2024 (3) TMI 248 - AT - Income Tax

Unexplained creditor u/s. 68 - onus to prove - AO based on the fact that the immediate source of the money advanced to the assessee was deposit of cash disbelieved the loan accepted by the assessee and has considered it as unexplained creditor and has added the same as income u/s. 68 - HELD THAT - As per the provisions of section 68 when any sum found credited in the books maintained by the assessee, and the assessee offers no explanation about the nature and source of that sum then it may be treated as unexplained cash credit whereas in this case the assessee has established the identity of the creditor by giving the PAN card, affidavit and his presence was marked before the ld. AO and the same is not doubted. As regards the genuineness of the transaction the assessee has received the money by an account payee cheque and the same has been given back this itself shows that the transaction was short period loan and the same is established by filling the details of the cheque and the bank account number. As regards the capacity he has explained the nature and source of the money advanced to the assessee and the ld. AO has not doubted that the fact that the assessee is engaged in the producing the sarbat and the source of the cash deposit is the amount received as sales proceeds of the sarbat. Thus, based on the various case laws cited by the assessee wherein it is held that when the identity and genuineness of the transaction is established then capacity of the lender to advance the money to the assessee cannot be a matter which the assessee could be required to established Labh Chand Bohra Vs. ITO 2008 (4) TMI 731 - RAJASTHAN HIGH COURT . The jurisdictional high court has also held that when the cash creditor have affirmed in their examination that they have advanced the money to the assessee from their own respective bank account. Therefore, when there is categorical finding even by the AO that the money came from the respective bank accounts of the creditors, which did not flow in the shape of the money, then such an addition cannot be sustained CIT Vs. Jai Kumar Bakiwal 2014 (8) TMI 685 - RAJASTHAN HIGH COURT . The relevant finding of the jurisdictional high court is as under When we peruse the facts herein above, it is an admitted position that all the cash creditors have affirmed in their examination that they had advanced money to the assessee from their own respective bank accounts. Therefore, when there is categorical finding even by the AO that the money came from the respective bank accounts of the creditors, which did not flow in the shape of the money, then, in our view, such an addition cannot be sustained and has been rightly deleted by both the two appellate authorities. There is no clinching evidence in the present case nor the AO has been able to prove that the money actually belonged to none but the assessee himself. The action of the AO appears to be based on mere suspicion. We direct the ld. AO to delete the addition made in the hands of the assessee. Assessee appeal of Allowed.

Issues Involved:
1. Legality of the order passed by the Income Tax Officer and sustained by the Commissioner of Income Tax (Appeals).
2. Sustenance of the addition of the amount received and repaid by account payee cheque.
3. Relevance of the case relied upon by the lower authority.
4. Addition without rejection of books of account.
5. Discharge of burden by the assessee.
6. Legality of the addition in light of judgment of Lalchand Bohra vs Income Tax Officer.
7. Charging of interest.

Summary:

Issue 1: Legality of the Order
The assessee contended that the order passed by the Income Tax Officer and sustained by the Commissioner of Income Tax (Appeals) was illegal, against the law, and without any application of mind. The Tribunal noted that the assessee had not pursued the appeal effectively, leading to the dismissal of the appeal by the Commissioner of Income Tax (Appeals) for non-prosecution. The Tribunal emphasized the inherent power of appellate authorities to dismiss appeals for non-prosecution, as supported by various judicial precedents.

Issue 2: Sustenance of Addition
The assessee argued that the Commissioner of Income Tax should not have sustained the addition of Rs. 5,00,000/- received and repaid by account payee cheque, supported by an affidavit and the creditor's statement. The Tribunal observed that the assessee had provided sufficient evidence, including the creditor's affidavit and statement, to prove the genuineness of the transaction. The Tribunal noted that the lower authorities failed to appreciate the explanation provided by the assessee and relied on judicial precedents that supported the assessee's claim.

Issue 3: Relevance of Case Relied Upon
The assessee contended that the lower authority relied on a case with different facts not identical to the assessee's case. The Tribunal agreed, noting that the case relied upon by the lower authority was not applicable to the facts of the assessee's case. The Tribunal emphasized that the assessee had successfully discharged the burden of proof by providing the creditor's affidavit and statement, which were not refuted by the lower authorities.

Issue 4: Addition Without Rejection of Books of Account
The assessee argued that no addition could be made without rejecting the books of account, citing various judicial precedents. The Tribunal agreed, noting that the lower authorities had not rejected the assessee's books of account. The Tribunal emphasized that without rejecting the books of account, any addition made was illegal and against the law.

Issue 5: Discharge of Burden by Assessee
The assessee contended that the A.O. should not have made the addition and the Commissioner of Income Tax (Appeals) should not have sustained the addition because the assessee had discharged the burden cast upon him by the statute. The Tribunal agreed, noting that the assessee had provided sufficient evidence to prove the genuineness of the transaction and the creditor's capacity to advance the loan.

Issue 6: Legality of Addition in Light of Judgment of Lalchand Bohra vs Income Tax Officer
The assessee argued that the addition was illegal in light of the judgment of Lalchand Bohra vs Income Tax Officer, which stated that the capacity of the lender to advance money to the assessee was not a matter that the assessee could be required to establish. The Tribunal agreed, noting that the assessee had provided sufficient evidence to prove the genuineness of the transaction and the creditor's capacity to advance the loan.

Issue 7: Charging of Interest
The assessee contended that the charging of interest was illegal and against the law. The Tribunal did not specifically address this issue in the judgment.

Final Decision:
The Tribunal directed the A.O. to delete the addition of Rs. 5,00,000/- made in the hands of the assessee, allowing the appeal. The Tribunal emphasized that the assessee had provided sufficient evidence to prove the genuineness of the transaction and the creditor's capacity to advance the loan, and that the lower authorities had failed to appreciate the explanation provided by the assessee.

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