2018 (11) TMI 1776 - AT - Income Tax

Unexplained cash credit u/s.68 - genuineness of the transaction - HELD THAT - All the transactions are through cheque and reflected in the bank statement, copy of account and supported by affidavit of the lendor, therefore, we are of the considered opinion that CIT(A) was not justified in confirming the such addition without allowing cross examination to rebut the averments made in the affidavit. In case of Ranchodbhai J. Natwa 2012 (5) TMI 186 - GUJARAT HIGH COURT has held that where lendors of the assessee are Income Tax Assessee s whose PAN have been disclosed to AO cannot ask assessee further prove genuineness of the transaction without first verifying such facts from Income Tax Return. Further, when the amount has been re-paid back which has been accepted by the AO, then no adverse view can be taken as held by the Hon'ble Gujarat High Court in the case of CIT vs. Ayachi 2013 (12) TMI 372 - GUJARAT HIGH COURT . In view of these facts, the addition together with interest is therefore directed to be deleted. - Decided in favour of assessee.

Summary

Issues:
Confirmation of addition of unexplained cash credit under section 68 of the Income Tax Act.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) pertaining to the assessment year 2012-13, arising from the Deputy Commissioner's order under section 143(3) of the Income Tax Act, 1961. The issue revolved around the addition of ?3,50,000 with interest on account of unexplained cash credit under section 68 of the Act. The assessee had raised an unsecured loan of ?15,10,000 from various persons and subsequently repaid it during the year. The Assessing Officer (AO) added the loan amount under section 68, stating that the loans were provided immediately after receiving equal funds and that the reasons submitted were afterthought. The prime contention was that since the amount was received through cheques, the genuineness of the loan should not be questioned. However, as the lenders were not made available, the loans were added under section 68 along with interest.

Upon appeal, the Commissioner deleted the addition in respect of three persons who appeared before the AO and filed confirmations. However, the addition in respect of one person was upheld as he denied giving the loan in his statement under section 131 of the Act. The lender did not attend the office for cross-examination but submitted an affidavit later retracting the earlier statement. The Tribunal noted that the lender had provided evidence of the transaction through cheques, bank statements, and affidavits, and the amount was repaid during the year. Citing precedents, the Tribunal held that the addition should be deleted as the lender's statements were retracted, and the genuineness of the transaction was supported by documentary evidence. The Tribunal also emphasized that when the amount had been repaid and accepted by the AO, no adverse view could be taken.

In conclusion, the Tribunal allowed the appeal, directing the deletion of the addition and interest. The decision was based on the lender's retracted statement, supported by documentary evidence, and the repayment of the loan during the year. The Tribunal highlighted the importance of verifying facts from income tax returns of lenders and the acceptance of repayment by the AO in such cases.