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TMI Blog2023 (11) TMI 494X X X X Extracts X X X X X X X X Extracts X X X X ..... mention that on being asked by the bench the ld. AR could not show us any documentary evidence or prove regarding payment of interest to the creditor and repayment of loan by the assessee to the creditor till date and he fairly accepted that the assessee has neither paid any interest on the unsecured loans nor has repaid the loan till date. Therefore, we hold that the ld. CIT(A) has granted relief to the assessee without controverting and dislodging the basis and allegation of the AO thus, we are not in agreement with the basis and conclusion drawn by the ld. CIT(A) and hence, we reverse the same by restoring the assessment order and addition made therein. Accordingly, grounds of revenue are allowed. - SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER For the Appellant : Shri Satish Kr. Agarwal, CA For the Respondent : Shri Kanav Bali Sr. DR ORDER PER CHANDRA MOHAN GARG, J.M. This appeal has been filed against the order of CIT(A)-34 New Delhi dated 25.10.2019 for AY 2016-17. 2. The grounds of revenue are as follows:- 1. That, in facts and circumstances of the case, Ld. CIT(A) erred in deleting addition of Rs. 4, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... categorically finding by the AO that the assessee could not provide any details of payment of interest or repayment of loan till the date of passing of order i.e. 27.12.2018 despite the fact that the loan was taken during FY 2015-16 i.e. from 01.04.2015 to 31.03.2016 therefore it cannot be presume that the assessee discharge onus lay on his shoulders as per mandate of section 68 of the Act. Therefore, he submitted that the first appellate order may kindly be set aside by restoring that of the Assessing Officer. 5. Replying to the above, the learned authorized representative of the assessee vehemently supporting the first appellate order submitted that the ld. CIT(A), after considering the explanation of the assessee supported by various documentary evidence rightly held that the assessee has discharge onus lay on his shoulders as per requirement of section 68 of the Act. Therefore, the ld. CIT(A) was right in deleting the base less addition therefore, conclusion drawn by the ld. CIT(A) may kindly be upheld by dismissing the grounds of revenue. He took us through the relevant part of the first appellate order and submitted that the ld. CIT(A) was right in relying on the judgments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om M/s Modern Lotus General Trading LLC, 316, Ahmed Al Juma Building, Naif Road, Deira, Dubai. Assessee has shown Loan of Rs 4,50,68,325/- from M/s Modern Lotus General Trading LLC(Dubai) 4.2 Assessee was show-caused vide letter darted 15/12/2018 as follows: In your reply dated 14/12/18 you have submitted that the source of investment in property E-14/21, Vasant Vihar Delhi 110057 consisted among others a loan from the Modem Lotus General Trading LLC.(Dubai) amounting to Rs 4,50,68, 325/- but you have not provided any supporting documents. In this connection you are required to a) Provide the personal statement of affairs as of 31.03.2015 and 31.03.2016, copy of loan agreement and details of Interest paid and principal amount repaid till date along with documentary proof. b) Please provide audited financials of Modern Lotus General Trading LLC. (Dubai) with all the annexures for F.Y 2014-15 and FY 2015-16 c) List of shareholders/beneficial owners Modern Lotus General Trading LLC (Dubai) as on 01.04.2015 and as on 30.03.2016 and if there is any change in shareholding pattern during F.Y. 2015-16 then provide details of the same. d) Please substant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are being reproduced here as below: Cash credits. 68. Where any sum is found credited in the books of an assessee 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 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer of amount to the assessee. The appellant has also not provided details of any interest paid or repayment of loan till date. Therefore A hold that nature and source of Rs. 4,50,68,325/- remains unexplained and added it to the taxable income of the appellant u/s 68. 