M/s Reddy Structure Private Limited , Bangalore V. Assistant Commissioner of Income Tax Circle-5(1)(1), Bangalore

ITA 773/BANG/2017

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 9171 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 27-11-2019
• Assessment Year: 2005-2006
• Appeal Filed On: 01-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R PREMI
• Keywords: Gift; Additional evidence
• Section: 37(1); 13; 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: BENGALURU BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER I.T.A NO.773/BANG/2017 (ASSESSMENT YEAR: 2005-06) M/S. REDDY STRUCTURES PVT. LTD., NO.1, MAHAVEER TOWERS, 3 RD FLOOR, 24 TH MAIN, 5 TH PHASE, JP NAGAR, BANGALURU 560 0478. [PAN: AACCR 6953L] VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-(1)(1), BENGALURU. ( /APPELLANT ) ( /RESPONDENT ) / APPELLANT BY : SHRI NARENDRA SHARMA,ADVOCATE / RESPONDENT BY : SMT. R. PREMI, JCIT / DATE OF HEARING : 27.11.2019 /DATE OF PRONOUNCEMENT : 05.12.2019 O R D E R PER D.S. SUNDER SINGH, A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-5, BENGALURU ( HEREAFTER REFERRED AS CIT(A)) IN ITA NO.142/195(A-1)/CIT(A)-5/2014-1 5 DATED 02.02.2017 FOR THE ASSESSMENT YEAR 2005-06. 2. GROUNDS NO.1 & 10 ARE GENERAL IN NATURE WHICH DOES NOT REQUIRE ANY SPECIFIC EDUCATION. ITA NO.773/BANG/2017 :- 2 -: 3. GROUND NO.2 IS RELATED TO SUSTAINING THE DISALLO WANCE OF DONATION AND CHARITIES OF RS. 26,115/- OUT OF THE TOTAL DISA LLOWANCE OF RS.1,17,551/- BY THE LD. CIT(A). THE ASSESSING OFFICER (AO) DURIN G THE ASSESSMENT PROCEEDINGS FOUND THAT THE ASSESSEE HAD DEBITED THE AMOUNT OF RS. 1,17,551/- TOWARDS THE DONATIONS AND CHARITIES BUT NOT MADE THE DISALLOWANCE, THEREFORE, THE AO DISALLOWED THE SAID AMOUNT OF RS.1,17,551/- AND ADDED BACK TO THE INCOME. ON APP EAL, THE LD. CIT(A) CONFIRMED THE ADDITION OF RS. 26,115/- AND ALLOWED THE REMAINING EXPENDITURE UNDER SECTION 37(1) OF THE INCOME TAX A CT, 1961 ('THE ACT'). AGAINST WHICH THE ASSESSEE FILED APPEAL BEFORE THIS TRIBUNAL. 4. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL PLACE ON RECORD. THE LD. CIT(A) CONSIDERED THE ASSESSEES SU BMISSION ON DONATIONS WHICH WAS SAID TO BE INCURRED DURING THE PUJA AND RITUALS CARRIED ON BY THE ASSESSEE IN THE CONDUCT OF BUSINE SS AND ALLOWED THE SUM OF RS.91436/- AND THE BALANCE OF AMOUNT OF RS. 26,115/- WAS CONFIRMED. DURING THE APPEAL OF HEARING, THE LD. AR COULD NOT SUBSTANTIATE THAT THE AMOUNT OF RS. 26,115/- WAS NOT THE DONATIO N AND CHARITY AND LAID OUT FOR THE PURPOSE OF BUSINESS. THEREFORE, THE APP EAL OF THE ASSESSEE ON THIS GROUND IS DISMISSED AND THE ORDER OF LD. CIT(A ) IS SUSTAINED. 