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Income Tax Appellate Tribunal, DELHI BENCH ‘C’, NEW DELHI
Before: Sh. N. K. Saini, Hon’ble & Smt. Beena A. Pillai
ORDER
Per N. K. Saini, Vice President:
This is an appeal by the assessee against the order dated 27.04.2015 of ld. CIT(A), Ghaziabad.
The only grievance of the assessee in this appeal relates to the sustenance of the addition of Rs.10,00,000/- made by the AO on account of unsecured loan received from M/s Shashank Financial Services (P) Ltd.
Facts of the case in brief are that the assessee filed its return of income on 26.09.2010 declaring an income of Rs.2,30,05,088/-. Later on, the case was selected for scrutiny. During the course of assessment proceedings, the AO noticed that the assessee had received unsecured loan of Rs.10,00,000/- from M/s Shashank 2 ITA No. 3707/Del./2015 Kisaan Steels (P) Ltd. Financial Services Pvt. Ltd. The AO required the assessee to verify the identity, capacity, creditworthiness of the person and genuineness of the transaction. In response, the assessee filed the copy of ledger account and bank statement of the lender. The AO noticed that there was a deposit entry on the same date just prior to issuance of the cheque. He also observed that the assessee did not produce the lender and explain the deposit entry in the bank account of the lender. The AO, therefore, made the disallowance of Rs.10,00,000/- u/s 68 of the Income Tax Act, 1961 (hereinafter referred to as the Act). A reference was made to the following decisions of the Hon’ble Supreme court: � Sumati Dayal Vs CIT 214 ITR 801 (SC) � McDowell and Co. Vs CIT 154 ITR 148 (SC) � Cochin State Power & Light Corporation Ltd. Vs State of Kerala [AIR 1965 SC 1688, 1691] � Vinod Krishna Kaul Vs Union of India [JT 1995 (9) SC 205, 208] 4. Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted as under:
It is respectfully submitted that the assessee company has opening balance of sum borrowed from M/s. Shashank Financial Services (P) Ltd (hereinafter referred to as ‘SFSPL’) amounting to Rs. 57,85,186/- as on 01.04.2009. During the AY 2010-11, assessee company has repaid sums of Rs. 2,85,186/- and Fs. 5,00,000/- on 23.07.2009 and 08.08.2009 to ‘SFSPL’. During the AY 2010-11, assessee company has paid interest of Rs. 3,10,684/- to ‘SFSPL’ in respect of sum borrowed from ‘SFSPL’. The same facts can be established from the loan account statement duly confirmed by ‘SFSPL’ and also submitted before the Ld. A.O. on 13.12.2012 during the 3 ITA No. 3707/Del./2015 Kisaan Steels (P) Ltd. course of assessment proceedings (copy of the confirmation of account is enclosed vide Annexure-1). Further, during AY 2010-11 i.e. on 30.10.2009, ‘SFSPL’ has, by inadvertence, transferred a sum of Rs. 10,00,000/- to the bank account of the assessee company by way of RTGS. ‘SFSPL’ has informed the assessee company over telephone about such wrong transfer on 03.11.2009 and requested to refund the same immediately. Thereupon, assessee company immediately issued a cheque of Rs. 10,00,000/- in favour of ‘SFSPL’ on 05.11.2009, which has been credited in the bank account of ‘SFSPL’ on 07.11.2009. Same facts can be established from the loan account statement duly confirmed by ‘SFSPL’ along with bank statement of ‘SFSPL’ (copy of bank statement of the assessee company is enclosed vide Annexure-2). During the assessment proceedings, Ld. AO asked to furnish relevant details in respect of this transaction of Rs. 10,00,000/-, which has been wrongly credited in the bank account of the assessee company. In response to the same, we have submitted following details/ documents on various dates: S. No. Date Details/ documents submitted 1. 13/12/2012 Loan account statement duly confirmed by ‘SFSPL’ relating to AY 2010-11. 2. 13/12/2012 Bank statement of ‘SFSPL’ relating to this sum of Rs. 10,00,000/-. 3. 13/12/2012 Copy of Income Tax Return of ‘SFSPL’ for the AY 2010-11. 4. 13/12/2012 PAN of the ‘SFSPL’. 5. 21/03/2013 Copy of Income Tax Returns of ‘SFSPL’ for the AY 2009-10 and 2008-09. 6. 25/03/2013 Balance sheet of' SFSPL as on 31.03.2010. 7. 25/03/2013 Balance sheet of ‘SFSPL’ as on 31.03.2009. 8. 