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2019 (5) TMI 1370 - AT - Income TaxUnexplained cash credit u/s 68 - loan receipts through prior dated cheque - HELD THAT - The loan amount is duly reflected under the list of unsecured loans. The account payee cheque have been cleared through proper banking channel in August, 2011. Revenue authorities have not disputed about the creditworthiness and identity of cash creditor Gajanand Ramlal Agrawal. Even the genuineness is not in doubt because the cheques are actually cleared in the bank account. Merely for entering the transaction in March, 2011 and the cheque getting cleared in August 2011 cannot be a reasonable basis to treat the loan amount as unexplained u/s 68 because the validity of cheque was for 6 months at that point of time. The alleged transaction is duly reflected in the books of both the parties, duly confirmed by the cash creditor Gajanand Ramlal Agrawal, bank statements and bank reconciliation statements clearly shows the alleged transactions and from all four corners, we can safely conclude that the alleged transactions of loan of ₹ 1.70 crores is duly explained and identity, genuineness and creditworthiness of the cash creditor is not doubtful. No inconsistency in the finding of Ld. CIT(A) deleting the addition and thus we uphold the same and dismiss the appeal of the revenue.
Issues:
Appeal by Revenue against CIT(A) order for AY 2011-12 regarding addition of unsecured loan under section 68 of the IT Act. Analysis: 1. Issue 1: Addition of Unsecured Loan - The Revenue challenged the deletion of the addition of ?1.70 crores made by the AO under section 68 of the IT Act. - The AO contended that the cheques for ?90 lakhs and ?80 lakhs received as a loan were not deposited on 30.3.2011 as the cheque book was issued on 28.06.2011. - The CIT(A) found that the cheques were handed over to the assessee in August 2011 and were deposited and cleared in the same month. The cheques were dated 30.3.2011 and 31.3.2011 but were entered into the books on those dates due to the mercantile system of accounting. - The CIT(A) also noted that similar additions made in the hands of the creditor were deleted by CIT(A)-II, Indore. The addition was deleted considering the material on record, and the grounds of the appellant were allowed. 2. Issue 2: Examination of Transactions - The Tribunal examined the ledger account of the business transactions with the creditor and found that the transactions were part of the business dealings for purchasing soya bean. - Three transactions totaling ?1.70 crores were payments made against goods purchased from the creditor through cheques issued in the previous financial year and cleared in the subsequent year. - The Tribunal verified the bank statements and reconciliation statements, confirming the transactions were genuine business dealings. 3. Issue 3: Mercantile Accounting System - The Tribunal addressed the concern raised by the AO regarding entering the loan transactions in March 2011 when the cheques were physically received in August 2011. - It was explained that before finalizing the accounts, entries for the audit year may be made for business expediency. The cheques were dated March 2011 for accounting purposes, following the mercantile system. - The Tribunal emphasized that the transactions were duly reflected in the books, confirmed by the creditor and supported by bank documents, concluding that the loan transactions were genuine and properly explained. 4. Final Decision - The Tribunal upheld the CIT(A)'s decision to delete the addition of ?1.70 crores, dismissing the revenue's appeal. - Both grounds of the revenue's appeal were dismissed, affirming the findings of the CIT(A) regarding the unsecured loan addition under section 68 of the IT Act for the assessment year 2011-12.
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