2019 (4) TMI 1369 - AT - Income Tax

Appellate Tribunal directs deletion of Rs. 8,20,000 addition under Sec.68 of Income Tax Act

The Appellate Tribunal ruled in favor of the appellant, directing the Assessing Officer to delete the addition of Rs. 8,20,000 under Sec.68 of the Income ... Unexplained cash credits - onus under section 68 - proof of identity and creditworthiness of creditors - source of source - verification under section 131/133(6)Unexplained cash credits - onus under section 68 - proof of identity and creditworthiness of creditors - source of source - Addition of Rs. 8,00,000 treated as unexplained cash credit under section 68 in respect of loan from Shri Venketaraman - HELD THAT: - The assessee produced bank statements, Form 26AS, account confirmation and an affidavit to demonstrate receipt of two cheques of Rs.4,00,000 each from Shri Venketaraman and thereby discharged the primary onus imposed by section 68 to explain the nature and source of the credit. The authorities below did not point to any defect in the documents filed nor did they undertake verification by issuing summons or by invoking the powers under section 131/133(6) to test the veracity of the creditors' claims. Relying on the settled proposition that an assessee must prove the source of credits in its books but is not required to prove the 'source of the source,' and on the material placed on record, the Tribunal found no justification for sustaining the addition. [Paras 10, 11]Addition of Rs. 8,00,000 under section 68 deleted; appeal allowed on this ground.Unexplained cash credits - Ground of appeal relating to addition of Rs. 20,000 on account of loan from Shri Alok Chaudhary - HELD THAT: - The assessee's counsel expressly informed the Tribunal that the addition of Rs.20,000 was not being pressed. Consequently, the Tribunal did not adjudicate the substantive correctness of that addition and dismissed the ground of appeal as not pressed. [Paras 3]Ground relating to Rs.20,000 dismissed as not pressed by the assessee.Final Conclusion: The Tribunal partly allowed the appeal by deleting the addition of Rs.8,00,000 made under section 68 for AY 2010-11 and dismissed the ground relating to Rs.20,000 as not pressed. Issues:- Applicability of Sec.68 of the Income Tax Act- Confirmation of addition of Rs. 8,20,000 made by the Assessing Officer- Dismissal of the appeal related to the addition of Rs. 20,000- Dispute over the addition of Rs. 8 lakhs under Sec.68 of the Act- Verification of the source and nature of receipts from a specific party- Doubt regarding the creditworthiness of the loan creditor- Discrepancy in the books of accounts regarding the loan source- Disagreement with the order of the Assessing Officer and the CIT(A)- Compliance with the conditions stipulated under Sec.68 of the ActAnalysis:The appeal was filed against the CIT(A)'s order confirming the addition of Rs. 8,20,000 under Sec.68 of the Income Tax Act, relating to a loan received. The appellant argued that the creditors were known persons, their identity established, and creditworthiness proven, thus the amount should not be treated as a cash credit under Sec.68. However, the Assessing Officer found discrepancies in the details provided, leading to the addition. The appellant's claim that the loan source was proved was disputed due to missing details from the creditor. The CIT(A) upheld the addition, doubting the creditworthiness of the creditor and noting the discrepancy in the loan source's representation in the books of accounts.The Appellate Tribunal noted that the appellant had submitted relevant documents, including bank statements and confirmations, which were not found defective by the authorities. The Tribunal emphasized that once basic details of a secured loan were provided, the onus under Sec.68 was met, citing relevant case law. Referring to precedents, the Tribunal highlighted that the appellant was not required to prove the source of the source of credit, only the source in their books. As the authorities did not verify the details submitted by the appellant, the addition under Sec.68 was deemed unjustified.Ultimately, the Tribunal ruled in favor of the appellant, directing the Assessing Officer to delete the addition, as no substantial evidence supported the addition under Sec.68. The judgment emphasized the importance of meeting the onus of proof under the Income Tax Act and the significance of verifying details before making additions to an assessee's income.