M/s. Sreenidhi Motors Private Limited, Vijayawada V. The Assistant Commissioner of Income Tax, Circle-3(1), Vijayawada

CO 2/VIZ/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6194 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 7 month(s) 20 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 25-09-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Appeal Filed On: 05-02-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: U. MINI CHANDRAN
• Assessee Lawyers: WAY OF CHEQUE OR A DAY EARLIER. IT WAS
• Keywords: Unexplained cash credit; Unexplained investment; Salary income; Assessment record
• Section: 131; 68; 143(3); 201; 208; 264; 192; 72; 13; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM (T HROUGH WEB - BASED VIDEO CONFERENCING PLATFORM) BEFORE SHRI V. DURGA RAO, HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER I . T . A . NO. 6 72 /VIZ/2019 (ASST. YEAR : 20 1 5 - 1 6 ) THE ACIT, CIRCLE - 3(1), VIJAYAWADA . VS. M/S. SREENIDHI MOTORS PVT. LTD., D.NO. 27 - 35 - 15, CHODAVARAPU VARI STREET, GOVERNORPET, VIJAYAWADA. PAN NO. AARCS 5170 K (APP ELLANT ) (RESPONDENT) C.O.NO. 02/VIZ/2020 (ARISING OUT OF I.T.A. NO. 6 72 /VIZ/2019 ) (ASST. YEAR : 201 5 - 1 6 ) M/S. SREENIDHI MOTORS PVT. LTD., D.NO. 27 - 35 - 15, CHODAVARAPU VARI STREET, GOVERNORPET, VIJAYAWADA. VS. THE ACIT, CIRCLE - 3(1), VIJAYAWADA. PAN NO. AARCS 5170 K (APP LICANT ) (RESPONDENT) ASSESSEE BY : SHRI C. SUBRAHMANYAM , C A . DEPARTMENT BY : SMT. U.MINI CHANDRAN , SR. DR DATE OF HEARING : 23 / 0 9 /2020 . DATE OF PRONOUNCEMENT : 25 / 0 9 /20 20 . O R D E R PER V. DURGA RAO , JUDICIAL MEMBER THESE APPEAL S BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDER S OF COMMISSIONER OF INCOME TAX (APPEALS) - 2 , 2 ITA NO. 672/VIZ/2019 C.O.NO. 02/VIZ/2020 ( M/S. SREENIDHI MOTORS PVT. LTD. ) VISAKHAPATNAM , BOTH DATED 31 / 1 0/201 9 FOR THE ASSESSMENT YEAR S 20 1 2 - 1 3 & 2013 - 14 . 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE ORDER OF THE CIT(A) IS ERRONEOUS ON FACTS AND CIRCUMSTANCES OF THE CASE NARRATED IN THE STATEMENT OF FACT. 2. THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT IN THE SWORN STATEMENT THE CREDITOR COULD NOT SUBSTANTIATE THE SOURCES FOR ADVANCING THE MONEY. 3. THE CIT(A) OUGHT NOT TO HAVE ADMITTED THE CLAIM OF THE CREDITOR FOR THE OPENING BALANCE OF RS. 171.72 LAKHS WITHOUT VERIFYING THE C ASH BOOK FOR THE F.Y. 213 - 14 REL A TING TO A.Y. 2014 - 15 . 4. ANY OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING. 3 . FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE - COMPANY IS ENGAGED IN THE BUSINESS OF DEALING YAMAHA MOTORCYCLES, FILED ITS RETURN OF INCOME FOR THE A.Y. 2015 - 16 ON 30/09/2015 ADMITTING BUSINESS LOSS OF RS. 59,05,890/ - . THE AO HAS COMPLETED THE ASSESSMENT U/SEC. 143(3) ON 07/12/2017 BY DETERMINING THE LOSS AT RS. 48,23,653/ - AND HE MADE VARIOUS ADDITIONS. ONE OF THE ADDITI ONS WHICH IS CONTESTED BEFORE