2012 (11) TMI 836 - AT - Income Tax

Addition under section 68 of the income tax act Held that - Loans which are not explainable, can be treated as income of the appellant assessee submitted that loan creditors are minors and it was only the guardians, who could explain entries in the bank statement - AO, after examining the guardians of the minor children from whom the assessee stated to have been received the impugned loans, found that the said ladies could not explain the sources of cash deposits of Rs. 1,20,000/- in the bank account - AO treated the said amounts as unexplained and made addition of the same u/s 68 of the Act. We find no infirmity in the order of the CIT(A) in confirming the addition made by the AO and the same is hereby upheld in favor of revenue

Summary

Issues:
1. Addition of Rs. 1,70,000/- under section 68 of the Income Tax Act for unexplained cash credit.

Analysis:
The appeal was filed against the order of the CIT(A)-9, Mumbai, for the assessment year 2001-02, specifically challenging the addition of Rs. 1,70,000/-. The Assessing Officer (AO) did not accept the genuineness of loans from minors, leading to the addition. The assessee provided confirmations and bank statements, but the AO issued summons which were not complied with. The Tribunal set aside the CIT(A)'s order and directed the AO to examine the guardians of the minors. Subsequently, statements of the guardians were recorded. The AO treated the unexplained cash credits as the assessee's income from undisclosed sources under section 68. The CIT(A) upheld this action, emphasizing the inability to explain the source of cash deposits. The Tribunal affirmed the addition, noting the failure to produce guardians and the lack of explanation for cash deposits.

The assessee argued for cross-examination of the guardians, but the AO proceeded based on recorded statements. The CIT(A) upheld the addition, stating that only unexplainable loans could be treated as income. The AO found the guardians unaware of the transactions and deposits, justifying the addition. The Tribunal dismissed the appeal, citing the failure to produce guardians and explain cash deposits. The grounds of appeal were therefore rejected, and the appeal was dismissed.

In conclusion, the Tribunal upheld the addition of Rs. 1,70,000/- under section 68 of the Income Tax Act due to unexplained cash credits. The failure to produce guardians and explain cash deposits led to the confirmation of the addition by the CIT(A) and subsequent dismissal of the appeal by the Tribunal.