Jalaram Enterprises Co. P. Ltd. vs. DCIT [ITA No. 4289/Mum./2014; Bench: J; Date of order: 29th April, 2016; Mum. ITAT] Section 68 – Cash credits – Unsecured loans received – The assessee has proved identity, genuineness of the transaction and the creditworthiness of the lenders – no addition can be made

13.  Pr. CIT-15 vs. Jalaram Enterprises Co. P.
Ltd. [Income tax Appeal No. 671 of 2017;

Date of order: 7^th
June, 2019;

A.Y.: 2010-11 (Bombay High
Court)]

Jalaram Enterprises Co. P. Ltd. vs.
DCIT [ITA No. 4289/Mum./2014; Bench: J; Date of order: 29^th April,
2016; Mum. ITAT]

Section 68 – Cash credits –
Unsecured loans received – The assessee has proved identity, genuineness of the
transaction and the creditworthiness of the lenders – no addition can be made

The assessee is a private limited
company engaged in the business of trading in real estate and grains. The
assessee had shown borrowings of Rs. 3 crores. The AO verified the same and was
of the opinion that the transactions were not genuine. He made addition of Rs.
2,66,00,000 out of the said sum of Rs. 3 crores u/s 68 of the Act.

The CIT(A) in his detailed order
allowed the assessee’s appeal and deleted the addition. He noted that out of 12
lenders, nine were parties to whom the assessee had allotted the shares of the
company on 1^st April, 2010. The amounts deposited by these parties
therefore were in nature of share application money. He also noted that in
response to summons issued by the AO, the assessee had submitted the reply and
response of all the lenders with supporting material. He noted that all 12
parties had confirmed the transactions, produced their bank statements and a
majority of them had filed their income tax returns, in which computation of
their income for A.Y. 2010- 11 was also available. The CIT(A) therefore held
that the transactions were genuine and that the assessee had established the
source and the creditworthiness of the lenders.

The Revenue took the matter before
the Tribunal. The Tribunal held that the AO made addition u/s 68 of the Act in
respect of 12 parties holding that the creditors had not appeared in response
to the summons issued u/s 131 of the Act; he also held that the genuineness of
the transaction and creditworthiness of the creditors was not established.

The assessee has proved the
identity and genuineness of the transaction and the creditworthiness of the
lenders by furnishing the requisite details, like confirmations, PAN details,
return of income, bank statements, etc. It is the finding of the CIT(A) that
first deposits were received through bank transfers from the lenders’ accounts
and thereafter they were given to the assessee company by account payee cheque.
In the circumstances, the order of the CIT(A) in deleting the addition made u/s
68 of the Act was upheld.