2015 (6) TMI 706 - AT - Income Tax

Unexplained cash credits u/s. 68 - CIT(A) deleted the addition - Held that - The assessee established the genuineness of the transaction of both the creditors since the loan was taken by account payee cheque and credited to the bank account of the assessee hence clear transaction was effected through banking channel. The creditworthiness of the creditors were filed by copy of relevant bank account of the creditors, the bank account, complete address of the holder and clearing cheque of the creditors are available in the copies of such cash. The assessee had thus prima facie established that all three ingredients for proving the cash credit introduced. This finding is not controverted by the Revenue by placing any material to disproving the same. Since this issue is well settled by various judicial pronouncements in the case of cash credits, the assessee has to establish identity of the creditors, the creditworthiness of such creditor and the genuineness of the transaction. In this view of the matter, we do not find any infirmity into the order passed by Ld. CIT(A). - Decided against revenue. Disallowing the interest paid on unsecured loan - CIT(A) deleted the addition - Held that - The fact that amount of ₹ 1.15 crores was the opening balance of loans taken from the financial year 2005-06 onwards and the same was never considered as unexplained credits u/s. 68 of the Act and this fact is not controverted by the Revenue, in this view of the matter, we do not find any infirmity into the order passed by Ld. CIT(A), hence, this ground of Revenue s appeal is dismissed.- Decided against revenue.

Summary

Issues:
1. Deletion of addition of unexplained cash credits under section 68 of the Income Tax Act.
2. Deletion of addition of interest paid on unsecured loan.

Issue 1: Deletion of addition of unexplained cash credits under section 68 of the Income Tax Act:
The appeal by the Revenue was against the order of the Commissioner of Income-Tax(Appeals) for the assessment year 2008-09. The Revenue challenged the deletion of the addition of Rs. 7.50,000 made on account of unexplained cash credits under section 68 of the Act. The Assessing Officer had added unsecured loan under section 68 and disallowed interest paid. The CIT(A) partly allowed the appeal of the assessee. The Revenue contended that the CIT(A) erred in deleting the addition made under section 68. The Authorized Representative of the assessee argued that the assessee proved the identity, creditworthiness, and genuineness of the transaction. The Tribunal found that the assessee had established the identity of the creditors, genuineness of the transaction, and creditworthiness of the creditors. The Tribunal upheld the order of the CIT(A) as the assessee had fulfilled the requirements to prove the cash credit introduced under section 68. The Tribunal dismissed this ground of the Revenue's appeal.

Issue 2: Deletion of addition of interest paid on unsecured loan:
The second ground related to the deletion of Rs. 16,20,242 made on account of interest paid on an unsecured loan. The Revenue argued that the CIT(A)'s order was not justified, stating that the Assessing Officer rightly disallowed the claim. The CIT(A) had observed that disallowance could not be made in the year of deposit or any subsequent year unless a finding of unexplained cash credit was given in the year of receipt of such loan or deposit. The Tribunal noted that the opening balance of loans taken from the financial year 2005-06 onwards was not considered unexplained credits under section 68. The Tribunal found that the AO was not justified in disallowing the interest paid for deposits taken in earlier years. The Tribunal upheld the order of the CIT(A) and dismissed this ground of the Revenue's appeal.

In conclusion, the Tribunal dismissed the appeal filed by the Revenue, upholding the orders of the CIT(A) regarding the deletion of additions related to unexplained cash credits and interest paid on unsecured loans for the assessment year 2008-09.