US IS OF RS. 2,06,50,000/ - RECEIVED FROM SRI BANDARU SRINIVASA RAO U/SEC. 68 OF THE ACT. IN THE ASSESSMENT ORDER , THE AO HAS NOTED FROM THE BALANCE SHEET THAT THE ASSESSEE HAD OBTAINED UNSECURED LOAN OF RS.2,06,50,000/ - FROM SRI BANDARU SRINIVASA RAO DURING THE YEAR. THE AO HAS ASKED THE ASSESSEE TO FURNISH THE NECESSARY 3 ITA NO. 672/VIZ/2019 C.O.NO. 02/VIZ/2020 ( M/S. SREENIDHI MOTORS PVT. LTD. ) DOCUMENTARY EVIDENCE IN SUPPORT OF THE GENUINENESS OF THE SAID UNSECURED LOAN. IN RESPONSE TO IT, THE ASSESSEE HAS FURNISHED CONFIRMATION LETTER OF THE CRED ITOR, COPY OF RETURN OF INCOME OF THE CREDITOR FOR THE A.Y. 2015 - 16, COPY OF LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF THE CREDITOR AND COPIES OF BANK STATEMENT S OF THE CREDITOR IN RESPECT OF ACCOUNT S HELD WITH KARUR VYSYA BANK AND AXIS BANK FROM WHICH THE CHEQUES WERE ISSUED TO THE ASSESSEE TOWARDS THE LOAN. AS PER THE CONFIRMATION LETTER AND LEDGER ACCOUNT EXTRACT, THE LOAN OF RS. 2,06,50,000/ - WAS ADVANCED TO THE ASSESSEE ON VARIOUS DATES AS PER THE FOLL OWING DETAILS: - DATE AMOUNT (RS.) DETAILS OF BANK ACCOUNT FROM WHICH CHEQUE ISSUED 28/08/2014 50,00,000 AXIS BANK CHEQUE NO. 318158 30/08/2014 23,53,000 AXIS BANK CHEQUE NO. 318159 26/09/2014 38,00,000 KARUR VYSYS BANK CHEQUE NO.182 13/10/2014 10,00,000 AXIS BANK CHEQUE NO. 400734 13/10/2014 9,00,000 KARUR VYSYS BANK CHEQUE NO. 186 13/10/2014 4,50,000 KARUR VYSYS BANK CHEQUE NO.131 28/10/2014 20,00,000 KARUR VYSYS BANK CHEQUE NO. 188 29/10/2014 28,00,000 KARUR VYSYS BANK CHEQUE NO. 189 28/11/2014 23,40,000 KARUR VYSYS BANK CHEQUE NO. 192 19/03/2015 10,000 CASH TOTAL 2,06,50,000 ON PERUSAL OF THE BANK ACCOUNT STATEMENT OF THE CREDITOR, IT WAS NOTICED BY THE AO THAT THE CREDITOR HAD DEPOSITED CASH IN THE BANK ACCOUNT S EITHER ON THE SAME DAY OF THE TRANSFERRING THE AMOUNT TO THE ASSESSEE BY WAY OF CHEQUE OR A DAY EARLIER. IT WAS 4 ITA NO. 672/VIZ/2019 C.O.NO. 02/VIZ/2020 ( M/S. SREENIDHI MOTORS PVT. LTD. ) OBSERVED THAT THOUGH THE CREDITOR STATED IN HIS CONFIRMATION LETTER THAT THE SOURCE S FOR THE LOAN ADVANCED TO THE ASSESSEE COMPRISED OF OPENIN G CASH BALANCE OF RS. 171.72 LAKHS , RENTAL INCOME, SALARY INCOME AND PROCEEDS FROM SALE OF APARTMENTS . IT WAS NOTICED ON PERUSAL OF THE COMPUTATION OF HIS TOTAL INCOME IN HIS RETURN OF INCOME FOR THE A.Y. 2015 - 16 HE DID NOT HA VE SOURCE S FOR ADVANCING SUCH HUG E LOAN TO THE ASSESSEE. IT WAS OBSERVED THAT THE C REDITOR HAD ALSO PAID HUGE INTEREST OF RS. 56,05,824/ - ON THE HOUSING LOAN S DURING THE YEAR. BY CONSIDERING THE ABOVE FACTS, THE AO HAS ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE WHY THE SAID UNSECURED LOAN FROM SRI BANDARU SRINIVASA RAO SHOULD NOT BE CONSIDERED AS UNEXPLAINED CASH CREDIT U/SEC. 68 OF THE ACT. IN RESPONSE TO THE SHOW CAU S E NOTICE, IT WAS STATED BY THE ASSESSEE THAT THE CREDITOR HAD ACKNOWLEDGED IN HIS CONFIRMATION LETTER THAT HE HAD ADVANCED THE