PR. COMMISSIONER OF INCOME TAX vs. MS KUNDLAS LOH UDYOG

Having gone through the decisions aforesaid, we are of the considered view that Hon’ble Supreme Court has not laid down the law so as to read, that unless and until the assessee starts production, rigours of Section 68 of the Income Tax Act, shall not come into force/play. Rather, perusal of the aforesaid reports suggest that burden lies upon the assessee to prove the creditworthiness of the creditors as well as genuineness of the transactions, which fact necessarily has to be adjudicated by the fact finding authorities.

Noticeably, in the instant case, which fact is also not in dispute that out of 64 creditors, notices never came to be issued to 11 creditors. Quite apparently, learned Tribunal without discussing the evidence, if any, placed on record by the assessee with regard to the creditworthiness and genuineness of the transactions, proceeded to hold that no addition on account of unexplained credit could be made against the assessee, since the assessee was in the process of installing the plant and had not commenced any business activities. Apart from above, it also emerges from the impugned order that assessee vide letter dated 24.11.2008 had requested the Assessing Officer to issue summons against the aforesaid 11 creditors to ensure their attendance for their examination on oath under Section 131 of the Income Tax Act, but Assessing Officer instead of issuing notices under Section 131 of the Act proceeded to decide the case on the basis of material on record.

Accordingly, in the given facts and circumstances of the case, we quash the impugned order dated 21.10.2015 (Annexure P-A) passed by the tribunal and remand back the matter to the Assessing Officer, ITA Baddi to examine and decide the matter afresh on the basis of material adduced on record by the respective parties, so they may confirm whether they had advanced loan to the assessee against interest through banking channel or not.