5. GROUNDS NO.3 & 3.1 ARE RELATED TO THE SUSTAIN ING THE DISALLOWANCE OF 25% OF EXPENDITURE INCURRED THROUGH CREDIT CARDS, S INCE, THE EXPENDITURE WAS PERSONAL IN NATURE. THE ASSESSING OFFICER (AO) DURING THE ITA NO.773/BANG/2017 :- 3 -: ASSESSMENT PROCEEDINGS FOUND THAT THE ASSESSEE DEBI TED THE AMOUNT OF RS.3,20,631/- THROUGH VARIOUS CREDIT CARDS UNDER TH E HEAD BUSINESS PROMOTION EXPENSES. DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, THE ASSESSEE WAS ASKED TO PRODUCE THE CREDIT CARD STATE MENT, WHICH THE ASSESSEE FAILED TO PRODUCE THE DETAILS. IN THE ABSE NCE OF THE DETAILS, THE AO DISALLOWED 75% OF THE CREDIT CARD EXPENSES AS PE RSONAL EXPENSES. ON APPEAL BEFORE THE LD. CIT(A), THE LD. CIT(A) RESTR ICTED THE DISALLOWANCE TO THE EXTENT OF 25%. AGAINST WHICH THE ASSESSEE FILED APPEAL BEFORE THIS TRIBUNAL. 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D FIND FROM THE ORDER OF LOWER AUTHORITIES THAT THE ASSESSEE HAS FA ILED TO FURNISH THE DETAILS OF EXPENSES INCURRED THROUGH CREDIT CARD CARDS. IN THE ABSENCE OF THE DETAILS OF THE EXPENDITURE INCURRED THROUGH CREDIT CARDS THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO THE EXTENT OF 25% AN D ALLOWED THE REMAINING EXPENDITURE. DURING THE APPEAL HEARING THE LD.AR CO ULD NOT SUBSTANTIATE THAT THE EXPENSES WERE INCURRED FOR THE PURPOSE OF BUSINESS. THEREFORE, WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF LD. CIT (A) AND THE SAME IS UPHELD. APPEAL OF THE ASSESSEE ON THIS GROUND IS DI SMISSED. 7. GROUND NO.4 RELATED TO SUSTAINING 50% OF ADD ITION IN RESPECT OF FOREIGN TRAVEL AND DOMESTIC TRAVEL EXPENDITURE. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOUND THAT THE ASSESSEE H AD INCURRED THE TRAVELLING EXPENDITURE OF RS. 11,65,065/-, OUT OF W HICH A SUM OF RS. ITA NO.773/BANG/2017 :- 4 -: 9,52,999/- WAS INCURRED FOR FOREIGN TRAVEL. THE ASS ESSEE WAS ASKED TO PRODUCE THE BILLS FOR THE SAME AND FROM THE BILLS T HE AO FOUND THAT THE TRAVEL WAS UNDERTAKEN TO DUBAI AND EGYPT BY SHRI PR AVEEN, THE DIRECTOR OF THE COMPANY HIS FAMILY MEMBERS AND OTHERS WHO HAS N O BUSINESS CONNECTION AND NOR THE OFFICIALS/EXECUTIVES OF THE COMPANY. THE ASSESSEE WAS UNABLE TO PROVE THE RELATION BETWEEN THE PEOPLE WHO TRAVELLED AND THE BUSINESS ACTIVITIES OF THE COMPANY. THE ASSESSEE AL SO DID NOT ESTABLISH THE NECESSITY OF FOREIGN TRAVEL FOR THE PURPOSE OF BUSINESS ACTIVITY, THEREFORE, THE AO DISALLOWED RS. 9,25,999/- AS THE EXPENDITURE NOT MADE OUT FOR THE PURPOSE OF BUSINESS. THE AO FURTHER FO UND THAT THE ASSESSEE HAS DEBITED THE AMOUNT OF RS. 81,974/- ON 14.04.20 04 TOWARDS TRAVELLING EXPENDITURE OF SHRI PRAVEEN, DIRECTOR AND