This article delves into the case ITA No. 4788/DEL/2019, where the appellant Meena Nayyar from New Delhi challenged the assessment by the ITO, Ward-41(5), New Delhi, for the assessment year 2009-10. The case was filed on May 27, 2019, and the final tribunal order was pronounced on March 19, 2020.
Meena Nayyar, the appellant, is a Director in M/s R.G. Consultants Private Limited. On November 23, 2010, a survey was conducted at the premises of R.G. Consultants Private Limited. Following the survey, cash credits from related parties were identified, leading the DCIT, Circle 15(1), to make an addition of Rs. 22,70,000/- to the income of M/s R.G. Consultants Private Limited. This addition was later deleted by the CIT(A), but the source of investment was directed to be verified in the hands of Meena Nayyar.
Subsequently, the AO reopened the case of Meena Nayyar for the assessment year 2009-10 by issuing a notice under Section 148 of the Income Tax Act on June 1, 2016. During the reassessment proceedings, it was revealed that Meena Nayyar had given a loan of Rs. 7,50,000/- to M/s R.G. Consultants Pvt. Ltd. This loan comprised Rs. 4,00,000/- obtained from a friend through an account payee cheque and Rs. 3,50,000/- transferred from her son’s bank account.
The AO made an addition of Rs. 7,50,000/- to the income of Meena Nayyar, treating the amount received as unexplained credits under Section 68 of the Income Tax Act. The AO alleged that the amounts were received from M/s Federal Exchange and failed to establish the identity, genuineness, and creditworthiness of the lender.
Aggrieved by the addition, Meena Nayyar filed an appeal before the CIT(A), who upheld the AO’s decision, confirming the addition of Rs. 7,50,000/-.
Meena Nayyar further appealed to the Income Tax Appellate Tribunal (ITAT). During the hearing, the appellant’s counsel argued that the CIT(A) had wrongly confirmed the addition despite providing detailed explanations and documentary evidence proving the identity and creditworthiness of the lenders and the genuineness of the transaction.
The tribunal, comprising Judicial Member Shri H.S. Sidhu, examined the case in detail. The appellant provided comprehensive documentation, including the identity proofs of the lender, Sh. Babu Jeethani, confirmations, and bank statements showing the transactions through proper banking channels.
The tribunal noted that the department did not possess sufficient material to conclude that the amount was an accommodation entry. The evidence submitted by the appellant demonstrated the existence of the lender and the genuineness of the transaction.
The tribunal referred to several precedents, including the ITAT Mumbai Bench’s decision in ACIT vs. Calvin Properties and the Delhi High Court’s judgment in CIT vs. Fair Finvest Ltd., to support its view that once the assessee has provided evidence supporting the identity and creditworthiness of the lender, the burden shifts to the department to disprove the same.
It was concluded that the AO had not made sufficient efforts to disprove the appellant’s claims and that the addition was unjustified. The tribunal held that the appellant had successfully discharged her initial burden of proof, and the onus was on the department to provide contrary evidence, which it failed to do.
The ITAT ruled in favor of Meena Nayyar, deleting the addition of Rs. 7,50,000/- made by the AO. The appeal was partly allowed, emphasizing the importance of thorough verification by the department before making additions under Section 68.
The order was pronounced on March 19, 2020, by Judicial Member Shri H.S. Sidhu.
This case underscores the necessity for tax authorities to conduct detailed and meaningful inquiries when questioning the legitimacy of transactions. Taxpayers must ensure they maintain proper documentation and evidence to substantiate their claims, which can significantly impact the outcome of disputes in tax assessments.
Unexplained Credits in the Case of Meena Nayyar: ITA No. 4788/DEL/2019
Manage the increasing number of hearings effortlessly by leveraging the legal AI revolution We are India's Leading revolutionary AI-powered legal platform where you can get enough insights into top cases and judgements.
Research Platform