2024 (9) TMI 729 - AT - Income Tax

Unexplained cash credits u/s 68 - sum found credited in the books of the assessee and the assessee does not offer satisfactory explanation, such sum credited may be charged to tax - manner in which the money was credited in the account of Mr. Grover and then reached the assessee - as argued receipt of money from Late Sanjay Grover has been offered for taxation as taxable income. Reliance on Statement of the wife of Mr. Grover to submit that her statement establishes that Mr. Grover had no creditworthiness or reasons to make loan or donations - HELD THAT - CIT(A) has taken into cognizance the fact that Sh. Sanjay Grover as an individual and non-resident was assessed to tax by the same AO completing assessment u/s. 153C and 144 of the Act and no addition was made in his assessment. This, to our mind is of great assistance to the assessee as where the credibility of source is doubted and the assessment of source is on the reported income then it is not justified to doubt the source and specially when the matter pertains to a charitable and religious society whose funds are to be used for public utility only. We are of the considered view that the assessee being a charitable and registered society is not disputed by the AO. The AO has also not disputed the nature of work of public utility of the assessee including construction and maintenance of cremation ground and the construction of temple by the society for public welfare. It appears that the AO was driven more by suspicion out of Mr. Grover s association with Gupta brothers. AO himself observes that the wife of Mr. Sanjay Grover was not aware of the donations in that case reliance on her statement was not justified. It is unjust to draw any inference about the credibility of a donor only on the basis of his monthly expenses or the money remitted to family. AO had alleged Sh. Sanjay Grover was conduit on merely on the basis of statement of the wife about monthly expenses or income as reported. We are of considered view that the deceased cannot be said to be conduit in the absence of any corroborative evidence surfacing during the search from the premises of the family of Gupta Brothers or their institutions. The affidavit in the possession with the assessee was in due course as beneficiary of the donation. We find no reason to differ from CIT(A) and we find no substance in the grounds raised by the Revenue - Decided in favour of assessee.

Issues Involved:
1. Legitimacy of the unsecured loans claimed by the assessee.
2. Creditworthiness of the lender, Late Sh. Sanjay Grover.
3. Genuineness of the transaction between the lender and the assessee.
4. The role of the assessee being a charitable trust in receiving the funds.
5. The assessment and findings of the Assessing Officer (AO).
6. The decision of the Commissioner of Income Tax (Appeals) [CIT(A)].
7. The Revenue's grounds for appeal.

Detailed Analysis:

1. Legitimacy of the Unsecured Loans Claimed by the Assessee:
The assessee, a charitable registered trust, declared unsecured loans of Rs. 10.99 crores for AY 2016-17 and Rs. 11.67 crores for AY 2015-16 from Late Sh. Sanjay Grover. The AO questioned these amounts as unexplained cash credits under Section 68 of the Income Tax Act, 1961. The AO issued notices under Sections 142(1) and 143(2) of the Act to probe the source of these loans and the identity, creditworthiness, and genuineness of the transactions.

2. Creditworthiness of the Lender, Late Sh. Sanjay Grover:
The AO found an undertaking from Late Sh. Sanjay Grover stating he had given loans to the society, which were later converted to donations. However, the AO was not satisfied with the evidence provided regarding the creditworthiness of Sh. Sanjay Grover. The AO noted that Sh. Sanjay Grover was an employee of the Gupta family and alleged he was merely a conduit for routing unaccounted money. Additionally, the AO referenced a statement from Sh. Sanjay Grover's wife, Smt. Renu Grover, who denied her husband's capability to remit such large sums as unsecured loans.

3. Genuineness of the Transaction:
The AO questioned the genuineness of the transactions, citing that mere transactions through cheques are not sufficient to establish genuineness. The AO highlighted discrepancies in the statements and the lack of supporting documents to prove the financial worthiness of Global Corporation LLC, Dubai, from where the funds were allegedly sourced.

4. Role of the Assessee Being a Charitable Trust:
The assessee argued that the funds received were used for charitable purposes, including the construction of a cremation ground and a temple. The CIT(A) acknowledged this and noted that the funds were utilized for public welfare, which aligns with the objectives of the charitable trust.

5. Assessment and Findings of the AO:
The AO concluded that the assessee failed to prove the creditworthiness of the lender and the genuineness of the transactions. Consequently, the AO treated the amounts as unexplained cash credits and added them to the total income of the assessee, initiating penalty proceedings under Section 271(1)(c).

6. Decision of the CIT(A):
The CIT(A) allowed the appeal of the assessee, noting that Sh. Sanjay Grover was assessed to tax by the same AO and no additions were made in his assessment. The CIT(A) also recognized that the funds in Sh. Sanjay Grover's account were transferred from his bank account in Dubai, establishing the source of the funds. The CIT(A) appreciated that the funds were used for charitable purposes and held that the addition made by the AO could not be sustained.

7. Revenue's Grounds for Appeal:
The Revenue appealed against the CIT(A)'s decision, raising multiple grounds, including the failure of the assessee to prove the financial worthiness of Global Corporation LLC, Dubai, and the genuineness of the transactions. The Revenue also contested the CIT(A)'s observations regarding the source of funds and the role of the assessee as a charitable trust.

Conclusion:
The Tribunal upheld the findings of the CIT(A), noting that the assessee provided sufficient evidence to establish the source and genuineness of the funds received from Late Sh. Sanjay Grover. The Tribunal emphasized that the funds were used for charitable purposes, and the AO's reliance on the statement of Sh. Sanjay Grover's wife was not justified. The Tribunal dismissed the appeals filed by the Revenue, affirming that the additions made by the AO were not sustainable.

Order:
The appeals filed by the Revenue are dismissed. Order pronounced in the open court on 05.09.2024.

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