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Income Tax Appellate Tribunal, DELHI BENCHES: ‘F’, NEW DELHI
Before: SHRI SMT. BEENA A PILLAI & SHRI PRASHANT MAHARISHI
ORDER PER BEENA A PILLAI, JUDICIAL MEMBER Present appeal has been filed by assessee against order dated 24/02/15 passed by Ld. CIT (A), Muzaffarnagar for assessment year 2010-11 on following grounds of appeal: 1. “In law, facts and in the circumstances of the case the Ld. CIT(A) was not justified in maintaining the addition of Rs. 60,00,000/- made by the AO u/s 68 of the Income Tax Act.
2. That the appellant craves leave to alter, amend or add to the forgoing grounds before or at the time of hearing of the appeal.”
Nav Bharat Engineering Works 2. Brief facts of the case are as under: Assessee filed its return of income on 28/09/10 declaring total income of Rs.1,05,63,210/-. The case was selected for scrutiny and subsequently notice under section 143(2) and 142(1) along with questionnaire was issued to assessee. In response to statutory notices, representative of assessee appeared before Ld.AO and filed audited balance sheet and profit and loss account which were test checked.
Ld.AO observed that assessee is a firm carrying on industrial activities. It was observed that it is engaged in manufacturing of all kinds of heavy machineries and rolling mills machinery, in particular their parts. On perusal of accounts, Ld.AO noticed that assessee shown fresh unsecured loans to a tune of Rs.85,05,000/-, out of which Rs.40,00,000/- was received from M/s. Vinay Holdings Pvt. Ltd, Rs.20,00,000/- from M/s. Welquin Suppliers Pvt. Ltd., and Rs.15,00,000/- from Sh. Krishna Traders. Ld.AO, accordingly, called upon assessee to file complete details of unsecured creditors along with company etc. Assessee was thus required to verify identity, capacity creditworthiness of persons and most importantly genuineness of transaction. Ld.AO recorded that assessee in response to notice, filed copy of ITR, bank statement and copy of ledger account and other details.
As regards, money received from Sh. Krishna Traders, Ld.AO was satisfied as proprietor of this concern stated on oath and recorded the confirmation regarding loan given by him to assessee.
Nav Bharat Engineering Works 4.1 In regards, other 2 companies, Ld.AO rejected submissions of assessee and made addition in hands of assessee, under section 68 of the Act.
Aggrieved by order of Ld.AO, assessee preferred appeal before Ld. CIT (A), who dismissed appeal filed by assessee by placing reliance upon decision of Hon’ble Supreme Court in case of CIT vs. Lovely Exports reported in 216 CTR 195 (SC).
Aggrieved by order of Ld. CIT (A) assessee is in appeal before us now.
Ld. Counsel submitted that assessee has discharged its primary onus as per section 68 of the Act, by filing all necessary details regarding two creditors. He submitted that confirmations of creditors verifying truthfulness and genuineness of transaction were also placed on record, and that, there was no material based upon which Ld.AO rejected contentions of assessee. He submitted that merely because creditors had collected monies through RTGS to finance cheques by them to assessee, entire addition was made in hands of assessee. He submitted that this cannot be reason to convert genuine loan transaction into dubious sham transaction.
Ld. Counsel further submitted that two creditors were assessed to Income Tax, and has filed particulars regarding PAN and their jurisdiction, under which, they are assessed to tax. It is also submitted that scrutiny assessment order passed under section 143 (3) for assessment year 2009-10 was also produced before the Ld.AO in respect of the two creditors.
Nav Bharat Engineering Works 7.1 He thus submitted that, under these circumstances detailed analysis made Hon’ble Supreme Court in case of CIT vs. Lovely Exports (supra) comes in rescue to assessee, as assessee has discharged its primary onus of providing details regarding identity, creditworthiness and genuineness of transaction.
As regards decision relied upon by Ld. CIT (A) in his order, Ld. Counsel submitted that these decisions are specifically dealing with issue of share application money, whereas in present case of assessee it is loan transaction, as has been admitted by creditors in their confirmations filed before authorities below.
On the contrary, Ld. Sr. DR submitted that address of both these are same as has been indicated in return of income placed at page 8 and page 41 of paper book. He submitted that assessee has failed to discharge onus cast upon it as regards to creditworthiness, identity of creditors and most importantly genuineness of transaction.
We have perused submissions advanced by both sides in light of records placed before us.
In paper book filed before us, assessee placed documents that have been filed before authorities below. It is observed that assessee filed computation and ITR of the creditor companies, scrutiny assessment order passed under section 143 (3) of the Act for assessment year 2009-10 of creditor company, copy of certificate of registration with Registrar of Companies in respect of both creditors. All these details are filed upon Ld.AO/Ld. CIT (A) (who has coterminous powers as of Ld.AO) to verify veracity of Nav Bharat Engineering Works these documents, it is observed from orders passed by authorities below that further verification on basis of these documents has not been conducted either by Ld. AO or by Ld. CIT(A).
Assessing officer in his order, made addition under section 68 by relying upon decision of Hon’ble Supreme Court in case of Sumathi Dyal vs. CIT reported in (1995) 214 ITR 801. Facts in case of Sumathi Dyal vs. CIT (supra) was that, in that case prima facie burden of discharging genuineness, identity and creditworthiness of creditors, in respect of cash transactions was not discharged by assessee therein. Further in that case explanation tendered by assessee was found not genuine, and under such circumstances Hon’ble Supreme Court laid down consideration of surrounding circumstances, after applying test of human probabilities.
Whereas in facts of present case, assessee filed all necessary details as called for by Ld.AO, thereby discharging initial onus cast upon assessee under section 68 of the Act. Ld. Counsel placed reliance upon the order of Hon’ble Supreme Court in case of CIT vs Orissa Corporation Pvt. Ltd., reported in (1986) 25 Taxmann 80. We have perused the said decision and observed that following observations of Supreme Court are squarely applicable to facts of present case: “13. In this case assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors work income tax assessees. Their index numbers was there in the file of the revenue. The revenue, apart from issuing notice under section 131 at the instance of the cake assessee, did not perceive the matter further. The revenue did not examined the source of income of the said alleged creditors to find out whether they were creditworthy or worth such, who could 5 Nav Bharat Engineering Works advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not to any further. In the premises, if the tribunal came to the conclusion that assessee has discharged the burden that lay on him then it could not be said that the said conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises.”
On perusal of observations by Ld.AO in assessment order, it is observed that Ld.AO has not issued notice under section 131 of the Act, in order to verify veracity of details filed by assessee. There is nothing on record brought out by Ld.AO/Ld. CIT(A) or Ld. CIT (DR) which could lead to conclusion that details filed by assessee were not genuine. Under such circumstances, we find order passed by authorities below cannot be sustained.
Respectfully following observations by Hon’ble Supreme Court in case of CIT vs Orissa Corporation Pvt.Ltd. (supra), and CIT vs. Lovely Exports (supra) reproduced hereinabove, we hold that Ld.AO has not made out ground for sustaining addition under section 68 of the Act and thus deserves to be deleted. Accordingly ground raised by assessee stands allowed. In the result appeal filed by assessee stands allowed. Order pronounced in the open court on 16/11/2018 Sd/- Sd/- (PRASHANT MAHARISHI) (BEENA A PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER Dt. 16th November,2018 *Kavita Arora