2015 (6) TMI 711 - AT - Income Tax

Unexplained cash credits u/s.68 - unsecured loans - Held that - The Revenue strongly refers to the Assessing Officer s findings. However, we tend to disagree with the same. The creditors bank statements maintained with the United Bank of India bearing no. 0521010049760 and 49757 duly proved these loan payments as well as repayments thereof. For instance, the assessee obtained sums of ₹ 4 lacs, ₹ 1 lac and ₹ 2,90,000/- on 27, 28 & 29th March, 2006; respectively. Thereafter, it transferred sums of ₹ 4 lacs and ₹ 3,90,000/- by the very banking channel in the account of Shri Meena/individual. Similarly, the HUF s bank statement reveals the assessee to have obtained a sum of ₹ 4 lacs on 28.3.2006 and repaid the same on 28.6.2006. The Revenue is unable to controvert this factual position. It refers to the common address of the assessee as well as that of Shri Meena (supra). There is no quarrel about the same. However, the fact also remains that there can be any number of assessees under a single roof. This itself cannot be a ground to invoke section 68 of the Act in absence other corroborative factors. Be that as it may, once creditors identity, mode of payment and repayment, assessee s books of accounts proved the impugned credit transactions, we do not find appropriate to look through the circumstances. The hon ble jurisdictional high court in Pratapbhai Virjibhai Patel vs. ITO 2014 (3) TMI 152 - GUJARAT HIGH COURT has upheld a co-ordinates bench order in ITO vs. Counter force 2010 (7) TMI 831 - ITAT AHMEDABAD deleting a similar addition on the basis of repayment of the impugned credits and supportive ledger account. We reiterate that facts of the present case also do not seem different than those decided by their lordships. Thus when there is no dispute about identity of the creditors, their pan cards, copy of income tax returns, balance sheet, profit and loss accounts are on record along with their cross objections, such an addition does not hold ground. Thus we delete the impugned addition of unexplained cash credit u/s.68 amounting to ₹ 11,90,000/. - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of unsecured loans as unexplained cash credits under Section 68 of the Income Tax Act.

Detailed Analysis:

1. Addition of Unsecured Loans as Unexplained Cash Credits under Section 68:

Background:
The assessee, a firm trading in textile items, appealed against the order of CIT(A)-II, Surat, which upheld the addition of Rs. 11,90,000 as unexplained cash credits under Section 68 of the Income Tax Act for the Assessment Year 2006-07. The loans were obtained from Shri Kailash Chandra Meena in his individual capacity and as an HUF.

Assessing Officer's Findings:
The Assessing Officer (AO) sought to verify the identity, genuineness, and creditworthiness of the loans. Upon issuing a Section 131 notice, the creditor confirmed the loans. However, the AO identified inconsistencies in the creditor's deposition regarding the source and nature of the funds, the acquisition of the cash amount, and the fact that the creditor's address was the same as the assessee's. The AO also noted that the bank account of the creditor was introduced by the manager and son of the assessee firm's partner. Based on these discrepancies, the AO concluded that the creditor's returns were prima facie bogus and treated the deposits as unexplained cash credits under Section 68.

CIT(A)'s Observations:
The CIT(A) upheld the AO's findings, emphasizing several critical points:
- The loans were shown to have been taken from Shri Kailash Chandra Meena (individual and HUF) with bank accounts opened at the end of the financial year and sums deposited and issued as loans to the assessee.
- The creditor's income returns and capital balances were shown without supporting documents, and his statement under oath contradicted the returns.
- The creditor's confusion about the source and handling of the funds, and the involvement of the assessee's manager in opening bank accounts and issuing cheques, indicated a lack of genuine transactions.
- The CIT(A) concluded that the creditor lacked the creditworthiness to give the loans and that the assessee's claim was bogus, justifying the addition under Section 68.

Tribunal's Analysis:
The Tribunal reviewed the assessment order, lower appellate order, and the assessee's written submission along with supporting documents. Key observations included:
- The amount in question was credited through cheque transfers, and there was no dispute about the identity of the creditors.
- The creditors' bank statements and the assessee's books of accounts corroborated the loan payments and repayments.
- The Tribunal disagreed with the Revenue's findings, noting that the creditors' identity, mode of payment and repayment, and the assessee's books of accounts proved the credit transactions.
- The Tribunal referred to case laws, including the jurisdictional High Court's decision in Pratapbhai Virjibhai Patel vs. ITO, which supported the deletion of similar additions based on repayment of credits and supportive ledger accounts.

Conclusion:
The Tribunal concluded that the facts of the present case were similar to those in the cited case laws, where the identity of the creditors, their PAN cards, income tax returns, balance sheets, and profit and loss accounts were on record. Thus, the addition of Rs. 11,90,000 as unexplained cash credits under Section 68 was deleted, and the assessee's appeal was allowed.

Order:
The assessee's appeal was allowed, and the order was pronounced on 9th June 2015 at Ahmedabad.