2018 (2) TMI 1161 - HC - Income Tax

Addition of unexplained cash credit u/s 68 for unscecured loan - no genuine transactions - Held that - The entire issue is based on appreciation of evidence on record and thus factual in nature. The Tribunal has given elaborate reasons to come to the conclusion that the entire transaction was not genuine. In absence of any perversity, we do not see any reason to interfere. As the assessee however vehemently contended that the assessee had received loans through cheques from lenders who had confirmed the same. Their accounts are audited and filed before the Revenue authorities. Thus, the genuineness of the transactions, the capacity of the lender and the factum of lending all have been established. Addition u/s 68 there could not have been made. However, as noted, the Tribunal has minutely examined the position of the lenders, the circumstances under which, the amounts were allegedly loaned to come to the conclusion that the transactions were not genuine. - Decided against assessee.

Summary

Issues:
1. Addition of ?20 lakh as unexplained cash credit under section 68 for unsecured loan.
2. Addition of ?3,66,041 made on account of interest paid on unsecured loans treated as unexplained cash credit under section 68.

Analysis:
1. The first issue revolves around the addition of ?20 lakhs as unexplained cash credit under section 68 of the Income Tax Act, 1961. The Tribunal rejected the assessee's appeal based on the observation that the bank statements of the lender did not inspire faith in the genuineness of the transaction. The lender's financial statements raised doubts as they showed minimal expenses compared to a high turnover, indicating inconsistencies typical of shell entities. The Tribunal concluded that the lack of related persons' verification and the inability to explain the circumstances of the loans cast doubt on the genuineness of the transactions. The Tribunal's decision was upheld as it was based on factual evidence and lacked perversity, leading to the dismissal of the Tax Appeal.

2. The second issue pertains to the addition of ?3,66,041 as interest paid on unsecured loans treated as unexplained cash credit under section 68. The Tribunal's detailed analysis highlighted discrepancies in the lender's financial activities, such as high transactions with minimal closing balances, indicating potential non-genuine transactions. Despite the assessee's claims of receiving loans through audited accounts and confirmations from lenders, the Tribunal meticulously examined the circumstances surrounding the loans and concluded that the transactions were not genuine. As a result, the Tribunal's decision to dismiss the Tax Appeal was upheld, emphasizing the importance of factual evidence in determining the authenticity of transactions under section 68 of the Act.