LOAN OF RS. 2,06,50,000 / - TO THE ASSESSEE. IT WAS ALSO SUBMITTED BEFORE THE AO THAT THE BANK ACCOUNT STATEMENT S OF THE CREDITOR HAVE REVEALED THAT THE LOAN AMOUNTS WERE ISSUED TO THE ASSESSEE THROUGH CHEQUES FROM THE BANK ACCOUNTS ONLY. IT WA S STATED THAT THE CREDITOR HAD ALSO EXPLAINED THE SOURCE FOR ADVANCING THE LO A N IN HIS CONFIRMATION LETTER. THE ASSESSEE HAS REQUESTED THAT IF AT ALL FURTHER INFORMATION IS REQUIRED REGARDING CREDITWORTHINESS , THE CREDITOR MAY BE EXAMINED BY THE 5 ITA NO. 672/VIZ/2019 C.O.NO. 02/VIZ/2020 ( M/S. SREENIDHI MOTORS PVT. LTD. ) AO UNDER THE PROVISIONS OF SECTION 131 OF THE ACT . ACCORDINGLY, THE AO ISSUED SUMMONS TO THE CREDITOR U/SEC. 131 OF THE ACT AND RECORD ED HIS SWORN STATEMENT ON 03/11/2017. THE CREDITOR IN HIS STATEMENT STATED THAT THE LOAN WAS ADVANCED TO THE ASSESSEE OUT OF OPENING CASH BALANCE AVAILABLE AS ON 01/04/2014, INCOME RECEIVED DURING THE YEAR , LOANS TAKEN FROM BANKS AND UNSECURED LOANS TAKEN FROM OTHERS. HOWEVER, THE CREDITOR STATED THAT HE DID NOT I MMEDIATELY H A VE THE DETAILS OF THE SPECIFIC SOURCE FOR EACH CASH DEPOSIT MADE IN THE BANK ACCOUNTS PRIOR TO ISSUE OF CHEQUES TO THE ASSESSEE TOWARDS THE LOAN AND THAT THE SAME WILL BE FURNISHED SUBSEQUENTLY . IN THE ASSESSMENT ORDER THE AO OBSERVED THAT THE CREDITOR DID NOT FURNISH THE SAID DETAILS SUBSEQUENTLY AND THEREFORE THE CREDITOR DID NOT HAVE DOCUMENTARY EVIDENCE FOR THE OPENING CASH BALANCE AND OTHER SOURCES EXPLAINED BY HIM IN H IS STATEMENT . ACCORDINGLY, HE CONCLUDED THAT THE CREDITWORTHINESS OF THE CREDITOR WAS NOT ESTABLISHED BY THE ASSESSEE. ACCORDINGL Y, LOAN AMOUNT OF RS.2,06,50,000/ - IS TREATED AS UNSECURED LOAN AND MADE THE ADDITION U/SEC. 68 OF THE ACT. 4 . ON BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). IT WAS SUBMITTED BE F ORE THE LD.CIT(A) THAT THE ASSESSEE HAS PROVED THE IDENTITY OF THE PARTIES I.E. CREDITOR SRI BANDARU SRINIVASA RAO AND ALSO CONFIRMATION LETTER 6 ITA NO. 672/VIZ/2019 C.O.NO. 02/VIZ/2020 ( M/S. SREENIDHI MOTORS PVT. LTD. ) FROM THE CREDITOR , COPY OF THE RETURN OF INCOME FOR THE A.Y. 2015 - 16 , COPY OF THE LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF THE CREDITOR, COPIES OF THE BANK ACCOUNT STATEMENTS OF THE CREDITOR IN RESPECT OF ACCOUNTS HELD WITH KARUR VYSYS BANK AND AXIS BANK FROM WHICH CHEQUES WERE ISSUED TO THE ASSESSEE TOWARDS LOAN AND SUBMITTED THAT THE ASSESSEE HA D DISCHARGED THE BURDEN TO SHOW THAT HE HAS RECEIVED FUNDS FROM THE CREDITOR SRI BANDARU SRINIVASA RAO AND THE AO WITHOUT CONSIDERING THE EXPLANATION GIVEN BY THE ASSESSEE AND THE DETAILS FILED BY THE ASSESSEE SIMPLY ADDITION WAS MADE U/SEC. 68 WHICH IS NOT PERMISSIBLE IN ACCORDANCE WITH LAW AND SUBMITTED THAT THE ADDITION MAY BE DELETED. THE LD. CIT(A) AFTER EXAMINING ALL THE DETAILS DELETED THE ADDITION MADE BY THE AO. 5. ON BEING AGGRIEVED, REVENUE CARRIED THE MATTER IN APPEAL BEFORE THIS TRIBUNAL. 