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TMI Blog2019 (11) TMI 1141X X X X Extracts X X X X X X X X Extracts X X X X ..... d a mistake in observing above for the reason that if at all he is having any doubt, he should have to issue summons to the parties and examine them, without doing that simply disbelieving the confirmation letters is not correct. On appeal before the ld. CIT(A) the assessee has filed the confirmation letters from all the remaining creditors. CIT(A) called the remand report from the Assessing Officer and in the remand report, the Assessing Officer has observed that most of the creditors are agriculturists, daily labours and persons working in unorganised sectors. He has also observed that payments should have been made through banking channel, but the assessee has borrowed the funds by taking cash and repaid the same in cash. We find there is nothing wrong in borrowing funds from daily labourers, agriculturists and milk vendors, if at all Assessing Officer is having doubt, he should have called them by issuing summons and examine them. Simply on the basis of that they are not filing returns of income, therefore the amounts borrowed by the assessee cannot be considered as not genuine transaction, is not correct. The Assessing Officer himself observed that the assessee has alrea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1357. When the Assessing Officer asked to file the details, the assessee is only able to file details to the extent of ₹ 28,35,000/- pertains to 162 persons and confirmation letters were also filed to that extent. The Assessing Officer has considered the entire case and confirmations filed for 162 persons and came to a conclusion that there is no creditworthiness, the transactions are not genuine as the loans obtained from the farmers, milk suppliers and commission agents and therefore the entire amount borrowed by the assessee is added to the total income of the assessee. 4. On appeal before the ld. CIT(A), the assessee has filed confirmation letters from all other creditors. The ld. CIT(A) by admitting the additional evidence in terms of Rule 46A of the I.T. Rules, 1962 referred the additional evidence to the Assessing Officer for his comments. The Assessing Officer has submitted his remand report which is extracted by the ld. CIT(A) as under:- 4) Out of 1275 loan creditors, 401 creditors amounting to R5.73,91,700 have been examined and sworn statements were recorded from them Out of the 401 creditors, repayment was made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e creditors have given a very clear account of the nature of their source of income, extent of income and the basis of income, the size of their family, the details of family expenses and savings etc. Further, they have submitted their proof of identity. The assessing officer did not point out any specific defect in the confirmation letters rather saying that the persons examined were mainly from rural areas such as K.O.Mallavaram, D. Polavaram and Gunipudi etc. Most of them are agriculturists, daily labours and persons working in unorganised sectors. Preponderance of probability of bank account repayment to said to have made through cheque. It was further stated that when the appellant is having bank account he failed to explain the necessity of taking loan in cash. The Assessing Officer stated that all the deponents are well tutored by the assessee in as much as all of the persons who were examined gave stereo typed replies. When the creditors appeared before the assessing officer, he could have questioned them to elicit the truth in case he considered the facts stated in the letters to be illusory and not genuine. No such efforts were made by the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from all the parties, therefore the assessee has discharged his burden, if at all Assessing Officer has any doubt, he has to issue summons and examine and decide the case on merits and submitted that ld. CIT(A) rightly deleted the addition made by the Assessing Officer. 9. We have heard both the sides, perused the material available on record and orders of the authorities below. 10. The assessee carrying small time cashew processing business. He has borrowed small amounts from local people who are milk vendors, ryotvaari coolies and commission agents to carry his business. In the assessment order, the Assessing Officer has found that assessee has borrowed money from 1357 persons, but he filed confirmation letters in respect of 162 persons. By examining the confirmation letters filed by the assessee, the Assessing Officer came to a conclusion that these people from whom the assessee borrowed funds, have no creditworthiness for the reason that they are small time milk vendors, ryotvaari coolies and commission agents. In our opinion, the Assessing Officer has committed a mistake in observing above for the reason that if at all he is having any doubt, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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