2018 (11) TMI 1248 - AT - Income Tax

Unexplained cash credit u/s 68 - Genuineness of the loan - Held that - In case of the bank statement of the assessee it is apparent that cash was deposited prior to issue of cheque to the assessee. It is also apparent that four years bank statement was not provided by the assessee to the assessing officer. In case of Siddh Sai reality private limited, the lender shown profit of ₹ 12 lakhs for the year but filed a return of income of ₹ 120,000. Further prior to the issue of the cheque of ₹ 10 lakhs on 14 2012 to the assessee there was deposit of ₹ 9 lakhs and ₹ 1 lakhs on two different dates prior to the issue of cheques to the assessee. On these transactions, the learned assessing officer has expressed its doubt about the genuineness of the transaction. This genuineness of the transaction can only be proved by the production of the directors before the assessing officer which assessee has failed to do repeatedly - We set aside the whole issue back to the file of the learned assessing officer with a direction to the assessee to produce the directors of both the lenders companies before the assessing officer for the examination and to explain the source of cash deposited in their bank account before issue of cheques to the assessee. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
- Addition of unexplained cash credit under section 68 of the Income Tax Act
- Failure to produce creditors/lenders for examination
- Burden of proof on the taxpayer to establish genuineness of transactions

Analysis:
1. Addition of Unexplained Cash Credit: The appeal was filed against the order upholding the addition of ?26,00,000 as unexplained cash credit under section 68 of the Income Tax Act. The appellant argued that the loan received was through bank RTGS from identifiable parties with corporate status who confirmed the loan. The Commissioner of Income Tax (Appeal) failed to consider the evidence provided and confirmed the addition without proper investigation. The Tribunal set aside the issue to the assessing officer to examine the directors of the lenders for further clarification.

2. Failure to Produce Creditors/Lenders: The assessing officer noted discrepancies in cash deposits and transfers related to loans from two companies. Summons were issued to the directors of the lender companies for personal deposition, but none attended. The appellant was requested to produce the creditors for examination but failed to do so. The failure to produce the directors raised doubts about the genuineness of the transactions, leading to the addition under section 68 of the Act.

3. Burden of Proof on Taxpayer: The Commissioner of Income Tax Appeals held that the onus was on the appellant to produce the directors of the lender companies for cross-examination by the revenue to establish the genuineness of the transactions. The appellant's failure to provide further evidence and the results of the investigation shifted a higher burden to prove the creditworthiness of the lenders. The Tribunal emphasized the importance of producing the directors for examination to determine the authenticity of the transactions.

In conclusion, the Tribunal allowed the appeal for statistical purposes and directed the assessing officer to re-examine the issue upon the production of the directors of the lender companies. The decision highlighted the significance of proving the genuineness of transactions through proper documentation and examination of involved parties to ensure compliance with the Income Tax Act.