2024 (7) TMI 1421 - AT - Income Tax

Unexplained cash credit u/s 68 - opening balance in respect of unsecured loans taken by the assessee in earlier financial years - HELD THAT - It is well settled law that addition u/s. 68 of the Act can be made only during the year in which such credits has been received and if the credit balances appearing in the account of the assessee is not pertaining to the year under consideration the AO cannot make addition u/s. 68 of the Act in the subsequent assessment year. This view is supported by the decision of the ITAT Ahmedabad Benches in the case of Samir J Shah 2023 (4) TMI 96 - ITAT AHMEDABAD Accordingly so far as the addition u/s. 68 of the Act on account of opening balances b/f are concerned we are restoring this issue to the file of AO to verify/examine that out of the closing balances of Unsecured Loans as on 31/03/2017 how much were brought forward from the earlier years and accordingly delete the additions on Account of Opening Balances added u/s. 68 of the Act. Balance of unsecured loans taken/accepted during the year under consideration - We also restoring this issue to the file of AO for fresh consideration with a direction to examine/verify the identities of the parties more particularly having sent their reply u/s 133(6) of the Act from the same Address as that of the Assessee in respect of the transactions entered in the year under consideration genuineness of the Transactions creditworthiness of the parties and to decide this issue in accordance with Law after giving reasonable opportunity of being heard. Appeal filed by the assessee is partly allowed for statistical purposes.

Issues Involved:

1. Confirmation of the assessment order by the CIT(A).
2. Addition made by the Assessing Officer (AO) as unexplained cash credit under Section 68 of the Income-tax Act, 1961.
3. Non-appreciation of the fact that most loans were accepted in earlier years.
4. Identity, genuineness, and creditworthiness of loan creditors.
5. Applicability of Section 115BBE of the Income-tax Act.
6. Liability to pay interest under Sections 234B and 234C of the Income-tax Act.

Detailed Analysis:

1. Confirmation of the Assessment Order by the CIT(A):
The assessee argued that the CIT(A) erred in confirming the AO's order and that the appellate order is "bad in law and is liable to be quashed." The Tribunal noted that the CIT(A) affirmed the AO's view by passing an "unreasoned & Non-speaking order," merely stating that no satisfactory explanation was provided by the appellant.

2. Addition as Unexplained Cash Credit under Section 68:
The AO observed that the assessee had shown an amount of Rs. 92,04,381/- as unsecured loans in the balance sheet. Notices under Section 133(6) were issued to the loan creditors, and only 10 out of 13 replied. Summons under Section 131 were also issued, but none of the creditors responded. The AO concluded that the loans were bogus and treated Rs. 91,14,998 as unexplained cash credit under Section 68. The Tribunal, however, noted that the assessee had provided documentary evidence, including confirmations from loan creditors and details of PAN, opening balance, and closing balance.

3. Loans Accepted in Earlier Years:
The assessee contended that most of the unsecured loans were taken in earlier years and had opening balances as of 01/04/2016. The Tribunal observed that out of the closing balance of Rs. 92,04,381, an amount of Rs. 81,73,804 was on account of opening balances from earlier financial years. Citing precedents, the Tribunal held that additions under Section 68 can only be made in the year the credit is received, not in subsequent years.

4. Identity, Genuineness, and Creditworthiness of Loan Creditors:
The Tribunal noted that the assessee had provided all necessary documentary evidence, including confirmations from loan creditors and details of PAN and addresses. The Tribunal directed the AO to verify the identities, genuineness, and creditworthiness of the loan creditors, especially those who replied from the same address as the assessee.

5. Applicability of Section 115BBE:
The assessee argued that the provisions of Section 115BBE were not applicable. However, the Tribunal did not provide a specific ruling on this issue in the summarized judgment.

6. Liability to Pay Interest under Sections 234B and 234C:
The assessee denied the liability to pay interest under Sections 234B and 234C, claiming it was levied erroneously. The Tribunal did not specifically address this issue in the summarized judgment.

Conclusion:
The Tribunal allowed the appeal partly for statistical purposes. It restored the issue of addition under Section 68 to the AO for verification of the opening balances and fresh consideration of the unsecured loans taken during the year. The AO was directed to examine the identities, genuineness, and creditworthiness of the loan creditors and decide the issue in accordance with the law, giving the assessee a reasonable opportunity to be heard. The order was pronounced in the open court on 24th July, 2024.

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