KAD Housing Pvt. Ltd. vs ACIT

Ld. Counsel for the assessee referring to page 1 of the PB submits that this is the confirmation of accounts furnished by Corporate Realtors Pvt. Ltd., the shareholder, wherein they have confirmed that an amount of Rs.20 lakhs was paid to the assessee on 12.03.2011. Ld. Counsel referring to page 5 of the PB which is the bank statement of Corporate Realtors Pvt. Ltd. submits that the said amount of Rs.20 lakhs was paid through banking channels on 12.03.2011. Ld. Counsel for the assessee submits that this amount was later on repaid on 11.03.2014 as could be seen from page 6 which is the bank statement of the share applicant in Oriental Bank of Commerce.

Ld. Counsel further submits that page 1 of the PB which is the confirmation of accounts also reflects an amount of Rs.31,60,000/- received by the assessee on 22.10.2010 which was repaid on 03.03.2011 through banking channels and this amount was not doubted by the AO. Ld. Counsel further referring to page 7 which is the company master data submits that the paid up capital of the shareholder Corporate Realtors Pvt. Ltd. is Rs.1,20,00,000/- and the company holds various assets running into several crores. Ld. Counsel further inviting our attention to page 12 of the paper book submits that Corporate Realtors Pvt. Ltd. has reserves and surplus of Rs.4,50,17,382/- and sales of Rs.1,82,00,000/- as on 31.03.2011. Therefore, the Ld. Counsel submits that the assessee has proved the identity, creditworthiness and genuineness of the transaction of this shareholder.

CIT Vs. Vrindavan Farms Pvt. Ltd. (2016) 6-ITR –OL 502 (Del.);

CIT Vs. Lovely Exports Pvt. Ltd. (299 ITR 268);

CIT Vs. Lovely Exports Pvt. Ltd. (216 CTR 195) (SC);

PCIT (Central) Vs. Ambey Trade Corp. Pvt. Ltd. 147 taxmann.com 375;

Pr. CIT Vs. Sri Leathers 448 ITR 332 (Cal.);

Confirmation of accounts;

Bank statements of the shareholder/lender;

Bank statement of the assessee;

Copy of Income tax return of the shareholder/loan creditors;

Copy of balance sheet, profit and loss account of the shareholder/lender;

Copies of bank statements showing the repayment of loans, etc.

M/s Corporate Realtors Pvt. Ltd.;

M/s JM Infratech Pvt. Ltd.;

M/s Vidya Shree Buildcon Pvt. Ltd.;

On perusal of the comments of the Ld.CIT(A), we find that in respect of the shareholder M/s Corporate Realtors Pvt. Ltd. the Ld.CIT(A) did not accept this transaction as genuine on the ground that the assessee has not furnished Income tax return of the shareholder and copy of the bank statement.

However, the assessee furnished the following documents in respect of the shareholder M/s Corporate Realtors Pvt. Ltd. as under: -

Confirmation of account for FY 2010-11;

Confirmation of account for FY 2013-14;

HDFC bank statement showing repayment of earlier loan;

P&B bank statements showing receipt of Rs.20 lakhs by the assessee from the shareholder;

Copy of Oriental Bank of Commerce bank statement showing repayment of Rs.20 lakhs to the shareholder;

Copy of company master data;

Audited financial statement of the shareholder;

P&B bank statement of assessee showing repayment of share application money received.

In our considered view, all the above evidences show that the assessee received share application money and also repaid through banking channels. The assessee furnished all the bank statements to show that the assessee has received the share application money from the shareholder as well as the repayment through banking channel. The bank statement of both assessee as well as the shareholder was furnished. The audited financial account of the shareholder establishes the creditworthiness of the shareholder, wherein the shareholder’s funds were sufficient to make the investments in the assessee company. Therefore, the documents furnished proves the identity, genuineness and creditworthiness of the shareholder. We also observed that the AO had made no adverse comments in the remand report. Therefore, treating the share application money as unexplained credit simply because the assessee has not furnished copy of Income tax return of the shareholder is not justified ignoring the volumenous other evidences furnished by the assessee to justify the transaction as genuine.

Coming to M/s JM Infratech Pvt. Ltd. where the assessee has received share application money of Rs.2 crores the assessee has furnished the following evidences to prove the identity, genuineness and creditworthiness of the shareholder:

Confirmation of account for the FY 2010-11;

Copy of acknowledgement of filing Income tax return for AY 2011-12 by the shareholder;

Audited financial statement of the shareholder;

Copy of Vijaya Bank statement of the shareholder reflecting the payment made by the shareholder to the assessee;

Copy of P&B statements of the assessee showing repayment.

On perusal of these evidences show that the shareholder has confirmed the payment made to the assessee, the bank statements clearly show that the assessee has received and repaid through banking transactions, the audited financials shows that the shareholder had reflected the investment made in assessee’s company, the balance sheet of the shareholder reflects that it had shareholder’s funds to the extent of Rs.2,61,00,000/- and advances from customers of Rs.1,87,75,391/-. The shareholder had sufficient balances in the bank account to invest in assessee’s company. All these evidences establishes the identity, genuineness and creditworthiness of the shareholder and, therefore, we are of the view that the Ld.CIT(A) is not justified in treating the share application money as unexplained for the reason that the shareholder company has filed loss returns for the assessment years 2010-11 to 2013-14 and the shareholder has shown meager revenue of Rs.17,23,728/- as on 31.03.2011 and the Assessee furnished only partial bank statement of the shareholder. We also observed that the AO had made no adverse comments in the remand report.

Coming to share application money received from M/s Vidya Shree Buildcon Pvt. Ltd. the Ld. CIT(A) sustained the action of the AO in treating the share application money received from the shareholder as unexplained income of the assessee for the reason that the shareholder reported meager income of Rs.9,42,146/- out of revenue of Rs.15,34,000/- for the AY 2011-12 and complete bank statement not furnished.

We observed that the assessee had furnished the following documents to prove the identity, genuineness and creditworthiness of the shareholder:

Confirmation of account for FY 2010-11;

Confirmation of account for the FY 2012-13;

Copy of acknowledgement in proof of filing Income tax return for AY 2011-12;

Copy of audited financial statements;

Copy of Indian bank statements showing receipt of share application money both by assessee as well as the shareholder.

It is observed from these evidences that the assessee received share application money through banking channels which was also confirmed by the shareholder. The shareholder filed return of income for AY 2011-12. The shareholder also reflected the share application money advanced to the assessee in the financial statements. The bank statement shows that the shareholder had sufficient funds to advance the amounts to the assessee. Therefore, all these evidences goes to prove the identity, creditworthiness and genuineness of the transaction and, therefore, the Ld.CIT(A)/AO is not justified in treating the said share application money from this party as not genuine for the reason that the shareholder has shown meager income in the returns filed. Further, the AO had made no adverse comments in the remand report. Therefore, there is no justification in treating the said amount as unexplained credit.

Coming to additions made towards unsecured loans, we observe that the Ld. CIT(A) sustained the additions in respect of the parties mentioned in sl. nos. 4, 5, 8 & 9 namely Shri Rishabh Aggarwal, Shri Surinder Pal Singh, Pratibha Aggarwal and Poonam Aggarwal of Table-D of the Ld.CIT(A) order extracted above based on the comments of the AO in the remand report.

In respect of the shareholder Shri Rishabh Aggarwal where the assessee has received loan of Rs.25 lakhs the Ld.CIT(A) sustained the addition made by AO in treating the loan as not genuine for the reason that creditor not attended personally on due date submissions made lately, no complete bank statement furnished, the creditor has shown meager income for the AY 2011-12.

We observe that in respect of Rishabh Aggarwal the assessee had furnished the following documents: -

Confirmation of account for FY 2010-11 and 2011-12;

Copy of bank statement reflecting the payments received by the assessee and repayment made;

Copy of bank statement of the lender;

Copy of acknowledgment of Income tax return along with computation of income for the AY 2011-12 filed by the creditor;

Copies of bank statements of the loan creditor as well as the assessee show that these transactions were reflected through banking channels.

We observe that the creditor had filed confirmation of account, bank statement, copy of Income Tax return. On perusal of the bank statement we noticed that the creditor had sufficient bank balance to advance amounts to the assessee, the creditor had also filed Income tax return wherein the interest paid by the assessee on the loan obtained was shown as income, TDS was deducted by the assessee on the interest paid the same was also reflected in the computation of income, confirmation of loan was also furnished. These documents show that the transaction is genuine the creditor had sufficient funds in the bank to advance loan to the assessee the creditor also accounted for interest income paid by the assessee in his Income tax return. Therefore, the creditworthiness cannot be doubted only for the reason that the creditor had filed Income tax return showing meager income. Identity and genuineness cannot be doubted simply because the creditor did not appear in person ignoring all other documents furnished by the creditor in the DAK.

Coming to Shri Surinder Pal Singh the Ld.CIT(A)/AO treated the loan of Rs.25 lakhs as not genuine for the reason that there was no response from creditor, lender has shown meager income and filed loss return. We observed that Assessee furnished the following documents to prove the identity, creditworthiness and genuineness of the transaction:

Confirmation of account for the FY 2010-11;

Confirmation of account for the FY 2011-12;

Nainital Bank statement of lender showing receipt of loan;

Punjab National Bank statement of the assessee showing repayment of loan;

Copy of acknowledgment of return for AY 2011-12 by the creditor.

All the above documents filed by the assessee proves that the loan transaction was made through banking channels. Assessee has received and repaid through banking channels the creditor has also confirmed the payment to the assessee, creditor is an Income tax assessee, bank statement shows that creditor had sufficient funds to lend monies and, therefore, the same cannot be treated as not genuine only for the reason that the creditor had shown meager income in his return of income and filed loss return. The Assessee has proved the identity, creditworthiness and genuineness of the transaction.

Coming to loan of Rs.3,50,000/- taken from Pratibha Aggarwal and Rs. 7,00,000/- from Poonam Aggarwal the assessee furnished the following documents in respect of the loans taken from the above parties: -

The above documents furnished by the assessee proves that the loans were taken through banking channels and repaid through banking channels, both the assessees are Income tax assessees filed returns of income. Both the parties have confirmed the loan transactions, bank statements show that these creditors had sufficient bank balances to advance loan to assessee. Therefore, the Ld.CIT(A)/AO is not justified in treating these transactions as not genuine observing that the copies of complete bank statements were not furnished, meager income was reported by the lender.

The Assessee in its grounds of appeal No.2.2 challenged the order of the Ld. CIT(A) in disallowing the interest of Rs.2,86,225/- on the addition sustained u/s 68 of the Act by enhancing the income of the Assessee. Since we have deleted the additions made u/s 68 towards unsecured loans which was sustained by the Ld.CIT(A) the interest addition on these loans which was enhanced by the Ld.CIT(A) is also deleted. The grounds raised by the assessee are allowed.