6 . LD.DR STRONGLY SUPPORTED THE ORDER PASSED BY THE AO AND ALSO SUBMITTED THAT THE ASSESSEE HAS FAILED TO DISCHARGE THE CREDITWORTHINESS OF THE CREDITOR , THEREFORE ADDITION DE LETED BY THE LD. CIT(A) MAY BE CANCELLED AND THE ORDER O F THE AO MAY BE CONFIRMED. 7 . ON THE OTHER HAND, LD. AR HAS SUBMITTED THAT ALL THE FUNDS RECEIVED BY THE ASSESSEE ARE FROM THE BANK AND CONFIRMATION 7 ITA NO. 672/VIZ/2019 C.O.NO. 02/VIZ/2020 ( M/S. SREENIDHI MOTORS PVT. LTD. ) LETTER ALSO FILED FROM THE CREDITOR, IDENTI T Y OF THE PARTY ALSO PROVED AND THE ASSESSEE HAS SATISFIED ALL THE CONDITIONS BEFORE THE AO THAT THIS TRANSACTION IS GENUINE . THE AO WITHOUT CONSIDERING THE DETAILS SUBMITTED BY THE ASSESSEE SIMPLY MADE THE ADDITION ON THE GROUND THAT CREDITWORTHINESS IS NOT PROVED. 8 . WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND ORDERS OF THE AUTHORITIES BELOW . 9 . THE ONLY ISSUE INVOLVED IN THIS APPEAL IS THE ADDITION MADE BY THE AO U/SEC. 68 DELETED BY THE LD. CIT(A) IS CORRECT OR NOT. IN THIS CASE, THE ASSESSEE HAS BORROWED A SUM OF RS. 2,06,50,000/ - FROM SRI BANDARU SRINIVASA RAO AND THE ASSESSEE ALSO REPAID AN AMOUNT OF RS. 50.00 LAKHS DURING THE YEAR. THE AMOUNT OF OUTSTANDING AT THE END OF THE YEAR IS AMO UN TING TO RS.1,56,50,000/ - . THE ASSESSEE FURNISHED CONFIRMATION OF THE CREDITOR SRI BANDARU SRINIVASA RAO AND ALSO COPY OF INCOME OF THE CREDITOR FOR THE A.Y. 2015 - 16, COPY OF THE LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF THE CREDITOR, COP IES OF THE BANK ACCOU NT STATEMENT S IN RESPECT OF ACCOUNTS HELD WITH KARUR VYSYS BANK AND AXIS BANK FROM WHICH CHEQUES WERE ISSUED TO THE ASSESSEE TOWARDS THE LOAN. FROM THE ABOVE IT IS VERY CLEAR THAT THE ASSESSEE HAS PROVED THE IDENTITY OF THE PARTIES , GENUINENESS OF THE TRA NSACTION, CREDITWORTHINESS OF THE CREDITOR. HOWEVER, THE AO 8 ITA NO. 672/VIZ/2019 C.O.NO. 02/VIZ/2020 ( M/S. SREENIDHI MOTORS PVT. LTD. ) HAS A DOUBT ABOUT THE CREDITWORTHINESS OF THE CREDITOR AND ASKED THE ASSESSEE TO ESTABLISH THE CREDITWORTHINESS OF THE CREDITOR. THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE AMOUNT WAS RECEIVED THROUGH BANKING CHANNELS AND CONFIRMATION LETTER ALSO FILED AND SUBMITTED THAT THE CREDITOR IS HAVI NG SOURCE OF INCOME , THE SAME IS ADVANCED TO THE ASSESSEE IF AT ALL WANT TO EXAMINE , 131 MAY BE ISSUED TO THE CREDITOR. THE AO ISSUED 131 SUMMON TO THE CREDITOR BY CALLING EXPLANA TION IN RESPECT OF CREDITWORTHINESS OF THE TRANSACTION. BEFORE THE AO THE C REDITOR HAS SUBMITTED THAT HE HA D ADVANCED FUNDS TO THE ASSESSEE, THE SOURCE OF ABOVE ADVANCE IS OPENING BALANCE OF RS. 17 1.72 LAKHS AND ALSO RENTAL INCOME AND OTHER INCOME. THE AO AFTER EXAMINING THE CREDITOR HE CAME TO A CONCLUSION THAT HE HAS NOT FILED THE DOCUMENTARY EVIDENCE TO SUBSTANTIATE THE SOURCE OF INCOME. ACCORDINGLY, THE AO WAS OF THE OPINION VIEW THAT THE CREDITOR HAS NOT CREDITWORTHINESS, THEREFORE HE MADE THE ADDITION U/SEC. 