Unexplained cash credit under Section 68 deleted after sufficient evidence of lender creditworthiness established through bank statements

The ITAT Indore ruled on three issues: (1) For unexplained cash credit under Section 68 involving unsecured loans, the tribunal found sufficient evidence of lender's creditworthiness through bank statements and account confirmations, deleting the addition made by AO. (2) Regarding another loan from Shri Ajay Gupta, the tribunal accepted that funds originated from legitimate recovery from M/s Unitrade Service, treating the loan as explained. (3) For charity donation expenses claimed as business expenditure, the tribunal upheld AO's disallowance, finding no evidence that donations helped advertise the business.

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Issues Involved:
1. Delay in filing the appeal.
2. Addition of Rs. 6,00,000/- as unexplained cash credit under Section 68.
3. Addition of Rs. 20,00,000/- as unexplained cash credit under Section 68.
4. Disallowance of Rs. 29,867/- on account of donation and charity expenses.

Summary:

1. Delay in Filing the Appeal:
The appeal was delayed by 66 days. The delay was attributed to the post containing the impugned order being received by a neighbor of the assessee, who then went out of town and delivered the post late. The bench considered the explanation and found sufficient cause for the delay. Citing Section 253(5) of the Income-tax Act, 1961 and the Supreme Court decision in Collector, Land Acquisition Vs Mst. Katiji, the delay was condoned, and the appeal was admitted.

2. Addition of Rs. 6,00,000/- as Unexplained Cash Credit under Section 68:
The AO added Rs. 6,00,000/- as unexplained cash credit due to insufficient evidence of the lender's creditworthiness. The CIT(A) upheld the addition, noting issues with the repayment method and lack of interest payment. The ITAT found that the assessee provided sufficient evidence, including bank statements and account confirmations, proving the lender's creditworthiness and the genuineness of the transaction. The addition was deleted.

3. Addition of Rs. 20,00,000/- as Unexplained Cash Credit under Section 68:
The AO added Rs. 20,00,000/- as unexplained cash credit, questioning the lender's creditworthiness. The CIT(A) upheld the addition, noting discrepancies in the lender's identity and the repayment method. The ITAT found that the lender, a non-resident, had sufficient funds sourced from recoveries made from M/s Unitrade & Services. The ITAT concluded that the lender's creditworthiness was proven and deleted the addition.

4. Disallowance of Rs. 29,867/- on Account of Donation and Charity Expenses:
The AO disallowed Rs. 29,867/- claimed as charity and donation expenses, noting they were not related to the assessee's business. The CIT(A) upheld the disallowance. The ITAT agreed with the lower authorities, finding no evidence that the donations were business-related. The disallowance was upheld.

Result:
The appeal was partly allowed. The additions under Section 68 were deleted, but the disallowance of charity and donation expenses was upheld. The order was pronounced in open court on 29.02.2024.

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