2023 (11) TMI 628 - AT - Income Tax

Addition u/s 68 - unexplained cash credit - Allegation of Non discharge of onus of establishing the identity, genuineness creditworthiness of the loan creditor - HELD THAT - Since the assessee has successfully discharged its onus of proving the identity of the loan creditor, which in the instant case duly registered with Ministry of Corporate Affairs, having PAN and had filed return of income as well. Further creditworthiness of the transaction is proved with the fact that they have been carried through banking channel and sufficient funds were available with the loan creditors to explain the amount of loan given and the genuineness of the transaction is proved with the fact that the assessee company is carrying out regular business activity and the loan was obtained at commercial rate of interest which was also repaid at a later date in subsequent year, interest was paid on the loans and tax at source has been deducted and duly reflected by the loan creditor in their income tax return. Therefore, we fail to find any justification in the action of ld. AO invoking the provisions of Section 68 - Assessee appeal allowed.

Summary

Issues:
The appeal challenges the addition of Rs. 25,00,000 made under section 68 of the Income Tax Act, 1961 for the Assessment Year 2013-14, regarding the unexplained cash credit received by the assessee.

Summary:

Issue 1: Addition of Rs. 25,00,000 under section 68
The assessee contested the addition of Rs. 25,00,000 made under section 68, arguing that the reasons for reopening the assessment were based on incorrect assumptions. The assessee provided evidence to establish the identity, creditworthiness, and genuineness of the loan transaction. The tribunal found that the reasons recorded prior to reopening were factually incorrect and untenable. The lender had sufficient funds to provide the loan, and all relevant documents supported the legitimacy of the transaction. Therefore, the tribunal set aside the addition under section 68.

Issue 2: Burden of Proof and Legal Precedents
The assessee argued that the burden of proof had been met by providing evidence regarding the identity of the lender, genuineness of the transaction, and creditworthiness of the lender. Legal precedents were cited to support the contention that once the initial burden of proof is discharged by the assessee, it shifts to the Assessing Officer to justify any additions under section 68. The tribunal agreed with the assessee's position and emphasized the importance of examining all evidence objectively before making any determinations.

Conclusion:
After careful consideration of the facts and legal arguments presented, the tribunal concluded that the assessee had successfully proven the legitimacy of the loan transaction. The lender's identity, creditworthiness, and the genuineness of the transaction were adequately demonstrated through documentary evidence. As the loan was repaid in the subsequent year, the tribunal found no justification for invoking the provisions of section 68. Therefore, the tribunal allowed the appeal and deleted the addition of Rs. 25,00,000 made under section 68 of the Act.

Note: Separate judgments were not delivered by the judges mentioned in the case.