2017 (6) TMI 394 - AT - Income Tax

Unexplained cash credit u/s.68 - disallowance of Interest paid to depositors - Held that - The onus is cast upon the assessee to produce the persons and the assessee cannot absolve himself from the onus cast upon him. The mere filing of confirmation and copy of return of income of depositors does not served the purpose unless and until the facts is verified from the depositors. Therefore, the assessee has not fulfilled the onus cast upon him. The ample opportunities have been given to the assessee to produce the persons. Because, in the above background and materials available with the department, it is necessary to verify the depositors in respect of accommodation entries have been received or not from the said depositors. However, the assessee fails to produce the depositors. Therefore, it is established beyond doubt that there is no genuine cash credit and thereby the cash credit remains unexplained. Therefore, the amount deposited during the year amounting to ₹ 9,70,923/- is treated as unexplained cash credit and the same is added to the total income of the assessee u/s 68. Further the assessee has also not furnished the age wise analysis of the opening balance of ₹ 24,71,091/- standing in the name of the above depositors. Therefore, the same is treated as received during the year and added to the total income of the assessee as unexplained cash credit. Moreover, since there is no genuine cash credit in the name of the above 7 depositors, the entered interest amounting to ₹ 1,08,818/- is also disallowed. - Decided in favour of revenue .

Summary

Issues:
- Addition of unexplained cash credit under section 68 of the Act
- Deletion of interest paid to depositors

Analysis:

Issue 1: Addition of unexplained cash credit under section 68 of the Act
The case involved an appeal by the revenue against the order of the Commissioner of Income Tax(Appeals) regarding the Assessment Year 2008-09. The appellant argued that the addition of ?34,42,014 made on account of unexplained cash credit under section 68 of the Act was wrongly deleted by the CIT(A). During the assessment proceedings, the appellant, engaged in the trading business, showed various sources of income, including business income, salary income, capital gains, and other income. The appellant provided confirmation from depositors, but it was revealed during a survey that one individual managed bank accounts of several persons, including the depositors. Despite multiple opportunities, the appellant failed to produce the depositors for verification. The Tribunal held that the appellant did not fulfill the onus to prove the genuineness of the transactions, leading to the unexplained cash credit being treated as income under section 68 of the Act. The interest amount was also disallowed due to the lack of genuine cash credit.

Issue 2: Deletion of interest paid to depositors
The second ground of appeal related to the deletion of ?1,01,818 interest paid to depositors. The appellant argued that the interest was paid, and TDS was deducted, hence disallowance would result in double taxation. However, the Tribunal found the appellant's submissions unacceptable as the onus to prove the genuineness of the transactions was not fulfilled. The Tribunal emphasized the need for verification of depositors and their bank accounts to establish genuine cash credit. Since the depositors were not produced, the interest amount was disallowed along with the unexplained cash credit. Consequently, the findings of the CIT(A) were set aside, and the revenue's appeal was allowed.

This detailed analysis of the judgment highlights the key issues, arguments presented, and the Tribunal's decision regarding the addition of unexplained cash credit and the deletion of interest paid to depositors.