HIS FAMIL Y MEMBERS. THE AO OBSERVED THAT EXCEPT THE DIRECTOR NO OTHER MEMBERS OF THE FAMILY WERE RELATED TO THE COMPANYS ACTIVITIES AND THE TRAVEL UNDERTAKEN TO DELHI HAS NO RELATION TO THE COMPANY. SINCE, THE ASSESSEE FAI LED TO PROVE ANY RELATION BETWEEN THE MEMBERS TRAVELLED AND THE BUSI NESS ACTIVITY OF THE COMPANY, THE AO DISALLOWED RS. 81,974/- AND ADDED B ACK TO THE INCOME. THE AGGREGATE DISALLOWANCE WAS RS. 10,07,973/- UNDE R THE HEAD TRAVEL EXPENSES. AGAINST WHICH THE ASSESSEE FILED APPEAL BEFORE LD. CIT(A). 8. THE LD. CIT(A) FOUND THAT THE DIRECTOR AND HIS WIFE ALONG WITH OTHER MEMBERS HAVE TRAVELLED ABROAD AND DELHI AND T HE EXPENDITURE WAS BORNE BY THE ASSESSEE COMPANY. EXCEPT THE DIRECTOR SHRI PRAVEEN NO OTHER PERSON HAS BUSINESS CONNECTION WITH THE ASSES SEE-COMPANY. ITA NO.773/BANG/2017 :- 5 -: THEREFORE, THE LD. CIT(A) WAS OF THE VIEW THAT ENT IRE THE EXPENDITURE WAS NOT WHOLLY AND EXCLUSIVELY HELD TO BE FOR THE PURPO SE OF BUSINESS, HOWEVER, RESTRICTED THE DISALLOWANCE TO THE EXTENT OF 50% AND ALLOWED THE APPEAL PARTLY. AGAINST WHICH THE ASSESSEE IS IN AP PEAL BEFORE US. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED ON RECORD. IN THE INSTANT CASE, MR. K. PRAV EEN, THE DIRECTOR OF THE COMPANY HAS TRAVELLED TO ABROAD I.E., DUBAI AND EGY PT ALONG WITH HIS WIFE, DAUGHTER, INFANT SNIGDHA, INFANT DEEKSHITA, MR.PRAB HAKARA REDDY, MR. VEERAGOWDA AND SMT NELA VEERAGOWADA. EXCEPT MR. PR AVEEN NO OTHER MEMBERS WHO TRAVELLED ABROAD HAVE BUSINESS CONNECTI ON DIRECTLY OR INDIRECTLY WITH THE ASSESSEE. SIMILARLY, MR. PRAVE EN AND SEVEN OTHERS TRAVELLED TO DELHI WERE ALSO NOT CONNECTED TO THE B USINESS DIRECTLY OR INDIRECTLY OF THE COMPANY. THE ASSESSEE COULD NOT E STABLISH THE BUSINESS CONNECTION OF OTHER MEMBERS WHO TRAVELLED ALONG WIT H THE DIRECTOR TO THE ABROAD AND DELHI. AS PER THE PROVISIONS OF INCOME T AX ACT THE EXPENDITURE WHOLLY AND EXCLUSIVELY LAID OUT FOR THE PURPOSE OF BUSINESS IS ONLY ALLOWABLE EXPENDITURE. SINCE, THE ASSESSEE FAILED TO PROVE THAT THE EXPENDITURE INCURRED ON FOREIGN TRAVEL AS WELL AS D OMESTIC TRAVEL WAS FOR THE PURPOSE OF BUSINESS, WE HOLD THAT THE LD. CIT(A ) RIGHTLY ALLOWED 50% OF EXPENDITURE, HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND THE SAME IS UPHELD. THE APPEAL OF THE AS SESSEE ON THIS GROUND IS DISMISSED. ITA NO.773/BANG/2017 :- 6 -: 10. GROUND NO.5 IS RELATED TO THE ADDITION OF RS. 5 ,00,000/- IN RESPECT OF LOAN FROM SHRI PIYUSH KUMAR U/S. 68 OF THE ACT. TH E ASSESSEE DID NOT SUBMIT ANY DETAILS OR FURNISH THE CONFIRMATION FROM THE CREDITOR, THEREFORE THE AO MADE THE ADDITION. AGAINST WHICH THE ASSESSE E WENT ON APPEAL BEFORE THE LD. CIT(A), AND FILED ADDITIONAL EVIDENC E BEFORE THE LD. CIT(A) IN THE FORM OF CONFIRMATION LETTER BUT NOT FURNISHE D THE PAN NUMBER, THEREFORE, THE LD.CIT(A) CONFIRMED THE ADDITION MAD E BY THE AO. AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 11. