DCIT 14(3)(2), MUMBAI vs. SIDMARK SALES P.LTD, MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the order,dated 15/06/2015,of the CIT(A)-22 Mumbai the Assessing Officer (AO)has filed the present appeal. Assessee- company, engaged in the business of intending agents., filed its return of income on 23.11.2011 declaring total income of Rs.93,89,255/- . The AO completed the assessment u/s.143(3)of the Act,on 21/3/2014,determining its income of the assessee at Rs.2.09 crores. 2.Effective Ground of appeal is about deleting the addition made by the AO u/s. 68 of the Act on account of unsecured loan of Rs.40.00 lakhs borrowed from M/s. Luminous Venture Pvt.Ltd.(LVPL).During the assessment proceedings,the AO found that the assessee had obtained unsecured loans of Rs.40.00 lakhs from LVPL. As the details about the loans were not available in the audit report.So,he directed the assessee to submit the details of unsecured loans alongwith the confirmation in respect of loan/share capital, shares application money received during the year.He asked it to submit documentary evidence to prove identity, credit worthiness and capacity of the investor. As per the AO the assessee provided only the name and addresses along with the PAN of the creditor.But it did not file any documentary evidence to establish the identity of the creditor. He issued summons u/s. 131 to LVPL which returned back with the remark “left” by the postal authorities. He directed the assessee to produce the creditor before him for verification to prove the genuineness of the transaction. The AO was informed that LVPL had changed its address .The assessee provided copy of 4885/M/15(11-12) Sidmark Sales Pvt.Ltd.

return and the bank statement of the creditor.After verifying the ITR-5 the AO observed that the loan creditor had declared total income at Nil and had paid nominal tax of Rs.7,552/- only, that creditworthiness of loan creditor to advance loan of Rs.40.00 lakhs was not established, that verification of bank statement revealed that creditor was having very low balances prior to advancing of loan, that it did not have any major source of income, in these circumstances he again directed the assessee to produce the lender and to furnish ledger confirmation, capital account, balance sheet and P&L account for last three years. Referring to the provisions of section 68 of the Act, he held that it was the duty of the assessee to prove the genuineness of the transaction. He referred to certain case laws and held that the assessee had failed to discharge its burden of establishing the credit worthiness of the loan creditor, that the amount of Rs.40.00 lakhs found to be credited in the books of accounts was unexplained investment.Finally, he added the said amount to the total income of the assessee. 3.Aggrieved by the order of the AO the assessee preferred an appeal before the First Appellate Authority (FAA) and made elaborate submissions before him.It submitted certain documents.After considering the assessment order and submission of the assessee he held that the assessee had filed loan confirmation of the creditors, ledger account of loan creditor, copy of IT return, bank statement of loan party with HDFC bank, balance sheet of LVPL, during the appellate proceedings.He held that the assessee had established genuineness of transaction,identity of creditor and its creditworthiness.He further observed that the assessee had discharged its duty by proving the test laid down in section 68 of the Act.Finally, he deleted the addition made by AO. 4.Before us, Departmental Representative (DR) argued that the assessee had not filed any documentary evidence to prove genuineness of the transaction.The lender did not appear before the AO/FAA, that statement of responsible person of LVPL were never recorded, that the documentary submitted before the FAA were not made available to the AO. The Authorised Representative (AR) supported the order of the FAA. 5.We have heard the rival submissions and perused the material available before us. We find that AO had issued summons to creditor on two occasions,that it did not appear before the AO, that confirmation and ledger accounts were never made available to the AO, certain new documents were furnished during appellate proceedings, that the FAA did not call for remand report in that regard,that he allowed the appeal filed by assessee after considering those documents.From the order it is clear that these documents were not admitted by him under Rule 46A(4) of the IT Rule,1962. We are unable to comprehend as to what prevented him 2