INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Unsecured loans allegedly treated as unexplained -

AO noted that the assessee had shown unsecured loan as Rs. 10,71,51,675, taken from 13 (thirteen) corporates. The AO noted that assessee had filed the list of lenders, on perusal of which, he noted that Rs. 10,65,32,302 had been credited to the books of the assessee during the previous year. Thereafter, the AO noted that summons under section 131, was issued to the Director of the assessee-company to verify the genuinity of the loan transactions, however it could not be served upon the assesses because the postal authorities reported back that at the given address, no company was there. So, according to the AO, due to non-compliance by the assessee-company, verification of the genuinity of the transactions, identity and creditworthiness of the lending companies could not be done. Thereafter, the AO made an addition of the entire loan amount of Rs. 10,65,32,302, as unexplained and added under section 68. CIT(A) was pleased to delete the same as well as similar addition made for assessment year 2013-14 which was also deleted.Held: In respect of source of credit, the assessee has to prove the three necessary ingredients, i.e., identity of lenders, genuineness of transactions and creditworthiness of lenders. For proving the identity of lenders, the assessee furnished the name, address, PAN of lender companies together with the copies of balance sheets and IT Returns. Hence the source of source of source was proved by the assessee in the instant case. The lending companies have confirmed about the loan in response to the notice under section 133(6) and have also confirmed the payments which were duly corroborated with their respective bank statements and all the payments were by account payee cheques and mostly the loans had been re-paid. Asessee had discharged its onus to prove the identity, creditworthiness and genuineness of the lender companies, thereafter the onus shifted to AO to disprove the documents furnished by assessee and it cannot be brushed aside by the AO to draw adverse view which action cannot be countenanced. In the absence of any investigation, much less gathering of evidence by the AO, an addition under section 68 cannot be sustained merely based on inferences drawn by circumstance. The order of the CIT(A) giving relief to the assessee was therefore, upheld.

Followed:ITO v. Wiz-Tech Solutions Pvt. Ltd. ITA No. 1162/Kol/2015; Asst.yr. 2012-13; Order, dt. 14-6-2018 : 2018 TaxPub(DT) 3845 (Kol-Trib). Relied:CIT v. Smt. P. K. Noorjahan (1999) 237 ITR 570 (SC) : 1999 TaxPub(DT) 80 (SC), Orissa Corpn. (P) Ltd. (supra) (1986) 159 ITR 78 (SC) : 1986 TaxPub(DT) 1425 (SC), Dy. CIT v. Rohini Builders (2002) 256 ITR 360 (Guj) : (2003) 127 Taxman 523 (Guj) : 2002 TaxPub(DT) 305 (Guj-HC), Nemi Chand Kothari (2003) 136 Taxman 213 (Bom) : 2003 TaxPub(DT) 1401 (Gau-HC), CIT v. S. Kamaljeet Singh (2005) 147 Taxman 18 (All.) : 2005 TaxPub(DT) 1275 (All-HC), S.K. Bothra & Sons, HUF v. ITO (2012) 347 ITR 347 (Cal) : 2012 TaxPub(DT) 815 (Cal-HC), Crystal Networks (P.) Ltd. v. CIT (2013) 353 ITR 171 (Cal) : 2013 TaxPub(DT) 1470 (Cal-HC) and CIT v. Dataware Private Ltd. ITAT No. 263 of 2011, dt. 21-9-2011 : 2013 TaxPub(DT) 1384 (Cal-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2012-13 & 2013-14

INCOME TAX ACT, 1961

Section 68

SUBSCRIBE FOR FULL CONTENT