Addition u/s 68 can be made for non production of lenders

IN THE ITAT AGRA BENCH

Smt. Suman Gupta

v/s.

Income-tax Officer, Ward 1, Aligarh

IT APPEAL NO. 454 (AGRA) OF 2009

[ASSESSMENT YEAR 2007-08]

MARCH 16, 2012

ORDER

Bhavnesh Saini, Judicial Member

This appeal by the assessee is directed against the order of ld. CIT(A), Ghaziabad dated 24.09.2009 for the assessment year 2005-06.

2. The assessee raised several grounds of appeal. The assessee has also filed concise grounds of appeal in which he has challenged the addition of Rs. 13,00,000/- on account of unexplained cash credits/loans u/s. 68 of the IT Act and disallowance of 20% expenditure out of conveyance and mobile phone expenses.

3. We have heard the ld. representatives of both the parties, perused the findings of the authorities below and considered the material available on record.

4. On issue No. 1, i.e., unexplained cash credits of Rs. 13,00,000/-, from the copies of bank account of the lenders, the AO noticed that in the case of following lenders, there were cash deposits of identical amounts (i.e. equivalent to the amounts stated to have been given to the assessee as loan) just before advancing the amounts to the assessee :

4.1 Since the sources of the above deposits in the bank accounts of the lenders were not known and such cash deposits were made just before advancing the amount to the assessee and hence, to verify the genuineness of said transactions, the AO required the assessee to produce all the above six persons for examination before him. Despite providing opportunity to the assessee, the assessee produced only one person, namely, Shri Abhay Maheshwari for examination and remaining five persons were not produced before the AO for examination. On examination of Shri Abhay Maheshwari and also from the details furnished in respect of this person, the AO noted that Shri Abhay Maheshwari has no creditworthiness to give unsecured loan of Rs. 2,00,000/-. In the case of remaining five lenders, who were not produced before the AO for examination, from the details furnished by the assessee in respect of these lenders, the AO has observed that they have also no creditworthiness to advance such big sums as unsecured loan to the assessee and hence, genuineness of these transactions has not been established. The AO, accordingly, made the addition u/s. 68 of the IT Act and also relied upon the decision of Hon’ble Supreme Court in the case of Sumati Dayal v. CIT [1995] 214 ITR 801/80 Taxman 89.

5. The assessee challenged the addition before the ld. CIT(A) and it was submitted that the assessee had furnished confirmatory letters regarding new loans taken and filed copies of bank passbooks of the lenders and also proved that transactions were entered into through account payee cheques only. Therefore, initial burden upon the assessee to prove the identity & creditworthiness of creditors and genuineness of the transaction has been discharged. The assessee further explained that all the amounts have been received through account payee cheques and all the creditors are assessed to tax. In addition to that, copies of their filing of returns of income, balance sheets, cash flow statements and extract of cash books have been furnished to prove creditworthiness of the creditors and genuineness of the transactions. Affidavits of the creditors were also filed, in which they have confirmed giving of loan to the assessee. It was also explained that some of the creditors could not be produced because they have shown their inability to appear before the AO because either their close relations were ill or the creditors were suffering from chronic disease. It was, therefore, submitted that the assessee has discharged the initial onus to prove genuine credit in the matter. The counsel for the assessee also relied upon several decisions in support of the contentions. The submissions of the assessee regarding each creditor are reproduced in the impugned order. The submissions of the assessee were forwarded to the AO for filing the remand report, in which the AO, more or less repeated the same findings and further submitted that so called balance sheets, cash books and cash flow statements have no evidentiary value, as those papers had not been filed with the return of income. It was also explained that the creditors are not persons of means. Therefore, the assessee failed to prove their creditworthiness and genuineness of the transaction in the matter. The ld. CIT(A) considering the explanation of the assessee in the light of findings of the AO, material on record and the remand report of the AO, confirmed the addition and dismissed this ground of appeal of the assessee. The findings of the ld. CIT(A) in para 8 and 9 of the appellate order are reproduced as under :

“8. The next issue pertains to the addition of Rs. 14,00,000/-made u/s. 68 of I.T. Act being unexplained credit appearing in the name of 6 persons.

8.2 The learned AR has first contended that the AO has wrongly taken the total of these credits at Rs. 14,00,000/- instead of Rs. 13,00,000/-. It has been further submitted that the learned AR has also erred in taking the total figure of credits appearing in the name of Smt. Keerti Maheshwari and Smt. Mithilesh Maheshwari at Rs. 4,50,000/- instead of Rs. 4,00,000/-. It was thus pleaded that the correct figures should be taken.

8.3 I have considered the submissions of the learned AR with reference to the material available on record. At page 2 of the assessment order, the AO has reproduced the loans appearing in the name of above 6 persons as follows :