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2019 (12) TMI 1633 - AT - Income TaxUnexplained cash credits u/s 68 - undisclosed loan taken - creditworthiness of share applicants not proved - HELD THAT - As come on record that the learned coordinate bench has already applied its mind in assessee s appeal 2019 (9) TMI 146 - ITAT KOLKATA whilst deleting the impugned addition in case of the very parties by holding that it had proved identity, creditworthiness and genuineness of all four related parties (supra). We therefore adopt the above detailed reasoning mutatis mutandis and affirm the CIT(A) s findings under challenge deleting the balance addition in issue. Revenue s appeal is dismissed.
Issues Involved:
1. Treatment of loans as unexplained cash credits under Section 68 of the Income Tax Act, 1961. Detailed Analysis: Issue 1: Treatment of Loans as Unexplained Cash Credits under Section 68 Background: The Revenue appealed against the Commissioner of Income Tax (Appeals) [CIT(A)]'s order, which partially reversed the Assessing Officer (AO)'s decision to treat the assessee's loans amounting to Rs. 11,85,00,000/- as unexplained cash credits under Section 68 of the Income Tax Act, 1961. The CIT(A) provided relief to the extent of Rs. 5,26,50,251/-, while the remaining Rs. 6,58,49,749/- was contested by the assessee in a separate appeal. Revenue's Argument: The Revenue contended that the AO had correctly added the assessee's total loan amount as unexplained cash credits, arguing that the loans were routed back as unaccounted income through related parties. Assessee's Argument: The assessee argued that the loans were genuine and provided detailed explanations and evidence to prove the identity, creditworthiness, and genuineness of the transactions with the four lending entities: M/s Diamond Carbon Pvt. Ltd., M/s Mukherjee Capital Pvt. Ltd., M/s Wimper Trading and Distributors Pvt. Ltd., and M/s Mukherjee Farms Pvt. Ltd. CIT(A)'s Findings: The CIT(A) partially accepted the assessee's explanations and provided relief for certain amounts based on the creditworthiness and genuineness of the transactions. The CIT(A) found that parts of the loans were sourced from business reserves and were thus explained, while other parts were deemed unexplained due to dubious share capital and share premium. Tribunal's Analysis: The Tribunal reviewed the evidence presented, including audited accounts, bank statements, confirmation letters, and certificates from banks regarding the maturity of deposit accounts. The Tribunal noted that the AO had accepted the interest outgoing to the four lender companies, which indicated the acceptance of the loan transactions' genuineness. Legal Precedents Considered: - CIT v. Smt. P. K. Noorjahan: The Supreme Court held that unsatisfactory explanations do not automatically result in deeming the amount as income. - Nemi Chand Kothari v. CIT: The Guahati High Court emphasized that the assessee's burden under Section 68 is limited to proving the source from which he received the credit. - CIT v. S. Kamaljeet Singh: The Allahabad High Court held that the assessee's burden is discharged by providing confirmation letters, affidavits, and other relevant documents. - Crystal Networks (P.) Ltd. v. CIT: The Calcutta High Court ruled that the failure of creditors to appear cannot be the sole basis for making additions if material evidence supports the transactions. - CIT v. Dataware Private Limited: The Calcutta High Court held that the AO of the assessee cannot dispute the creditworthiness of the creditor if the creditor is an income tax assessee. Conclusion: The Tribunal concluded that the assessee had discharged its onus to prove the identity, creditworthiness, and genuineness of the lender companies. The Tribunal found that the AO did not conduct sufficient investigations to disprove the assessee's claims and relied on inferences without substantial evidence. Consequently, the Tribunal upheld the CIT(A)'s decision to provide partial relief and directed the deletion of the remaining addition of Rs. 6,58,49,749/-. Final Decision: The Tribunal dismissed the Revenue's appeal and affirmed the CIT(A)'s findings, thereby providing full relief to the assessee. Pronouncement: The order was pronounced in the open court on 31.12.2019.
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