M/s Arora Jewellers Pvt. Ltd.;

M/s Hum Tum Builders Pvt. Ltd.;

M/s Prasidh Fincap Ltd.;

M/s P.P. Sintex Pvt. Ltd.;

Shri Vipul Jain

On perusal of the findings of the Ld.CIT(A) order, we find that in respect of this shareholder the Ld.CIT(A) did not accept the transaction as genuine on the ground that shareholder did not respond to the summons, filed loss return for the AY 2012-13 and accepted share application money in cash.

It is observed that the assessee furnished the following documents in respect of the above shareholder:

Confirmation of account for the FY 2011-12 & 2014-15;

Copy of acknowledgment of return for AY 2012-13 along with computation of income;

Audited financial statements;

Copy of cash book of the shareholder;

Copy of Axis Bank statement of the shareholder reflecting the repayment;

Copies of Punjab National Bank statements of the assessee showing the repayment to the shareholder.

As could be seen from the above even though the shareholder did not respond to the summons, furnished confirmation of account for assessment years 2012-13 to 2015-16, filed copy of Income Tax return for AY 2012-13, cash book, bank statement and Audited Financial Statements. On perusal of the balance sheet of the shareholder, we find that the investment in the assessee company was reflected by the shareholder. The bank statements of the assessee as well as the shareholder reflected the repayment of the share application money. It is the observation of the Ld.CIT(A) that the Assessee received share application money in cash and since the shareholder had shown loss of Rs.1,08,576/- in its return for AY 2012-13 and revenue of Rs.1,42,350/-, he is not convinced with the creditworthiness of the shareholder. Perusal of the Audited P&L account and Balance Sheet shows that the company had shown revenue from operations for FY 2010-11 at Rs.1,19,32,227/- and cash balance at Rs.85,66,055/- as on 31.03.2011. The copy of cash book of the shareholder as on 01.05.2011 shows cash balance at Rs.86,12,297/- out of which Rs.75,00,000/- was advanced as share application money to the Assessee on 07.05.2011. In so far as the observation of the authorities that Assessee received share application money in cash is concerned we see no bar in the Act for AY 2012-13 in accepting share application money in cash. In the Balance Sheet for FY 2011-12 this company has reflected short term loans and advances at Rs.86,00,000/- as against Rs.8,00,000/- in FY 2010-11. Long term borrowings for FY 2011-12 has come down to Rs.35,00,000/- from Rs.42,00,000/-. The company had shown its investment in Assessee Company in its Balance Sheet for FY 2011-12 relevant to AY 2012-13 and had sufficient cash balances to advance money to Assessee Company. Further, it is the submission of the Assessee that since the Assessee had repaid the amount to the shareholder it had not responded to the summons issued by AO. This contention of the Assessee cannot be ruled out. Therefore, all these evidences show that the assessee received share application money and also repaid, assessee furnished copy of cash book of shareholder, bank statements of both lender and Assessee reflecting the transactions. Therefore, the observation of the Ld.CIT(A) that since shareholder has filed loss return and shown only Rs.1,42,350/- as Revenue for AY 2012-13, the creditworthiness of the shareholder is not proved is not correct when the shareholder possessed sufficient cash balance reflected in its books of accounts and audited balance sheet, to advance as share application money to the Assessee. Therefore, we hold that the genuineness, identity and creditworthiness cannot be doubted for the reason that the shareholder did not respond to the summons, filed loss return for the assessment year under consideration and share application money was advanced in cash.

Confirmation of account for FY 2011-12;

ITR Ack for AY 2012-13 (alongwith ROC certificate, audited financial statements);

PNB Statement of Assessee showing repayment of Rs.30 lakhs (05.01.2015).

Confirmation of account for FY 2011-12;

Confirmation of account for FY 2014-15;

AO had made no enquiries with the lender on the evidences furnished by the Assessee. We observed that the assessee had furnished the following evidences to prove the genuineness, creditworthiness and identity:

Ledger account in the books of the assessee;

Copy of Income tax return for the AY 2012-13 of the lender;

Audited financial statements of the lender;

Bank statement of the lender with Punjab National Bank;

Copy of bank statement to prove that the loan transaction was made through banking channels both receipt as well as repayment.

We observed from the above documents that the lender is an Income tax assessee, loan was advanced through banking channels i.e. PNB, Patparganj Branch, New Delhi and the same was also repaid through the banking channels by the Assessee. The lender company in its Audited balance sheet reflected short term loans and advances at Rs.8.20 crores as on 31.03.2013 as against Rs.4.27 crores as on 31.03.2012. Long term borrowings were reflected at Rs.6.05 crores as on 31.03.2013 as against Rs.1.85 crore as on 31.03.2012 and cash and bank balances stood at Rs.75.85 lakhs as on 31.03.2013 as against Rs.5.43 lakhs as on 31.03.2012. We further observed from the balance sheet of the lender and the Directors report the lender company was incorporated on 01.09.2011 with the main object of real estate and entered into agreement of purchase of commercial plot of 5532.73 sq. meters at sector 46-A, Vasundhara, Ghaziabad. Therefore, this is the first year of operation of the lender company where it had filed NIL return for AY 2012-13 and 2013-14. Filing NIL return by the lender cannot be a ground for treating the transaction as not genuine. It is observed that AO had made no enquiries with regard to the lender except in the remand report that summons could not be served on the lender. Therefore, all these evidences goes to show that the genuineness, creditworthiness and identity cannot be doubted.

The addition was sustained by the Ld.CIT(A) for the only reason that the lender has shown meager income of Rs.2,10,000/- for the AY 2012-13. Therefore, the Ld.CIT(A) doubted the genuineness, creditworthiness and identity of the creditor. The AO has not made any adverse comments on the evidences furnished by the Assessee. We observed that the Assessee furnished the following evidences to prove the genuineness, identity and creditworthiness of the transaction:

Confirmation of account for AY 2012-13;

Copy of acknowledgement of ITR for AY 2012-13 of the lender;

Bank statements of the lender showing the payment of loan and payment of loan by the assessee as well as repayment of loan by the assessee;

Copies of bank statements by the assessee reflecting the payments through banking channels.

Above documents show that the creditor has confirmed the loan transaction, lender is an Income Tax Assessee filing returns. Copies of bank statement reflected the transaction of loan receipt as well as repayment. Lender had sufficient balance in his bank account to lend money to the Assessee. All these evidences goes to prove that the loan transaction was genuine and the assessee had proved the creditworthiness and identity of the lender.

The addition was sustained by the Ld.CIT(A) on the ground that the lender has shown meager income for AY 2012-13 and no complete bank statement was furnished. No adverse comments by AO in the remand report the assessee furnished the following documents to prove the genuineness, creditworthiness and identity:

Confirmation of accounts for the AY 2012-13 & 2013-14;

Copy of acknowledgement of ITR for AY 2012-13 by the lender;

Copy of bank statement of the lender reflecting the loan transactions made to the assessee;

Copies of bank statements of the assessee reflecting the repayment of loan through banking channels.

The creditor has confirmed the loan transaction, lender is an Income Tax Assessee, the loan transaction was made through banking channel both receipt as well as repayment. Lender had sufficient bank balance to lend money. All these evidences goes to prove that the assessee has proved the genuineness, creditworthiness and identity of the creditor.

Addition of Rs.25,00,000/- was sustained by the Ld.CIT(A) observing that meager income was shown by the lender for AY 2011-12, copy of return for AY 2012-13 was not furnished and no complete bank statement was furnished. No adverse comments by AO in the remand report. However, the assessee furnished the following evidences to prove the transaction as genuine: -

Confirmation of accounts for AY 2012-13;

Copy of acknowledgement of ITR for AY 2011-12;

Copy of bank statement of the lender showing the payment made to the assessee through banking channels;

Copy of bank statements of the assessee showing the part repayment of loan through banking channels;

Copy of bank statement of the lender shows that the lender had sufficient balance to advance the loan to the assessee;

We observed that the lender had confirmed the loan transaction. Perusal of the bank statement of the lender show that the lender had bank balance of Rs.25,06,000/- as on 01.02.2012 out of which Rs.25 lakhs was lent to the assessee on 15.03.2012. Loan transaction was made through banking channel. Lender is an Income Tax Assessee and filed return for AY 2011-12. Therefore, all these evidences goes to show that the assessee has proved the genuineness, creditworthiness and identity of the creditor.

Addition of Rs.1,40,000/- was sustained on the ground that the assessee has not furnished any documentary evidences in respect of Nidhi Jain but the assessee furnished information in respect of Vakil Chand Jain.

We observed that the assessee had furnished the following documents to prove the genuineness of the transaction:

Confirmation of account for AY 2012-13;

Copy of Bank of Maharashtra statement showing payment of loan to the assessee;

Copy of acknowledgment of return filed for AY 2014-15 by lender Vakil Chand Jain.

On perusal of the documents it is noticed that Vakil Chand Jain had confirmed the loan transaction, wherein his bank statement with Bank of Maharashtra show that he has lent Rs.1,40,000/- to the assessee through banking channels. Vakil Chand Jain had also filed return for AY 2014-15. The addition was sustained on the ground that loan was in the name of Nidhi Jain but all the documents were furnished are of Vakil Chand Jain. It is the submission of the Counsel that the loan was in fact obtained from Vakil Chand Jain. However, wrongly mentioned the name of the lender as Nidhi Jain, Nidhi Jain is one of the family members of Vakil Chand Jain. Documents produced before us show that an amount of Rs.1,40,000/- was in fact lent to the assessee by Vakil Chand Jain who has also confirmed the loan transaction having been made through the banking channels. When the amount was lent on 18.06.2011 the creditor had sufficient balance in his bank account from 07.06.2011 till 18.06.2011. The creditor is also an Income Tax assessee filing returns. Therefore, all these evidences goes to show that the loan transaction is genuine. Assessee proved the genuineness, identity and creditworthiness of the creditor.

Addition of Rs.5,00,000/- was sustained on the ground that no return was filed for AY 2012-13, bank statement was not furnished and TDS from interest payment does not prove creditworthiness of the lender and genuineness of the loan transaction. The assessee has furnished the following documents to prove the genuineness, creditworthiness and identity of the creditor:

Ledger account as per books of assessee for FY 2011-12;

Ledger account as per books of assessee for FY 2013-14;

Copy of PAN card;

PNB statement of assessee showing repayment of Rs.8,50,000/-(02.04.2014).

