2016 (7) TMI 1385 - HC - Income Tax

Addition u/s 68 - unsecured loans from various persons - not only the identity was established but the genuineness and creditworthiness of the creditors were well proved as said by CIT-A and ITAT - Held that - It is an admitted fact that all the cash creditors have not only placed on record the entire material but have also affirmed in their examination that they had advanced money to the assessee from their own respective bank accounts and when even the AO finds only minor discrepancies in the statements recorded but as found that the money came from the respective bank accounts of the creditors, then we are in conformity with the order passed by the Tribunal There is no evidence as alleged by the AO that the money actually belonged to none but he assessee himself. The said finding if any is based on mere suspicion. In view of what we have noticed hereinbefore, the finding by the learned Tribunal is essentially a finding of fact based on the material on record after appreciation of evidence and in our view, no question of law much less substantial question of law can be said to arise out of the order passed by the Tribunal so as to call for interference of this Court. - Decided against revenue

Summary

Issues:
Challenge to addition under section 68 of the Income Tax Act, 1961 based on unexplained cash credits.

Analysis:
The appellant-Revenue filed an instant IT appeal challenging the Tribunal's order related to the assessment year 2008-09. The respondent-assessee, engaged in construction activities, had taken unsecured loans from various individuals. The Assessing Officer (AO) raised concerns about the genuineness of these loans, particularly from three creditors. Despite submissions and statements, the AO added ?90 lakh to the income of the assessee under section 68. The CIT(A) later deleted this addition after finding that the identity, capacity, and genuineness of the creditors were established. The Tribunal upheld the CIT(A)'s decision, emphasizing that the source of the funds was duly explained.

The appellant contended that discrepancies in the statements of the creditors raised doubts about the genuineness of the transactions. It was argued that being an income-tax assessee does not automatically prove the legitimacy of credits under section 68. The High Court noted that all three creditors provided comprehensive documentation, including bank statements and IT returns, to support the transactions. The Court emphasized that once the assessee discloses the identity of the creditor, and transactions are through bank channels, the burden shifts to the AO to prove any wrongdoing.

Referring to previous judgments, the Court highlighted that suspicion alone is insufficient to treat the funds as undisclosed income. The burden on the assessee does not extend to proving the source of the creditor's funds unless it can be traced back to the assessee. In this case, the Court found that the creditors had adequately explained the source of the funds, and minor discrepancies did not undermine the credibility of the transactions. The Court concluded that the Tribunal's decision was based on factual evidence and did not warrant interference.

In light of the evidence presented and the legal principles discussed, the High Court dismissed the appeal, ruling that no substantial question of law arose from the Tribunal's order. The Court found no basis to challenge the decision, as the findings were supported by the material on record and the assessment of evidence.