TaxTMI 
TaxTMI 
2022 (12) TMI 576
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....g Rs. 3,86,35,000/- as unexplained Cash credit U/s. 68 of the Income Tax Act. 2. Your appellant most humbly reserves the right to add, amend, alter or substitute the ground in this appeal on or before the time of hearing. 3. The only issue raised by the assessee is that the learned CIT-A erred in deleting the addition of Rs. 3,86,35,000/- made by the AO on account of unexplained cash credit under section 68 of the Act. 4. The assessee is an individual and engaged in the business of trading and manufacturing of machinery in the name and style of AR Chem Industries. During the course of assessment proceeding, the AO found that the assessee has shown unsecured loan from following parties: 1. Ashok M Khurana Rs. 36,00,000/- 2. Akshar Trading Rs. 2,33,85,000/- 3. M.S. Carting contractor Rs. 1,16,50,000/- Total Rs. 3,86,35,000/- 4.1. The assessee in support of impugned loan transactions only furnished copy of confirmation letter from the loan parties. Thereafter, the AO issued notice under section 131(1) to the loan parties seeking necessary detail which were complied with by them. 4.2. The AO from the reply furnished by the loan party namely ....
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....y to day requirement. Therefore in such a situation giving such huge loan to the assessee that too without charging interest is highly improbable and not possible. Thus, the circumstantial evidence suggest that the assessee has utilized their bank account to channelize her own unaccounted money. In this regard the AO referred the judgment of Hon'ble Supreme court in case of Durga Prasad More reported in 82 ITR 540 where the Hon'ble court held that it is very easy for making self-serving document if assessee want to evade tax. Therefore, the taxing authority is required to look beyond the documentary evidence produced and entitled to look into surrounding circumstantial evidence to find out the reality. The AO further made reference to various judicial pronouncement with regard to onus to prove under section 68 of the Act. Accordingly, the AO held that the assessee failed to explain genuineness and creditworthiness of the lender creditor and made addition of Rs. 3,86,35,000/- to the total income of the assessee under section 68 of the Act. 5. The aggrieved assessee preferred an appeal to the learned CIT(A). 6. The assessee before the learned CIT(A) with regard to addit....
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...., the addition made by the treating the genuine loan transaction with above said parties namely Akhsar Trading Company and MS Carting Contractor as unexplained cash credit needs to be deleted. 7. The learned CIT(A) after considering the facts in totality rejected the contention made by the Assessee and confirmed the addition made by the AO by observing as under: 4.2 Sole ground of appeal pertains to addition u/s. 68 amounting to Rs. 3,86,35,000/- on account of unexplained unsecured loan from three parties as under : (i) Ashok K Khurana :Rs. 36.00.000/- (ii) Akshar Trading : Rs. 2,33J85,000/- (iii) MS Carting Contractor : Rs. 1,16,50,000/- Rs. 3,86,35,000/- From pages 2 to 6 of the assessment order. AO has discussed capacity of each lender, identity and genuineness of loan. AO has also cited case laws in favour of revenue. AR on the other hand vehemently argued before AO that all the transactions were through banking channel & identity has been proved hence addition u/s. 68 was not required. However, dissatisfied with the AR w.r.t. capacity of all the lenders, AO proceeded to add entire unsecured loan of Rs. 3,86,35,000/- u/s.....
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....d to creditor but not cleared has to be part of unexplained income. The Hon. ITAT Visakhapatanam in case of no V Sri Tadi Vasudeva Rao, held that AO was justified in making addition u/s. 68 of credit balance showing in assessee's books of account against the Nil balance shown by the creditors in their books of account as on verification of books of accounts of the creditors. AR's make belief story of mistake in ledger books of accounts w.r.t. loan of Rs. 36,00,000/- (50,00,000-14,00,000) fails to convince me. Even if, I believe ARs theory then once again, I don't find any interest payment was made by appellant. Neither purpose of loan has been explained. Therefore, loan of Rs. 36,00,000/- has rightly been considered as unexplained by AO. II) Loan from Akshar Trading - Rs. 2,33,85,000/- AR submitted confirmation, identity DUE could not prove genuineness of transaction. On reply to notice u/s. 133(6) issued by A.O., lender stated that it did not file return due to heavy loss incurred by the firm. Sanjay Parmar appeared on behalf of Akshar Trading before AO against summon issued u/s. 131(1) of the Act. He confessed to have meager income ....
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.... investor companies, it could be said that assessed was a shell company engaged in money laundering by providing bogus accommodation entries through a web of bank accounts thus addition u/s. 68 was justified." 4.5 The Hon. High Court of Mumbai, [2014] 110 Taxmann.com 71 (Bombay) in case of Swastik Realtors v. ACIT, held as under: "Merely because certain entries had been shown in book of account of accommodation entry provider, loan transaction could not be held to be genuine where entry provider had no financial capacity." 4.6 The Hon. High court of Madhya Pradesh in ITA No. 223/2017 in case of SSP Enterprise Pvt. Ltd. vs. ACIT vide its order dated 07-05-2018 has upheld the additions u/s. 68 in respect of unsecured loan taken by assessee. Shree Shyam Polymers, this lender has shown meager income in his return, no interest is provided and appellant had proved identity of the depositor. Observing serious doubt on capacity of the lender, addition us 68 of Rs. 16,39,960 was upheld. 4.7 The Hon'ble Gujarat High Court in the case of Bomin P. Ltd. Vs. CIT 160 ITR 477 has ruled that section 68 enjoins upon the assessee to officer an explanation about....
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.... established the genuineness of the transaction and creditworthiness of the parties which is a mandatory requirement in order to avoid the rigorous provisions of section 68 of the Act. The learned DR vehemently supported the order of the authorities below. 11. We have heard the rival contention of both the parties and perused the materials available on record. The fact of the case have been elaborated in the previous paragraphs. Therefore, for the sake of brevity and convenience, we are not inclined to repeat the same. The provision of section 68 of the Act fastens the liability on the assessee to provide the identity of the lenders, establish the genuineness of the transactions and creditworthiness of the parties. These liabilities on the assessee were imposed to justify the cash credit entries under Section 68 of the Act by the Hon'ble Calcutta High Court in the case of CIT Vs. Precision Finance (P) Ltd. reported in 208 ITR 465 wherein it was held as under: "It was for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. On the facts of this case, the Tribunal did not take into account all these ingre....
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.... note that the addition under section 68 of the Act was made on account of unsecured loan from 3 different parties. The first party was namely Shri Ashok Khurana against which assessee has shown outstanding loans liability of Rs. 36 lakh treating the same as unexplained credit by the AO for the reason that AO on verification from the Shri Ashok Khurana found that there was no such loan extended by the such party to the assessee. However, during the appellate proceeding, the assessee explained that the loan amount of Rs. 50 Lakh dated 29th April 2011 was credited from M/s. Aashka Construction Limited on the instruction of Shri Ashok Khurna. But by mistake entry was made in the ledger account of Shri Ashok Khurana. M/s. Aashka Construction Ltd. was subsequently merged with M/s. Myraj Consultancy Ltd. vide order of Hon'ble Gujarat High Court dated 15th February 2013, thereafter it was renamed as M/s. Madhav Infra Projects Ltd. with effect from 12-06-2013. The assessee before the learned CIT(A) claimed mistake committed in the books of account for the year under consideration was got rectified in the subsequent year. The assessee to substantiate her claim furnished ledger copy of A....