On going through the evidences furnished. It is observed that the assessee has furnished copy of PAN card of Radha Krishan Tuteja, copy of bank statement of the assessee reflecting the loan transaction through banking channels. The assessee has not furnished any confirmation from the lender. The assessee also did not furnish any copy of return of the lender. The assessee also not provided bank statement of the lender to prove the creditworthiness of the creditor. The documents furnished by the assessee could not prove the genuineness, identity and the creditworthiness of the creditor. Therefore, the action of the Ld.CIT(A) in sustaining the addition to the extent of Rs.5 lakhs in respect of unsecured loan from Radha Krishan Tuteja is sustained.

Addition of Rs.16,00,000/- was sustained by the Ld.CIT(A) on the ground that assessee has not furnished copy of return of the lender for AY 2012-13 and not furnished complete bank statements of the lender. No adverse comments were made by the AO on the evidences furnished by the Assessee.

The assessee furnished the following documents to prove the genuineness, creditworthiness and identity of the creditor:

Confirmation of account for FY 2011-12, AY 2012-13;

PNB statement showing payment of Rs.16,00,000/- (28.02.2012) to Assessee;

ITR acknowledgement with computation of income, P&L, Balance sheet of business and personal balance sheet of Sachin Datta.

Perusal of the above documents show that the lender had confirmed the loan transaction. He also filed return of income for the AY 2011-12 declaring income of Rs.11,51,939/-. Copy of bank statement of Punjab National Bank of the lender shows that the lender had advanced loan to the assessee on 28.02.2012 through banking channel and he had balance of Rs.31,07,650/- as on 27.02.2012 in his bank account to lend money to the Assessee. The lender had shown turnover of Rs.1,37,27,068/- and net profit of Rs.4,89,639/- from his liquor business and net profit of Rs.6,48,701/- from construction business for the year ended 31.03.2011. All these documents go to prove that the loan transaction from Sachin Datta is genuine, creditworthiness of the creditor and identity cannot be doubted simply because copy of ITR of the lender for AY 2012-13 was not furnished. The AO had made no enquiries with the lender.

Addition was sustained on the ground that lender has shown meager income for AY 2012-13 and complete bank statement was not furnished. The following documents were furnished in respect of this lender:

Confirmation of account for FY 2011-12;

Company Master Data;

Ledger account as per books of assessee for the period 01.04.2013 onwards;

PNB statement of assessee showing repayment of Rs.1000000/-(17.01.2014);

PNB statement of Assessee showing repayment of Rs.2000000/-(16.01.2014);

PNB statement of Assessee showing repayment of Rs.1268920/-(28.06.2016)

The above documents show that the lender had confirmed the loan transaction. The transaction was made through the banking channels. The assessee has repaid through banking channels along with interest lender is an Income Tax Assessee and filed return of income for AY 2012-13. The addition cannot be sustained on the ground that the assessee has not furnished the bank statement of the lender ignoring the confirmation of the loan transaction with the lender. The assessee also deducted TDS on the interest paid to the lender which was through banking channels. The Assessee repaid the entire loan alongwith interest through banking channels. The AO had made no enquiries on the evidences furnished by the Assessee. We also further find that in the remand report the Assessing Officer has not given any adverse findings on this lender. Therefore, we hold that the assessee has proved the genuineness, creditworthiness and identity of the creditor.

Addition was sustained by the Ld. CIT(A) on the ground that lender has reported meager income for the AY 2012-13 and also not furnished complete bank statement. Assessee furnished the following documents to prove the genuineness, identity and creditworthiness of the lender: -

Confirmation of account for FY 2012-13;

ITR acknowledgement for AY 2012-13;

PNB statement of assesse showing repayment of Rs.1000000/-(06.01.2014);

PNB statement of assessee showing repayment of Rs.5300000/-(03.11.2014).

On perusal of the above documents we find that the lender has confirmed the loan transaction, the assessee has deducted TDS on the interest paid, lender had furnished Income tax return for the AY 2012-13. The assessee has obtained loan through banking channels and the same was repaid through banking channels. AO has made no enquiries on the documents furnished by Assessee. Therefore, the genuineness, identity and creditworthiness cannot be doubted.

Addition in these three cases was sustained by the Ld.CIT(A) on the ground that the assessee has not furnished copy of return of the lenders for the AY 2012-13. He also observed that complete bank statement of the lender was not furnished and, therefore, the transactions are not genuine.

Assessee furnished the following documents to prove the genuineness, identity and creditworthiness of the lenders: -

Confirmation of Account for FY 2011-12 and AY 2012-13;

HDFC Bank Statement of lender showing payment of Rs.2,50,000/-(12.09.2011);

HDFC Bank Statement of lender showing receipt of Rs.2,50,000/-(10.06.2014);

PNB statement of Assessee showing repayment of Rs.2,50,000/-(11.06.2014)

Confirmation of account for FY 2011-12;

PAN Card;

PNB Statement of Assessee showing repayment of Rs.6,50,000/-(06.06.2014).

Confirmation of account for FY 2011-12 and AY 2012-13;

PAN Card of self and wife Surekha Jain;

SBI statement of lender (joint account of Yongender Kumar Jain and Surekha Jain) showing payment of Rs.6,00,000/- (20.07.2011)

On perusal of the above documents we find that the parties have confirmed the loan transactions. The assessee has furnished copy of PAN Card in the case of Vikas Verma and Yogendra Kumar Jain. Assessee has furnished copies of bank statements of the lenders, wherein the loan transactions both receipt and repayments were reflected through banking channels. The bank statements provided show that the lenders had sufficient balances to lend the money to the assessee. The transactions cannot be treated as not genuine simply for the reason that copies of Income tax returns of the lenders for the AY 2012-13 were not furnished by the assessee. Further, no enquiries were conducted by the AO on the evidences furnished by the Assessee with respect to these creditors. Therefore, we hold that the assessee had proved the genuineness, creditworthiness and the identity of the above creditors.

Based on the findings of the Assessing Officer in the remand report and on analyzing the evidences furnished by the assessee the Ld.CIT(Appeals) partly deleted the addition made towards unsecured loans and partly sustained the addition. It is observed from the Ld.CIT(Appeals) order that the addition made towards unsecured loans from the following creditors have been sustained which are mentioned in sl. nos. 1, 4, 5 & 7 of the table (B) extracted above:

M/s Aadyshee Constructions - Rs.45,00,000/-

M/s Radha Krishan Tuteja - Rs. 3,50,000/-

M/s Raj Kumari Tuteja - Rs. 3,50,000/-

Vikas Verma - Rs. 4,00,000/-

The Ld. CIT(Appeals) sustained the addition on the ground that the creditor did not make personal appearance, the Income tax return filed by the creditor for the AY 2013-14 showed meager income of Rs.2,15,900/- and complete bank statement of the lender was not provided based on the comments of the AO in the remand report.

The assessee furnished the following documents to support its contention that the transaction is genuine and also the creditworthiness and identity of the creditor is proved:

Confirmation of account for FY 2012-13;

Confirmation of account for FY 2016-17;

PNB Statement of lender showing payment of Rs.45 lakhs (July 2012)

ITR Ack. for the AY 2013-14;

PNB Statement of Assessee showing repayment of Rs.45 lakhs (31.03.2017).

On perusal of these documents it is observed that the assessee had furnished confirmation of accounts for the FY 2012-13 relevant to the AY 2013-14 and also the confirmation of account for the FY 2016-17 relevant to AY 2017-18 from the creditor. Copy of ITR of the lender for AY 2013-14 was furnished. Though the creditor did not appear in person it had filed all these documents in DAK before AO during remand proceedings. The assessee also furnished copy of bank statement of the creditor, wherein the transaction of receipt of loan was reflected. Assessee also furnished copy of acknowledgement of Income tax return of the lender for the AY 2013-14 declaring income of Rs.3,35,858/-. The assessee also furnished its bank statement to show that the loan of Rs.45 lakhs was repaid through banking channels. On perusal of the bank statement of the lender as on 15.07.2012 with Punjab National Bank shows that the lender had credit balance of Rs.72,49,419/- and as on the date of lending of loan to the assessee on 23.07.2012 the creditor had bank balance of Rs.75,04,194/-, out of which an amount of Rs.45 lakhs was lent to the assessee. Therefore, all these evidences goes to prove that the loan transaction is genuine and assessee proved the creditworthiness and identity of the creditor. Therefore, the loan received by the assessee from Aadyashee Constructions cannot be doubted simply because there was no personal attendance by lender and meager income was shown in the return.

It is observed that the Ld.CIT(A) sustained the addition on the ground that the assessee has not furnished copy of Income tax return of these creditors and also not furnished complete bank statement. The assessee furnished the following documents to prove the genuineness, identity and creditworthiness of the creditors:

Ledger account as per books of Assessee;

OBC Statement showing payment of Rs.3,50,000/- (30.03.2013);

PNB Statement of Assessee showing repayment of Rs.8,50,000/-(02.04.2014).

Ledger account as per books of Assessee;

PNB Statement of Assessee showing receipt of Rs.3,50,000/-(30.03.2013);

PNB Statement of Assessee showing repayment of Rs.3,50,000/-(02.04.2014).

On perusal of the documents furnished, we observed that the assessee has not furnished any confirmation from these creditors. The assessee has also not furnished any bank statement of the lender in the case of Raj Kumari Tuteja. In respect of Radha Krishan Tuteja, the assessee has furnished copy of bank statement said to be belonged to Radha Krishan Tuteja which is incomplete and it is not known from this statement whether it belongs to Radha Krishan Tuteja. While dealing with this creditor for the AY 2012-13 we have held that the assessee has not proved the identity of this creditor as the assessee has furnished only copy of PAN Card and neither furnished any confirmation nor bank statement. Therefore, the documents furnished by the assesse in respect of these creditors do not prove the genuineness, identity and creditworthiness of these creditors in the absence of confirmation and bank statements from the creditors. Thus, we sustain the action of the Ld.CIT(Appeals) in sustaining the addition made towards unsecured loans in respect of these two creditors.

It is observed that the addition was sustained by the Ld.CIT(A) on the ground that the assessee has not furnished copy of Income tax return of the creditor and also the bank statement.

We observed that the assessee furnished the following documents:

Confirmation of account for FY 2012-13;

Confirmation of account for FY 2013-14;

PAN Card;

PNB Statement of Assessee showing receipt of Rs.4,00,000/-(26.07.2012);

PNB Statement of Assessee showing repayment of Rs.6,50,000/-(06.06.2014).

On perusal of the documents it is observed that the lender had confirmed the loan transaction both payment as well as repayment of loan. The assessee has furnished copy of PAN Card of the lender and also the bank statement of the assessee reflecting the loan transactions by way of banking channels both receipt as well as repayment. Therefore, since the lender had confirmed the loan transactions both payment to the assessee as well as repayment from the assessee, the genuineness, identity and creditworthiness cannot be doubted simply because the summons were returned unsecured and lender declined to accept the letter. It is also observed that while dealing with this creditor for the AY 2012-13 we have held that the loan transaction was genuine.

