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TMI Blog2015 (11) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... dit u/s. 68 of the I. T. Act, 1961." 3. Briefly stated facts are that the assessee company is engaged in real estate development and promoter-ship business. During the course of assessment proceedings, on perusal of the Balance Sheet, the AO observed that during the previous year relevant to assessment year under appeal, the assessee company had received the following unsecured loans: i) Amar Singh Sharma Rs. 1,30,000/- ii) Madhulika Sharma Rs. 1,50,000/- iii) Vandana Sharma Rs. 6,00,000/- iv) Subhas Jain Rs. 2,00,000/- v) Phoolchand Jain Rs. 1,00,000/- vi) Phoolchand Sarwogi Rs. 1,00,000/- vii) Softy Jain Rs. 1,00,000/- viii) Pannadevi Jain Rs. 2,00,000/- On verification of income tax returns, balance sheet and bank statement of the loan creditors filed by the assessee, the AO observed that the loan creditors mentioned in Sl. No. (i) to (iii) are the family members of the directors of the assessee company and their creditworthiness is there and transaction of was loan found genuine. However, in respect of remaining five loan creditors i.e. Subhas Jain, Phoolchand Jain, Phoolchand Sarwogi, Softy Jain and Pannadevi Jain, the AO was not satisfied with their creditw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d before the Assessing Officer were submitted along with the written submission dated 15.03.2012. On examination of the Bank Accounts of these loan creditors it is found that in all occasions equivalent amounts of cash were deposited in the Bank Accounts on the same day cheques were issued to the assessee. Due to the deposit of equivalent amounts of cash just on the day of issuance of cheques to the assessee, the genuineness of the transactions comes within the sphere of doubt and is therefore not proved beyond doubt. The sources of income of these loan creditors do not justify their creditworthiness. The income shown in their Returns does not justify and substantiate their claim of advancing interest free loans to the assessee company. Meagre bank balances were found in their Bank Accounts from which loan cheques were issued to the assessee company. There were no substantial transactions made in their Bank Accounts during the whole year. The claim of advancing interest free loans by these five loan creditors to the assessee company is not acceptable in view of the fact that they are not financially well off and their creditworthiness is not proved beyond doubt. The Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly when three conditions are fulfilled by the assessee then the burden shifts to the Department. The assessee has utterly failed to discharge the onus of proving prima-facie the creditworthiness of these five loan creditors and genuineness of the transactions. The contention of the AR that the very fact that statements u/s.131 were not recorded in the case of Smt. Softy Jain, Smt Panna Devi Jain and Phool Chand Saraogi (HUF) implies that the A.O. was satisfied with their creditworthiness and genuineness of the loan transactions is not acceptable. The A.O. was courteous enough not to call the lady members of the family of Shri Phool Chand Jain and Shri Subhash Jain. It may be clarified that Shri Phool Chand Jain is the Karta of Phool Chand Saraogi (HUF) and the statement of Shri Phool Chand Jain under u/s.131 was recorded by the A.O. The contention of the AR that since the loan creditors do not have good bank balance their creditworthiness has been questioned is also not correct. The A.O. had not taken meagre bank balances as the sole criterion for judging creditworthiness of these loan creditors. The A.O. 's decision on creditworthiness of the loan creditors is based on exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prove prima-facie the genuineness of the transactions with identity of the creditor and his capacity. Only after these three things are proved prima facie, then the burden shifts to the Department. We find from the case records that documentary evidences relating to the unsecured loan from five loan creditors Phool Chand Jain, Panna Devi Jain, Subhash Jain, Softy Jain and Phool Chand Saraogi (HUF) produced before the AO as well before CIT(A). By the AO on examination of the Bank Accounts of these loan creditors, it is found that in all occasions equivalent amounts of cash were deposited in the Bank Accounts on the same day cheques were issued to the assessee. Due to the deposit of equivalent amounts of cash just on the day of issuance of cheques to the assessee, the genuineness of the transactions comes within the sphere of doubt and is therefore not proved beyond doubt. The sources of income of these loan creditors do not justify their creditworthiness. The income shown in their Returns does not justify and substantiate their claim of advancing interest free loans to the assessee company. Meagre bank balances were found in their Bank Accounts from which loan cheques were issued t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese loan creditors but creditworthiness of the loan creditors is based on examination of all the relevant facts emanating from their I. T. Returns, Computation of total income, Balance Sheets, Bank Accounts statements recorded u/s.131 etc. The contention of the Ld. Counsel for the assessee that necessary documentary evidences in support of the claim of receipt of unsecured loan from the loan creditors were produced before the A.O. and the assessee has discharged its duty properly and therefore it was for the A.O. to verify the documents before treating the loans as not genuine is without any basis. The AO has definitely gone through the documents produced by assessee and only after thorough examination of the documents and statements recorded u/s.131 came to the conclusion that these five loan creditors are not creditworthy enough to advance the loan amounts. If the assessee has not been able to prove the creditworthiness of the loan creditors, the cash credits are liable to be treated as unexplained and added back under u/s.68 of the Act. To sum up, the creditworthiness of the loan creditors must be proved beyond doubt by the assessee to substantiate the claim of receipt of unsec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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