SATISH SINGHAL,DELHI vs. ITO, WARD- 11(1), NEW DELHI

Brief facts of the case is that assessee is an individual who is income from business or profession capital gain an income from other sources in the taxable income was declared at Rs. 620320 in return of income filed on 24/9/2013. During the course of assessment, proceedings it was noted by the learned assessing officer that the assessee had taken a loan of ₹ 18 lakhs from M/s Harsh build well private limited and ₹ 10 lakhs from M/s Sid Sai reality private limited. To verify the genuineness of the loan the assessing officer issued letter under section 133 (6) of the act. The replies were filed by the lender companies and wherein the learned AO has noted that there was a cash deposit of ₹ 8 lakhs on 25/6/2012 2012 and ₹ 1,050,000 on 26/2/2012 and in turn an amount of ₹ 16 lakhs was transferred to the assessee’s account by the Harsh build well private rupees limited. Similarly, in case of sid Sai reality private limited cash was deposited of Rs. 9 lakhs on 18/9/2012 and ₹ 1 lakh on 4/10/2012 and in turn the aggregate cash deposit of ₹ 10 lakhs was transferred in the name of the assessee on 4/10/2012. Therefore the learned AO issued summons under section 131 (one) of the act on 18/2/2016 on the directors of the lenders for personal deposition on 24/2/2016 to establish the identity of the person who had given the loan and to prove the genuineness of the transaction and creditworthiness of those parties. None attended. Therefore, the learned assessing officer requested the assessee to produce all those creditors for examination along with the notice dated 8/3/2016. The assessee also did not reply this notice. Therefore the learned assessing officer applying the decision of the honourable Delhi High Court in case of Navodaya Castles private limited 367 ITR 306 made the addition of ₹ 26 lakhs under section 68 of the Page | 2 income tax act and determine the total income of the assessee at ₹ 32 20320/– against the returned income of ₹ 6 20320/–.

Assessee agreed with the order of the learned assessing officer preferred an appeal before the learned commissioner of income tax appeals – 22, New Delhi. The learned CIT appeal dismissed the appeal of the assessee. He held that since the appellant has claimed that the loan was genuine the onus was on the appellant under section 101 of the evidence act, 1972 to produce the directors and principal officers of the lender companies on its own as its own witness for cross-examination by the revenue the appellant should have discharged its duty as a taxpayer by producing the directors of those companies particularly in a scenario in which these companies have made substantial investment in the appellant company. He further held that once the appellant was made aware of the result of investigation, which proved, that the transaction was not genuine the higher burden was on the assessee to prove the creditworthiness of the lenders and the genuineness of the transaction. Thereafter he relying upon several decisions confirmed the addition made by the learned assessing officer.

Assessee agreed with the order of the learned commissioner of income tax appeals preferred an appeal before us. The learned authorised representative submitted that the lenders has submitted the details under section 133 (6) of the income tax act before the learned assessing officer submitting the conformation of the account and furnishing the return of income of those lenders. The bank statement for the relevant period was also filed and therefore the initial onus cast upon the assessee was discharged. He further referred to various documents submitted before the learned assessing officer. He therefore submitted that the addition has wrongly been made by the learned assessing officer and confirmed by the learned commissioner of income tax appeals.

The learned departmental representative vehemently supported the orders of the lower authorities and submitted that the assessee has failed to produce the creditors/lenders before the learned assessing officer. He further stated that merely filing a confirmation by the lender does not Page | 3 prove the creditworthiness of the lenders. He further submitted that the assessee has been given a loan of ₹ 26,00,000 by 2 companies who have deposited cash prior to giving loan to the assessee shows that these loans are not genuine. He further stated that the assessee has miserably failed to produce the directors of those companies to prove the genuineness of the transaction.

We have carefully considered the rival contention and perused the orders of the lower authorities. The brief facts show that the assessee has borrowed a sum of ₹ 26 lakhs from two companies. On examination of the details by the learned assessing officer submitted by the AO and received under section 133 (six) of the income tax act from the lenders it was found that both these companies have deposited cash prior to issue of cheques to the assessee. Further, the assessing officer issued summons to these parties, which were not complied with. Further assessee was also asked to produce them did not produce. In response to the notice by the assessee, the assessee also did not file reply to the assessing officer. Merely submitting the conformation does not discharge the initial onus by the assessee when they learned assessing officer has specifically examine the bank statement of the lenders and found that cash has been deposited by them prior to issuing cheques to the assessee. Further it is also apparent that based on the details furnished by the assessee the harsh build well private limited company which is given 16 lakhs to the assessee has shown the returned income of ₹ 27 lakhs and further the profit as per profit and loss account before tax was ₹ 12 lakhs. Further, in case of the bank statement of the assessee it is apparent that cash was deposited prior to issue of cheque to the assessee. It is also apparent that four years bank statement was not provided by the assessee to the assessing officer. In case of Siddh Sai reality private limited, the lender shown profit of ₹ 12 lakhs for the year but filed a return of income of ₹ 120,000. Further prior to the issue of the cheque of ₹ 10 lakhs on 14 2012 to the assessee there was deposit of ₹ 9 lakhs and ₹ 1 lakhs on two different dates prior to the issue of cheques to the assessee. On these transactions, the learned assessing Page | 4