Onus to explain identity and creditworthiness of person from whom credit is received lies on assessee: ITAT

The brief facts of the case is that of the case are that during the year under consideration a sum of Rs. 2,00,00,000 is shown to have been received by the assessee company on 04/05/2011 from M/s Innovative Spinning and Knitting Private Limited. During scrutiny proceedings, the Assessing Officer on verification of the bank statement found this sum as received on 04/05/2011 through RTGS and out of the same, the assessee transferred ₹1,99,75,000/ to M/s Garandiose Jewelry Private Limited on same date. The assessee however, submitted that in books of accounts the credit of ₹1,40,00,000/- was transferred and recorded against to M/s Aqua Glitters marketing Private Limited (i.e. associate concern of M/s Innovative Spinning and Knitting Private Limited), which was further transferred to M/s Mumbai Gems and diamonds Private Limited (i.e. an associate concern of the assessee). For verification of the parties, the Assessing Officer issued notice under section 133(6) of the Income-Tax Act, 1961 (the Act), however those notices returned back by the postal authority with the remark “not available”. The Assessing Officer vide letter dated 05/03/2015 asked the assessee to produce the principal officer of the M/s Innovative Spinning and Knitting Private Limited, however the assessee failed to produce the same. In view of the Assessing Officer, the identity, creditworthiness of the parties who provided sum of Rs. 2 crores to the assessee could not be established and genuineness of the transaction also could not be proved and therefore he added the sum of ₹2.00 crores as unexplained cash credit due to failure on the part of the assessee in discharging his ouns in terms of section 68 the Act.

On further appeal, the assessee submitted before the Ld. CIT(A) that director of M/s Innovative Spinning and Knitting Private Limited Sh Pushpesh Kumar Baid was absconding as per the newspapers and therefore he could not be produced. The Ld. CIT(A) deleted the addition.

ITAT in its order held that it is the onus is on the assessee to explain the identity and creditworthiness of the person from whom credit is shown to have been received and also to establish genuineness of the transaction. In the facts and circumstances of the case, the assessee has failed to substantiate with evidences to explain all the three ingredients of section 68 of the Act, therefore the Ld. CIT(A) is not justified in deleting the addition. Accordingly, it set aside the order of the Ld. CIT(A) on the issue in dispute and uphold the order of the Assessing Officer.

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