2020 (4) TMI 432 - AT - Income Tax

Tribunal rules in favor of assessee, deletes tax additions, accepts loans from non-resident, and deems cash deposits as business income.

The Tribunal partly allowed the appeal, deleting additions under section 68 of the Income Tax Act. For loans from individuals, the Tribunal accepted ... Addition u/s 68 - unexplained cash credit - assessee has failed to furnish the name and address, PAN, confirmation, acknowledgement of return of income, and bank statement in respect of five person - HELD THAT:- We find that in respect of loan of ₹ 1 Lakh from Shri Parth Kumar Ghediya, the assessee has filed acknowledgement of return of income and copy of bank pass book. Therefore, the assessee has discharged his onus under section 68 of the Act. Similarly, the loan of ₹ 3 Lakh was taken from non-resident through banking channel. Hence, for this loan the onus has been discharged. Therefore, genuineness of the same cannot be doubted, accordingly, addition of ₹ 4 Lakh is deleted and balance addition is sustained. This ground of appeal is therefore, partly allowed. Deemed income under section 68 - admission of additional evidence to prove the genuineness of the transactions - HELD THAT:- The perusal of details of cash deposits taken by the assessee from various persons shows that same are below ₹ 19,000, which have also been repaid during the year by the assessee. AO has denied the claim of the assessee on the ground that no details were filed before him. However, during the course of appellate proceedings, in order to prove the genuineness of the transactions, the assessee has filed details of these persons giving their identity name and address PAN. The assessee has been trading in shares as is evident from the profit and loss account placed in the paper book and was filed before the authorities below. We observed that the assessee has furnished details of their identity in shape of voter ID card, electricity bill, 7/12 extract of agricultural land holding and PAN. Therefore, if the AO wanted to disbelieve the identity, credit-worthiness and genuineness of transaction of cash depositors with the assessee, the AO’s could have carried out more enquiry by examining these persons to establish whether they have given cash to the assessee for carrying out share trading on their behalf or not . The learned Sr. D.R. contended that identity proof given by the assessee amounts to additional evidence. We find that such evidences were submitted before Ld. CIT(A), on which a remand report was duly called for from the AO. Hence, these evidences cannot be treated as additional evidences as claimed by the revenue. As decided in CHANAKYA DEVELOPERS [2013 (10) TMI 7 - GUJARAT HIGH COURT] in order to prove genuineness of transaction, relating to receipt of booking amount of flats, supplied address and PAN of concerned persons, it had discharged its primary onus and therefore, AO could not make addition of said amount to assessee`s taxable income without making proper enquiries under section 133(6) of the Act.” Revering back to the present case, the assessee has filed name and address, PAN, electricity bill, 7/12 extract, confirmation. Therefore, no addition could be made - Decided in favour of the assessee. Issues:1. Addition under section 68 of the Income Tax Act - Loan confirmation and documentation.2. Deemed income under section 68 of the Income Tax Act - Cash deposits and source verification.Issue 1: Addition under section 68 of the Income Tax Act - Loan confirmation and documentation:The appeal was against the addition of Rs. 4,95,000 under section 68 of the Act due to the assessee's failure to provide necessary documentation for loans from five individuals. The AO treated these loans as unexplained cash credits. The assessee contended that details could not be submitted earlier as contact with the individuals was not established. The matter was remanded to the AO, who reported no confirmation from the lenders. The CIT(A) upheld the addition, questioning loan repayment details. The Tribunal found that for a Rs. 1 lakh loan, the assessee provided necessary documents, discharging the onus under section 68. For a Rs. 3 lakh loan from a non-resident through banking channels, the genuineness was established. The Tribunal deleted the Rs. 4 lakh addition, sustaining the balance.Issue 2: Deemed income under section 68 of the Income Tax Act - Cash deposits and source verification:The appeal challenged the addition of Rs. 14,75,000 as deemed income under section 68 due to cash deposits without proper documentation. The AO treated these deposits as undisclosed income. The assessee claimed the deposits included business income and cash loans from villagers for share trading. The CIT(A) accepted part of the claim but confirmed the balance addition. The Tribunal noted that deposits below Rs. 19,000 were repaid during the year and the assessee provided identity details of villagers. The Tribunal found the villagers lacked share trading facilities and gave cash to the assessee for trading, supported by identity proofs. The Tribunal held that the AO should have conducted further enquiries to verify the transactions, as the assessee had provided necessary documentation. Citing precedent, the Tribunal allowed the appeal in favor of the assessee.In conclusion, the Tribunal partly allowed the assessee's appeal, deleting certain additions under section 68 of the Income Tax Act based on the provided documentation and source verification.