Condition of section 68 treated to be fulfilled by furnishing necessary materials with supporting evidence

IN THE INCOME TAX APPELLATE TRIBUNAL

(DELHI BENCH `D’: NEW DELHI)

BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND

SHRI K.D. RANJAN, ACCOUNTANT MEMBER

ITA No.4850/Del /2011

(Assessment Year: 2008-09)

ACIT, Circle 4(1),

New Delhi.

(Appellant)

Vs.

Luminous Hodings Pvt. Ltd.,

115, Yashwant Place,

Chankyapuri,

New Delhi.

(PAN/GIR No.AAACL8754B)

 (Respondent)

Assessee by: Shri Ajay Vohra, Adv.,

Revenue by: Ms. Banita Devi Naorem, DR

ORDER

PER U.B.S. BEDI, J.M.

This appeal of the department is directed against the order passed by the CIT(A)- VII, New Delhi, dated 29.08.2011, relevant to assessment year 2008-09, whereby deletion of addition u/s 68 of the I.T. Act, 1961, despite the fact that the assessee could not prove creditworthiness of the persons extending such a huge interest free loans to it, has been challenged.

2. Facts indicate that Assessing Officer made addition of Rs.1,98,64,646/- as unexplained cash credit u/s 68 of the Act against which assessee preferred appeal in which action of he Assessing Officer in regard to addition u/s 68 of the Act was challenged and Ld.AR of the assessee submitted before first appellate authority that during the year under consideration, the assessee received interest free unsecured loans, from its directors as under:

1. Sh. Gurinder Singh Dhillon - Rs.50,00,000

2. Smt. Shabnam Dhillon - Rs.1,00,000

3. The Assessing Officer, on perusal of the audited annual accounts for the year ended 31.03.2008, observed that the following amounts of the loans extended by the directors of the assessee company were outstanding as on that date:

1. Sh. Gurinder Singh Dhillon - Rs.1,08,66,347/-

2. Smt. Shabnam Dhillon - Rs.89,98,299/-

4. The Assessing Officer issued summons to the above directors under section 131of the Act. In response to the same, Shri Gurinder Singh Dhillon as well as Smt. Shabnam Dhillon, vide letter dated 19.10.2010, submitted the following details/documents before the Assessing Officer.

- Confirmation regarding granting of unsecured loan:- Copies of the ledger account of the assessee company as appearing in their books of account.

- Copies of their income tax returns for the assessment years 2007-08 and 2008-09; and

- Copies of their attested annual accounts for the year ending 31.03.2007 and 31.03.2008.

5. The Assessing Officer, however, being dissatisfied with the responses filed, added the outstanding balance payable to the aforesaid parties aggregating to Rs.1,98,64,646/- as on 31.03.2008 as the assessee’s undisclosed income under section 68 of the Act, holding that the lenders of the above loans, i.e. the directors, did not have the capacity to advance loans of such magnitude and also the loan transactions were non-genuine.

6. Ld.AR of the assessee submitted before first appellate authority that during the year under consideration, the assessee received interest free unsecured loans from its directors as under:

