ERODE ANNAI SPINNING MILLS LIMITED,ERODE vs. DCIT, COIMBATORE

Per G.MANJUNATHA, AM: This appeal filed by the assessee is directed against the

order of learned Commissioner of Income Tax (Appeals),

Coimbatore-3, dated 16.01.2020 and pertains to assessment

year 2008-09.

“1. The order of the Commissioner of Income Tax (Appeals) - 3, Coimbatore dated 16.01.2020 in ITBA/APL/S/250/2019- 20/1023925956(1), for the above mentioned Assessment Year is contrary to law, facts, and in the circumstances of the case.

ITA No.489/Chny/2020

3 ITA No.489/Chny/2020 8. The ITO failed to appreciate that there was no proper opportunity given before passing of the impugned order and any order passed in violation of the principles natural justice would be nullity in law.”

action u/s.132 of the Act was carried out in the case of Mr.

P.K.Duraisamy on 13.03.2008. Consequent to search,

assessment has been completed u/s. 143(3) of the Act on

31.12.2009 and determined total income of Rs.20,00,000/- by

inter-alia, making additions towards unsecured loan of Rs.20

lakhs received from Mr. M. Raju and Mr. Umamaheswaran

u/s.68 of the Income Tax Act, 1961. The assessee carried

matter in appeal before first appellate authority, but could not

succeed. The learned CIT(A) for reasons stated in his appellate

order, sustained additions made by the Assessing Officer. The

assessee carried the matter in further appeal before the

Tribunal. The Tribunal vide its order dated 18.12.2015 remitted

the matter back to file of the learned CIT(A) to give one more

opportunity of hearing to the assessee to file necessary

evidences and to explain unsecured loans. During appellate

proceedings, the learned CIT(A) called upon the assessee to

file necessary evidences to prove identity of person,

genuineness of transaction and creditworthiness of person. In

4 ITA No.489/Chny/2020 response, the assessee has filed necessary details including

bank statements to explain unsecured loan taken from Mr. M.

Raju and Mr. Umamaheswaran and argued that parties have

directly deposited amount into bank account of the assessee

maintained at Axis bank. The assessee had also filed

confirmation letters from parties to prove identity and

genuineness of transaction and also filed their income tax

returns to prove creditworthiness of the parties. The learned

CIT(A) has accepted identity and creditworthiness of the

parties, however disputed genuineness of transaction by

holding that the bank has credited two different cheques with

two different addresses, two different PANs, two different

account numbers and two different names together. Further,

narration given in the bank account statement is not self-

explanatory. Therefore, he opined that the assessee has failed

to prove genuineness of transaction and hence, sustained

additions made by the Assessing Officer towards unsecured

loan u/s.68 of the Income Tax Act, 1961. Aggrieved by the

order passed by learned CIT(A), the assessee is in appeal

before us.

5 ITA No.489/Chny/2020 4. The learned A.R for the assessee submitted that the

assessee has proved identity and creditworthiness of the

parties. Further, the assessee has also proved genuineness of

transaction by filing bank statements to prove that unsecured

loans have been taken through cheque, however, the learned

CIT(A) has doubted genuineness of transaction only for reason

that bank statement filed by the assessee does not give clear

details from whom loans have been taken, ignoring fact that

narrations recorded by bank in their books of account is not in

the hands of the assessee. What is required to be seen is

whether the assessee has discharged its onus by filing

necessary evidences and such evidences demonstrate that

loan is genuine or not. In this case, except doubting narration

recorded by bank, the learned CIT(A) has not given any valid

reason to doubt genuineness of transaction. Therefore, he

submitted that additions made towards unsecured loans taken

from two parties is not in accordance with law.

the learned CIT(A) submitted that the assessee has not filed

necessary evidences to prove genuineness of transaction which

6 ITA No.489/Chny/2020 is evident from facts recorded by the learned CIT(A), as per

which bank has not given any reasons to show credits in the

name of parties without mentioning cheque number and

account number. Therefore, the learned CIT(A) has rightly held

that although the assessee has proved identity and

creditworthiness of the loan creditors, but genuineness of

transaction is doubtful and thus, sustained additions.

available on record and gone through orders of the authorities

below. There is no dispute with regard to fact that the assessee

has proved identity and creditworthiness of loan creditors,

which is evident from fact that the learned CIT(A) has accepted

fact of identity and creditworthiness of parties. The only dispute

is with regard to genuineness of transactions. According to the

learned CIT(A), although unsecured loans claimed to have

been received by cheques, but on perusal of Axis bank

statement, there is no clarity from whom said credit was received including cheque numbers, address and PAN. We

have gone through reasons given by the learned CIT(A) to

doubt genuineness of transaction and we ourselves do not

7 ITA No.489/Chny/2020 subscribe to reasons given by the learned CIT(A) for simple

reason that as per bank statement filed by the assessee, a sum

of Rs.20 lakhs (Rs.10 lakhs each) has been received from Mr.

M.Raju and Mr.Umamaheswaran on 28.02.2008 and same

has been credited to Axis bank account. The assessee had also

filed Axis bank statement of Mr. Umamaheswaran, as per which

there is withdrawal of Rs.10 lakhs vide cheque No.471041 on

28.02.2008. The assessee had also furnished Axis bank

statement of Mr.M. Raju, as per which there was withdrawal of

Rs.10 lakhs vide cheque No.4711012 on 28.02.2008. From the

above, it is very clear that Mr. M.Raju and Mr. Umamaheswaran

had withdrawn amount from their respective bank accounts on

28.02.2008 and deposited a sum of Rs.20 lakhs on 28.02.2008

in the bank account of the assessee maintained at Axis bank.

From the above, it is very clear that there is no doubt of

whatsoever with regard to genuineness of transactions. No

doubt, bank might not have given narration with regard to

cheque no., address and PAN while giving credit to the bank

account of the assessee. But, fact remains that the assessee

has filed all those details, including confirmation letter from loan

creditors which matches with credit in the bank account of the

8 ITA No.489/Chny/2020 assessee on 28.02.2008. Therefore, we are of the considered

view that the assessee has filed necessary evidences to prove

genuineness of transactions. Since, there is no dispute with

regard to identity and creditworthiness of the loan creditors and

further the assessee has filed necessary evidence to prove

genuineness of transactions, we are of the considered view

that the learned CIT(A) has erred in sustaining additions made

by the Assessing Officer towards unsecured loans u/s.68 of the

Income Tax Act, 1961. Hence, we set aside order of the learned

CIT(A) and direct the Assessing Officer to delete addition of

Rs.20 lakhs made towards unsecured loans u/s.68 of the Act.

Order pronounced in the open court on 30th November, 2021 Sd/- Sd/- (महावीर �संह) ( जी. मंजुनाथ ) (Mahavir Singh) (G. Manjunatha ) उपा�य�/ Vice-President लेखा सद%य / Accountant Member चे'नई/Chennai, (दनांक/Dated 30th November, 2021 DS

आदेश क� ��त*ल+प अ,े+षत/Copy to: 1. Appellant 2. Respondent 3. आयकर आयु-त (अपील)/CIT(A) 4. आयकर आयु-त/CIT 5. +वभागीय ��त�न1ध/DR 6. गाड� फाईल/GF.