2023 (6) TMI 515 - AT - Income Tax

Unsecured loans - Additions u/s 68 as cash credit - onus to prove - CIT-A deleted the addition - HELD THAT - Assessee had been successful in establishing the identity of the creditor, genuineness of the transactions as also the capacity of the creditor. Not only the immediate and direct source was established being from the concerned creditor from the banking channels but also there been sufficient source available in the hands of the respective creditors. It is not case of the revenue that cash amount was deposited in the bank account of the creditor before transfer to the assessee. Once such initial burden was successfully discharged by the assessee, the onus shifted to the revenue to prove that the subjected credits did not belong to the creditors but the said amount belong to the assessee, however, the AO completely failed to discharge the burden shifted to him. DR failed to point out if anything wrong was committed by the ld. CIT (A). No infirmity in the order of Ld CIT(A), who rightly deleted the addition made u/s 68 of the act. Therefore, the ground of appeal no.1 taken by the revenue is hereby dismissed. Unsecured loans - Additions u/s 69 as unexplained expenditure - CIT(A) deleted the impugned additions - HELD THAT - As not disputed that all the transactions have been carried out through banking channels only. Even all the transactions carried out with India Nivesh are through banking channels. The AO has nowhere established that the loss on occasion of share trading was a bogus or sham loss claimed. The attempt of AO to compare the balance amount of 1.62 crore with the share trading loss was an example of mere suspicion without any supporting material. Repayment of Rs. 1.62 crores was made through banking channel. The audited accounts were submitted and the AO completely failed to point out any discrepancy or error in the accounts which were not even rejected by him. As not the case of the AO as he failed to point out any expenditure incurred without source or which is unrecorded. Hence provisions of S.69C were wrongly invoked. - Decided against revenue. Addition on account of shortfall in NP rate - Difference while comparing the gross profit shown by the appellant in the books of accounts and the gross profit worked out by the AO on the basis of sales and purchases shown in the VAT return - CIT-A deleted addition - HELD THAT - Assessee has maintained complete books of accounts on day today basis which were subjected to tax audit. It is not denied that there was no adverse remark made by the Tax Auditor in the tax audit report. The accounts were neither rejected nor S.145 of the Act was invoked. The copies of the VAT return, copies of goods ledger account with purchase sale register were submitted before us which were carefully gone through and it is seen that all the transactions shown in the reconciliation statements are verifiable with reference to the books of accounts, tax audit report and the VAT return. The contention of the assessee that the commission income of Rs. 50,212/- on the sales and purchase made on the behalf of the principal M/s Sanjay Rathi HUF were duly disclosed has not been found fault with or wrong by any of the lower authorities. The Ld CIT(A) has also recorded categorical finding of facts which could not be rebutted by Ld DR during the course of hearing. The assessee has not challenged the part sustenance of the addition so made. After considering the totality of the facts of circumstances, we find no error in the order of the Ld CIT(A). Decided against revenue.

Summary

Issues Involved:
1. Deletion of addition on account of unsecured loans treated as unexplained cash credit u/s 68 of the I.T. Act.
2. Deletion of addition on account of unsecured loans treated as unexplained expenditure u/s 69C of the I.T. Act.
3. Deletion of addition on account of shortfall in NP (Net Profit).

Summary:

Issue 1: Deletion of Addition on Account of Unsecured Loans Treated as Unexplained Cash Credit u/s 68
The Revenue challenged the deletion of Rs. 1,47,01,596/- added by the AO as unexplained cash credit u/s 68. The AO observed discrepancies in the bank statements and alleged that the funds were repaid and received back as unsecured loans, thus remaining unexplained. However, the Ld. CIT(A) found that the assessee provided sufficient evidence, including confirmatory letters, ITRs, and bank statements, proving the identity, capacity, and genuineness of the transactions. The Tribunal upheld the CIT(A)'s decision, stating the assessee had discharged the initial onus, and the Revenue failed to disprove the evidence provided.

Issue 2: Deletion of Addition on Account of Unsecured Loans Treated as Unexplained Expenditure u/s 69C
The AO added Rs. 1,62,39,154/- as unexplained expenditure u/s 69C, doubting the source of repayment of loans. The Ld. CIT(A) deleted the addition, noting that the assessee had submitted all necessary documents, including confirmations, ITRs, and bank statements. The Tribunal agreed with the CIT(A), emphasizing that all transactions were through banking channels and the AO did not establish any bogus or sham transactions. The Tribunal found no error in the CIT(A)'s order and dismissed the Revenue's appeal.

Issue 3: Deletion of Addition on Account of Shortfall in NP
The AO added Rs. 19,42,012/- based on a difference in gross profit calculated from VAT returns and books of accounts. The Ld. CIT(A) partly confirmed Rs. 8,52,000/- and deleted Rs. 10,90,012/-. The Tribunal noted that the assessee provided reconciliation statements and supporting documents, which the AO failed to consider properly. The Tribunal found that the CIT(A) thoroughly verified the transactions and upheld the deletion of Rs. 10,90,012/-, dismissing the Revenue's appeal on this ground as well.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s deletions of additions under sections 68 and 69C, and the partial deletion regarding the shortfall in NP. The Tribunal found that the assessee had provided sufficient evidence to discharge the initial onus, and the Revenue failed to disprove the evidence.