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Facts
The assessee company filed its return of income, which was subsequently selected for complete scrutiny. An addition of Rs. 18,00,000/- was made by the Assessing Officer under section 68 of the Income Tax Act as unexplained cash credit, which was confirmed by the CIT(A). This addition pertained to an unsecured loan received by the assessee from Shri Bhim Sen Grover, father of the company's Director.
Held
The Tribunal found that Shri Bhim Sen Grover had sufficient funds, and the loan was received and repaid through banking channels, establishing the genuineness and creditworthiness of the transaction. Citing the principle from *CIT vs. Shri Ram Narain Goel*, the Tribunal reiterated that the assessee is not required to prove the source of the loan for the creditor, and suspicion cannot replace evidence. Therefore, the appeal was allowed, and the assessment order and the CIT(A)'s order were set aside.
Key Issues
Whether the addition under section 68 for an unsecured loan was justified when the creditor's genuineness and creditworthiness were established via banking channels, and whether the assessee is required to prove the source of the source of the credit.
Sections Cited
Section 68, Section 143, Section 142(1), Section 272A(1)(d), Section 271AAC
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “F”: NEW DELHI
Before: SHRI S RIFAUR RAHMAN & SHRI VIMAL KUMAR
This appeal is against order dated 11.10.2023 of the Learned Commissioner of Income Tax (Appeals) through which addition of Rs. 18,00,000/- in terms of provisions of section 68 in the assessment year 2017-18 vide assessment order dated 25.12.2019 of the Learned Assessing Officer was confirmed.
Brief facts of the case are that assessee company e-filed its return of income on 25.09.2017 declaring income of Rs. 10.73,540/-. The case was selected for complete scrutiny through CASS. Notice under section 143 of Income Tax Act, 1961 dated 08.08.2018 was issued. Notice under section 142(1) of Income Tax Act, 1961 was also issued. In response to notices assessee company furnished details. The assessee failed to comply with various notices issued penalty for non-compliance under section 272A(1)(d) of the Act vide show cause notice dated 14.11.2019 were issued. The assessee company filed its reply dated 22.12.2019 which was not found to be credit worthy. Amount of Rs. 18,00,000/- was unexplained cash credit under section 68 of the Act. Proceedings under section 271AAC of the Income Tax Act, 1961 were initiated separately. The assessee preferred appeal which was dismissed vide order dated 11.10.2023.
Being aggrieved appellant assessee preferred an appeal.
Learned Counsel for the assessee submitted that addition of Rs. 18,00,000/- made by Learned Assessing Officer under section 68 on account of unsecured loan received by assessee company Shri Bhim Sen Grover father of son of Director of assessee company. Learned CIT(A) mentioned that bank statement of Shri Bhim Sen Grover was examined and it was noticed that as soon as any clearing of substantial value was entered in his account, the same was followed by a debit entry same day, leaving a petty balance. Nothing adverse was found regarding effective financial management of Shri Bhim Sen Grover, funds were kept invested in one form or another to create passive income and where a better opportunity appears he withdrew funds from his earlier investment and made fresh investment. The observation of Learned CIT(A) supported case of assessee that Shri Bhim Sen Grover had enough funds in his bank account to advance the money to assessee company. Shri Bhim Sen Grover was assessed to tax and said loan was received and repaid by the assessee through banking channel during the FY 2016-17 and FY 2017-18. Hon’ble High Court of Punjab & Haryana in case of CIT vs. Shri Ram Narain Goel (1996) 64 CCH 1318 PHHC (1997) 224 ITR 0180 has held that Tribunal correctly took the view that the assessee was not supposed to prove the source of the loans. Suspicion, howsoever strong, cannot take the place of evidence or proof. So appeal may be accepted. Impugned orders may be set aside.
Learned DR submitted that Shri Bhim Sen Grover maintained account which showed that as soon as any clearing of substantial value has entered his account, the same was followed with a debit entry on the same day, leaving a petty balance. Therefore appeal may be rejected.
From examination of record in light of aforesaid rival contention, it is crystal clear that Learned CIT(A) in para No. 8.3 at page 24 has mentioned that as soon as Shri Bhim Sen Grover received Rs. 18,00,000/- from one M/s. Mark Metals Pvt. Ltd. same amount got forwarded to the assessee, leaving a balance of Rs. 76,000/-. Learned CIT(A) in para 8.5 at page 25 has mentioned that Shri Bhim Sen Grover established through submission of ITR, bank statement and Form 16 and the loan was received by it through banking channels was genuine and credit worthy. As per ratio of judgment in CIT vs. Shri Ram Narain Goel’s case (supra) it is well settled that the assessee is not supposed to prove the source of the loan, suspicion howsoever strong cannot take the place of evidence or proof. In view of the above material facts and well settled principle of law passing of assessment order dated 25.12.2019 and confirming the order of Learned CIT(A) dated 11.10.2023 are not just fair and reasonable and deserves to be set aside.
No other point was argued.