TaxTMI 
TaxTMI 
2025 (5) TMI 2158
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.....12.2017 passed by the Assessing Officer [AO] under Section 143 (3) of the Act. 3. The present appeal was admitted on 24.11.2023 on the following questions of law: - "(i) Whether the Income Tax Appellate Tribunal [in short "Tribunal"] misdirected itself in fact and law in holding that Rs. 27,50,000/-, received by the appellant/assessee from its director i.e. Mr Hitesh Bhatia, in the form of a loan, constituted unexplained credit/entry in his books of accounts and hence, liable for addition under Section 68 of the Income-tax Act, 1961 [in short "Act"]? (ii) Whether, in the facts and circumstances of the case, the Tribunal's conclusion that Rs. 27,50,000/- was required to be added to the income of the appellant/assessee, was perverse, having regard to the fact that the appellant/assessee had discharged its onus?" PREFATORY FACTS 4. The Assessee is engaged in the business of readymade garments and leather goods and filed its return of income for AY 2015-16 on 29.09.2015, declaring a total income of Rs. 93,660/-. During the previous year relevant to AY 2015-16, the Assessee had received unsecured loans aggregating to Rs. 83,00,000/- from its two directors namely, Mr. R.C. Bhatia....
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.... 9. As noted above, the Assessee appealed the said decision of the CIT(A) before the Tribunal. The Tribunal concurred with the decision of the CIT(A) and accordingly, dismissed the Assessee's appeal. REASONS AND CONCLUSION 10. At the outset, it would be relevant to refer to Section 68 of the Act. The said Section as original enacted reads as under: "68. Cash credits. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year." 11. The said Section was amended by the Finance Act, 2012 and a proviso was added. Section 68 of the Act, as amended and in force at the material time, is set out below: "68. Cash credits.- Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory....
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...., which are introduced as capital in a company. The amendment to Section 68 of the Act, introduced by virtue of the Finance Act, 2022 also makes it abundantly clearly that Section 68 of the Act as was in force prior to 01.04.2023, did not require the assessee to explain the source of the source of funds other than share capital money, share capital, share premium or any amount of such nature. Thus, the enlargement of the assessee's onus to explain the source of the source of sums credited as unsecured loans necessitated the amendment to Section 68 of the Act to expressly provide for the same. Accordingly, the proviso to Section 68 of the Act, as amended by the Finance Act, 2022, reads as under:- "Provided that where the sum so credited consists of loan or borrowing or any such amount, by whatever name called, any explanation offered by such assessee shall be deemed to be not satisfactory, unless,- (a) the person in whose name such credit is recorded in the books of such assessee also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided f....
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....e is not a stranger to the Assessee and is vitally interested in the affairs of the Assessee. Therefore, the financial assistance extended by him cannot be doubted. 21. The only remaining issue in this regard is the capacity of Mr. Hitesh Bhatia to lend the funds to the Assessee. Here too, we find no ground to doubt the capacity of Mr. Hitesh Bhatia to extend the unsecured loan to the Assessee. There is no dispute that the amount received by the Assessee was provided from the overdraft facility extended by Lakshmi Vilas Bank. The Assessee also produced the certificate which established that Lakshmi Vilas Bank had extended the overdraft facility to Mr. Hitesh Bhatia. The said overdraft facility was provided against the fixed deposits maintained by Mr. Hitesh Bhatia and therefore, his capacity to pay the amount stands established. The overdraft facility extended by the Lakshmi Vilas Bank was secured by the assets of Mr. Hitesh Bhatia. 22. The additions made to the income of the Assessee are solely on account of certain cash deposits by Mr. Hitesh Bhatia in his bank account during the relevant period from 13.09.2014 to 22.12.2014. Any doubt as to the source of funds used by Mr. Hite....