2014 (3) TMI 618 - AT - Income Tax

Addition u/s 68 of the Act Unexplained cash credits - Revenue was of the view that the assessee issued bearer cheque to his loan creditors and the same were deposited in the accounts of two persons who are other than the loan creditors of the assessee Held that - Nowhere AO has mentioned the fact that assessee had taken loan of Rs. 22.46 lacs during the year the FAA has given a finding of fact that the said loan amounts were taken as loan by the assessee in the earlier AYs and they were opening balances for the year under consideration - Provisions of section 68 of the Act are very clear for invoking the said section-the first and foremost condition is the credit of some amounts in the books of accounts of the assessee for a particular year - If the assessee does not offer any explanation about such credit or explanation offered by him is not satisfactory, then only AO can make additions for such cash credits - as stated by the FAA, there is no finding that assessee had taken loan of Rs. 22.46 lacs during the under appeal thus, the order of the FAA does not suffer from any legal infirmity Decided against Revenue.

Summary

Issues:
- Addition of unexplained cash credit under section 68 of the Income Tax Act.
- Assessment of genuineness of loans shown in the books of accounts.
- Consideration of loan creditors' confirmations and bank statements.
- Appeal challenging the order of the CIT(A) regarding the addition made by the Assessing Officer.

Analysis:
1. The Assessing Officer (AO) raised grounds of appeal challenging the deletion of an addition of Rs. 22,46,422 made under section 68 on account of unexplained cash credit. The AO found discrepancies in the unsecured loans shown in the books of the assessee. The AO issued notices under section 133(6) to the parties to confirm the loans. Despite responses from the parties, the AO concluded that the genuineness of the loans was not proven and made the addition to the income of the assessee.

2. The First Appellate Authority (FAA) considered the submissions of the assessee regarding the loans and directed the AO to make inquiries. The FAA noted that the loans were shown as opening balances from previous years and not taken during the year under consideration. The FAA found no evidence that the assessee had taken a loan of Rs. 22.46 lacs during the relevant year, emphasizing the conditions under section 68 for adding cash credits. The FAA dismissed the appeal of the AO based on these findings.

3. The ITAT Mumbai, in its judgment, highlighted that there was no evidence that the assessee had taken the loan in question during the year under appeal. The tribunal noted that the FAA's decision was based on factual findings that the loans were from previous years and were opening balances. The tribunal emphasized the importance of the conditions under section 68 for adding cash credits and found no legal infirmity in the FAA's order. Consequently, the appeal filed by the AO was dismissed.

In conclusion, the judgment focused on the genuineness of the loans, the conditions under section 68 for adding unexplained cash credits, and the findings of the FAA regarding the nature of the loans as opening balances from previous years. The tribunal upheld the FAA's decision, emphasizing the necessity for evidence of loans taken during the relevant year to make additions under section 68 of the Income Tax Act.