DCIT, NEW DELHI vs. SH. VIVEK NAGPAL, NEW DELHI

ORDER PER PRASHANT MAHARISHI, A.M.: 1. This appeal preferred by the Revenue against the order of Commissioner of Income Tax (Appeals) dated 15.02.2013, raising the only ground of appeal that the learned Commissioner of Income Tax(Appeals) has erred in deleting the addition of Rs. 33,15,000/- made by the Assessing Officer under Section 68 of the Income-tax Act, 1961 (for short “the Act”).

2. The brief facts of the case are that the assessee is an individual, filed return of income on 16th March, 2010 showing income of Rs. 9,15,680/-. The assessment was framed under Section 143(3) of the Act on 22.12.2011. During the course of assessment, the statement DCIT CC 18 New Delhi Vs Sh. Vivek Nagpal AY. 2009-10 of affairs of the assessee were examined wherein it was found that loan of Rs. 33,15,000/- has been taken by the assessee from M/s. Zodic.Com Solution (P) Ltd. The assessee submitted before the Assessing Officer the confirmation of M/s. Zodic.Com Solution (P) Ltd. stating its address and PAN of the lender. However, the assessee could not submit the income tax return and bank statement of the lender and, therefore, the Assessing Officer made addition under Section 68 of the Act. The assessee carried the matter before the Commissioner of Income Tax (Appeals) who deleted the addition. Therefore, the Revenue is in appeal before us.

3. Learned Sr. Departmental Representative submitted that the assessee did not file income tax return and bank statement of the lender and the addition has been made by the Assessing Officer as assessee failed to prove creditworthiness of the lender. He vehemently supported the order of the Assessing Officer.

4. Ld AR submitted that the assessee has submitted before the Assessing Officer the confirmation, permanent account number, audited balance-sheet and profit and loss account, and cash flow statement of the creditor company, who had given loan to the appellate. Further, in the balance-sheet of the company, a loan of Rs. 33,15,000/- is shown and the company has the sources of the DCIT CC 18 New Delhi Vs Sh. Vivek Nagpal AY. 2009-10 funds to the tune of Rs. 2,11,00,000/- in form of share capital and b0rrowed funds and has sales of Rs. 22.98 crores. Therefore, he submitted that he is fully discharged the onus caste on the assessee under Section 68 of the Act proving identity, creditworthiness and geuineness of the transactions. He further submitted that on submission of these details, no inquiry has been done by the Assessing Officer and in subsequent years loan of this party raised further was accepted by AO. Therefore he contended that CIT (A) has rightly deleted the addition.

5. We have carefully considered the rival contention and could see from the order of the learned Commissioner of Income Tax (Appeals) as well as the Assessing Officer that the assessee has filed confirmation, permanent account number, audited balance- sheet and profit and loss account of the lender. On going through order of ld AO. we found that merely because the assessee could not file the bank account statements and income Tax returns of lender company, the addition has been made. When assessee has submitted the confirmation of the company which is having PAN and assessed to income tax the account also shows the receipts by the cheques and in subsequent years, loans of this company was DCIT CC 18 New Delhi Vs Sh. Vivek Nagpal AY. 2009-10 accepted by AO. learned Commissioner of Income Tax (Appeals) has dealt the issue in its appeal order as under:

“5. I have gone though the above submissions of the appellant and have perused the AD's order and considered the facts and evidences on records and other judicial pronouncements on the issue. On going through the assessment records I found that during the course of assessment proceedings vide letter dated 13.12.2011 the appellant filed the confirmation, PAN number and the audited balance sheet and Profit and Loss Account and the cash flow statement of the creditor company who had given loan to the appellant. From the perusal of balance sheet it is further noticed That Zodiac.com Solutions P. Ltd. that who had advance loan of Rs.33,15,000 to the appellant, had the sources of fund to the tune of Rs 2,11,00,000 and audited financial statement reveals that in the year under consideration that they had sales/income of R.s 22.98 crores. Keeping the audited financial statements of the creditor company, (Zodiac.com Solutions P. Ltd.) into consideration, I fail to understand on what basis the AD came to the conclusion that the appellant has not been able to prove the creditworthiness, identity and genuineness of the transaction. Simply the appellant did not file the copy of income tax return of Zodiac.com Solutions P. Ltd. with the AD does not mean the appellant has failed in his duty to prove the creditworthiness, identity and genuineness of the transaction. The appellant did inform the AD about the PAN number which is 'AAACZ2289D', to the AD. If the AD had any doubt about the creditworthiness of the lender, the AD could have verified from the assessment record from the AD of the creditor company as they are being assessed in the same city as that of the appellant. 5.1 I further find that the AD in his order has not brought any material on record to show that the confirmation filed by the creditor is not genuine, here I would like to place reliance in the case of CIT vs. Gangour Investment Ltd. (Income Tax Act No. 34/2007) dated 30.1.2009 where it was held that Revenue can make addition under Section 68 of the Act only if the assessee is unable to explain the credits appearing in its books of accounts. In the said case the appellant has duly explained the said credit entries in the form of various documentary evidences. The said documentary evidence contained details, which set out not only the identity of the subscribers, but also gave information, with respect to their address, as well as, PAN, etc. Based on these facts, the Hon'ble Delhi Court dismissed the appeal of revenue. 5.2 It is seen from the AD's order that no enquiry was conducted to examine l the contents of the information filed by the appellant. It is also seen that the AD has not brought any material on record to show that the information filed by the appellant is not genuine. Further nothing adverse has been brought on record by the AD to establish that the money received from Zodiac.com Solutions P. Ltd represents appellant's own undisclosed income. 5.3 The facts and evidence of the case shows that from the very beginning AD had shifted entire burden upon the appellant and no material 4 DCIT CC 18 New Delhi Vs Sh. Vivek Nagpal AY. 2009-10 has been brought by the AD himself to prove his allegation that the transaction of the appellant with Zodiac.com Solutions P. Ltd is not genuine one and the impugned amount represented the appellant's own undisclosed income. Therefore on this ground also in my view the addition made by the AD deserves to be deleted. In coming to this conclusion, I carry support from the decision of Delhi High Court in the case of CIT Vs. Pradeep Gupta 207 CTR 115 which has also been relied upon by Delhi ITAT. 5.4 In view of the factual position as well as the judicial pronouncement on the subject, discussed above, I am of the considered view that the appellant has discharged the initial onus of establishing the bona- fides of the transactions by filing the confirmation, audit financial statement and PAN particular of the creditor viz. Zodiac.com Solutions P. Ltd. and the AD was not justified in ignoring these evidences provided to him by the appellant. Thus in view of the above discussion and keeping in view the fact that confirmation of the creditor company its financial statements and PAN number details was filed with the AO, l am of the considered view that the addition made by the AD deserves to be deleted. In a result the appeal is allowed.”