2010 (8) TMI 1106 - AT - Income Tax

Summary

Issues involved:
The judgment deals with the deletion of an addition of undisclosed cash credit u/s. 68 of the Income Tax Act by the Ld. CIT(A) for assessment year 2006-07, which was challenged by the revenue before the Appellate Tribunal ITAT Kolkata.

Details of the Judgment:

1. Background and AO's Findings:
The AO found that the assessee had taken loans from friends and relatives, with an outstanding amount of &8377; 16,25,961 at the end of the year. The AO observed that just before issuing the loan cheques, equivalent amounts were deposited in the creditors' bank accounts. Consequently, the AO concluded that the loans represented the assessee's money routed through the creditors, adding the amount u/s 68 of the IT Act.

2. Revenue's Contention:
During the appeal, the Ld. DR argued that the loans were unexplained money introduced by the assessee, as the creditors lacked creditworthiness, and the funds were sourced from their bank deposits. The Ld. DR urged the bench to set aside the CIT(A)'s order and reinstate the AO's decision.

3. Assessee's Defense:
The assessee's counsel presented various documents to establish the creditworthiness and genuineness of the creditors, including I.T. returns, balance sheets, and bank statements. It was argued that the creditors' funds were from legitimate sources, such as loans received from other entities and personal accounts. The assessee contended that the burden of proof had been met, citing relevant case law.

4. CIT(A)'s Decision:
The Ld. CIT(A) thoroughly examined the submissions and documents provided by the assessee. After seeking a report from the AO, the CIT(A) found that the loans were adequately explained, with funds sourced from legitimate channels. The CIT(A) directed the deletion of the addition, noting that the assessee had fulfilled the requirements of section 68 of the IT Act.

5. Tribunal's Verdict:
After considering the arguments and documents, the Tribunal upheld the CIT(A)'s decision, as the revenue did not challenge the findings during the hearing. The appeal of the revenue was dismissed, affirming the deletion of the cash credit addition.

In conclusion, the Tribunal upheld the CIT(A)'s order, dismissing the revenue's appeal and confirming the deletion of the undisclosed cash credit addition.