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Income Tax Appellate Tribunal, BANGALORE BENCHES “C” BENCH: BANGALORE
Before: SHRI CHANDRA POOJARI & SHRI GEORGE GEORGE K
Assessee by : Shri Ningoji Rao, CA Smt. Priyadarshini Besaganni, Revenue by : JCIT (DR) Date of Hearing : 17.11.2021 Date of Pronouncement : 22.11.2021 ORDER
PER SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER
This appeal by assessee is directed against the order of CIT(A) dated 16.08.2018. The assessee raised grounds as follows. “1. That the impugned order of the First Appellate Authority is liable to set aside in so far as the impugned additions and disallowances made by the Assessing Officer and sustained by the First Appellate Authority are irregular, incorrect, improper, and unlawful and opposed to facts of the case and law.
That the CIT (Appeals) erred in sustaining the impugned addition of Rs.15,00,000/- made as unexplained cash credit u/s 68 of the Income Tax Act, 1961, in respect of the loan lent by Ranglal Agarwal HUF to the Appellant in so far as the same is opposed to the provisions under section 68.
3. That the CIT (Appeals) erred in sustaining the impugned addition of Rs.15,00,000/- made as unexplained cash credit u/s 68 of the Income Tax Act, 1961, in respect of the loan lent by Sonraj Vaidh HUF to the Appellant in so far as the same is opposed to the provisions under section 68.
4. That the CIT (Appeals) erred in sustaining the impugned disallowance of interest of Rs.1,35,000/- made u/s 37 of the Income Tax Act, 1961, being the interest payable to Ranglal Agarwal HUF due on the loan of Rs.15,00,000/- borrowed by the Appellant, in so far as the same is opposed to the provisions under section 36 (1)(iii) of the Act. 5. That the CIT (Appeals) erred in sustaining the impugned disallowance of interest of Rs.1,35,000/- made u/s 37 of the Income Tax Act, 1961, being the interest payable to Sonraj Vaidh HUF due on the loan of Rs.15,00,000/- borrowed by the Appellant, in so far as the same is opposed to the provisions under section 36 (1)(iii) of the Act. 6. That the CIT (Appeals) erred in sustaining the impugned additions of Rs.30,00,000/- made by the AO as unexplained cash credit u/s 68 of the Act is liable to set aside in so far as the same is made out of mere suspicion, surmise and conjecture which is opposed to the provisions of section 68. 7. That the CIT (Appeals) erred in sustaining the impugned disallowances of interest of Rs.2,70,000/- made by the AO u/s 37 of the Act is liable to set aside in so far as the same is made out of mere suspicion, surmise and conjecture which is opposed to the provisions of section 36(1)(iii) of the Act. 8. That the CIT (Appeals) erred in sustaining the levy of interest under section 234B of the Act when in fact the appellant is not liable thereto and as such the impugned order is liable to set aside. 9. That the CIT (Appeals) erred in sustaining the levy of interest under section 234C of the Act when in fact the appellant is not liable thereto and as such the impugned order is liable to set aside.” 2. The facts of the issue are that assessee is in the business of trading in ferrous and non-ferrous metal scraps as proprietor of Radha Lakshmi Metallurgicals. The Assessing Officer framed assessment u/s. 143(3) made interalia the following additions towards unsecured credits. i) Rangalal Agarwal (HUF) - Rs. 16,35,000/- ii) Sonraj Vaidh (HUF) - Rs. 16,35,000/- Page 3 of In these cases, the principal amount was Rs. 15 Lakhs in case of each person and interest on it at Rs. 1.35 Lakhs in case of each person, these together addition made by the AO for Rs. 32.70 Lakhs on this component. The AO sent notices to these lenders as per address provided by the assessee which are returned unserved. On request of the AO, the ITO, Ward-(3)(3), Jodhpur made enquiries as regards these two creditors. However, Shri Rangalal Agarwal and Shri Sonraj Vaidh did not appear before that AO of Jodhpur nor provided their ID proof. They only submitted copy of the Bank Pass Book and copy of ITR-V. It was found by the AO that their income as per the returns as per the last 5 years was below Rs. 2 Lakhs except one year and for AY 2014-15 there was no return filed by both these persons. Complete address details of these two persons are not provided. Further, it was noted by the AO that both the persons have shown income of more than Rs. 2 Lakhs, showing income of Rs.2,47,262/- and Rs. 2,49,155 in the AY 2015-16 only and no return was filed by both of them for AY 2014-15. The AO found from the bank accounts of both the