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US. BEFORE THE AO, THE ASSESSEE NEITHER FURN ISHED THE CONFIRMATION NOR FURNISHED THE DETAILS. HOWEVER, BEFORE THE LD. CIT(A) THE ASSESSEE FURNISHED THE CONFIRMATION LETTER WITH DETAILED ADD RESS AND WITHOUT PAN NUMBER. THE LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE AO, SINCE THE ASSESSEE HAS NOT EVEN FURNISHED THE PAN NUMBER. FRO M THE PERUSAL OF THE CONFIRMATION LETTER OF SHRI PIYUSH KUMAR, IT IS SEEN THAT SHRI PIYUSH KUMAR DID NOT EXPLAIN THE SOURCE AND EVEN DID NOT F URNISH THE PAN NUMBER FOR GIVING LOAN OF RS. 5,00,000/- TO THE ASS ESSEE. THE CONFIRMATION LETTER WAS UNDATED AND THE DATE OF LOAN MODE OF GIV ING THE LOAN, SOURCE OF LOAN ETC., WAS ALSO NOT FURNISHED IN THE CONFIRMATI ON LETTER. HOWEVER, THE CREDITOR HAS FURNISHED THE FULL ADDRESS AND THE LD. CIT(A) HAS CONFIRMED THE ADDITION WITHOUT MAKING THE ENQUIRY. HAVING ADM ITTED THE ADDITIONAL EVIDENCE THE LD. CIT(A) OUGHT TO HAVE MADE THE ENQU IRY AND GIVEN THE FINDING. SINCE, THE CREDITOR HAS GIVEN THE COMPLETE ADDRESS WE, ARE OF THE ITA NO.773/BANG/2017 :- 7 -: VIEW THAT ENQUIRY REQUIRED TO BE MADE BEFORE CONFIR MING THE ADDITION. THEREFORE, WE REMIT THE MATTER BACK TO THE FILE OF AO TO RE-EXAMINE THE ISSUE IN DETAIL AND DECIDE THE ISSUE AFRESH ON MERI TS. ACCORDINGLY, GROUND NO.5 OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE . 12. GROUND NO.6 IS RELATED TO THE ADDITION OF RS.5, 00,000/- LOAN RECEIVED FROM SHANTA DEVI. THE ASSESSEE HAS NEITHER FURNISHE D THE ADDRESS NOR ANY OTHER DETAILS WITH REGARD TO THE CREDITOR, INSP ITE OF REPEATED REQUESTS MADE BY THE AO. THE ASSESSEE PRODUCED ONE LEAF OF B ANK PASS BOOK PURPORTEDLY BELONGING TO SHANTA DEVI GULECHA WHICH SHOWS WITHDRAWAL OF RS. 5,00,000/- ON 07.03.2005 AND IT DOES NOT CONTAI N EVEN THE NAME OF THE ASSESSEE. AS PER THE BANK PASS BOOK, THE CREDITOR WAS HAVING BALANCE OF RS. 2,34,453/- ON 01.03.2005. SUBSEQUENTLY, THE DE POSITS WERE MADE AMOUNTING TO RS. 1,60,000/- AND RS. 2,20,000/- AND WITHDRAWN THE AMOUNT OF RS. 5,00,000/- ON 07.03.2005. THE SOURCE WAS NOT EXPLAINED HENCE, THE AO DISBELIEVED IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE CREDITOR AND ACCORDINGLY, MADE THE ADDITION OF RS. 5,00,000/- U/S. 68 OF THE ACT. AGAINST WHICH THE ASSESSEE FILED APPEAL BE FORE THE CIT(A) AND THE LD.CIT(A) CONFIRMED THE ADDITION AND THE ASSESSEE I S IN APPEAL BEFORE US. 13. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E MATERIAL PLACED BEFORE US. BEFORE THE AO THE ASSESSEE PLACED THE CO PY OF THE BANK ACCOUNT. THE LD.A.R FURNISHED CONFIRMATION LETTER I N RESPECT OF SMT. SHANTHA DEVIN GULECHA IN PAGE NO.37 OF THE PAPER BO OK. AS PER THE ITA NO.773/BANG/2017 :- 8 -: ORDER OF THE LD.CIT(A) IN PARA 12.1 IT IS OBSERVED THAT THE ASSESSEE HAS FURNISHED THE CONFIRMATION LETTER BEFORE THE LD.CIT (A). HOWEVER THE LD.CIT(A) CONFIRMED THE ADDITION UNDER THE IMPRESSI ON THAT THE SAME WAS NOT FURNISHED. IT APPEARS THERE WAS SOME CONFUSION WITH REGARD TO THE CONFIRMATION FURNISHED BY THE ASSESSEE IN RESPECT O F THE CREDITOR. THEREFORE, WE ARE OF THE VIEW THAT THE CORRECT INFO RMATION IS NOT FORTHCOMING FROM THE ORDER OF THE LD.CIT(A), HENCE, IN OUR CONSIDER OPINION THIS ISSUE REQUIRE VERIFICATION AT THE END OF THE AO. HENCE WE, REMIT THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO REEXAMINE THE ISSUE AND DECIDE AFRESH ON MERITS. NEEDLESS TO SAY THAT THE ASSESSEE MUST COOPERATE WITH THE AO AND THE AO SHOULD AFFORD REASONABLE OPPORTUNITY TO THE ASSESSEE. THUS THIS GROUND OF AP PEAL IS ALLOWED FOR STATISTICAL PURPOSES. 14. GROUND NO.7 IS RELATED TO THE ADDITION OF RS.2, 90,000/- U/S 68 OF THE ACT, RELATING TO THE LOAN RECEIVED FROM SRI GURUMUR THY. BEFORE THE AO AND THE LD.CIT(A) THE ASSESSEE NEITHER FURNISHED THE DE TAILS NOR THE CONFIRMATION LETTER. THEREFORE, THE LD. CIT(A) CONF IRMED THE ADDITION. DURING THE APPEAL HEARING ALSO THE LD. AR DID NOT P LACE ANY MATERIAL TO CONTROVERT THE DECISION OF THE LD.CIT(A), THEREFORE WE, DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A) AND THE SAME IS UPHELD. THE APPEAL OF THE ASSESSEE ON THIS GROUND IS DISMIS SED. ITA NO.773/BANG/2017 :- 9 -: 15. GROUND NO.8 IS RELATED TO THE ADDITION OF RS.10 ,00,000/- LOAN RECEIVED FROM MAHENDRA NAYAKAM. THE AO HAS EXAMINED SHRI MAHEDRA NAYAKAM, BY ISSUE OF SUMMONS U/S. 131 OF THE ACT. T HE CREDITOR SHRI MAHENDRA NAYAKAM APPEARED BEFORE THE AO AND CONFIRM ED THAT HE HAS GIVEN THE LOAN OF RS. 10,00,000 IN THE YEAR 2005 A ND FURTHER SUM OF RS. 10,00,000/- IN THE YEAR 2006. BEFORE THE AO THE CR EDITOR DID NOT PRODUCE THE BANK ACCOUNT STATEMENT AND DID NOT EXPLAIN THE SOURCE. THE CREDITOR IS A SALARIED EMPLOYEE IN THE ASSESSEES COMPANY WORKI NG FOR MONTHLY SALARY OF RS.10000/- FOR THE LAST THREE YEARS WITHO UT HAVING ANY ADDITIONAL SOURCE OF INCOME. THEREFORE, THE AO DISBELIEVED THE GENUINENESS AND CREDITWORTHINESS OF THE CREDITOR AND MADE THE ADDIT ION OF RS. 10,00,000/- U/S. 68 OF THE ACT. AGAINST WHICH THE ASSESSEE FILE D APPEAL BEFORE THE LD. CIT(A) AND THE LD.CIT(A) CONFIRMED THE ADDITION OBS ERVING THAT THE ASSESSEE FAILED TO ESTABLISH THE GENUINENESS AND CR EDIT WORTHINESS OF THE TRANSACTION. 