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TMI Blog2021 (12) TMI 811X X X X Extracts X X X X X X X X Extracts X X X X ..... ained credit under section 68 even though all the documentary evidences were submitted before him. Therefore, we are inclined to dismiss the grounds raised by the revenue. - ITA No. 4169/MUM/2019 - - - Dated:- 25-11-2021 - Shri S. Rifaur Rahman (Accountant Member) And Shri Pavan Kumar Gadale (Judicial Member) For the Revenue : Mr. Usha Gaikwad, DR For the Assessee : Ms. Neelkant Khandelwal, AR ORDER PER S. RIFAUR RAHMAN, A.M. The present appeal is filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-21, Mumbai [in short CIT(A) ] for the assessment year 2014-15 dated 28.02.2019 and arises out of assessment completed u/s 143(3) of the Income Tax Act, 1961 (in short the Act). 2. The brief facts of the case are, assessee filed its return of income for assessment year 2014 15 on 30.09.2014 declaring total income at Nil, after carrying forward of current year loss of ₹ 82, 78, 483/ . The case of the assessee was selected for scrutiny and notice under section 143 (2) and 142 (1) of the Income Tax Act 1961 (in short Act) along with questionnaires. In response AR of the assessee attended and filed the relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gangotri Exim Put Ltd and Euro Concept Put Ltd as well as in the assessee's books and books of accounts of all these concerns are audited without any qualification by auditors. 5. The loan taken from above companies was used for the purpose of business only. 6. In the said show cause notice your goodself has stated that the summon w/s 131 of Act were issued to principal officers of M/s. Shree Bharve Exports Put Ltd. Gangotri Exim Pvt Ltd and Euro Concept Pt Ltd. In this connection we say that the assessee has fulfilled its onus by submitting the ITR Acknowledgement, account confirmation and Bank Statement. However, we enclosed herewith the Audited Financial Statement of above concerns The assessee has proved the identity, genuineness and creditworthiness of the above of the above concerns by submitting the document stated above. The assessee requested the principal officers of above concerns to appear before you. However, the assessee cannot compel or force the party to appear before you. 7. The assessee has not paid or receives any cash against the said loan and your goodself have not provided any corroborative evidence to prove that the assessee has paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eof 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-tax as the income of the assessee of that previous year. Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless- (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded. is a venture capital fund or a venture capital company as referred to in clause (23FB)of section 10. 6. On perusal of above section, your honour will find that pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 action unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a particular person, be he is a family member or close relative then the responsibility of the assessee is over. The assessee cannot ask that person, who advanced the loan, whether money advanced is properly taxed or not. 12. At this juncture, we would like to state that, as mentioned by the learned AO vide Page 2 Para 5.3 of the Assessment order, to establish the genuineness of receipt of funds, three basic criteria should be fulfilled. In this case, all the three criteria have been fulfilled as follows Proof of identity of creditor - The unsecured loan parties are holding valid PAN and are filing return of Income. Capacity of creditor to lend money - Financial statement of parties have been submitted by appellant along with bank statement to prove the capacity of the parties. Genuineness of transaction - The transactions are carried through banking channels and duly recorded in the books of accounts of both-appellant and respective parties 13. In view of above, it is evident that, the appellant has satisfactorily proved the genuineness of the transaction. However, the learned AO merely on the basis of suspicion, presumption and conjecture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o is vested under section 131 with certain powers in respect to certain matters. We earnestly request your honour to direct the AO to issue the summons to the lender and enforce its presence before the AO or your honour. 18. In view of above your honour will appreciate the fact that the appellant, as an businessman, has submitted all the details which justifies the genuineness of the unsecured loans received. The appellant had duly discharged its primary onus to justify the genuineness of the said amount received. 19. The learned AO further failed to appreciate the basic fact that mere non production of creditor cannot be taken as a basis to make the addition, where as all the documentary evidences filed by the appellant establish the genuineness of the transaction. 