2015 (6) TMI 706 - AT - Income Tax

Revenue's Appeal Dismissed Upholding CIT(A)'s Decision on Unexplained Cash Credits

Income Tax Officer, Ward-11 (4), Ahmedabad Versus M/s. Mukeshkumr & Co.

Income Tax Officer, Ward-11 (4), Ahmedabad Versus M/s. Mukeshkumr & Co. - TMI Issues:1. Deletion of addition of unexplained cash credits under section 68 of the Income Tax Act.2. Deletion of addition of interest paid on unsecured loan.Issue 1: Deletion of addition of unexplained cash credits under section 68 of the Income Tax Act:The appeal by the Revenue was against the order of the Commissioner of Income-Tax(Appeals) for the assessment year 2008-09. The Revenue challenged the deletion of the addition of Rs. 7.50,000 made on account of unexplained cash credits under section 68 of the Act. The Assessing Officer had added unsecured loan under section 68 and disallowed interest paid. The CIT(A) partly allowed the appeal of the assessee. The Revenue contended that the CIT(A) erred in deleting the addition made under section 68. The Authorized Representative of the assessee argued that the assessee proved the identity, creditworthiness, and genuineness of the transaction. The Tribunal found that the assessee had established the identity of the creditors, genuineness of the transaction, and creditworthiness of the creditors. The Tribunal upheld the order of the CIT(A) as the assessee had fulfilled the requirements to prove the cash credit introduced under section 68. The Tribunal dismissed this ground of the Revenue's appeal.Issue 2: Deletion of addition of interest paid on unsecured loan:The second ground related to the deletion of Rs. 16,20,242 made on account of interest paid on an unsecured loan. The Revenue argued that the CIT(A)'s order was not justified, stating that the Assessing Officer rightly disallowed the claim. The CIT(A) had observed that disallowance could not be made in the year of deposit or any subsequent year unless a finding of unexplained cash credit was given in the year of receipt of such loan or deposit. The Tribunal noted that the opening balance of loans taken from the financial year 2005-06 onwards was not considered unexplained credits under section 68. The Tribunal found that the AO was not justified in disallowing the interest paid for deposits taken in earlier years. The Tribunal upheld the order of the CIT(A) and dismissed this ground of the Revenue's appeal.In conclusion, the Tribunal dismissed the appeal filed by the Revenue, upholding the orders of the CIT(A) regarding the deletion of additions related to unexplained cash credits and interest paid on unsecured loans for the assessment year 2008-09.