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2018 (1) TMI 387 - AT - Income TaxUnexplained cash credit - Held that - Just before giving the loan there is deposit of equivalent amount in the bank accounts is certainly a factor for which the revenue authorities cannot put upon blinkers. The facts of the case as noted by the authorities below clearly indicate that the creditworthiness of the lenders have not at all been established. In such circumstances, there is no infirmity in the order s of the authorities below wherein these have been added in the hands of the assessee as unexplained credits. In fact, on the facts and circumstances of the case, ratio from Hon ble Apex Court decision in the case of Sumati Dayal vs. CIT 1995 (3) TMI 3 - SUPREME Court and CIT vs. Durga Prasad More 1971 (8) TMI 17 - SUPREME Court is applicable wherein it was held that the revenue authorities should not put upon blinkers but look into the economic realities and surrounding circumstances. The fact in the present case indicate that despite the assessee making available confirmation and other evidence, the creditworthiness of these lenders is abysmally low and hence these loans have rightly been added as unexplained credit in the hands of the assessee. - Decided against assessee.
Issues Involved:
1. Addition of unsecured loans as unexplained cash credit. 2. Relevance of case laws relied upon by the appellant. Issue-wise Detailed Analysis: 1. Addition of unsecured loans as unexplained cash credit: The primary issue in this case was whether the Assessing Officer (AO) was justified in treating unsecured loans amounting to ?15,00,000/- from four parties as unexplained cash credit under Section 68 of the Income Tax Act. The AO observed that the lenders' creditworthiness and the genuineness of the transactions were not proven. Specifically, the AO found that: - The returned income of the lenders was significantly low, not justifying their capacity to advance the loans. - Bank accounts of these lenders showed deposits of similar amounts just before issuing cheques to the assessee, indicating the accounts were used merely as conduits for arranging loans. - The AO noted that the lenders' income was insufficient to meet their household expenses, let alone provide substantial loans. Upon appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, emphasizing that the assessee failed to discharge the onus of proving the creditworthiness of the lenders and the genuineness of the transactions. The CIT(A) noted that: - The income returned by the lenders was not enough to justify the loans. - No regular or periodic income was credited to the lenders' bank accounts. - The deposits in the lenders' bank accounts were made just before issuing the loan cheques. The Income Tax Appellate Tribunal (ITAT) also upheld the decisions of the AO and CIT(A). It was noted that the lenders did not have the financial capacity to provide the loans, and their bank accounts showed deposits just before the issuance of the loans, indicating a lack of genuine financial transactions. The ITAT concluded that the creditworthiness of the lenders was not established, and the loans were rightly added as unexplained credits in the hands of the assessee. 2. Relevance of case laws relied upon by the appellant: The appellant argued that the case laws they relied upon were relevant to their situation. However, the CIT(A) found these case laws to be distinguishable on facts and not applicable to the present case. For instance: - The case of Orient Trading Co. Ltd. was decided under the 1922 Act and involved different facts, such as a benami transaction. - In the case of Anant Shelters Pvt. Ltd., the AO did not attempt to rebut the evidence filed by the assessee, which was not the situation in the present case. - The appellant's reliance on a previous ITAT order for A.Y. 2010-11 was also found irrelevant as the lenders in that case were family members, and no inquiry had been made by the AO to counter the evidence filed by the appellant. The ITAT agreed with the CIT(A) that the case laws cited by the appellant did not support their case. The ITAT emphasized that the revenue authorities should consider economic realities and surrounding circumstances, as per the principles laid down by the Hon'ble Apex Court in Sumati Dayal vs. CIT and CIT vs. Durga Prasad More. Conclusion: The ITAT dismissed the appeal, affirming the orders of the AO and CIT(A). The ITAT found no infirmity in the decision to treat the unsecured loans as unexplained credits due to the lack of creditworthiness of the lenders and the non-genuine nature of the transactions. The appellant's reliance on certain case laws was also found to be misplaced and not applicable to the facts of the case.
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