7.2 During the course of appellate proceedings, appellant has filed written submission which is reproduced as under:- 3. Ground No 3: relates to addition of 4,50,86,325 u/s 68 of the income tax act as stated in the Assessment order that the appellant has squarely failed to discharge the onus to prove the credit worthiness of the person extending loan and genuineness of the transaction. The brief fact of the loan transaction is that the Appellant had received a loan from M/S modern lotus general trading LLC, Dubai amounting to Rs. 4,50,86,325. The Appellant had filed the following documents in support of the loan taken. a) Foreign inward remittance certificate issued by the bank confirming the remittances are attached herewith asAnnexure-5. b) Confirmation of loan issued by modern lotus general trading LLC, Dubai has been attached herewith as Annexure-6. c) Bank statement for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 85 Cr. Hence net cash withdrawal from the bank comes to 77 Cr even if say nothing was received from business transactions and the deposit was made from withdrawals from same bank. Hence, the suspicion of the learned A.O that the cash deposit before transfer of money does not prove the genuineness of the transaction is unfounded and addition made on basis of this suspicion is not justified. From the bank statement and enquiry made from the person giving the loan, we were informed that most of the business was done in Cash and there is no restrictions UNDER THE DUBAI LAW which bars the dealing in CASH. Hence the decision taken by A for correlating to cash deposit and the loan given was not at all justified. g) The learned A.O has not brought any material on record which proves that cash deposit in the bank account of modern lotus general trading LLC, Dubai before the transfer to the appellant actually belong to appellant. h) The learned A. O. has failed to prove that loan received by appellant is in any way linked with any income earned by the appellant. Delhi high court in various cases has held that the case of Divine leasing (SUPRA) and Dwarkadhish (SUPRA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be withdrawn in view of following established facts: 1.The Appellant has proved his onus casted u/s 68 by proving that the money has been received and recorded in the books of account. 2. The Money received is a loan. 3. The appellant has proved the identity of the person, genuineness of the transaction and credit worthiness of the lender. 4. The suspicion raised by the Learned A0 while making decision that the cash deposited in the bank before giving loan proves the loan given is not genuine which has been presumed without establishing Any link with the deposit in the bank with the appellant income. 5. The Learned AO has also doubted the genuineness of the transaction for the reasons that the financials of the lender was not provided and there is no principal repayment or interest payment against which the appellant has filed copy of the air ticket to Dubai for 23/12 due to paucity of the time being time barring case on 31/12 but the appellant got such statements after assessment and can be produced now. But one of the important question arose in the above context is that once it is established that it is a loan, it Is not relevant whether the said lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awal during the year was 9,01,81,300/- AED equivalent to approximately Rs. 162 Crore and cash deposit was only 4,76,87,968 AED equivalent to approximately Rs. 85 Crore. Hence net cash withdrawal from the bank comes to Rs. 77 Crore. It is brought into the notice by the appellant that most of the business was done in cash by Modern General Trading LLC and there is no restriction under the Dubai law which bars the dealing in cash. 7.4 As per the provisions of section 68 if there is any credit in the books of account of the appellant, onus is upon the appellant to establish identity, creditworthiness and genuineness of the transaction. The appellant has proved the identity of the depositor by providing commercial license issued by Dubai Govt. which mention the name of the proprietor and appellant has also filed the passport copy of the proprietor. The genuineness of the transactions was proved as the same was done through banking channel. The money has been transferred from the account of the creditor directly to the account of the appellant and appellant has filed his bank statement along with the bank advises for the remittance and FIRC issued by the bank for the remittances. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of CIT Vs Oasis Hospitalities (P) Ltd [2011] 331 IT 119, ....11. It is clear from the above that the initial burden is upon the assessee to explain the nature and source of the share application money received by the assessee. In order to discharge this burden, the assessee is required to prove: (a) Identity of shareholder; (b) Genuineness of transaction; and (c) Credit worthiness of shareholders. 