68 OF THE A CT. ON APPEAL, LD. CIT(A) AFTER EXAMINING THE RETURN OF INCOME OF THE CREDITOR FOR THE A.Y. 2015 - 16, COPY OF LEDGER OF THE ASSESSEE IN THE BOOKS OF THE CREDITOR, COPIES OF THE BANK ACCOUNT STATEMENT S OF THE CREDITOR IN RESPECT OF ACCOUNTS HELD WITH KARUR VYSYS BANK CHEQUE AND AXIS BANK FROM WHICH CHEQUES WERE ISSUED TO THE ASSESSEE TOWARDS THE LOAN. THE LD. CIT(A) FURTHER OBSERVED FROM THE RECORD OF THE 9 ITA NO. 672/VIZ/2019 C.O.NO. 02/VIZ/2020 ( M/S. SREENIDHI MOTORS PVT. LTD. ) CREDITOR SRI BANDARU SRINIVASA RAO FOR A.Y. 2015 - 16 , IT IS SEEN THAT THE SAID CASE WAS SELECTED FOR SCRUTINY FOR VERIFICATION OF CASH DEPOSIT S MADE IN THE BANK ACCOUNTS. THE ISSUE OF SOURCE FOR THE CASH DEPOSITS MADE IN THE BANK ACCOUNTS WAS EXAMINED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS . THE AVAILABILITY OF OPENING CASH BALANCE OF 1.72 CRORES WAS EXAMINED AND WAS FOUND TO BE CORRECT BY THE AO AS EVIDENT FROM THE DISCUSSION MADE AT PARA 4 OF THE ASSESSMENT ORDER. FURTHER THE DETAIL ED CASH FLOW STATEMENT FURNISHED BY THE CREDITOR DURING THE COURSE OF ASSESSMENT PROCEEDINGS WAS VERIFIED BY THE AO AND NO DISCREPANCIES WERE NOTICED IN RESPECT OF THE SAME. HE NOTICED THAT THE SAID CASH FLOW STATEMENT CONTAINED THE LOAN ADVANCED TO THE ASSESSEE AS AN ITEM OF CASH OUTFLOW. FURTHER IT IS SEEN THAT THE BALANCE SHEET OF THE CREDITO R AS ON 31/03/2015 REFLEC TED THE OUTSTANDING LOAN OF RS. 1,56,50,000/ - IN THE NAME OF THE ASSESSEE. ON PERUSAL OF THE ASSESSMENT ORDER PASSED U/SEC. 143(3) DATED 28/12/2017 IN THE CASE OF THE CREDITOR BY THE ITO, WARD - 3(1), VIJAYAWADA IT IS SEEN THAT NO AD DITION HAS BEEN MADE TOWARDS THE LOAN ADVANCED TO THE ASSESSEE BY TREATING THE SAME AS UNEXPLAINED INVESTMENT. THEREFORE, THE AO OF THE CREDITOR WAS SATISFIED REGARDING THE SOURCES FOR THE LOAN ADVANCED TO THE ASSESSEE AFTER MAKING NECESSARY EXAMINATION OF THE SAID ISSUE . 10 ITA NO. 672/VIZ/2019 C.O.NO. 02/VIZ/2020 ( M/S. SREENIDHI MOTORS PVT. LTD. ) FOR THE SAKE OF CONVENIENCE, THE RELEVANT PORTION OF THE ORDER OF THE LD. CIT(A) IS EXTRACTED AS UNDER: - 12 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE ASSESSEE THE ASSESSE E HAD SHOWN RECEIPT OF UNSECURED LOAN OF RS 2,06,50,000/ - DURING THE YEAR FROM SHRI BANDARU SRINIVASA RAO THE ASSESSEE HAS ALSO SHOWN REPAYMENT OF THE LOAN TO THE EXTENT OF RS 50,00,000/ - 'DURING THE YEAR THE AMOUNT OF LOAN OUTSTANDING AT THE END OF THE YEA R AMOUNTED TO R9.1,56,50 - 000/_, THOUGH THE ASSESSEE FURNISHED THE CONFIRMATION LETTER OF THE CREDITOR SHRI BANDARU SRINIVASA RAO WITH REGARD TO THE UNSECURED LOAN OF RS.2,06,50,000/ - OBTAINED FROM HIM DURING THE YEAR ALONG WITH COPY OF THE RETURN OF INCOME OF THE CREDITOR FOR A Y 015 - 16, COPY OF THE LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF THE CREDITOR AND COPIES OF BANK ACCOUNT STATEMENTS OF THE CREDITOR IN RESPECT OF ACCOUNTS HELD WITH KARUR VYSYA BANK AND AXIS