2017 (2) TMI 327 - AT - Income Tax

Addition u/s. 68 - Held that - The undisputed fact is that the assessee had produced all the cash creditors except one. It is also not in dispute that all the related documentary evidences were furnished to establish the genuineness of the transaction and the prima facie creditworthiness of the creditors. The documentary evidences given it goes to prove that the assessee has discharged the initial burden. As the assessee has fulfilled all the conditions to discharge its onus additions hereby deleted - Decided n favour of assessee

Issues Involved:
1. Addition of ?15.70 lacs under Section 68 of the Income Tax Act.
2. Examination of the creditworthiness and genuineness of the transactions involving shareholders/cash creditors.

Detailed Analysis:

1. Addition of ?15.70 lacs under Section 68 of the Income Tax Act:

The appeal by the Assessee is directed against the order of Ld. CIT(A)-6, Ahmedabad dated 30.11.2015, pertaining to A.Y. 2005-06. The primary grievance of the assessee relates to the addition of ?15.70 lacs made under Section 68 of the Act. This amount includes deposits of ?3.20 lacs and share application money/capital of ?12.50 lacs.

In the first round of litigation, the Tribunal had restored the matter to the files of the A.O. with directions to verify the creditworthiness and genuineness of the transactions of the shareholders/cash creditors. The Tribunal's findings indicated that the assessee did not furnish confirmations in a timely manner, leaving the A.O. with insufficient time to issue summons to the loanees or shareholders.

2. Examination of the Creditworthiness and Genuineness of the Transactions:

Following the Tribunal's directions, the A.O. initiated fresh assessment proceedings. The assessee produced all the referred persons except one, Raniben Jadavbhai Kalsariya. Statements were recorded, but the A.O. dismissed the statements of the creditors and made the addition of ?15.70 lacs once again under Section 68 of the Act. The assessee then appealed to the ld. CIT(A) but was unsuccessful in convincing the authority.

Before the Tribunal, the assessee's counsel argued that the assessee had discharged the onus cast upon it by the provisions of Section 68. The counsel emphasized that all creditors, except one, were produced and examined, and necessary documents were filed to establish their creditworthiness. The ld. D.R., however, supported the findings of the revenue authorities, stating that the assessee failed to discharge the initial burden.

The Tribunal considered the orders of the authorities below and the directions of the Tribunal. It was undisputed that the assessee produced all cash creditors except one and furnished related documentary evidence to establish the genuineness and prima facie creditworthiness of the creditors. The documentary evidence included confirmation letters, affidavits, bank statements, and other relevant documents for each creditor.

The Tribunal referred to the Hon'ble High Court of Gujarat's decision in the case of Rohini Builders (256 ITR 360), which dealt with a similar issue. The High Court had ruled that the assessee discharged the initial onus by proving the identity of the creditors, their addresses, and PAN numbers, and by showing that the amounts were received and repaid through account payee cheques. The High Court emphasized that the assessee is not expected to prove the source of the source of the credits.

In light of the High Court's decision, the Tribunal found that the assessee in the present case had also fulfilled all conditions to discharge its onus. Consequently, the Tribunal did not find merit in the addition of ?15.70 lacs and directed the A.O. to delete the addition.

Conclusion:

The Tribunal set aside the findings of the ld. CIT(A) and directed the A.O. to delete the addition of ?15.70 lacs. The appeal filed by the Assessee was allowed, and the order was pronounced in Open Court on 31-01-2017.

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