2024 (10) TMI 743 - AT - Income Tax

Unexplained cash credit/ loan transaction - onus to prove - whether assessee had duly discharged the onus as casted under law i.e., to establish identity of the lender, their creditworthiness and the genuineness of the transactions? - CIT(A) deleted addition - HELD THAT - All loans have come through banking channels. The assessee has paid interest thereon and deducted applicable TDS against the same. The loans have duly been confirmed by all the lenders. The complete documents of all the loan creditors have been placed by Ld. AR. Upon perusal of the same, it could be seen that in many cases, the assessee has repaid the loan back to the lenders. All the loan creditors have confirmed the transactions. As against this, Ld. AO rejected the same without any cogent reasons. AO, while accepting a part of the loan from a particular lender has rejected the other part of the loan which is without any logic or justification. It could also be seen that no independent enquiries whatsoever has been conducted by Ld. AO to verify the claim of the assessee. No notice u/s 133(6) has been issued to any of the lenders. Once the assessee has furnished the requisite documents to support its case, the onus would shift on Ld. AO to controvert the same. No investigation is shown to have been carried out by Ld. AO during the course of assessment proceedings to ascertain the genuineness of loan creditors. During appellate proceeding, remand report was sought by Ld. CIT(A). Even during remand proceedings, no action is shown to have taken place. In such a case, the appellate authority would have no option but to proceed further to examine the claim of the assessee. The power of Ld. CIT(A) is co-extensive with that of Ld. AO. Therefore, in our considered opinion, the impugned issue has been clinched in right perspective by Ld. CIT(A) and the impugned addition has rightly been deleted. Decided against revenue.

Summary

Issues:
1. Delay condonation for appeal admission.
2. Addition made by Ld. AO on account of unexplained cash credit.

Analysis:

Issue 1: Delay Condonation for Appeal Admission
The appeal by the revenue for Assessment Year 2016-17 was delayed by 141 days, which the Ld. CIT-DR sought condonation for. The delay was condoned as the Ld. AR did not object. The appeal was then admitted for adjudication on merits.

Issue 2: Addition Made by Ld. AO on Account of Unexplained Cash Credit
The assessee, a resident firm engaged in real estate business, faced an addition by the Ld. AO for unexplained cash credit. The assessee had sourced funds from unsecured loans for property purchases. The Ld. AO observed discrepancies in the documentation provided by the assessee regarding certain loan creditors, leading to the addition of unexplained credit to the income.

During appellate proceedings, the assessee submitted detailed payments and sources of funds, refuting the Ld. AO's observations. The Ld. AO rejected the submissions, resulting in the addition of unexplained credit. The Ld. CIT(A) examined the claim and found that the assessee had adequately substantiated the sources of funds for property purchases, including providing details of loan creditors.

The Ld. CIT(A) noted that the assessee had fulfilled the onus of establishing the identity, creditworthiness, and genuineness of the loan creditors. The impugned addition was deleted based on the evidence provided by the assessee. The revenue appealed this decision, leading to the current judgment.

Upon review, the Tribunal found that the assessee had indeed sourced funds from loan creditors, providing comprehensive documentation to support the transactions. The Tribunal criticized the Ld. AO for rejecting parts of the loans without justification and for failing to conduct independent inquiries or issue notices to the lenders.

The Tribunal concurred with the Ld. CIT(A)'s decision to delete the addition, emphasizing the lack of investigation by the Ld. AO and supporting the assessee's fulfillment of the onus of proof. The appeal by the revenue was dismissed, upholding the deletion of the impugned addition.

In conclusion, the Tribunal upheld the Ld. CIT(A)'s decision to delete the addition of unexplained cash credit, highlighting the assessee's fulfillment of evidentiary requirements and criticizing the Ld. AO's lack of inquiry and justification for rejecting parts of the loans.