HOTEL GOKUL LUNCH HOME,MUMBAI vs. INCOME TAX OFFICER , MUMBAI

Shri Praveen B. Shetty appearing on behalf of the assessee submitted that the assessee is a partnership firm engaged in the business of hotels and restaurants. During the period relevant to the assessment year under appeal the assessee had taken unsecured loan amounting to Rs.46,41,433/- from two parties:

Per contra, Smt. Anne Varghese representing the Department vehemently defended the impugned order. The ld. Departmental Representative submitted that admittedly the assessee had furnished PAN and Address of the lenders however, no Bank Statement of the parties was provided by the assessee to prove creditworthiness of the lenders. The ld. Departmental Representative submits that even confirmations filed by the assessee were not signed by the lenders. The ld. Departmental Representative prayed for upholding the impugned order and dismissing appeal of the assessee.

We have heard the submissions made by rival sides and have examined the orders of authorities below. During Financial Year 2017-18 relevant to the Assessment Year 2018-19, the assessee has taken loans from Harish Poojary and Maheshwari Prabhakar Kunte. The assessee has furnished PAN and Address in respect of both the lenders. In so far as Maheshwari Prabhakar Kunte we find that the assessee had taken loans in the preceding Assessment Year as well. As per confirmation filed by the assessee there was opening balance of Rs.20,00,000/- as on 01/04/2017, out of which the assessee repaid Rs.17,00,000/- during Financial Year 2017-18 and has taken fresh loan of Rs.6,00,000/-. The ld. Authorized Representative for the assessee has drawn our attention to the assessment order for Assessment Year 2017-18, wherein no addition was made by the Assessing Officer in respect of loans from Maheshwari Prabhakar Kunte. In other words the Assessing Officer was satisfied with the creditworthiness of the said party. The assessee has also filed copy of ITR Acknowledgement for Assessment Year 2018-19 in respect of Maheshwari Prabhakar Kunte. Thus, qua Maheshwari Prabhakar Kunte the assessee has discharged its onus in proving identity of the lender, genuineness of the loan transaction and creditworthiness of the party.

As regards Harish Poojary, the assessee has furnished PAN and address, however, no Bank details were furnished by the assessee either before the Assessing Officer /CIT(A) nor any document to prove creditworthiness of Harish Poojary was filed by the assessee before the Tribunal. Thus, the assessee failed to discharge its onus in proving the creditworthiness of Harish Poojary. Under the provisions of section 68 of the Income Tax Act,1961 [in short ‘the Act’] three mandatory conditions that have to be complied with i.e: (i) identification of the lender; (ii) creditworthiness of the lender; and (iii)genuineness of the loan transaction. Even though the assessee was able to prove identity of the lender ( Harish Poojary), the assessee failed to discharge its onus in proving creditworthiness and genuineness of the transaction.

In facts of the case and documents on record,, we direct the Assessing Officer to delete addition of Rs.6,00,000/ i.e. in respect of loan from Maheshwari Prabhakar Kunte . Thus, ground No.1 of appeal is partly allowed.

In ground No.2 of appeal, the assessee has assailed initiation of penalty proceedings u/s. 271AAC(1) of the Act. Challenge to penalty proceedings at this stage is premature, hence, ground No.2 of appeal is dismissed, as such.

In the result, appeal by the assessee is partly allowed.