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TMI Blog2020 (3) TMI 714X X X X Extracts X X X X X X X X Extracts X X X X ..... course of the business. Thus in the absence of sufficient documentary evidence about the interest expenses on the borrowed fund whether the same was utilized for the purpose of business, we do not find any reason to interfere in the order of the authorities below. Hence the ground of Appeal of the assessee is dismissed. Unexplained cash credit under section 68 - liability on the assessee to provide the identity of the lenders, establish the genuineness of the transactions and creditworthiness of the lenders - HELD THAT:- The provision of section 68 of the Act fastens the liability on the assessee to provide the identity of the lenders, establish the genuineness of the transactions and creditworthiness of the lenders. These liabilities on the assessee were imposed to justify the cash credit entries under section 68 in the case of CIT Vs. Precision finance (p) Ltd [ 1993 (6) TMI 17 - CALCUTTA HIGH COURT] Admittedly the assessee has discharged its onus by furnishing the necessary details such as a copy of ledgers, confirmation, bank details, etc. in support of identity of the parties. There is also no doubt that the transaction for the loan received from M/s Master Develo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MD such as, confirmation, bank statement, source of money received by MD i.e. Rajni bhai Desai but the AO has not made any verification from such parties. As such, the case of the entire group was centralized and all the relevant documents of MD and Rajni bhai Desai were available befor the AO. But the AO has not made any reference to such documents and arrived at the conclusion that the impugned amount represents unexplained cash credit under section 68 of the Act. Assessee before the learned CIT (A) has furnished the copies of the income tax return filed by MD but the learned CIT (A) without considering the same insisted for financial statements of MD. If the assessee has not furnished the details of MD, then the CIT (A) could have easily collected the same from the office of the income tax Department. But he has not done so. Once the assessee has discharged primary onus by proving the identity of lender, genuineness of transaction and capacity to advance the loan then it is the burden of the revenue to prove it otherwise. Creditworthiness of MD cannot be doubted merely on the ground that the assessee failed to furnish the financial statement. As such, MD has declared th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.1 The Ld.CIT(A) has grievously erred in law and on facts in confirming the addition of ₹ 7.45 cr. towards unsecured loans from Master Developers. The Ld. CIT(A) has confirmed the addition by a non-speaking order and flimsy ground (even without giving opportunity for the same). 4.2 That in the facts and circumstances of the case as well as in law, the) Ld.CIT(A) ought not to have upheld the addition of ₹ 7.45 cr. towards unsecured loans from Master Developers. It is, therefore, prayed that the disallowance of ₹ 24,30,617/- and validity u/s.153A(1) upheld by the CIT(A) may kindly be deleted. 2. The 1st issue raised by the assessee in ground No. 1 is general in nature and no separate adjudication is required for the same. Therefore we dismiss the same as infructuous. 3. The 2nd issue raised by the assessee in ground number 2 was not pressed by the learned Counsel for the assessee. Therefore, we dismiss the same as not pressed. 4. The 3rd issue raised by the assessee in ground No. 3 is that the learned CIT (A) erred in confirming the disallowance of ₹ 24,30,617/- on account of interest expenses. 5. The facts in brief are that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment order and submissions made by the appellant that has not corroborated with documentary evidences his claim that interest bearing funds were not used to pay his income tax dues, and that the same were paid out of his interest free funds. The total income .tax dues paid by the appellant amounted to ₹ 5.06,83,141/-, of which ₹ 24,30,617/- was disallowed @ 12% interest. Looking to the facts of the case, I am in agreement with the decision of the A.O. The addition of ₹ 24,30,617/- on account of being used for non-business purposes is confirmed. Ground of appeal No.3 is dismissed. 12. Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us. 13. The learned AR before us submitted that the amount of tax was paid out of the interest-free fund available with the assessee. Accordingly, there was no diversion of interest-bearing fund for non-commercial activity. 14. On the contrary, the learned DR before us vehemently supported the order of the authorities below. 15. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, the onus lies on the assessee to just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the amount of loan received from it. Therefore, the copy of such ledger account cannot be trusted without the authenticated documentary evidence i.e. balance sheet, profit and loss account of M/s Master Developers. iii. The assessee was diverting its taxable income by paying the amount of interest on such loan taken from M/s MD. 21. In view of the above, the AO observed that the assessee failed to discharge his onus by proving the capacity of the party who advanced loan and genuineness of the transaction as required under section 68 of the Act. Accordingly the AO treated the impugned amount of loan as unexplained cash credit and added to the total income of the assessee. 