2016 (6) TMI 41 - AT - Income Tax

Addition u/s 68 - Held that - From bare perusal of the observations made by CIT(A) it is evident that he has not at all examined the creditworthiness of the lender particularly with reference to the documents showing agricultural holding and produce thereon. Ld. CIT(A) has not given any cogent reasons for confirming the addition to the extent of ₹ 1,15,000/-. Considering the entirety of facts and circumstances and the detailed documents submitted by lender, we are of the opinion that the addition deserves to be deleted as lender has been able to establish its identity, genuineness of the transaction and the capacity to advance the loan. Accordingly, this ground is allowed in favour of assessee Undisclosed cash deposit in the bank account - Held that - There was cash deposit amounting to ₹ 50,000/- in the bank account of the assessee on 16.6.2005. the source of the said cash was explained as ₹ 17,000/-each received from Manoj Kumar, Mohd. Saffique and Mohd. Aslam. He observed that in response to notice u/s 133(6), which were received back it transpired that there was no such person. Assessee also could not produce them before the AO. Accordingly, addition of ₹ 50,000/- was made, which was confirmed by CIT(A).After hearing both the parties we do not find any reason to interfere on this count as the assessee miserably failed to explain the basic three ingredients in respect of these three loans. In the result, this ground is dismissed against assessee

Summary

Issues Involved:
- Appeal by the revenue against the order passed by the ld. CIT(A)-XIX, New Delhi in appeal no. 214/208-09 relating to AY 2006-07.
- Deletion of additions made under section 68 of the IT Act relating to creditors.
- Dispute regarding the tax effect involved in the department's appeal.
- Disposal of the assessee's cross objections after the department's appeal is dismissed.
- Addition of unexplained credits under section 68 of the IT Act.
- Addition of cash deposit in the bank without proper explanation.

Analysis:

1. The revenue appealed against the CIT(A)'s order, challenging the deletion of additions made under section 68 of the IT Act related to various creditors. The department disputed the tax effect involved in the appeal, citing a CBDT Circular specifying a limit of ?10 lakhs for filing departmental appeals before the ITAT. However, the cross objections filed by the assessee were deemed not infructuous and were to be considered on merits as per section 253(4).

2. The assessee's cross objections primarily contested the additions made under section 68 of the IT Act for unexplained credits from creditors. The first ground challenged the additions related to loans from Atul Katyal, Ashok Kumar, and Manju Khatri. The assessee provided detailed explanations and supporting documents to establish the genuineness and creditworthiness of the transactions, disputing the AO and CIT(A)'s findings.

3. The CIT(A) confirmed some additions made by the AO under section 68, citing lack of proper explanations for the sources of funds. However, upon detailed examination of the documents submitted by the assessee, the ITAT found discrepancies in the lower authorities' reasoning and allowed the grounds raised in the cross objections, deleting the additions related to loans from Atul Katyal and Ashok Kumar.

4. Regarding the addition of cash deposit in the bank without proper explanation, the ITAT upheld the CIT(A)'s decision to confirm the addition, as the assessee failed to adequately explain the source of the deposited funds. The ITAT dismissed the ground related to this addition, as the necessary explanations were not provided by the assessee.

5. In conclusion, the revenue's appeal was dismissed, and the assessee's cross objection was partly allowed based on the detailed analysis of the additions made under section 68 of the IT Act. The ITAT's decision provided a comprehensive review of the submissions and evidence presented by both parties, ensuring a fair and reasoned outcome in line with the provisions of the IT Act.