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2024 (6) TMI 1371 - HC - Income TaxIssues Involved: 1. Justification of the Tribunal in upholding the deduction of addition caused on account of unexplained cash credit under section 68 of the Income Tax Act, 1961. 2. Justification of the Tribunal in upholding the deduction despite detailed inquiry revealing the non-existence of the creditor. Issue-wise Detailed Analysis: 1. Justification of the Tribunal in upholding the deduction of addition caused on account of unexplained cash credit under section 68 of the Income Tax Act, 1961: The assessee, engaged in the business of trading rough and polished diamonds, filed a return of income for the period under consideration on 13.02.2016, declaring a total income of Rs. 56,54,590/-. During the assessment proceedings under section 143(3) of the Act, the total income was assessed at Rs. 12,13,54,590/- after making an addition of Rs. 11,57,00,000/- on account of unsecured loans, treating them as unexplained cash credits under section 68 of the Act. The assessee appealed to the CIT(Appeals), who allowed the appeal, noting that the advances were repaid within the financial year, mostly within 30 days, and that the repayments were evident from ledger accounts, bank statements, and affidavits filed by the lenders. The CIT(A) observed that the AO did not question the repayments or their sources, and thus, the repayment of loans constituted good evidence regarding the genuineness of the loans. This view was supported by the jurisdictional High Court in Ayachi Chandrashekhar Narsangaji and the ITAT Surat in Kalubhai A. Dhamelia and Damjibhai Varjibhai Gangani. The Tribunal dismissed the Revenue's appeal, noting that all advances were repaid within the same financial year, with most repayments occurring within 30 days. The Tribunal relied on the decision of the Jurisdictional High Court in Ayachi Chandrasekhar Narsangji, which held that when a loan amount is repaid in the immediately next year and accepted by the Department, no addition under section 68 can be made. The Tribunal found that the assessee had refunded the entire deposits within a short period, and the repayment was not doubted by the assessing officer. 2. Justification of the Tribunal in upholding the deduction despite detailed inquiry revealing the non-existence of the creditor: The Tribunal, after considering the assessee's submission, noted that the advances were repaid within the same financial year, and the repayment was verified from the ledger account and bank statement. The Tribunal observed that the repayment of loans within a short period and the acceptance of such repayment by the Department without further probing constituted sufficient evidence of the genuineness of the loans. The Tribunal also referred to the decision in CIT Vs Ayachi Chandrashekhar Narsangji, where it was held that no addition could be made in the current year on account of cash loans if the Department had accepted the repayment of the loan in the subsequent financial year. The High Court, upon hearing the submissions and reviewing the orders, noted that the amount of loan received by the assessee was returned within the same financial year, and in most cases, within 30 days. The repayment was verified from the Ledger Account and Bank Statement. The High Court referred to the decision in Dy. CIT v. Rohini Builders, which emphasized that the assessee had discharged the initial onus under section 68 by proving the identity of the creditors, their capacity, and the genuineness of the transaction through account payee cheques. The Court highlighted that the phraseology of section 68 uses "may" and not "shall," indicating that the unsatisfactoriness of the explanation does not automatically result in deeming the amount credited as income. In conclusion, the High Court found no merit in the appeal, considering the ratio laid down in the cited judgments and the facts of the case, and dismissed the appeal with no order as to costs.
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