22. Aggrieved assessee preferred an appeal to the learned CIT (A). 23. The assessee before the learned CIT (A) submitted that M/s MD was engaged in the development of real estate projects for residential and commercial purposes. M/s MD has received amount from various parties against the project launched by it. However, such projects could not take place due to some technical hitch. Accordingly, M/s MD advanced loan to the related parties on interest basis. As such the amount of interest was utilized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by any documentary evidences. In view of these facts and the fact that no balance sheet or P L A/c or bank statements of Master Developers, Rajnibhai Desai or the appellant have been produced to corroborate and explain the transactions between the* three parties have been produced, the addition of ₹ 7,45,00,000/- made by the A.O is confirmed. Ground of appeal No 2 is dismissed. 28. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. 29. The learned AR before us submitted that the amount of loan was taken from the partnership firm namely MD and the assessee has furnished necessary documentary evidence before the learners CIT (A). 30. On the contrary, the learned DR before us vehemently supported the order of the authorities below. The learned DR without prejudice to the above also submitted that the conditions specified under section 68 of the Act i.e. identity, creditworthiness and genuineness of the transactions was not established by the assessee. Therefore, at the most the matter can be referred back to the file of the AO for fresh adjudication as per the provisions of law. 31. We have heard the rival contentions of bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: Where as in present case the appellant produces bank statement as well as confirmation of firm hence facts of the case relied upon is not identical hence not applicable. The observation/conclusion of the Learned AO is not correct. 35. This fact was also admitted by the learned CIT (A) in his order as evident here in below: 6.2. I have carefully considered the assessment order and the submissions made by the appellant. It is seen from a perusal of the same that while a copy of bank statement of Master Developers has been submitted, the copies of ledger accounts and accounts of the appellant from the books of Master Developers and Rajnibhai Desai, are simple printouts without any signature. These cannot be accepted as having any evidentiary value. It is also seen that the appellant has given a very convoluted explanation for the-said unsecured loan (reproduced in Para 4.2 above), which is not backed by any documentary evidences. In view of these facts and the fact that no balance sheet or P L A/c or bank statements of Master Developers, Rajnibhai Desai or the appellant have been produced to corroborate and explain the transactions between the* three partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laring the income which has been elaborated in the preceding paragraph. As such the income declared by the M/s Master Developers in its income tax returns were duly accepted by the Revenue. Though, these returns were filed by MD subsequent to the assessment in the hands of the assessee, but these returns in our considered view are crucial for determining the net worth of MD. These returns were filed before the learned CIT (A) and no doubt was raised on these returns. 38. Similarly, we also note that the assessee in respect of source of fund in the hands of the lender i.e. MD has furnished the sufficient documentary pieces of evidence such as bank statement, ledger copy of MD and Shri Rajnibhai Desai in the books of each other including the details of the income of MD which has been elaborated in the preceding paragraph. Therefore in our considered view, the assessee has discharged its onus imposed under section 68 of the Act. 39. The assessee in the present case has duly explained the source of money received in its hands. The assessee is not answerable to justify the source of the source of the money received by it. In this connection, we place our reliance on the judgment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been invested by a particular person, be he a partner or an individual, then the responsibility of the assessee-firm is over. The assessee-firm cannot ask that person who makes investment, whether the money invested is properly taxed or not. The assessee is only to explain that the investment has been made by the particular individual and it is the responsibility of that individual to account for the investment made by him. If that person owns that entry, then the burden of the assessee-firm is discharged. It is open for the Assessing Officer to undertake further investigation with regard to that individual who has deposited this amount. So far as the responsibility of the assessee is concerned, it is satisfactorily discharged. Whether that person is an income-tax payer or not or from where he had brought this money, is not the responsibility of the firm. The moment the firm has given a satisfactory explanation and produced the person who has deposited the amount, then the burden of the firm is discharged and in that case that credit entry cannot be treated to be the income of the firm for the purposes of income-tax. It is open for the Assessing Officer to take appropriate acti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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