Assessee fails to prove identity and creditworthiness of creditor, section 68 addition upheld for unexplained cash credits

ITAT Raipur set aside CIT(A)'s order deleting addition under section 68 for unexplained cash credits. The assessee failed to discharge the onus of proving identity, creditworthiness of creditor, and genuineness of transaction by not providing requisite documents including confirmation, ITR, bank statements, financials, and complete address of creditor. Despite CIT(A)'s satisfaction with assessee's evidence, ITAT found the view contrary to facts as essential documents were not submitted to AO or CIT(A). Following precedent in Raja Kaimoor Breweries case, ITAT upheld AO's addition under section 68. Appeal decided against assessee.

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Issues Involved:
1. Deletion of addition of Rs. 2,16,33,868/- under Section 68 of the Income Tax Act, 1961 on the issue of unexplained cash credits.

Summary:

Issue 1: Deletion of Addition under Section 68 of the Income Tax Act, 1961

The Revenue appealed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) dated 08.06.2023, which deleted the addition of Rs. 2,16,33,868/- made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961 for the Assessment Year (AY) 2011-12. The AO had reopened the case based on credible information that the assessee company had introduced unaccounted money into its books through a multi-layering of funds involving entities like M/s. Jagdamba Traders and M/s. Surya International. The AO observed cash deposits totaling Rs. 6.74 crores and Rs. 6.35 crores in the accounts of these entities, which were transferred to M/s. Dreamland Barter Pvt. Ltd. and subsequently to the assessee's account. The AO added Rs. 2,16,33,868/- as unexplained cash credit under Section 68 due to the assessee's failure to provide satisfactory explanations and relevant documents.

The CIT(A) vacated the addition, finding the assessee's contentions satisfactory, which led to the Revenue's present appeal. The Revenue argued that the CIT(A)'s order was erroneous and that the assessee failed to substantiate the identity, creditworthiness, and genuineness of the transactions involving M/s. Vinayak Cement Udyog, from whom the assessee claimed to have received the amount as an advance against the sale of Clinker. The Revenue highlighted that the assessee did not provide confirmation, financials, or the complete address of Vinayak Cement Udyog, and the AO's inquiries were not satisfactorily addressed.

The Tribunal noted that the CIT(A) has powers coterminous with the AO and is obliged to conduct necessary inquiries or direct the AO to do so. The Tribunal found that the CIT(A) failed to exercise these powers adequately and relied on internal documents and bank statements provided by the assessee without sufficient external verification. The Tribunal emphasized the necessity for the assessee to provide essential information and documents to establish the identity, creditworthiness, and genuineness of the creditor.

Citing the case of Raja Kaimoor Breweries Private Limited and other relevant judgments, the Tribunal concluded that the assessee failed to discharge the onus cast upon it under Section 68. Therefore, the Tribunal set aside the order of the CIT(A) and upheld the addition made by the AO.

Conclusion:
The appeal of the department was allowed, and the addition of Rs. 2,16,33,868/- under Section 68 of the Income Tax Act, 1961 was upheld.

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