2021 (1) TMI 918 - AT - Income Tax

Addition u/s 68 - Bank statements of the lenders were not provided - HELD THAT - Ledger account of both the creditors there are loans given to the assessee-company as well as assessee paid back the amounts to them. The debit of financial charges to the profit and loss account is not a relevant criteria to consider under section 68. Bank statements are part of the record which also did not show if any cash have been deposited in the bank accounts of the creditors for giving loan to the assessee-company. Their bank accounts clearly show that both the creditors have sufficient funds in their bank account and all the transactions are carried-out through banking channel only. Thus, the initial burden upon the assessee-company to prove the creditworthiness of the creditors and genuineness of the transaction have been established in the matter and burden upon assessee-company have been discharged A.O/CIT(A) did not do anything on the documentary evidences produced on record and no further enquiry have been made into the matter. Since the A.O. accepted the creditworthiness and genuineness of the transaction with the same creditors in subsequent assessment year as well, it s stand proved on record that there were no justification for the authorities below to make any addition against the assessee-company. In view of the above discussion, we set aside the orders of the authorities below and delete the entire addition - Decided in favour of assessee.

Issues Involved:
1. Legality of the CIT(A)'s order.
2. Confirmation of additions under Section 68 of the Income Tax Act.
3. Consideration of bank statements and other documents.
4. Proof of identity, genuineness, and creditworthiness of lenders.

Detailed Analysis:

1. Legality of the CIT(A)'s Order:
The assessee challenged the CIT(A)'s order, arguing it was "bad in law and against the facts and circumstances of the case." The Tribunal examined the procedural history, noting that the CIT(A) had previously deleted the additions, which were later remanded by the High Court for further inquiry. The Tribunal found that the CIT(A)'s subsequent confirmation of the additions was based on incorrect premises, particularly the assertion that bank statements were not provided, which was factually incorrect.

2. Confirmation of Additions Under Section 68:
The primary contention was the CIT(A)'s confirmation of additions amounting to ?36,19,25,209 and ?12,29,99,000 under Section 68, which concerns unexplained cash credits. The Tribunal noted that the CIT(A) upheld the additions due to the absence of bank statements and perceived lack of creditworthiness and genuineness of the transactions. However, the Tribunal found that the assessee had indeed provided comprehensive documentation, including bank statements, ledger accounts, and balance sheets, which demonstrated the creditworthiness of the lenders.

3. Consideration of Bank Statements and Other Documents:
The Tribunal emphasized that the assessee had submitted a paper book containing 96 pages of relevant documents, including bank statements, which the CIT(A) failed to consider adequately. The Tribunal criticized the CIT(A) for ignoring these documents and for making conclusions without a proper basis. The Tribunal highlighted that the High Court had directed the CIT(A) to consider these additional documents, which were crucial for establishing the lenders' creditworthiness and the genuineness of the transactions.

4. Proof of Identity, Genuineness, and Creditworthiness of Lenders:
The Tribunal extensively reviewed the evidence provided by the assessee, including the lenders' ledger accounts, PAN, ITRs, balance sheets, and bank statements. It was noted that the lenders had substantial funds and that the transactions were conducted through normal banking channels. The Tribunal also pointed out that in subsequent assessment years, similar transactions with the same lenders were accepted by the Revenue without any additions under Section 68. This consistency in the acceptance of transactions in other years further supported the assessee's case.

Conclusion:
The Tribunal concluded that the assessee had successfully discharged the initial burden of proving the identity, creditworthiness, and genuineness of the transactions with the lenders. It found that the CIT(A)'s reasons for confirming the additions were incorrect and not supported by the evidence on record. Consequently, the Tribunal set aside the orders of the lower authorities and deleted the entire addition, allowing the appeal in favor of the assessee. The order was pronounced in the open court.

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