The Income Tax Appellate Tribunal held that the Unavailability of the parties is a clear sign of the transactions not been genuine.
In this case, the assessee was asked to submit ITR of the relevant years for all the parties to prove the creditworthiness of the parties. The Assessing Officer noted that till date no ITR has been submitted.
The Assessing Officer issued summons u/s131(1A) to several parties at the address provided by the assessee requesting their personal deposition and information. During the analysis of the bank statement of the concerned parties, the Assessing Officer noted that the amount forwarded to the assessee was received by the lenders from some other accounts just before it was forwarded. However, no one attended on the given date nor any information requested by the summons was filed Based on the failure of the assessee to show the genuineness of the transaction, the observation of layering seen in all the above loans, the non attendance of the lenders in regards to the summons issued to the lenders and the lack of creditworthiness of the above lenders,.
Penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961 for concealment of income within the meaning of explanation 1 to the sub-section(1) of the section 271(1)(c) of
the Income Tax Act, 1961 were initiated.” Against the above order, the assessee appealed before the Ld. CIT(A).
The Ld. CIT(A) concluded as under:- “Crux of the matter is that it was onus of the revenue to prove that nexus between amount deposited in the bank account of lender was belonging to appellant. In the present case, the AO has certainly failed to discharge this onus. There is no cash deposit in the bank accounts of the lender as well as the persons advancing the funds to the lenders. The Assessing Officer failed to establish that any unaccounted money belonging to the assessee has rooted back to it through these lenders. The AO did talk about layering but failed to break any nexus between the lenders and the assessee to establish that there was any unaccounted money, which changed hands. Whereas, the assessee provided all the necessary details to the Assessing Officer to prove identity, creditworthiness and genuineness of the transactions. Income declared in the ITR cannot be the sole criteria for doubting the creditworthiness of the lender, when source of the source has also been proved. Therefore, the addition is not sustainable on merit. AO is not justified in treating the unsecured loan as unexplained cash credit u/s 68 and addition made by the AO at Rs. 4,33,18,170/- is hereby deleted.”
Against the above order, the Revenue filed an appeal .
The Ld. DR submitted that there is no iota of evidence about the existence of the persons who have given loan, their income is rather meagre and just before giving of loans, amounts have been transferred in their account. The Ld. DR submitted that this is a classic case of routing of unaccounted money in circuitatious manner. It is also not clear that the details, which the Ld. CIT(A) has reproduced in his order had been given by the assessee before the Assessing Officer or not. Just because transactions have been routed through banking channel does not prove that the transactions is sacrosanct. The Unavailability of the parties is a clear sign of the transactions not been genuine
Upon careful consideration, it was noted that in the present case, “firstly the persons who have given loan are not present at their address which clearly shows the lack of genuineness of the transactions. Receipt of the amount in their bank accounts immediately before giving the loans further cast doubt of the creditworthiness. If in the appeal, the ld. CIT(A) was of the opinion that further enquiry was required, the same should have been done by the Ld. CIT(A) himself. The Ld. CIT(A) has observed that Assessing Officer has only issued summons and not done anything thereafter. In this regard, we direct the Assessing Officer to make further enquiry/examination. The entire financials of the loan given are not on record. Without examining the entire financials of the parties, how their creditworthiness has been accepted by the Ld. CIT(A) itself is a mystery. Hence, relying upon the documents and data picked from here and there, the Ld. CIT(A) has held that the assessee has discharged the onus of creditworthiness. In our considered opinion, the non-existence of the parties who have given loan to the assessee is clear indication of their nature being prima facie bogus.”
CASE: ACIT V. M/s Hare Krishna Orchid
CITATION: ITA No.662/DEL/2020
BENCH: Accountant Member-Shamim Yahya, Judicial Member- Yogesh Kumar
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