INCOME TAX OFFICER,WARD-1, MALEGAON vs. SAROJ JAIN, MALEGAON

This is an appeal filed by the appellant directed against the order of National Faceless Appeal Centre, Delhi dated 10.01.2024 passed u/s 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) for the assessment year 2018-19.

Briefly, the facts of the case are that the respondent-assessee is an individual engaged in the business of Trading in Fabrics etc. under the name and style “M/s. Shankeshwar Fabrics”. The respondent-assessee filed the Return of Income for the A.Y. 2018-19 on 21.10.2018 declaring total income of Rs.5,77,860/-. Against the said return of income, the assessment was completed by the Assessing Officer (AO) vide order dated 28.04.2021 passed u/s.143(3) r.w.s.144B of the Act. While doing so, the AO made addition of unsecured loans of Rs.16,39,08,187/- received from 12 parties, details of which are extracted on pages 3 & 4 of the assessment order for alleged failure of the respondent-assessee to prove the identity, creditworthiness of the parties and genuineness of the transactions.

Being aggrieved by the above addition, an appeal was filed before the CIT(A)/NFAC who vide impugned order after calling the remand report from the AO deleted the addition by holding that the respondent-assessee had discharged the onus lying upon him by providing the identity, creditworthiness of the creditors.

Being aggrieved, the Revenue is in appeal before the Tribunal in the present appeal.

The ld. CIT-DR for the Revenue submits that the NFAC was not justified in deleting the addition made on account of unsecured loans and interest thereon as even during the assessment proceedings, the respondent-assessee had failed to prove the identity, creditworthiness of the creditors and genuineness of the transactions. It is further contended that mere filing of the confirmation letters does not prove the genuineness of the transactions.

On the other hand, the ld. Authorized Representative for the respondent-assessee submits that entire loans received from the creditors were squared off during the year which clearly establishes the genuineness of the transactions. The respondent-assessee has running accounts with the loan creditors and there are several transactions of receipts and payments of money. Therefore, no interference in the order passed by the NFAC is called for.

We heard the rival submissions and perused the material on record. The issue in the present appeal is whether the NFAC was justified in deleting the addition made on account of unsecured loans received from the loan creditors of Rs.16,39,08,187/-. From the perusal of the assessment order, it would reveal that the AO made addition on account of sundry creditors for the failure of the respondent-assessee to prove the identity, creditworthiness of the loan creditors and genuineness of the transactions. During the course of proceedings before the NFAC, the respondent-assessee had filed certain evidences in the form of confirmation letters of the parties, bank account statements, acknowledgement of filing of returns, balance sheet along with relevant annexures etc. The NFAC had called for remand report from the AO, the AO reiterated the same view. After calling of the remand report from the AO had deleted the addition by holding that the respondent-assessee had discharged the onus cast upon him by proving identity, creditworthiness of the creditors and genuineness of the transactions.

We had carefully perused the order of the NFAC and find that the order of NFAC is bereft of factual discussion in respect of each party of the sundry creditors, as to how the ingredients of creditworthiness of the creditors and genuineness of the transactions had been satisfied. Further, there is nothing in the order of NFAC to show that the NFAC had considered the first proviso to section 68 which reads as under :

In the result, the appeal filed by the Revenue stands partly allowed for statistical purposes. Order pronounced in the open court on 04th September, 2024.