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TMI Blog2015 (1) TMI 1399X X X X Extracts X X X X X X X X Extracts X X X X ..... same to respective AO of said parties, the same was used against appellant as there is no connection whatsoever between us and the dealings of said parties. Once the creditor was established, there was no occasion for the revenue to go further to find out whether creditor of creditor was also genuine and creditworthy. Meaning whereby, as in the appeal before us, the AO of Hightech should have corresponded that the transaction with Hightech and LFPL was not genuine. - Decided in favour of assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... ein assessee will have to submit details for source of funds of the person who has given funds to lender of assessee (Source of source of source). If that was the intention than it is a never ending chain. Kindly also note that even the amended section 68 comes into force from 01-04-2013, that is, from AY 2013-14 onwards, hence for AY 2010-11, we were not even required to explain source of funds in Lorraine Finance P Limited. Still, in a bid to cooperate with department, we have made all efforts to persuade our parties to submit their respective responses and they have all done so. 5. Without prejudice to the above, even for arguments sake, if the source of funds in Lorraine Finance P Limited was to be explained, the same has been adequately done personally by director of Lorraine Finance P Limited and also by M/s Hitech Engineers. 6. Without prejudice, we fail to understand that even assuming some of the transactions of said M/s Hitech Engineers have not been confirmed by one of their party, how can the same make funds given by them to Lorraine Finance P Limited as non-genuine. If the learned AO was in possession of any such information, why instead of supplying the same to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. The assessee is not supposed to know the capacity of the money lender or cash creditor. It is within the exclusive domain of the creditor. Addl. CIT v. Hanuman Agarwal 151 ITR 150 (Patna HC). 12. Hon'ble Supreme Court in CIT v. Lovely Exports (P) Limited 216 CTR 195 held that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law but no addition can be made in the hands of company receiving such sums. 13. Where the assessee had received loans through account payee cheques and the creditors had confirmed the loans by making statement on oath, the high court held that in such situation the assessee is not required to establish the capacity of the lenders to advance the money as that would amount to calling upon the assessee to establish the source of source. Labh Chand Bohra v. ITO [2008] 219 CTR 571. (Rajasthan HC). 14. Where the assessee had provided, to the AO the name, address and details of share applicants, addition u/s 68 cannot be made. CIT v. STL Extrusion P. Limited 333 ITR 269 (MP High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deleted". 5. The CIT(A), after taking into account the submissions of the assessee, held, "I have considered the facts and circumstances of the case together with finding of the Assessing Officer, assessment proceedings and rival submission of the appellant/A.R., carefully. I find that Assessing Officer has rightly reached to the conclusion that unsecured loan of ₹ 1,65,00,000/- shown by the appellant under schedule 'C' of the balance sheet is not from any genuine source. The unsecured loan shown in the name of M/s. Lorraine Finance Pvt. Ltd. is not at all from genuine source of income or fund. It is very obvious that arrangement has been made by the appellant company in connivance with off the record player floating various companies for utilizing unaccounted cash / income through such concerns and ultimately giving while colour of transaction through Bank as if such transaction is genuine one. The fact emerged from the investigation and during the assessment proceedings reveal that appellant has utilized its own unaccounted money for obtaining loan in the name of M/s. Lorraine Finance Pvt. Ltd. The origin point of the fact is that Mr. Abhishek Morarka, Director o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y referring the bank statement or confirmation letter of creditor. Obviously, appellant has failed to establish the creditworthiness of the M/s. Lorraine Finance Pvt. Ltd. and genuineness of transaction. Assessing Officer has very intelligently and effectively made the investigation and has had asked the appellant through proper show cause notice for explanation. Appellant has not been able to establish its case otherwise, hence in the background of facts and circumstances of the case, the finding of the Assessing Officer deserves approval and sustenance. 3.6 It is pertinent to mention that in the background of such facts and circumstances of the case the Hon'ble ITAT Indore Bench in the case of M/s. Agarwal Coal Corporation Pvt. Ltd. vs. Addl.CIT, Range - 5, Indore vide I.T.A. Nos.151/Ind./2009 and 283/Ind/2010, AYrs 2005-06 & 2006-07 dated 31.10.2011 has sustained M/s.Veedhota Tower Pvt. Ltd. A. Y.2010-11 such additions made ujs.68 of the I.T. Act. 3.7 Provisions of law u/s. 68 gives legal authority to the Assessing Officer to deem such income of the appellant vide Shreelekha Bannerji vs. CIT (1963) 49 ITR 112(SC) and Ganpathy Mudaliar (1964) 53 ITR 623 (SC) and CIT vs. