2016 (6) TMI 1411 - HC - Income Tax

Addition u/s 68 - CIT(A) discussed each and every cash credit entry and found the advances by 13 creditors as genuine and accordingly restricted the addition made on account of unexplained cash credit - appeal preferred by the Revenue against the order passed by the CIT(A) stands dismissed by the ITAT - HELD THAT - CIT(A) discussed the creditworthiness and genuineness of each and every individual transaction and found 13 creditors as genuine - ITAT has arrived at the finding that the assessee has established the creditworthiness of the creditors to the extent he is obliged under the law to do so. ITAT found that the creditors have accepted that they had advanced their respective credits to the assessee and also given the details of the sources of the deposit. ITAT opined that the assessee cannot be burdened with proof of 'source of source' and the cash credit cannot be held to be ingenuine by stretching the ingredients of Section 68 too far. We are of the considered opinion that the findings arrived at by the CIT(A), affirmed by the ITAT regarding identity of the creditors and creditworthiness and genuineness of the transactions remain findings of facts, which do not give rise to any substantial question of law. - Decided against revenue.

Summary

Issues:
Appeal against ITAT order deleting addition under Section 68 of the Income Tax Act for assessment year 2006-07.

Analysis:
1. The appeal was filed against the ITAT order dismissing the Revenue's appeal against the CIT(A) order deleting the addition of ?1,81,46,869 made by the AO under Section 68 of the Income Tax Act for the assessment year 2006-07.
2. The assessee, engaged in business, declared total income of ?32,93,790 for the assessment year 2006-07. The AO found cash credits in the books during 2005-06 as bogus advances and added them back under Section 68. The CIT(A) found 13 creditors' advances genuine, restricting the addition to ?13,39,750. The ITAT dismissed the Revenue's appeal against the CIT(A)'s order.
3. The appellant contended that the ITAT erred in not discussing the grounds disproving the creditors' creditworthiness. The appellant argued that while identity was proven, creditworthiness and genuineness were not. The ITAT confirmed the CIT(A)'s order based on the creditors' acceptance of advancing credits and providing deposit sources.
4. The CIT(A) discussed each transaction's creditworthiness and genuineness, finding 13 creditors genuine. The ITAT held that the assessee met the required creditworthiness proof. The ITAT opined that the assessee shouldn't prove 'source of source,' and stretching Section 68's requirements too far would not render the cash credits ingenuine.
5. The High Court upheld the findings of the CIT(A) and ITAT regarding the identity, creditworthiness, and genuineness of the transactions as factual, concluding that no substantial question of law arose. The appeal was dismissed.