2023 (1) TMI 617 - AT - Income Tax

Unexplained cash credit u/s 68 - assessee has failed to prove the bona fide of the transactions in terms of identity, creditworthiness and genuineness of such transaction - money received by assessee shown in Form 3CD as unsecured loan - HELD THAT - The assessee has refunded the entire deposits either within in a day or in a week in respect of seven transactions. It was refunded in a maximum period of five months in respect of six transactions. Thus, no amount was left at the end of financial year. It is also matter or record that the repayment is not doubted by the assessing officer. As in case of CIT Vs Ranchod Jivabhai Nakhava 2012 (5) TMI 186 - GUJARAT HIGH COURT the Hon ble jurisdictional high court held that where the lenders of the assessee are income tax assessee whose PAN have been disclosed, the assessing officer cannot not ask assessee to further prove genuineness of the transaction without first verifying such facts from income tax returns of lenders. We also find that the assessee furnished all such details of the lenders/ depositors. There is no allegation of assessing officer that any of such lenders/ creditors are part of syndicate of accommodation entry provider. There is no evidence that credit/ advance in the books of assessee was result of some circular transactions. We find that before granting relief to the assessee, the ld CIT(A) cross checked all such details, including the proof of repayment. - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition made by the Assessing Officer on account of unexplained cash credit under Section 68 of the Income Tax Act.
2. Identity, creditworthiness, and genuineness of the transactions involving deposits.

Detailed Analysis:

1. Deletion of Addition on Account of Unexplained Cash Credit:
The Revenue challenged the deletion of an addition of Rs. 11,57,00,000/- made by the Assessing Officer under Section 68 of the Income Tax Act, claiming the assessee failed to prove the bona fide nature of transactions. The Assessing Officer had noted discrepancies and doubted the identity, creditworthiness, and genuineness of the deposits shown by the assessee. The case was selected for scrutiny, and the Assessing Officer required the assessee to substantiate the deposits with confirmations, financial statements, and affidavits from the lenders. Despite the assessee providing detailed documentation, the Assessing Officer remained unconvinced and added the deposits as unexplained cash credit.

Upon appeal, the Commissioner of Income-tax (Appeals) [CIT(A)] considered the assessee's detailed submissions and additional evidence, including Import-Export Code certificates, VAT/GST registration, and bank statements. The CIT(A) found that the advances were repaid within the same financial year, often within a short period, and that the transactions were genuine business dealings. The CIT(A) relied on precedents from the jurisdictional High Court, which held that repayment of loans in the subsequent year without challenge negates the applicability of Section 68.

2. Identity, Creditworthiness, and Genuineness of Transactions:
The Assessing Officer's doubts about the identity of the lenders were based on a Ward Inspector's report indicating that many of the lenders' offices were closed or not found at the given addresses. However, the CIT(A) noted that twelve out of thirteen lenders were engaged in business and had provided substantial documentary evidence, including PAN, CIN master data, and affidavits. The CIT(A) verified these details and found no adverse findings against the lenders.

Regarding creditworthiness, the Assessing Officer had questioned the lenders' capacity to provide such large sums, citing their meager incomes. However, the CIT(A) found that many lenders had significant turnovers and were regular income-tax payees. The CIT(A) cross-checked the affidavits and bank accounts, confirming the transactions' authenticity.

For genuineness, the CIT(A) observed that the advances were received and repaid through banking channels, with no cash transactions involved. The CIT(A) relied on judicial precedents, emphasizing that once the identity and creditworthiness of the lenders are established, and the transactions are through banking channels, the onus shifts from the assessee.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, affirming that the assessee had adequately proved the identity, creditworthiness, and genuineness of the transactions. The Tribunal noted that the repayment of advances within the same financial year and the absence of any evidence of accommodation entries or circular transactions further supported the genuineness of the transactions. Consequently, the appeal by the Revenue was dismissed, and the addition made by the Assessing Officer under Section 68 was deleted.