Justify the genuineness and creditworthiness- Reply to Income Tax Notice

 There are certain transactions e.g, accepting unsecured loans or deposits from Directors or relative of Directors usually done in Private Limited Companies. 

1. Income Tax Department usually asked to justify the genuineness and creditworthiness of such borrowings from the above persons along with the documents to substantiate your claim during the Scrutiny case or in regular Assessment case under Section 143(2)/143(3).

2. apart from the above income Tax Department asked Declaration taken from Directors or Such relative of directors as follows.

"the undertaking that “declaration in writing to the effect that the amount is not being given out of funds acquired by him by borrowing or accepting loans or deposits from others.” Based on ‘The Companies (Acceptance of Deposit) second amendment Rules, 2015’ dated 15th September, 2015 G.S.R. 695(E)"

Companies (Acceptance of deposit) Rule 2014

Based on above the question arise that what documents should we provide and how to justify the above to Income Tax Authority, basically Revenue department wants complete justification and genuineness of the transactions done between the Directors and Companies. Some Assessee, provide the ITR and PAN no. of the lender (i.e, Director or relative of the Directors)

So only Giving the ITR and PAN of the lender would not be sufficient to justify these transactions. 

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