2019 (2) TMI 615 - AT - Income Tax

Addition u/s 68 - Unexplained Cash Credit u/s 68 (Unsecured Loan) - Held that - Identity, creditworthiness and genuineness of the transactions have been proved. In the case of M/s Angad Chemicals Ltd., it has total assets of more than 10.17 Crores. Income earned during the year cannot be the only criteria to determine the creditworthiness. Hence, the addition made on the loan given by M/s Angad Chemical Pvt. Ltd., is hereby deleted. In the case of Contship Commodities (P) Ltd. the total Net assets are worth of ₹ 22.46 Crores. This proves the genuineness of the transaction and both the identity and the creditworthiness of the creditors are proved. In the case of Mindtrack Ventures (P) Ltd the total Net assets are worth of ₹ 15.32 Crores. This proves the genuineness of the transaction and both the identity and the creditworthiness of the creditors are proved. In the case of Subhlabh Fiscal Services (P) Ltd. the total Net assets are worth of ₹ 88.81 Crores. This proves the genuineness of the transaction and both the identity and the creditworthiness of the creditors are proved. Thus, the additions made on loans borrowed from all the above entities, are hereby deleted. Loans borrowed from M/s. SNV Enterprises and M/s B R Trading Co. though, the assessee has furnished certain details in support of its claim as notices could not be served on these creditors by the Assessing Officer due to the reason that, he did not have the latest address, we deem it fit and proper to remand this issue to the file of the Assessing Officer for fresh adjudication, in accordance with law. - decided in favour of assessee partly.

Summary

Issues:
1. Addition made under section 68 of the Income Tax Act for unexplained cash credit.
2. Burden of proof on the assessee to establish identity, creditworthiness, and genuineness of transactions.
3. Non-appearance of loan creditors before the Assessing Officer.
4. Legal precedents regarding burden of proof on the assessee.
5. Examination of details provided by the assessee for each loan creditor.
6. Deletion of additions based on established identity and creditworthiness.
7. Remand of issue regarding loans from specific creditors.

Analysis:
1. The judgment pertains to an appeal against the addition made under section 68 of the Income Tax Act for unexplained cash credit for the Assessment Year 2013-14. The only issue for consideration was the addition made under this provision.

2. The key contention revolved around the burden of proof on the assessee to establish the identity, creditworthiness, and genuineness of the transactions. The Assessing Officer had raised concerns regarding the unsecured loans and the non-appearance of loan creditors before the authorities.

3. The Assessing Officer highlighted discrepancies in the responses of loan creditors to summons issued under section 131 of the Act. The non-appearance of certain creditors led to adverse inferences, prompting the addition under section 68.

4. Legal precedents, including the judgment of the Hon'ble Supreme Court in the case of CIT vs. Orissa Corporation P. Ltd., were cited to emphasize that the burden of proof lies on the assessee but adverse inferences cannot be solely based on non-appearance of creditors.

5. Detailed examination of the details provided by the assessee for each loan creditor was conducted. The evidence presented, including financial statements, confirmation certificates, and bank statements, was scrutinized to establish the identity and creditworthiness of the creditors.

6. Based on the evidence presented, the Tribunal concluded that the identity and creditworthiness of certain creditors were adequately established, leading to the deletion of additions on loans borrowed from these entities. The genuineness of transactions was upheld in these cases.

7. However, for loans from specific creditors where notices could not be served due to address issues, the matter was remanded back to the Assessing Officer for fresh adjudication in accordance with the law.

This detailed analysis of the judgment provides insights into the legal reasoning and application of precedents in resolving the issues raised in the appeal.