Now we take up the appeal of the Assessee for the AY 2014-15 in ITA No.3321/Del/2019. Both the parties submitted that the issue in this appeal is with respect to addition made u/s 68 with regard to unsecured loans and this appeal is also identical to the appeals filed by the assessee for the AY 2011-12 to 2013-14. Both the parties advanced similar arguments as that of the arguments made in the appeals for the assessment years 2011-12 to 2013-14.

Heard rival contentions, perused the orders of the authorities below and the evidences furnished before us. For the AY 2014-15 the Ld.CIT(Appeals) partly sustained and partly deleted the additions made by the AO towards unsecured loans based on the comments in remand report furnished by the AO in the course of appellate proceedings and the evidences furnished by the Assessee. The observations of the Ld.CIT(A) based on the comments in remand report of the AO and the evidences furnished by the Assessee are as under:

It is observed that the AO had made his comments in the remand report only in respect of the parties in Sl. No. 5 to 10 the above Table-B. Based on the findings of the Assessing Officer in the remand report and on analyzing the evidences furnished by the assessee the Ld.CIT(Appeals) partly deleted the addition made towards unsecured loans and partly sustained the addition.

It is observed from the Ld.CIT(Appeals) order that the addition made towards unsecured loans from the following creditors have been sustained which are mentioned in sl. nos. 1 to 11 except in sl. no. 10 i.e. Sh. Ram Babu Kabra, wherein the Ld. CIT(A) accepted the unsecured loan of Rs.60 lakhs received by the assessee for the reason that the assessee had shown income of Rs.1,53,29,900/- for the AY 2014-15 and the assessee furnished bank statement of the creditor reflecting the loan transaction and also furnished confirmation of loan transaction from the creditor.

However, the Ld.CIT(A) sustained the credits from the following creditors:

Sh. Aman Mittal Rs.5 lakhs;

Ms. Anju Mittal Rs.10 lakhs;

Ms. Meena Kabra Rs.15 lakhs;

M/s Nand Karin & Sons Rs.25 lakhs;

M/s Peace Enterprises Rs.50 lakhs;

Param Ved Goel (HUF) Rs.50 lakhs;

Sh. Ram Avtar Jindal Rs.50 lakhs;

M/s Rudra Buildwell Projects Pvt. Ltd. Rs.1 crore;

Sh. Sachin Chawla Rs.35,50,000/-

Ms. Urmila Tiwari Rs.6,50,000/-

The Ld. CIT(A) sustained the addition on the ground that assessee has not furnished complete bank statement of the creditor in the case of Sh. Aman Mittal. In the case of Ms. Anju Mittal and Ms. Meena Kabra the Income tax returns filed by the creditors showed meager income of Rs.2,19,570/- and Rs.3,14,330/- respectively and the complete bank statement of the creditors were not furnished.

We observed that the assessee furnished the following documents in support of its contention that the loan transactions are genuine, identity and creditworthiness of the creditor are proved:

Confirmation of account for FY 2013-14;

Confirmation of account for FY 2014-15;

Corporation Bank Statement of Aman Mittal showing payment of Rs.5,00,000/- (24.02.2014) and also receipt of Rs.5,00,000/-(08.04.2015);

ITR Ack for AY 2014-15;

PNB Statement of Assessee showing receipt of Rs.5,00,000/-(20.02.2014);

PNB Statement of Assessee showing repayment of Rs.5,00,000/-(07.04.2015).

Confirmation for FY 2013-14;

Confirmation for FY 2014-15;

Corporation Bank Statement of Anand Sarup Mittal & Anju Mittal showing payment of Rs.5,00,000/- (February 2014);

Corporation Bank Statement of Anand Sarup Mittal & Anju Mittal showing receipt of Rs.5,00,000/- (April 2015);

Syndicate Bank statement of Anju Mittal showing receipt of Rs.5,00,000/- (2014);

Syndicate Bank statement of Anju Mittal showing receipt of Rs.5,00,000/- (March 2015);

ITR Ack for AY 2014-15;

PNB Statement of Assessee showing receipt of Rs.5,00,000/-(14.02.2014);

PNB Statement of Assessee showing receipt of Rs.5,00,000/-(15.02.2014);

PNB Statement of Assessee showing repayment of Rs.5,00,000/-(07.04.2015);

PNB Statement of Assessee showing repayment of Rs.5,00,000/-(21.04.2015);

Confirmation of account for FY 2013-14;

Confirmation of account for FY 2014-15;

HDFC Bank Statement of Meena Kabra showing payment of Rs.15,00,000/- (04.10.2013)

ITR Ack for AY 2014-15;

PNB Statement of Assessee showing repayment of Rs.15,00,000/-(06.04.2015).

On perusal of the above documents we observed that all the three creditors have confirmed the loan transactions both lending of money to the assessee as well as repayment of loan from the assessee. The documents also show the bank statements of the creditors reflecting the loan transactions having been made through banking channels. The assessee has furnished copy of Income tax returns of these creditors to prove the identity. All these documents showed that the creditors are genuine they have sufficient balances in their bank accounts to lend money and the identity was proved and, therefore, the credits cannot be disbelieved and treated as unexplained in the hands of the assessee simply because the lenders have shown meager income for the AY 2014-15 when compared to the loans advanced to the assessee. Further we observed that no enquiries were carried out by the AO and no adverse comments were made in the remand report.

The Ld. CIT(A) sustained the addition on the ground that the creditors have shown meager income for the AY 2014-15 and complete bank statements were not furnished. The assessee has furnished the following documents as to prove the loan transactions as genuine:

Confirmation of account for FY 2013-14;

Confirmation of account for FY 2015-16;

Bank Statement showing payment of Rs.25,00,000/- (21.01.2014)

ITR Ack for AY 2014-15;

PNB Statement of Assessee showing repayment of Rs.25,00,000/-(30.03.2017).

Confirmation of account for FY 2013-14;

Confirmation of account for FY 2014-15;

BOB Statement showing payments of Rs.25,00,000/- (21.01.2014) & Rs.25,00,000/- (21.01.2014);

ITR Ack for AY 2014-15;

PNB Statement of Assessee showing repayment of Rs.50,00,000/-(18.01.2014).

Confirmation of account for FY 2013-14;

Confirmation of account for FY 2016-17;

BOB Statement showing payments of Rs.50,00,000/- (18.11.2013);

ITR Ack for AY 2014-15;

PNB Statement of Assessee showing repayment of Rs.50,00,000/-(27.09.2016).

On perusal of the documents furnished by the assessee it is noticed that the creditors have filed confirmations of the loan transactions both lending money to the assessee as well as repayment made by the assessee to the creditors. The assessee has furnished copies of Income tax returns of the creditors, bank statements of the creditors, wherein the transactions were reflected having been made through banking channels. The bank statements of the creditors showed that they had sufficient balances to lend monies to the assessee and all the transactions were made through NEFT/RTGS. All these documents prove the genuineness, creditworthiness and identity of the creditors. These creditors cannot be doubted simply because the creditors have shown incomes of Rs.5,58,010/-, 3,75,390/- and Rs. 8,18,580/- respectively for the AY 2014-15 when the creditors have sufficient bank balances to lend monies to the assessee. Genuineness of the documents cannot be doubted when no further enquiries were carried out except commenting that either summons were returned or no personal appearance was made by the creditors ignoring the evidences furnished by the lender in DAK and the evidences furnished by the Assessee.

The reasons for sustaining the addition by the Ld.CIT(A) is that the assessee has not furnished copy of Income tax return for the AY 2014-15, and no complete bank statement of the creditor was furnished. However, the assessee had furnished the confirmation of loan transaction from the creditor. Copy of Income tax return for the AY 2013-14 declaring income of Rs.21,85,276/-, copy of bank statement of Ram Avtar Jindal reflecting the loan transaction by way of banking channels i.e. RTGS made to the assessee. The bank statement of the creditor shows sufficient balance to lend monies to the assessee. Therefore, all these evidences goes to prove the genuineness, identity and creditworthiness of the creditor and thus, there is no justification in treating the said credit as unexplained simply because the assessee has not furnished copy of Income tax return of the lender for the AY 2014-15 completely ignoring the Income tax return of the creditor filed for the AY 2013-14 declaring income of Rs.21,85,276/-, confirmation of loan and bank statements furnished.

The Ld.CIT(A) sustained the addition on the ground that the creditors namely Rudra Buildwell Projects Pvt. Ltd. and Sachin Chawla showed less income for the AY 2014-15 complete bank statement of the creditor was not furnished, no personal attendance by the creditors. Similarly in the case of M/s Urmila Tiwari the addition was sustained on the ground that complete bank statement was not furnished.

We observed that the assessee furnished the following documents in respect of the above creditors to prove that the loan transactions are genuine, identity and creditworthiness is proved:

Confirmation of account for FY 2013-14;

AXIS Bank Statement showing payment of Rs.1,00,00,000/-(22.05.2013);

ITR Ack for AY 2014-15;

PNB Statement of Assessee showing repayment of Rs.50,00,000/-(28.01.2016);

PNB Statement of Assessee showing repayment of Rs.20,00,000/-(16.02.2016);

PNB Statement of Assessee showing repayment of Rs.25,00,000/-(03.03.2016).

Confirmation of account for FY 2013-14;

Confirmation of account for FY 2016-17;

IOB Statement showing payment of Rs.35,50,000/- (20.03.2014);

IOB Statement showing receipt of Rs.35,50,000/- (02.06.2016);

ITR Ack for AY 2014-15;

PNB Statement of Assessee showing repayment of Rs.35,50,000/-(02.06.2016).

Confirmation of account for FY 2013-14;

HDFC Bank Statement showing payment of Rs.6,50,000/-(08.10.2013);

ITR Ack for AY 2013-14.

Perusal of the above documents show that all the creditors have confirmed the loan transactions. The loan transactions were reflected through banking channels. The assessee has furnished copy of bank statements of the lenders. The loans were also repaid through banking channels. The assessee also furnished copies of Income tax returns for the AY 2014-15 in the case of Rudra Buildwell Projects Pvt. Ltd. and Sachin Chawla. The lenders Rudra Buildwell and Sachin Chawla declared income of Rs.24,04,494/- and Rs.6,37,980/- respectively for AY 2014-15. In the case of Urmila Tiwari the assessee furnished Income tax return for the AY 2013-14 declaring income of Rs.4,05,218/-. All these evidences goes to show the genuineness, creditworthiness and identity of the creditors and, therefore, the credits in the name of these creditors cannot be treated as an unexplained simply because the creditors have shown meager income in their returns for the AY 2014-15, not responded to summons, no personal attendance, submissions filed in DAK.

