2014 (8) TMI 758 - AT - Income Tax

Addition of credit balance u/s 68 - Genuineness of transactions Held that - The AO was of the view that there are certain contradictions between the statement of the assessee and that of the creditors and the creditor has not proved the credit-worthiness of the person from whom he has borrowed the funds - assessee has demonstrated that the amount was repaid in cash, and another amount was paid through M/s. Sunil Castings Ltd. through M/s. Maheswari Brothers - From the relevant account copies from the books of M/s. Sunil Castings Ltd., and that of M/.s Maheswari Brothers, it could be find out that the assessee has stated the facts correctly. Non-appearance of ₹ 4,50,000 Assessee claimed that it has been paid by cheque trough IOB Held that - The payment has been made to M/s. Singareni Collieries on behalf of M/s. Nasreen Old Iron Traders - the person who has advanced the money, namely, Shri Jani Miya, is a man of substance, as he has bid for a tender of ₹ 8 crores, and is having a OD limit of ₹ 20 lakhs - his creditworthiness is beyond doubt - as far as the assessee is concerned, the source for the credit has been established, by discharging the onus of proving the identity of the creditor, his credit worthiness and also the genuineness of the transaction - there is no justification for any addition in the hands of the assessee, and if at all, any addition is warranted, that has to be examined in the hands of the creditor of the assessee, viz. Shri Jani Miya - Decided against Revenue.

Summary

Issues:
1. Addition of Rs. 41,76,000 as credit balance outstanding under S.68 of the Act.
2. Dispute over the genuineness of transactions claimed by the assessee.

Analysis:
1. The Revenue appealed against the CIT(A)'s order deleting the addition of Rs. 41,76,000 as credit balance outstanding in the name of M/s. Nasreen Old Iron Traders, Khammam, under S.68 of the Act. The Assessing Officer disbelieved the genuineness of the transactions claimed by the assessee, leading to the addition. The assessee, engaged in trading, filed returns for the assessment year 2005-06, with the dispute arising from transactions with M/s. Nasreen Old Iron Traders. The CIT(A) deleted the addition after considering additional evidence and a remand report from the Assessing Officer, leading to the Revenue's appeal.

2. The Assessing Officer raised concerns regarding contradictions in statements, non-appearance of credited amounts in bank accounts, and the source of funds. The assessee provided evidence showing repayment through different channels, including a sister concern, M/s. Sunil Castings Ltd., and transactions with M/s. Maheswari Brothers. The CIT(A) found the assessee's explanations satisfactory, highlighting the creditor's creditworthiness and bid for significant tenders. The tribunal concluded that the assessee met the burden of proving the transaction's genuineness and the creditor's creditworthiness. The tribunal rejected the Revenue's appeal, emphasizing the lack of justification for the addition in the assessee's hands.

In conclusion, the tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the addition of Rs. 41,76,000. The judgment focused on establishing the genuineness of transactions and the creditor's creditworthiness, ultimately ruling in favor of the assessee based on the evidence presented.