SHAILESH JAIN,MUMBAI vs. DCIT CC 2 (3), MUMBAI

This appeal in A.Y.2012-13 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-48, Mumbai in appeal No.CIT(A)-8/IT-682/DCCC-2(3)/2018-19 dated 20/09/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.153C r.w.s. 143(3)of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 29/12/2018 by the ld. Dy. Commissioner of Income Tax, Central Circle-2(3), Mumbai (hereinafter referred to as ld. AO).

The only ground raised by the assessee is as under:-

The facts in brief are that a search and seizure action u/s.132 of the Act was conducted on Emco Group on 09/02/2017 by the DDIT (Investigation), Unit No.7(4), Mumbai. Thereafter after recording necessary satisfaction, a notice u/s.153C of the Act dated 30/11/2017 was issued to the assessee which was duly served. The assessee complied with the notice by filing the return of income on 16/12/2017 declaring an income of Rs.23,26,140/-. During the course of assessment proceedings, the ld. AO called upon the assessee to prove the identity, genuineness and creditworthiness of the person from whom he has taken loan of Rs.30,00,000/- which was replied by the assessee vide written submission dated 27/12/2018 furnishing all the necessary evidences in relation to the lender. The assessee borrowed Rs.30,00,000/- from Farzana Esmail Mandsaurwala. The assessee submitted copy of ITR, balance sheet and bank statement of lender as well as self bank statement. The ld. AO however, was not convinced with the reply of the assessee and concluded that assessee had failed to prove the creditworthiness of the loan on two points namely (i) the assessee is filing a meager income in ITR and is showing source of that income only from interest received from the assessee and thus, assessee is not having any substantive source of income (ii) the balance sheet of lender is not audited and assessee has not proved the source of money from which lender has borrowed the money. Finally the AO added the same to the income of the assessee in the assessment framed u/s.153C r.w.s. 143(3) of the Act dated 29/12/2018.

In the appellate proceedings, the order of the ld. AO was affirmed on the ground that assessee has failed to prove the creditworthiness of the lender and thus, the appeal of the assessee was dismissed.

After hearing the ld. Counsels of rival parties and perusing the material on record, and after referring to various evidences filed in the paper book, we observe that it is only the creditworthiness which is in doubt and not the identity of the lender and genuineness of the transaction. We note that on page 1 of the paper book assessee has filed the ITR acknowledgement for A.Y.2012-13. On Page 2, the assessee has filed the statement of affairs as on 31/03/2013 which showed that lender has assets worth Rs.2,24,65,288/-. On page No.3 the bank statement of the lender is filed showing credit balance of Rs. 1,65,16,317.23 as on 28/03/2012. The lender issued cheque on 29/03/2012 of Rs.30,00,000/- to the assessee and thereafter, the balance left in the bank account was Rs.1,35,16,317.23 and on 30/03/2012 the lender issued cheque to Orbit Corporation Ltd., of Rs.1,34,22,375/-. On page 4, we note that in the bank statement of the assessee, the loan taken is duly reflected. After examining the facts and documents , we are of the considered opinion that the creditworthiness of the lender is sufficiently proved and therefore we are not in agreement with the conclusion drawn by the by the ld. AO as well as ld. CIT(A) on the issue of lack of creditworthiness of the lender. It is pertinent to state that the genuineness of the transaction is not at all doubted. So far as creditworthiness is concerned , the assessee has proved the source of funds as well as source of source. In view of these facts and circumstances, we set aside the order of the ld. CIT(A) and direct the ld. AO to delete the addition of Rs.30,00,000/- by holding that the lender has creditworthiness to lend this amount to the assessee.

In the result, appeal of the assessee is allowed.