2016 (5) TMI 1004 - AT - Income Tax

Unexplained cash credits u/s. 68 - Held that - There is no dispute about the fact that the assessee s HDFC bank account stands credited with 14 payments of ₹ 49,000/- each followed by another one involving ₹ 14,000/-. This gross figure of ₹ 7 lacs forms subject matter of section 68 addition. The assessee s endeavour seeks to treat the same as repayment of loans/old advances. A co-ordinate bench has already directed the Assessing Officer to verify the same from the material on record. The assessee files before us her ledger account maintained in case of above stated 15 parties right from 01-04-2003 to 31-03- 2008 stating outstanding closing balances of ₹ 49,000/- and ₹ 14,000/-. This is not the Revenue s case that these accounts are not genuine or improper maintained. There is hardly any dispute that the same stands accepted as correct in the relevant intervening assessment year. Ld. DR fails to rebut this factual position. We do not find any observation in Assessing Officer s consequential order alleging that he ever summoned these creditors for the purpose of conducting verification and they did not turn up to confirm assessee s stand. We take into account totality of all these facts and circumstances to hold that the assessee has successfully proved her case of having received repayment of earlier loans and advances given to the above stated 15 creditors in financial year 2003-04. The Revenue s arguments strongly supporting Assessing Officer s action making the impugned addition stand rejected. We accordingly delete the impugned section 68 addition - Decided in favour of assessee.

Summary

Issues involved:
Appeals against addition of unexplained cash credits u/s. 68 for assessment year 2008-09.

Analysis:

1. Identical sum of ?7 lacs added as unexplained cash credits:
- Six assessees filed appeals against CIT(A)'s orders upholding AO's addition of ?7 lacs each as unexplained cash credits u/s. 68.
- Assessing Officer noted 15 credit entries in HDFC bank account, totaling ?7 lacs, treated as loans and advances from relatives.
- AO sought details of parties, addresses, and application forms for demand drafts, which were received from banks.
- AO observed dubious nature of transactions due to lack of creditor identity, leading to addition u/s. 68.
- CIT(A) confirmed the addition, leading to appeals before ITAT.

2. Verification of repayment of old advances:
- ITAT remitted the issue back to AO for verifying if the entries were return of old advances, not fresh loans.
- Assessee provided returns, bank accounts, and balance sheets to support the repayment claim.
- AO found pending advances unverified in previous years and observed discrepancies in balance sheet.
- Assessee submitted bank account statement showing cheque transfers, but AO doubted the repayment explanation.
- AO made the same addition of ?7 lacs, upheld by CIT(A), leading to the second round of litigation.

3. ITAT's decision and reasoning:
- ITAT noted the identical nature of cases and the assessee's claim of repayment of old advances.
- Assessee submitted ledger accounts showing outstanding balances, which were accepted in previous assessments.
- ITAT found no evidence of creditors not confirming the repayment claims or improper maintenance of accounts.
- Considering the facts and circumstances, ITAT held that the assessee proved repayment of loans to creditors.
- ITAT rejected Revenue's arguments and deleted the addition of ?7 lacs u/s. 68 in the lead case and all other appeals.

4. Outcome:
- ITAT allowed all six assessees' appeals, deleting the additions of unexplained cash credits.
- The judgment was pronounced on 15-04-2016 by the ITAT bench consisting of Shri Pramod Kumar, Accountant Member, and Shri S. S. Godara, Judicial Member.