2024 (8) TMI 1372 - HC - Income Tax

Unsecured loan cash credits u/s68-whether factual findings on identity and creditworthiness can be recast as law; appeal dismissed

In an appeal against deletion of an addition for unexplained cash credits under s. 68 (unsecured loans), the dominant issue was whether the HC could ... Unexplained cash credits u/s 68 - unexplained unsecured loans - Onus to prove - substantial question of law OR fact - Maintainability of appeal in HC - addition made as assessee has failed to establish identity, creditworthiness of the lender companies as well as genuineness of the transactions - ITAT setting aside the order of the ld.CIT(A) which upheld the addition - HELD THAT:- As in the instant case no substantial question of law arises from the order of the Tribunal as the appellant has raised all the questions of facts and have disputed the fact findings of the ITAT in the garb of substantial questions of law which is not permitted by the statute itself. This Court refrains from entertaining this appeal as there is no perversity in the order passed by the ITAT since the ITAT has dealt with all the grounds raised by the appellant in the order impugned and has passed a well reasoned and speaking order taking into consideration all the material available on record. Tribunal being a final fact finding authority, in the absence of demonstrated perversity in its finding, interference with the concurrent findings of the CIT (A) as well as the ITAT therewith by this Court is not warranted. We have no hesitation in holding that no question of law, much less any substantial question of law arises from the order of the Tribunal requiring consideration of this court. Appeal dismissed. Issues Involved1. Justification of ITAT in setting aside the order of CIT(A) regarding the addition of Rs. 3.73 crores as unexplained cash credits under Section 68 of the Income Tax Act, 1961.2. Failure of the assessee to establish the identity, creditworthiness of the lender companies, and genuineness of the transactions.3. Burden of proof under Section 68 of the Act and the role of the Assessing Officer (AO) and ITAT in conducting inquiries.4. Alleged perversity in the findings of ITAT.Issue-Wise Detailed Analysis1. Justification of ITAT in Setting Aside the Order of CIT(A)The appellant questioned whether the ITAT was justified in law in setting aside the order of the CIT(A), which upheld the addition of Rs. 3.73 crores made on account of unexplained cash credits under Section 68 of the Income Tax Act, 1961. The CIT(A) had confirmed the AO's action of treating the unsecured loans as unexplained cash credits, citing judgments in Pavankumar M Sanghvi vs. ITO and Pr.CIT vs. Bikran Singh. However, the ITAT found that the assessee had discharged the initial burden under Section 68 and directed the AO to delete the addition.2. Failure to Establish Identity, Creditworthiness, and GenuinenessThe appellant contended that the assessee failed to establish the identity, creditworthiness of the lender companies, and genuineness of the transactions. The AO had issued notices under Section 133(6) to the creditors but received no replies from 15 creditors. The assessee argued that the creditors were uncooperative and provided available details, noting that most loans were repaid before the assessment proceedings commenced.3. Burden of Proof and Role of AO and ITATThe appellant argued that the AO had raised serious doubts about the information provided by the assessee, shifting the burden under Section 68 to the assessee, which was not discharged. The appellant cited the case of Jansampark Advertising & Marketing (P) Ltd., asserting that the ITAT erred in not conducting independent inquiries and simply deleting the addition. The ITAT, however, found that the assessee had discharged the initial burden and that the tax authorities were not justified in assessing the amount under Section 68.4. Alleged Perversity in ITAT's FindingsThe appellant claimed that the ITAT's findings were perverse, as it failed to consider relevant facts, misread evidence, and did not apply the legal position correctly. The appellant relied on the case of Sudarshan Silk and Sarees, arguing that a perverse order by the ITAT constitutes a substantial question of law. However, the court found no perversity in the ITAT's order, noting that the ITAT had dealt with all grounds raised by the appellant and passed a well-reasoned order.ConclusionThe court concluded that no substantial question of law arises from the ITAT's order, as the appellant's questions were factual disputes rather than legal issues. The court emphasized that the ITAT is the final fact-finding authority and its findings should not be interfered with unless there is demonstrated perversity. The court found no merit in the appeal and dismissed it, stating that the addition/deletion made by the ITAT cannot be said to be erroneous or prejudicial to the interest of revenue. Thus, the appeal was dismissed in limine.