ITO-19(2)(4), MUMBAI, MUMBAI vs. NARPATCHAND DEVICHANDJI MEHTA HUF, GRANT ROAD

1 The Assessing Officer (AO) observed that during the assessment proceedings, the Assessee had taken various loans from the following parties: -

3 The Ld. AO, therefore, in order to verify the aforesaid unsecured loans, asked the Assessee to furnish confirmations of unsecured loans from the said parties.

4 The Assessee in support of its claim, furnished confirmations of unsecured loans from various parties with supporting documents.

On perusing the details and documents provided by the Assessee, the AO analyzed the same and ultimately, found that Assessee has not proved creditworthiness of the persons, who advanced loans to the Assessee, while in some cases creditworthiness and genuineness of the transactions could not be proved and therefore, he ultimately made the addition of Rs.5,71,82,289/- u/sec. 68 r.w.s. 115BBE of the Act, as 3 unexplained income and added the same to the total income of the Assessee.

The Assessee, being aggrieved, challenged the said addition by filing first appeal before the Ld. Commissioner and in order to prove the genuineness, creditworthiness and identity of the loan creditors, furnished following documents: -

1 The Assessee before the Ld. Commissioner further claimed that from the ITR acknowledgments, the identity of the parties was proved, as they are known to the Income Tax Department. Further, from the bank statement of the parties, who advanced loans, creditworthiness is also proved. Further, as all the amounts were received through banking channels, genuineness of the transactions is also proved.

2 The Assessee before the Ld. Commissioner further claimed that the primary onus casted upon the Assessee, has been discharged and thereafter it was for the AO to examine the evidence and documents and bring material on record to show that the loans were not genuine. The Assessee also claimed that it has already repaid the amount of loans along with interests by deducting the TDS as detailed below: - 4

The Ld. Commissioner by considering the aforesaid facts and circumstances of the case and documents filed by the Assessee in order to discharge its onus casted upon it, and the loan confirmations and bank statements of the creditors, which reflects that loans taken were already repaid in the subsequent years, detailed below: -

5 to 4.13 x x x x x x

14 For the reasons given above, and after due consideration of all the facts and circumstances of the case, I am of the considered view that the assessee has been able to establish the identity, genuineness and creditworthiness of the loan creditors, especially in light of the fact that the AO has not been able to bring contrary facts and evidences on record. Further, as the loans have been repaid subsequently the assessee, it also cannot be said that the assessee is the beneficiary of the loans so received. Furthermore, the loan repayment in itself is a corroborating fact in support of the claim of the assess. In light of these, and respectfully following the decisions of the various higher courts cited supra, I direct the AO to delete the addition of Rs. 5,73,81,289/- made u/s 68 of the Act as unexplained cash credit. Accordingly, the ground of appeal no. 1 taken up by the appellant is allowed.”

The Revenue Department, being aggrieved with the decision of the Ld. Commissioner in deleting the addition under consideration, has preferred the instant appeal. 6 7. The Learned Departmental Representative (DR) has claimed that Ld. Commissioner has erred in deleting the addition without appreciating the fact that the nature of the transactions by accepting the documentations presented by the Assessee at face value, without adequately considering the fact that Assessee has failed to prove the creditworthiness and genuineness of the transactions. Further, Ld. Commissioner failed to apply the test of probabilities, the surrounding circumstances and diligent exercise before deleting the addition under consideration. Further, the onus upon the Assessee to establish the genuineness of the creditors, however, the Assessee has failed to discharge its onus and therefore, the impugned order, is liable to be set aside.

On the contrary, learned counsel for the Assessee has demonstrated the fact that Assessee before the authorities below not only filed the details and documents pertaining to receiving the loans from the aforesaid parties, but infact also, provided the loan confirmations along with relevant documents, such as ITR acknowledgments of the loaners and bank statements and details of repayments of loans along with interest and by deducting the TDS etc. just to prove the genuineness of the loan transactions, identity and creditworthiness of the loaners and, therefore, the Assessee has prima-facie discharged its onus caste u/sec. 68 of the Act and thus, the Ld. Commissioner by considering the peculiar facts and circumstances of the case and documents filed by the Assessee in totality, has correctly deleted the addition. Therefore, in the decision of the Ld. Commissioner, no interference is required.

Heard the parties and perused the material available on record. Admittedly, the Assessee before the Authorities below, in 7 order to establish genuineness of the transactions and identity and creditworthiness of the loaners has submitted following details and documents: -

1 It clearly appears from the orders passed by the authorities below that Assessee in support of its claim qua genuineness of the transactions of loans, has duly filed the PAN cards, ledger 8 confirmations, ITR acknowledgments, bank statements and balance sheets etc. of the loaners. It is also a fact, which has not been disputed by the Department that the Assessee in subsequent years has already repaid the loan amounts, to the respective loaners. It is also a fact that Assessee, except in the case of Deepak Steels India qua loan of Rs. 5,50,000/-, has also paid the interest to other four parties by deducting TDS. It is also not disputed that interest and TDS has also been accepted by the Department, in the relevant assessment years. Therefore, Ld. Commissioner by considering above peculiar facts and circumstances and documents substantiated the genuineness of loans and identity and creditworthiness of the loaners and specific fact that loans have already been repaid with interest thereon by deducting the TDS and respectfully judgements mentioned below deleted the addition under consideration.

2 We further observe that decision of the Ld. commissioner is in consonance with the following judgments of the Hon’ble High Courts and the Tribunal.

3 In the case of PCIT vs. Ambe Tradecorp (P.) Ltd. [2022] 145 taxmann.com 27 (Guj.), the Hon’ble High Court of Gujrat has held that once the identity of the lenders stood proved and loans were also paid subsequently, then no addition is permissible u/sec. 68 of the Act. 9 9.4 Narsangji [2014] 221 Taxman 146 (Guj.) the Hon'ble Gujarat High Court has also considered the identical issue wherein the loan amounts have been repaid by the Assessee in the immediate next financial year and the Department has accepted the repayment of loans, without disputing it and, therefore, the Hon'ble High Court approved the decision of the Tribunal in holding that the matter is not required to be remanded, as no other view would be possible.

5 1080/MUM/2023, decided on 22/01/2024 the Tribunal at Mumbai has also held “where the Assessee had taken loan from the parties and discharged its initial onus by showing identity and creditworthiness of the lenders along with genuineness of transaction by producing confirmation, ledger, bank statement of lender and income tax returns and Assessee had also produced evidence of repayment of loan”, impugned addition u/sec. 68 made on account of loan amount received by the Assessee was not justified.

Thus, on the aforesaid analyzations, we are of the considered view that the Assessee in the instant case, has been able to discharge its prima-facie onus cast u/sec. 68 of the Act and thus, no addition is warranted and, therefore, the Ld. Commissioner has rightly deleted the addition made by the AO by impugned order or illegality and, therefore, the same is sustained, by dismissing the appeal of the Revenue Department. 10 11. In the result, appeal filed by the Revenue Department stands dismissed.