2022 (2) TMI 913 - AT - Income Tax

Unsecured loan treated as cash credit - unsecured loans received by the assessee from two brothers - HELD THAT - One Lenders had attended before the AO and admitted that he himself as well as his brother had given loan to the assessee firm. Thus, this admission clearly establishes the genuineness of transaction and further that the assessee has fully discharged the burden of establishing the genuineness of loan transaction by both the parties. Moreover, both these persons are regularly assessed to income- tax and they have their independent source of income.. Thus, we note that both the Lenders are assessed to tax and the loan is taken through banking channel by RTGS and there is a categorical admission of loan being given to the assessee firm out of own funds and through banking channel and the same has been accepted by the AO also. The assessee need not prove the source of source . Once the existence of the person is proved and on the basis of relevant evidences it is proved that credit entry is not fake, the primary onus cast on the assessee is discharged and that assessee in such cases cannot be expected to prove the source of source. Thus, we note that assessing officer has failed to bring even an iota of evidence on record which indicates that loans received from above party actually emanated from the coffers of assessee. In the assessee s case under consideration, there is no finding that any details, documents and evidences supplied by the assessee to the AO were found to be incorrect or erroneous or false. As such addition cannot be made u/s 68 of the Act. Hence we are not inclined to accept the contention of the Assessing Officer in any manner and hence the addition of ₹ 10,00,000/- so made is deleted. Hence this ground of the assessee is allowed.

Summary

Issues:
1. Delay in filing the appeal
2. Addition of unsecured loan as cash credit

Delay in filing the appeal:
The appeal filed by the assessee for Assessment Year 2014-15 was delayed by 28 days. The assessee attributed the delay to the unavailability of the active partner of the firm, who was at his native place during the time of filing. After hearing both parties and reviewing the condonation petition, the delay was condoned, and the appeal was admitted for adjudication.

Addition of unsecured loan as cash credit:
During the assessment proceedings, the Assessing Officer observed unsecured loans of ?4 lacs and ?6 lacs received by the assessee from two individuals. The AO issued summons to the lenders and found discrepancies in the loan transactions. The AO concluded that the creditworthiness of the lenders was doubtful and added ?10 lacs as unexplained cash credit. On appeal, the CIT(A) upheld the AO's decision. The assessee argued that the loans were temporary, repaid through banking channels, and provided evidence of the transactions' genuineness. The Tribunal noted that the lenders confirmed the loans, were regularly assessed to tax, and the transactions were through banking channels. Referring to relevant case law, the Tribunal held that the assessee had established the genuineness of the transactions and discharged the burden of proof. As there was no evidence to suggest the loans were from the assessee's funds, the addition of ?10 lacs was deleted, and the appeal was allowed.

Conclusion:
The Tribunal allowed the appeal, ruling in favor of the assessee. The delay in filing the appeal was condoned, and the addition of unsecured loans as cash credit was deemed unjustified and subsequently deleted. The Tribunal emphasized the importance of establishing the genuineness of transactions and upheld the principle that the assessee need not prove the source of the source when the primary onus is discharged satisfactorily.