SHIV KUMAR AGGARWAL,NEW DELHI vs. ITO, NEW DELHI

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ITA 1037/DEL/2016Status: DisposedITAT Delhi10 February 2017AY 2011-128 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the identity, creditworthiness, and genuineness of the transactions were proved as the lenders had declared the amounts in their balance sheets and were assessed to tax. Therefore, the additions were not sustainable.

What were the facts?

The assessee received loans of Rs. 2 lakhs from Sachin Aggarwal and Rs. 3 lakhs from Lata Aggarwal, which were credited as the assessee's own capital. The Assessing Officer made additions under Section 68 as the notices to the lenders were returned undelivered.

What were the issues?

Whether the addition made under Section 68 of the Income Tax Act is justified when the lenders have declared the amounts and are assessed to tax, proving identity, creditworthiness, and genuineness of the transaction.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, DELHI BENCH “SMC”, NEW DELHI

Before: SHRI H.S. SIDHU

Assessee has filed this Appeal against the impugned Order dated 21.12.2015 passed by the Ld. CIT(A)-16, New Delhi relevant to assessment year 2011-12 on the following grounds:-

1.

On the facts and in the circumstances of the case and in law, the Ld. C.I.T. (Appeal) was incorrect and unjustified

in confirming the addition of RS.200000/- (Two Lac Only) made by the AO U/s 68 in the name of Mr. Sachin

Aggarwal.

2. On the facts and in the circumstances of the case and in law, the Ld. C.I.T. (Appeal) was incorrect and unjustified

in confirming the addition of RS.300000/- (Three Lac Only) made by the AO U/s 68 in the name of Mrs. Lata Aggarwal.

3. On the facts and in the circumstances of the case and in law, the Ld. C.I.T. (Appeal) erred in confirming the addition of RS.200000/- (Two Lac Only) in the account of Mr. Sachin Aggarwal even though he was examined by the C.I.T. (Appeal) and during examination he admitted

to have given a sum of Rs. 200000/- to the assessee during the Assessment Year - 2011-2012.

4. On the facts and in the circumstances of the case and in law, the Ld. C.I.T. (Appeal) erred in confirming the addition of RS.200000/- (Two Lac Only) & RS.300000/-

(Three Lac Only) by the AO in account of Mr. Sachin

Aggarwal & Mrs. Lata Aggarwal even though they have declared the same in their Balance Sheet, books of accounts and they are assessed to Tax.

5. On the facts and in the circumstances of the case and in law, the Ld. C.IT. (Appeal) confirming the addition of RS.200000/- (Two Lac Only) and RS.300000/- (Three Lac

Only) even without considering the various judgments relied by the AR & copies filed during the appeal proceedings.

6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was incorrect and unjustified in confirming the addition of Rs. 2,00,000/- (Two Lac only)

and Rs. 300000/- (Three lac only) made by the AO u/s. 68 in account of Mr. Sachin Aggarwal and Mrs. Lata

Aggarwal even when identity, creditworthiness and genuineness of the transactions proved.

2.

The brief facts of the case are that the assessee filed its return of income on 23.9.2011 declaring an income of Rs. 2,28,090/-. The return was processed on 24.12.2011 at income of Rs. 2,28,090/-.

The case was selected for scrutiny and accordingly, the notice u/s. 143(2) of the I.T. Act dated 27.9.2012 was issued and served upon the assessee. Another notice u/s. 143(2) of the I.T. Act dated 24.7.2013 and notice u/s. 142(1) of the I.T. Act, dated 13.11.2013 was issued and served upon the assessee and in response to notices, the A.R. of the assessee appeared from time to time and filed the details including the books of account, but the stock register was not produced. The AO examined the books on test check basis. The assessee was engaged in the business of trading of sanitary items and during the year its GP ratio was 10.40% in comparison to previous year 10.53%. During the year, the assessee has taken interest free loan of Rs. 2 lakhs from Sh. Sachin Aggarwal R/o Malan Gali Hathras and Rs. 3 lakhs from Smt. Lata Aggarwal, R/o Malan Gali Hathras. The loan was recevied in the personal bank account and thereafer was credited in the books of accounts as assessee’s own capital intorduced durin gthe year. Notice u/s. 133(6) of the I.T. Act was issued to both the lenders. But notices were returned as undelivered. AO observed that assessee has introduced its own money throug the bank accounts of its relative.

The assessee is unable to prove (i) identity of the lenders (ii) crediworthiness of the lenders and (iii) the genuinness of the transaction, hence, AO made the addition of Rs. 2 lacs on account of loan from Sh. Sachin Aggarwal and Rs. 3 lacs on account of loan from Smt. Lata Aggarwal in the total income in the hands of the assessee and completed the assessment at Rs. 36,05,454/- u/s. 143(3) of the I.T. Act, 1961 vide his order dated 11.03.2014.