20. Similar view has also been held by Hon. Mumbai ITAT in case of Reliance Corporation v. Income Tax officer [ITA No. 1069 to 1071 of 2017] wherein Hon. Tribunal has made the following observation while deleting the similar addition made by the learned A.O.: g. We have heard the rival contentions perused the material placed before us including the orders of authorities below and orders reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed to the assessee and information was used against the assessee causing violation of natural justice. Copy of above judgment is enclosed vide Page No. 115 to 126 of Paper Book. 21. In support of the above contention, we would like to draw reference to on. Delhi High Court's decision in case of Commissioner of Income Tax v. Dwarkadhish Investment (P.) Ltd [2010] 194 Taxman 43, wherein it was held as under: In any matter, the onus of proof is not a static one. Though in Section 68 proceedings, the initial burden lies on the assessee, yet once he proves the identity of the creditors/share applicants by either furnishing their PAN numbers or income tax assessment numbers and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the revenue. Just because the creditor / share applicants could not be found at the address given, it would not give the revenue the right to invoke section 68. One must not lose sight of the fact that it is the revenue which has all the powers and wherewithal to trace any person. Moreover, it is settled law that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affidavits executed by creditors, and also relied on fact that deposits had been received. by cheques or drafts on banks and repayments of same were also by cheques and drafts Assessee also expressed his inability to produce depositors for cross- examination as those persons resided far away, but offered to examine all depositors on commission - However, no commission was issued by ITO and he held that aforesaid deposits represented profits from undisclosed sources and included same in total income of assessee - Whether depositors could not be compelled by ITO to appear before him in person for giving evidence and ITO could not have refused to issue commission for their examination when assessee applied for it - Held, yes - Whether, material relied upon by department was not sufficient to come to conclusion that said credits represented undisclosed profits of firm - Held, yes Similar view has been held by Hon. Nagpur ITAT (Third Member) in the case of Gopal Bindraban Agarwal v. Assistant Commissioner of Income Tax [1997] 62 ITD 107. 24. Undoubtedly, as noted above the assessee has a legal duty to identify the creditors in addition to his means and genuineness of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shifts on to the Department. (Vide Commissioner of Income Tax v. Baishaab Charan Mohanty 212 IT 199). We most respectfully submit that burden of the assessee to prove genuineness of transaction as well as creditworthiness is confined to the transaction which have taken place between the appellant and creditors, and it is not burden of the assessee to show the source of his creditors or to prove creditworthiness of the sources of such creditors - 264 ITR 254. When appellant had disclosed name, address and Income Tax File number (PAN), it is duty of the A. O. to take steps to examine him and no addition could have been made without taking steps to examine him Pritam Daftary v. Commissioner of Income Tax 195 ITR 304 (Calcutta High Court). In view of leqal and factual submission made hereinabove, we would like to submit that the loan received by the appellant from the said 3 companies are genuine and the same has been duly substantiated by the appellant during the course of assessment proceedings. The addition is made merely on the basis of presumption, surmises and conjecture of the assessing officer without any strong corroborative evidence to substantiate the same and henc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan transaction he also brought on record copy of books of account, bank statement and income-tax return of lender, transaction in question was to be regarded as genuine and, thus, loan amount could not be added to assessee's taxable income under section 68. 6.12 Thus, the decision of the AO treating the unsecured loans as unexplained credits is not justified when all the details are furnished. Therefore, the AO is accordingly directed to delete the addition made u/s 68 of the Income Tax Act. 1961 6. Aggrieved the revenue is in appeal before us by raising the following grounds of appeal: On the facts and circumstances of the case and in law the Ld. CIT(A)₹ 1,11,93,525/- has erred in deleting the cash credit of ₹ 3,45,00,000/ received by the assessee company because as per section 68 of the I.T. Act, the onus is upon the assessee to prove the three ingredients, i.e. identity, creditworthiness of. creditors/lenders and genuineness of the transaction but despite of being given various opportunities by the assessing officer to prove unexplained cash credit, the assessee has failed to do so. 6.1 At the time of hearing Ld. DR brought to our not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the honourable High Court observed that the shares of the private limited companies are sourced through private placement and the assessee should have known or has to prove the identity and genuineness. In that context, hon ble Delhi High Court observed that it is on the part of assessee to prove the identity and genuineness of the issue of share capital. However, we observed that in the given case, assessee has taken unsecured loans and submitted all the relevant information in support of the sum credited in the books for which assessee has offered explanation in respect of the nature and source of the same and in the given case assessing officer is not satisfied due to the fact that none of the principal officers of the lender companies appeared before him. The assessing officer merely issued show cause notice to the lenders and apparently stopped without making any further verification. He cannot merely reject all the detailed submissions and supporting documents which were submitted before him and further he has not pointed out any defect in the documentary evidences submitted by the assessee before him and made addition merely because none appeared before him for explanation. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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