Under Section 68 of the Income-tax Act, once an assessee establishes the identity, genuineness, and creditworthiness of a creditor through documentary evidence and banking channel verification, the initial burden is discharged. The Revenue cannot demand an endless investigation into the 'source of source' without evidence of a sham transaction.

आदेश / O R D E R

PER AMIT SHUKLA (J.M):

The aforesaid appeal has been preferred by the Revenue against the order passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, for A.Y. 2018-19, whereby the learned CIT(A) has deleted the addition of Rs.8,32,57,000/- made by the Assessing Officer under section 68 of the Income-tax Act, 1961 on account of alleged unexplained cash credits/long term liabilities reflected in the books of the assessee company.

2. Briefly stated, the facts borne out from the record are that the assessee company filed its return of income for the impugned assessment year on 15.10.2018 declaring Nil income after claiming current year loss of Rs.1,23,394/-. The return was processed under section 143(1) and thereafter the case was selected for complete scrutiny under CASS. During the course of assessment proceedings, notices under sections 143(2) and 142(1) were issued from time to time. While examining the balance sheet of the assessee company, the Assessing Officer observed that the assessee had shown “other long term liabilities” aggregating to Rs.15,13,75,900/- payable to various parties in relation to sale of land/project and financing of the project activities. Upon verification of the movement in these liabilities, the Assessing Officer noticed that substantial credits had been introduced during the year mainly in the names of Shri Madan Gopal Gupta, Shri Mehul Sanghvi, M/s Vijay Victory Realtors and M/s Prashanti Land Developers Pvt. Ltd. The aggregate fresh credits pertaining to these parties amounted to Rs.8,32,57,000/-.

3. The Assessing Officer called upon the assessee to establish the nature and source of these credits and to furnish confirmations, PAN details, copies of return of income, bank statements, capital accounts and other documentary evidences to prove the identity of the creditors, genuineness of the transactions and their creditworthiness. The Assessing Officer noted that the assessee had filed certain confirmations, copies of return acknowledgements and bank statements. However, according to him, the assessee failed to substantiate the financial capacity and creditworthiness of the lenders. He observed that Shri Madan Gopal Gupta had disclosed returned income of Rs.17,61,070/- whereas loan/credit of Rs.4,87,00,000/- had been advanced; Shri Mehul Sanghvi had disclosed returned income of Rs.13,66,500/- whereas credit of Rs.1,19,00,000/- had been advanced; and M/s Vijay Victory Realtors had disclosed returned income of Rs.8,86,490/- despite having advanced loan of Rs.1,58,57,000/-. In the case of M/s Prashanti Land Developers Pvt. Ltd., the Assessing Officer observed that only bank statement had been furnished and confirmation and return of income were not filed at the assessment stage.

4. The Assessing Officer further observed that though the assessee had furnished confirmations and certain bank statements, the assessee had not furnished complete capital accounts and had not satisfactorily explained the source and financial capacity of the lenders to advance such substantial sums. Accordingly, after referring to the notices issued under section 142(1), the bank statements and return particulars of the parties, the Assessing Officer concluded that the assessee had failed to prove the creditworthiness of the creditors and the nature and source of the impugned liabilities. He therefore treated the credits