2017 (3) TMI 326 - AT - Income Tax

Addition u/s 68 - unsecured loan received treating the same as unexplained cash credit - Held that - Both the depositors were having the sufficient amount in their bank account and only a nominal amount was deposited in cash before issuing the cheques to the assessee, so it cannot be said that amount was deposited before issuing of the cheques to the assessee. In the present case, identity of both the parties is not in dispute, their creditworthiness is also proved because there was sufficient balance in their bank accounts, the genuineness of the transaction is also proved since the transaction took placed through banking channel and both the depositors are regularly assessed with the income tax department. Therefore, the assessee discharged the onus cast upon it for proving the identity and creditworthiness of the depositors alongwith the genuineness of the transaction. Therefore, the addition made by the AO and sustained by the ld. CIT(A) was not justified. - Decided in favour of assessee

Summary

Issues:
Confirmation of addition of unsecured loan under section 68 of the Income Tax Act.

Analysis:
1. The assessee appealed against the order confirming the addition of ?27,00,000 as unexplained cash credit under section 68 of the Income Tax Act.
2. The AO added the amount received from two lenders, Sh. Anil Kumar Agarwal and Smt. Kavita Agarwal, as unsecured loans based on lack of proof of creditworthiness and cash deposits before issuing cheques.
3. The assessee provided details such as confirmations from lenders, income tax returns, and bank statements to prove the genuineness of the transactions.
4. The ld. CIT(A) upheld the addition, stating that the appellant failed to substantiate its claim and that the depositors were not creditworthy.
5. In the appeal, the assessee argued that all relevant details were furnished, including confirmation from depositors and bank statements, to establish the genuineness of the loans.
6. The Tribunal noted that the assessee had proven the identity, creditworthiness, and genuineness of the transactions through bank statements and income tax returns of the lenders.
7. As both depositors had sufficient funds in their bank accounts and the transactions were through banking channels, the Tribunal concluded that the addition made by the AO and upheld by the ld. CIT(A) was not justified.
8. Consequently, the Tribunal allowed the appeal, and the addition of ?27,00,000 was deleted.

This detailed analysis of the judgment highlights the key arguments, evidence presented, and the Tribunal's decision regarding the addition of unsecured loans under section 68 of the Income Tax Act.