3.

Against the order of the Ld. AO, assessee appealed before the Ld. CIT(A), who vide his impugned order dated 21.12.2015 has partly allowed the appeal of the assessee and sustained the addition of Rs. 2,00,000/- & Rs. 3,00,000/- respectively by observing that the assessee has not satisfactorily explained the loans, therefore, hit by the provision of section 68 of the I.T. Act.

4.

Aggrieved with the order of the Ld. CIT(A), Assessee is in appeal before the Tribunal.

5.

Ld. Counsel of the assessee has filed the Paper Book containing pages 1 to 99 attaching therewith the copy of computation of loan ledger of Sh. Sachin Aggarwal in the books of Shiv Kumar Aggarwal; confirmation by Sh. Sachin Aggarwal; copy of ITR, computation with B/s of Sh. Sachin Aggarwal; copy of Election Card and Bank statement of Sh. Sachin Aggarwal; copy of loan ledger of Smt. Lata Aggarwal in the books of Shiv Kumar Aggarwal; copy of ITR, computation with B/s of Smt. Lata Aggarwal and copy of Election Card, Ration Card and Bank Statement of Smt. Lata Aggarwal. He further stated that assessee has raised loan of Rs.2 lacs from Sh. Sachin Aggarwal and Rs. 3 lacs from Smt. Lata Aggarwal and during the examination by the Ld. CIT(A) Sh. Sachin Aggarwal has admitted to have given a sum of Rs. 2 lacs to the assessee during the AY 2011-12. He further stated that Sh. Sachin Aggarwal and Smt. Lata Aggarwal even though have declared the same in their balance sheet, books of accounts and they are assessed to tax, hence, the identity, creditworthiness and genuineness of the transactions have been proved, therefore, requested to delete the addition in dispute.

6.

On the other hand, Ld. Sr. DR relied upon the orders of the authorities below and stated that Ld. CIT(A) has passed a well reasoned order which does not need any interference on my part, hence, the appeal of the assessee may be dismissed.

7.

I have heard both the parties and perused the records especially the impugned order and the Paper Book filed by the assessee containing pages 1 to 99 attaching therewith the copy of computation of loan ledger of Sh. Sachin Aggarwal in the books of Shiv Kumar Aggarwal; confirmation by Sh. Sachin Aggarwal; copy of ITR, computation with B/s of Sh. Sachin Aggarwal; copy of Election Card and Bank statement of Sh. Sachin Aggarwal; copy of loan ledger of Smt. Lata Aggarwal in the books of Shiv Kumar Aggarwal; copy of ITR, computation with B/s of Smt. Lata Aggarwal and copy of Election Card, Ration Card and Bank Statement of Smt. Lata Aggarwal. I note that the assessee has raised loan of Rs.2 lacs from Sh. Sachin Aggarwal and Rs. 3 lacs from Smt. Lata Aggarwal and during the examination by the Ld. CIT(A) Sh. Sachin Aggarwal has admitted to have given a sum of Rs. 2 lacs to the assessee during the AY 2011-12. I further find that Sh. Sachin Aggarwal and Smt. Lata Aggarwal even though have declared the same in their balance sheet, books of accounts and they are assessed to tax, which itself proves the identity, creditworthiness and genuineness of the transactions and hence, the addition in dispute is not sustainable in the eyes of law, therefore, the same is deleted. My aforesaid view is fully supported with the following decisions from which the present issue is squarely covered:-

Nemi Chand Kothari vs. CIT & Anr. 264 ITR

254 (Gauhati), wherein it has been held that “a person may have funds from any source and an assessee, on such information received, may take a loan from such a person. It is not the business of the assessee to find out whether the source or sources from which the creditor had agreed to advance that the amounts were genuine or not. If a creditors has, by any undisclosed source, a particular amount of money in the bank, there is no limitation under the law on the part of the assessee to obtain such amount of money or part thereof from the creditor, by way of cheque in the form of loan and in such a case, if the creditor fails to satisfy as to how he had actually received the said amount and happened to keep it in the bank, the said amount cannot be treated as income of the assessee from undisclosed sources.”

8.

In the background of the aforesaid discussions and respectfully following the precedent, as aforesaid, the addition in dispute is hereby deleted and accordingly, the appeal of the assessee stands allowed.

9.

In the result, the Appeal filed by the Assessee stands allowed.

Order pronounced in the Open Court on 10/02/2017.

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