DCIT CC 3.4, MUMBAI vs. GSP IMPEX PRIVATE LIMITED, MUMBAI

Since both the above appeals were heard together, they are being adjudicated and disposed of vide this composite order for the sake of brevity. We take up Revenue’s ground first.

Facts of the case are that the made an addition of Rs 20,23,18,892/- u/s 68 of the Act being the peak balance of loan taken from one Credence Commodities Exports. It was stated that the source of fund in the hands of the lender was not proved beyond doubt. The ld.CIT(A) has after detailed analysis of all the relevant facts and circumstances of the case has concluded in para 10.8.12 to 10.10 on pages 40 and 41 of the appeal order, that the appellant has done everything in its power to prove the three ingredients required to prove the loan. The assessee even submitted source of source. It is also observed that assessee even requested the AO to cross examine the lender by issuing notice u/s 133(6) of the Act which the AO did not opt for. The addition made was treated as based on guesswork, surmises and conjectures. The said loan was ably proved by the assessee.

The Ld. CIT(DR) has vehemently argued in favour of the order of the Ld. AO stating that the assessee failed to discharge onus cast upon it in proving the impugned case credit which was rightly treated as unexplained in terms of section 68 of the Act.

Per contra, the Ld. AR has argued that all the primary details proving identity, credit worthiness and genuineness of the credit have been duly satisfied as the assessee produced all the relevant evidence before the lower authorities. He stated that the assessee offered to the AO to issue notice u/s 133(6) to confirm the transaction from the creditor himself. However, the Ld. AO did not take recourse to such request also. The primary onus has been duly discharged by filing relevant confirmation, ITR, Bank statements etc which all have been glossed over and ignored by the AO.

We have carefully considered the entire factual matrix of the case and find sufficient force in the contentions of the ld.AR. In this case, the assessee had given the names, address, ITR, Bank statement of the creditor. The AO did not make any independent enquiry in the matter by examining the lender if at all he doubted the whole transaction. In such circumstances, the assessee could do nothing any further and as such had discharged the burden. Once the assessee has proved the identity of his creditor, the genuineness of the transactions which he had with his creditor, and the creditworthiness of his creditor vis-a-vis the transactions which he had with the creditor, his burden stands discharged and the burden then shifts to the revenue. A delicate balance must be maintained while walking the tightrope of section 68.The burden of proof cannot be discharged to the hilt by the assessee. If the Assessing Officer harbors any doubt about the legitimacy of the loan, he is empowered to carry out investigations thoroughly. But, if he is unable to unearth any discrepancy, he cannot obdurately adhere to his suspicion and treat the credit as unexplained.

1 In view of the above discussion on facts and the circumstances of the case also the provisions of the Act in this regard, we conclude that the Assessing officer was not justified in invoking provisions of section 68 of the case on the facts and the circumstance of the case. The addition made is therefore, deleted and order passed by the Ld. CIT(A) is upheld.

In the result, the appeal of the Revenue and also the cross objections appeal by the assessee are hereby dismissed.