In view of the above discussion, we are of the view that the AO as well as the Ld.CIT(A) are not justified in treating the unsecured loans received by the assessee from the above parties as not genuine and as unexplained credits in the hands of the assessee. We direct the AO to delete the additions made towards unexplained credits in respect of the unsecured loans received by the assessee from the above parties mentioned in sl. nos. 1 to 9 and 11 of Table- B extracted above. The grounds raised by the assessee are allowed.

Coming to the case laws, the Ld.CIT(A) placed reliance on the decision of the Hon’ble Delhi High Court in the case of CIT Vs. NR Portfolio (P) Ltd. This case is distinguishable on facts. The Assessee failed to produce necessary evidences to prove the genuineness of the share application money received from the shareholders. The AO made extensive enquiries of the shareholders and found that the shareholders are not existed on the address given by the Assessee. Inspector was deputed to make enquiries of the shareholders. This is not the case on hand before us. Assessee had produced all the evidences to prove the genuineness, identity and creditworthiness of the transactions remand was called for an AO made limited enquiries, CIT(A) based on the comments of the AO in remand report and on appreciation of evidences produced by Assessee gave part relief. AO has not made sufficient enquiries to prove the transactions are not genuine. The shareholders are income tax assessees filing return of income and audited financial statements and some of them were present physically and some of the shareholders/loan creditors filed all the information and documents in DAK before AO in the remand proceedings. AO has not made enquiries to prove that the shareholders are non-existent. This decision has no application to the facts of the Assessee’s case.

In the case of Onassis Axles Private Limited Vs. CIT in ITA No.31/2013 dated 13.02.2014 on which the CIT(A) relied on we observed that the AO made enquiries to prove the share application is not genuine unlike in Assessee’s case. The findings of the ITAT that the share applicant as bogus was upheld based on the findings of the ITAT that the shareholders are not existent on the address given. Therefore, the case laws relied on by the Ld.CIT(A) cannot be applied to the facts of the assessee’s case.

In the case of CIT Vs. Nova Promoters and Finlease (P) Ltd. [342 ITR 169] on which reliance was placed by Ld.CIT(A) the facts are that the Assessee has taken accommodation entry in the name of share application money from the accommodation entry providers and the AO had sufficient material with him to establish link between self confessed accommodation entry providers and the entries provided by them to the Assessee. In this background of facts the Hon’ble High Court held as under: -

As could be read from the above the general proposition that where complete particulars of share applicants such as their names and addresses, income tax file numbers, their creditworthiness, share application Form, transfer register etc., are furnished to the AO and the AO has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false and cannot be acted upon, then no addition can be made in the hands of the company u/s 68 and the remedy open to the Revenue is to go after the share applicants in accordance with law was affirmed by the Hon’ble High Court. Therefore, as a matter of principle this decision of the Hon’ble Delhi High Court supports the case of the Assessee in the background of the facts of the Assessee.

The Hon’ble Supreme Court in the case of CIT Vs. Orissa Corporation (P) Ltd. (159 ITR 78) held as under:

As could be seen from the above the Hon’ble Supreme Court has held that when Assessee borrows loan and gives names and addresses of creditors who are assessed to tax and full particulars are furnished then the Assessee had discharged its duty. If the Revenue merely issues summons u/s 131 of the Act and does not pursue the matter further the Assessee does not become responsible even if the creditors do not appear before AO.

We observed that the Hon’ble Delhi High Court in the case of CIT Vs. Value Capital Services (P) ltd. (307 ITR 334) held if the Assessee had produced the income tax returns, confirmations, PAN letter, share application forms, ration card, bank statements, etc. in respect of the share applicants, the principle that has been laid down by various decisions rendered by the Delhi High Court from time to time is that if the existence of the applicant is proved normally no further enquiry is necessary. It was also held that if the rename has any doubt with regard to ability of shareholder to make investment, the assessments of the shareholders may be reopened by the department. It was further held that the Revenue must show that even if the shareholder does not have the means to make the investment, such investment made by the applicant actually emanated from the coffers of the Assessee so as to enable it to be treated as undisclosed income of the Assessee.

We further observed that the Hon’ble Delhi High Court in the case of CIT Vs. Lovely Exports (P) Ltd. (299 ITR 268) held as under: -

The Income-tax Appellate Tribunal has dismissed the Revenue’s appeal and thus there are concurrent findings pertaining to the factual matrix. The following paragraph from the impugned decision adequately encapsulates the necessary details:

No question of law, far less any substantial question of law arises for our consideration. We may, however, briefly reflect upon a submission made by learned counsel for the respondent to the effect that the assessee had, by its letter dated March 8, 1999, requested the Assessing Officer to examine the assessment records of the share applicants whose GR Nos. had been supplied. It is not controverted that action was not taken by the Assessing Officer, but it has justifiably been contended that this inaction was due to paucity of time left at that stage since the assessment had to be framed by March 31, 1999. It has been pointed out that several adjournments had been granted by the Assessing Officer on the asking of the assessee. The timing of the assessee's said letter is most suspect. Generally speaking, it is incumbent on the Assessing Officer to manage his schedule, while granting adjournments, in such a manner that he does not run out of time for discharging the duties cast on him by the statute. In the present case, the details had been furnished to the Assessing Officer much before March 1999, but he failed to react to the shifting of the burden to investigate into the creditworthiness of the share applicants. Therefore, the appeal is dismissed.”

The SLP filed by the Revenue against the decision of the Hon’ble Delhi High Court in the case of CIT Vs. Lovely Exports (P) Ltd. (supra) is dismissed by the Hon’ble Supreme Court (319 ITR St. 5) observing as under: -

We observed that the Hon’ble Allahabad High Court in the case of CIT Vs. Jay Dee Securities and Finance Ltd. (350 ITR 220) held as under:

As could be seen from the above the Hon’ble High Court held that the burden of proving source of share capital gets discharged once the Assessee files copies of confirmations and copies of Income Tax returns. It was also held that if the Assessing Authority is not satisfied with the creditworthiness of the shareholder it is open to the AO to verify the same in the hands of the shareholder and not the Assessee Company.

In the case of CIT Vs. Misra Preservers (P) Ltd. (350 ITR 222) (All.) the Hon’ble Allahabad High Court held as under: -

In the case of CIT Vs. Nav Bharat Duplex Ltd. (217 Taxman 17) the Allahabad High Court held as under: -

As could be seen from the above the Hon’ble Allahabad High Court held that the Hon’ble Supreme Court in the cases of CIT Vs. Steller Investment Ltd. (251 ITR 263) and in CIT Vs. Lovely Exports it was held that the identity of shareholder alone is required to be proved in case of capital contributed by the shareholders.

In the case of Pr. CIT Vs. Sreeleathers (448 ITR 332) the Hon’ble Calcutta High Court held as under: -

In the case of CIT Vs. Vrindavan Farms (P) Ltd. in ITA No. 71, 72 & 84/2015 dated 12.08.2015 the Hon’ble Delhi High Court held as under: -

In the case of PCIT Vs. Ambey Trade Corporate Private Limited (147 Taxmann.com 375) the Hon’ble High Court OF gUJARAT held that where the assessee company claimed that amount recorded in account books was received towards share application money from creditor and was paid that fully and moreover account books showed source of funds and identity of party It was not opened to AO to raise doubt about creditworthiness of the creditor. While holding so the Hon’ble High Court observed as under: -

My learned Brother has taken note of the fact of the documents submitted relating to confirmation of account, bank statement, ITRs, repayment and noted that the loan transaction was made through banking channels. He also noted that the creditor had sufficient funds in the bank to lend monies wherein interest paid on loan was shown as income by the creditor, TDS was being deducted and therefore the same cannot be treated as not genuine, only for the reason that the creditor had shown meagre income in his return of income and did not appear in person ignoring all other documents furnished by the creditor in the DAK. He, therefore, held that the assessee had proved the identity, creditworthiness and genuineness of the transaction.

In this regard, the details of the immediate credit entries in the bank account of the creditor before the unsecured loan was advanced to the assessee and my observation in the ‘remarks’ in the table below, is as under:-

In view of my above observation in the ‘remarks’ column, it is seen that the creditworthiness and genuineness of the transaction has not been established by the assessee as the immediate source of credit of the creditor in his bank account remains unexplained. In this regard, the creditor did not appear in response to summons u/s 131 of the Act and therefore the source of the immediate credit in the bank account of the creditor remains unexplained and therefore, the genuineness of the transaction is not established. Therefore, in absence of the explanation regarding immediate credit in the bank account of the creditor, I do not agree with the finding of my learned Brother that the assessee had sufficient funds for advancing the unsecured loan to the assessee company. In this regard, the Id. CIT(A) has also observed that the assessee has a meagre income of Rs. 1,64,862/- for AY 2011-12. Further, the source of advancing the unsecured loan is not out of the income/funds of the creditor but as per the narration on the bank statement, it is out of a gift for which there is no narration and in absence of the same, the source of the credit remains unexplained. Further, I also do not agree with the view of the learned Brother that repayment of the unsecured loan will be one of the ground to treat the unsecured loan as genuine because if at the first instance, the creditworthiness and genuineness of the same is not established then the provisions of section 68 of the Act will get attracted and it cannot escape taxation under section 68 of the Act merely on the ground of its repayment at a later stage or deduction of TDS on the interest income and offering of the interest income by the creditor. However, since, the assessee had filed loan confirmation but did not appear in response to summons u/s 131 of the Act and therefore in order to sub-serve the interest of justice and to give one more opportunity to the assessee to explain the creditworthiness of the creditor, the order of the Ld. CIT(A) is set-aside on this issue and is restored to the file of the AO with a direction to frame the assessment de novo on this issue keeping in view the above observation after giving due opportunity of being heard to the assessee and as per law.

My learned brother has taken note of the fact of the documents submitted relating to confirmation of account, bank statement, ITRs, repayment and noted that the loan transaction was made through banking channels and also the assessee received and repaid through banking channels. He also noted that the bank statement shows that the creditor had sufficient funds to lend monies and therefore the same cannot be treated as not genuine, only for the reason that the creditor had shown meagre income in his return of income and filed loss return. He, therefore, held that the assessee had proved the identity, creditworthiness and genuineness of the transaction.

