2018 (6) TMI 1706 - HC - Income Tax

Unexplained cash credit - addition made towards unsecured loans / gifts - tribunal confirmed addition - HELD THAT - Assessee failed to prove the capacity of the concerned persons who alleged to have given the unsecured loan and/or gift, it cannot be said that the learned Tribunal has committed any error in confirming the additions made by the AO and confirmed by the CIT (Appeals) as unsecured cash credit. So far as submission on behalf of the assessee that all the concerned persons gave their confirmation, the aforesaid confirmations are neither here or there. These confirmations are required to be decided and/or considered along with the capacity / financial capacity of the concerned persons. Mere confirmation alone is not sufficient. In a given case, it may happen that a labourer may give a confirmation of ₹ 1 Crore, but ultimately the same is to be decided or considered, considering his paying capacity. Thus it cannot be said that the Tribunal has committed any error. No substantial question of law

Summary

Issues:
Challenge to the dismissal of appeal by the Income Tax Appellate Tribunal regarding addition of unexplained cash credit.

Analysis:
The judgment pertains to an appeal filed against the decision of the Income Tax Appellate Tribunal regarding the addition of unexplained cash credit of ?18,26,730 for the Assessment Year 2006-2007. The case was reopened based on information received about deposits in the assessee's bank account. Despite various notices and opportunities, the assessee did not provide the required details. Consequently, the Assessing Officer made an addition of ?18,49,305 as unexplained cash credit.

The assessee's appeal before the CIT (Appeals) and the Tribunal was unsuccessful. The Tribunal observed that the assessee had shown receipts of ?19,92,730 as unsecured loans or gifts from various individuals. However, doubts were raised about the capacity of these individuals to provide such loans or gifts. The Tribunal highlighted discrepancies in the evidence provided by the assessee, questioning the capacity and credibility of the donors.

The Tribunal emphasized that mere confirmations from the donors were not sufficient to establish the legitimacy of the transactions. It was noted that the capacity and financial standing of the donors needed to be considered alongside their confirmations. The Tribunal scrutinized the evidence presented by the assessee, including statements from the donors, and concluded that the assessee had failed to prove the capacity of the individuals providing the unsecured loans or gifts.

Ultimately, the Tribunal held that there was no error in confirming the additions made by the Assessing Officer and CIT (Appeals) as unsecured cash credit. The Tribunal dismissed the appeal, stating that no substantial question of law arose in the case. Therefore, the appeal was dismissed based on the failure to establish the capacity and credibility of the individuals providing the unsecured loans or gifts.

In conclusion, the judgment underscores the importance of substantiating transactions with concrete evidence and demonstrating the financial capacity of parties involved in providing unsecured loans or gifts to avoid additions of unexplained cash credits.