Bombay High Court
The Principal Commissioner Of Income ... vs M/S. H.K. Pujara Builder on 4 June, 2019
Bench: Akil Kureshi, S.J. Kathawalla
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INCOME TAX APPEAL NO. 544 OF 2017
The Pr.Commissioner of Income Tax-25 ... Appellant
Versus
M/s.H.K. Pujara Builders ... Respondent
Mr.N.C.Mohanty for the Appellant.
None for the Respondent.
CORAM : AKIL KURESHI &
S.J. KATHAWALLA, JJ.
DATE : JUNE 4,2019 P.C.:
1. This Appeal is filed by the Revenue to challenge the orders dated 9th May, 2016 and 10th May, 2016 passed by the Income Tax Appellate Tribunal - H Bench, Mumbai.
2. Following question is argued before us :
"Whether, on the facts and in the circumstances of the case and in law, the Tribunal is justified in holding that the identity and creditworthiness of the loan creditors as well as the genuineness of the loans stand established and the said loans totaling to Rs.11.40 Crores cannot be added under Section 68 of the Income Tax Act, 1961".
3. The Respondent - Assessee had filed a return of income for the assessment year 2009-10, in which there were sundry creditors. The Assessing Officer questioned ::: Uploaded on - 07/06/2019 ::: Downloaded on - 14/07/2019 07:00:04 ::: Nitin 2 / 4 19-ITXA-544-2017.doc the same and called upon the Assessee to provide necessary details of the borrowings. The Assessing Officer rejected the Assessee's defence and made addition of sum of Rs.11,40,00,000/- under Section 68 of the Income Tax Act, 1961 (for short 'the Act')
4. The Respondent - Assessee carried the matter in Appeal to the Commissioner of Income Tax (Appeals) who deleted the major portion of addition reletable to one of the lenders holding that the transaction was genuine and that the source and credit worthiness were also established. To the extent the CIT Appeal refused to grant relief to the Assessee, the matter was carried further in Appeal before the Tribunal. The Revenue also filed the Appeal against the Order of CIT Appeal. The Tribunal allowed the Assessee's Appeal and dismissed the Revenue's Appeal. The Tribunal further examined the material on record, made the following observations :
"We have earlier noticed that the provisions of Sec. 68 places initial burden of proof upon the assessee. In the instant cases, there is no dispute between the parties that the identity of the loan creditors has been established. Even though the assessing officer has expressed doubt about the credit worthiness of the creditors on the basis of low income reported by them, yet the Ld CIT (A) has rightly appreciated the fact that these companies have used their own capital funds for advancing loan to the assessee company. The quantum of own funds held by these companies has also been discussed by Ld CIT (A). In our view, the Ld CIT (A) was justified in holding that the income declared by these loan companies are not criteria, but the source for giving the loans to the ::: Uploaded on - 07/06/2019 ::: Downloaded on - 14/07/2019 07:00:04 ::: Nitin 3 / 4 19-ITXA-544-2017.doc assessee company is the determinative of the credit worthiness. Thus, the Ld CIT (A) has rightly held that the credit worthiness of the loan creditors has also been established.
It is a well settled proposition that the genuineness of the transactions shall stand established if the transactions are routed through banking channels. In the instant case, the loan transactions have been routed through the banking channels. Hence the genuineness of the transactions also stand established. However, the Ld CIT (A) has expressed doubt about the genuineness in respect of loan taken from M/s. NVPL and M/s.SVPL, since he was of the view that a NBFC company shall not give interest free advances to unrelated parties. In our view, the doubt so expressed by Ld CIT (A) is beyond the scope of the provisions of Sec. 68 of the Act. Since the provisions of Sec. 68 is a deeming provision, the same is required to be interpreted strictly. The Courts have held that the assessee is required to discharge the initial burden of proof placed on his shoulders. In the instant case, we are of the view that the assessee has discharged the initial onus placed upon it. Hence, the burden of proof gets shifted to the assessing officer.
From the forgoing discussions, we notice that the tax authorities have not discharged the burden of proof shifted upon their shoulders by bringing any material on record to disprove the claim of the assessee. On the contrary, the tax authorities have merely suspected the genuineness by making certain adverse inferences. It is pertinent to note that they have not disputed the genuineness of various documents furnished by the assessee to prove the identity and credit worthiness of the creditors and genuineness of the ::: Uploaded on - 07/06/2019 ::: Downloaded on - 14/07/2019 07:00:04 ::: Nitin 4 / 4 19-ITXA-544-2017.doc transactions. Accordingly, we are of the view that the tax authorities have not discharged the burden of proof placed upon them.
We have noticed earlier that the Ld CIT (A) has deleted the addition pertaining to M/s.ACPL, but confirmed the addition pertaining to M/s.NVPL and M/s.SVPL. Since we have held that the tax authorities have failed to discharge the burden of proof shifted upon them, we are of the view that they are not justified in making the addition in respect of all the three loans. Accordingly, we confirm the order of Ld CIT (A) in granting relief in respect of loan taken from M/s. ACPL. Accordingly, we set aside the order passed by Ld. CIT (A) in respect of loan taken from M/s.NVPL and M/s. SVPL and direct the AO to delete the additions relating to them."
5. The material on record and in particular the order of the Tribunal, would show that the entire issue is based on appreciation of evidence on record. The Tribunal has come to the factual findings, which were not shown to be perverse. The Tribunal recorded that the Respondent - Assessee had discharged initial burden of showing genuineness of the transactions and established the source and credit worthiness in the lender. No question of law therefore arises. In the result, the Appeal is dismissed.
( S.J.KATHAWALLA, J. ) ( AKIL KURESHI, J.)
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