2017 (4) TMI 1055 - AT - Income Tax

Unexplained credit u/s 68 - addition of loan received - proof of identity of the lender and genuineness of transaction made through banking channel - Held that - We find that a perusal of the bank statement of the lender Mr. Dattu (p-3 of P/B) shows that there were two withdrawals of ₹ 3,00,000/- each on 08.05.2008. The assessee has not furnished the transactions prior to 04.04.2008. In the statement recorded by the AO (point no 7-9 of the statement) Mr. Dattu confirmed that he had given loans of ₹ 6,00,000/- to the assessee. Mr. Dattu stated before the AO that he received the funds from M/s. Suzlon Ltd. who had acquired his ancestral agricultural land for installation of a windmill. However he had not proof of receiving the funds from M/s. Suzlon Ltd. Mr. Dattu has stated before the AO that he was working in Vashi and Khadk, Mumbai as a labourer and was earning ₹ 9,000/- p.m. It is inconceivable that with such meagre income Mr. Dattu could give a loan of ₹ 6,00,000/- to the assessee. As the Hon ble Supreme Court laid down in Kalekhan Mohammed Hanif vs. CIT (1963 (2) TMI 33 - SUPREME Court), the onus is on the assessee to explain the nature and source of cash credits, whether they stand in the assessee s account or in the account of a third party. At para 7 here-in-above, we have delineated that the assessee has failed to prove the genuineness of the transaction. - Decided against assessee

Summary

Issues:
Appeal against addition of loan received under section 68 of the Income Tax Act.

Analysis:
The appeal was filed against the addition of a loan received amounting to ?6,00,000, treated as an unexplained credit under section 68 of the Income Tax Act. The assessee contended that the identity of the lender and the genuineness of the transaction through the banking channel were established. However, during the assessment proceedings, the Assessing Officer requested loan confirmations from parties who had advanced loans, but no confirmation was provided for the loan in question. The lender, Mr. Shantaram Dattu, was identified as a farmer not assessed to tax, and the AO asked for evidence regarding the source of his income. Despite the assessee's attempts, the address of the lender and the source of investment remained unexplained, leading to the addition of ?6,00,000 under section 68 of the Act.

The assessee appealed to the CIT(A) and submitted the loan confirmation of Mr. Shantaram Dattu as additional evidence under Rule 46A of the Income Tax Rules, 1962. The matter was remanded to the AO for verification. During the remand proceedings, Mr. Dattu confirmed giving the loan but could not provide proof of receiving funds from Suzlon Ltd. The CIT(A) considered the AO's findings that Mr. Dattu's income was insufficient to provide a loan of ?6,00,000. The bank statement showed limited funds, raising doubts about the capacity to lend. Additionally, transactions prior to May 2008 were not provided, failing to establish the source of the amount. The CIT(A) upheld the addition under section 68 of the Act based on these discrepancies.

In the subsequent appeal, the assessee presented a Paper Book containing various documents, while the Revenue relied on the CIT(A)'s order. The Tribunal observed the lack of transactions before April 2008 and noted discrepancies in Mr. Dattu's income and lending capacity. Citing the Supreme Court's ruling in Kalekhan Mohammed Hanif vs. CIT, the Tribunal emphasized the assessee's failure to prove the genuineness of the transaction, leading to the dismissal of the appeal.

In conclusion, the Tribunal upheld the addition of ?6,00,000 as an unexplained credit under section 68 of the Income Tax Act, emphasizing the assessee's failure to establish the legitimacy of the loan transaction despite the evidence presented.