2024 (3) TMI 146 - AT - Income Tax

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

Ultimate Construction, Versus DCIT-1 (1), Bhopal

The ITAT Indore ruled on three issues: (1) For unexplained cash credit under Section 68 involving unsecured loans, the tribunal found sufficient evidence ... Unexplained cash credit u/s 68 - unsecured loan - HELD THAT:- It is not a case where there is any cash deposit in lender’s bank a/c before giving loan to assessee. Thus, the source or creditworthiness of lender qua the giving of loan to assessee is proved. The A/c Confirmation, which is basically in the form of a certificate of lender, also makes a clear confirmation of giving loan to assessee as well as receipt of repayment subsequently from assessee. So far as the point raised by CIT(A) that the repayment has been made via cross- cheque and not a/c payee cheque, the assessee has filed complete bank statement showing debit entries of payments which have a clear mention of the repayment having gone to “Reshma Qureshi”, lender. Therefore, any doubtful apprehension by CIT(A) in this regard is dislodged. Thus, taking into account entire conspectus, we are of the view that the assessee has filed sufficient evidences to prove the creditworthiness of loan; therefore the addition made by AO should not stand. We, accordingly, delete the same and allow this ground of appeal. Unexplained cash credit u/s 68 - AO was not satisfied with creditworthiness of the lender and made addition - HELD THAT:- We find that Shri Ajay Gupta was having a pre-existing deposit with M/s Unitrade & Service and by making recoveries therefrom, made loans to assessee. Thus, there should be any doubt so far the availability of funds with the lender Shri Ajay Gupta is concerned. Ld. CIT(A) has made an observation that the assessee has taken loan from M/s Unitrade & Service but as can be seen the correct position is different. It is true that funds have originated from M/s Unitrade & Service but Ld. AR has shown by reference to documents in Paper-Book that Shri Ajay Gupta made a recovery from M/s Unitrade & Service for giving loans to assessee. We do not find any weakness in this explanation of assessee which is fully supported by documents. Consequently, we are satisfied that Shri Ajay Gupta has made loans to assessee from funds available with him and there is no reason to treat the loans taken by assessee as unexplained. Disallowance of Charity & Donation Exp - assessee submitted that impugned donations are in the nature of contributions given to various organisations which helped in advertising business of assessee, therefore they are very much in the nature of business expenditure and must be allowed - HELD THAT:- On a careful consideration, we agree with the submissions of Ld. DR and do not find any weightage in the argument of Ld. AR which is just a submission for the sake of submission. There is no evidence to show that the impugned donations helped the assessee in advertising business. Therefore, we uphold the disallowance made by AO. This ground is accordingly dismissed. 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.