2013 (10) TMI 553 - AT - Income Tax

Addition u/s 68 - Creditworthiness of parties not proved - Held that - assessee did not make any serious attempt to establish the creditworthiness of the creditors - Even the AR primarily dealt with the credits of a teacher and an agriculturist who owned 3.63 acres of agricultural land both living in villages - Credit given by other people are considered as not genuine - no details of family and income details were either filed before the revenue authorities - Assessee was not been able to substantiate as to how the creditor was able to save a sum of Rs. 50, 000/- from her teaching profession which has been advanced as loan to the assessee - no details except for his cultivable land holding of 3.63 acres has been provided to substantiate agriculturist s savings to lend a loan of Rs. 60, 000 - These vague details are not good enough reasons to treat the impugned loans as genuine - Decided against assessee. Addition of Cash deposited in ledger account - Addition made u/s 68 - Under section 68 an addition can be made if the transaction is not genuine; the creditworthiness of the person whose money is credited in the books is not established and where the identity of the creditor is not proved - There is a peculiar tangent to section 68 where the director collected the sale proceeds and deposited them with the assessee company. So far the revenue authorities have looked into this aspect and fact which is undisputed. But the fact as to why the director collected and why the assessee company who had renounced its rights on the original agreement to undertake the sale of sub plots belonging to the trust and why was the assessee company through its director was still collecting payments on behalf of the trust has not been looked into. The real motive and purpose has yet to be ascertained in the light of arguments of the AR - Matter restored back to A.O. - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition under Section 68 - Rs. 3,55,000/-
2. Addition of Cash deposited in the ledger account of Shri Jaideep Kapadia - Rs. 40,54,400/-
3. Addition towards cash deposit in the bank account - Rs. 46,64,000/-

Issue-wise Detailed Analysis:

1. Addition under Section 68 - Rs. 3,55,000/-:

The Commissioner of Income-tax (Appeals) [CIT(A)] confirmed the addition made under Section 68 of the Income Tax Act, 1961, for an aggregate amount of Rs. 3,55,000/- credited in the books of the assessee from five parties. The Assessing Officer (AO) had found that the assessee failed to provide PAN details for creditors at Serial Nos. 1 to 4 and that the amounts were received through account payee cheques or demand drafts. The AO disbelieved the explanation and added the amounts to the income of the assessee. The CIT(A) upheld this addition, noting incomplete details and inconsistencies, such as the non-existence of a person with the provided PAN details. The ITAT also upheld the addition, stating that the assessee did not make a serious attempt to establish the creditworthiness of the creditors and failed to provide sufficient details to substantiate the loans as genuine.

2. Addition of Cash deposited in the ledger account of Shri Jaideep Kapadia - Rs. 40,54,400/-:

The AO found Rs. 40,54,400/- credited to the account of Shri Jaideep Kapadia and questioned the source. The assessee explained that the director collected payments on behalf of a charitable trust and deposited the same in the assessee's bank account. The AO and CIT(A) found the explanation unconvincing and sustained the addition, questioning the logical reason for such transactions. The ITAT noted that the revenue authorities did not fully investigate the agreements between the trust and the assessee, the director's role, and the transactions' nature. Consequently, the ITAT set aside the CIT(A)'s order and restored the issue to the AO for a thorough examination of the agreements and the transactions.

3. Addition towards cash deposit in the bank account - Rs. 46,64,000/-:

The CIT(A) restored the issue of the addition of Rs. 46,64,000/- under Section 68 to the AO for further investigation. The ITAT observed that the ground taken in the appeal was misplaced and inconsistent with the CIT(A)'s order. The ITAT noted that the CIT(A) had already given appropriate directions for the AO to comply with and, therefore, rejected this ground of appeal.

Conclusion:

The appeal filed by the assessee was partly allowed. The ITAT upheld the addition under Section 68 for Rs. 3,55,000/- due to insufficient evidence of creditworthiness. The addition of Rs. 40,54,400/- was set aside and remanded to the AO for further examination. The issue of Rs. 46,64,000/- was already appropriately directed by the CIT(A) for further investigation by the AO, and the ITAT rejected the ground of appeal as misplaced.