creditors obtained from the bank shows that the balance in the accounts are minimal which puts a question mark on the creditworthiness of these persons. The AO also noted that there were some credit of large amounts which were subsequently transferred out on the same day or within a week. On further verification, the AO found that the sum of Rs. 15 Lakhs each lent by these two persons have actually come through RTGS from one account belonging to one Jor Singh (HUF) which is a non KYC compliance account. It was also found that the money has come to the account of Jor Singh (HUF) from one Arihant Impex which is a company already striked off as per information in the website of Ministry of Corporate Affairs. All these facts point out that the source of the credit is doubtful and dubious and the creditors do not posses credit worthiness. On these reasons the addition was made by the AO. On appeals, CIT(A) confirmed the same observing that assessee has not shown the source of cash deposits and also failed to establish the identity, the capacity of the creditors and Page 4 of the genuineness of the transaction. Against these, the assessee is in appeal before us.
2. The Ld.AR pleaded that addition of Rs. 30 Lakhs made u/s. 68 and an addition of Rs. 2,70,000/- towards interest disallowance u/s. 37 to be deleted as the assessee has proved the source of credit and the assessee is not required to prove the sources of source of credit. Primary burden cast upon the assessee has been discharged. On the other hand, the Ld.DR submitted that assessee failed to prove the identity and credit worthiness of the parties and genuineness of the transaction. She submitted that the addition to be sustained.
We have heard both the parties and perused the record. In this case, the assessee is said to be borrowed money from following two persons. i) Rangalal Agarwal (HUF) - Rs. 15,00,000/- ii) Sonraj Vaidh (HUF) - Rs. 15,00,000/- and the interest claim as expenditure on the above at Rs. 1.35 Lakhs each and claimed expenditure which was disallowed. The credit of Rs. 30 Lakhs has been treated as unexplained credit u/s. 68 and the interest charged on these loans at Rs. 2.70 Lakhs has been disallowed by the AO u/s. 37. Now the contention of the Ld.AR is that assessee provided all details proving the identity and capacity of parties and genuineness of the transaction. The burden cast upon the assessee has been discharged and the department cannot ask the assessee to prove the source of sources of credit. In this case, the details furnished by the assessee does not prove the identity of the parties since there is no complete ID proofs furnished by the assessee. Further, the return of income filed by the assessee in respect of these creditors would not suggest that they have capacity to lend such a huge amount to the present assessee. Since there were no income declaration return of income such a capacity to them to advance that Rs. 15 Lakhs to present assessee is very doubtful. It is also noted by the AO that Rs. 15 Lakhs lent by these two persons Page 5 of RTGS from one account belonging to Jor Singh(HUF) which is a non KYC compliance account. Further, it was also found that the money has come to the account of Jor Singh (HUF) from one Arihant Impex which is a company already striked off as per information in the website of Ministry of Corporate Affairs. In such circumstances, burden cast upon by the assessee to prove the identity and capacity from lendor and genuineness of transaction not fulfilled. The enquiry made by the AO not resulted in any positive evidence in favour of the assessee. In these circumstances, we are of the opinion that it is appropriate to remit the issue to the file of AO to establish the identity, genuineness of transaction and creditworthiness of the persons from whom that assessee has received the said amount as a loan. The Assessing Officer could not examine these facts during the assessment proceedings since the assessee had not provided necessary evidence to establish these ingredients. Therefore, the issue is remitted to the file of AO with the direction to the assessee to co-operate with the Assessing Officer and furnish all necessary evidence in support of his claim so as to prove the identity, creditworthiness and genuineness of transaction who lend money to the assessee. Accordingly, the issue in dispute is remitted to the file of AO for de novo consideration with the direction to assessee to furnish necessary details of her case.
In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on 22nd November, 2021.