2022 (11) TMI 19 - AT - Income Tax

Unexplained cash credit u/s 68 - assessee failed to offer any explanation regarding the source and nature of the deposit, the assessing officer added back the amount u/s 68 - HELD THAT - As prior to the issue of cheque to the assessee, the lender had sufficient fund available with him. From the aforesaid evidences available on record, the following facts emerge, firstly, the identity of the creditor has been established, secondly, the transaction has been made through banking channel by way of account payee cheque and thirdly, the lender has funds available with him to advance the amount. As could be seen, only because the lender did not comply with the summons issued under Section 131 of the Act, the addition has been made. Non-compliance with the summons issued u/s 131 of the Act can be for various reasons. However, that cannot be the solely criteria to treat the loan received as unexplained cash credit u/s 68. Unfortunately, learned first appellate authority has decided the issue in a very cryptic manner without independent application of mind. When the transaction has been carried out through banking channel by way of account payee cheque, it is not understood how there can be an issue regarding the genuineness of the transaction. Nothing prevented the departmental authorities to exercise the statutory powers vested in them to get to the root of the matter, irrespective of the fact that the lender did not comply with the summons issued u/s 131 - when the assessee has discharged his initial onus to prove the source and nature of deposits made in the bank account, the burden shifts to the department to prove the contrary, which, in my view, the department has failed to discharge. Appeal of assessee allowed.

Summary

Issues:
Addition of Rs.10,00,000 as unexplained cash credit under Section 68 of the Income-Tax Act, 1961.

Analysis:
In this case, the dispute revolves around the addition of Rs.10,00,000 as an unexplained cash credit under Section 68 of the Income-Tax Act, 1961. The assessing officer added this amount to the assessee's income as the source and nature of the deposit could not be explained by the assessee. However, during the appeal proceedings, the assessee provided evidence to support the claim that the amount was received from a specific individual through an account payee cheque. The evidence included a confirmation, bank statement, and Aadhar card of the person in question. The Commissioner (Appeals) directed the assessing officer to examine the claim further. The assessing officer, in a subsequent report, noted that although the person from whom the money was claimed to be received did not comply with the summons, the confirmation and bank statement provided by the assessee supported the claim. It was observed that the lender had sufficient funds in their account before issuing the cheque to the assessee. The Tribunal found that the identity of the creditor was established, the transaction was done through a banking channel via an account payee cheque, and the lender had the funds available to advance the amount. The Tribunal held that non-compliance with the summons by the lender cannot be the sole reason to treat the loan as an unexplained cash credit. The Tribunal emphasized that the department failed to discharge its burden of proving otherwise after the assessee had provided evidence of the transaction. Consequently, the Tribunal deleted the addition of Rs.10,00,000, and the appeal was allowed.

This judgment highlights the importance of providing evidence to support claims in tax matters and the burden of proof shifting from the assessee to the department once the initial onus is discharged. It also underscores the significance of transactions through banking channels and the need for thorough investigation by tax authorities before making additions to an assessee's income.