16. AGGRIEVED BY THE ORDER OF THE LD.CIT(A) THE ASS ESSEE FILED APPEAL BEFORE US. DURING THE APPEAL OF HEARING, THE LD. AR SUBMITTED THAT THE SUMMONS U/S. 131 OF THE ACT WERE ISSUED TO THE CRED ITOR AND HE HAS CONFIRMED THE TRANSACTION, THUS, ARGUED THAT THE AS SESSEE HAD ESTABLISHED THE IDENTITY AND GENUINENESS OF THE TRANSACTION. S INCE, THE ASSESSEE EXPLAINED THE SOURCE, THERE IS NO CASE FOR MAKING T HE ADDITION IN HANDS OF THE ASSESSEE. THE LD. AR FURTHER SUBMITTED THAT IT IS NOT THE DUTY OF THE ASSESSEE TO EXPLAIN THE SOURCE OF SOURCE AND IT IS FOR THE DEPARTMENT TO ITA NO.773/BANG/2017 :- 10 -: MAKE THE INQUIRIES AND DISPROVE THE TRANSACTION FOR MAKING THE ADDITION. HAVING ACCEPTED THE LOAN TRANSACTION BEFORE THE AO, THE LD. AR ARGUED THAT THE AO OUGHT NOT TO HAVE NOT MADE THE ADDITION . THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE CANNOT SUBMIT THE BANK PASS BOOKS AND INCOME TAX RETURNS OF THE CREDITOR SINCE HE IS NOT HAVING ACCESS TO THE SAME. THEREFORE, ARGUED THAT THE ASSESSEE HAS DISCH ARGED ITS BURDEN AND IT IS FOR THE AO TO MAKE FURTHER INQUIRES AND DISPR OVE THE GENUINENESS OR OTHERWISE HENCE, ARGUED THAT THE AO HAS NO MATERIAL TO MAKE THE ADDITION ACCORDINGLY, REQUESTED TO DELETE THE ADDITION MADE BY THE AO. 17. ON THE OTHER HAND, THE LD. DR ARGUED THAT SHRI MAHENDRA NAYAKAM THOUGH ACCEPTED THE LOAN HE FAILED TO EXPLAIN THE S OURCE TO ESTABLISH THE GENUINENESS AND CREDITWORTHINESS OF THE TRANSACTION S. THE CREDITOR HAS NO SOURCE AND HE WAS UNABLE TO EXPLAIN THE SOURCE FOR GIVING THE LOAN. HE IS AN EMPLOYEE OF THE ASSESSEE-COMPANY DRAWING SALARY OF RS. 10,000/- AND THERE WAS NO ACCUMULATION OF MONEY AVAILABLE TO THE CREDITOR, THEREFORE, ARGUED THAT THE ASSESSEE FAILED TO ESTABLISH THE CR EDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. THUS, ARGUED THAT THE LD. CIT(A) HAS RIGHTLY UPHELD THE ADDITION AND NO INTERFERENCE IS CALLED FOR. 18. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED ON RECORD. SHRI MAHENDRA NAYAKAM HAS CONFIRM ED THE LOAN TRANSACTION IN THE STATEMENT GIVEN U/S. 131 OF THE ACT BUT HE COULD NOT EXPLAIN THE SOURCE FOR GIVING THE LOAN TO THE ASSES SEE. THE CREDITOR HAS ITA NO.773/BANG/2017 :- 11 -: FILED RETURNS ONLY FOR THE AY 2005-06 AND AY 2006-0 7 RELATED TO THE ASSESSMENT YEAR OF TRANSACTION INVOLVING THE LOAN. THERE WAS NO EVIDENCE OF ACCUMULATION OF FUNDS TO THE CREDITOR I.E IN THE YEAR IN WHICH THE LOAN WAS GIVEN. THE CREDITOR DID NOT PRODUCE BANK ACCOU NT COPY INSPITE OF SPECIFIC REQUEST MADE BY THE AO. THOUGH