2014 (12) TMI 395 - HC - Income Tax

Deletion of unexplained credits u/s 69 genuineness of the transaction proved by assessee - Held that - The Tribunal was rightly of the view that the loans were given to the assessee through cheques and all the creditors have confirmed by appearing before the Additional CIT (Investigation) stating that they had advanced loans mentioned against their names to the assessee-company - the identity of the creditors could not be disputed - The only difficulty appears to be that some of them do not have PAN numbers, but that by itself should not be a reason to discredit their creditworthiness - all the creditors are agriculturists and they do not require any filing of returns of income and that is the reason they did not have PAN number - The Tribunal considered the minute details that were gone into by the CIT(A) and the explanation given by the assessee company that the entire loan amount was a genuine transaction - assessee had given plausible explanation for having taken a loan for a sum of ₹ 37.00 lakhs, for which, the assessee had produced evidences to prove the creditworthiness and genuineness of the transaction - the assessee had fulfilled the requirements u/s 68 as such no substantial question of law arises for consideration Decided against revenue.

Summary

Issues:
1. Deletion of additions made towards unexplained credits under Section 68 of the Act.
2. Deletion of addition made under Section 68 when some creditors denied advancing loans.
3. Perversity of findings rendered by the Tribunal based on the test of human probabilities.

Issue 1: Deletion of additions under Section 68:
The case involved the appellant challenging the deletion of additions made towards unexplained credits under Section 68 of the Income Tax Act by the Income Tax Appellate Tribunal. The appellant argued that the Tribunal erred in deleting the additions despite subjective satisfaction of the Assessing Officer and the available evidence. The Tribunal concluded that all creditors, who were agriculturists, confirmed advancing loans through cheques. The Tribunal emphasized that the absence of PAN numbers should not discredit their creditworthiness. The Commissioner of Income Tax (Appeals) also supported the evidence provided by the assessee, leading to the Tribunal dismissing the appeal, stating that the loans were genuine transactions and the creditworthiness of the creditors was established.

Issue 2: Deletion of addition when some creditors denied advancing loans:
The second issue revolved around the deletion of additions made under Section 68 despite some creditors denying advancing loans to the assessee and others not proving their creditworthiness satisfactorily. The Assessing Officer had made an addition of Rs. 37.00 lakhs under Section 68 due to unsatisfactory replies from the assessee. However, the Commissioner of Income Tax (Appeals) admitted the evidence produced by the assessee under Rule 46A and found that all requirements of Section 68 were fulfilled. The Tribunal concurred, stating that the creditors' identity, creditworthiness, and the genuineness of the transactions were proven, especially since the loans were given through cheques.

Issue 3: Perversity of findings by the Tribunal:
The final issue questioned the perversity of the Tribunal's findings, citing the test of human probabilities as applied by the Supreme Court. The Tribunal's decision was challenged as being illegal and against the test of human probabilities. However, the High Court found that the issue was a pure question of fact, and no substantial question of law arose for consideration. The Court confirmed the Tribunal's order, dismissing the Tax Case (Appeal) and stating that no costs were applicable.

In conclusion, the High Court upheld the Tribunal's decision to delete the additions made under Section 68, emphasizing the credibility of the evidence provided by the assessee and the confirmation of loans by the creditors. The Court found no substantial question of law in the appeal, thereby confirming the Tribunal's order and dismissing the Tax Case (Appeal).