- Shri Gurinder Singh Dhillon - Rs.50,00,000/-

- Smt. Shabnam Dhillon - Rs.1,00,000/-

7. Ld.AR of the assessee further submitted before first appellate authority that it is settled law that in terms of provisions of section 68 of the Act, the primary onus to frame the nature and source of the amount, so found to be credited is on the assessee. However, once reasonable explanation is furnished by the assessee, the onus shifts to the Revenue and number of decisions were cited in first appeal proceedings and attention was invited to the copy of the bank account of Shri G.S. Dhillon for the period 01.04.2007 to 31.03.2008 as contained at pages 60-61 of the paper book filed in appeal and it was contended that Rs.50,00,000/- was advanced to the assessee on 18.10.2007 on which date Shri G.S. Dhillon was having balance of Rs.51,22,278.06, which was sufficient enough to advance the loan of Rs.50,00,000/- to the assessee during the year under consideration. Similarly, copy of bank account statement of Smt. Shabnam Dhillon for the same period, revealed that Rs.1,00,000/- was advanced to the assessee on 27.10.2007 on which date Smt. Shabnam Dhillon was having balance of Rs.2,07,323.81 which was sufficient enough to advance the loan of Rs.1,00,000/- to the assessee during the year under consideration. Attention of CIT(A) was further invited to the attested annual accounts of two directors which revealed that amounts received as loans by the assessee is duly reflected in the respective balance sheets filed. Since assessee has established the source of loan inasmuch as the documentary evidence placed on record which clearly established that loan was received from the directors of the assessee company and evidence in the form of bank account statement and attested balance-sheets of the creditors have also been placed on record to establish the creditworthiness of the creditors and since loans were advanced by such creditors out of the unsecured loans which further goes to substantiate the fact that the creditors were having sufficient funds at their disposal for granting such loan to the assessee and by placing further reliance on Calcutta & Delhi High Courts decisions, it was pleaded to delete the impugned additions made by the Assessing Officer.

8. Ld.CIT(A) while considering and accepting the appeal of the assessee has concluded to delete the impugned addition as per para.3.3 of his order which reads as under:

“Under the facts and circumstances of the case stated above, it is held that the appellant had discharged its burden of proof u/s 68 of the Act since the appellant has proved not only the identity of the creditor but have also proved the creditworthiness of the creditor and genuineness of transaction by showing the bank statements. Even if human probabilities are to be considered as propounded by Hon’ble Supreme Court in cases relied by Assessing Officer, still the evidence

on record should suggest so as to draw adverse inference. It is not subjective satisfaction of the Assessing Officer but based on objective analysis of evidence filed and after examining it, one can come to the conclusion whether the transaction was probable or not. Therefore, merely alleging will not assist the case of the Assessing Officer. Thus, in absence of any contrary evidence than that produced by assessee, the addition u/s 68 is not justified. Accordingly, it is held that the addition of Rs.1,98,64,646/- on account of unsecured loans cannot be sustained and accordingly, the same is directed to be deleted.”

9. Aggrieved by this order of the CIT(A), department has come up in appeal and while relying upon the order of the Assessing Officer, it was pleaded for reversal of the order of the CIT(A) and restoring that of the Assessing Officer.

10. Ld.Counsel for the assessee pleaded that all necessary evidence/documents in support of loans raised by the assessee have been duly filed which not only prove the genuineness but also creditworthiness of the transactions when these two persons are directors in the assessee company. By drawing our attention to various papers filed in the paper book to substantiate its claim of the creditors being genuine, creditworthiness have been established. The CIT(A) has already concluded to delete the impugned addition whose action may be confirmed. It was thus pleaded for confirmation of the impugned order.

11. We have heard both the sides, considered the material on record and find that since onus lay on the assessee has duly been discharged in this case by furnishing necessary material and evidence before the authorities below which is supported by all documentary evidence in the shape of bank statements and balance sheets etc. whose copies have been filed in the paper book before us and CIT(A) while considering all the aspects of the case is found to come to a just and appropriate conclusion to delete the impugned addition made by the Assessing Officer. Neither any contrary material has been placed on record by the department nor any infirmity of law has been pointed out or noticed by this bench in the order of Ld.CIT(A). Therefore, keeping in view the entirely of facts, circumstances and material on record, we do not find any justifiable reason to interfere in the order passed by the CIT(A) which is confirmed and this appeal of the Revenue is dismissed.

12. As a result, appeal of the department gets dismissed.

Order pronounced in open court on 01.08.2012.

                                                          Sd/-                             Sd/-

                                                (K.D. RANJAN)         (U.B.S. BEDI)

                               ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: Aug. 08, 2012

SKB

Copy of the order forwarded to:-

1. Appellant

2. Respondent

3. CIT

4. CIT(A)-VII, New Delhi.

5. CIT(ITAT)

Deputy Registrar, ITAT