Gujarat High Court rules No Additions can be made once the Assessee confirms its Genuineness and Creditworthiness of its Transactions
Gujarat High Court rules No Additions can be made once the Assessee confirms its Genuineness and Creditworthiness of its Transactions
The Gujarat High Court while hearing an appeal filed under Section 260- A of the Income Tax Act, 1961 (hereinafter referred as IT Act) in the case of Principal Commissioner of Income Tax (Central), Surat vs. Neotech Education Foundation observed that once the identity, genuineness of transactions and creditworthiness have been established by the assessee/appellant- Neotech Education Foundation, no further additions can be made.
The appellant/assessee is a company running as an educational institution. A survey operation under Section 133A was carried out on the premises of M/s.Neotech Education Foundation on 13th November, 2014 and incriminating materials had been found reflecting unaccounted payments made in cash for the land as well as unaccounted expenses incurred.
The Assessing Officer compared the entries with the payment details as per the books of accounts and found the payment schedules to have been followed on the page which had been found. No signature was found against the payment, hence the Assessing Officer concluded that since the cheque payments were done before the date impliedly, the cash payments also must have been made as per the schedule. The Assessing Officer estimated Rs. 5.68 crore as unexplained investment under Section 69B of the IT Act and had made an addition of Rs. 1.35 crore.
The Commissioner of Income Tax (Appeals) (in short CIT) held that Rs. 135 crore for the assessment year 2014-2015 cannot be sustained as the amount was not transacted and accordingly deletion was directed.
The Income Tax Appellate Tribunal (ITAT) was approached by the revenue which dismissed endorsing the reasonings and conclusion given by the CIT (Appeals).
The High Court noted that during assessment proceedings, the Assessing Officer had found that the assessee had received loans from the Directors as well as others aggregating to Rs.1,62,44,073. The list of unsecured loans forming part of the record in the assessment order. The assesses were required to prove the identity, creditworthiness, and the genuineness of the loan.
The assessee contended that the monies were received and subsequently repaid through account payee cheques or bank transfers, and they had been recorded in the books of accounts. The lenders also confirmed the transactions, and thus, the company discharged the onus regarding the said deposits.
CIT (Appeals) had consequently deleted the addition by observing that, "the appellant has discharged its onus of proving identities, the sources of the loans and the genuineness of the transactions in accordance with the provisions of Section 68, and thereafter the onus has shifted to the Assessing Officer to prove the transactions to be otherwise. The same has not been done by the Assessing Officer. I hold that the addition of Rs.1,62,44,073/- cannot be upheld."
The High Court highlighted that in the remand reports, the Assessing Officer had not questioned the identity as well as the genuineness of the transactions. He had later questioned only the creditworthiness of all the lenders.
The Court observed that it is settled law that once the identity, genuineness of transactions and the creditworthiness have been established, no additions can be made. The High Court relied on the decision of Principal Commissioner of Income-Tax vs. NRA Iron and Steel Pvt.Ltd., [2019] which stated that the basic principle continues to remain the same that it is the assesses legal obligation to prove the genuineness of transactions, the identity of the creditors and the creditworthiness of the investors who would have the financial capacity to make the investment in question. Once the primary onus is discharged, it is for the assessing officer to inquire into this aspect.
The High Court issued a returnable notice for final disposal of the deletion of the addition made by the Appellate Tribunal under Section 69B of Income Tax Act, 1961 on Unexplained Investment.
