2018 (4) TMI 1530 - AT - Income Tax

Addition towards unexplained cash credit - claim of the assessee is that the creditor admitted that he has sold his agricultural land and utilised the said amount for giving loans to friends and relatives - Held that - In the instant case, the volume of evidence filed by the assessee-company really shows that genuineness, identity and creditworthiness of the creditors was explained by the assessee in which event addition, in my humble opinion, cannot be made u/s 68 of the Act. CIT(A) observed that the cash transactions between Smt. Jyothi and Mr. Raghuram is violative of the provisions of section 269SS of the Act. However, no such proceedings were taken. We are not concerned with the provisions of section 269SS. If the evidence is not sufficient or if Shri Raghuram has no means to pay the sum, the same can be considered in the hands of Shri Raghuram; but in the instant case, the Tax Authorities have not made any efforts in that direction. - Decided in favour of assessee

Summary

Issues:
1. Addition of unexplained cash credit of ?10,48,000 made by the Assessing Officer and confirmed by the Ld. CIT(A).
2. Verification of the genuineness, creditworthiness, and source of funds related to the unsecured loans introduced by the assessee.
3. Admissibility of additional evidence by the Ld. CIT(A) under Rule 46A of the Income Tax Rules, 1962.
4. Examination of the evidence provided by the assessee to prove the identity, creditworthiness, and genuineness of the cash creditors.
5. Compliance with Section 68 of the Income Tax Act regarding the burden of proof on the assessee in cases of unexplained cash credits.

Analysis:
1. The appeal concerns the addition of ?10,48,000 as unexplained cash credit by the Assessing Officer, which was upheld by the Ld. CIT(A). The Tribunal reviewed the evidence provided by the assessee to justify the source of funds, including unsecured loans, and the subsequent verification conducted by the authorities.
2. The Assessing Officer raised concerns regarding the source of funds for the unsecured loans introduced by the assessee. Specific discrepancies were noted in the documentation provided by the cash creditors, leading to doubts about the genuineness and creditworthiness of the transactions, resulting in the addition of the amount to the total income of the assessee.
3. The Ld. CIT(A) admitted additional evidence submitted by the assessee under Rule 46A of the Income Tax Rules, 1962, allowing further inquiry to establish the genuineness of the transactions. The Tribunal examined the propriety of admitting such evidence and its impact on the final decision.
4. The Tribunal assessed the evidence presented by the assessee to prove the identity, creditworthiness, and genuineness of the cash creditors. It considered the arguments made by the assessee's counsel regarding the burden of proof under Section 68 of the Income Tax Act and the adequacy of the documentation provided.
5. The Tribunal scrutinized the compliance of the assessee with Section 68 of the Income Tax Act, emphasizing the requirement to prove the identity, creditworthiness, and genuineness of cash credits. It evaluated the contentions of both the assessee and the Revenue regarding the burden of proof and the adequacy of the explanations provided.

In conclusion, the Tribunal allowed the appeal filed by the assessee, highlighting deficiencies in the verification process conducted by the authorities and emphasizing the importance of establishing the genuineness, creditworthiness, and source of funds in cases of unexplained cash credits to avoid arbitrary additions to the total income.