2023 (7) TMI 1039 - AT - Income Tax

Tribunal overturns addition of unexplained cash credit, emphasizes independent verification

Mrs. Raj Bala Mittal, C/o- MattaGarg & Co., Dehradun Versus Income Tax Officer, Ward-3, Hardwar

Mrs. Raj Bala Mittal, C/o- MattaGarg & Co., Dehradun Versus Income Tax Officer, Ward-3, Hardwar - TMI Issues involved: Appeal against order confirming addition of loan as unexplained cash credit for assessment year 2013-14.Summary:The appeal was made by the assessee against the order confirming the addition of Rs. 5,25,000 as unexplained cash credit, pertaining to the assessment year 2013-14. The key issue was whether the confirmation of the addition by the learned CIT(A) was justified.During the assessment year, the assessee borrowed Rs. 5,25,000 from Ms. Manju Tyagi, providing necessary details and confirmation from the lender. The lender had transferred the amount through RTGS from her overdraft account to the assessee. The Assessing Officer added the sum to the total income of the assessee as unexplained when the party was not produced for examination.The assessee requested another opportunity to produce the lender, leading to a remand report seeking to examine the lender. The lender was brought before the Assessing Officer, but due to official duties elsewhere, the lender handed over evidence to the assessee, which was presented before the CIT(A). Despite efforts, the CIT(A) upheld the addition made by the Assessing Officer.The Tribunal found that the lender's inability to be present during the original assessment proceedings was reasonable, given the distance between her location and the assessee. The lender was eventually produced during the remand proceedings, and crucial evidence, including an affidavit and income tax return acknowledgment, was submitted. The Tribunal admitted these pieces of evidence and held that the initial burden of proof was discharged by the assessee, emphasizing that the Assessing Officer failed to independently verify the evidence before making the addition. Relying on precedent, the Tribunal concluded that the addition of Rs. 5,25,000 as unexplained cash credit was unwarranted, as the three requirements of section 68 of the Act were satisfactorily met by the assessee. Consequently, the appeal of the assessee was allowed, and the addition was deleted.In conclusion, the Tribunal ruled in favor of the assessee, highlighting the importance of fulfilling the burden of proof and independent verification in cases involving unexplained cash credits.