25/03/2013 Bank statement of ‘SFSPL’ for the AY 2010-11. ./2015 Kisaan Steels (P) Ltd. From the above mentioned details duly submitted by us before the Ld. AO, during the assessment proceedings itself, Your Honour would appreciate that we have discharged our onus to prove the nature, source and genuineness of the transaction along with financial capacity of the ‘SFSPL’ (the lender). Copies of our submission dated 13.12.2012, and 25.03.2013 are enclosed vide Annexure-3, and 4 respectively. Despite, submitting the above mentioned details, which clearly proves the genuineness of the transaction, Ld. AO asked us to personally present director of ‘SFSPL’ in his office. Accordingly, we requested Mr. Yogesh Singhal, director of ‘SFSPL’ to appear before the Ld. AO and to explain the said transaction of Rs, 10,00,000/- to the Ld. AO. He agreed for the same, but unfortunately he met with a serious accident on 24.03.2013, in which he suffered serious head injury. The said fact can also be verified from local news paper1 Dainik Jagran’, dated 25.03.20)3, which covered this incidence of accident (copy of ‘Dainik Jagran’ news paper is enclosed vide Annexure -5). Further, copy of report of MMG district hospital, Ghaziabad, in which Mr. Yogesh Singhal was admitted for first aid is also been enclosed vide Anaexure-6. Therefore, despite best efforts, unfortunately Mr. Yogesh Singhal, director of ‘SFSPL’ could not appear before the Ld.AO, these facts were also properly brought to the notice of the Ld. AO (copy of our submission dated 25.03 2013 is enclosed vide Annexure -4). In the assessment order passed u/s 143(3) of the Act, Ld. AO added the said sum of Rs.10,00.000/- to the returned income of the assessee company for the AY 2010-11 u/s 68 of the Act. In this case, we would like to discuss provisions of section 68 of the Act. Following is the reiteration of section 68 of the Act: ./2015 Kisaan Steels (P) Ltd. “Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that, previous year.
From the above it is very much clear that the provision of section 68 can be applied only when assessee offers no explanation about the nature and source of the transaction or explanation offered by the assessee is not satisfactorily in the opinion of the AO. In the captioned case, as already mentioned supra, assessee company has submitted ITR, balance confirmation, Balance sheet and bank statement of ‘SFSPL’. Ld. AO did not doubt about the genuineness of the said transaction of Rs. 10,00,000/-. Assessee company has provided all the details as asked by the Ld. A.O. from time to time, except personal attendance of the director of the ‘SFSPL’, due to his accident. At page no. 3 of the assessment order, Ld. AO has mentioned that: "The assessee has filed copy of ledger ITR a/c and copy of bank statement of the lender. The copy of ITR has not been filed by the assessee,’’ First of all we are unable to understand the term ‘ledger ITR a/c.’ used by the Ld. AO. Secondly, Ld. AO has alleged that the copy of ITR of lender has not been filed by us, which fact is totally incorrect. Copy of ITR of the ‘SFSPL’ has already been filed by us on 13.12.2012, before the Ld. AO. Therefore, this allegation of the Ld. AO is totally false and incorrect. Further, Ld. AO has mentioned that assessee did not produce the lender. In this connection, vide our submission dated 25.03.2013, we have informed to the ./2015 Kisaan Steels (P) Ltd. Ld. AO about the severe accident of the Director of the ’SFSPL’ (the lender). We have also submitted relevant proofs i.e. copy of news paper, Hospital’s report before the Ld.AO on 25.03.2013. Therefore, this allegation of the Ld. AO is also not tenable, it cannot become a base of making addition u/s 68 of the Act. At page no. 3 of the assessment order, Ld. AO has given reference to the judgment of Hon’ble Supreme Court in the case of Sumati Dayal vs CIT (214 ITR 801), wherein it is held that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. In this connection, we humbly submit that, during the assessment proceedings, the assessee company has furnished all the proofs, which it could furnish to prove the genuineness of the said transaction of Rs.10,00,000/- i.e. balance conformation, lender’s bank account, balance sheet of the lender etc. etc., except personal presence of the Director due to his accident. Just due to the fact that the assessee company could not make available to the director of its lender, Ld. AO made an addition of Rs. 10,00,009/- without appreciating the details submitted before him and totally ignoring the fact of the accident of the said director. Therefore, in the captioned case, the Ld, AO totally failed to appreciate the surrounding circumstances to find out the reality and made addition with a predetermined mind.”