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant has failed to establish any contrary facts. As regards, decision of the Hon'ble Supreme Court in the case of CIT vs. Lovely Exports Pvt. Ltd. 216 CTR 195 (SC). It is pertinent to mention that while dealing with such situation the Hon'ble ITAT Indore in the case of M/s. Agarwal Coal Corporation Ltd. vs. Addl.CIT (Supra) has distinguished and has discussed the background of that case. It is yet worthwhile to mention that if unsecured loan is found to be not from any genuine sources, Assessing Officer is well within his jurisdiction to tax it u/s.68 of the I.T. Act. While reviewing the facts and circumstances of the case, I reach to the conclusion that Assessing Officer has been able to establish his finding and contrary facts has not been proved by the appellant either before the Assessing Officer or during the appellate proceedings". 6. The CIT(A), thus sustained the order of the AO. 7. Against the order, the assessee is now before the ITAT. 8. Before us, the AR submitted that the assessee took an unsecured loan from Lorraine Finance Pvt. Ltd. (LFPL), who had submitted complete details and confirmations before the AO in the proceedings going on for the assessee. On this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2013-14 onwards, In that sense, transaction pertaining to assessment year 2010-11 does not fall within the mischief of amended provision. The assessee in good faith cooperated with revenue authorities, and persuaded their party to submit their respective responses and LFPL has done all it could, including the recording of the statement. 14. As we have observed earlier that it is a never ending chain, then if some of the transactions of M/s Hitech Engineers have not been confirmed by their party, how can the blame of farce come onto LFPL, and to be held as non-genuine. If the revenue authorities had any information then, without the knowledge of the assessee, the same was exchanged by the AOs and consequently held against the assessee. In this proceeding, assessee was not even involved. It is a fact that the assessee did not have any dealings with either Hitech or Citibase Multimedia. This fact, even the revenue authorities were not able to controvert. In the statement of Mr. N C Trivedi, proprietor of Hitech, had submitted the sales tax no., its stock accounts and the bank statements and he had stated that Hitech who had a turnover of over 5.60 crores had advanced funds to L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce of income of the creditor. Once he has furnished the true identity, the correct address and correct GIR number of the creditor, he fulfills his obligations under the Act. The assessee is not supposed to know the capacity of the money lender or cash creditor. It is within the exclusive domain of the creditor". 20. Even Hon'ble Supreme Court in the case of CIT vs Lovely Exports (P) Limited, reported in 216 CTR 195 has held, "that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law but no addition can be made in the hands of company receiving such sums". 21. In the case of Labh Chand Bohra vs ITO, reported in 219 CTR 571 (Rajasthan HC), the Hon'ble High Court lays down that where the assessee had received loans through account payee cheques and the creditors had confirmed the loans by making statement on oath, in such a situation, the assessee is not required to establish the capacity of the lenders to advance the money as that would amount to calling upon the assessee to establish the source of so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngh, in 147 Taxman 18 (Allahabad HC). 29. The issue before us was whether the loan taken by the assessee from LFPL was genuine or not. We have seen that the AO went an extra mile, from source to source to source, which as per the various decisions by the various fora has been held to be futile exercise. Calling for creditors details is understandable, but if the revenue authorities go on and on, this effects the reputation of the person taking loan. The fact that the assessee has already returned a part of the loan taken, goes on to prove that neither the loan was bogus, nor the repayment was bogus. 30. On the other hand, the fact that the director of the creditor has accepted the giving of the loan and also submitting its bank statements and other financials, prove that the loan of ₹ 1,65,00,000/- was a genuine transaction. 31. Keeping in view the ratios of the above decision, and the facts, as detailed by the AO in his order, upto the bank account of LFPL, we are of the opinion that the addition has been made by the AO without appreciating the facts and details on records and the same deserve to be deleted". 32. We therefore, set aside the order of the CIT(A) on the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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