2025 (9) TMI 1650 - AT - Income Tax

Appeal allowed: cash-credit entries explained; Rs85 lakh and Rs50 lakh additions deleted; Rs1,32,708 treated as contract receipt taxable at 10%

ITAT found that cash-credit entries were satisfactorily explained as interlinked cash-credit account receipts and corresponding cross-entries with a ... Unexplained cash credit u/s 68 - assessee unable to prove the credit worthiness and genuineness of these transactions - HELD THAT:- Assessee stated that these entries are arising out of the CC account and these are not unexplained cash credit. Similarly, the assessee also filed the bank account details of Sidh Prakash & Sons and drew our attention to the balance sheet and entry list. The Ld. Counsel stated that this amount was received by account payee cheques of Central Bank of India’s CC account and these amounts were received on 20.12.2016 Rs. 50 lakhs and on 23.12.2016 Rs. 19 lakhs and balance sheet sum of Rs. 11 lakhs on 27.12.2016. The next amount of Rs. 5 lakhs was received on 7.3.2017. From perusal of bank account, it seems that these credit entries are received through CC accounts and these are reflected in cross entries of assessee as well as the accounts of Sidh Prakash & Sons HUF. We find no infirmity in these explanations and the entry in regard to Sidh Prakash & Sons Rs. 85 lakhs and entry of Rs. 50 lakhs received from Jai Kishan Dass Kirori Mal are explained. Hence, we delete the addition and allow the appeal of assessee on this issue. Addition on account of undisclosed receipts, on which TDS was claimed - We noted from the arguments of assessee that the assessee did not receive any amount or income of this nature from Paradise Wires Limited. He stated that the Paradise Wires Limited has committee error by filing Form No.26AS. But, to substantiate the same, the assessee could not produce any evidence or the statement of account of Paradise Wires Limited that they have not paid this income of Rs. 1,32,708/-. Counsel agreed that this amount, if received, of Rs. 1,32,708/-, the same can be considered as contract income and percentage of profit can be applied. Hence, we estimate the income at 10% of the receipt and direct the AO to recompute the income accordingly. ISSUES PRESENTED AND CONSIDERED 1. Whether unsecured loans of Rs. 50,00,000 and Rs. 85,00,000 treated as unexplained cash credits under Section 68 are explained by bank account entries and lender account details such that additions under Section 68 should be deleted. 2. Whether an alleged undisclosed receipt of Rs. 1,32,708 (on which TDS was shown in Form 26AS) that was not disclosed in the assessee's ITR can be added as income; and if so, whether the Tribunal may estimate taxable profit on that receipt when the assessee cannot produce accounts/statements from the payer to rebut the claim. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Treatment of unsecured loans as unexplained cash credits under Section 68 Legal framework: Section 68 treats unexplained cash credits as income where the assessee fails to satisfactorily explain the nature and source of the credit, including the creditworthiness and genuineness of the lender and the transaction. Evidence such as bank statements, lender account details and corresponding entries in the lender's books/account are relevant to discharge the onus. Precedent treatment: The order does not invoke or apply any specific judicial precedents; the Tribunal's approach is fact-driven and based on statutory principles of Section 68 concerning explanation by the assessee. Interpretation and reasoning: The Tribunal examined contemporaneous bank evidences and account copies. For the Rs. 50,00,000 entry from one lender, the assessee produced RTGS entries on specified dates and corresponding entries in the lender's and assessee's bank accounts; a complete CC account detail (PNB account) was filed. For the Rs. 85,00,000 entry from the other lender, the assessee produced banker's entries (account-payee cheques/CC account credits) spread over dates with corresponding reflections in the assessee's bank account and the lender's HUF account, and supporting balance sheet entries. The Tribunal found these cross-referenced bank credits and account details to constitute satisfactory explanation of the nature and genuineness of the credits and to demonstrate that the amounts arose from bank CC account transactions rather than unexplained cash credits. Ratio vs. Obiter: Ratio - The Tribunal's deletion of the additions rests on the legal principle under Section 68 that properly contemporaneous bank account entries and corresponding ledger/account records of the lender can satisfactorily explain cash credits. Obiter - No general rule beyond the facts was stated; the conclusions are confined to the sufficiency of the specific documentary evidence produced. Conclusions: The additions under Section 68 in respect of Rs. 50,00,000 and Rs. 85,00,000 are deleted because the assessee furnished bank statements, RTGS/cheque evidence and lender account records that satisfactorily explain the credits as transactions through CC/bank accounts and establish genuineness and creditworthiness to the Tribunal's satisfaction. Issue 2 - Addition of Rs. 1,32,708 alleged undisclosed receipt shown in Form 26AS Legal framework: Income not disclosed in return but shown in third-party records (e.g., Form 26AS reporting TDS) may be assessable unless the assessee establishes non-receipt or satisfactorily explains the nature of the entry. Where the assessee cannot produce corroborative evidence from the payer, the assessing authority/tribunal may estimate taxable income if appropriate. Precedent treatment: No judicial authorities were cited or applied; the Tribunal proceeded on statutory assessment principles and evidentiary expectations regarding receipts and TDS records. Interpretation and reasoning: The AO observed TDS of Rs. 2,650 on a receipt of Rs. 1,32,708 reflected for the assessee in Form 26AS; the assessee did not disclose corresponding income in its ITR. The assessee asserted non-receipt and contended that the payer had filed Form 26AS erroneously but failed to produce any statement of account or evidence from the payer to substantiate non-receipt. The assessee's counsel accepted that if the amount were received, it would constitute contract income and that a percentage-of-profit method could be applied. Given absence of rebuttal evidence from the payer and the assessee's concession on the nature of income, the Tribunal exercised its power to estimate and directed computation of taxable income at 10% of the receipt of Rs. 1,32,708. Ratio vs. Obiter: Ratio - Where a receipt is reflected in third-party TDS records and the assessee fails to produce evidence from the payer to disprove receipt, the Tribunal may estimate taxable income; here the Tribunal applied a 10% profit rate to compute taxable income. Obiter - The choice of 10% as the rate is an estimation on the facts of the case and does not purport to be a universal benchmark. Conclusions: The addition of Rs. 1,32,708 as undisclosed receipt was sustained in substance but the Tribunal directed recomputation by treating 10% of the alleged receipt (i.e., estimating taxable income at 10% of Rs. 1,32,708) due to absence of evidence from the payer and the assessee's inability to establish non-receipt. Cross-references The conclusion on Issue 1 (deletion under Section 68) is fact-specific and rests on cross-referenced bank/CC account entries of both assessee and lenders; it is distinct from Issue 2 where absence of payer's evidence led to estimation. Both issues apply the evidentiary principle that the onus lies on the assessee to satisfactorily explain credits or to rebut third-party records.