2015 (2) TMI 935 - AT - Income Tax

Unaccounted cash credit - addition u/s 68 made by observing that commodity profit earned by eight family members is income from undisclosed sources of the assessee - Held that - When loans have been taken from the family members and which have been routed through bank by most of such family members, they cannot be added as cash credits unless it is found as a fact that such bank accounts are benami of the assessee. In case before us, it cannot be alleged that bank account of various family members are benami of the assessee because loans have been taken from such family members for last many years and which have been shown as opening balance and have been accepted by the Department. We would like to point out that it was strongly contended by the ld. counsel of the assessee that similar profits were received by the same family members in the earlier years, therefore, even in this year without pointing out any defect in such amounts or without recording the finding of such profit was bogus, same could not have been addedto the income of the assessee. Thus additions deleted - Decided in favour of assessee. Unaccounted loan - CIT(A) confirmed addition on amount received from Shri Vijay Kumar s/o of the Proprietor, despite confirmation and source of source of Shri Vijay Kumar explained during the course of assessment - Held that - Burden casted on the assessee to prove the identity of creditor, genuineness of the transaction and credit worthiness of the person giving loan, is proved then such loans should have been accepted. Therefore, the addition is not justified and accordingly we set aside the order of the ld. CIT(A) and delete the addition. - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of Rs. 17,21,100/- in respect of loans from family members.
2. Addition of Rs. 24 lakhs on account of amount received from Shri Vijay Kumar.

Issue-wise Detailed Analysis:

1. Addition of Rs. 17,21,100/- in respect of loans from family members:

The assessee had shown various loans amounting to Rs. 1,40,50,668/- from friends and relatives, out of which Rs. 17,21,100/- were received during the year from family members. The Assessing Officer (AO) found these loans suspicious, alleging that the profits from commodity trading accounts opened in the names of these family members were not genuine. The AO observed that the accounts were opened and closed simultaneously, and the profits were received in equal installments. The AO concluded that the profits belonged to the assessee and added Rs. 17,21,100/- as income from undisclosed sources.

On appeal, the assessee reiterated that the loans were genuine, supported by copies of accounts, income tax returns, bank statements, and commodity trading profits. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's findings. However, the Income Tax Appellate Tribunal (ITAT) found that the AO did not doubt the genuineness of the commodity profits and that the loans were supported by sufficient evidence, including confirmations and bank statements. The ITAT noted that the AO failed to prove that the family members were benami of the assessee and that similar profits were accepted in previous years. Therefore, the ITAT concluded that the addition of Rs. 17,21,100/- was not justified and deleted the addition.

2. Addition of Rs. 24 lakhs on account of amount received from Shri Vijay Kumar:

The assessee received Rs. 24 lakhs from Shri Vijay Kumar, who in turn had taken a loan from Shri Subhash Kinger. The AO doubted the creditworthiness of Shri Subhash Kinger, noting inconsistencies in his statement and his small means. The AO added Rs. 24 lakhs to the assessee's income, concluding that the transaction was a sham.

The CIT(A) upheld the AO's addition, noting that the AO had reopened the assessment of Shri Vijay Kumar and found the transaction not genuine. Before the ITAT, the assessee provided evidence including confirmations, affidavits, bank statements, and details of the source of funds. The ITAT found that the loan from Shri Subhash Kinger was genuine, supported by sufficient documentation and that the AO's objections were minor and did not affect the overall credibility of the transaction. The ITAT concluded that the addition of Rs. 24 lakhs was not justified and deleted the addition.

Conclusion:

The ITAT allowed the appeal of the assessee, deleting both additions of Rs. 17,21,100/- and Rs. 24 lakhs, finding that the AO's conclusions were not supported by sufficient evidence and that the transactions were genuine and adequately documented.