Case Law Details
South Shourne Corporation (India) Vs ACIT (ITAT Ahmadabad)
Section 68 addition on basis of handwritten confirmation letters by lenders was not justified in case assessee proved identity, creditworthiness and genuineness.
Conclusion: AO was not justified in making addition under section 68 where assessee had furnished evidences such as PAN and copies of bank statements of lenders which proved identity and creditworthiness of lenders and genuineness of impugned loan transactions.
Held: Assessee-firm was engaged in the business of Pharmaceuticals. Assessee during the year has taken loans from the parties who were non-resident Indians and did not have any source of income in India. Assessee in support of above loans filed the Xerox copies of the confirmation letters from both the lenders. However, AO observed that the confirmation letters given by the lenders were hand-written by the single person. Accordingly, AO did not believe the confirmations filed by assessee. AO also observed that assessee failed to furnish the identity, genuineness, and creditworthiness of the lenders. Therefore, AO treated the amount of loan of Rs.13,70,000/- as unexplained cash credit u/s 68 and added to the total income of the assessee. It was held regarding the identity of both the lenders, PAN, bank statement was furnished to the AO during the assessment proceedings. Therefore, assessee had discharged his duty by furnishing the identity proof of the lenders. There was no doubt that the transaction of the loan was carried out through the banking channel. Therefore there could not be any doubt about the genuineness of the transactions. Regarding creditworthiness of the lenders, there was sufficient balance in both the accounts of the lenders before transferring the loan amount to assessee. Therefore the creditworthiness of the lenders could not be questioned. As such, assessee was liable to justify the source of money in his bank accounts and was not expected to justify the source of funds in the hands of the lenders. Assessee had discharged his duties imposed under section 68 by establishing the identity of the lenders, the genuineness of the transactions and creditworthiness of the lenders.
FULL TEXT OF THE ITAT JUDGEMENT
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