2015 (4) TMI 1095 - AT - Income Tax

Tax Appeal: Tribunal reviews Income Tax Act section 69 addition, emphasizes transaction genuineness.

The Income Tax Officer Ward-9 (2) Versus. Shri Kishorbhai Chhotalal Parmar

The Revenue's addition of Rs. 27,96,075 under section 69 of the Income Tax Act was reduced to Rs. 10,99,109 by the Commissioner of Income Tax (Appeals). ... Addition u/s 69 - unexplained source of the credits made in the four undisclosed bank accounts - contention of the assessee is that the accounts were held jointly with other relatives - CIT(A) deleted the addition - Held that:- There is no dispute with regard to the fact the account Nos.9427,61506, 61175 & 61095 with the Surat Peoples Co-operative Bank Ltd., Bhgatalao Branch, Surat, were not disclosed by the assessee to the Income Tax Department while filing the return. The explanation of the assessee in respect of these accounts was that the accounts were jointly held with other persons and the amount credited therein was out of the savings, loan and maturity of mutual funds. In our considered view, if any, credit entries found in the accounts of the assessee, it is incumbent upon him to explain the source of such credit. In the present case, the assessee has merely made a sweeping statement that these amounts were out of loans from friends and relatives, cash deposits, interest income and from maturity of mutual funds. The assessee also furnished certain confirmations from Jayshreeben Parmar, Chandan Parmar, Hansaben Parmar and Bhudarji Mithal. However, the assessee has not furnished the proof of creditworthiness of such creditors. Therefore, the ld.CIT(A) was not justified in deleting the addition being the loan received from friends and relatives without any supporting evidences of the creditworthiness of such creditors. Further, the ld.CIT(A) observed that there was an opening cash balance of ₹ 10 lacs which he presumed that amount might have been used for depositing in the bank account. Before us, the assessee could not point out as to whether the amount of ₹ 10 lacs shown as cash on hand related to the account declared by the assessee. These accounts are not the recorded accounts. The assessee was required to demonstrate with evidence as to how this cash was generated. Therefore, we cannot affirm the order of the ld.CIT(A), same is hereby set aside. The ld.CIT(A) ought to have passed a speaking order in respect of genuineness of the transactions and creditworthiness of depositors. It is also not clear whether the transactions in question had been reflected by other persons or not in their respective books of accounts. And also whether such transactions were reflected in their respective income-tax returns of the parties, if not what action has been taken in their hands. Under these facts, we restore this issue back to the file of ld.CIT(A) for decision afresh in the light of our observation made hereinbefore. - Decided in favour revenue for statistical purposes. Issues:1. Addition of Rs. 27,96,075 under section 69 of the Income Tax Act.2. Deletion of the said addition by the Commissioner of Income Tax (Appeals).3. Source of credits in undisclosed bank accounts.4. Loan amount taken from friends/relatives without reflecting in their balance sheets.5. Assessment Year 2007-08.Issue 1: Addition of Rs. 27,96,075 under section 69 of the Income Tax Act:The Revenue made the addition on account of unexplained cash credit, bank deposit, and investment in securities from undisclosed bank accounts under section 69 of the IT Act. The Commissioner of Income Tax (Appeals) restricted the addition to Rs. 10,99,109. The Revenue challenged this decision, arguing that the accounts were not disclosed and the addition should have been sustained.Issue 2: Deletion of the addition by the Commissioner of Income Tax (Appeals):The Commissioner of Income Tax (Appeals) deleted the addition after considering the submissions of the assessee. The assessee explained that the accounts were held jointly with relatives, and the deposits comprised loans, cash deposits, mutual fund redemptions, and interest income. The Commissioner found the explanations satisfactory and reduced the addition based on the source of funds provided by the assessee.Issue 3: Source of credits in undisclosed bank accounts:The assessee claimed that the cash deposits in the undisclosed accounts were made from cash withdrawn from those accounts in earlier years. The Commissioner accepted this explanation based on the cash book entries and opening balances, concluding that the source of funds was adequately explained. However, the negative cash balance on a specific date remained unexplained, leading to a partial addition.Issue 4: Loan amount taken from friends/relatives without reflecting in their balance sheets:The assessee received loans from friends and relatives, supported by confirmation letters and bank passbooks. The Commissioner found the explanations and evidence provided by the assessee satisfactory, concluding that the loans were genuine and not taxable income. However, the lack of creditworthiness proof of the creditors led to a partial addition of the loan amount.Issue 5: Assessment Year 2007-08:The judgment pertains to the Assessment Year 2007-08 and involves disputes related to undisclosed bank accounts, unexplained cash credits, and loans from friends/relatives. The Tribunal set aside the Commissioner's decision on certain aspects, requiring further examination and clarification on the genuineness of transactions and creditworthiness of the depositors.This detailed analysis covers the key issues addressed in the legal judgment delivered by the Appellate Tribunal ITAT Ahmedabad.