In this regard, the details of the immediate credit entries in the bank account of the creditor and my observation in the ‘remarks’ in the table below, is as under:-

In view of my observation, it is seen that the creditworthiness and genuineness of the transaction has not been established by the assessee as the immediate source of credit of the creditor in his bank account remains unexplained. In this regard, no response was received by the AO and therefore the source of the immediate credit in the bank account of the creditor remains unexplained and therefore, the genuineness of the transaction is not established. Therefore, in absence of the explanation regarding immediate credit in the bank account of the creditor before, I do not agree with the finding of my learned Brother that the assessee had sufficient funds for advancing the unsecured loan to the assessee company. In this regard, the Id. CIT(A) has also observed that the assessee has a meagre income of Rs.65,000/- and current year loss of Rs.23,13,994/- for AY 2011-12.Further, the source of advancing the unsecured loan is not out of the income/funds of the creditor and therefore, it becomes more incumbent on the part of the creditor to explain the immediate source of credits, which have been utilized for advancing the unsecured loan. Further, I also do not agree with the view of the learned Brother that repayment of the unsecured loan will be one of the ground to treat the unsecured loan as genuine because if at the first instance, the creditworthiness and genuineness of the same is not established then the provisions of section 68 of the Act will get attracted and it cannot escape taxation under section 68 of the Act merely on the ground of its repayment at a later stage. However, since, the assessee has filed loan confirmation but did not file any response before the AO, therefore, in order to sub-serve the interest of justice and to give one more opportunity to the assessee to explain the creditworthiness, the order of the Ld. CIT(A) is set-aside on this issue and is restored to the file of the AO with a direction to frame the assessment de novo on this issue keeping in view of the above observation after giving due opportunity of being heard to the assessee and as per law.

The details of the shares subscription are as under:-

My learned Brother has deleted this addition mainly on the ground that the shareholder had cash balance at Rs.85,66,055/- as on 31.03.2011 and further the cash book of the shareholder shows cash balance at Rs.86,12,297/- as on 01.05.2011 (page-161 of the paper book) out of which Rs.75,00,000/- was advanced as share application money to the assessee on 07.05.2011. He also took note of the fact that the bank statement of the assessee as well as the shareholder reflected the repayment of share application money. Further, he took note of the explanation of the assessee that the creditor did not appear in response to the summons, since the amount was already repaid to the creditor by the assessee. Further, he also noted that during this period, there was no bar in the Act for AY 2012-13 in accepting share application money in cash and the AO did not make any adverse remark in the remand report. However, the same is not acceptable in view of the observation of the Id. CIT(A) that the assessee had filed a loss return of Rs. 1.08 lakhs and the assessee did not appear in response to summons u/s 131 of the Act. Therefore, the authenticity of the cash ledger on page no. 161 of the paper book showing cash balance of Rs.86,12,297/-as on 01.05.2011 is not established. Further, the cash flow is on 01.05.2011 and this does not explain the source of share subscription as on 07.05.2011.Further, I also do not agree with the view of the learned Brother that repayment of the unsecured loan will be one of the ground to treat the unsecured loan as genuine because if at the first instance, the creditworthiness and genuineness of the same is not established then the provisions of section 68 of the Act will get attracted and it cannot escape taxation under section 68 of the Act merely on the ground of its repayment at a later stage. Therefore, the creditworthiness of the share subscribers and the genuineness of the transaction is not established.

In this regard, I do not agree with my learned Brother agreeing to the plea of the assessee that the creditor did not appear in response to the summons, since the amount was by that time repaid back by the assessee, because the onus to explain the source was at the time of advancing the money in cash by creditor towards the share subscription which was not done by the creditor in this case. However, since the assessee had submitted the cash balance at Rs.86,12,297/- as on 01.05.2011 (page-161 of the paper book) in fairness and to subserve the interest of justice, the order of the Ld. CIT(A) is set-aside on this issue and the matter is restored to the file of the AO with a direction to frame the assessment de novo on this issue keeping in view the above observation after giving due opportunity of being heard to the assessee and as per law.

The details of the shares subscription are as under:-

My learned Brother has deleted this addition mainly on the ground that the shareholder reflected cash balances as on 31.03.2011 at Rs. 1,10,37,594/- and Rs.89,33,685/- as on 31.03.2012 and the assessee received share application money of Rs.10 lakhs on 17.05.2011 and 13.01.201 lin cash from the shareholder, which was also confirmed by the shareholder. He also took note of the financials of the of the creditor and the income of Rs. 11,06,900/- filed by the creditor. He also took note of the fact that the assessee had repaid the share application money by cheque. He also took note of the fact that the AO did not make any enquiry in this case. However, in this case the availability of cash balance in the hands of the share applicant as on the dates of subscribing are not established as the availability of cash balance as on 31.03.2011 and 31.03.2012 does not explain the share subscription on 17.05.2011, 07.07.2011 and 13.07.2011. Further, as stated above by the Ld. CIT(A), the immediate source of cash flow has not been submitted and the investment in the shares were not reflected in the financials of the creditor as the break-up of the investment in equity shares was not available. Therefore, the source of shares subscription has not been established. Further, the fact of repayment for treating the share capital as genuine is not acceptable in view of the fact that if at the first instance, the creditworthiness and genuineness of the same is not established then the provisions of section 68 of the Act will get attracted and it cannot escape taxation under section 68 of the Act merely on the ground of its repayment at a later stage. Therefore, I do not agree with the findings of my learned Brother.

The AO has not given any adverse remarks in the remand report even though the Id. CIT(A) confirmed the addition with the findings as stated above. However, the creditworthiness and the genuineness of the transaction is required to be examined by the Tribunal also on the basis of evidences placed before it. As discussed above, the evidence in this case does not explain the specific source of the cash available on the date of share subscription, therefore, the source of subscription is not available on the basis of evidences placed before the Tribunal. Moreover, even though, there was no bar in accepting share capital in cash during this assessment year but the acceptance of share capital in such a huge amount and that too from the Private Limited Company which has invariably the facility of current account and cheque facilities raises strong suspicion about the creditworthiness and genuineness of the transaction. The Ld. CIT(A) also took note of the fact that no cash flow statement was submitted and that the investment was not reflected in the financial statements of the creditor company as the break-up of investment was not available. In the given facts of the case, it is seen that the assessee had not established the capacity and creditworthiness of the share applicant. Therefore, instead of deleting the addition, the matter is to be set-aside to the file of the AO for fresh examination regarding the identity, creditworthiness and genuineness of the transactions, which are essential to get out of rigours of section 68 of the Act. In this regard, the provisions of section 254(1) of the Income Tax Act, is reproduced as under: -

Thus, it is seen that the responsibility given to the Tribunal to decide an appeal is given in the widest amplitude. However, the same will be governed by the principles of equity, reasonableness and fairness and keeping in mind that it is the final fact finding authority. Further, after the order of the Tribunal the dispute travels to Hon’ble High Court and the Hon’ble Supreme Court only on the issue of substantial question of law.

As discussed above, I do not agree with the finding of my learned Brother about the source of availability of funds for advancing shares subscription amounting to Rs.30 lakhs. However, since the confirmation- was filed by the assessee and therefore to subserve the interest of justice, the order of the Ld. CIT(A) is set-aside on this issue and the matter is restored to the file of the AO with a direction to frame the assessment de novo on this issue keeping in view the above observation after giving due opportunity of being heard to the assessee and as per law.

The details of the shares subscription are as under:-

My learned Brother has deleted this addition mainly on the ground that the shareholder reflected cash balances as on 31.03.2011 at Rs.21.77 lakhs and the assessee received share application money of Rs.20 lakhs on 25.05.2011. My learned Brother also took note of the confirmation of accounts for AY 2011-12 and 2014-15 and the financials of the audited balance sheets and profit & loss account and also about the fact of repayment of share subscription. Further, he noted that the AO did not make any enquiry in this matter. However, in this case the availability of cash balance in the hands of the share applicant as on the date of subscribing is not established as the cash balance as on 31.03.2011 does not explain the share subscription on 25.05.2011. Further, as stated above by the Ld. CIT(A), the immediate source of cash flow has not been submitted and the investment in the shares were not reflected in the financials of the creditor as the break-up of the investment in equity shares was not available. Therefore, the source of shares subscription has not been established. Further, the fact of repayment for treating the share capital as genuine is not acceptable in view of the fact that if at the first instance, the creditworthiness and genuineness of the same is not established then the provisions of section 68 of the Act will get attracted and it cannot escape taxation under section 68 of the Act merely on the ground of its repayment at a later stage. Therefore, I do not agree with the findings of my learned Brother.

^5.1. However, in this case also, it is seen that the AO has not given any adverse remarks in the remand report. In this case, the confirmation was filed by the assessee. Therefore, in view of my reasoning given in the case of M/s Hum Turn Builders Pvt. Ltd. as earlier in this order, since the confirmation was filed by the assessee and, therefore to subserve the interest of justice, the order of the Ld. CIT(A) is set-aside on this issue and the matter is restored to the file of the AO with a direction to frame the assessment de novo on this issue keeping in view the above observation after giving due opportunity of being heard to the assessee and as per law.

However, in this case also, it is seen that the AO has not given any adverse remarks in the remand report. In this case, the confirmation was filed by the assessee. Therefore, in view of my reasoning given in the case of M/s Hum Tum Builders Pvt. Ltd. as earlier in this order, since the confirmation was filed by the assessee and, therefore to subserve the interest of justice, the order of the Ld. CIT(A) is set-aside on this issue and the matter is restored to the file of the AO with a direction to frame the assessment de novo on this issue keeping in view the above observation after giving due opportunity of being heard to the assessee and as per law.

My learned Brother took note of the fact that the assessee has provided copy of confirmation of account for AY 2011-12 and 2012-13, copy of acknowledgment of ITR for AY 2011-12 of the lender and the copy of the bank statements of the lender to show that the loan was advanced through banking channels and also the copy of bank statement of the lender to show that assessee has repaid through banking channels. Further, my learned Brother stated that the lender had current account from which account the lender has advanced loans through RTGS to the assessee and the assessee has also repaid the loans through banking channels from its Punjab National Bank through RTGS. He further held that the genuineness, creditworthiness and identity cannot be doubted simply because the assessee has shown loss for AY 2011-12 and summons were returned unserved. He also noted that the lender had confirmed the loan transaction and the AO had not made any further enquiries with regard to lender except observing in the remand report that the summons could not be delivered.

My learned Brother has taken note of the fact that the AO did not make any enquiry with the lenders in respect of the evidences furnished by the assessee. He also took note of the documents submitted relating to ledger account in the books of the assessee, bank statement, ITRs, repayment and noted that the loan transaction was made through banking channels and also the assessee received and repaid through banking channels. My learned Brother also discussed about the financials of the creditor and also noted that this company was incorporated on 01.09.2011 and this being the first year of operation of the lender company, filing of return at NIL by the lender cannot be a ground for the treating the transactions as not genuine. He, therefore, held that the genuineness, creditworthiness and identity cannot be doubted. He, therefore, held that the assessee had proved the identity, creditworthiness and genuineness of the transaction.

