2016 (4) TMI 665 - AT - Income Tax

Unexplained cash credit u/s 68 - Held that - As regards unsecured loan received from Ashwinkumar L. Patel at ₹ 75,000/- and from Sumitraben J. Patel of ₹ 1,25,000/-, assessee has not provided any details except the affidavits and copies of some ledger account and bank account of Asst. Year 2007- 08 and following years. These affidavits cannot be taken as a substantive proof in order to satisfy the provisions of section 68 of the Act in regard to the identity, creditworthiness and genuineness of loan taken during the year. No evidence in the form of PAN, bank statement, income-tax return have been put on record before the lower authorities. In these circumstances we find that assessee has nothing more to prove the genuineness of unsecured loans taken from Ashwinkumar L. Patel and Sumitraben J. Patel at ₹ 75,000/- and ₹ 1,25,000/- respectively. As regards loan taken from Falguniben Patel of ₹ 50,000/- we find that this loan amount has been taken by cheque and the source of cash deposit of ₹ 50,000/- immediately before issue of the cheque to the assessee has been shown to have been received as gift from grand father and past savings as well as withdrawal of ₹ 43,000/- in previous months from her bank account. We further find that assessee has submitted details of grand father of Falguniben Patel namely Mr. Ramanbhai N. Patel who has retired from railway department and is owning 8 bighas of agricultural land. In these circumstances, we are inclined to believe that there was some source of cash deposit of ₹ 50,000/- in the bank account of Falguniben Patel and we accordingly find that the loan taken from Falguniben Patel to be genuine. In view of our above discussion, we hold that out of the addition on account of unexplained cash deposit of ₹ 2,50,000/- loan of ₹ 50,000/- from Falguniben Patel is explained and we delete the addition of ₹ 50,000/-.- Decided in favour of assessee in part. TDS u/s 194C - disallowance u/s 40(a)(ia) - Held that - The assessee has filed its return of income for Asst. Year 2004-05 on 28.10.2004 and has shown income from business or profession under the deeming provisions of section 44AB of the Act available for income from running heavy vehicles. Certainly assessee was not falling under the provisions of section 44AB of the Act for Asst. Year 2004-05. It was the assessment year 2005-06 in which total gross turnover of the assessee exceeded the limit of ₹ 60 lacs provided in section 44AB of the Act. We, therefore, are of the view that assessee became liable to deduct TDS from Asst. Year 2006-07 and certainly was not required to deduct TDS under the provisions of section 194C of the Act for Asst. Year 2005-06. Therefore, the Assessing Officer was not correct in making disallowance u/s 40(A)(ia) - Decided in favour of assessee.

Summary

Issues:
1. Addition of unexplained cash credit u/s 68 of the Income Tax Act, 1961
2. Disallowance u/s 40(a)(ia) of the Income Tax Act, 1961 for non-deduction of TDS u/s 194C

Analysis:
1. Unexplained Cash Credit (Issue 1):
The assessee appealed against the addition of Rs. 2,50,000 as unexplained cash credit u/s 68. The CIT(A) confirmed the addition stating that the assessee failed to prove the identity, creditworthiness, and genuineness of the cash credit. The Tribunal found that for loans from Ashwinkumar L. Patel and Sumitraben J. Patel, the affidavits provided were insufficient to establish the necessary details. However, for the loan from Falguniben Patel, the source of cash deposit was explained as gifts from her grandfather and past savings, supported by bank account withdrawals. The Tribunal accepted this explanation and deleted the addition of Rs. 50,000, providing partial relief to the assessee.

2. Disallowance of TDS (Issue 2):
Regarding the disallowance of Rs. 2,50,507 u/s 40(a)(ia) for non-deduction of TDS u/s 194C, the assessee argued that as it was the first year its turnover exceeded the limit specified in section 44AB, it was not liable to deduct TDS. The Tribunal examined the relevant provisions of section 194C and found that the assessee became liable to deduct TDS from the assessment year 2006-07, not for the year in question (2005-06). As the assessee was not required to deduct TDS u/s 194C for the year under consideration, the disallowance made by the Assessing Officer was incorrect. Consequently, the Tribunal deleted the disallowance of Rs. 2,50,507, allowing the assessee's appeal partially.

In conclusion, the Tribunal partly allowed the appeal of the assessee, deleting the addition related to unexplained cash credit and the disallowance of TDS, based on the detailed analysis of the provisions and facts presented during the proceedings.