2019 (2) TMI 229 - AT - Income Tax

Addition made u/s 68 - Held that - Assessee has failed to prove the credit worthiness of the loan creditors, genuineness of the transactions, is not established, the amounts received from the aforesaid persons need to be added in the hands of the assessee under section 68 of the Act. In respect of the balance loan creditors, the assessee has not proved the credit worthiness of the said persons for making the aforesaid advances wherein Vinayak Satale has advanced a sum of ₹ 8 lakhs, Vinayak Anandrao Satale (HUF) has advanced a sum of ₹ 6,22,000/-, Bharati Dharme has advanced a sum of ₹ 49,900/- and Narayan Salunkhe has advanced a sum of ₹ 50,000/-. The lenders had deposited the cash in their bank accounts and issued cheques subsequently. Since all the lenders did not have sufficient source of income, the explanation of the assessee is not accepted and the addition made under section 68 of the Act is upheld. - Decided against assessee.

Summary

Issues:
Appeal against addition under section 68 of the Income Tax Act 1961 relating to assessment year 2009-10.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) regarding the addition made under section 68 of the Act. The assessee raised grounds challenging the addition made by the Assessing Officer, claiming that all depositors confirmed the funds and their sources. However, during the assessment, it was found that unsecured loans were taken from various individuals, including close relatives, with questionable creditworthiness. The Assessing Officer issued summons to verify the sources of funds, but discrepancies were noted in the explanations provided. The Commissioner upheld the addition under section 68, emphasizing the lack of creditworthiness proof despite transactions through banking channels.

The Assessing Officer observed suspicious patterns in the transactions, such as cash deposits followed by immediate transfers to the assessee's account. Various lenders failed to adequately explain the sources of funds, leading to doubts about the genuineness of the transactions. The Commissioner highlighted inconsistencies in the explanations provided by the assessee and the lenders, ultimately upholding the addition under section 68 based on insufficient creditworthiness proof.

The Tribunal noted that the assessee failed to provide additional information or explanations to counter the doubts raised regarding the sources of funds. Specific lenders who opened bank accounts just before providing loans lacked credible income sources, further weakening the assessee's case. The Tribunal upheld the addition under section 68 for transactions involving lenders with questionable creditworthiness, as detailed in the table provided.

The Tribunal referenced a judgment by the Hon'ble Gujarat High Court in a similar case involving cash credits, emphasizing the burden of proof on the assessee. The High Court's decision highlighted the importance of establishing the capacity to raise such funds and dismissed pleas based on failure to prove the source of the source. Applying this reasoning to the present case, the Tribunal dismissed the grounds of appeal raised by the assessee and upheld the addition under section 68.

In conclusion, the Tribunal dismissed the appeal, affirming the addition under section 68 in the hands of the assessee based on insufficient proof of creditworthiness and questionable sources of funds. The decision was pronounced on December 28, 2018.