Burden is upon the Assessee to prove identity of the creditor, creditworthiness of the creditors and genuineness of the transaction

In ACIT, New Delhi vs. Sidhavandan Enterprises, appeal was filed before the INCOME TAX APPELLATE TRIBUNAL by the revenue department against the order of the Commissioner of Income Tax CIT(A).

The Assessee is a company and filed return of income showing loss of Rs.35,53,560. The Assessing Officer, (AO) noted that, in assessment year under appeal, the Assessee Company has received an amount of unsecured loan of Rs.2 crores from Varrenyam Securities Pvt. Ltd., The AO noted back ground of the case with regard to bogus accommodation entry provided by various entities controlled by S.K. Jain and V.K. Jain and Investigation conducted by Investigation Wing of the Department. The AO has given an opportunity to the Assessee to prove creditworthiness of the investor and genuineness of the transaction and required the Assessee to produce Director Director of Varrenyam Securities Pvt. Ltd., and C.A. who has arranged the funds in the matter. However, both the above persons were not produced. 

The AO after considering the fact that, burden is upon the Assessee to prove the ingredients of Section 68 of the Income Tax Act, 1961 (IT Act) i.e., identity of the creditor, creditworthiness of the of the creditors and genuineness of the transaction, found that assessee failed to prove the same, therefore, addition of Rs.2 crores was made against the Assessee under Section 68 of the IT Act, 1961. The assessee challenged the addition before the Learned Commissioner of Income Tax CIT(A). The learned CIT(A) deleted the addition. 

Setting aside the Order of the Ld. CIT(A), Appellate Tribunal agreeing with the AO further held that the CIT(A) in his finding reproduced above has merely referred to the facts noted in the preceding A.Y. 2012-013 with regard to loan transaction between the assessee and the Investor company. Merely because loan is repaid through banking channel in assessment year by itself may not be a ground to delete the addition because ultimately assessee shall have to prove the ingredients of Section 68 of the I.T. Act to the satisfaction of the A.O. According to Section 250(6) of the I.T. Act, the Ld. CIT(A) is required to mention point for determination and reasons for decision in the appellate order while deciding the appeal. The impugned findings of the Ld. CIT(A) however clearly show that he did not mention the evidence and material on record in the light of finding of fact arrived at by the A.O. in appellate order. The Ld. CIT(A) has also not recorded any finding of fact for deleting the addition in the matter. The Ld. CIT(A) did not give any finding as to what is the implication of making addition of Rs.2 crores in the hands of the creditor in preceding A.Y. 2012-2013.