namely - The identity of the creditor, The credit-worthiness of the creditor, and The genuineness of the transaction in question. Once the assessee proves all the above three things, its onus is discharged. We have no hesitation to say that the assessee has successfully discharged its onus u/s 68 - Decided in favour of assessee.

Summary

Issues:
Confirmation of addition under section 68 of the Income-tax Act, 1961.

Analysis:
The appeal before the ITAT Delhi was against the order of the CIT(A) confirming the addition of ?1 crore made under section 68 of the Income-tax Act, 1961 for the assessment year 2014-15. The Assessing Officer had noted a loan of ?1 crore under "Loans and Advances" from M/s Arti Securities and Services Ltd. The assessee provided detailed explanations, documents, bank statements, and even summoned the lender company. However, the Director of the lender company did not attend the assessment proceedings, leading to the addition by the Assessing Officer.

The ITAT observed that the transactions were made through the banking channel, with entries reflected in the bank accounts of both parties. The lender company had also provided its complete income tax details and documents to the Registrar of Companies. The ITAT emphasized that the absence of the Director alone cannot disregard the direct evidence presented by the assessee. It was noted that there was no suggestion of cash purchase of cheques or accommodation entries, and all documentary evidence was in order.

The ITAT highlighted that under section 68 of the Act, the assessee must establish the identity of the creditor, the credit-worthiness of the creditor, and the genuineness of the transaction. Upon reviewing the evidence, the ITAT concluded that the assessee had successfully discharged this burden. Consequently, the ITAT directed the Assessing Officer to delete the addition of ?1 crore. The appeal of the assessee was allowed by the ITAT Delhi.

In conclusion, the ITAT Delhi found in favor of the assessee, holding that the addition under section 68 of the Income-tax Act was not justified based on the evidence provided. The ITAT emphasized the importance of direct evidence and compliance with the requirements of proving the identity, credit-worthiness, and genuineness of the transaction when dealing with such additions.