2021 (4) TMI 1082 - AT - Income Tax

Tribunal upholds CIT(A) decision on unexplained cash credit under Income-tax Act, emphasizing evidence

The Tribunal upheld the CIT(A)'s decision to delete the addition of unexplained cash credit under section 68 of the Income-tax Act, emphasizing that the ... Addition u/s 68 - Unexplained loans - CIT(A) held that mere establishing of the identities of the lenders of loan together with the fact that the transactions were made through cheques could be itself establish the genuineness of the transactions - HELD THAT:- The assessee has complied with the basic conditions of the provision of 68 by submitting the confirmations of loan, copies of the Bank Statements and Copies of Income Tax Return of these four loan creditors. We noted from the assessment order that although the Assessing Officer has written a very elaborate order but he has missed the basic three ingredients of the provision of section 68 of the Act. Hence, not carried any enquiry qua these three conditions rather he mainly relied on the search conducted in the case of Bhawarlal Jain Group of cases. It is also not clear from the assessment order whether these loan parties are genuine or non-genuine and the amount received are unexplained but how. It is a fact that the assessee has discharged its primary onus by filing all these documents which the Assessing Officer should have verified and examined these parties. The assessee has complied with the basic conditions of the provision of 68 by submitting the confirmations of loan, copies of the Bank Statements and Copies of Income Tax Return of these four loan creditors. We noted from the assessment order that although the Assessing Officer has written a very elaborate order but he has missed the basic three ingredients of the provision of section 68 of the Act. Hence, not carried any enquiry qua these three conditions rather he mainly relied on the search conducted in the case of Bhawarlal Jain Group of cases. It is also not clear from the assessment order whether these loan parties are genuine or non-genuine and the amount received are unexplained but how. It is a fact that the assessee has discharged its primary onus by filing all these documents which the Assessing Officer should have verified and examined these parties. DR could not controvert the basic facts of the case except relying on the case law of Pawankumer M Sanghvi [2017 (5) TMI 1159 - ITAT AHMEDABAD] and Pr. CIT vs. NRA Iron & Steel (P) Ltd. [2019 (10) TMI 1178 - SUPREME COURT]. Without pointing out the factual aspect of this case, we cannot take it as legal proposition laid down in the given facts. Hence, we are of the view that there is no infirmity in the order of the CIT(A) and hence, we confirm the same. The appeal of Revenue on this issue is dismissed. Addition of commission paid at the rate of 3% on the above loans and addition of interest on the above loan transactions - HELD THAT:- Since, the CIT(A) has already held this loan as genuine and we confirmed the order of CIT(A), these grounds are consequential and hence, dismissed. Issues:1. Addition of loan transaction as unexplained under section 68 of the Income-tax Act.2. Deletion of addition of commission paid on loans.3. Deletion of addition of interest on loan transactions as non-genuine.Issue 1: Addition of Loan Transaction as Unexplained under Section 68:The appeal by Revenue challenged the CIT(A)'s deletion of the addition made by the Assessing Officer treating the loan transaction as unexplained under section 68 of the Act. The Assessing Officer added unexplained cash credit amounting to &8377; 2,22,50,000/-, alleging that the loans were received from a group concern and thus unexplained. The CIT(A) deleted the additions, emphasizing that the appellant submitted loan confirmations, bank statements, and income tax returns of the creditors, establishing the identity, genuineness, and creditworthiness of the transactions. The CIT(A) found that all three criteria for establishing the genuineness of the loans were fulfilled, directing the deletion of the addition. The Tribunal upheld the CIT(A)'s decision, noting that the Assessing Officer failed to verify the essential conditions of section 68, and there was no evidence to deem the loan parties as non-genuine. The Tribunal confirmed the CIT(A)'s order, dismissing the Revenue's appeal on this issue.Issue 2: Deletion of Addition of Commission Paid on Loans:The Revenue contested the CIT(A)'s deletion of the addition of commission paid on the loans received. However, since the CIT(A) had already determined the loans to be genuine, the Tribunal considered this ground consequential and dismissed the appeal on this issue.Issue 3: Deletion of Addition of Interest on Loan Transactions as Non-Genuine:Similarly, the Revenue challenged the CIT(A)'s decision to delete the addition of interest paid on the loan transactions as non-genuine. As the CIT(A) had already established the loans' genuineness, the Tribunal deemed this ground consequential and dismissed the appeal on this issue.The Tribunal pronounced the order on 19.04.2021, dismissing both the appeal of Revenue and the Cross Objection (CO) of the assessee. The decision reaffirmed the CIT(A)'s findings regarding the genuineness of the loan transactions, emphasizing the importance of fulfilling the criteria of identity, creditworthiness, and genuineness in such cases.