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TMI Blog2022 (9) TMI 1436X X X X Extracts X X X X X X X X Extracts X X X X ..... year the appellant had introduced unsecured loans of Rs 12,10,00,000/- from Aum Impex (Rs 5.00 Crores) and Pioneer Exim (Rs 7.10 Crores). The perusal of ledger accounts of these creditors reveals that the appellant had not paid any interest on these loans. In order to ascertain the genuineness of lhe.se loans, the appellant was required to establish three essential ingredients of provisions of Sec 68 of the I T Act, i.e. identity of creditors, creditworthiness of creditors and genuineness/nature of transactions, by furnishing credible documentary evidences. In compliance the appellant merely filed confirmation from these creditors and subsequently filed copies of Income Tax Returns and other details. On perusal of the Income Tax Returns the AO noticed that the incomes of these creditors were not commensurate to the amount of loans advanced. M/s Aum Impex and M/s Pioneer Exim had declared meager income of Rs.1,78,770/- and Rs. 8,56,790/-, against which they had advanced interest free loans of Rs 5 Crores and Rs 7.10 Crores, respectively. The AO further observed that there were huge credit entries through RTGS, etc., in the bank accounts of these loan creditors, immediately before i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulging in the business of providing entries) and genuineness / nature of transactions (as the appellant had failed to establish the source of credits in the bank accounts, just before issue of cheques in favour of the appellant). The AO, therefore, inferred that the appellant has squarely failed to establish the genuineness of these loans. 6.3 On receipt of the remand report from the AO, a copy thereof was handed over to the appellants for comments. In the rejoinder the Ld. AR merely contended that the above loans have been routed through the banking channels and the documents such as ITRs, PAN, etc., have been filed before the AO and the AO should have enforced their attendance, for establishing the genuineness of transactions, if not satisfied. 6.4 After considering the above facts and to ascertain the genuineness of these unsecured loans, during appellate proceedings, the Ld. AR was required to furnish credible documents such as current confirmed copies of ledger accounts, for the relevant years i.e. year in which loans were borrowed and till the years in which the same were repaid, highlighting the details of loans received, interest allowed, tax deducted, tax deposited i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es that where any sum is found to be credited in the books of accounts maintained for any previous year and the appellant offer no explanation about nature and source thereof or the explanation offered by appellant is not, in the opinion of the AO, satisfactory, the sum so credited may be charged to income tax as income of that previous year. It is also settled legal position that the onus of the appellant, of explaining nature and source of credit, does not get discharged merely by filing confirmatory letters or demonstrating that the transactions are done through banking channels or even by filing the copies of Income Tax returns. It is pertinent mention to here that what is genuine and what is not genuine, is a matter of perception, based on facts of each case vis-a-vis ground realities of the facts under consideration. The facts of the case cannot be considered in isolation, with the ground realities, to understand as to how the shell entities which are loan creditors, typically functions vis-a-vis genuine loan creditors. The shell entities are generally those entities which are indulging in providing various types of accommodation entries, without any significant/ actual tradi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... generally masked to pump in black money into banking channels and such practices continue to plague Indian economy. 3. Toby Consultants (P.) Ltd. Vs CIT (2010) 324 ITR 338 (Delhi) -where Hon'ble Delhi High Court held that where assessee-company had shown in books unsecured loans of Rs. 2.58 crores and Rs. 2.45 crores from its two directors and it was explained that money belonged to its own entity and was routed through directors and Tribunal found that directors who advanced loan were admittedly not at all men of means for advancing such huge amount of loan amounting to about Rs. 5 crores and secondly that assessee even for taking such huge amount of loan did not want to pay any interest for which creditors also agreed, Tribunal had rightly, arrived at a finding of fact, on analysis of all relevant material on record, that genuineness of transaction had not been established and assessee had failed to independently prove same application money, amount so received was liable to be taxed under section 68. 4. Sanraj Engineering Pvt. Ltd. Vs CIT (ITA 79/2016) (Delhi) - where Hon'ble Delhi High Court held that addition made u/s 68 on account of unsecured loans was justifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uineness of transaction not established, addition u/s 68 justified 13. Prakashchandra Singhvi (HUF) Vs ITO (ITAT, Ahd) 134 ITD 283 - Mere filing of PAN cards, I. T. returns etc. did not by itself discharge assessee from preliminary burden to establish genuineness of gifts where donors were not found at the address given in the returns or PAN card - In such circumstances, it is the duty of the assessee to produce donors /creditors before the Assessing Officer as otherwise addition u/s 68 has to be made. 14. V.I.S.P (P) Ltd. V/s CIT (MP) 265 ITR 202 - Sec 68 does not confine to cash entries in books - If the liability shown in the account is found to be bogus and there is no plausible and reasonable explanation of the assessee, the amount can certainly be added towards the income of the assessee 6.7 Considering the facts as discussed above, in my considered opinion, the appellant has squarely failed to establish the three essential ingredients, provided in Sec 68 of the Act, to establish the genuineness of loans, during assessment as well as remand and appellate proceedings, therefore, the addition of unexplained unsecured loans of Rs 12,10,00,000/-, made by the AO, is quite ..... X X X X Extracts X X X X X X X X Extracts X X X X
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