Case Law Details
Sasi Enterprises Vs DCIT (ITAT Chennai)
ITAT Chennai held that once the assessee has discharged its primary onus of fulfilling the three ingredients of section 68 of the Income Tax Act, the further onus was on revenue to make further enquiry. However, since the onus lying on the revenue was not discharged, addition u/s 68 couldn’t be sustained.
Facts- The assessee admitted loan of Rs.16.47 lacs from Mr. Ramachandran. The assessee filed address of the lender along with confirmation letter dated 27.02.2000 from M/s H.M.C. Fabrics Private Ltd. The loan was stated to be received through Indian Bank DD No.787070 dated 19.03.1997. The sworn statement of the lender was recorded wherein lender assured the authorities to furnish copies of account for M/s H.M.C. Fabrics Pvt, Ltd. as proof of sources for the remittances. However, he failed to do so. The perusal of Bank account no. 1563 held by M/s H.M.C. Fabrics Pvt. Ltd. revealed that there was cash deposit of Rs.7.75 Lacs on 17.03.1997 and Rs.11.25 Lacs on 19.03.1997. Immediately thereafter, a cheque was issued and demand draft was taken in favor of the assessee. It was not possible for a company with a turnover of Rs.3.95 Lacs to advance huge loan of Rs.16.47 Lacs. Accordingly, AO held that the assessee’s own undisclosed cash was brought in the guise of loan from Mr. Ramachandran / M/s H.M.C. Fabrics Pvt. Ltd. and the same was not genuine and hence, added to the income of the assessee.
CIT(A) upheld the addition. Being aggrieved, the present appeal is filed.
Conclusion- Held that the assessee had discharged its primary onus of fulfilling the three ingredients of Sec.68. The lender, in sworn statement, admitted the fact of granting of loan and thus, the assessee stood discharged. The onus was now on revenue to make further enquiries from the lenders to ascertain their financial capacity to lend the loans. The turnover alone could not be considered as source of loan as advanced to the assessee. In the absence of such a fact based-finding to prove that assessee’s own money was routed through banking channels in the garb of loan, the impugned addition could not be sustained in law.
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