Tribunal deletes unexplained cash credit addition under Income-tax Act Section 68

The Tribunal allowed the assessee's appeal, deleting the addition of Rs. 8,92,30,496 as unexplained cash credit under section 68 of the Income-tax Act. The Tribunal found that the transactions were genuine, as evidenced by recorded purchases and sales in the books, payments through banking channels, and established identities of creditors. Non-compliance with notices alone did not prove non-genuineness, and the burden of proof for taxable income rested with the Department. The Tribunal held that the addition under section 68 was unwarranted and therefore deleted.

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Issues Involved:
1. Addition of Rs. 8,92,30,496 as unexplained cash credit u/s 68 of the Income-tax Act.

Summary:

Issue 1: Addition of Rs. 8,92,30,496 as unexplained cash credit u/s 68 of the Income-tax Act

The assessee, engaged in trading goods, purchased grey clothes from M/s. Cable Corporation of India Ltd. for Rs. 8.94 crore and sold them to M/s. Nikhil Trading Company (NTC) and Geeta Trading Company (GTC) for Rs. 8.95 crore. The Assessing Officer (AO) issued notices u/s 133(6) and summons u/s 131 to NTC, GTC, and CCI, but did not receive the required information. The AO noted the absence of a stock register and details of the transporter, concluding the transactions were not genuine and made an addition u/s 68. The CIT(A) upheld this addition.

The assessee argued that the transactions were recorded in the books of account and payments were made through banking channels, thus fulfilling the requirements of identity, creditworthiness, and genuineness u/s 68. The assessee contended that the AO's demand for the source of the source was not required u/s 68, citing the Gujarat High Court judgment in Dy. CIT v. Rohini Builders and the Delhi High Court decision in CIT v. Divine Leasing & Finance Ltd.

The Tribunal observed that the AO did not doubt the purchases and sales recorded in the books. The Tribunal referred to the Apex Court judgment in Sumati Dayal v. CIT, which states that the burden lies on the Department to prove a receipt is taxable income. The Tribunal found that the assessee had discharged its burden by showing the credits were against sale consideration. The Tribunal noted that non-compliance with summons and notices alone does not prove non-genuineness, as per the Delhi High Court's observation in Divine Leasing & Finance Ltd.

The Tribunal concluded that the identity of creditors was established, and the transactions were through banking channels, thus satisfying the conditions of creditworthiness and genuineness. The Tribunal emphasized that the AO accepted the purchases and sales but doubted the corresponding bank deposits, which is not justified. The Tribunal held that the addition u/s 68 was not warranted and deleted the same.

Conclusion:
The appeal of the assessee was allowed, and the addition of Rs. 8,92,30,496 u/s 68 was deleted.

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