Case Law Details

Case Name : Xerces Technologies Pvt. Ltd. Vs DCIT (ITAT Pune)
Appeal Number : ITA Appeal No. 2087/PN/2013
Date of Judgement/Order : 10/06/2015
Related Assessment Year :
Courts : All ITAT (7621) ITAT Pune (261)

Brief of the case:

In the case of Xerces Technologies Pvt. Ltd. Vs DCIT, ITAT Pune held that assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. Mere furnishing of the particulars is not enough. Mere payment by account payee cheque cannot make a non- genuine transaction genuine.

Facts of the case:

The assessee is a private limited company and is engaged in the business of software development. The assessee filed its return of income for the impugned assessment year on 29-01-2009.

During the course of scrutiny assessment the Assessing Officer made an addition of Rs.40, 00,702/- as unsecured loan received from one of its Director.

Contention of the revenue:

The Revenue submitted that the documents furnished by the assessee in respect of unsecured loans of the director were all self-serving documents. Although the assessee had furnished the information of the persons who had extended loan, however, creditworthiness of the Director was not established. The Director had returned his total income for the assessment year 2008-09 as Rs. 1,50,820/- only. Whereas, the alleged loan extended by him to the assessee is more than Rs. 40, 00,000/-. The source for funding loan amount was not established.

Contention of the Assessee:

The assessee submitted that Shri Xerces Mullan is the promoter Director of the assessee company. Since, the operations of the assessee company had just commenced, the bank account of Shri Xerces Mullan was operated like a current account on behalf of the assessee.

From the said bank account cheques were issued on behalf of the assessee company. It further submitted that balance outstanding represents accumulated balance on account of series of transactions. The ld. AR in support of his submissions placed on record ledger Loan account of Director Shri Xerces Mullan in the books of the assessee. The ld. AR contended that the Director of the company had furnished confirmation letter and copy of PAN Card.


Before us the assessee has filed loan account of the Director in the books of the assessee company. However, the question raised by the Commissioner of Income Tax (Appeals) regarding the source of funding the assessee company remained unanswered. The Commissioner of Income Tax (Appeals) had raised a very valid doubt, that is, if the Director has returned his income of Rs.1,50,820/- in the assessment year 2008-09, how he can extend loan of Rs.40,00,702/- to the assessee company. The assessee has not been able to place on record for any cogent evidence in the form of bank statement, statement of asset and liability of the assessee etc. to dispel the shadow of doubts.

It is a well-accepted principle that to accept a credit as genuine all the three conditions i.e. identity of person who has accepted the loan, genuineness of transaction and creditworthiness of the person extending loan has to be satisfied. If any of the aforesaid conditions are absent the loan transaction comes under cloud.

In the present case the assessee has not been able to establish the creditworthiness of the Director of the company who has purportedly extended loan.

Hence, the appeal of the assessee is dismissed.

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