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TMI Blog2015 (2) TMI 402X X X X Extracts X X X X X X X X Extracts X X X X ..... e assumption that the creditworthiness of the creditors are not proved. When the loan transaction is through banking channel to prove that it is not genuine, the A.O. has to make proper enquiry and establish it on record by bringing sufficient evidence that it is the assessee’s money which has been routed back to him through the creditors. Unless this fact is proved through proper enquiry, it will not be proper to treat the loan transaction as not genuine on conjecture and surmises.Therefore, on overall consideration of facts and materials on record, we are of the view that the entire issue relating to the loan transactions representing the 78 creditors requires re-examination. More so, considering the specific grievance of the assessee that adequate opportunity to explain was not given to him. Having held that issue relating to loan transactions requires re-examination, it is necessary also to decide whether A.O. or CIT(A) will be the appropriate authority to decide it afresh. In this context, it needs to be observed each of the loan transaction has to be examined independently in the context of the evidences produced relating to it along with the explanation of the assessee for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t appear in person but were represented through their Authorised Representatives whereas, rest of the creditors never appeared. A.O. observed, the creditors who appeared before him confirmed of having advanced the loans to the assessee. However, when asked to prove their creditworthiness, they stated that the loans advanced were out of loan taken from others, refund of loans given earlier and sale of shares. Similarly, when Authorised Representatives who appeared on behalf of some of the creditors were asked about the creditworthiness of the creditors also advanced similar explanation. As far as other loan creditors who did not appear in response to the summons issued but send letters to the A.O. with their confirmation and income tax assessment details, balance sheet etc., the A.O. observed that the particulars given by them does not prove their creditworthiness to advance the loans. In respect of one of the creditor, namely Mr. Pradeep Nag of Kolkata, it was observed by the A.O. that the said person appeared before the A.O. in response to summons and when examined categorically stated that neither he knew the assessee nor he at any time advanced any loan to the assessee. Furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enquires made. Learned A.R. submitted that at the fag end of March, 2013 some more enquires were made at Jaipur, Mumbai and Delhi through local investigation wing and the A.O. on 22.03.2013 furnishing some of the copies of the enquires made proposed to add back the loans as unexplained credit under section 68. 5. Learned A.R. submitted, in reply dated 25.03.2013, though, the assessee made an attempt to explain to the extent possible on the objections raised by the A.O. but without considering the same or giving reasonable opportunity to the assessee to explain, the assessment was completed on 31.03.2013 by making addition of the unsecured loan of ₹ 24,51,59,299. Learned A.R. submitted that the facts on record will reveal (a) all the information gathered by the A.O. has not been made available to the assessee (b) the enquiries were made only at the fag end and (c) time available to the assessee was too short for adequate response. In this context, the learned A.R. referred to assessee s letter dated 18.03.2013 wherein it was stated that as the creditors are not personally known to the assessee and they are not under his control and it is his company s executives and persons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es enquiries reveal that no such company or person were in existence but the assessee could not furnish any explanation as he had no knowledge of the enquiry made by the A.O. Learned A.R. submitted, all the creditors are available at the addresses and the correspondence on record including the letters addressed to the A.O. by the creditors in the month of March, 2013 also establish the fact that they were at the given addresses. The bank accounts produced as well as the income tax returns also have their addresses. Summons issued were also received by the creditors. Under these circumstances, it cannot be said that the creditors do not exist. Learned A.R. submitted, several creditors could not appear before A.O. at Kolkata on the date fixed may be because they did not receive any notice for appearance or may be because they were out of station on the date fixed but subsequently, once they came to know that they were required to appear, they immediately offered to appear before the A.O. or any income tax authority at any time convenient to the A.O. Learned A.R. submitted, though out of 78 creditors 65 creditors appeared before the A.O. whereas, A.O. in the assessment order has state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presentative. However, learned A.R. has submitted before us that out of 78 creditors, 65 persons appeared before the A.O. and furnished necessary details/evidences with regard to loan transactions. Learned A.R. submitted that 13 creditors who earlier could not appear before the A.O. for various reasons are also now ready to appear. From the facts on record, one more thing is clear that the assessee has furnished the names, addresses, income tax particulars of all the loan creditors and has obtained confirmation letters from the loan creditors which are furnished before the A.O. A majority of the creditors have also appeared either in person or through their Authorised Representatives before the A.O. and have confirmed of having advanced the loan to the assessee. It is also evident that all the loan transactions were through regular banking channel. Many of the creditors are also income tax assessee s and not only their income tax particulars but the income tax returns filed by them along with balance sheets etc., were also submitted before the A.O. either by assessee or directly by those persons. It also appears from the facts on record that in case of many of the creditors, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance sheet/capital account and disclosed to the department. If the loan transaction has been accepted in their hand by the department, then, it cannot be held to be otherwise in case of the assessee. On perusal of the assessment order it is manifest the A.O. has not looked into all these aspects by making a proper enquiry. Only on the basis of presumption and surmises, he has formed an opinion that the creditworthiness of the creditors are not proved or their statements that the loan was advanced out of sale of shares or from taking loan from others is not believable. In our view, the issue could have been thrashed out by the first appellate authority had he made little effort and examined the documentary evidences produced before him. However, it is manifest from the order of the Ld. CIT(A), he has confirmed the view of the A.O. in a mechanical manner without examining the issue properly. Had the Ld. CIT(A) properly applied his mind while deciding the issue then the matter could have been different. For instance, the A.O. while examining one of the creditor namely Mr. Pradeep Nag, who advanced loan of ₹ 3 lakhs, has observed that in course of examination the said credito ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e matter back to the A.O. for deciding afresh. It is open for the A.O. to conduct necessary enquiry as deemed necessary. He may call upon the assessee to furnish further information and if necessary may examine the concerned loan creditors who have not appeared before him, as the assessee has submitted that the creditors are ready to appear before the A.O. The A.O. must make available to the assessee any material which he proposes to use against assessee and allow opportunity to assessee to explain. At this juncture, we want to make it clear that we have not expressed any opinion with regard to the acceptability or otherwise of the loan transactions, which the A.O. has to decide by examining each of the loan transactions on its own merit by considering the explanation of the assessee and the evidences produced. Needless to mention, A.O. must afford reasonable opportunity of being heard to the assessee before taking a decision in the matter. Accordingly, grounds raised by the assessee are allowed for statistical purposes. 10. As assessee s appeal is disposed off, the stay application registered as S.A.No.104/Hyd/2014 has become infructuous, hence, dismissed. 11. In the result, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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