2015 (4) TMI 1160 - AT - Income Tax

Addition u/s 68 on account of unexplained cash credit - Held that - The transaction has to be proved as genuine as well as creditors should be creditworthiness. While examining the detail of the first creditor namely Gurumukhdas Dulhanomal A Pritmani, Ld. First Appellate Authority has observed that money was paid through account payee cheque. Shri Gurumukhdas Dulhanomal A Pritmani had not received any money from the assessee before issuance of a cheque to the assessee. He was a income tax payer and the copy of the return was also submitted. It is pertinent to mention that there are 13 creditors. Ld. CIT(A) has confirmed the addition qua four, meaning thereby, additions have been deleted qua 9 creditors. Revenue is challenging the deletion qua five creditors only. The grievance of the revenue is that discussion was not made by the Ld. First Appellate Authority with respect to five. In our opinion, when Ld. First Appellate Authority has made observation about 13 creditors then it is to be appreciated that Ld. First Appellate Authority must have a glance on all the details. It is the Assessing Officer who did not make specific objections to the details submitted by the assessee, in his remand report in respect of these five creditors. Therefore, after going through the order of Ld. CIT(A), we are of the view that Ld. CIT(A) has appreciated the facts in right perspective and no interference is called for. This appeal is devoid of any merit.

Summary

Issues:
Appeal by Revenue against CIT(A) order for assessment year 2005-06 - Addition of unexplained cash credit under section 68.

Analysis:
1. Grounds of Appeal: Revenue's appeal against CIT(A) order for assessment year 2005-06 was found descriptive and augmentative, not in line with Rule 8 of ITAT Rules. Revenue contested deletion of &8377; 10,67,572/- unexplained cash credit against 5 persons added by AO under section 68.

2. Assessee's Profile: Individual running M/s. Amik Printers declared total loss of &8377; 10,69,779/-. AO noted credit entries against 13 persons, seeking explanation on their identity, creditworthiness, and transaction genuineness.

3. AO's Action: Despite details furnished by assessee, AO added &8377; 21,96,634/- under section 68 as unexplained cash credit. Assessee appealed to CIT(A) with supporting documents like tax returns, bank statements, and creditor details.

4. CIT(A) Decision: After examining evidence and remand report, CIT(A) deleted most additions except for 4 creditors from the list, citing lack of creditworthiness and genuineness.

5. Legal Obligations: Section 68 of the Income Tax Act requires the assessee to prove creditor identity, creditworthiness, and transaction genuineness. CIT(A) scrutinized each creditor's details and confirmed additions for 4 creditors based on lack of satisfaction.

6. Judicial Review: Revenue contested CIT(A)'s decision on 5 creditors, arguing lack of discussion. However, ITAT upheld CIT(A)'s approach, emphasizing the need to prove creditor identity, transaction genuineness, and creditworthiness. CIT(A)'s decision was deemed appropriate, and the appeal was dismissed.

This detailed analysis highlights the legal proceedings, the obligations under section 68 of the Income Tax Act, and the judicial review of the CIT(A)'s decision by the ITAT, ultimately upholding the deletion of additions for most creditors based on lack of satisfactory explanations.