2019 (6) TMI 535 - AT - Income Tax

Unexplained credit u/s. 68 - unexplained source of income - HELD THAT - The allegation of AO is that the confirmation letters are dated 27/04/2015 and 16/08/2016 which are almost ten years later than the year in which the loan was taken. These confirmation letters were furnished by the brother and mother of Late Mr. Subair Khan and it cannot be doubted without examining these parties. AO has made the addition without providing any evidence contrary to the submissions made by the assessee which is not correct. There is no reason to suspect the bonafides and genuineness of the transactions. There is also no basis to suspect the credit worthiness of Late Subair Khan. To that extent, there are no grounds to suspect the transactions with him. CIT(A) also accepted ₹ 10 lakhs assessed for AY 2005-06 as satisfactorily explained. Since the construction of M/s. Killi Tower had just begun and funds were contributed by several contributors, the earning of unexplained income even during the construction period is a clear imaginary situation. During the life time of Late, Subair Khan, he had confirmed the transactions with M/s Killi Constructions, however, AO never wanted him to be examined or any evidence collected. Accordingly, we are inclined to delete the addition - Decided in favour of assessee.

Summary

Issues:
Appeals against common order of CIT(A)-III, Kochi for AY 2005-06 and 2006-07.

Analysis:
For AY 2005-06, the assessee received an unsecured loan of ?15,00,000 from Mr. Subair Khan, with ?10,00,000 explained and ?5,00,000 unexplained. The Assessing Officer added the unexplained amount as per section 68. Despite confirmation letters from relatives, AO found them invalid due to timing. CIT(A) dismissed the appeal, noting discrepancies in signatures. On appeal, AR argued for the unexplained amount's legitimacy, citing project involvement and confirmations. Tribunal found no reason to suspect genuineness or creditworthiness, deleting the addition.

For AY 2006-07, an addition of ?10,20,000 was made by CIT(A) as unexplained income, despite no addition by AO. AR argued for deletion based on pre-search transactions and confirmations. Tribunal found no basis to doubt transactions or creditworthiness, deleting the addition.

In both years, the Tribunal found confirmations valid, no grounds to suspect transactions, and no evidence contrary to the submissions. The Tribunal deleted the additions for both AY 2005-06 and 2006-07, allowing the appeals.