However, since, the assessee has confirmed the loan transaction and submitted the ledger account of the creditor, but since the immediate source of the credit is in cash and therefore in view of the discussion in the case of M/s Hum Tum Builders Pvt. Ltd., this issue needs to be set-aside to the file of the AO to verify the source of the above cash, which is the immediate source of lending to the assessee. Therefore in order to sub-serve the interest of justice and to give one more opportunity to the assessee to explain the creditworthiness, the order of the Ld. CIT(A) is set-aside on this issue and is restored to the file of the AO with a direction to frame the assessment de novoon this issue keeping in view the above observation after giving due opportunity of being heard to the assessee and as per law.

My learned Brother has taken note of the documents submitted relating to confirmation of account, bank statement, ITRs, acknowledgment for AY 2013-14 repayment and noted that the loan transaction was made through banking channels and also the assessee received and repaid through banking channels. He also noted that though the creditor did not appear in person, it had filed these documents in DAK before the AO during the remand proceedings. He also noted that on perusal of the bank statement of the lender, it is seen that the lender had credit balance of Rs.72.49 lakhs and on the date of lending the loan on 23.07.2012, it had credit balance of Rs.75.04 lakhs, out of which an amount of Rs.45 lakhs was lent to the assessee. He, therefore, held that the loan was genuine and the same could not be doubted because there was no personal attendance by the lender and meagre income was shown in its return of income.

In this regard, the details of the immediate credit entries in the bank account of the creditor and my observation in the ‘remarks’ in the table below, is as under:-

The details of unsecured loan are as under:

In view of my above observation in the ‘remarks’ column, it is seen that the creditworthiness and genuineness of the transaction has not been established by the assessee as the immediate source of credit by the creditor in its bank account remains unexplained. In this regard, the creditor did not appear in response to summons u/s 131 of the Act and therefore the source of the immediate credit in the bank account of the creditor remains unexplained and therefore, the genuineness of the transaction is not established. Apparently, this loan has not been advanced by the lender of its own funds/income. Therefore, in absence of the explanation regarding immediate credit in the bank account of the creditor, I do not agree with the finding of the learned Brother that the assessee had explained the funds for advancing the unsecured loan to the assessee company. Further, I also do not agree with the view of my learned Brother that the documents submitted establishes the genuineness of the loan, when the immediate source of the credit in the bank account of the creditor of advancing the loan to the assessee is not explained. In this regard, the finding of the ld. CIT(A) about the meagre income of Rs.2,15,900/- also does not inspire confidence about the creditworthiness of the creditor. Further, I also do not agree with the view of my learned Brother that the repayment of the unsecured loan will be one of the ground to treat the unsecured loan as genuine because if at the first instance, the creditworthiness and genuineness of the same is not established then the provisions of section 68 of the Act will be attracted and it cannot escape taxation under section 68 of the Act merely on the ground of its repayment at a later stage.. However, since, the assessee has confirmed the loan transaction but since the creditor failed to appear in response to summons u/s 131 of the Act and therefore in order to sub-serve the interest of justice and to give one more opportunity to the assessee to explain the creditworthiness, the order of the Ld. CIT(A) is set-aside on this issue and is restored to the file of the AO with a direction to frame the assessment de novo on this issue keeping in view the above observation after giving due opportunity of being heard to the assessee and as per law.

My learned Brother has taken note of the documents submitted and observed that the lender had confirmed the loan transaction both the payment as well as repayment of the loan. He also noted that the assessee had furnished copy of the PAN Card of the lender and also the bank statement of the assessee reflecting the loan transaction both payment to the assessee as well as repayment of the assessee. He further held that the genuineness,identity, and creditworthiness cannot be doubted simply because the summons was returned back and the lender declined to accept the summons. He also observed that while dealing with this creditor for AY 2012-13, the loan has been treated as genuine.

In this regard, the details of the immediate credit entries in the bank account of the creditor and my observation in the ‘remarks’ in the table below, is as under:-

The details of unsecured loan are as under:

PAN: credit of Rs.4 lakhs ACKPV8630M on 28.07.2012. Thus, the source of the above credit of Rs.4 lakhs is not explained.

In view of my above observation in the ‘remarks’ column, it is seen that the creditworthiness and genuineness of the transaction has not been established by the assessee as the immediate source of credit of the creditor is not explained since he did not submit his bank account. In this regard, the creditor did not appear in response to summons u/s 131 of the Act and therefore the source of the immediate credit in the bank account of the creditor remains unexplained and therefore, the genuineness of the transaction is not established. Therefore, in absence of the explanation regarding immediate credit in the bank account of the creditor, I do not agree with the finding of the learned Brother that the assessee had explained the funds for advancing the unsecured loan to the assessee company. Further, the finding of the ld. CIT(A) that no ITR was filed and the assessee declining to receive the summons does not speak favourably about the genuineness of the transaction. Even though, the transaction with this party was accepted in AY 2012-13 but that cannot be a ground for accepting the same this year also in view of the above adverse finding. Further, I also do not agree with the view of the learned Brother that repayment of the unsecured loan will be one of the ground to treat the unsecured loan as genuine because if at the first instance, the creditworthiness and genuineness of the same is not established then the provisions of section 68 of the Act will get attracted and it cannot escape taxation under section 68 of the Act merely on the ground of its repayment at a later stage. Therefore, the creditworthiness and the genuineness of the transaction is not established.

However, since, the assessee has confirmed the loan transaction but since the creditor failed to appear in response to summons u/s 131 of the Act and therefore in order to sub-serve the interest of justice and to give one more opportunity to the assessee to explain the creditworthiness, the order of the Ld. CIT(A) is set-aside on this issue and is restored to the file of the AO with a direction to frame the assessment de novoon this issue keeping in view the above observation after giving due opportunity of being heard to the assessee and as per law.

My learned Brother has taken note of the documents relating to confirmation of account, bank statement of the creditors, where the transactions were reflected having been made through banking channels. He also noted that the bank statement of the creditor showed that it had sufficient cash balance to lend monies to the assessee and that all the transactions were made through NEFT/RTGS. He held that all these documents prove the genuineness, creditworthiness and the identity of the creditor. He also held that the genuineness cannot be doubted when no further enquiries were carried out except commenting that either the summons was not served or no personal attendance was made by the creditor ignoring the evidences furnished by the lender in the DAK and the evidences furnished by the assessee.

In this regard, the details of the immediate credit entries in the bank account of the creditor and my observation in the ‘remarks’ in the table below, is as under:-

The details of unsecured loan are as under:

In view of my above observation in the ‘remarks’ column, it is seen that the creditworthiness and genuineness of the transaction has not been established by the assessee as the immediate source of credit of the creditor in its bank account remains unexplained. In this regard, the creditor did not appear in response to summons u/s 131 of the Act and therefore the source of the immediate credit in the bank account of the creditor remains unexplained and therefore, the genuineness of the transaction is not established. Apparently, this loan has not been advanced by the lender of its own funds/income. Therefore, in absence of the explanation regarding immediate credit in the bank account of the creditor, I do not agree with the finding of my learned Brother that the assessee had explained the funds for advancing the unsecured loan to the assessee company. In this regard, the finding of the ld. CIT(A) about the meagre income of Rs.3,75,390/- also does not inspire confidence about the creditworthiness of the creditor.Further, I also do not agree with the view of the learned Brother that repayment of the unsecured loan will be one of the ground to treat the unsecured loan as genuine because if at the first instance, the creditworthiness and genuineness of the same is not established then the provisions of section 68 of the Act will get attracted and it cannot escape taxation under section 68 of the Act merely on the ground of its repayment at a later stage.Therefore, the creditworthiness and the genuineness of the transaction is not established.

However, since, the assessee has confirmed the loan transaction but since the creditor failed to appear in response to summons u/s 131 of the Act and therefore in order to sub-serve the interest of justice and to give one more opportunity to the assessee to explain the creditworthiness, the order of the Ld. CIT(A) is set-aside on this issue and is restored to the file of the AO with a direction to frame the assessment de novoon this issue keeping in view the above observation after giving due opportunity of being heard to the assessee and as per law.

My learned Brother has made common observation in the case of this creditor along with the case of M/s Peace Enterprises

In this regard, the details of the immediate credit entries in the bank account of the creditor and my observation in the ‘remarks’ in the table below, is as under:-

In view of my observation, it is seen that the creditworthiness and genuineness of the transaction has not been established by the assessee as the immediate source of credit of the creditor in his bank account remains unexplained. In this regard, the creditor did not appear in response to summons u/s 131 of the Act and therefore the source of the immediate credit in the bank account of the creditor remains unexplained and therefore, the genuineness of the transaction is not established. In this regard, the finding of the ld. CIT(A) about the income of Rs.8,18,580/-, and no personal attendance also does not justify the lending of loan of amounting to Rs.50 lakhs. Therefore, in absence of the explanation regarding immediate credit in the bank account of the creditor, I do not agree with the finding of the learned Brother that the assessee had explained the funds for advancing the unsecured loan to the assessee company. Further, I also do not agree with the view of the learned Brother that repayment of the unsecured loan will be one of the ground to treat the unsecured loan as genuine because if at the first instance, the creditworthiness and genuineness of the same is not established then the provisions of section 68 of the Act will get attracted and it cannot escape taxation under section 68 of the Act merely on the ground of its repayment at a later stage. Therefore, the creditworthiness and the genuineness of the transaction is not established.

However, since, the assessee has confirmed the loan transaction but since the creditor failed to appear in response to summons u/s 131 of the Act and therefore in order to sub-serve the interest of justice and to give one more opportunity to the assessee to explain the creditworthiness, the order of the Ld. CIT(A) on this issue is set-aside and is restored to the file of the AO with a direction to frame the assessment de novoon this issue keeping in view the above observation after giving due opportunity of being heard to the assessee and as per law.

My learned Brother has taken note of the documents relating to confirmation of account, bank statement, ITRs acknowledgment of AY 2014-15, repayment and noted that the loan transaction was made through banking channels and also the assessee receipt and repaid through banking channels. He also noted that the assessee also furnished copies of income tax returns and Sachin Chawla had shown returned income of Rs.6,37,980/-. He held that all these evidences go to show the genuineness, creditworthiness and the identity of the creditors and therefore the credit in his name cannot be treated as unexplained simply because the creditor had shown meagre income in his return for AY 2014-15 and not responded to summons, or there was no personal attendance or the submissions were filed in the DAK.

