GREENSPACE INFRATECH PVT. LTD.,VADODARA vs. THE INCOME TAX OFFICER,WARD-1(1)(3) NOW WARD-1(1)(1), VADODARA

The grounds of appeal raised by the assessee are as under:

In Ground No.1, the assessee has challenged the order of the Ld.CIT(A) confirming the addition made by the AO of unsecured loans amounting to Rs.6,56,66,047/- on account of failure of the assessee to prove the genuineness of the same in terms of provisions of Section 68 of the Act.

A perusal of the assessment order reveals the issue to have been dealt with by the AO at page nos. 6 & 7 of the order wherein he has noted the assessee to have furnished the copy of ledger account from the books of Kemrock Industries and Exports Ltd. (‘KIEL’), to which the loan pertained, showing transactions from the bank accounts of the said company. However, neither any confirmation was filed by the assessee from the said company nor bank statement or return of income was furnished by the assessee. Therefore, in the absence of proper documentary evidence furnished by the assessee, the AO treated the loan of Rs.6.56

The Ld. CIT(A) has dealt with the issue at para nos. 6.3 to 6.6 of his order, a perusal of which reveals that the Ld.CIT(A) found that on comparing the ledger account of KIEL submitted by the assessee with the bank account of the assessee with ICICI Bank and Axis Bank, the transactions were found to tally and demonstrate amounts to have been received from KIEL. However, the Ld.CIT(A) held that merely because the transaction was done through cheques it would not suffice to prove its genuineness since the assessee had not submitted the confirmation and other records to substantiate the genuineness and creditworthiness of the creditor. The Ld. CIT(A) noted the contention of the assessee that the confirmation and other records of KIEL could not be submitted since KIEL was under liquidation, but, he found the said explanation not acceptable noting that the Directors of the Company, Shri Rajendra Patel and Shri Biren Shah were employed with KIEL and, therefore, KIEL was not an unknown party, but, the assessee was intrinsically connected with KIEL. Even on merits Ld.CIT(A) noted that KIEL was in liquidation facing financial losses and was unable to repay its debts due to banks, leading to ultimately winding up by the Hon’ble High court. The Ld.CIT(A) held that no prudent person in such circumstances would have advanced such huge loan of Rs.6.56 Crores to the

The fact as noted by the authorities below, therefore, with respect to the loan advanced by KIEL to the assessee amounting to Rs.6.56Crores is that in discharge of its onus to prove the genuineness of the same, the assessee had filed only a copy of the ledger account of the assessee in the books of KIEL and the bank transaction recorded therein tallied with the transactions noted in the bank account of the assessee. Further, it is undisputed that no confirmation or any other document was filed by the assessee from KIEL also. It is an admitted fact that KIEL was in liquidation. During the course of hearing before us, the Ld. Counsel for the assessee stated that since KIEL was in the process of liquidation, the Liquidator must have audited its books of accounts. That therefore there was a possibility of confirming the impugned transactions from the audited results of KIEL and if given an opportunity the assessee would do the needful in this regard. His contention was that since KIEL was in liquidation at that time they were unable to obtain the confirmation from KIEL, however the documents submitted by the assessee, being the copy of ledger account of the assessee in the books of KIEL and the bank statements of the asessee clearly revealed that the amounts came from KIEL itself. That therefore if given an opportunity the assessee would be able to submit confirmation of the transaction.

Having heard the rival contentions, we are of the view that the assessee should be given one more opportunity to discharge its onus of proving the genuineness of loan received, which we agree the assessee was unable to do so considering the prevailing facts and circumstances of the case at that time when the loan creditor itself was in liquidation and, therefore, necessary documents confirming the loan transaction could not be obtained from it. Considering the submission of the Ld. Counsel for the assessee that accounts of KIEL must have been audited by the liquidator and the audited accounts would confirm the transaction of unsecured loans conducted with the assessee, we consider it fit to restore the issue back to the file of the AO to give further opportunity to the assessee to discharge its onus of proving the genuineness of the impugned unsecured loan. Ground of appeal No.1 is, accordingly, allowed for statistical purposes.

Ground No.2 relates to addition of Rs.77,02,144/- being outstanding sundry creditors. During assessment proceedings, the AO found from the summary of creditors that the total of creditors at the end of the year was Rs.28.33 Crores including an amount of Rs.27.55 Crores received from Diamond Power Infra Structure

Before the Ld. CIT(A), the assessee submitted that in the absence of access to the books of accounts, it was unable to offer any explanation. Therefore, the Ld. CIT(A) confirmed the addition.

Before us, Ld. Counsel for the assessee was unable to offer any explanation regarding the unsecured creditors. We, therefore, see no reason to interfere in the order of the Ld. CIT(A). The addition made of Rs.77,02,144/- is, therefore, confirmed. Ground of appeal no.2 is dismissed.

In the result, appeal filed by the assessee is partly allowed for statistical purposes.

संबंिधत आयकर आयु� / Concerned CIT आयकर आयु�(अपील) / The CIT(A)- 4. �वभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. गाड� फाईल / Guard file. 6. आदेशानुसार/ BY ORDER,