INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Alleged unexplained loan creditors - Conditions precedent discharged by assessee

AO asked the assessee-company to explain the identity, creditworthiness and genuineness of the loan creditors for the loan received during the year under consideration. The assessee-company filed the reply, balance sheets, bank statements and ITRs of some of the loan creditors. However, the AO noted that the reply could not be accepted by him. AO noted that in the facts and circumstances in the instant case as well as the assessee's inability to discharge its own burden of proof to substantiate the genuineness of introduction of unsecured loans. It was held that the purported unsecured loans aggregating to Rs. 2,60,67,315 were nothing but the assessee's own money conduced under the garb of fresh unsecured loans into the assessee's business. Therefore, Rs. 2,60,67,315. was hereby treated as unexplained cash credit found in the books of the assessee. DR stated that CIT(A) had erred in concluding that the identity of the loan creditors were proved solely on the basis of paper documentation placed by the assessee before the CIT(A) whereas in the reality the loan creditors were non-existent at the addresses furnished by the assessee and entire addition was deleted by CIT(A).Held: In the facts of the present case, both the nature & source of the loan received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the loan creditors. The PAN details, bank account statements, audited financial statements and income-tax acknowledgments were placed on AO's record. Accordingly all the three conditions as required under section 68 the identity, creditworthiness and genuineness of the transaction were placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO was based on conjectures and surmises cannot be justified.Impugned order of CIT(A) was confirmed and consequently the appeal of revenue was dismissed.

Relied:Orissa Corpn. (P) Ltd. (supra) 159 ITR 78 and Dy. CIT v. Rohini Builders (2002) 256 ITR 360/(2003) 127 Taxman 523; CIT v. S. Kamaljeet Singh (2005) 147 Taxman 18 (All.); S.K. Bothra & Sons, HUF v. ITO, Ward-46(3), Kolkata 347 ITR 347; Crystal Networks (P) Ltd. v. CIT 353 ITR 171; CIT, Kolkat-III v. Dataware Private Limited ITAT No. 263 of 2011 Date: 21-9-2011

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14

INCOME TAX ACT, 1961

Section 37(1)

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