2019 (3) TMI 1245 - AT - Income Tax

Unexplained cash credit under section 68 - genuineness of the loan transaction and creditworthiness of the creditors - discharge of onus of proving the genuineness of loan transaction - HELD THAT - The assessee has not only furnished the confirmations from all the loan creditors but he also produced various other documentary evidences like income tax returns of the loan creditors indicating their PAN details, bank statement copies, ledger account copies, etc. It is evident, AO has disbelieved the unsecured loan with some general observations like loan confirmations are not in the prescribed format, creditworthiness of the creditors not proved, etc. On a specific query from the Bench the learned Departmental Representative submitted that there is no loan confirmation form / format prescribed in the statute. Therefore, the aforesaid allegation of the Assessing Officer is totally irrelevant. As regards the genuineness of the loan transaction and creditworthiness of the creditors are concerned, it is a fact on record that in course of assessment proceedings, the assessee has not only furnished loan confirmations of all the creditors but has also furnished their income tax return copies, bank account copies, Balance Sheet, ledger account copies, etc. On a perusal of these documents it is evident that all the loan transactions were carried out through proper banking channel. Moreover, the bank account copies also reveal regular transaction. The Balance Sheet and Capital Account of the creditors also reveal that loan transactions are duly reflected in them. AO has not conducted any independent enquiry with the loan creditors or the concerned AO where the creditors are assessed or even with the bank to ascertain the genuineness of the loan transactions. No material has been brought on record by the Assessing Officer to prove either the fact that the creditors do not have creditworthiness or the loan transactions are not genuine. Merely on presumption and surmises the Assessing Officer has treated the loan transactions as unexplained cash credit under section 68 of the Act. Unfortunately, Commissioner (Appeals) has concurred with the view expressed by the Assessing Officer in a mechanical manner without properly evaluating the evidences furnished by the assessee or even conducting any enquiry at her level, though, she is empowered to do so. After overall consideration of facts and material available on record, we are of the view that the assessee has discharged the onus of proving the genuineness of loan transaction - Decided in favour of assessee.

Summary

Issues:
Challenging two separate orders dated 25th January 2018 passed by the Commissioner (Appeals)–48, Mumbai for assessment year 2011–12.

Analysis:
1. ITA no.2034/Mum./2018: The assessee challenged the addition of ?10,18,986 under section 68 of the Income Tax Act, 1961. The Assessing Officer added this amount as unexplained cash credit after finding discrepancies in the new loans availed by the assessee during the year. The assessee provided documentary evidence to prove the genuineness of the loan transactions, including confirmations from loan creditors who were income tax assessees and transactions through banking channels. The Assessing Officer's basis for the addition was flimsy, citing issues with loan confirmations and creditor creditworthiness. The Tribunal found that the assessee had established the identity of creditors, genuineness of transactions, and creditworthiness of creditors. The addition was deemed unjustified, and the Tribunal directed the Assessing Officer to delete the added amount.

2. ITA no.2038/Mum./2018: The only dispute in this appeal was the addition of an unsecured loan of ?13 lakh as unexplained cash credit under section 68 of the Act. The facts were similar to the previous case, with the addition made without proper enquiry into the genuineness of loan transactions or creditor creditworthiness. The Tribunal emphasized the necessity of conducting a thorough investigation before deeming loan transactions as non-genuine or unexplained cash credit. Following the detailed reasoning in the previous case, the Tribunal deleted the addition made by the Assessing Officer. Both appeals were allowed, and the additions were removed in both cases.

In both cases, the Tribunal highlighted the importance of thorough investigation and proper assessment before adding unexplained cash credits under section 68 of the Income Tax Act. The Tribunal emphasized the need for concrete evidence to establish the non-genuineness of loan transactions or the lack of creditor creditworthiness. The decisions were based on the assessee's ability to provide substantial documentary evidence proving the legitimacy of the loan transactions, ultimately leading to the deletion of the additions made by the Assessing Officer.