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2021 (12) TMI 48 - AT - Income TaxAddition u/s 68 - Unexplained loans - onus to establish the creditworthiness of the investor companies - none attended on behalf of the companies imparting loans in the enquiry to examine third party or verify the genuineness or creditworthiness of the loan providers could not be done and the loan providers have been found to be fake and not in existence - HELD THAT - It appears from the records that the assessee received loans from all the parties through account payee cheques. Confirmation in respect of loans as received by the assessee was also obtained and placed before the Ld. CIT(A). The PAN of loan creditors, the copy of Income Tax Return, the Bank statement, Master records and balance sheet of those parties were duly placed before the CIT(A). Thus, the assessee has properly discharged its onus by providing the identity, creditworthiness and genuine of the unsecured loans as received. While confirming the addition made by the Ld. AO relying upon the Remand Report the Ld. CIT(A) observed that the investor companies has not established the source of funds from which the investment was ultimately made. Further that he has relied upon a judgment passed in the matter of NRA Iron Steel Pvt. Ltd. 2019 (3) TMI 323 - SUPREME COURT and came to the finding that the onus to establish the creditworthiness of the investor companies was not discharged by the assessee; the entire transaction made in that particular matter seemed bogus and lack credibility. AO though initiated enquiry but was not been able to proceed further since no one appeared on behalf of the investor companies and, therefore, finally the addition was confirmed. In the instant case by producing various documents the appellant had proved that balance of convenience was in its favour. Considering the entire aspect of the matter we find no rational for sustaining the addition made to the total income of the assessee on account of advance received from these parties solely on the reason that notices issued u/s 133(6) of the Act either not served or no reply was received in response to such notices - the appellant by filing ample documentary evidences sought to justify the identity and creditworthiness of the parties and genuineness of the transactions as entered into with these parties. It seems that the assessee satisfactorily discharged its primary onus cast upon it under Section 68 - Hence, the addition as made to the total income of the appellant under Section 68 of the Act on account of advance received from parties is not sustainable and, thus, deleted. Hence, assessee s appeal is allowed.
Issues Involved:
1. Addition of ?50,87,000 under Section 68 of the Income Tax Act, 1961. 2. Establishment of identity, creditworthiness of the parties, and genuineness of the transaction. 3. Adequacy of the Assessing Officer's (AO) enquiry. Detailed Analysis: 1. Addition of ?50,87,000 under Section 68 of the Income Tax Act, 1961: The assessee, an investment company, filed its return for A.Y. 2013-14 showing a loss. During scrutiny, the AO added ?50,87,000 to the total income under Section 68, citing the failure of the assessee to establish the identity, creditworthiness, and genuineness of transactions with four parties. The First Appellate Authority (CIT(A)) upheld this addition, leading to the present appeal. 2. Establishment of Identity, Creditworthiness of the Parties, and Genuineness of the Transaction: The assessee provided extensive documentation to substantiate the identity, creditworthiness, and genuineness of the transactions, including: - Copies of accounts, confirmations, and income tax returns of the loan creditors. - Master records, balance sheets, and other corporate documents of the loan creditors. Despite these submissions, the AO, in a remand report, noted that notices sent to three of the four parties were returned undelivered, and no reply was received from the fourth party. The AO concluded that the loan providers were fake and non-existent. 3. Adequacy of the Assessing Officer's (AO) Enquiry: The assessee argued that it had fulfilled its obligation by proving the source of the loan and was not required to prove the source of the source. The assessee cited several legal precedents supporting this view, including judgments from various ITAT benches and high courts. The Tribunal found merit in the assessee's argument that non-service of notice does not conclusively prove the non-genuineness of a transaction. The Tribunal also noted that the AO did not conduct adequate enquiries to verify the genuineness and creditworthiness of the loan providers. Conclusion: The Tribunal concluded that the assessee had satisfactorily discharged its primary onus under Section 68 by providing ample documentary evidence. The addition of ?50,87,000 was deemed unsustainable and was deleted. The appeal filed by the assessee was allowed. Result: The appeal filed by the assessee was allowed, and the addition of ?50,87,000 made to the total income was deleted.
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