BANK FROM WHICH THE CHEQUES WERE ISSUE D TO THE ASSESSEE TOWARDS THE LOAN, THE AO HELD THAT THE CREDITWORTHINESS OF THE CREDITOR WAS NOT SATISFACTORILY ESTABLISHED SINCE THE CREDITOR DID NOT FURNISH THE DOCUMENTARY EVIDENCES WITH REGARD TO OPENING CASH BALANCE AVAILABLE WITH HIM AND THE LOANS O BTAINED BY HIM WHICH WERE EXPLAINED TO BE THE SOURCES FOR THE LOAN ADVANCED TO THE ASSESSEE APART FROM THE INCOMES EARNED BY HIM DURING THE YEAR FROM SALARY, RENTS AND SALE OF FLATS AND THE CREDITOR DID NOT FURNISH THE DETAILS OF IMMEDIATE SOURCE IN RESP ECT OF EACH CASH DEPOSIT MADE IN HIS BANK. ACCOUNTS PRIOR TO ISSUE OF CHEQUES TO THE ASSESSEE TOWARDS THE LOAN . 13 HOWEVER, IT WAS CONTENDED BY THE ASSESSEE IN THE WRITTEN SUBMISSION THAT THE ONUS CAST ON THE ASSESSEE UNDER THE OR PROVISIONS SEC 68 STANDS DULY DISCHARGED AS IT HAS ESTABLISHED THE IDENTITY OF THE CREDITOR, GENUINENESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF THE CREDITOR, BY FURNISHING THE CONFIRMATION LETTER OF THE CREDITOR WHEREIN THE SOURCE FOR THE LOAN WERE EXPLAINED BY THE CREDIT OR ALONG WITH THE COPY OF INCOME TAX RETURN OF THE CREDITOR AND THE COPIES OF BANK ACCOUNT STATEMENTS OF THE CREDITOR IT WAS STATED THAT IT HAS BEEN ESTABLISHED BY VARIOUS JUDICIAL PRONOUNCEMENTS THAT THE BURDEN OF THE ASSESSEE TO PROVE THE CREDITWORTHINES S OF THE CREDITOR IS CONFINED TO THE TRANSACTIONS WHICH HAVE TAKEN PLACE BETWEEN THE ASSESSEE AND THE CREDITOR AND IT IS NOT THE BURDEN OF THE ASSESSEE TO SHOW THE SOURCE OF HI4S CREDITOR OR TO PROVE THE CREDITWORTHINESS OF THE SOURCE OF THE SUB - CREDITORS THE ASSESSEE PLACED RELIANCE ON THE FOLLOWING DECISIONS IN SUPPORT OF THIS CONTENTION : 11 ITA NO. 672/VIZ/2019 C.O.NO. 02/VIZ/2020 ( M/S. SREENIDHI MOTORS PVT. LTD. ) 1) CIT VS METACFIEM INDUSTRIES (1999) 245 ITR 160 (MP) 2) NEMI CHAND POTARI VS CIT (2003) 264 ITR 254 (GAUHATI) 3) ARAVALI TRADING CO VS ITO (2007) 220 CTR 622 (RAJASTHAN) 4) CIT VS ANAND KUMAR MODI (2014) 88 CCH 124 JHARKAND) 5) CIT VS RANCHHOD JIVABHAI NAKHAVA (2012) 208 TAXMAN 0035 (GUJARAT ) 14 . IT WAS FURTHER CONTENDED BY THE ASSESSEE THAT SINCE THE CREDITOR CONFIRMED THE LOAN ADVANCED TO THE ASSESSEE IN HIS CONFIRMATION LETTER AND REITERATED THE SAME IN THE STATEMENT RECORDED U/S 131 AND SINCE THE LOAN AMOUNTS ADVANCED TO THE ASSESSEE WERE DEMON STRATED TO HAVE FLOWN FROM THE SANK ACCOUNTS OF THE CREDITOR, THE AO IS NOT CORRECT IN TREATING THE SAID LOAN AS UNEXPLAINED CASH CREDIT PARTICULARLY WHEN THERE WAS NO DIRECT OR INDIRECT EVIDENCE TO SHOW THAT THE DEPOSITS IN THE BANK ACCOUNTS OF THE CREDIT OR HAVE ACTUALLY FLOWN FROM THE HANDS OF THE ASSESSEE IT WAS CONTENDED THAT IF THE AO HAD ANY DOUBTS REGARDING THE CREDITWORTHINESS OF THE CREDITOR, HE OUGHT TO HAVE REFERRED HIS FINDINGS TO THE AO HAVING JURISDICTION OVER THE CREDITOR IN VIEW OF THE FACT THAT THE CREDITOR HAS FILED HIS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR