2023 (4) TMI 96 - AT - Income Tax

Tribunal upholds deletion of additions under Section 68 of Income Tax Act, citing lack of fresh receipts

The ITO, Ward-2 (2) (5), Ahmedabad Versus Samir J. Shah

The Tribunal upheld the Commissioner of Income Tax (Appeals)' decision to delete additions made under Section 68 of the Income Tax Act amounting to Rs. ... Additions u/s 68 - opening balance in respect of unsecured loans taken by the assessee in earlier financial years - identity of the transactions, creditworthiness of the creditor and genuineness of the transaction not proved - CIT-A deleted the addition - HELD THAT:- It is a well settled law that addition u/s. 68 can be made only during the year in which such credit has been received and if the credit balance appearing in the account of the assessee is not pertaining to the year under consideration, the Assessing Officer cannot make addition u/s. 68 of the Act in the subsequent assessment year. It is a settled law that opening balance of unsecured loans coming from previous financial years cannot be added u/s. 68 of the Act to the income of the assessee. Even the PAN numbers as well as addresses of all such parities were duly furnished by the assessee to AO during the course of assessment proceedings. The copy of chart containing details of unsecured loans which were provided to the AO - CIT(A) also gave due consideration to the chart giving details of party wise break up of loans while giving relief to the assessee. Accordingly, so far as addition u/s. 68 on account of opening balance we find no infirmity in the order of ld. CIT(A) so as to call for any interference. Unsecured loans received during the year under consideration from Vinita Neshva Infrastructure Pvt. Ltd - As we observe that various documentary evidences were placed on record by the assessee in respect of such fresh credits received during the year under consideration viz. confirmation of the party, acknowledgement of ITR and statement of total income of the party, annual report of the lender, audit report of the party - Therefore assessee has been able to give satisfactory documentary evidences in support of the genuineness and creditworthiness of the aforesaid party. Fresh unsecured loan from Dharamdev Infrastructure Ltd. - As the assessee had furnished copy of the balance sheet of the said party before ld. CIT(A) in order to establish creditworthiness of such party and a copy of PAN and Income Tax Return of such party had been furnished by the assessee before the A.O. Accordingly, assessee has given satisfactory documentary evidences in respect of fresh unsecured loans taken during the year under consideration, which were also rightly appreciated by the ld. CIT(A) in the appellate order. Accordingly, in the light of the above observations, we find no infirmity in the order of ld. CIT(A) so as to call for interference - Appeal of the Department is dismissed. Issues Involved:1. Deletion of additions made under Section 68 of the Income Tax Act.2. Assessment of the genuineness and creditworthiness of creditors.Summary:Issue 1: Deletion of Additions under Section 68 of the Income Tax ActThe Department appealed against the order of the Commissioner of Income Tax (Appeals)-10, Ahmedabad, which deleted the additions made by the Assessing Officer (AO) amounting to Rs. 7,63,88,871/- under Section 68 of the Income Tax Act. The AO had observed significant credit/debit transactions in the assessee's bank account and made additions on the grounds that the assessee failed to establish the genuineness and creditworthiness of the creditors.In appeal, the assessee provided details of unsecured loans received, including copies of balance sheets, income tax returns, and confirmations from the creditors. The CIT(A) allowed the appeal, noting that the AO had not considered the provided evidence and had erred in making additions based on the inability to produce creditors in person. The CIT(A) emphasized that the addition under Section 68 could only be made in the year the credit was received, not in subsequent years.Issue 2: Assessment of Genuineness and CreditworthinessThe CIT(A) found that the only fresh credits during the relevant year were Rs. 50 lakhs from Dharamdev Infrastructure Pvt. Ltd. and Rs. 2.89 crores from Vinita Neshvi Infrastructure Pvt. Ltd. The assessee had provided satisfactory explanations and supporting evidence for these credits. The CIT(A) concluded that the AO was not justified in making additions based on opening balances of previous years and interest credited during the year, which did not constitute fresh receipts.The Tribunal upheld the CIT(A)'s decision, citing various case laws that support the principle that additions under Section 68 can only be made in the year the credit is received. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the Department's appeal.Conclusion:The Tribunal concluded that the AO's additions under Section 68 were unjustified as they pertained to opening balances from previous years and interest credited during the year. The assessee had provided adequate documentation to prove the genuineness and creditworthiness of the creditors for the fresh credits received during the year. The Department's appeal was dismissed, and the CIT(A)'s order was upheld.