SHANTADEVI RAMESH JAIN,MUMBAI vs. INCOME TAX OFFICER 19(3)(3), MUMBAI

The brief facts of the case are that assessee is engaged in the business of trading of ferrous and non ferrous metals, filed her return of income for AY 2013-14 on 20-09-2013 declaring income of Rs.8,62,790. The return was selected for scrutiny. During the assessment, the AO, from the balance-sheet of assessee noted that assessee has taken unsecured loan from various persons. The assessee was asked to submit the details of unsecured loans availed during the year along with identity and creditworthy of the persons and to prove the genuineness of transaction. The assessee filed its detailed reply to various queries raised by AO. On perusal of reply and confirmation filed by assessee, the AO noted that there are certain parties and the loans details which require further investigation by AO which was tabulated in the following manner:-

The assessee was asked to furnish income-tax return, bank statement of the above six parties. The AO also issued summons to four parties namely Reena Jain, Nitika Jain, Dimple Jain and D.B. Rathod to attend his office personally. The AO noted that only Nikita Jain and Dimple R Jain attended date and the other two persons did not attend his office. The AO further noted that Nikita Jain and Dimple Jain are the daughters of assessee. The AO recorded their statements. After recording statement of both the persons, he concluded that they had no idea about the cheque issued to the assessee as their bank accounts were handled by their father. The notice issued to DB Rathod was served, but he did not appear for giving his statement. The confirmation was sent by him through post. The AO noted that BP Singh and Raising B Rathod did not have any PAN and they were not filing their income-tax return. On the enquiry conducted by AO, the AO concluded that assessee failed to prove the creditworthiness, identity and genuineness of transaction with BP Singh, RB Rathod, Dimple Jain and Nikita Jain. The AO concluded that they could not explain the source of deposit of cash in their bank account. Therefore, the AO treated the loan amount as unexplained cash credits and made

On appeal before the CIT(A), the action of AO was confirmed. Hence, further aggrieved by the order of CIT(A), the assessee has filed the present appeal before the Tribunal.

None, appeared on behalf of the assessee when matter was taken up for hearing. Perusal of records reveals that assessee was duly served with the notice of hearing of the appeal. Therefore, we are left with no option except to hear the submission of the Ld. departmental representative (DR) for the revenue and to decide the appeal on the basis of material available on record. The Ld. DR for the revenue supported the order of lower authorities. The Ld. DR further submitted that assessee failed to substantiate the creditworthiness of two creditors, viz. Nikita Jain and Dimple Jain. The assessee further failed to prove the identity of remaining two persons, viz. D.B Rathord and Shri Rai Singh Rathod as the assessee failed to prove the creditworthiness of creditors and genuineness of transaction, therefore, the addition was confirmed.

We have considered the submission of ld. DR for the revenue and gone through the order of the lower authorities. During the assessment, the AO identified that the assessee has availed unsecured loan from six parties. The AO asked the assessee to file income-tax return, bank statement of four parties, viz. Reena Jain, Nikita Jain, Dimple Jain and D.B. Rathod. The AO also issued notice to all four parties to attend

Before the ld. Commissioner (Appeals) the assessee explained that Reena Jain not filed return of income for assessment year 2013-14 however, the return for assessment year 14-15 was furnished. Copy of bank statement of Reena Jain was also filed. Similarly, the return of income of DB Rathod for assessment year 2014-15 was also furnished. The statement of bank account of DB Rathod Rathod was also furnished. For BP Singh the assessee stated that he has no taxable income. Similarly for Raibsingh Rathore, the assessee stated that no income tax return was filed as his income was below taxable limit. For Dimple Jain and Nitika Jain the assessee stated that they have discharge their obligation to prove the identity and creditworthiness by furnishing bank statement and Ledger confirmation. The contention of assessee was not accepted by learned Commissioner (Appeals). The learned Commissioner (Appeals) confirmed the action of 6 ITAs 4685 & 4686/Mum/2018 assessing officer in making addition under section 68 of the Act. The ld. Commissioner (Appeals) concluded that creditworthy of the partied are not proved. We have noted that the ld. Commissioner (Appeals) has not disputed the identity of the parties and genuineness of transaction. The ld. Commissioner (Appeals) doubted the creditworthiness of the parties. We have given our thoughtful consideration on the amount of loan availed from all the creditors. All the creditors have given a very small amount. The assessee has paid interest. The payment of interest is not disputed. The interest was disallowed as the loan was treated as unexplained credit. Considering the peculiarity of the fact that out of creditor/lenders, three of them are family member of assessee and remaining three have gave the confirmation of loans. The loan given by three lender are very small amount i.e. Rs. 83,000/- by D.B. Rathod, Rs. 1,28,000/- by B.P. Singh and only Rs. 60,000/- by Raisingh B. Rathod.

Considering the smallness of the amount, for which they are also not required to maintain cash book or audited account. Moreover, confirmations were filed by all remaining three creditors. Further, all the credits were received by assessee through banking channel. The assessee has paid interest during the year. Therefore, genuineness of transactions of loan was proved as the assessee has paid due interest to the creditor. Therefore, in our view, the assessee has proved identity, creditworthiness and genuineness of transaction. Therefore, in such circumstances, the AO was not justified in 7 ITAs 4685 & 4686/Mum/2018 making addition on small unsecured borrowings; hence, the ground of appeal raised by assessee is allowed.

Ground 2 relates to disallowance of interest on unsecured loan. Considering the fact that we have allowed ground 1 pertaining to loan on which interest was paid by the assessee. Therefore, this ground being directly related to ground 1 and relates to consequential interest; hence, this ground is also allowed. ITA 4686/Mum/2018 FOR AY 2014-15 11. The assessee has raised identical ground of appeal