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TMI Blog2019 (11) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) has failed to appreciate the fact that the assessee has failed to prove the genuineness and creditworthiness of the transactions and also to prove the identity of the lender from whom the assessee has taken loans. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate that the assessee has failed to produce the parties before the A.O. when there was a question of proving identity creditworthiness and genuineness of transactions. 5. The appellant prays that the order of the Ld. CIT(A) on the above ground be reversed and that of the Assessing Officer be restored. 3. Briefly stated, the facts of the case are that the assessee filed its return of income for the assessment year (AY) 2013-14 on 28.09.2013 declaring total income of Rs. Nil. During the course of assessment proceedings, the Assessing Officer (AO) observed from the 'Tax Audit Report' that the assessee has borrowed fresh loans from the following lenders : Sr. No. Name of the lender Loan taken (Rs.) 1. Kaushali Impex Pvt. Ltd. 90,00,000 2. Radhekrishna Gems 1,20,00,000 3. Shankeshwar Diamond Pvt. Ltd. 10,00,000 4. Shree Charbuja Diamond Pvt. Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce have been made by all the four lenders by speed post from the new business address. However, the AO observed that all the four lenders were having paid up capital of negligible amount of Rs. 1,00,000/- only as compared to the volume of purchases and sales effected by them ; all the four lenders were having huge amount of trade payables and trade receivables remaining outstanding at the year end ; all the four lenders were operating from Mahidapura, Surat-395003; all the four lenders got their return of income for the AY 2013-14 filed on 13th and 14th October 2013 ; none of the lenders have proved their identity by filing photocopy of PAN card, memorandum & article of association and resolution authorizing change in business address ; none of the lenders have filed photocopy of the documents filed with the Registrar of Companies, amending the business address. With the above observations, the AO came to a finding that all the four lenders have failed in proving their identity and creditworthiness. Therefore, he made an addition of Rs. 3,80,00,000/- as unexplained cash credit u/s 68 of the Act and a disallowance of Rs. 30,04,000/- of interest paid thereon. 4. Aggrieved by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the loans have been subsequently repaid by the appellant through banking channels, the appellant is able to prove that not only did he take genuine loans, but the same has been repaid and if the loans were not genuine, then there would not have been a question of repayment. Thus holding that the weight of evidence is in favour of the appellant as he has been able to satisfy all the ingredients of cash credit i.e. identity, creditworthiness and genuineness of transaction, the Ld. CIT(A) deleted the addition of Rs. 3,80,00,000/- u/s 68 and interest thereon of Rs. 30,04,000/- totalling to Rs. 4,10,04,000/- made by the AO. 5. Before us, the Ld. counsel for the assessee files a Paper Book containing the case laws in support of his contentions that merely because the parties have not been produced before the AO, addition cannot be made u/s 68 of the Act i.e. (i) ITO vs. Shri Dhansukh D. Mehta in ITA No. 1725/Mum/2018 dated 12th July, 2019, (ii) M/s. Jalaram Enterprises Co. Pvt. Ltd. vs. DCIT in ITA No. 4289/Mum/2014 dated 29th April, 2016, (iii) DCIT vs. M/s. Jalaram Enterprises Co. Pvt. Ltd. in ITA No. 671 of 2017 dated 7th June, 2019, (iv) CIT vs. Nikunj Exim Enterprises Pvt. Ltd. (37 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly, the AO issued commission u/s 131(1)(d) dated 28.12.2015 to DDIT (Inv), Surat to verify the identity, capacity and genuineness of the loan creditors. In reply, the DDIT (Inv) vide letter dated 23.02.2016 informed the AO that summons u/s 131 were issued to the said parties but those could not be served as the premises were found closed. Therefore, the summons were served on them by affixture on the said addresses. As informed by the DDIT (Inv), the loan creditors have not responded to the summons issued. Thereafter, the AO informed the assessee the above facts vide letter dated 26.02.2016. In response to it, the assessee filed a reply dated 07.03.2016 before the AO stating that the concerned parties have already sent the details. For more clarification, the AO issued final show cause notice dated 11.03.2016 to the assessee to prove the genuineness and creditworthiness of loan creditors on 22.03.2016. In response to it the assessee filed a reply dated 22.03.2016. The AO has recorded that finally the compliance have been made by all the four lenders by speed post from the new business address. Thus as evident from the above, the new address along with full compliance was made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee maintained for any previous year, and the Assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the Assessee of that previous year' The use of the words "any sum found credited in the books" in Section 68 of the Act indicates that the section is widely worded, and includes investments made by the introduction of share capital or share premium. 8.2. As per settled law, the initial onus is on the Assessee to establish by cogent evidence the genuineness of the transaction, and credit-worthiness of the investors under Section 68 of the Act. The assessee is expected to establish to the satisfaction of the Assessing Officer, CIT v. Precision Finance Pvt. Ltd. (1994) 208 ITR 465 (Cal) 15 : * Proof of Identity of the creditors; * Capacity of creditors to advance money; and * Genuineness of transaction This Court in the land mark case of Kale Khan Mohammad Hanif v. CIT, [1963] 50 ITR 1 (SC), and, Roshan Di Hatti v. CIT, [1977] 107 ITR (SC), laid down that the onus of proving the source of a sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial, in event of Assessing Officer failing to discharge his functions properly, obligation to conduct proper inquiry shifts to the Commissioner (Appeals) and Tribunal and they cannot simply delete addition made by the Assessing Officer on ground of lack of inquiry". 7.3 As mentioned earlier, out of the said four parties, one party namely M/s Radhey Krishna Gems Pvt. Ltd. filed copy of confirmation along with copy of ITR and relevant pages of the bank statement, in response to the notice u/s 133(6) issued by the AO. The onus shifted to the AO. The AO failed to conduct any enquiry to verify the genuineness of the transactions with the above party. The addition made by the AO in respect of M/s Radhey Krishna Gems Pvt. Ltd is hereby deleted. 7.4 However, following the ratio laid down in NRA Iron & Steel (P.) Ltd. (supra) &Jansampark Advertising & Marketing (P.) Ltd. (supra), we set aside the order of the Ld. CIT(A) in part and restore the matter to the file of the AO to make an order afresh in respect of the remaining three parties, after allowing reasonable opportunity of being heard to the assesse. We direct the assessee to file the relevant documents/evidence before the AO. As th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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