Appeal granted for depositor, denied for lack of proof of creditworthiness.

The Tribunal partly allowed the appeal by deleting the addition of Rs. 5,00,000/- in the case involving Sh. Champa Lal Baid, as the depositor was a regular income-tax assessee and the money was deposited through cheques. However, the additions of Rs. 2,50,000/- each in the cases of Sh. Parkash Joshi and Smt. Chandra Kanta Joshi were upheld due to insufficient proof of creditworthiness. The final order was pronounced on 03/07/2015.

---

---

Issues Involved:
1. Addition of Rs. 5,00,000/- under Section 68 on account of an unsecured loan from Sh. Champa Lal Baid.
2. Addition of Rs. 2,50,000/- under Section 68 on account of an unsecured loan from Sh. Parkash Joshi.
3. Addition of Rs. 2,50,000/- under Section 68 on account of an unsecured loan from Smt. Chandra Kanta Joshi.

Detailed Analysis:

1. Addition of Rs. 5,00,000/- under Section 68 on account of an unsecured loan from Sh. Champa Lal Baid:
During the assessment proceedings, the Assessing Officer (AO) noted that the assessee had taken unsecured loans from various parties, including Rs. 5,00,000/- from Sh. Champa Lal Baid. The AO did not accept the explanation justifying the loans, stating that the assessee failed to prove the genuineness of the transaction and the creditworthiness of the creditor. The AO observed that the person advancing the loan had a salary of merely Rs. 48,000/- per annum, and the loan was advanced after receiving a declaration under Section 197A, indicating the person did not have taxable income.

Before the CIT(A), the assessee contended that the identity, genuineness, and creditworthiness of the creditors were proved by submitting copies of returns, bank statements, and affidavits. However, the CIT(A) upheld the AO's decision, stating that merely proving the identity and payment by cheque does not establish the creditworthiness of the creditor.

Upon appeal, the Tribunal considered the rival submissions and noted that the depositor, Sh. Champa Lal Baid, was a regular income-tax assessee, and the loan was returned through an account payee cheque. The Tribunal referred to the decision of the Hon'ble Punjab & Haryana High Court in CIT v Laul Transport Corporation, which held that once the initial source is proved, the Revenue cannot investigate the source of the source. Consequently, the Tribunal concluded that the sum of Rs. 5,00,000/- could not be added to the income of the assessee, as the depositor was a regular income-tax assessee and the money was deposited through cheques.

2. Addition of Rs. 2,50,000/- under Section 68 on account of an unsecured loan from Sh. Parkash Joshi:
The AO also added Rs. 2,50,000/- taken as an unsecured loan from Sh. Parkash Joshi, citing similar reasons as in the case of Sh. Champa Lal Baid. The assessee argued that the loan was taken from a regular income-tax assessee, and the necessary documents were submitted.

However, the Tribunal noted that the relevant portion of the bank statement was not filed, and the first entry showed a debit entry in respect of cheques issued to the assessee after depositing cash. The Tribunal referred to the decision in ACIT Vs. Ekta Construction Co., which emphasized that the onus to prove the creditworthiness of the depositor lies with the assessee. Since the cheque was issued after depositing cash, the Tribunal concluded that the loan from Sh. Parkash Joshi could not be accepted, and the addition was upheld.

3. Addition of Rs. 2,50,000/- under Section 68 on account of an unsecured loan from Smt. Chandra Kanta Joshi:
Similarly, the AO added Rs. 2,50,000/- taken as an unsecured loan from Smt. Chandra Kanta Joshi. The assessee contended that the loan was genuine and submitted the necessary documents.

The Tribunal observed that a sum of Rs. 40,000/- was deposited in cash immediately before giving the loan, and another entry of Rs. 2,40,000/- was unexplained. Referring to the principles established in previous cases, the Tribunal concluded that the creditworthiness of Smt. Chandra Kanta Joshi was not proved, and the addition was upheld.

Conclusion:
The Tribunal partly allowed the appeal, deleting the addition of Rs. 5,00,000/- in the case of Sh. Champa Lal Baid, while upholding the additions of Rs. 2,50,000/- each in the cases of Sh. Parkash Joshi and Smt. Chandra Kanta Joshi. The final order was pronounced in the open court on 03/07/2015.

---