Case Law Details
Smt. Leela Kothari Vs ITO (ITAT Jaipur)
The issue under consideration is whether the CIT(A) is correct in making an addition u/s 68 regarding loan received by assessee considering it as non genuine?
In the currect case, the assessee is an Individual and proprietor of M/s. Leela Kothari. During the course of scrutiny assessment proceedings, the AO noted that the assessee has raised loans from various persons. In order to examine the conditions as provided under section 68, the AO issued notices under section 133(6) to 13 loan creditors. After receiving the response as well as confirmations and other documents including the bank statements of the loan creditors, the AO noted that out of 13 loan creditors, cash has been deposited prior to the issuing cheques to the assessee in case of 9 loan creditors. Thus the AO proceeded to examine the claim of loan and particularly the creditworthiness and genuineness of the transactions in respect of 9 loan creditors. After conducting the enquiry as well as recording the statements under section 131 of the IT Act, the AO held that various persons have given contradictory statements and, therefore, assessee failed to establish the creditworthiness of the loan creditors. Accordingly, the AO made an addition under section 68 of the Act.
ITAT states that, once the source of deposit is explained as prior withdrawal from the bank of more than the amount deposited subsequently then the creditworthiness of the creditor and genuineness of the transaction cannot be doubted. All the creditors were assessed to income tax and they provided their confirmations, PAN, affidavits and all the relevant documentary evidence in support of the claim that the loans were given from the funds available with them through banking channel. The deposits of the cash in the bank accounts is certainly a relevant aspect and strong reason to conduct an enquiry and to verify the transaction but the deposit itself cannot be a ground to hold that the transaction is not genuine and the loan creditors were not having the capacity to grant the loan. Accordingly, when the assessee has produced all the documentary evidence to dispel the doubts of the AO, then the transaction cannot be held as non-genuine without bringing any material or fact to show that the assessee’s own unaccounted money has routed through the bank accounts of the loan creditors.
In view of the above facts and circumstances as well as the documentary evidence produced by the assessee, the addition made by the AO is not justified and the same is deleted.
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