2019 (3) TMI 1400 - AT - Income Tax

Addition u/s 68 - Unexplained cash deposits - unexplained nature and source of loan received - doubtful creditworthiness of the lender - HELD THAT - The creditworthiness of the lender is in serious doubt and could not be demonstrated to the satisfaction of the Assessing Officer when seen on the touchstone of preponderance of probabilities. We observe that the Assessing Officer has rightly recorded its conclusion against the assessee on the ground that deposit of cash in the account of the lender prior to its lending to the assessee is not supportable with the worth and conduct of the lender. Therefore, the primary onus placed on the assessee, in our view, could not be discharged. The CIT(A), in our view, has rightly analysed the factual matrix and answered the appeal of the assessee in negative - decided in favour of revenue

Summary

Issues Involved:
1. Addition of ?5 lakhs under Section 68 of the Income Tax Act, 1961 as unexplained cash credit.
2. Genuineness and creditworthiness of the loan transaction.
3. Evaluation of evidence and statements provided by the lender.

Detailed Analysis:

1. Addition of ?5 lakhs under Section 68 of the Income Tax Act, 1961 as unexplained cash credit:
The assessee contested the addition of ?5 lakhs made by the Assessing Officer (AO) under Section 68 of the Act. The AO found the source of the loan received by the assessee unsatisfactory. The lender, a retired government employee, deposited ?5 lakhs in cash into his bank account immediately before lending the same amount to the assessee. The AO concluded that the cash deposit was not from known sources and added the amount to the assessee's total income.

2. Genuineness and creditworthiness of the loan transaction:
The CIT(A) upheld the AO's addition, noting that the lender did not have a regular income source and that the cash deposit was an isolated transaction. The lender's claim of agricultural income was unsupported by evidence, and the bank account was opened only in the relevant year. The CIT(A) cited various judgments, including the Hon'ble Supreme Court's decision in Commissioner of Income-tax v. P. Mohanakaia, emphasizing that transactions through bank cheques alone do not establish genuineness.

3. Evaluation of evidence and statements provided by the lender:
The Tribunal examined the lender's financial capacity and the circumstances surrounding the loan. The lender's bank statement showed minimal balance, raising doubts about his ability to lend ?5 lakhs. The Tribunal noted that the lender withdrew ?25,000 to ?30,000 per month from his pension for household expenses, making the large cash deposit implausible. The Tribunal concluded that the assessee failed to discharge the primary onus of proving the loan's genuineness and creditworthiness.

Conclusion:
The Tribunal dismissed the assessee's appeal, affirming the CIT(A)'s decision. The addition of ?5 lakhs under Section 68 of the Act was upheld due to the lack of credible evidence supporting the loan's genuineness and the lender's financial capacity. The Tribunal found no infirmity in the CIT(A)'s order and declined to interfere.

Order Pronouncement:
The order was pronounced in open court on 26/03/2019.