DHIREN SHIVJI GOSAR (PROP JAY ENTERPRISE),MUMBAI vs. INCOME TAX OFFICER 17(2)(4), MUMBAI

The dispute in the present appeal is confined to the addition of ` 15 lakh as unexplained cash credit under section 68 of the Income–tax Act, 1961 (for short "the Act").

Brief facts are, the assessee is an individual and engaged in the business of dealing in iron and steel goods. For the assessment year under dispute, the assessee filed his return of income on 29th September 2012, declaring total income of ` 57,250. During the assessment proceedings, the Assessing Officer on examining the Balance Sheet of the assessee found that the assessee has shown unsecured loan of ` 49,42,700. He, therefore, called upon the assessee to submit the details of the unsecured loan. After verifying the details of unsecured loan and interest paid thereon, as furnished by the assessee, the Assessing Officer issued notices under section 133(6) of the Act to the concerned parties to cross verify the genuineness of the unsecured loans. As observed by the Assessing Officer, notices issued under section 133(6) of the Act in respect of three parties representing aggregate loan amount of ` 15 lakh returned back un–served by the postal authorities on account of incorrect address. Therefore, the Assessing Officer called upon the assessee to produce the aforesaid three parties before him. Since, the assessee did not produce the concerned parties, the Assessing Officer treated the loan amount of ` 15 lakh as unexplained cash credit under section 68 of the Act and added back to the income of the assessee.

Being aggrieved with such addition, the assessee preferred appeal before the first appellate authority. However, learned

The learned Authorised Representative submitted, simply for the reason that notices issued under section 133(6) to the concerned parties returned back un–served, the Assessing Officer has treated the unsecured loans as unexplained cash credit under section 68 of the Act. He submitted, though, before the Departmental Authorities the assessee had furnished the income tax returns filed by the concerned parties along with loan confirmation letters, however, such evidences produced by the assessee were not duly considered by them. He submitted, when the creditors are income tax assessees with valid PAN and their income tax returns along with confirmation letters were filed, without making proper enquiry / investigation no addition could have been made under section 68 of the Act. Therefore, he submitted, the issue may be restored back to the Assessing Officer for re–considering the claim of the assessee by properly examining the documentary evidence filed and making proper enquiry.

The learned Departmental Representative, though, relied upon observations of the Departmental Authorities, however, he submitted that assessee’s claim can be verified afresh by the Assessing Officer in the context of documentary evidences filed by him.

We have considered rival submissions and perused material on record. It is evident, in course of assessment proceedings, to cross verify the genuineness of unsecured loansthe Assessing Officer issued notices under section 133(6) of the Act to all the six lenders.However, such notices issued to three parties representing aggregate loan amount of ` 15 lakh returned back un–served by the postal authorities due to incorrect address. For the aforesaid reason coupled with the fact that the assessee could not produce these loan creditors before the Assessing Officer, he treated the unsecured loan of ` 15 lakh as unexplained cash credit under section 68 of the Act. However, from the evidences produced by the assessee viz. income tax returns of the concerned loan creditors, their bank account, copies of loan confirmations, etc., it appears that not only the loan creditors are identifiable but they are income tax assessees with valid PAN. Even,the bank accounts also reflect the loan transactions. In the confirmations filed also the creditors have accepted the loan advanced by them to the assessee. These documentary evidences furnished by the assessee, in our view, were not properly examined/verified by the Departmental Authorities. Before making the addition, it is incumbent upon the Assessing Officer to carry out proper investigation to conclusively form an opinion that all the ingredients of section 68 of the Act are not satisfied. In the present case, the returns of income of the lenders along with confirmations and bank account copies

In the result, assessee’s appeal is allowed for statistical purpose. Order pronounced in the open Court on 30.01.2019