2023 (3) TMI 610 - AT - Income Tax

Unexplained cash credit u/s 68 - As per AO assessee failed to provide the complete details of the lenders to prove the identity, creditworthy and genuineness of transaction - AO taxed such addition under section 115BBE - HELD THAT - We find that not only before assessing officer but before ld CIT(A) as well the assessee filed complete details of the lenders, consisting their name, PAN, which is otherwise reflected on their Form-16 alongwith addresses, contra confirmation, their bank pass books, return of income with capital accounts. No investigation against such evidences was carried out either by assessing officer or by ld CIT(A). No contrary evidences are brought on record to discard such evidences filed by the assessee. We find that in absence of any comment of the evidences furnished by the assessee in discharging its primary onus, assessing officer was not justified in making such additions. We find that in the case of CIT vs. Orissa Corporation (P.) Ltd. 1986 (3) TMI 3 - SUPREME COURT and M/s Pankaj Enka Pvt limited 2016 (1) TMI 1463 - GUJARAT HIGH COURT , and CIT vs. Ranchhod V. Nakhava 2012 (5) TMI 186 - GUJARAT HIGH COURT held that if the transaction is through regular banking channels and the assessee has filed confirmation along with PAN of the creditors, the assessee has discharged its onus. Thus we find that the assessee furnished all such details of the lenders/ depositors. There is no evidence that credit/ advance in the books of assessee was result of some circular transactions or any cash was deposited before issuing cheques to the assessee. In case of Chunilal Jivanram, the assessee has square up the loan during the present financial year. Thus, in view of the aforesaid factual and legal discussion, we do not find justification in making addition under section 68 of the Act - Decided in favour of assessee.

Summary

Issues:
- Addition of Rs.35,00,000 on the ground of alleged unexplained cash credit u/s 68 of the Act.
- Disallowance of interest expenses of Rs.2,78,500 paid on unsecured loans.

Issue 1: Addition of Rs.35,00,000 under section 68 of the Act:
The assessee, a partnership firm, declared a loss for the assessment year 2015-16 and showed unsecured loans in its books of account from various parties. Despite repeated requests, the assessee failed to provide details regarding the identity, creditworthiness, and genuineness of the creditors. The Assessing Officer made an addition of Rs.35,00,000 as unexplained cash credit and also disallowed interest expenses paid by the assessee. The NFAC/Ld. CIT(A) upheld the addition, stating that the burden of proof lies on the assessee to establish the genuineness of transactions. The assessee argued that it had provided complete details of the lenders, including PAN, addresses, and bank statements, and had fulfilled its onus. The Tribunal found that the assessing officer did not consider the evidence provided by the assessee and made the addition unjustifiably. Citing relevant case law, the Tribunal allowed the appeal, stating that the assessee had discharged its onus.

Issue 2: Disallowance of interest expenses of Rs.2,78,500:
The disallowance of interest expenses was found to be a consequential addition to the unsecured loan issue. Since the Tribunal allowed the appeal on the first issue regarding the addition of Rs.35,00,000, the disallowance of interest expenses was also deemed unjustified and, therefore, allowed. The Tribunal concluded that the appeal of the assessee was to be allowed in its entirety.

In conclusion, the Tribunal allowed the appeal of the assessee, overturning the addition of Rs.35,00,000 under section 68 of the Act and the disallowance of interest expenses of Rs.2,78,500. The Tribunal found that the assessee had provided sufficient evidence to establish the genuineness of the transactions and had fulfilled its onus in this regard.