In this regard, the details of the immediate credit entries in the bank account of the creditor and my observation in the ‘remarks’ in the table below, is as under:-

The details of unsecured loan are as under:

In view of my above observation in the ‘remarks’ column, it is seen that the creditworthiness and genuineness of the transaction has not been established by the assessee as the immediate source of credit of the creditor in his bank account remains unexplained. In this regard, the creditor did not appear in response to summons u/s 131 of the Act and therefore the source of the immediate credit in the bank account of the creditor remains unexplained and therefore, the genuineness of the transaction is not established. Therefore, in absence of the explanation regarding immediate credit in the bank account of the creditor, I do not agree with the finding of my learned Brother that the evidences on record goes to show the genuineness, creditworthiness and identity of the creditor even though as noted by the ld. CIT(A) that the summons in his case could not be served at the address. Further, I also do not agree with the view of the learned Brother that repayment of the unsecured loan will be one of the grounds to treat the unsecured loan as genuine because if at the first instance, the creditworthiness and genuineness of the same is not established then the provisions of section 68 of the Act will get attracted and it cannot escape taxation under section 68 of the Act merely on the ground of its repayment at a later stage.Therefore, the creditworthiness and the genuineness of the transaction is not established.

However, since, the assessee has confirmed the loan transaction but since the creditor failed to appear in response to summons u/s 131 of the Act and therefore in order to sub-serve the interest of justice and to give one more opportunity to the assessee to explain the creditworthiness, the order of the Ld. CIT(A) is set-aside on this issue and is restored to the file of the AO with a direction to frame the assessment de novoon this issue keeping in view the above observation after giving due opportunity of being heard to the assessee and as per law.

CIT vs Orissa Corporation (P.) Ltd. (159 ITR 78)(SC) on the proposition that the Revenue did not examine the source of income of the said alleged creditors to find out whether there were creditworthy or were such who could advance the alleged loan.

CIT vs Value Capital Services (P) Ltd. (307 ITR 334) (Del.) on the proposition that the Revenue must show that even if the shareholder does not have the means to make the investment, such investment made by the applicant actually emanated from the coffers of the assessee to show as to enable it to be treated as undisclosed income.

CIT vs Lovely Export (P) Ltd. (229 ITR 268)(Del.) and the dismissal of the SLP filed by the Revenue by the Hon’ble Apex Court reported in 319 ITR St. 5)

CIT vs Jay Dee Securities and Finance Ltd. (350 ITR 220) (Allahabad) On the basis of this decision, my learned Brother observed that the burden of proving share capital gets discharged once the assessee files copies of income tax returns and if the AO is not satisfied with the creditworthiness of the shareholder, it is open to the AO to verify the same in the hands of the shareholder and not the assessee company.

CIT vs Misra Preservers (P.) Ltd. (350 ITR 222) (Allahabad). Similar observation as in the case of CIT vs Jay Dee Securities and Finance ltd. (supra) has been made by the Hon’ble Court in this case.

CIT vs Nav Bharat Duplex Ltd. (217 Taxman 17)(Allahabad). On the basis of this decision, my learned Brother observed that the Hon’ble Allahabad High Court held that the Hon’ble Supreme Court in the cases of CIT vs Stellar Investments Ltd. (251 ITR 263) and in CIT vs Lovely Export Ltd. held that identity of the shareholder, alone is required to be proved in case of capital contributed by the shareholders.

CIT vs Sreeleathers (448 ITR 332)(Calcutta) In this case, the Hon’ble Court has observed that once the basic documents are submitted and the AO failed to enquire about it, addition cannot be sustained.

CIT vs Vrindavan Farms (P) Ltd. in ITA No.71,72 and 84/2015, dated 12.08.2015 (Del.) In this case, the Hon’ble Court did not accept the contention of the Revenue to doubt the creditworthiness if low income is reflected in the Income Tax Return of the creditor.

PCIT vs Ambey Trade Corporate Private Limited (147 taxmann.com 375) (Gujarat)My learned brother has observed that where the assessee company claims that amount recorded in the account books was received towards share application money from creditor and was paid back fully and moreover account books showed source of funds and identity of the party, it was not open to raise doubt about creditworthiness of the creditor.

The above decisions and the discussion made by the learned Brother have been carefully perused. In the above decisions, the Hon’ble Courts have held that once the initial burden of submitting the identity, the creditworthiness and the genuineness of the transaction is discharged by the assessee and the AO does not make any enquiry or proper enquiry, then in such an event no addition can be made in the assessee company, where, the share application money has been received. However, the above decisions do not lay down a law that in a situation, if the Tribunal finds that proper enquiry has not been conducted and the capacity and creditworthiness of the creditor/share applicant is not established on the basis of the evidences filed before it, then the Tribunal cannot set-aside the matter again to the file of the ld. CIT(A)/AO as the case may be for fresh examination with or without any directions as discussed earlier in this order in the case of M/s Hum Tum Builders Pvt. Ltd. My learned Brother has also observed that the decisions relied upon by the Ld. CIT(A) for confirming the addition will not be applicable due to distinguishable facts. The same is not acceptable, because the principle laid down in these judgments will apply in all the cases, where the capacity and creditworthiness of the share applicant and genuineness of the transaction is not established as per its relevance to the facts of each case.

Further, theHon’ble Apex Court in the case of Pr. Commissioner of Income Tax (Central)-1 vs NRA Iron & Steel (P) Ltd. [2019] 103 taxmann.com 48(SC) held that ‘merely proving the identity of the investors does not discharge the onus of the assessee, if the capacity or credit-worthiness has not been established’. The discussion in para no.8 to 8.3 of the order is reproduced as below:-

In the cited case, enquiries were conducted by the AO and adverse material was brought on record by the AO. In the case of our assessee, there is an adverse material in the subscription of share capital in cash by M/s Arora Jewellers Pvt. Ltd., M/s Hum Tum Builders Private Ltd., PrasidhFincap Ltd. and P.P. Syntex Pvt. Ltd. all being private limited companies, who always have the facility of current account and cheque book. Except in the case of M/s Arora Jewellers Pvt. Ltd., no cash flow statement was submitted in respect of the other three parties. The non-acceptance of the cash flow for explaining the source of credit in subscribing the share capital in respect of the above four parties has already been discussed earlier in this order. In view of the adverse material, to ascertain the facts about the creditworthiness and genuineness of the transaction, these issues have been set-aside to the file of the AO for necessary verification as stated earlier in this order.

Further, the Hon’ble Apex Court in this case observed that if summons was given and nobody appears and only submissions are filed in DAK,then it creates a doubt about the identity of the investor companies. Further, the Hon’ble Apex Court also took note of the fact about the meagre or NIL income of the investor companies raises doubt about the creditworthiness of such investors and also observed that in respect of private placement of shares a higher onus is required to be placed on the assessee since the information was within the personal knowledge of the assessee. The relevant discussion in paras no.3.7 and para no.13 and 14 are reproduced as under:-

Further, in this regard, the Hon’ble Delhi High Court in the case of CIT v. Nipun Builders and Developers [2013] 350 ITR 407 (Del)held that the AO is within his rights to ask the assessee to prove the creditworthiness of the creditor/share holder for the purpose of section 68 and observed in para no.9 as under:-

Further, the Hon’ble Delhi High Court in this case noted the decision of the Hon’ble Madras High Court in the case of S. Hastimal vs Commissioner of Income Tax, Madras,wherein the requirement of the AO for asking the source of source was rejected on the ground that the same wasbeingasked to be furnishedafter a lapse of ten years. The Hon’ble Delhi High Court in the cited case also agreed with this view of the Hon’ble Madras High Court in the case of S. Hastimal vs CIT. In this case also, the issues for the respective assessment years that are being set-aside to the file of the AO relate to a period beyond ten years.This fact has been kept in mind while setting aside the issues in the above appeals and it has been done only in the cases where there was no compliance in the remand proceedings and the returned income of the creditor is quite meagre and the immediate source of credit entries in the bank account of the creditors advancing unsecured loans has not been explained despite opportunity given except in the case of M/s Balaji Buidserve Pvt. Ltd. In the case of M/s Balaji Buidserve Pvt. Ltd, the immediate source of lending was two cash deposits of Rs.34 lakhs and Rs.10 lakhs on 15.10.2011 in the bank account of the creditor and on the same date, the unsecured loan was advanced to the assessee for the reasons stated therein despite no enquiry being done by the AO and no adverse finding given in the remand report. Similarly, in respect of shares subscription, I have set-aside only the cases in which shares subscription were made in cash for the reasons stated therein. I have taken care to not to set-aside the cases wherein the where the bank statement of the shares subscribers/unsecured loan creditor was submitted during the remand proceedings, in which the immediate source of credit entries was not available but where the AO did not make any further enquiry and has not made any adverse remark in the remand report keeping in view of the ratio of decisions relied by my learned Brother and the decision of the Hon’ble Madras High Court in the case of S. Hastimal vs CIT(supra), which was endorsed by the Hon’ble Delhi High Court in the case of CIT vs Nipun Builders and Developers (supra).

In the case of the assessee, the aboveappealswere filed before the Tribunal on 16.04.2019 arising out of the order dated 26.08.2019 passed by the Ld. CIT(A), which was appealed against the assessment order dated 31.03.2016. In the appellate proceeding, before us, the case was adjourned on 31.08.2022, 22.02.2023, 16.5.2023, 26.07.2023 and 09.10.2023 at the request of the assessee and the paper book was filed by the assessee on 10.01.2024. Thus, it is seen that the paper book was filed by the assessee almost five years after filing of the appeal and there is a considerable delay on its part in pursuing this appeal and therefore set-aside of the cases for the reasons as stated above cannot be said to be unreasonable in the given facts of the case.

Further, the decision of the Hon’ble Gujarat High Court in the case of PCIT vs Ambey Trade Corporate Private Limited (supra), while considering the fact of repayment of share subscription also took further note of the fact that the return of income of the shares subscriber i.e. M/s Rachna Finlease Pvt. Ltd., in respect of which credits was added by the AO was submitted in response to notice u/s 148 and accordingly assessment was completed u/s 147 r.w.s. 143(3) of the Act in the case of M/s Rachna Finlease Pvt. Ltd., where huge additions were made in the hands of the M/s Rachna Finlease Pvt. Ltd., of unexplained cash credit u/s 68 of the Act. The Hon’ble High Court also quoted the above finding of the Tribunal as below:-

Therefore, the facts in the case of our assessee are distinguishable as it is not on record that the share subscription/unsecured loan being set-aside has also been added in the hands of the creditors.

Further, in respect of the cases also where creditor did not appear in response to the summons but in view of the facts as stated below in the following cases,Iagree with the findings of my learned Brother.

Ledger account in the books of the assessee;

Copy of Income tax return for the AY 2012-13 of the lender;

Audited financial statements of the lender;

Bank statement of the lender with Punjab National Bank;

Copy of bank statement to prove that the loan transaction was made through banking channels both receipt as well as repayment.