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TMI Blog2024 (10) TMI 651X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be taken in the hands of those sundry creditors and no adverse inference could be drawn on the assessee. The assessee had discharged its primary onus. In any event, as stated supra, the provisions of Section 41(1) cannot be made applicable in the instant case. Case of New World synthetics Ltd. [ 2018 (9) TMI 230 - DELHI HIGH COURT ] is very well founded and directly applicable to the facts of the assessee s case. Hence, Ground Nos. 3 to 5 of the assessee are hereby allowed. Unsecured loan as unexplained cash credit u/s 68 - HELD THAT:- AR submitted that the loan was repaid in subsequent assessment year and reiterated that all the documents were duly placed on record by him to prove the 3 ingredients of Section 68 of the Act. We find that the assessee had furnished the necessary documents to prove 3 ingredients of Section 68 i.e. identity of the creditors, genuineness of the transaction and creditworthiness of the lenders. The lender is duly assessed to tax and had even furnished the confirmation. The loan was received by the assessee on 27.03.2015 in regular banking channels. The summons issued u/s 131 of the Act on the said lender was duly served on the lender, which fact is al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 4 (supra) in detail. No response was received from the parties for notice u/s 133(6) of the Act. Summons u/s 131 of the Act was issued to all the parties and the same was served through the Inspector attached to the Circle. The Inspector submitted his report dated 07.09.2017, in which he reported that none of the parties were found to be existing on the addresses provided by the assessee. These facts were confronted by the ld AO to the assessee and assessee was also directed to furnish the following documents:- 4.1. Copies of balance sheet and PL Account as on 31.03.2014 and 31.03.2015. 4.2. copies of your ledger account appearing in the books of the creditors for the period 01.04.2014 31.03.2016. Alongwith supportive evidence of each transaction appearing in the ledger account in the form of Bills/Invoices raised. 4.3. Mode of receipts of payment in respect of such goods showing relevant entries in the bank account about such receipts. 4.4. Complete details of goods supplied by these parties during the period 01.04.2014 to 31.03.2016 and evidence in support of mode of transport used for transporting the goods with details of location from where goods were picked up and locatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld AO revealed that Shri Sunil Kumar and Vikas Mohan also were employees of M/s. Best Foods Ltd and were in receipt of salary from M/s. Best Foods Ltd. Both these parties had declared their salary income in their returns, showing the employer name as M/s. Best Foods Ltd. Accordingly, the ld AO concluded that these 3 parties produced by the assessee are not genuine as they are not working as accountant with the sundry creditors being examined by the ld AO and instead they were working only with M/s. Best Foods Ltd. Hence, the ld AO observed that it has been established that these persons were planted by the assessee in order to establish the genuineness of liabilities payable to the concerned sundry creditors. The ld AO also observed that the ld counsel for the assessee and counsel for M/s. Best Foods Ltd happened to be the same person. The assessee submitted that Shri Rajan Goyal Brothers is proprietor of m/s. Rajan Goyal and Brothers and assessment for Assessment year 2014-15 was completed u/s 143(3) of the Act and produced the copy of the assessment order. The ld AO sought to make enquiries from the ld AO of Shri Rajan Goyal i.e. ITO, Ward-2, Kaithal, who vide letter dated 11.12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that these sundry creditors have running accounts with the assessee and they are paid in Assessment Year 2016-17. The ld AR also relied on the decision of the Hon ble Jurisdictional High Court in the case of PCIT Vs. New World Synthetics Ltd in ITA No. 806/2018 dated 27.08.2018, wherein it was held that once a liability is shown as outstanding amount payable by the assessee in the balance sheet, the same cannot be treated as remission or cessation of liability u/s 41(1) of the Act. Per contra, the ld DR took us to the various enquiries carried out by the ld AO in the assessment proceedings and heavily relied on the orders of the lower authorities. 9. At the outset, we find that the sundry creditors shown in the balance sheet of the assessee in respect of said 3 disputed parties are trading liabilities. It is not in dispute that purchases made by the assessee from these parties in Assessment years 2013-14 and 2014-15, as the case may be, were accepted as genuine. It is pertinent to note that assessee is having running account and continuous transactions with the aforesaid sundry creditors. On perusal of the ledger account of the assessee as appearing in the books of M/s. Heritage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹5 crores. This aspect itself goes to prove that the said party cannot be ingenuine as it had the benefit of receipt of secured loan from a private bank to the tune of ₹5 crores. In the said revision order, the ld PCIT sought to examine the sundry creditors and sundry debtors shown in the balance sheet of M/s. Rajan Goyal Brothers and ultimately found everything to be perfect, except a small difference of ₹5,914/- in respect of one sundry debtor, directing the ld AO to make addition to that effect. Even in this revision order, no adverse inference was drawn by the ld. PCIT, Karnal with regard to sale transaction made by Rajan Goyal and Brothers to the assessee company. This revision order is enclosed in pages 193 to 196 of the paper book. 10. When all these documents are staring on us, irrespective of alleged manipulative tactics adopted by the assessee with regard to planting of 3 persons who were allegedly found to be accountant employed with M/s. Best Foods Limited and not working as accountants with the disputed three creditors, the parties per se ( i.e. 3 disputed sundry creditors) cannot be considered as ingenuine and the balance shown to their credit in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceeded to treat the loan of ₹15 lakhs as unexplained cash credit u/s 68 of the Act. This action of the ld AO was upheld by the ld CIT(A). The ld AR submitted that the loan was repaid in subsequent assessment year and reiterated that all the documents were duly placed on record by him to prove the 3 ingredients of Section 68 of the Act. We find that the assessee had furnished the necessary documents to prove 3 ingredients of Section 68 of the Act i.e. identity of the creditors, genuineness of the transaction and creditworthiness of the lenders. The lender is duly assessed to tax and had even furnished the confirmation. The loan was received by the assessee on 27.03.2015 in regular banking channels. The summons issued u/s 131 of the Act on the said lender was duly served on the lender, which fact is also acknowledged by the ld AO in his assessment order. Merely because the summons has not been responded by the said lender, no adverse inference could be drawn on the assessee. Reliance in this regard is placed on the decision of the Hon'ble Supreme Court in the case of CIT Vs. Orissa Corporation Limited reported in 159 ITR 78 (SC). 13. In view of the above observations and r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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