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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 ..... en 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 unsecured loan from them. In this case, the assessee has failed to prove the creditworthiness of the five loan creditors and therefore failed to substantiate the receipt of unsecured loan - Decided against assessee. - I.T.A No. 1076/Kol/2012 - - - Dated:- 17-9-2015 - Shri Mahavir Singh, JM And Shri M. Balaganesh, AM For the Appellant : Shri Subhas Agarwal, Advocate For the Respondent : Shri Amitabha Choudhury, Addl. CIT ORDER Per Shri Mahavir Singh, JM This appeal by assessee is arising out of order of CIT(A), Siliguri in appeal No. 79/CIT(A)/Slg/10-11 dated 17.05.2012. Assessment was framed by DCIT, Circle-2, Siliguri u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) for AY 2008-09 vide its order dated 29.12.2010. 2. The only issue in this appeal of assessee is against the order of CIT(A) confirming the addition of ₹ 7,00,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee company. It was also observed that there were no substantial transactions made in their bank account during the year. Hence, the claim of advancing interest free loans by these five loan creditors to the assessee company is not acceptable to the AO in view of the fact that they are not financially well off and their creditworthiness is not proved beyond doubt. He, therefore, added the sum of ₹ 7,00,000/- to the income of the assessee on account of unsecured loans as unexplained cash credit u/s. 68 of the Act. 4. Aggrieved, assessee preferred appeal before CIT(A), who confirmed the action of AO by observing as under: I have carefully examined and considered the submission of the Ld. AR and also perused the assessment order. As mentioned in the assessment order, the assessee company had claimed receipt of unsecured loan to the tune of ₹ 15,80,000/- from eight loan creditors. On perusal of the documentary evidences produced by the assessee, the Assessing Officer found the claim of receipt of unsecured loans from three loan creditors viz. Amar Singh Sharma, Madhulika Sharma and Vandan Sharma out of eight loan creditors as genuine. The Assessing Officer found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts that the assessee must prove identity of credits, capacity of creditor to advance money and genuineness of transaction e.g. as in Shankar Industries Vs. CIT (Cal) 114 ITR 689, Nanak Chandra Laxman Das Vs. CIT (Cal) 140 ITR 151, Hari Chand Virender Paul Vs. CIT (P H) 140 ITR 148, CIT Vs. Biju Patnaik (SC) 160 ITR 674, ITO Vs. Sky jet Aviation (P) Ltd. (ITAT, Ahd- TM) 71 ITD 95, CIT Vs. Precision Finance P. Ltd. (Cal) 208 ITR 465, Oriental Wire Industries (P) Ltd. Vs. CIT (Cal) 131 ITR 688, Malabar Agricultural Co. Ltd. Vs. CIT (Ker) 229 ITR 548, Roshan De Hatti Vs. CIT (SC) 107 ITR 938, C. Kant Co. Vs. CIT (Cal) 126 ITR 63, Bharat P. Ltd. Vs. CIT (Cal) 111 ITR 951, Dhanalakshmi Steel Re-rolling Mills Vs. CIT (AP) 228 ITR 780, Prakash Textile Agency Vs. CIT (Cal) 121 ITR 890, Northern Bengal Jute Trading Co. Ltd. Vs. CIT (Cal) 70 ITR 407, Sanil K.M.P. Vs. CIT (Ker) 177 Taxman 481 etc. It is also a fact that mere filing of Income Tax file number or PAN is not enough to prove genuineness of cash credit as held in CIT Vs. Korlay Trading Co. Ltd. (Cal) 232 ITR 820. Further, cash credit can be assessed even if transaction is through cheques as held in CIT Vs. Precision Finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uine is also devoid of constructive logic. The A.O. has definitely gone through the documents produced before the A.O. 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. The case laws cited by the AR invariably lay emphasis on the fulfillment of three basic criteria by the assessee - identity of the creditor, creditworthiness of the creditor and genuineness of the transactions. 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 I.T. Act, 1961. Some of the case laws are relating to share application money and are not relevant. The AR has not cited any such case law where even without the satisfaction of the Department in respect of the creditworthiness of the loan creditors the addition of unexplained cash credit u/s.68 of the Act has been deleted. To sum up, the creditworthiness of the loan creditors must be proved beyond doubt by the assessee to substantiate the claim of receipt of unsecured loan from them. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Shri Phool Chand Jain and Shri Subhash Jain. The inference drawn by the Assessing Officer of these five loan creditors not being creditworthy on the basis of analysis of the documentary evidences produced before him and the incongruities noticed in the statements recorded u/s.131 of Shri Phool Chand Jain and Shri Subhash Jain is justified. We find that the AO has tabulated the information in relation to bank statements filed by the assessee in respect to cash creditors, which shows that there were nominal deposits and withdrawals all along and all of a sudden at the time of advancement of these loans, required amounts were deposit in lump sum and cheques were issued. The tabulated form as brought out by AO in his assessment order reads as under: Name Bank Account Number Details of deposit in bank account Details of withdrawal from bank Subhash Jain No. 1276355361 of Central Bank of India, Siliguri Branch Cash deposit of ₹ 2,00,000/- on 29.01.2008 Transfer of ₹ 25,000/- and ₹ 1,75,000/- by cheque No. 110024-25 on 29.01.2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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