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Income Tax Appellate Tribunal, Hyderabad ‘ B ‘ Bench, Hyderabad
Before: Smt. P. Madhavi Devi & Shri B. RamakotaiahShri Bogdad Ali
Per Smt. P. Madhavi Devi, J.M.
This is Revenue’s appeal for the A.Y 2008-09. This appeal is filed by the Revenue against the order of the learned CIT (A)-2, Hyderabad, dated 31.01.2017. The Revenue has raised the following grounds of appeal: “ 1. The order of the learned CIT (A)’s is contrary to law and facts of the case. 2. The learned CIT (A) ought to have upheld the order of the AO as the assessee has completely failed to prove the credit worthiness of the creditors to the satisfaction of the AO. 3. The learned CIT (A) ought to have relied on the decision of the Hon'ble Supreme Court in the case of CIT vs. P. Mohanakala wherein the Apex Court has held that it is not only identity, genuineness and creditworthiness of the person that needs to be established but also equally important that the explanation offered by the assessee should in opinion of the AO be satisfactory”.
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Brief facts of the case are that the assessee, an individual, deriving income from trading in textiles, filed his return of income for the A.Y 2008-09 returning an income of Rs.6,12,253. During the assessment proceedings for the A.Y 2009-10, the AO observed that the assessee had invested an amount of Rs.1,28,00,000 in the firm M/s. New Vista Constructions, during the financial year relevant to the A.Y 2009- 10 and since the assessee has not furnished the source for such investment, he added the same to the income returned. The AO also observed that for the A.Y 2008-09 also, the assessee had made similar investment of Rs.1,10,00,000 in the firm M/s. New Vista Constructions and therefore, opined that the income declared by the assessee at Rs.6,12,253 for the A.Y 2008-09 is not commensurate with the huge investment of Rs.1,10,00,000.
Therefore, observing that there is a reason to believe that the income chargeable to tax has escaped the assessment, a notice u/s 148 was issued to the assessee on 26.03.2014 and the same was served on the assessee on 30.03.2014. There was no response from the assessee to the notice issued and therefore, a notice u/s 142(1) along with a letter dated 13.06.2014 requiring the assessee to furnish the required information was issued. There was no response to the said notice also. Thereafter, a series of notices were issued to the assessee in response to which, the Authorised Representative of the assessee appeared and furnished the details with regard to the investment made in M/s. New Vista Constructions. During the assessment proceedings u/s 147, the AO also considered that the assessee has shown credits
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in the balance sheet under the head “unsecured loan of Rs.63,50,000 on the liability side. The assessee was directed to furnish the necessary evidence like names, addresses, assessment particulars, details of PAN and confirmation letters of the parties, breakup like opening balance, amounts received during the year, and balances outstanding etc., The assessee filed the copies of the conformations stated to have been obtained from the loan creditors but further details called for were not furnished. Observing that the assessee has got his books of account audited as per section 44AB of the Act and that the assessee has mentioned that the loans/deposits were accepted during the previous year and also that the same was reflected in the balance sheet drawn up based on his books of account, the AO observed that the assessee was required to prove the identity and creditworthiness of the parties and genuineness of the transaction. Observing that the assessee has failed to furnish the basic details to satisfy the above condition, he made an addition of Rs.63,50,000 as unexplained credits u/s 68 of the Act and brought it to tax. Aggrieved, the assessee preferred an appeal before the CIT (A), who allowed the same and the Revenue is in appeal before us by raising the grounds of appeal reproduced above in Para 1 of this order.
The learned DR submitted that the onus is on the person who makes a claim to prove the identity and the creditworthiness of the parties and also genuineness of the transactions. She submitted that the assessee has failed to furnish the required information before the AO and has only furnished the confirmation letters without giving the details of the
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PAN Nos, etc., of the respective parties. Therefore, according to her, the assessee has failed to prove the transaction and also the creditworthiness of the parties. She submitted that the CIT (A), without proper evidence before him, has accepted the assessee’s contentions and has granted relief to the assessee. She submitted that the CIT (A) has observed that all the amounts borrowed by the assessee are received by cheques and are reflected in the assessee’s bank a/c and hence the genuineness of the transaction is proved. According to her, this finding is without any basis.
The learned Counsel for the assessee, on the other hand, supported the orders of the CIT (A) and submitted that the loans are given to the assessee through banking channels which proved the identity and also the creditworthiness of the creditors and the confirmation letters issued by the creditors prove the genuineness of the transactions. Therefore, according to him, the order of the CIT (A) is to be upheld.
Having regard to the rival contentions and the material on record, we find that though the assessee has claimed that these loans are from close friends and relatives who are Non-Residents, and that the amounts have been received by cheques from their NRI accounts, the assessee has not filed any of these details before the AO or before the CIT (A). The copies of the bank statement and the confirmation letters are filed before us. From the perusal of the Bank statements, we find that the deposits are by way of cheques and the balances are in a round figure. It is also not clear as to the Accounts from which the amounts are received by the assessee. The CIT (A) has accepted the contentions of the assessee, on the basis of the confirmation letters
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filed by the assessee, without even calling for a remand report from the AO. In a case where an assessee makes a claim about the loans received, the burden is on the assessee to prove the identity and creditworthiness of the parties and also the genuineness of the transaction as held by the Hon'ble Supreme Court in the case of CIT vs. Mohanakala dated 15.05.2017 in Civil Appeal No.2540 of 2007. Therefore, in the interest of justice, we deem it fit and proper to remand the issue to the file of the AO with a direction to reconsider the issue in accordance with law in the light of the evidences filed by the assessee.
In the result, Revenue’s appeal is treated as allowed for statistical purposes. Order pronounced in the Open Court on 4th April, 2018.
Sd/- Sd/- (B. Ramakotaiah) (P. Madhavi Devi) Accountant Member Judicial Member
Hyderabad, dated 4th April 2018. Vinodan/sps Copy to: 1 ITO Ward 8(2), 6th Floor, Signature Towers, Kothaguda, Kondapur, Opp: Botanical Gardens, Serilingampalli (M) Hyderabad 500084 2 Shri Bogdad Ali, D.No.21-1-112, Dewan Devdi, Madina Circle, Hyderabad 3 CIT (A)-2, Hyderabad 4 Pr. CIT – 2 Hyderabad 5 The DR, ITAT Hyderabad 6 Guard File
By Order
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