2022 (8) TMI 1439 - AT - Income Tax

Addition u/s 68 - unexplained cash credit - Onus to prove - HELD THAT - It is clear, that if AO is not satisfied and ask additional evidences from assessee, assessee is duty bound to produce, further details or persons for verification. The assessee cannot take plea that he has submitted some papers and his onus has been discharged. It is duty of assessee to provide further explanation and material as required by AO. We note that AO has conducted the field inquiry and issued notices under section 131 of the Act on the address provided by the assessee, however these notices were returned back, as the parties were not existed on the given address. In these circumstances, burden shifts on the assessee to produce these parties before the Assessing Officer or to provide new address, if address has been changed, however assessee has failed to do so. Similarly, if Assessing Officer at any stage of probe reaches to a dead end, and inform assessee about the same, it is duty of assessee to help him and provide whatever is asked. This position of shifting of onus from assessee to Assessing Officer Assessing Officer to assessee is tricky one, which depends on the facts of the case. We note that assessee has proved creditworthiness and genuineness, however assessee failed to prove identity of these parties from whom unsecured loan had been received, therefore we are of the view that one more opportunity should be given to the assessee to plead his case before the Assessing Officer to prove identity of these parties. Hence, we set aside the order of the CIT(A) and remand the matter back to the file of Assessing Officer for limited purpose to examine the identity of the parties, and to decide the matter in accordance to law after giving opportunity of being heard to the assessee. Appeal of the Revenue is allowed for statistical purposes.

Summary

Issues:
- Addition of unsecured loan under section 68 of the Income Tax Act, 1961.
- Burden of proof on the assessee to establish the genuineness of transactions.
- Identity, creditworthiness, and genuineness of parties providing unsecured loans.
- Assessment of temporary creditworthiness versus real creditworthiness.
- Application of legal precedents in determining undisclosed income.

Analysis:

1. Addition of Unsecured Loan under Section 68:
- The appeal filed by the Revenue challenged the deletion of an addition of Rs. 20,87,54,237 made by the assessing officer on account of unsecured loan. The Assessing Officer noted discrepancies in the unsecured loan received by the assessee and issued notices to verify the transactions' genuineness. Despite submissions by the assessee, the Assessing Officer treated the unexplained cash credit as income under section 68 of the Act.

2. Burden of Proof on the Assessee:
- The Assessing Officer found discrepancies in the identity, creditworthiness, and genuineness of the parties providing unsecured loans. The burden was on the assessee to establish these aspects, failing which the unsecured loan amount was treated as undisclosed income. Legal precedents were cited to support the Assessing Officer's decision, emphasizing the importance of proving the capacity of the loan providers.

3. Identity, Creditworthiness, and Genuineness of Parties:
- The parties providing unsecured loans were found to be non-traceable, with discrepancies in their business activities and addresses. Despite submissions by the assessee, the Assessing Officer and the Revenue argued that the creditworthiness of these parties was temporary and not genuine. The lack of concrete evidence regarding the identity and genuineness of the transactions raised concerns.

4. Assessment of Temporary Creditworthiness:
- The Assessing Officer and the Revenue contended that the creditworthiness of the parties providing unsecured loans was artificially created and not based on genuine financial capacity. The parties were found to be fictitious and non-existent at the addresses provided, leading to doubts about the authenticity of the transactions.

5. Application of Legal Precedents:
- The decision of the Learned Commissioner of Income Tax (Appeals) to delete the addition made by the Assessing Officer was challenged by the Revenue. The Tribunal, after considering the submissions and evidence presented, set aside the order of the Ld. CIT(A) and remanded the matter to the Assessing Officer to re-examine the identity of the parties providing unsecured loans. The Tribunal emphasized the importance of proving the identity of the parties involved in such transactions.

This detailed analysis of the judgment highlights the key issues related to the addition of unsecured loans under section 68 of the Income Tax Act, emphasizing the burden of proof on the assessee to establish the genuineness of transactions, especially concerning the identity, creditworthiness, and genuineness of the parties providing the loans. The Tribunal's decision to remand the matter back to the Assessing Officer underscores the significance of verifying the identity of the parties involved in financial transactions to prevent potential tax evasion.