2023 (2) TMI 696 - AT - Income Tax

Addition u/s 68 - cash deposit - depositor is one of the directors of the company - As per AO assessee has to not only establish the identity of the source but also establish at least prima facie the capacity of such source and genuineness of the transaction - HELD THAT - Merely pointing out to the source and the source admitting that it had made the payments is not sufficient to discharge the burden placed on the assessee by Section 68 - To discharge the burden which Section 68 casts upon the assessee, at least some plausible explanation is required to be furnished, which must be backed by some reliable evidence. CIT(A) after considering the submissions of the assessee, the bank statement which have been reproduced by the CIT(A) in his order has given a finding that for A.Y. 2015-16 assessee had filed return of income of Rs.9,05,220/- which could not explain the source of its deposit of Rs.51,00,000/-. He has further given a finding that for the cash deposit of Rs.27,50,000/- no reasonable explanation was furnished by the assessee and the summons issued to Hitesh Bhatia was not complied with. Before us, no fallacy in the findings of CIT(A) has been pointed out by assessee - if the circumstances required u/s 68 and the findings of CIT(A) are taken into consideration, then in the present case we are of the view that the assessee has not discharged the burden which was cast u/s 68 - In such a situation, we find no reason to interfere with the order of CIT(A) and thus the grounds of assessee are dismissed.

Summary

Issues:
1. Addition of unsecured loans under section 68 of the IT Act.
2. Failure to prove creditworthiness and genuineness of transactions.
3. Burden of proof on the assessee regarding cash credits.

Analysis:
1. The appeal was against the order of the Commissioner of Income Tax (Appeals) relating to the Assessment Year 2015-16. The primary issue was the addition of Rs. 27,50,000 under section 68 of the IT Act, which was part of a larger addition made by the Assessing Officer. The CIT(A) partially upheld this addition, leading to the current appeal.

2. The Assessing Officer noted that the assessee had received unsecured loans from two directors, one of whom failed to provide details when summoned. The AO considered the unexplained cash deposits in the director's bank account and treated the amount as unsecured cash credit under section 68. The CIT(A) upheld part of this addition, citing lack of proof regarding the director's creditworthiness and the source of funds.

3. The burden of proof under section 68 requires the assessee to establish the identity, capacity, and genuineness of the transaction regarding any cash credits. The CIT(A) found that the assessee failed to adequately explain the source of the funds and the cash deposits made by the director. The tribunal concurred with the CIT(A)'s findings, emphasizing the need for a plausible explanation backed by reliable evidence to discharge the burden imposed by section 68. As the assessee did not meet this standard, the tribunal dismissed the appeal.

In conclusion, the tribunal upheld the CIT(A)'s decision to confirm the addition of Rs. 27,50,000 under section 68 of the IT Act, emphasizing the importance of meeting the burden of proof regarding cash credits as required by the law.