2023 (7) TMI 465 - AT - Income Tax

Unexplained cash credits - Additions u/s 68 - identity, creditworthiness and genuineness of the transaction - HELD THAT - Assessee has placed substantial material on record to prove the identity, creditworthiness and genuineness of the transaction. Admittedly, in the instant facts all transactions took place through banking channels, the confirmation of the lender Shri Gaurav Viradia is on record, the returns of income filed by Shri Gaurav Viradia were also placed before the assessing officer for his records and the bank account of Shri Gaurav Viradia was also placed before the Department. The fact that in remand proceedings Shri Gaurav Viradia did not cause appearance in person, does not lead to the inference that the identity of lender or his creditworthiness has not been established by the assessee. In view of the above facts, we are of the considered view, that no addition under section 68 of the Act is called for in the case of Shri Gaurav Viradia. For the other lender assessee has been unable to give any plausible explanation as to why cash was deposited in the bank account of the lender immediately prior to extending loan to the assessee. Also, there is an apparent contradiction in the stand taken by the assessee with respect to the date on which loan was extended to the assessee. Accordingly, assessee has not been able to establish the creditworthiness or genuineness of the aforesaid transaction with Shri Alpesh Patel, and therefore the addition made by the Ld. CIT(Appeals) with respect to the aforesaid party is liable to be sustained. Decided partly in favour of assessee.

Summary

Issues involved:
The issues involved in this case are related to the addition of unexplained cash credits under Section 68 of the Income Tax Act for the assessment year 2012-13.

Addition of Rs. 71,94,139/- under Section 68 of the Act:
The appeal was filed against the order of the Commissioner of Income Tax (Appeal-3), Vadodara, regarding the addition of Rs. 71,94,139/- as unexplained cash credits. The Assessing Officer observed that the assessee received unsecured loans from various parties, specifically from two parties - Gaurav Viradia and Alpesh Patel. The AO confirmed these amounts as unexplained income under section 68 of the Act. The CIT(A) also upheld the addition made by the AO concerning these two parties.

Gaurav Viradia's loan of Rs. 29,00,000/-:
The appellant provided confirmation, bank account details, and the return of income for the loan received from Gaurav Viradia. The AO noted discrepancies in the bank statement and lack of substantial balance in the lender's account. Despite requests to produce Gaurav Viradia for verification, he did not appear or provide any explanation. The genuineness and creditworthiness of the transaction were not proven by the appellant. However, the Tribunal found that the appellant had provided substantial evidence to establish the identity, creditworthiness, and genuineness of the transaction. All transactions were conducted through banking channels, and relevant documents were submitted. The addition was deemed not sustainable.

Alpesh Patel's loan of Rs. 8,00,000/-:
The AO raised concerns about cash deposits in Alpesh Patel's account before extending the loan to the appellant. Discrepancies in the bank statement and contradictions in the dates of transactions were noted. The appellant failed to provide a plausible explanation for these discrepancies. The Tribunal agreed with the CIT(A) that the addition concerning Alpesh Patel was valid. The appellant could not establish the creditworthiness or genuineness of the transaction, leading to the confirmation of the addition.

Conclusion:
The appeal was partly allowed, with the Tribunal overturning the addition related to Gaurav Viradia but upholding the addition concerning Alpesh Patel. The Tribunal found that the appellant successfully proved the legitimacy of the transaction with Gaurav Viradia but failed to do so in the case of Alpesh Patel.