2014 (2) TMI 1330 - AT - Income Tax

Unexplained cash entry made in its books of account u/s 69 - Held that - AO in the previous year could not catch the wrongs done by the assessee with the motive to evade tax but it does not mean that if in the previous year, one wrong is continuously coming from the financial year 2001-02 as in the case of the assessee, and at one stage if the Assessing Officer doubted there is evasion of tax, then he/she can call the explanation of the assessee for the assessment year in his/her hand. Nothing is wrong, if the Assessing Officer stop to continue the wrongs committed by the assessee to watch the interest of the Revenue and the negligence of the previous Assessing Officer should not be continued and should be stopped at one stage as has been stopped by the AO in the present case. In our considered view, learned first appellate authority has wrongly deleted the addition without appreciating the facts of the case on hand. Addition u/s 69C - Held that - The unsecured loan of ₹ 18,30,000/- shown by the assessee in its balance sheet from some Sh. Ghlam Nabi for the financial year 2005-06 which the assessee has stated to be repaid during the financial year 2006-07 and no credit balance was shown against Sh. Ghulam Nabi for the financial year ending on 31.03.2007. For lack of documentary evidence establishing the identity of Sh. Ghulam Nabi, we hold that the assessee has shown this bogus liability with the intention to evade the tax and has introduced its own money in the books in the garb of unsecured loan. - Decided in favour of revenue

Summary

Issues Involved:
1. Deletion of addition of Rs. 15,00,000/- {actually Rs. 1,50,00,000/-} under Section 68 of the Income Tax Act, 1961.
2. Deletion of addition of Rs. 18,30,000/- under Section 69C of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Deletion of Addition of Rs. 15,00,000/- {actually Rs. 1,50,00,000/-} under Section 68 of the Income Tax Act, 1961

Facts and Arguments:
The assessee had an outstanding unsecured loan of Rs. 1,50,00,000 from M/s Himachal Futuristic Communications Ltd. since the financial year 2001-02. The Assessing Officer (AO) questioned the genuineness of this loan, noting the lack of business transactions and interest payments between the assessee and the lender. The AO added this amount to the assessee's income under Section 68, citing the failure to provide satisfactory explanations and documentary evidence.

Findings:
The tribunal noted that the AO was justified in questioning the loan due to the absence of business transactions and interest payments. The assessee's explanation of "friendly relations" and "liquidity crunch" was deemed baseless and unsupported by evidence. The tribunal emphasized that the onus was on the assessee to prove the identity, creditworthiness, and genuineness of the transaction, which the assessee failed to do. The first appellate authority's decision to delete the addition was found contrary to law and facts, and thus, the tribunal upheld the AO's addition of Rs. 15,00,000 under Section 68.

Conclusion:
The tribunal concluded that the AO was correct in adding Rs. 15,00,000 as unexplained cash credit under Section 68, and the deletion by the first appellate authority was erroneous. The tribunal upheld the AO's order on this issue.

Issue 2: Deletion of Addition of Rs. 18,30,000/- under Section 69C of the Income Tax Act, 1961

Facts and Arguments:
The assessee had declared an unsecured loan of Rs. 18,30,000 from an individual named Ghulam Nabi for the financial year 2005-06, which was allegedly repaid in the financial year 2006-07. The AO found this liability to be bogus, as the assessee failed to establish the identity of Ghulam Nabi or provide any documentary evidence of the repayment. Consequently, the AO added this amount under Section 69C as unexplained expenditure.

Findings:
The tribunal observed that the assessee did not provide any evidence to substantiate the loan or its repayment, nor did it produce Ghulam Nabi for verification. The tribunal found the first appellate authority's decision to delete the addition to be based on assumptions and lacking documentary support. It was concluded that the unsecured loan was a bogus liability introduced by the assessee to evade tax.

Conclusion:
The tribunal held that the AO was justified in treating Rs. 18,30,000 as unexplained expenditure under Section 69C, and the deletion by the first appellate authority was incorrect. The tribunal upheld the AO's order on this issue as well.

Final Judgment:
The tribunal upheld the AO's assessment order dated 18.09.2009, allowing the Revenue's appeal and canceling the first appellate authority's order dated 28.09.2010. The additions of Rs. 15,00,000 under Section 68 and Rs. 18,30,000 under Section 69C were reinstated. The appeal filed by the Revenue was allowed.