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Facts
The assessee, a private limited company, received a notice under Section 148 for assessment year 2011-12 due to large credit entries in its bank account, despite not conducting business. The additions were made for alleged unproven creditworthiness of the lender, Mrs. Charu Ben K Mehta, for a sum of Rs. 25,33,700/-.
Held
The Tribunal held that the Assessing Officer erred in disallowing the creditworthiness without proper verification and also noted that the additions were made arbitrarily. The Tribunal decided to remit the issue back to the Assessing Officer for necessary verification of the financial statements of the unsecured creditors.
Key Issues
Whether the AO correctly established lack of creditworthiness of the lender and genuineness of transactions, and if additional evidence should have been considered.
Sections Cited
148, 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “J(SMC
Before: SMT. BEENA PILLAI & SHRI OMKARESHWAR CHIDARA
Per: Smt. Beena Pillai, J.M.: The present appeal filed by the assessee arises out of order dated 24/05/2024 for assessment year 2011-12 for following grounds of appeal :
“1. The Order passed by, A.O, Ward-3(1)((4), Mumbai is bad in law, unjust and unfair.
2. Additions u/s 68 of Rs. 25.33,700 i) AO erred in making additions of Rs. 25,33,700/- holding that the credit worthiness of the lender has not been proved. ii) AO erred in concluding that lender did not have creditworthiness overlooking the factual position that the amounts had been paid from other group entities where the lender and her family were directors/shareholders and loan confirmation had also been submitted. Now, (1) Copy of Voter id of Charu Ben K Mehta, (2) Copy of Ledgers A/c.s of Charu Ben K Mehta and Beautiful Electronics & Computer System P. Ltd. in the Books of Darshita Trading P. Ltd. for the F.Y. 2009- 10 and (3) Copy of Pan alongwith Annual Accounts, ITR Acknowledgement and challan of ROC filling of M/s. Darshita Trading P. Ltd. for the F.Y. 2010-11 is enclosed herewith. Further to add that the Ld. AO has completely ignored the fact that "The capacity to advance loan can be established by showing sufficient income, capital and reserve or other fund in the hands of creditors i.e. loan can be given out of Capital, reserves and other fund also as held by Hon'ble ITAT Ahmedabad in the case of Nitesh Kumar Maganbhai Patel vs. DCIT Circle -1(1), Vadodra. (Copy of Decision enclosed). iii) AO, erred in selecting only few transaction from Mrs. Charu Mehta's loan account while arriving at the additions, and at the same time allowing other transactions in the same loan account, thereby contradicting his own conclusion about the credit worthiness of the lender. iv) AO erred in holding that the bank statements were not submitted whereas the fact was that Ao had never called for such statements. v) Without prejudice to above, AO erred in holding that documents/bank statements were not submitted and ought to have held that the issue being raised late, and it would have been difficult to provide such papers for period almost 7-8 years old, in a short span of time.
3. The disallowance of expenses of Rs. 33,678/- which was incurred certainly and necessarily which the company was required to expand for meeting out its statutory and legal obligations is also arbitrary and unlawful.
The National Faceless Appeal Centre has confirmed the additions made by Assessing Officer and dismissed the Appeal without admitted the additional evidences produced which could not produced during the Assessment proceedings. Thus, we can say that the Ld. A.O. Ward 3(1)(4), Mumbai assessed the case arbitrarily. illegally, beyond the ambit of Law and against the Law of Natural Justice wherein his goodness even didn't try to ascertain whether the Assessee Company is an active company or Just defunct company. Relief Claimed: The order passed by the Ld. A.O. Ward 3(1)(4), Mumbai needs be disowned and be set aside und Assessee Company's Return as submitted be accepted in the Interest of justice. The Assessee Company reserves its right to provide some other information Relevant and Pertinent for the case at the time of hearing as per law” Brief facts of the case are as under:
The assessee is a private limited company and filed its return of income perusing to notice issued under section 148 of the Act on 10/12/2018. The selection for reassessment was based on the information the assessee has not conducted any business during the year under consideration, however, these were huge credit entries in the bank account.
2.1 During the assessment proceedings, the assessee was called upon to establish the credit worthiness of the lender and genuiness of the transaction totalling to Rs. 25,23,33,700/-. The assessee during the assessment proceedings filed various details of the payment received from one Mrs. Charu Bel K Mehata; It was submitted that the assessee took borrowed assistance for making payment towards acquisition of an immovable property from Charu Mehta as the assessee furnished ledger account and bank statement.
2.2 The Ld.AO however, made addition in the hands of the assessee u/s. 68 of the Act amounting to Rs. 25,33,700/-.
Aggrieved by the order of the Ld.AO assessee preferred appeal before the Ld.CIT(A).
The Ld.CIT(A) upheld the addition of the Ld.AO by observing that assessee failed to satisfy the compliance before the assessing officer and was unable to establish the source and genuiness unsecured loan.
Aggrieved by the order of the Ld.CIT(A), assessee is in appeal before this Tribunal.
4. The Ld. AR submitted that, all relevant ledger accounts and bank statement of assessee as well as of Mrs. Charu were filled before the authorities below which was not been verified properly. He thus prayed for the issue to be remanded in order to verify the financial statement of Mrs. Charu.
4.1 The Ld. DR did not object for the issue to be remanded for necessary verification considering the submissions by both sides.
We have perused the submissions advanced by both sides in light of records placed before us.
It is noted that Mrs. Charu obtained the funds from M/s. Darshita, which was forwarded to the assesse.
In the interest of justice we deem it appropriate to remit the issue back to the Ld.AO for necessary verification in accordance with law. The Ld. AO is directed to verify the financial statement of all the unsecured creditors and to pass detailed order on merits by granting proper opportunity of the being hered to the assessee. Accordingly the grounds raised by the assessee stands allowed for statistical purposes.
In the result appeal filed by the assessee stands allowed for statistical purpose.
Order pronounced in the open court on 31/01/2025