2016 (3) TMI 505 - AT - Income Tax

Addition under Section 68 - bank statement and ITR of the lender were not submitted - Held that - On going through order of ld AO. we found that merely because the assessee could not file the bank account statements and income Tax returns of lender company the addition has been made. When assessee has submitted the confirmation of the company which is having PAN and assessed to income tax the account also shows the receipts by the cheques and in subsequent years loans of this company was accepted by AO. On submission of confirmation by the assessee ld AO did not make any further inquiry u/s 131 of 133 (6) of the act which he did in subsequent years and satisfied himself about the identity creditworthiness and genuineness of the transaction which could also have been done in this year too. But Ld AO did not do so. Further the provisions of section 68 does not prescribe the specified documents which and assessee is required to lay down before AO to prove identity creditworthiness and genuineness of amount credited in the books of accounts it is left upon assessee to satisfy the assessing officer with the substantial evidence/ documents for discharging his onus. Therefore merely because the bank statement an ITR of the lender were not submitted in spite of submitting balance sheet and profit and loss account of the company confirmation stating its PAN and also transactions are through account payee cheques and in absence of any inquiry we are of the view that no addition can be made in the hands of the assessee under Section 68 of the Act of this amount. - Decided in favour of assessee

Summary

Issues:
Appeal against deletion of addition under Section 68 of the Income-tax Act, 1961.

Analysis:
The case involved an appeal by the Revenue against the deletion of an addition of Rs. 33,15,000 made by the Assessing Officer under Section 68 of the Income-tax Act, 1961. The assessee had taken a loan from a company, and the Assessing Officer made the addition as the assessee failed to submit the income tax return and bank statement of the lender. However, the assessee provided confirmation, PAN, audited balance-sheet, and profit and loss account of the lender company. The Commissioner of Income Tax (Appeals) deleted the addition, stating that the assessee had proved the creditworthiness, identity, and genuineness of the transaction. The Commissioner found that the lender company had sufficient funds and income to provide the loan. The Commissioner also noted that no inquiry was conducted by the Assessing Officer, and in subsequent years, the lender company's loans were accepted. The Commissioner relied on judicial pronouncements to support the decision to delete the addition.

The Appellate Tribunal considered the submissions and evidence presented. It was noted that the assessee had fulfilled the initial burden of proving the bona fides of the transaction by providing confirmation, financial statements, and PAN details of the lender company. The Tribunal found that the Assessing Officer had not justified ignoring these pieces of evidence and had not conducted any inquiry to verify the creditworthiness of the lender. The Tribunal emphasized that the provisions of Section 68 do not specify particular documents to prove identity and creditworthiness, leaving it to the assessee to satisfy the assessing officer with substantial evidence. The Tribunal concluded that the non-submission of bank statements and income tax returns of the lender, despite providing other relevant documents, did not warrant the addition under Section 68. The Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) and dismissed the appeal of the Revenue.

In summary, the Tribunal ruled in favor of the assessee, holding that the addition under Section 68 was unjustified as the assessee had adequately demonstrated the creditworthiness and genuineness of the transaction. The Tribunal emphasized the importance of assessing all evidence presented by the assessee and conducting necessary inquiries before making additions under Section 68 of the Income-tax Act.