2015 (7) TMI 835 - AT - Income Tax

Unexplained cash credit - addition u/s 68 - Held that - The creditors given loans to the assessees through Demand Draft and the assessees furnished the details of the same alongwith confirmation letter and also explained mode of transaction, which is through banking channel and also repaid the said loan through banking channel. Considering these facts, in our opinion the assessee herein had discharged their onus placed on them. The fact that credit entry shown in the name of a person other than the actual lender of the money would not by itself, be relevant where cogent evidence is independently available. Once the existence of the creditors is proved and such person owed the credits which are found in the books of accounts of the assessees, the onus stand discharged and the assessee is not further required to prove the source of income from which the creditors would have acquired the money and, therefore, addition u/s.68 cannot be sustained in the absence of anything to establish that source of creditors deposit, flew from the assessee itself. In our opinion, creditor having appeared before the Assessing Officer in response to the summons issued u/s.131 of the Act before the Assessing Officer and confirmed by filing of confirmation letter, the transaction cannot be doubted. The assessee discharged onus placed upon them by establishing the identity of the creditor, his credit worthiness, genuineness of the transaction. Being so, in our opinion the addition made in this case u/s.68 is unwarranted. The same is deleted. - Decided in favour of assessee.

Summary

Issues Involved:
1. Unexplained cash credit under Section 68 of the Income Tax Act, 1961.
2. Genuineness of the loan transactions.
3. Creditworthiness of the creditor.

Issue-wise Detailed Analysis:

1. Unexplained Cash Credit under Section 68 of the Income Tax Act, 1961:
The primary issue in both appeals was whether the sums of Rs. 43,90,000/- and Rs. 44,00,000/- received by the assessees from Shri. R. Balasubramanian could be treated as unexplained cash credits under Section 68 of the Income Tax Act, 1961. The Assessing Officer (AO) added these amounts to the income of the assessees, citing the lack of credible evidence regarding the identity, creditworthiness, and genuineness of the transactions. The Commissioner of Income Tax (Appeals) upheld the AO's decision, leading to the present appeals.

2. Genuineness of the Loan Transactions:
The assessees contended that the loans were genuine and provided confirmation letters from Shri. R. Balasubramanian. They argued that the loans were received through banking channels and were repaid via crossed demand drafts, thus proving the genuineness of the transactions. The AO, however, doubted the genuineness due to inconsistencies in Shri. R. Balasubramanian's statements and his financial status. Despite the confirmation letters and the fact that the loans were routed through banking channels, the AO and the Commissioner of Income Tax (Appeals) were not convinced of the transaction's authenticity.

3. Creditworthiness of the Creditor:
The AO questioned the creditworthiness of Shri. R. Balasubramanian, noting that he was a salaried employee earning Rs. 15,000/- per month, with no bank account or significant assets. The AO found it improbable that such an individual could lend substantial amounts to the assessees. Furthermore, Shri. Balasubramanian's statements during the assessment proceedings did not support the claim that he had the financial capacity to extend such loans. The assessees argued that the loans were sourced from Mahalakshmi Estates, a real estate firm, which had confirmed the loan transaction. They provided the firm's PAN and other details to substantiate their claim.

Tribunal's Findings:
The Tribunal evaluated the evidence and arguments presented by both parties. It noted that the assessees had provided confirmation letters, details of the banking transactions, and evidence of loan repayment through banking channels. The Tribunal emphasized that the assessees had discharged their onus by proving the identity of the creditor, the genuineness of the transactions, and the creditworthiness of the creditor through the confirmation from Mahalakshmi Estates.

The Tribunal referred to the Supreme Court's decision in CIT vs. Orissa Corporation P. Ltd (159 ITR 78), which held that once the existence of the creditors is proved, the onus shifts to the Revenue to disprove the creditors' capacity to advance the loan. In this case, the Tribunal concluded that the assessees had sufficiently discharged their burden, and the AO's doubts were not substantiated by concrete evidence.

Conclusion:
The Tribunal held that the additions made under Section 68 were unwarranted and deleted them. It allowed the appeals of both assessees, concluding that the transactions were genuine and the creditors' creditworthiness was adequately demonstrated.

Order:
The appeals in ITA Nos. 2314/13 and 2315/13 were allowed, and the additions made by the AO under Section 68 were deleted. The order was pronounced on 19.6.2015.