2022 (9) TMI 241 - AT - Income Tax

Unexplained cash credit u/s 68 - Estimation of income - C ommission income earned for arranging such short term loans - HELD THAT - Details filed by the assessee in the form of proof of identity, bank statements, nature of transactions carried out during the year, confirmation of amounts received, and copies of Income Tax Returns, we intend to hold that in the instant case, there can only can be an element of commission income which the assessee might have earned for arranging such short term loans for M/s. Pragati Managment and without holding the assessee to be an accommodation entry provider. Thus, to end the dispute and without setting any precedence for the alleged transactions, we estimate income of the assessee @ 3% of the total loans advanced i.e., 3% of Rs.1,00,00,000/- which comes to Rs.3,00,000/- and direct the Assessing Officer to sustain the said addition and the remaining addition of Rs.97,00,000/- stands deleted - Appeal of assessee partly allowed.

Issues:
1. Unexplained cash credit under section 68 of the Income Tax Act.
2. Addition of interest-free advances.
3. Charging interest under section 234B.
4. Opportunity of cross-examination not provided.

Issue 1: Unexplained Cash Credit under Section 68 of the Income Tax Act:
The appeal was against the order of the Learned Commissioner of Income Tax (Appeals) confirming the addition of Rs. 1,00,00,000 as unexplained cash credit under section 68 of the Income Tax Act. The assessee argued that the loans were genuine and supported by proper documentation. The Assessing Officer found discrepancies in the transactions and the cash creditors denied any dealings with the assessee. The Tribunal observed that the assessee provided proof of identity, bank statements, and financial details of the alleged cash creditors. The Tribunal concluded that there was an element of commission income earned by the assessee for arranging short-term loans, estimating it at 3% of the total loans advanced, amounting to Rs. 3,00,000. The remaining addition of Rs. 97,00,000 was deleted, emphasizing that the decision should not set a precedent for other cases.

Issue 2: Addition of Interest-Free Advances:
The Assessing Officer added Rs. 1,00,00,000 as unexplained cash credit due to discrepancies in the loan transactions. The assessee contended that the loans were genuine and supported by documentation. The Tribunal noted that the assessee provided loan confirmations, bank statements, and details of the alleged cash creditors. It was observed that the nature of the transactions indicated a short-term interest-free loan arrangement. The Tribunal estimated the commission income earned by the assessee at 3% of the total loans advanced, amounting to Rs. 3,00,000, and directed the deletion of the remaining addition of Rs. 97,00,000.

Issue 3: Charging Interest under Section 234B:
The assessee argued that charging interest under section 234B was mechanically wrong and illegal. However, the judgment did not specifically address this issue, focusing primarily on the unexplained cash credit and interest-free advances.

Issue 4: Opportunity of Cross-Examination Not Provided:
The assessee raised concerns about not being provided an opportunity for cross-examination during the assessment proceedings. This issue was not explicitly addressed in the judgment, as the focus was on the substantiation of the loan transactions and the addition of unexplained cash credit.

In conclusion, the Tribunal partially allowed the appeal, directing the Assessing Officer to sustain the addition of Rs. 3,00,000 as commission income earned by the assessee for arranging short-term loans, while deleting the remaining addition of Rs. 97,00,000. The judgment emphasized that the decision was based on the specific facts of the case and should not be considered a precedent for other cases.

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