SANJAY KUMAR Vs. ASSISTANT COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeals) -II, Chennai dated 22.04.2014 for the assessment year 2009 -10. The only grievance of the assessee in its appeal is that Commissioner of Income Tax (Appeals) erred in upholding the addition of unsecured loan of Rs. 17,00,000/ - as unexplained cash credit under section 68 of the Act.

(2.) BRIEF facts are that Assessing Officer in the course of assessment proceedings noticed that assessee has received loan of Rs. 7,00,000/ - from Mrs. Sadhana Sharma and Rs. 10,00,000/ - from Mrs. Mangala. The Assessing Officer required the assessee to provide details about these two creditors. The assessee provided name & addresses of the loan creditors. The Assessing Officer called for information under section 133(6) from these loan creditors. The letters calling for information returned back unserved. The Assessing Officer again asked the assessee to furnish true & correct addresses of loan creditors. The assessee provided different addresses. The assessee also provided bank statements and copies of returns of loan creditors. On analyzing these bank statements, the Assessing Officer noticed that the loan creditors have deposited cash in their bank accounts on the same day when cheques were issued to the assessee. The Assessing Officer also noticed that by the year ended 31.3.2008 both the loan creditors were not having sufficient cash balances. For verifying the sources, summons under section 131 were issued to the loan creditors. Loan creditors have not responded to the summons. The assessee was asked to produce the creditors before the Assessing Officer for cross verification. The assessee failed to produce the loan creditors for cross verification. The assessee submitted in his reply that he is providing bank statements, balance sheets, acknowledgements for filing of returns by the creditors and the creditors have given loan from opening capital and income generated during the assessment year 2009 -10, therefore he has discharged his liability to show the genuineness of transactions appearing in his books and thus cannot be added as his income. The Assessing Officer rejected the submissions of the assessee and added Rs. 17,00,000/ - received by the assessee from the creditors as unexplained cash credit under section 68 of the Act holding that identity of the loan creditors could not be verified beyond doubt as the letters and summons issued to the loan creditors were returned unserved. The credit worthiness of the loan creditors could not be verifiable beyond doubt since cash has been deposited in the loan creditors bank account on the same day on which loan has been given to the assessee through cheque and the loan creditors have no sufficient cash balances in their balance sheet. The loan creditors have not responded to the letters and summons and the assessee could not produce the loan creditors for cross verification, therefore genuineness of transactions could not be verifiable beyond doubt. The assessee carried the matter to the Commissioner of Income Tax (Appeals). Before the Commissioner of Income Tax (Appeals) assessee reiterated his submissions made before the Assessing Officer. Further, the assessee also produced affidavits from the loan creditors stating that they have advanced loans to the assessee, they have provided addresses, PAN and copies of acknowledgement of returns having filed for the assessment year 2009 -10. Commissioner of Income Tax (Appeals) though accepted the identity of the creditors, he has sustained the addition on the ground that genuineness of the transactions and creditworthiness of the creditors were not proved.

(3.) DEPARTMENTAL Representative referring to page 2 of the assessment order submits that creditors have not responded to the notices issued under section 133(6) nor summons issued under section 133(1) of the Act. The identity of the creditors is not proved. Departmental Representative submits that creditors have given notarized affidavits before the Commissioner of Income Tax (Appeals) which shows that creditors appeared before the notary but chose not to appear before the Assessing Officer. Departmental Representative referring to page 10 of the paper book submits that creditors have not given any address in reply said to have been given in response to the notice issued under section 133(6), therefore he submits that identity of the creditors have not been proved. Departmental Representative further submits that since loan was given on the same day when the cash was deposited into the bank accounts of the creditors and creditors have not cross verified, they were not produced, the genuineness of the loans and credit worthiness of the creditors have not been proved and therefore he supports the orders of the lower authorities in making addition under section 68 of the Act.