2014 (1) TMI 244 - AT - Income Tax

Unexplained cash credit - Held that - The assessee has given detailed explanation in respect of the amount received from each creditor on each and every date - The CIT(A) has found that the assessee has duly discharged the onus to prove the cash credit lying in its books of account - The assessee has explained the source of each and every amount paid by the creditor - Most of the amounts paid by the creditor were after receiving the same from Karush Auto Pvt.Ltd. and from the maturity of LIC policy except one amount which is received out of the sale consideration of the commercial property sold by Rahul Kumar Marwah - The assessee had also produced the evidences of the amount received by the creditor from M/s Karush Auto Pvt.Ltd. and also from maturity of LIC policies of the creditors - The assessee has proved the identity and creditworthiness of the creditor as well as the genuineness of the transaction - Decided against Revenue.

Summary

Issues:
1. Addition on account of unsecured loans as undisclosed income under section 68 of the Act.

Analysis:
The appeal by the Revenue challenged the order of the CIT(A) regarding the addition of unsecured loans as undisclosed income under section 68 of the Income Tax Act, 1961. The Revenue contended that the assessee failed to discharge the onus of proving the cash credit, including the identity of the creditor, creditworthiness, and genuineness of the transaction. The Assessing Officer treated the credit as unexplained, which the CIT(A) deleted. The Revenue argued for the restoration of the Assessing Officer's order.

The assessee, on the other hand, claimed to have produced confirmations of all creditors to the Assessing Officer and provided explanations supported by evidence regarding the availability of funds with each creditor. The CIT(A) deleted the addition after considering the explanations and evidence submitted by the assessee, which were not controverted by the Assessing Officer in two remand reports. The assessee maintained that the onus was discharged before both the Assessing Officer and the CIT(A).

Upon review, the Tribunal found that the assessee had indeed provided detailed explanations and supporting evidence for each amount received from the creditors. The CIT(A) had called for remand reports and subsequently deleted the addition after verifying the explanations and evidence. The Tribunal noted that the assessee had demonstrated the creditworthiness and genuineness of the lenders, with the creditors being assessed to tax and the sources of funds being explained. Despite the Revenue's argument regarding the onus of proof, the Tribunal upheld the CIT(A)'s decision, as the assessee had sufficiently proven the legitimacy of the transactions.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s order to delete the addition of unsecured loans as undisclosed income. The Tribunal found no reason to interfere with the CIT(A)'s decision, considering the evidence provided by the assessee and the lack of contradiction by the Assessing Officer in the remand reports.

This judgment highlights the importance of substantiating cash credits and the onus on the assessee to prove the identity, creditworthiness, and genuineness of transactions, as stipulated under section 68 of the Income Tax Act, 1961.