Tax Appellate Tribunal confirms deletion of unexplained cash credits & deposits, upholds set off of losses.

The ITAT upheld the CIT(A)'s decision to delete additions made by the AO under section 68 for unexplained cash credits and unexplained cash deposits, as well as the set off of losses against income assessed under various heads. The ITAT affirmed the genuineness of transactions involving Basant Marketing Pvt. Ltd., stating that the creditworthiness was not in doubt. The revenue's appeals were dismissed, and the order was pronounced on 14.10.2019.

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Issues Involved:
1. Deletion of addition made by AO in respect of unexplained cash credit under section 68 of the Act.
2. Deletion of addition of unexplained cash deposit in the bank account.
3. Set off of losses against income assessed under various heads.

Detailed Analysis:

1. Deletion of Addition Made by AO in Respect of Unexplained Cash Credit Under Section 68:

The first common issue in the appeals pertains to the deletion of additions made by the AO regarding unexplained cash credits under section 68 of the Income-tax Act, 1961. The AO had added amounts of Rs. 1.53 crores for AY 2008-09 and Rs. 2.30 crores for AY 2013-14, which were credited in the name of Basant Marketing Pvt. Ltd. The AO argued that the assessee failed to prove the source, creditworthiness, and genuineness of the transactions, and that Basant Marketing Pvt. Ltd. was providing accommodation entries as per information received from the ADIT investigation unit.

The CIT(A) relied on the ITAT Mumbai's decision in the case of Venkatesh Securities Ltd., where similar issues involving Basant Marketing Pvt. Ltd. were adjudicated. The CIT(A) observed that the AO had not disputed the identity or creditworthiness of Basant Marketing Pvt. Ltd. and that the transactions were duly reflected in the audited books of both parties. The CIT(A) concluded that the AO was influenced by the history of the case rather than the facts, and thus deleted the additions.

The ITAT upheld the CIT(A)'s decision, noting that the issue was covered by the Tribunal's decision in the assessee's own case for previous assessment years. The Tribunal confirmed that Basant Marketing Pvt. Ltd. was a genuine company and that the creditworthiness of the transactions was not in doubt. Consequently, the ITAT affirmed the deletion of the additions for both assessment years.

2. Deletion of Addition of Unexplained Cash Deposit in the Bank Account:

The second issue in AY 2008-09 involved the deletion of an addition of Rs. 3,25,520/- made by the AO as unexplained income from undisclosed sources. The AO had made the addition based on cash deposits in the assessee's bank account. The assessee explained that the deposits were made from the opening cash balance and withdrawals from the bank account.

The CIT(A) deleted the addition, noting that the revenue did not dispute the availability of the opening cash balance. The ITAT upheld the CIT(A)'s decision, finding no infirmity in the deletion of the addition as the cash balance was not disputed by the revenue.

3. Set Off of Losses Against Income Assessed Under Various Heads:

The third issue raised by the revenue pertained to the set off of losses against income assessed under various heads, as per section 71 of the Act. The revenue argued that income ascertained under section 68 could not be set off against other heads of income.

The ITAT noted that since the main additions were deleted and affirmed by the CIT(A), the issue of set off under section 71 became infractuous. Consequently, this ground was dismissed.

Conclusion:

In conclusion, the ITAT dismissed the revenue's appeals, upholding the CIT(A)'s decisions to delete the additions made by the AO under section 68 for unexplained cash credits, the addition of unexplained cash deposits, and the set off of losses against income assessed under various heads. The ITAT affirmed that the transactions involving Basant Marketing Pvt. Ltd. were genuine and that the creditworthiness was not in doubt. The order was pronounced in the open court on 14.10.2019.

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