THE LOAN WA S GIVEN FOR INTEREST THE ASSESSEE HAS NOT PAID ANY INTEREST TO THE CREDI TOR TILL DATE. 19. THE CREDITOR IS AN EMPLOYEE WORKING WITH THE AS SESSEE-COMPANY FOR A SALARY OF RS. 10,000/- PER MONTH AND THOUGH THE CREDITOR HAS STATED TO HAVE DONE SOME CONTRACT WORKS THERE WAS NO EVIDENCE HAVING CARRIED OUT THE CONTRACT WORKS AND THE CREDITOR DID NOT FURNISH THE INCOME TAX RETURNS DECLARING THE CONTRACTS INCOME OF EARLIER YEARS. AS SEEN FROM THE ASSESSMENT ORDER, THOUGH HE WAS WORKING FOR MONTHLY SALARY OF RS. 10,000/- PER MONTH WITH THE ASSESSEE HE WAS NOT PAI D THE INTEREST TILL THE DATE OF FINALIZATION OF ASSESSMENT ORDER. THE CREDI TOR STATED THAT HE HAD RECEIVED THE GIFT OF GIFT OF RS. 25,00,000/- FROM H IS BROTHER BUT HAS NOT FURNISHED ANY EVIDENCE TO SHOW THE GIFT TRANSACTION . FURTHER, HE WAS RESIDING IN HYDERABAD AND FILED THE RETURNS OF INCO ME IN BANGALURU, WHICH SHOWS THAT THE INCOME TAX RETURNS WERE FILED TO EXP LAIN THE LOAN TRANSACTION. THE ASSESSEES AR PRODUCED THE BANK S TATEMENT OF THE CREDITOR FROM WHICH IT WAS FOUND THAT THERE WAS NO ENTRY IN THE BANK STATEMENT OF SHRI MAHENDRA NAYAKAM BETWEEN 23.08.20 04 TO 18.05.2005. FROM THE ABOVE FACTS, IT IS FOUND THAT SHRI MAHENDR A NAYAKAM IS NOT A MAN OF MEANS AND THE INCOME EARNED BY THE ASSESSEE IS INSUFFICIENT TO ITA NO.773/BANG/2017 :- 12 -: ACCUMULATE THE SUM OF RS. 20 LAKHS WHICH IS STATED TO BE GIVEN AS LOAN. THOUGH THE CREDITOR EXPLAINED THE SOURCE AS GIFT FR OM HIS BROTHER NO EVIDENCE WAS FURNISHED BY THE CREDITOR TO ESTABLISH THE RECEIPT OF GIFT. IT IS THE OBLIGATION OF THE ASSESSEE TO ESTABLISH THE IDE NTITY, GENUINENESS AND THE CREDITWORTHINESS OF THE CREDITOR TO EXPLAIN THE SOURCE TO THE SATISFACTION OF THE AO FOR THE SUM FOUND CREDITED IN THE BOOKS O F THE ASSESSEE. IN THE INSTANT CASE, THE ASSESSEE FAILED TO ESTABLISH THE GENUINENESS AND CREDITWORTHINESS OF THE CREDITOR THEREFORE, WE HOLD THAT THE LD. CIT(A) RIGHTLY CONFIRMED THE ADDITION AND NO INTERFERENCE IS CALLED FOR. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS DISMISSED. 20. GROUND NO.9 IS WITH REGARD TO LEVY OF INTEREST WHICH IS MANDATORY AND CONSEQUENTIAL. WE, DIRECT THE AO TO LEVY THE IN TEREST CORRECTLY ON GIVING EFFECT TO THIS ORDER. ACCORDINGLY THIS GROUN D IS ALLOWED FOR STATISTICAL PURPOSES. 21. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH DECEMBER, 2019. SD/- SD/- (N.V. VASUDEVAN) (D.S. SUNDER SINGH) VICE PRESIDENT ACCOUN TANT MEMBER BENGALURU, DATED: 05 -12-2019 EDN ITA NO.773/BANG/2017 :- 13 -: COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT (A) 4. PR. CIT 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL BANGALORE