2012 (8) TMI 387 - AT - Income Tax

Unexplained cash credit assessee obtained loans from parties by means of cheques - AO had accepted part of the loans - AO not only accepted the identity and genuineness of the creditors but also the creditworthiness of the creditors - he chose to disallow a part of the loan without bringing on record any material to show that the assessee had any other source of income which could have been routed in the from of loan given by a third party Held that - Creditors have explained the source of their deposits which in effect means that the sources were explained by the creditors. The AO has not pointed out how the explanation is not convincing and merely proceeded to invoke provisions of section 68 of the Act, that too for a part of the loan - initial onus placed upon the assessee stood discharged - appeal of the assessee is allowed

Issues Involved:
1. Addition of Rs. 3,30,000 under section 68 of the IT Act, 1961.
2. Justification of the addition of Rs. 2,00,000 deposited by Sri Diwas Gupta as unexplained cash credit.
3. Justification of the addition of Rs. 1,30,000 deposited by Smt. Ruchira Gupta as unexplained cash credit.
4. Opportunity provided to the appellant to comply with the reasons for the proposed additions.
5. Excessive income assessment and interest charged.
6. Permission to modify or add grounds of appeal.

Detailed Analysis:

1. Addition of Rs. 3,30,000 under section 68 of the IT Act, 1961:
The assessee's appeal contested the addition of Rs. 3,30,000 made by the Assessing Officer (A.O.) under section 68 of the IT Act, 1961, which was sustained by the CIT(A). The amount consisted of Rs. 2,00,000 from Sri Diwas Gupta and Rs. 1,30,000 from Smt. Ruchira Gupta. The A.O. questioned the creditworthiness of the loan creditors despite their confirmations and documentary evidence provided by the assessee. The Tribunal, upon examining the records, found no infirmity in the CIT(A)'s order and dismissed the appeal. However, the Accountant Member dissented, finding that the assessee had discharged the onus of proving the identity, genuineness, and creditworthiness of the creditors.

2. Justification of the addition of Rs. 2,00,000 deposited by Sri Diwas Gupta as unexplained cash credit:
The assessee provided confirmation from Sri Diwas Gupta, who had given a loan of Rs. 3,50,000 via cheque, along with his bank statement, PAN details, and income tax return acknowledgment. Sri Diwas Gupta appeared before the A.O. and confirmed the loan on oath. Despite this, the A.O. accepted only Rs. 1,50,000 of the loan and added Rs. 2,00,000 as unexplained cash credit, doubting the sufficiency of Sri Diwas Gupta's cash availability. The Accountant Member found that the A.O. ventured into the source of the source, which was not required, and the assessee had sufficiently discharged the onus under section 68.

3. Justification of the addition of Rs. 1,30,000 deposited by Smt. Ruchira Gupta as unexplained cash credit:
Similarly, the assessee provided confirmation from Smt. Ruchira Gupta, who had given a loan of Rs. 1,80,000 via cheque, along with her bank statement, PAN details, and income tax return acknowledgment. Her husband confirmed the loan on oath. The A.O. accepted Rs. 50,000 of the loan and added Rs. 1,30,000 as unexplained cash credit, doubting the sufficiency of the cash deposits. The Accountant Member again found that the A.O. ventured into the source of the source and the assessee had sufficiently discharged the onus under section 68.

4. Opportunity provided to the appellant to comply with the reasons for the proposed additions:
The appellant argued that after submitting the necessary documents and statements on oath, no further proper opportunity was provided to comply with the reasons for the proposed additions. The Tribunal found that the assessee was given adequate opportunity to present evidence and that the A.O. had considered the materials submitted before making the additions.

5. Excessive income assessment and interest charged:
The appellant contended that the income assessed and interest charged were highly excessive and contrary to the facts, law, and principles of natural justice. The Tribunal, however, upheld the CIT(A)'s order, finding no infirmity in the assessment process.

6. Permission to modify or add grounds of appeal:
The appellant prayed for permission to modify and/or add any other ground or grounds of appeal as the circumstances might require. The Tribunal did not find it necessary to address this issue separately, given the dismissal of the appeal.

Conclusion:
The majority view of the Tribunal, as per the Third Member, concluded that the assessee had discharged the onus of proving the identity, genuineness, and creditworthiness of the loan creditors. The addition of Rs. 3,30,000 under section 68 was deleted, and the appeal of the assessee was allowed.

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