13. Genuineness of the transaction is to be demonstrated by showing that the assessee had, in fact, received money from the said shareholder and it came from the coffers from that very shareholder. The Division Bench held that when the money is received by cheque and is transmitted through banking or other indisputable channels, genuineness of transaction would be proved. Other documents showing the genuineness of transaction could be the copies of the shareholders register, share application forms, share transfer register, etc. 14. As far as creditworthiness or financial strength of the credit/subscriber is concerned, that can be proved by producing the bank statement of the creditors/subscribers showing that it had sufficient balance in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement for relevant period - Assessee furnished all documents asked for - From bank statement of ACL, Assessing -AD Officer noticed that funds were transferred through internal transfer to ACL and then in same manner in bank account of assessee-company - Assessing Officer, therefore, treated same as unexplained cash credits under section 68 - On appeal, Commissioner (Appeals) held that assessee had discharged its burden of proving identity, capacity and genuineness of transaction and in those circumstances, addition made by Assessing Officer was not justified - An appeal preferred there against by revenue was dismissed by Tribunal - Whether since there was no material with Assessing Officer to come to conclusion regarding any in genuineness or fictitious identity of entries or non-capacity of lender, addition was rightly deleted. 7.11 In the case of the unsecured loan even after the amendment in the Finance Act 2012, the appellant has not to explain the source of source of the credit and act clearly mentions that requirement only for share application money. It is held by Hon'ble Delhi High Court in the case of Shiv Dhooti Pearls and Investment Ltd. (2015) 64 taxman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey of his creditor or of the genuineness of the transactions, which took between the creditor and sub-creditor and/or creditworthiness of the sub-creditors, for, these aspects may not be within the special knowledge of the Assessee. 7.12 Hon'ble ITAT Delhi in the case of Empire Buildtech Private Limited vs Department of Income Tax - ITAT, Delhi, IT No 4656/Del/2009 held that We find that the assessee has furnished the names and complete addresses of the persons from whom share application money was received. The copy of the share application and amount invested and details of number of shares applied were also furnished to the Assessing Officer. The assessee has also given the details of mode of payment and cheque/demand draft numbers and the banks from which the amounts were received. The confirmations from the investors were also filed before the Assessing Officer. The assessee has filed the copy of return of income of these investors. Thus, the assessee has furnished the relevant information during the assessment proceedings itself. In our considered view, assessee had discharged obligation/onus as laid out in section 68 of the Act. The assessee has provided to Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he certificate of confirmation of loan issued by the lender. b. The assessee, despite several opportunities given, has not submitted any financial of the said lender entity to establish its creditworthiness and genuineness of transactions. c. The Assessing Officer on perusal of the bank statement of said lender entity observed that there was various cash deposit made immediately prior to transfer of amount to the assessee which raises strong clouds over the genuineness of the transaction. d. The assessee did not provide details of any interest paid or repayment of loan to the lender entity till date of passing order despite several opportunities given. e. The assessee could not prove the creditworthiness of the lender entity located at Dubai and therefore genuineness of transaction has also not proved as per requirement of section 68 of the Act. 10. At the very outset, from the relevant part of assessment order(supra) we note that the Assessing Officer after taking note of investment by the assessee in the property purchased and situated at E-14/21 Vasant Vihar New Delhi, show cause the assessee and after taking reply of assessee on record the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terated the basis and observation of the Assessing Officer. In para 7.2 he reproduced the written submission of the assessee and para 7.3 and 7.4 recorded his observations on the explanation of document submitted by the assessee. The ld. CIT(A) thereafter in para 7.5 noted her observations regarding onus of proof u/s. 68 of the Act and in subsequent paras 7.6 to 7.12 she mentioned the preposition rendered by coordinate benches of Tribunal and Hon ble High Court of Delhi and deleted the addition by making observations in para 7.13 of the impugned order. 13. Thus, on careful and vigilant reading of first appellate order, we find that the ld. CIT(A) in para 7.1 noted the facts emanated from the assessment order and findings of the Assessing Officer and in para 7.2 reproduced the written submissions of assessee. Thereafter she recorded her observations and findings in broadly in paras 7.3 to 7.5 7.13 only. The ld. CIT(A) has considered the stand of the Assessing Officer as well as explanation of the assessee and granted relief precisely by observing that the cash deposit was made by the creditor from cash withdrawal from the same bank account prior to deposit of cash which cannot ..... 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