The Income Tax Appellate Tribunal (ITAT), Delhi Bench held that mere low declaration of Income by creditors is no ground to make the addition in respect of Unexplained cash credit.
The assessee company, M/s. Carissa Investment is engaged in the business of Investment and Trading in Shares. The A.O. noted that assessee-company has taken loan from 11 parties in assessment year under appeal.
The AO issued notices under section 133(6) of the Income Tax Act to all the parties requiring them to furnish copy of the bank statements, PAN etc., The AO noted that notices could not be served upon M/s. Alter Investment Pvt. Ltd., and M/s. Ilac Investment Pvt. Ltd. The assessee-company submitted a copy of the ledger account, confirmations by the parties along with their ITR and other details before AO.
The AO without making further enquiry considered them as unexplained credits and made the addition in respect of both the creditors.
The assessee submitted that submitted that initial burden upon the assessee to prove creditworthiness of the creditors and genuineness of the transaction have been discharged.
On the other hand, authority relied upon others of the authorities below and submitted that assessee did not prove creditworthiness and genuineness of the transaction in the matter.
The coram consists of O.P. Kant and Bhavnesh Saini while allowing the appeal in favour of the assessee noted that the assessee-company has been able to prove that both the creditors have availability of sufficient funds to give loan to the assessee-company in assessment year under appeal. Merely because income was low declared by both the creditors, is no ground to make the impugned addition against the assessee-company.
The ITAT noted that since the AO accepted the creditworthiness and genuineness of the transaction with the same creditors in subsequent assessment year as well, it’s stand proved on record that there were no justification for the authorities below to make any addition against the assessee-company.
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