2007 (10) TMI 433 - AT - Income Tax

Unexplained cash credit u/s 68 - Unsecured loans received from depositors - Genuineness of the transaction - Onus of Proof - HELD THAT - The payment has been made by the assessee to each of the party through account payee Cheque and the same has duly been confirmed by each of the party. The assessee has filed the copy of the Bank Account, which clearly denotes that none of the party has deposited cash in their respective bank account. There is no evidence on record, which may prove that the assessee has ever given cash or received back the cash relating to this transaction. In our opinion the assessee had duly discharged his burden of proof, which a person of ordinary prudence could have discharged. The Assessing Officer even did not ask for the production of these parties. The assessee had its own requested the Assessing Officer to issue summons u/s 131 but the Assessing Officer has not done anything further. Once the assessee has discharged his burden, the onus got shifted on the Assessing Officer to prove that the evidence filed by the assessee are not correct. No cogent material or evidence has been brought on record, which may prove that the Assessing Officer had discharged his burden in this regard. Since we have already held in the preceding paragraph that the assessee had duly discharged his onus of the creditors were the income- tax assessee s. The permanent account numbers were in the file of the revenue. Payments were received by the assessee through account payee cheque and refunded through account payee cheque. The assessee requested for the issuance of notice u/s 131 but the Assessing Officer did not pursue the matter further by issuing notice u/s 131. Therefore in our opinion in the present case the proposition of law laid down by the Hon ble Supreme Court in the case of Orissa Corpn. (P.) Ltd. 1986 (3) TMI 3 - SUPREME COURT is clearly applicable. Thus, we delete the addition. Thus, ground Nos. 2 and 3 of the assessee s appear are allowed. We, directed the Assessing Officer to recompute the interest u/s 234A and 234B in accordance with law after giving effect to our order in the preceding paragraph. Thus both the ground Nos. 5 and 6 are allowed for statistical purposes. In the result, the appeal of the assessee is partly allowed.

Summary

Issues Involved:
1. Addition of Rs. 16,25,000 as unexplained cash credit under Section 68 of the Income-tax Act.
2. Levy of interest under Section 234A.
3. Levy of interest under Section 234B.

Detailed Analysis:

1. Addition of Rs. 16,25,000 as Unexplained Cash Credit:
The primary issue revolves around the addition of Rs. 16,25,000 made by the Assessing Officer (AO) treating the amount of unsecured loans received from three depositors as unexplained cash credit under Section 68 of the Income-tax Act. The assessee contended that it had complied with all the three ingredients stipulated under Section 68: identity, creditworthiness, and genuineness of the transaction. The loans were received through account payee cheques and repaid similarly. The assessee provided confirmations from the depositors, their Permanent Account Numbers (PAN), and bank account details. The AO, however, based the addition on the statement of a third party, Mr. Sanjay Rastogi, who alleged that the transactions were bogus.

The Tribunal noted that the AO did not summon the depositors for cross-examination, despite the assessee's request. The Tribunal referred to the Supreme Court's decision in CIT v. Orissa Corpn (P.) Ltd., which held that if the assessee provides all necessary evidence, the burden shifts to the AO to disprove the evidence. The Tribunal found that the assessee had discharged its burden of proof by submitting confirmations, PAN details, and bank statements showing no cash deposits. The AO did not provide any cogent material to disprove the assessee's evidence. Consequently, the Tribunal deleted the addition of Rs. 16,25,000, holding that the assessee had satisfactorily explained the nature and source of the credits.

2. Levy of Interest under Section 234A:
The assessee contested the levy of interest under Section 234A amounting to Rs. 40,394. The Tribunal directed the AO to recompute the interest under Section 234A in accordance with law after giving effect to the Tribunal's order regarding the deletion of the addition of Rs. 16,25,000. This issue was allowed for statistical purposes.

3. Levy of Interest under Section 234B:
Similarly, the assessee challenged the levy of interest under Section 234B amounting to Rs. 3,61,928. The Tribunal directed the AO to recompute the interest under Section 234B in accordance with law after considering the Tribunal's decision on the primary issue. This issue was also allowed for statistical purposes.

Conclusion:
The Tribunal allowed the appeal partly. The addition of Rs. 16,25,000 as unexplained cash credit under Section 68 was deleted, as the assessee had satisfactorily explained the nature and source of the credits. The issues related to the levy of interest under Sections 234A and 234B were remanded to the AO for recomputation in accordance with the Tribunal's findings.