2016 (5) TMI 469 - AT - Income Tax

Addition u/s 68 - Unexplained loans - Held that - Assessee has fully proved its burden and discharged the onus upon the Department, however, no contrary evidence was shown by the AO which will prove that the transactions were not genuine, therefore, the addition made by the AO and confirmed by the Ld. CIT(A) is totally unwarranted and the same needs to be deleted - Decided in favour of assessee

Summary

Issues:
1. Addition of loan amount of ?5,00,000 made by the Assessing Officer.
2. Justification of confirming the addition of loan amount by the Ld. CIT(A).
3. Establishment of identity, source, and genuineness of the transaction by the Assessee.
4. Burden of proof in cases of cash credits under Section 68 of the Income Tax Act, 1961.

Analysis:

Issue 1:
The Assessing Officer made an addition of ?5,00,000 based on specific information received regarding an accommodation entry. The AO assessed the income at ?6,10,742, which the Assessee challenged through an appeal to the Ld. CIT(A).

Issue 2:
The Ld. CIT(A) upheld the addition, citing a scam of accommodation entries and lack of proof regarding the loan transaction. The Assessee argued that the loan was genuine, supported by detailed documents and the repayment made to the lender. The Ld. CIT(A) observed that the alleged loan was returned by the Assessee to avoid scrutiny, indicating suspicion.

Issue 3:
The Assessee received a loan from a known lender through a cheque transaction, providing complete details of the lender, including PAN card, balance sheet, and bank statements. The lender's identity and creditworthiness were established, contradicting the AO's claim of an accommodation entry. The Assessee successfully proved the genuineness of the transaction through banking channels.

Issue 4:
In cases of cash credits under Section 68, the burden of proof lies initially with the Assessee to establish the identity and creditworthiness of the lender. Once the Assessee fulfills this burden, the onus shifts to the Department to disprove the genuineness of the transaction. In this case, the AO failed to provide contrary evidence, leading to the deletion of the addition by the ITAT.

The ITAT, after considering all arguments and evidence presented, concluded that the Assessee had sufficiently proven the genuineness of the loan transaction and discharged the burden of proof. The addition made by the AO and confirmed by the Ld. CIT(A) was deemed unwarranted and deleted. The judgment was based on established legal precedents regarding burden of proof in cases of cash credits under the Income Tax Act, 1961.