2020 (5) TMI 403 - AT - Income Tax

Unexplained cash credit u/s 68 - discharge of initial onus or not - providing identity of creditors and creditworthiness - HELD THAT - Assessee has discharged the initial onus which lay on him in the terms of section 68 of the Act by providing identity of creditors and same has not been doubted by the AO also. Assessee has proved the creditworthiness by way of filing ITR returns, bank account, balance sheet, confirmation of the creditors. Assessee is not expected to prove the genuineness of cash deposits in bank accounts of those e creditors because under the law the assessee can be asked to prove source of credit but not the source of the source as held in the case of Orient Trading Co. v. CIT 1962 (8) TMI 69 - BOMBAY HIGH COURT Therefore, in such a situation and considering above fact and finding , we are in complete agreement with the reasoning given by the Ld. CIT (A) that when full particulars, inclusive of the confirmation with name, PAN, copy of Income-tax returns, balance sheet Profit Loss Account computation of income are furnished and same reflected in their books of accounts - addition so made is rightly deleted by the Ld. CIT (A). In view of these facts and circumstances, we do not find any infirmity in the order of CIT (A), accordingly, same is upheld. Accordingly, all the grounds of appeal of as taken by the Revenue are therefore, dismissed.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Deletion of addition made on account of unexplained cash credit under section 68 of the Income Tax Act, 1961.

Detailed Analysis:

Condonation of Delay:
The Tribunal noted that there was a delay of one day in filing the appeal. The Revenue's representative explained that the delay was due to a technical error in counting the limitation period. The Tribunal, considering the small delay and the absence of any malafide intention, condoned the delay and allowed the appeal to be heard on its merits.

Deletion of Addition under Section 68:
The main issue was the deletion of an addition of ?12,89,25,938 made by the AO under section 68 of the Act, on account of unexplained cash credits. The AO had made this addition after finding that the assessee could not prove the genuineness of the loans or the creditworthiness of the lenders.

Facts and Findings:
- The assessee filed its return for the Assessment Year 2011-12, declaring a total income of ?5,14,26,940. The AO made an addition of ?12,89,25,938 under section 68, as the assessee had taken unsecured loans from 56 persons, primarily based in Ranchi.
- The AO issued commissions to conduct inquiries about the lenders. The inquiry reports indicated that many lenders were not found at their given addresses, and the transactions appeared to be accommodation entries.
- The CIT (A) examined the assessment records and found that the AO had all the details of the lenders, including confirmations, bank accounts, and ITR copies. The CIT (A) noted discrepancies in the AO's findings and concluded that the AO's adverse inferences were not justified.
- The CIT (A) observed that the AO did not provide specific findings to refute the documents submitted by the assessee. The CIT (A) also noted that the AO had accepted loans from some lenders without any discussion, despite similar circumstances.

Legal Position:
- The CIT (A) relied on various judicial precedents, including decisions of the Hon'ble Supreme Court and the Hon'ble Gujarat High Court, which held that once the assessee provides basic details like confirmation, ITR copies, and bank accounts, the onus shifts to the department to prove otherwise.
- The CIT (A) concluded that the assessee had discharged the initial burden under section 68 by providing full particulars of the lenders. The AO's failure to provide specific adverse findings meant that the addition could not be sustained.

Tribunal's Decision:
- The Tribunal agreed with the CIT (A)'s findings and noted that the AO had not provided sufficient evidence to discredit the documents submitted by the assessee.
- The Tribunal observed that the CIT (A) had conducted a thorough examination of each lender and found the loans to be genuine.
- The Tribunal upheld the CIT (A)'s decision to delete the addition under section 68, as the assessee had provided sufficient evidence to establish the identity, creditworthiness, and genuineness of the transactions.

Conclusion:
The appeal of the Revenue was dismissed, and the order of the CIT (A) deleting the addition of ?12,89,25,938 under section 68 was upheld. The Tribunal emphasized the importance of the department providing specific adverse findings when challenging the documents submitted by the assessee.