M/S. SUBHASHREE ENTERPRISES,SAMBALPUR vs. DCIT, CIRCLE-1(1), SAMBALPUR
In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal held that the assessee is only required to explain the source of credit in its books and not the source of the source. Following the Delhi High Court's decision in CIT vs. Shiv Dhooti Pearls & Investment, the Tribunal ruled that if the assessee discharges its onus regarding the loan creditor's identity, genuineness, and creditworthiness, proving the sub-creditor's details is not required.
What were the facts?
The assessee received a loan of Rs. 10,00,000/- from M/s. Epson Marketing Pvt Ltd. The Assessing Officer treated this as an unexplained credit, as the loan creditor had received the funds from an unknown person, Sabita Tulshyan, whose purpose of receipt was not explained. The CIT(A) confirmed this addition.
What were the issues?
Whether the assessee needs to prove the source of the source of a loan when the loan creditor's details are provided, and if the addition under Section 68 is justified when the assessee has discharged its onus regarding the loan creditor.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, CUTTACK
Before: SHRI N.S SAINI
This is an appeal filed by the assessee against the order of CIT(A)-
Cuttack, dated 23.11.2015, for the assessment year 2011-12.
The sole issue involved in this appeal is that the ld CIT(A) erred in
confirming the addition of Rs.10,00,000/- under section 68 of the Act made
by the Assessing Officer.
I have heard the rival submissions and perused the orders of lower
authorities and materials available on record. In the instant case, the
assessee claimed to have received Rs.10,00,000/- from M/s. Epson
2 ITA No. 35/ CTK/2016 Asse ssment Year : 20 11- 12
Marketing Pvt Ltd.,. The Assessing Officer observed that M/s. Epson
Marketing Pvt Ltd., received loan from Sabita Tulshyan of Rs.10 lakhs and
in turn advanced Rs.10,00,000/- to the assessee. The Assessing Officer
held that the amount received from Sabita Tulshyan by the loan creditor
company was an unknown person and the purpose of such receipts was
not explained. Therefore, he treated the loan of Rs.10 lakhs as unexplained
credit and added the same to the income of the assessee.
On appeal, the CIT(A) confirmed the action of the Assessing Officer.
Before me, ld Authorised Representative of the assessee submitted
that the assessee received loan of Rs.10 lakhs from M/s. Epson Marketing
Pvt Ltd., The assessee filed the loan confirmation, PAN No. and other
particulars to prove the genuineness of transaction, identity of the loan
creditors and creditworthiness of the loan creditors. The assessee has
fulfilled all the three ingredients and discharged its burden u/s.68 of the
Act. The Assessing Officer was not justified in making addition of Rs.10
lakhs u/s.68 of the Act on the ground that Sabita Tulshyan from whom the
loan creditor received the unsecured loan did not explain the purpose of
the receipt. He submitted that as per law, the assessee was required to
explain the source of credit of Rs.10 lakhs in his books of account and not
the source of the source. Therefore, the addition made by the Assessing
Officer and confirmed by the CIT(A) cannot be sustained in law and same
should be deleted.
3 ITA No. 35/ CTK/2016 Asse ssment Year : 20 11- 12
On the other hand, ld Departmental Representative supported the
orders of lower authorities.
I find that in the instant case, the assessee received loan of Rs.10
lakhs from M/s. Epson Marketing Pvt Ltd., The Assessing Officer observed
that the loan creditor has received Rs.10 lakhs from Sabita Tulshyan, an
unknown person and the purpose of such receipt could not be explained by
the said company. Hence, he treated the loan of Rs.10 lakhs as
unexplained credit in the hands of the assessee.
On appeal, the CIT(A) confirmed the same.
The contention of ld Authorised Representative of the assessee is that
in law, the assessee is required to explain the source of such credit and not
the source of source. He argued that he has explained the identity of the
loan creditor, genuineness of the transaction and creditworthiness of the
loan creditors and has discharged its burden u/s.68 of the Act and
therefore, the addition made of Rs.10 lakhs cannot be sustained in law. I
find that Hon’ble Delhi High Court in the case of CIT vs. Shiv Dhooti Pearls
& Investment in ITA No.429/2003 order dated 21.12.2015 has held that
where the assessee has discharged its onus to prove the creditworthiness
and genuineness of the lender, there was no requirement in law for the
assessee to prove the genuineness and creditworthiness of the sub-
creditor. I find that the facts in the present case are identical to the facts
decided by the Hon’ble Delhi High Court in the case of Shiv Dhooti Pearls &
Investment (supra). Respectfully following the same, I set aside the orders
4 ITA No. 35/ CTK/2016 Asse ssment Year : 20 11- 12
of lower authorities and delete the addition of Rs.10 lakhs made u/s.68 of
the Act and allow the ground of appeal of the assessee.
In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 22/03/2017 in the presence of parties. Sd/- (N.S Saini) ACCOUNTANT MEMBER Cuttack; Dated 22/03/2017 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : M/s. Subhashree Enterprises, At/PO: Rengali, Dist: Sambalpur 2. The Respondent. DCIT, Circle 1(1), Sambalpur 3. The CIT(A) Cuttack 4. Pr.CIT Cuttack 5. DR, ITAT, Cuttack 6. Guard file. BY ORDER, //True Copy//
SR.PRIVATE SECRETARY ITAT, Cuttack
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