S K GUPTA & CO.,GHAZIABAD vs. ITO, WARD-2(3), GHAZIABAD

This appeal by the assessee is preferred against the order of the CIT(A), Ghaziabad dated 31.01.2018 pertaining to A.Y 2014-15.

The sum and substance of the solitary grievance of the assessee is that the ld. CIT(A) erred in confirming the addition of Rs. 1 crore made u/s 68 of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'].

Representatives of both the sides were heard at length. Case records carefully perused.

Briefly stated, the facts of the case are that during the course of scrutiny assessment proceedings, the Assessing Officer noticed that under the head “Loans and Advances”, the assessee has shown a loan of Rs. 1 crore taken from M/s Arti Securities and Services Ltd. The assessee was asked to explain the transaction in light of provisions of section 68 of the Act.

The assessee furnished detailed reply alongwith documents and bank statements. The assessee also filed copy of ledger account of M/s Arti Securities and Services Ltd and bank statement of lender company alongwith all documents relating to its Income tax status.

In order to verify the genuineness of the loan transaction, the Assessing Officer issued summons u/s 133(6) of the Act at the address given by the assessee. However, the said notice was returned back by the postal authorities. Thereafter, summons u/s 131 were issued at the address given by the assessee and the summons were duly served, but no response was received by the Assessing Officer.

Thereafter, the Assessing Officer deputed an Income Tax Inspector for making field inspection and the Inspector, in his report, submitted that M/s Arti Securities and Services Ltd has left the premises. The Assessing Officer once again issued summons u/s 131 of the Act and in response, Shri Praveen Chauhan, Accountant of the company authorised by the Director of the company, attended the proceedings on behalf of M/s Arti Securities and Services Ltd.

The Assessing Officer recorded the statement of Shri Praveen Chauhan. Shri Praveen Chauhan also furnished letter from the Director Shri Anoop Agarwal who has confirmed the transaction conclusively and showed his inability to attend the proceedings because of his ill health.

The Assessing Officer proceeded by making addition of Rs. 1 crore solely on the ground that the Director did not attend the assessment proceedings, ignoring all the direct evidences furnished by the assessee in support of its claim that the initial burden has been discharged by it.

When the matter was agitated before the ld. CIT(A), the assessee once again furnished all documents in support of its claim but the ld. CIT(A) endorsed the view taken by the Assessing Officer that the Director did not attend the assessment proceedings.

We are of the considered view that merely because the Director of the lender company could not attend the assessment proceedings cannot be the basis for brushing aside the clinching direct evidences brought on record by the assessee. We find that the transactions have been made through banking channel. The entries are duly reflected in the bank accounts of both the parties i.e. the lender and the borrower.

We find that it is not the case of the Assessing Officer that the assessee has purchased cheque by paying cash nor it is the case of any accommodation entry, nor there is any allegation or suspicion on the documentary evidences furnished by the assessee which are part of the record. The only reason we find is the non-appearance of the Director before the Assessing Officer.

We are of the considered view that in a case where a sum is credited in the books of account of the assessee, the assessee could discharge its onus by proving three things, namely,

After going through the direct evidences discussed hereinabove, which are part of the record of the lower authorities, we have no hesitation to say that the assessee has successfully discharged its onus u/s 68 of the Act. Therefore, no addition is called for. The Assessing Officer is directed to delete the addition.

In the result, the appeal of the assessee in is allowed.