Gayatri Seva Sansthan Vs. Addl. CIT, Range-1 - (Income Tax Appellate Tribunal) (18 Aug 2020)

The onus is always on the Assessee to substantiate with evidence to the satisfaction of the AO that cash credit is genuine

MANU/ID/0654/2020

Direct Taxation

The Assessee is a society engaged in the business of manufacturing of soap. It filed its return of income on 31st August, 2010 declaring the total income at Rs. 9,84,900. During the course of assessment proceedings, the Assessing Officer (AO) noted from the balance sheet that, there was an increase of Rs. 1,88,25,151 during the year under consideration which consists of Rs. 90 lakhs received by the Society from Baldev Promoters Pvt. He asked the Assessee to prove the identity and credit worthiness of the loan creditor and genuineness of the transactions. He conducted enquiries with regard to the existence of Baldev Promoters Pvt. Ltd., at the given address.

After all verifications, the AO held that, Baldev Promoters Pvt. Ltd. is not a genuine Company and is merely an entry provider and the Assessee Trust failed to prove the creditworthiness of Gulab Chand Verma who is the Managing Director and is maintaining the bank account of the Company. Accordingly, the AO made addition of Rs. 90 lakhs under Section 68 of the Income Tax Act, 1961 (IT Act).

The AO further noted that, the Assessee society has also shown unsecured loan of Rs. 25 lakhs from one Shri Raju Khan (another creditor). Since the Assessee failed to prove the identity and credit worthiness of another creditor, the AO conducted his own enquiries and found that, no such person was found at the address given. Further, the Assessee has not paid any interest to the lender on the loan obtained. AO made an addition of Rs. 25 lakh to the total income of the Assessee by invoking the provisions of Section 68 of the IT Act. In appeal, the learned Commissioner of Income Tax (CIT(A)) sustained the addition made by the AO.

The Assessee, in the instant case, has accepted a loan of Rs. 90 lakhs from Baldev Promoters Pvt. Ltd., and Rs. 25 lakhs from another creditor during the year under consideration. The AO invoking the provisions of Section 68 of Act made addition of Rs. 1.15 crores being loan obtained from the above two persons.

It is the settled proposition of law that, for accepting any cash credit as genuine, the onus is always on the Assessee to substantiate with evidence to the satisfaction of the AO regarding the identity and credit worthiness of the loan creditor and genuineness of the transaction. In the instant case, no doubt, the Assessee has filed some papers/documents before the AO. However, the Assessee Company failed to produce the directors of Baldev Promoters Pvt. Ltd., and another creditor.

In the facts of the case and in the interest of justice, present Tribunal deems it proper to restore the issue to the file of the AO with a direction to give one more opportunity to the Assessee to substantiate with evidence to his satisfaction regarding the identity and credit worthiness of the loan creditors and the genuineness of the transaction. The Assessee is directed to produce the Managing Director/Director of Baldev Promoters Pvt. Ltd. and another creditor before the AO for his examination. The appeal filed by the Assessee is allowed.

Tags : TRANSACTION GENUINENESS ADDITIONS