2019 (9) TMI 291 - AT - Income Tax

Tribunal remits appeal due to failure in verifying unexplained cash credit under Income-tax Act.

The Asst. Commissioner of Income Tax, Circle 2, Kolhapur Versus Shri Nitin Mohan Wadikar Pvt. Ltd.

The Tribunal allowed the Revenue's appeal, remitting the matter back to the Assessing Officer for further verification as the assessee failed to establish ... Unexplained cash credit u/s 68 - assessee could not prove the basic condition i.e. identity of the actual loan creditor; genuineness of the source, and capacity / credit worthiness of the creditor - HELD THAT:- Assessee has shown the transaction with Mr. Ramesh Havele and later had modified its case that the loan was received from Mr. Prafulla Anil Madiwale. The onus was on the assessee to establish and fulfill all the three conditions of section 68 which have not been fulfilled. In any case, the creditor is not person of means and the plea of receiving money and advancing the same cannot be accepted at face value. Accordingly, we remit this issue back to the file of AO, who shall carry out necessary verification and the assessee is directed to fulfill the conditions laid down in section 68 of the Act to establish its case. The assessee is also directed to produce Mr. Ramesh Havele, as Summons issued by Assessing Officer had remained un-complied. Further, Assessing Officer may summon Mr. Prafulla Anil Madiwale, as the facts of the present case are peculiar and require verification. Reasonable opportunity of hearing shall be given to the assessee and the Assessing Officer is directed to decide the issue in accordance with law. The grounds of appeal raised by Revenue are thus, allowed. Issues involved:- Deletion of addition made under section 68 of the Income-tax Act, 1961.Detailed Analysis:1. The primary issue in this case revolves around the deletion of an addition made under section 68 of the Income-tax Act, 1961. The Revenue filed an appeal against the order of the CIT(A) relating to the assessment year 2013-14. The Revenue contended that the CIT(A) unjustifiably deleted the addition made by the Assessing Officer on account of unexplained cash credit under section 68 of the Act. The crux of the matter was the failure of the assessee to prove the identity of the actual loan creditor, the genuineness of the source, and the creditworthiness of the creditor.2. The Assessing Officer noted discrepancies in the assessee's explanation regarding a declared unsecured loan and observed that the assessee failed to establish the identity of the creditor. Despite claiming the loan was from one individual, the assessee later changed its stance during scrutiny proceedings. The Assessing Officer issued Summons under section 131 of the Act to verify the source of the loan, but the creditor did not comply. The Assessing Officer raised concerns about the genuineness of the transaction, citing a pattern of money transfers between parties. Additionally, the creditworthiness of the creditor was questioned based on the financial position and income reflected in the return of the alleged lender.3. The CIT(A) considered an affidavit filed by the assessee, attributing the error in the account entries to a mistake by the accountant. The CIT(A) relied on confirmations from the alleged creditor and bank statements to support the genuineness of the transaction. The CIT(A) concluded that the amount in question was indeed received as a loan by the assessee. Consequently, the CIT(A) deleted the entire addition made under section 68 of the Act.4. The Tribunal, upon hearing both parties, analyzed the case in detail. It emphasized the importance of fulfilling the three essential conditions of section 68 of the Act: the identity of the creditor, the creditworthiness of the creditor, and the genuineness of the transaction. The Tribunal found discrepancies in the assessee's claims and noted the lack of fulfillment of these conditions. It directed the Assessing Officer to conduct further verification, requiring the assessee to establish compliance with section 68. The Tribunal highlighted the need to produce the alleged creditor and other relevant individuals for verification purposes. Ultimately, the Tribunal allowed the appeal of the Revenue, remitting the issue back to the Assessing Officer for proper examination and decision in accordance with the law.In conclusion, the judgment focused on the meticulous evaluation of the evidence presented by the parties to determine the legitimacy of the unsecured loan transaction and underscored the significance of fulfilling the statutory requirements under section 68 of the Income-tax Act, 1961.