2016 (9) TMI 499 - AT - Income Tax

Addition u/s. 68 - Held that - The burden of the assessee in respect of the loans stand discharged and therefore, no addition is tenable. Once the amount has been received by account payee cheques and the creditors have duly confirmed the transactions no adverse inference can be drawn. Therefore, assessee shows his inability to explain the source of source, which cannot be a basis to confirm the addition u/s. 68 of the Act. Hence addition deleted. - Decided in favour of assessee

Summary

Issues Involved
1. Addition of ?16,00,000/- representing cash deposits in ICICI Bank and held to be alleged unexplained credit under Section 68 of the Income Tax Act.
2. Addition of ?5,49,000/- representing loans received by the assessee and held to be unexplained cash credit under Section 68 of the Income Tax Act.

Detailed Analysis

Issue 1: Addition of ?16,00,000/- Representing Cash Deposits in ICICI Bank
The assessee contended that the amount of ?16,00,000/- credited in his bank account was an advance received from Shri Balwant Singh Pannu, who confirmed the advance by appearing in person. The lower authorities, however, held that Shri Balwant Singh Pannu had no means and source to advance ?16 lacs, which the assessee argued was a misapprehension of facts and law. The Tribunal noted that both the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] were incorrect in concluding that the period of 10 months for the execution of the conveyance deed was abnormal. The Tribunal also found that Shri Balwant Singh Pannu was of sufficient creditworthiness, being an Executive in the Land Mortgage Bank and practicing in the Punjab and Haryana High Court, and owning 20 acres of agricultural land.

The Tribunal emphasized that the source of the cash deposits was duly explained through the agreement to sell dated 12.10.2009, the statement of Shri Balwant Singh Pannu, and other relevant documents. The Tribunal relied on several case laws, including CIT vs. Daulat Ram Rawatmull (87 ITR 349), CIT vs. Diamond Products Ltd. (177 Taxman 331), and CIT vs. Real Time Marketing (P) Ltd. (306 ITR 35), to support the view that the source of source cannot be a basis for addition under Section 68. Consequently, the Tribunal deleted the addition of ?16,00,000/-.

Issue 2: Addition of ?5,49,000/- Representing Loans Received by the Assessee
The assessee argued that the unsecured loans aggregating to ?5,49,000/- were received through account payee cheques from identifiable parties who confirmed the loans. The lower authorities upheld the addition on the grounds that the creditors did not have enough creditworthiness and that cash deposits were made in their accounts before issuing cheques to the assessee. The Tribunal found that the assessee had discharged the burden of proof by providing affidavits and bank statements of the creditors, thereby confirming the transactions.

The Tribunal further noted that the inability to explain the source of the source cannot be a basis for confirming the addition under Section 68. This view was supported by case laws such as DCIT vs. Rohini Builders (256 ITR 360) and CIT vs. Kamdhenu Steel & Alloys Ltd. (361 ITR 220). Hence, the Tribunal deleted the addition of ?5,49,000/-.

Conclusion
The Tribunal allowed the appeal filed by the assessee, deleting the additions of ?16,00,000/- and ?5,49,000/- made by the AO and upheld by the CIT(A). The Tribunal emphasized that the assessee had adequately explained the sources of the credits and that the lower authorities' conclusions were factually and legally unsustainable. The order was pronounced in the Open Court on 02/08/2016.