2023 (5) TMI 827 - AT - Income Tax

Addition u/s 68 - cash deposit/time deposit by the assessee in its cooperative credit society and IDBI Bank account - HELD THAT - When the assessee has not given the detail viz. name, address and PAN of the person from whom the cash in question was received along with confirmation neither before the AO nor before the Ld. CIT(A) nor the assessee has come up before the Tribunal to furnish any such detail, the identity and creditworthiness of the depositor has not been proved nor the genuineness of the transaction is proved as required under section 68 of the Act, we find no illegality or perversity in the impugned findings returned by the Ld. CIT(A). So ground No.1 raised by the assessee in its appeal is hereby dismissed. Unexplained/ unsecured loans - HELD THAT - No doubt the assessee has brought on record PAN, bank statement, ledger account of the lender etc. but in the given circumstances their creditworthiness has not been proved by the assessee when specifically called upon by the AO to prove as required under section 68 of the Act. Merely because of the fact that transaction is through banking channel does not absolve the assessee to prove the creditworthiness of the lenders. Financials of any of the creditors have not been brought on record. When such transactions are surrounded by unexplainable facts and suspicious circumstances the onus is on the assessee to explain and to dispel all the suspicious circumstances which the assessee has miserably failed to prove. No doubt income of the lending entities is not the requirement of the law or they should have sufficient balance in their account to lend the loan. But we are of the considered view that when transactions themselves are surrounded by unexplainable and suspicious circumstances, income of the lending parties and their business profile do become a requirement to be explained by the assessee. No income or meager income of the lender itself speaks volume of the creditworthiness of the lenders which is the requirement of section 68 to prove.When the assessee has failed to discharge the onus by proving genuineness of the transactions and creditworthiness of the creditors as required under section 68 of the Act, the impugned deletion made by the Ld. CIT(A) is not sustainable - Decided in favour of revenue. Estimated addition @ 25% of the advance booking receipt on shops/flats by the AO u/s 68 - HELD THAT - Assessee being a builder developer received an amount as advance booking of low cost housing flats. It is also not in dispute that at the time of applying for conversion of use of the land in question from agriculture to residential the assessee was informed that sole plot reserved for a project called Virar Alibag Corridor Project on which no construction activity can be carried out. Assessee was to refund the advance to the investors. Since the project could not be further carried out due to legal bar the assessee was under legal obligation to refund the amount to the investors after receiving compensation from the government. Estimated addition @ 25% of the advance booking received by the assessee by the AO is not sustainable, hence rightly deleted by the CIT(A). Consequently grounds raised by the Revenue are hereby dismissed.

Summary

Issues Involved:
1. Addition of unexplained cash deposits.
2. Deletion of unsecured loans.
3. Deletion of addition on account of advance booking receipts.

Summary:

Issue 1: Addition of Unexplained Cash Deposits

The assessee contested the addition of Rs.1,25,01,969/- made by the AO under section 68 of the Income Tax Act for unexplained cash deposits in cooperative credit society and IDBI Bank. The CIT(A) upheld the addition, noting that the assessee failed to provide necessary details such as names, addresses, PANs, and confirmations from depositors. The Tribunal found no illegality in the CIT(A)'s findings and dismissed the assessee's appeal on this ground.

Issue 2: Deletion of Unsecured Loans

The Revenue challenged the deletion of Rs.92,86,843/- by the CIT(A) which was initially added by the AO under section 68 for unexplained unsecured loans. The AO had objected to the additional evidence provided by the assessee during the remand proceedings, arguing that the assessee failed to establish the creditworthiness and genuineness of the transactions. The Tribunal agreed with the AO, noting that the lenders did not have sufficient income or regular income tax returns to prove their creditworthiness. Consequently, the Tribunal set aside the CIT(A)'s deletion and restored the AO's addition, allowing the Revenue's appeal on this ground.

Issue 3: Deletion of Addition on Account of Advance Booking Receipts

The Revenue also contested the deletion of Rs.74,39,883/- made by the AO under section 68, which was 25% of the total advances received for booking flats/shops. The CIT(A) found the estimated addition unsustainable, noting that the AO had already added Rs.1,25,01,969/- for cash deposits from the same advances and that the project could not proceed due to legal restrictions. The Tribunal upheld the CIT(A)'s deletion, dismissing the Revenue's appeal on this ground.

Conclusion:

The assessee's appeal was dismissed, and the Revenue's appeal was partly allowed. The Tribunal upheld the addition of unexplained cash deposits and restored the addition for unsecured loans while confirming the deletion of the estimated addition for advance booking receipts.