2019 (3) TMI 291 - AT - Income Tax

Tribunal upholds CIT(A)'s decision, assessee not required to prove source of funds for loan repayment.

The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal. It was ruled that the assessee was not obligated to prove the source of funds ... Reopening of assessment - addition u/s 68 - HELD THAT:- So far as receipt from Prakruti Infrastructure P. Ltd. is concerned the CIT(A) has rightly observed that since this is a case of repayment of loan given by the assessee, there is no requirement on the part of the assessee to prove the source of funds in the hands of Prakruti Infrastructure P. Ltd. There cannot be any dispute on the above reasoning. We are supported by the decision in Veedhata Tower Pvt. Ltd. (2018 (4) TMI 1004 - BOMBAY HIGH COURT) and M/s SDB Estate Pvt. Ltd. (2018 (3) TMI 1592 - BOMBAY HIGH COURT). In so far as, the receipt of ₹ 50,00,000/- from Shri Dharmendra Bhanushali and ₹ 20,00,000/- from Ms. Tulsiben Bhanushali is concerned. The Ld. CIT(A) has directed the assessee to file the copies of confirmation and cheques before the AO as delineated at para 4.1 hereinbefore. Thus we uphold the order of the Ld. CIT(A). - Decided against revenue Issues:- Addition made under section 68 of the Income Tax Act for unexplained cash credit.- Requirement of proving the source of funds in the hands of the creditor.- Validity of the additions made by the Assessing Officer.- Submission of additional evidence by the assessee before the Commissioner of Income Tax (Appeals).- Interpretation of the law regarding the source of funds for repayment of loans.Analysis:1. Addition under Section 68: The Assessing Officer (AO) made an addition of Rs. 14,78,00,000 as unexplained cash credit under section 68 of the Income Tax Act based on credits in the bank account of the assessee. The AO was not convinced with the explanation provided by the assessee regarding the source of these funds, leading to the addition.2. Requirement of Proving Source of Funds: The Commissioner of Income Tax (Appeals) (CIT(A)) considered the case of repayment of a loan given by the assessee to Prakruti Infrastructure Pvt. Ltd. The CIT(A) held that there was no requirement for the assessee to prove the source of funds in the hands of Prakruti Infrastructure Pvt. Ltd. for the repayment of the loan, thereby directing the deletion of the addition of Rs. 13,48,50,000 related to this transaction.3. Validity of Additions: The CIT(A) also addressed the additions made by the AO concerning amounts received from other parties. For the sums received from Shri Dharmendra Bhanushali and Ms. Tulsiben Bhanushali, the CIT(A) directed the assessee to provide additional documents to support the transactions, with the possibility of deletion of the additions if the documents were found to be correct.4. Submission of Additional Evidence: The assessee submitted additional evidence before the CIT(A), which was not presented before the AO. The CIT(A) considered this evidence and sought a remand report from the AO, allowing the assessee an opportunity to provide further documentation to support their case.5. Interpretation of Law: The interpretation of the law regarding the requirement to prove the source of funds for loan repayment was a crucial aspect of the judgment. The CIT(A) and the Tribunal relied on relevant legal precedents to support the decision that in cases of loan repayment, the burden of proving the source of funds in the hands of the creditor may not apply.6. Final Decision: The Tribunal upheld the order of the CIT(A), dismissing the appeal filed by the Revenue. The decision was based on the reasoning that in the case of loan repayment, the assessee was not required to prove the source of funds in the hands of the creditor. The judgment was pronounced on 30/01/2019 in an open court session.