Non-Existence Of Parties Who Gave Loan To Assessee Is Indication Of Its Prima Facie Bogus Nature: ITAT

The two-member bench of Yogesh Kumar US (Judicial Member) and Shamim Yahya (Accountant Member) has observed that in the entire proceeding, there is no discussion about the loan documentation and terms of condition of the loan, the issue of TDS, and nothing has been examined.

The assessing officer noted that the respondent/assessee had received an unsecured loan during the Financial Year 2014-15. The assessee was also asked to submit ITRs for all the relevant years to prove the creditworthiness of the parties. The Assessing Officer noted that, till date, no ITR has been submitted.

The Assessing Officer issued summons to several parties at the address provided by the assessee requesting their personal deposition and information. During the analysis of the bank statements 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 was any information requested by the summons filed. The Assessing Officer again issued a reminder. The Assessing Officer noted all the people had given alibis for not being able to attend personally. Thus, their identity was doubtful. It was alleged that certain people had given loans after themselves having received a certain amount just before giving the loan.

The Assessing Officer rejected the submissions of some of the parties that it was their savings from which he had given a loan, as the amount of loan granted was just after receiving amounts in the bank account. Hence, the Assessing Officer found the source to be unexplained. It was found that certain parties had meagre income.

The assessee filed an appeal before the CIT(A). The CIT(A) noted that the assessee stated that all details had been provided to the Assessing Officer.The CIT(A) noted that the assessee had provided more specific information/documents filed during the assessment proceedings for each party.The CIT(A) rejected the Assessing Officer's contention that none of the parties appeared before him. The CIT(A) gave emphasis that the transactions had been through a banking channel. The assessee has proved the identity and genuineness of the transaction and creditworthiness, and the assessee has discharged its onus.

The department contended that there was no iota of evidence about the existence of the people who had given loans; their income was rather meagre and just before the giving of loans, amounts had been transferred into their account. It is a classic case of the routing of unaccounted money in a circuitatious manner.

The ITAT noted that the people who had given the loans were not present at their address, which clearly shows the lack of genuineness of the transactions. The receipt of the amount in their bank accounts immediately before giving the loans further cast doubt on their creditworthiness.

The Tribunal ordered the assessee to cooperate and to provide convincing evidence in support of the transaction's identity, creditworthiness, and genuineness.

Case Title: ACIT Versus M/s Hare Krishna Orchid

Citation: ITA No.662/DEL/2020

Dated: 12.08.2022

Counsel For Appellant: Sr. DR Gayasuddin Ansari

Counsel For Respondent: CA R.S. Singhvi

Click Here To Read/Download Order