2017 (8) TMI 1244 - AT - Income Tax

Unexplained Cash Credit - addition u/s 68 - Loans and Advances received - Held that - There is nothing on record toward establishing the creditworthiness of the creditors and/or genuineness of the impugned credits. None of the confirmations in the present case bear the Permanent Account Numbers (PAN) of the creditors. Mere furnishing of a confirmation letter by a creditor, as it again well settled, does not prove the credit; the same would at best only establish the identity of the creditors, i.e., given that the Revenue has not required the assessee to prove the signatures on the confirmation letters, so that the same may be regarded as accepted. There is completely in contrast with the unsecured loans and advances furnished by the assessee during the course of assessment proceedings and as reflected in his Balance Sheet. No doubt, the ledger accounts of the relevant creditors are on record, and which are in agreement with the breakup of the loans as provided subsequently, but then it is only the assessee who can explain as to how its balance sheet, which purports to reflect its state of its affairs as at the year-end per its accounts, discloses a separate and different set of figures, including their profiling. In this regard, it is notable that all the loans/advances are received in cash, without as much as a cash receipt being issued, so the assessee could, at any time, change a creditor, or the amount ascribed to him, to suit himself. The Revenue is equally to blame for not questioning the assessee in this respect, which clearly undermines, nay, castigates, the assessee s case, who only could explain the said differences. Assessee s appeal is dismissed.

Summary

Issues Involved:
1. Unexplained cash credits under Section 68 of the Income Tax Act.
2. Assessment and confirmation of additions made by the Assessing Officer (AO).
3. Admissibility of additional evidence and confirmation letters.
4. Burden of proof and the taxpayer's failure to substantiate claims.

Issue-wise Detailed Analysis:

1. Unexplained Cash Credits under Section 68:
The primary issue revolves around the unexplained cash credits amounting to ?21.50 lakhs in the assessee's balance sheet under the head "Advance from customers." The assessee claimed these to be unsecured loans and advances received in cash. However, except for a rent advance of ?2.50 lakhs, no evidence was furnished to substantiate these claims. Consequently, the AO treated the balance ?21.50 lakhs as unexplained cash credits and deemed it as income, assessing it at ?24,55,580/- against the returned income of ?3,05,580/-.

2. Assessment and Confirmation of Additions by the AO:
Upon appeal, the CIT(A) confirmed the additions made by the AO due to the lack of evidence provided by the assessee. The Tribunal, in its first round, remanded the case for fresh adjudication, directing the assessee to cooperate. In the second round, the CIT(A) admitted additional evidence but still confirmed the addition to the extent of ?13.50 lakhs. The assessee's second appeal contended that the confirmation letters discharged the onus cast on him by law, but the Revenue argued that the nature and source of the credits were not satisfactorily explained.

3. Admissibility of Additional Evidence and Confirmation Letters:
The Tribunal noted that mere furnishing of confirmation letters does not prove the credit, as it only establishes the identity of the creditors. The assessee failed to provide evidence of the capacity and genuineness of the loans or advances. For instance, in the case of Shri Arokiyasamy, the assessee's father, the bank account details did not support the claim of advancing ?2.50 lakhs. Similarly, for other creditors like Shri G.K. Ganesan and Shri Subramanian, the assessee could not furnish any substantial evidence apart from confirmation letters.

4. Burden of Proof and Taxpayer's Failure to Substantiate Claims:
The Tribunal emphasized that the primary onus to prove a credit lies on the assessee. The assessee must satisfactorily explain the nature and source of the credits with relevant materials. In this case, the assessee failed to discharge this burden. The Tribunal also highlighted inconsistencies in the assessee's balance sheet and the explanations provided during assessment proceedings. The balance sheet showed different figures and profiling compared to the breakup of loans furnished later. The Tribunal noted that all loans/advances were received in cash without any receipts, allowing the assessee to alter the details at any time.

Conclusion:
The Tribunal found no merit in the assessee's case due to the lack of substantial evidence and inconsistencies in the explanations provided. Consequently, the Tribunal upheld the CIT(A)'s order, confirming the additions made by the AO. The assessee's appeal was dismissed, and the order was pronounced on May 19, 2017, in Chennai.