2022 (11) TMI 19 - AT - Income Tax

Appeal Allowed: Unexplained Cash Credit Deletion under Income-Tax Act

Outcome: The Tribunal allowed the appeal, deleting the addition of Rs.10,00,000 as an unexplained cash credit under Section 68 of the Income-Tax Act, ... Unexplained cash credit under Section 68 - onus of proof in respect of cash credits - evidence of identity, genuineness and creditworthiness of creditor - banking channel/account payee cheque as proof of genuineness - non-compliance with summons under Section 131 not decisiveUnexplained cash credit under Section 68 - onus of proof in respect of cash credits - evidence of identity, genuineness and creditworthiness of creditor - banking channel/account payee cheque as proof of genuineness - non-compliance with summons under Section 131 not decisive - Deletion of addition of Rs.10,00,000 treated as unexplained cash credit under Section 68. - HELD THAT: - The assessee produced a confirmation from the alleged lender, the lender's bank statement and identity evidence, showing the amount was advanced by account payee cheque and that the lender had sufficient funds prior to issuance of the cheque. These materials satisfied the assessee's initial onus to establish identity, genuineness and creditworthiness of the creditor and that the transaction was effected through banking channels. The assessing officer relied solely on the lender's non compliance with a summons under Section 131 to sustain the addition. The Tribunal held that non compliance with a summons may occur for various reasons and by itself cannot be the sole criterion to treat a receipt as an unexplained cash credit where the assessee has discharged the initial burden. Once the assessee discharged the initial onus, the burden shifted to the department to prove the transaction was not genuine, which the department failed to do on the materials before it. Consequently the addition was unsustainable and was deleted. [Paras 6, 7]The addition of Rs.10,00,000 as unexplained cash credit under Section 68 is deleted and the appeal is allowed.Final Conclusion: Assessee's evidence establishing identity of creditor, bank transaction by account payee cheque and lender's funds discharged initial onus; non compliance with summons under Section 131 alone could not sustain addition under Section 68, hence deletion of the addition and appeal allowed. Issues:Addition of Rs.10,00,000 as unexplained cash credit under Section 68 of the Income-Tax Act, 1961.Analysis:In this case, the dispute revolves around the addition of Rs.10,00,000 as an unexplained cash credit under Section 68 of the Income-Tax Act, 1961. The assessing officer added this amount to the assessee's income as the source and nature of the deposit could not be explained by the assessee. However, during the appeal proceedings, the assessee provided evidence to support the claim that the amount was received from a specific individual through an account payee cheque. The evidence included a confirmation, bank statement, and Aadhar card of the person in question. The Commissioner (Appeals) directed the assessing officer to examine the claim further. The assessing officer, in a subsequent report, noted that although the person from whom the money was claimed to be received did not comply with the summons, the confirmation and bank statement provided by the assessee supported the claim. It was observed that the lender had sufficient funds in their account before issuing the cheque to the assessee. The Tribunal found that the identity of the creditor was established, the transaction was done through a banking channel via an account payee cheque, and the lender had the funds available to advance the amount. The Tribunal held that non-compliance with the summons by the lender cannot be the sole reason to treat the loan as an unexplained cash credit. The Tribunal emphasized that the department failed to discharge its burden of proving otherwise after the assessee had provided evidence of the transaction. Consequently, the Tribunal deleted the addition of Rs.10,00,000, and the appeal was allowed.This judgment highlights the importance of providing evidence to support claims in tax matters and the burden of proof shifting from the assessee to the department once the initial onus is discharged. It also underscores the significance of transactions through banking channels and the need for thorough investigation by tax authorities before making additions to an assessee's income.