2022 (8) TMI 910 - AT - Income Tax

Addition u/s 68 - Whether identity and creditworthiness of the cash received from the said company has been established? - CIT-A deleted addition - HELD THAT - As per Section 68 it is the burden on the assessee to establish identity, creditworthiness and genuineness of the transaction for sum credited in the books of accounts to the satisfaction of the AO - We do not understand proposition of the assessee that cash had changed the hands from the company to its promoter Director without any reason and there is no reason forthcoming as to why the cash was paid in cash by the three parties. There is no document produced before either the AO or before CIT (Appeals) or before us to prove the genuineness of the transaction. While deleting the addition the CIT (Appeals) has not discussed about the proving of genuineness of the transaction by the assessee. CIT (Appeals) merely relied on the submission made by the assessee and come to the conclusion in favour of the assessee. The entire approach of the CIT (Appeals) is erroneous and the matter deserves to be re-looked by the AO - Hence, in the interest of justice, we deem it fit to set aside the issue of addition u/s 68 to the file of the AO with a direction to the assessee to prove the creditworthiness and genuineness of the above transaction with creditable evidence and reasons for travelling such amount of cash from the company to the promoter and parties with whom share purchase agreement has been entered. The assessee should also relate the cash deposit date-wise with the cash received by the parties. Needless to say the ld. Assessing Officer shall give opportunity of hearing to the assessee as per law. The grounds of appeal filed by the Revenue are allowed for statistical purpose.

Summary

Issues:
- Appeal filed against CIT (Appeals) order regarding unexplained cash credit and deduction under Section 80C.
- Burden of proof under Section 68 of the Income Tax Act.
- Assessment of income based on unexplained cash credit and deduction disallowance.
- Identity and creditworthiness of the entities involved in cash transactions.
- Lack of proof for genuineness of cash transactions.
- Judicial review of CIT (Appeals) decision.

Analysis:
1. The appeals were filed against the order of the CIT (Appeals) regarding unexplained cash credit and deduction disallowance for assessment years 2009-10 and 2010-11. The appeals were clubbed together due to similar facts and grounds raised by the appellants.

2. In the case of one appellant, the assessment order disallowed a deduction claimed under Section 80C and made an addition on account of unexplained cash credit. The CIT (Appeals) partly allowed the appeal by deleting the cash credit addition. The Revenue challenged this decision.

3. The main issue revolved around the burden of proof under Section 68 of the Income Tax Act, requiring the assessee to establish the identity, creditworthiness, and genuineness of transactions. The Assessing Officer contended that the burden was not met, especially regarding cash receipts from specific entities.

4. The CIT (Appeals) held that the company involved in the cash transactions had the necessary creditworthiness and identity, supporting the assessee's claims. However, the Tribunal found a lack of evidence proving the genuineness of the transactions, leading to the decision to set aside the matter for further assessment.

5. The Tribunal noted that the CIT (Appeals) did not adequately address the genuineness of the transactions and relied heavily on the assessee's submissions. Consequently, the Tribunal deemed it necessary to send the issue back to the Assessing Officer for a reevaluation with specific directions for the assessee to provide credible evidence and reasons for the cash transfers.

6. Ultimately, the Tribunal allowed the Revenue's appeal for statistical purposes, emphasizing the importance of proving the creditworthiness and genuineness of transactions involving significant cash amounts. The decision aimed to ensure a thorough examination of the transactions in question.

7. In similar appeals involving different appellants but identical issues, the Tribunal followed the same approach of setting aside the matters for reassessment by the Assessing Officer, maintaining consistency in the decision-making process.

8. The Tribunal's decision highlighted the significance of meeting the burden of proof in cases of unexplained cash credits, emphasizing the need for clear evidence to support transactions and ensure compliance with the Income Tax Act.

9. The judgment provided a detailed analysis of the legal requirements and the shortcomings in the assessment process, emphasizing the need for a robust and evidence-based approach to tax matters to maintain fairness and integrity in the tax system.