It was further stated that the assessee during the assessment proceedings have not only submitted the confirmation letter from the lender but also its ITR, PAN, Balance Sheet etc. and that the decisions relied by the AO were not applicable. It was further submitted that the assessee had produced all the proofs to establish ./2015 Kisaan Steels (P) Ltd. the identity and capacity of the lender, genuineness of the transactions and the AO did not rebut even a single proof submitted by the assessee in its support. Therefore, the addition u/s 68 of the Act could not have been made. The reliance was placed on the following case laws: � CIT Vs Ganeshwari Metal (P) Ltd. 30 taxmann.com 328 (Del.) � CIT-I Vs Hitesh Somani (2014) 41 taxmann.com 152 (Guj.) 6. The ld. CIT(A) after considering the submissions of the assessee confirmed the disallowance by observing in paras 5.1 & 5.2 of the impugned order as under: “5.1 From the facts, I find that despite opportunity by the A.O., the assessee failed to produce the Director for examination. The assessee’s plea is that the Director had met an accident. However, at appellate stage also the appellant expressed his unwillingness to produce the Director. Though the amount has been transferred by way of RTGS and it has been returned back one month later, that does not mean that creditworthiness of creditor is proved. Even if identity is assumed to be proved, creditworthiness still remains to be proved. I find that the bank A/c of creditor shows a negative balance and the income too is merely Rs. 187675/-. The appellant is already a creditor of Rs. 5785186/- on 01.04.09. Despite that the creditor has advanced this amount to the assessee. It defies the business prudence. The claim that transfer of funds was by mistake is not supported by any evidence. Director has not been produced for examination even at appeal stage. Therefore, the case of the assessee fails on the test of creditworthiness of creditor and as per the law all the ingredients of Section 68 viz. identity, creditworthiness and genuineness have to be proved by the assessee. In the given facts, the appellant has failed to prove ./2015 Kisaan Steels (P) Ltd. creditworthiness. The case of Ganeshwari Metals (supra) cited by the appellant is not applicable in present case. In that case, the issue was regarding share capital where identity of shareholder has been proved and as per the Court, the A.O. had not brought on record anything to prove that share applicants were not creditworthy. In the present case, the A.O. has brought on record the bank A/c of creditor and the return of income of creditor (submitted by the assessee) which prove that creditor lacks creditworthiness. Facts of the case of Ranchhod Jivabhai Nakhava (supra) cited by the appellant are distinguishable. In that case the court had observed inconsistencies in statements of creditors whereas in the present case, the assessee does not want to avail of the opportunity of producing the creditor for examination, who allegedly had met an accident during assessment stage. Therefore, this case does not help me case of the appellant. 5.2 In facts and circumstances of the case, I hold that the appellant has failed to discharge the onus cast upon him u/s 68 of proving creditworthiness of the creditor and genuineness of the transaction. Therefore, the addition made by the A.O. u/s 68 is sustained and ground of appeal
is rejected.”
7. Now the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessee furnished all the documents relating to the identity, creditworthiness of the creditors and genuineness of the transaction before the AO as well as the ld. CIT(A). Our attention was drawn towards page nos. 1 to 3 of the assessee’s paper book which are the copies of acknowledgment for filing the Income Tax Return for the assessment years 2008-09 to 2010-11 filed by the creditor M/s Shashank Financial Services Pvt. Ltd. and it was submitted that the identity of the creditor was 9 ITA No. 3707/Del./2015 Kisaan Steels (P) Ltd. proved from the said Income Tax Return. It was further submitted that the assessee filed the confirmation received from the creditor (copy of which is placed at page no. 14 of the assessee’s paper book) and that the assessee furnished copy of balance sheet of the said party. It was pointed out that the amount received as a loan was repaid within 7 days. Therefore, there was no occasion to doubt the creditworthiness of the lender and genuineness of the transaction.
In his rival submissions, the ld. Sr. DR strongly supported the orders of the authorities below and further submitted that the assessee did not produce the creditor and that the deposit of Rs.10,00,000/- was made by the creditor on the same date before giving loan to the assessee. Therefore, the genuineness was in doubt.
We have considered the submissions of both the parties and perused the material available on the record. In the present case, it is not in dispute that the creditor was regularly filing the return of income which is evident from page nos. 1 to 3 of the assessee’s compilation which are the copies of acknowledgment of Income Tax Return filed by the creditor. It is also noticed from the copy of the confirmation of account placed at page no. 4 of the paper book that the creditor was having opening balance of Rs.57,85,186/- in the books of the assessee’s account and an amount of Rs.10,00,000/- was received by the assessee on 03.11.2009 through RTGS. The assessee has also paid interest of Rs.3,10,684/- on the said loan which has been accepted by the department since no disallowance 10 ITA No. 3707/Del./2015 Kisaan Steels (P) Ltd. has been made for the said interest paid to the creditor by the assessee on which TDS of Rs.31,069/- was deducted. From the aforesaid fact, it is clear that the amount of Rs.10,00,000/- was received by the assessee through RTGS and interest paid on the outstanding balance in the name of the creditor was accepted by the department as genuine, so there was no question for doubting the genuineness of the transactions, therefore, the addition of Rs.10,00,000/- made by the AO and sustained by the ld. CIT(A) was not justified. Accordingly, the same is deleted.
In the result, the appeal of the assessee is allowed. (Order Pronounced in the Court on 31/12/2018)