AND HIS CASE FOR THE SAID ASSESSMENT YEAR HAS BEEN TAKEN UP FOR SCRUTINY BY HIS AO. 15. ON CAREFUL EXAMINATION OF THE FACTS OF THE CASE, IT IS SEEN THAT THE AO WAS SATISFIED REGARDING THE IDENTITY OF THE CREDITOR AND THE GENUINENESS OF THE LOAN TRANSACTION BASED ON THE EXAMINATION CONFIRMATION LETTER OF HIS RETURN OF INCOME AND THE COPIES OF HIS BANK ACCOUNT STATEMENTS. HOWEVER, THE AO WAS NOT SATISFIED REGARDING THE CREDITWO RTHINESS OF THE CREDITOR SINCE THE CREDITOR DID NOT FURNISH THE DOCUMENTARY EVIDENCES WITH REGARD TO OPENING CASH BALANCE AVAILABLE WITH HIM AND THE LOANS OBTAINED BY HIM WHICH WERE EXPLAINED TO BE THE SOURCES FOR THE LOAN ADVANCED TO THE ASSESSEE APART FR OM THE INCOMES EARNED BY HIM DURING THE YEAR FROM SALARY, RENTS AND SALE OF FLATS AND THE CREDITOR DID NOT FURNISH THE DETAILS OF IMMEDIATE SOURCE IN RESPECT OF EACH CASH DEPOSIT MADE IN HIS BANK ACCOUNTS PRIOR TO ISSUE OF CHEQUES TO THE ASSESSEE TOWARDS T HE LOAN. 16. IN THIS CONNECTION, IT IS NOTICED THAT THE AO OF THE ASSESSEE ADDRESSED A LETTER DATED 06.11.2017 TO THE ITO, WARD - 3(1), VIJAYAWADA, THE JURISDICTIONAL AO OF THE CREDITOR AND INFORMED HER REGARDING THE OBSERVATIONS MADE WITH REGARD TO THE CRE DITWORTHINESS OF THE CREDITOR IN ADVANCING LOAN OF RS.2,06,50,000/ - TO THE ASSESSEE. IT WAS INFORMED THAT CASH DEPOSITS WERE MADE IN THE BANK ACCOUNTS OF THE CREDITOR IMMEDIATELY PRIOR, TO THE ISSUE OF CHEQUES TO THE ASSESSEE TOWARDS THE LOAN AND THAT THE CREDITOR DID NOT FURNISH SATISFACTORY 'REPLIES REGARDING THE IMMEDIATE SOURCE FOR SUCH CASH DEPOSITS MADE IN THE BANK ACCOUNTS DURING THE COURSE OF HIS STATEMENT RECORDED U/S.131 ON 03.11.2017 THE AO OF THE CREDITOR WAS 12 ITA NO. 672/VIZ/2019 C.O.NO. 02/VIZ/2020 ( M/S. SREENIDHI MOTORS PVT. LTD. ) ACCORDINGLY REQUESTED TO EXPLORE TH E POSSIBILITY OF INVOKING THE PROVISIONS OF SEC.69 TO TAX THE LOAN ADVANCED BY THE CREDITOR TO THE ASSESSEE. 17. ON PERUSAL OF THE ASSESSMENT RECORD IN THE CASE OF THE CREDITOR SHRI BANDARU SRINIVASA RAO FOR AY 2015 - 16, IT IS SEEN THAT THE SAID CASE WAS S ELECTED FOR SCRUTINY FOR VERIFICATION OF CASH DEPOSITS MADE II THE BANK ACCOUNTS. THE ISSUE OF SOURCES FOR THE CASH DEPOSITS MADE IN THE BANK ACCOUNTS WAS EXAMINED BY THE AO OF THE CREDITOR DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS IN THE CASE OF THE CREDITOR IN VIEW OF THE SAID REASON FOR SELECTION OF THE CASE FOR SCRUTINY AND THE LETTER DATED 06.11.2017 RECEIVED FROM THE AO OF THE ASSESSEE. THE AVAILABILITY OF OPENING CASH BALANCE OF RS. 1.72 CRORES WAS EXAMINED AND WAS FOUND TO BE CORRECT BY THE AO OF THE CREDITOR AS EVIDENT FROM THE DISCUSSION MADE AT PARA 4 OF THE ASSESSMENT ORDER OF THE CREDITOR. FURTHER , THE DETAILED CASH FLOW STATEMENT FURNISHED BY THE CREDITOR DURING THE COURSE OF HIS ASSESSMENT PROCEEDINGS WAS VERIFIED BY THE AO AND DISCREP ANCIES WERE NOTICED IN RESPECT OF THE SAME. IT IS NOTICED THAT THE SAID CASH