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TMI Blog2003 (11) TMI 293X X X X Extracts X X X X X X X X Extracts X X X X ..... t. yr. 1995-96 and also observed that the creditor was not a man of good financial standing, nor he has charged any interest from the assessee and hence, on taking into consideration all these facts, the AO concluded that the assessee had introduced his own money in the guise of collusive loan and added the credit of Rs. 1 lac as income of the assessee earned from other sources. 4. The next creditor in this case is Sh. Om Prakash Goyal. From the order of the AO, it appears that the assessee has raised a loan of Rs. 2 lakhs from him which was advanced through account payee cheque. The AO examined this creditor and observed that immediately before the loan of Rs. 2 lakhs was advanced to the assessee-firm, this creditor had deposited a sum of Rs. 2,00,500 in his bank account and has also not charged any interest on the loan and has also not produced his books of account for verification. Hence, this led the AO to believe that the loan transaction was not genuine and called for an addition to the return income of the assessee-firm and accordingly, this amount was also added to the income of the assessee. 5. The third creditor in this case is Sh. Vijay Kumar. The assessee raised a l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purchase of wood. It was claimed that Sh. Inderpal Singh was dealing in the purchase and sale of wood. To carry out his business, he was to make purchases of wood from the market and was regularly making such purchases from a sister concern of the assessee-firm. It was further submitted that Sh. Inderpal Singh had confirmed the advance given by him. The advance so made was through banking channels. As regards the non-payment of interest, the learned counsel for the appellant contended that such non-payment was not very material and in fact, there was no agreement for payment of interest as Sh. Inderpal Singh had advanced the impugned amount for purchase of wood. There were certain problem in supplying the wood required by him as such there was a delay in the return of the deposit. It was maintained that the impugned addition has been made under s. 68 of the IT Act. As per this section, the assessee is required to identify the creditor, prove his creditworthiness and establish the credit transaction. According to the learned counsel for the assessee, the identity or the fact of transaction is not disputed. The only issue in dispute is the creditworthiness of Sh. Inderpal Singh. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn. A perusal of the bank account shows that Sh. Inderpal Singh has been making substantial deposits inclusive of the amounts of Rs. 3,26,016, Rs. 2,47,500, Rs. 2,00,000 and Rs. 1,00,000 in addition to the other deposits ranging between Rs. 10,000 to Rs. 60,000. Whatever may be the source of income of this person, atleast the deposits in the bank account clearly indicate that he had a sound financial position. Of course, the deposit of equivalent amount, immediately before the loan was advanced to the appellant-firm, does create a suspicion but no addition can be made merely on the basis of such suspicion. In this case, the suspicion becomes baseless, in view of the fact that there are other huge deposits in the account of the creditor. The AO has not disputed the identity or the genuineness of the actual transaction and has only doubted the financial position. The financial position, as explained above, is good enough to make advance of Rs. 1,00,000. In the circumstance, I hold that there was no justification for making the addition of Rs. 1,00,000." 10. Before us, the learned Departmental Representative for the Revenue placed reliance on the reasoning given in the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry loan. The creditor was carrying on the business of brick kiln since 1975. The loan was advanced out of his income form his source. It was further pointed out that the AO had called for a copy of the bank account of the creditor. The learned counsel for the assessee inviting our attention to the entries made in the bank account of the creditor, submitted that the creditor has all along being depositing money in cash in the bank account. The reason for the deposit in cash is that the bricks are sold on cash basis. The learned counsel for the assessee contended that the AO had doubted the deposit of Rs. 2,00,500 ignoring the fact that the creditor had also deposited Rs. 3,20,000 in cash which would show that the creditor has all along been depositing cash in his bank. If the deposit in the bank account through cash is a normal routine with the creditor, the cash deposit immediately before the advancing of loan to the assessee firm should not have created any doubt in the mind of the AO. The AO was only required to look into the financial position of the creditor, his identity and the actual loan transaction. The soundness of the financial position was substantiated by the huge amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per book relating to the bank account of the assessee in Punjab National Bank indicating that Sh. Om Prakash Goel was a man of means and was in a sound financial capacity to advance loan to the assessee. 15. On considering the arguments of both the parties, we are of the opinion that the learned CIT(A) has rightly concluded in his order that the identity of the creditor was not in dispute. He was in a sound financial position and transaction was also genuine and hence, the impugned deletion made by the CIT(A) in his well-reasoned and well-discussed order does not call for any interference from our side and accordingly, the same is upheld. 16. The assessee challenging the 3rd addition made by the AO relating to the loan of Rs. 1 lac claimed to have been raised from Sh. Vijay Kumar, the counsel for the assessee submitted before the CIT(A) that the assessee had raised this loan for a few months only. The creditor is a regular income-tax assessee and filed his returns for asst. yr. 1995-96 and 1996-97 declaring net incomes at Rs. 1,39,837 and Rs. 1,44,823 respectively. The transaction of loan was confirmed and even the sources were explained. Nothing more was required. In the absen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee challenging the addition made by the AO in respect of Sh. Ravinder Pal, submitted before the CIT(A) that the case of Sh. Ravinder Pal was almost similar to the case of Sh. Vijay Kumar and so, the AO was not justified in making the impugned addition of Rs. 1 lac. He further submitted that this creditor was an existing assessee and has been filing his return regularly. He was assessed to tax with ITO, Ward II(4) at Ludhiana. The creditor had withdrawn Rs. 1 lac from his cash book and deposited the same in the bank account. The loan was advanced out of such deposit. It was further submitted that no interest was charged as it was a friendly loan raised by the firm for a short period. It was maintained that since all the conditions of a genuine cash credit are satisfied, no addition was called for and the addition made deserves to be deleted. 20. The learned CIT(A) agreeing with the submissions of learned counsel for the assessee deleted the impugned addition by making following observations in his order: "The creditor is a regular income-tax assessee. He had advanced the impugned loan out of the cash available with him in the books of account. Necessary evidence was furnished to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of M/s Devinder Sandhu Co. is Rs. 25,00,000 and in the case of M/s B.S. Sandhu Hosiery Rs. 30,00,000. Even in these cases, the additions have been made only on the ground that no interest was charged. It was explained to the AO that the loans were advanced for temporary period and no interest was charged due to friendly relations. The financial position of the concerns is not in dispute. The loan transactions were confirmed. In such circumstances, the AO could only refer the case to the AO assessing these concerns and had no justification for making impugned additions without making out a proper case." 26. Before us, the learned Departmental Representative for the Revenue except placing reliance on the reasoning given in the order of the AO was not able to controvert the observations made in the order of the CIT(A). Whereas, on the other hand, the learned authorised representative for the assessee reiterated the submissions before us which he made before the CIT(A) and contended that the CIT(A) in his well-reasoned and well-discussed order has rightly deleted the impugned addition. 27. We have considered the rival submissions of both the parties, perused the record ..... X X X X Extracts X X X X X X X X Extracts X X X X
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