Validity of addition if the creditors have declared sufficient bank balances also supported by the documentary evidences 

 

Samco Alloys India Pvt Ltd Vs ACIT

 

 

– Assessee’s appeal partly allowed : DELHI ITAT

 

Whether the addition is not sustainable if the creditors have declared sufficient bank balances also supported by the documentary evidences – YES: ITAT

 

 in the case of creditors, they have declared income from other sources and paid the taxes. Therefore, all these creditors were having sufficient bank balances in their bank accounts for giving credit to the assessee. Thus, there were no reasons for the AO to doubt the creditworthiness of the creditors except creditor mentioned at sl. No. 2. The AO has not made further investigation on the veracity of the documents submitted by the assessee. The issue is, therefore, squarely covered in favour of the assessee by order of the Tribunal in the case of M/s Topline Buildtech Pvt. Ltd. The AO has nowhere mentioned in the order, if assessee was asked to produce the creditors for examination on oath. No evidence has been brought on record, if the amount in question came from the assessee. There is no dispute that AO accepted the identity of the creditors. These facts, therefore, show that assessee has been able to prove the creditworthiness and genuineness of the transaction in the cases of the creditors. Thus, the additions in their cases cannot be made in the hands of the assessee. Accordingly, the Court set aside the orders of the lower authorities and delete the addition. The disallowance of interest is also deleted;

 

 it is not in dispute that prior to giving loan to the assessee there were cash deposits of the equivalent amount of the credit in her bank account. There were insufficient bank balances in her account for giving loan to the assessee. In the cases of Smt. Suman Gupta vs. ITO 138 ITD 153, ITAT Agra Bench took the adverse view in the similar circumstances because the equivalent amount of the credits were deposited in cash in the bank account of the creditor and explanation of the assessee has been rejected. The order of the Tribunal has been confirmed by dismissing the appeal of assessee by the Allahabad High Court in ITA No. 680/2012 dated 07.08.2012. The Gujarat High Court in the case of M/s Blessing Construction vs. ITO 32 taxmann.com 366 held that “where sizeable amounts were deposited in cash in account of depositors only before their withdrawal through cheques in favour of the assessee, addition was justified”. Thus, the Court confirms the addition on account of unexplained credit.

 

ITA No.2372/Del/2016