FLOW STATEMENT CONTAINED THE LOAN ADVANCED TO THE ASSESSEE AS AN ITEM OF CASH OUTFLOW. FURTHER, IT IS SEEN THAT THE BALANCE SHEET OF THE CREDITOR AS ON 31.03.2015 REFLECTED THE O UTSTANDING LOAN OF RS.1,56,50,000/ - IN THE NAME OF THE ASSESSEE. ON PERUSAL OF THE ASSESSMENT ORDER PASSED U/S.143(3) ON 28.12.2017 IN THE CASE OF THE CREDITOR BY THE ITO, WARD - 3(1), VIJAYAWADA, IT IS SEEN NO ADDITION HAS BEEN MADE TOWARDS THE LOAN ADVANCE D TO THE ASSESSEE BY TREATING THE SAME AS UNEXPLAINED INVESTMENT. THUS, IT IS SEEN THAT THE AO OF THE CREDITOR WAS SATISFIED REGARDING THE SOURCES FOR THE LOAN ADVANCED TO THE ASSESSEE AFTER MAKING NECESSARY EXAMINATION OF THE SAID ISSUE. 18. IN THE LIGHT OF SAID FINDING OF THE AO OF THE CREDITOR, IT IS HELD THAT THERE IS NO GROUND FOR TREATING THE UNSECURED LOAN FROM THE CREDITOR AS UNEXPLAINED CASH CREDIT ON THE GROUND THAT THE CREDITWORTHINESS OF THE CREDITOR HAS NOT BEEN SATISFACTORILY EXPLAINED. HENCE, THE AO IS DIRECTED TO DELETE THE ADDITION OF RS2,06,50,000/ - MADE U/S . 68 OF THE ACT TOWARDS THE UNEXPLAINED UNSECURED LOAN FROM SHRI BANDARU SRINIVASA RAO. THESE GROUNDS OF APPEAL ARE THEREFORE ALLOWED. 10. T HEREFORE BY CONSIDERING THE ABOVE SPECIFIC FIN D ING GIVEN BY THE LD. CIT(A) AND ALSO BY CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE OPINION THAT THE ASSESSEE HAS DISCHARGED THE BURDEN CASTED UPON HIM BY PRODUCING ALL THE RELEVANT DETAILS 13 ITA NO. 672/VIZ/2019 C.O.NO. 02/VIZ/2020 ( M/S. SREENIDHI MOTORS PVT. LTD. ) BEFORE THE AO. THEREFORE, THE AO IS NOT CORRECT IN MAKING THE ADDITION ON THE GROUND THAT THE CREDITOR HAS NO SOURCE TO ADVANCE THE FUNDS TO THE ASSESSEE IN SPITE OF SPECIFIC CONFIRMATION LETTER GIVEN BY THE CREDITOR AND IN 131 EXAMINATION HE ADMITTED THAT HE ADVANCED THE LOAN TO THE ASSESSEE AN D ALSO EXPLAINED THE SOURCE FOR THE ADVANCE. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE , WE FIND NO REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD. CIT(A). THUS, THIS APPEAL FILED BY THE REVENUE IS DISMISSED. C.O.NO. 02/VIZ/2020 1 1 . THE CROSS OBJECTION FILED BY THE ASSESSEE IS IN SUPPORTIVE TO THE ORDER OF THE LD. CIT(A). AS THERE IS NO GRIEVANCE AGAINST THE ORDER OF THE LD. CIT(A), THIS CROSS OBJECTION FILED BY THE ASSESSEE HAS BECOME INFRUCTUOUS AND IS DISMISSED ACCORDINGLY. 12 . IN THE RESULT, APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON TH IS 2 5 T H DAY OF SEPT. , 2020 . S D / - S D / - (D.S. SUNDER SINGH) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 2 5 T H SEPTEMBER , 20 20 . VR/ - 14 ITA NO. 672/VIZ/2019 C.O.NO. 02/VIZ/2020 ( M/S. SREENIDHI MOTORS PVT. LTD. ) COPY TO: 1. THE ASSESSEE - M/S. SREENIDHI MOTORS PVT. LTD., D.NO. 27 - 35 - 15, CHODAVARAPU VARI STREET, GOVERNORPET, VIJAYAWADA. 2. THE REVENUE THE ACIT, CIRCLE - 3(1), VIJAYAWADA. 3. THE PR. CIT , VIJAYAWADA. 4. THE CIT(A) , VIJAYAWADA. 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.