2024 (11) TMI 1300 - AT - Income Tax

Addition u/s 68 - appellant has proved the identity, creditworthiness of the creditor and genuineness of the transaction - onus to prove - CIT(A) deleted addition - HELD THAT - The primary onus has been duly discharged by filing relevant confirmation, ITR, Bank statements etc which all have been glossed over and ignored by the AO.In such circumstances, the assessee could do nothing any further and as such had discharged the burden. It has been rightly pointed out that although the AO issued notice u/s 133(6) of the Act and obtained all relevant documents from SDPL, he without making any further enquiry or investigation summarily treated it as paper company. Once the assessee has proved the identity of his creditors the genuineness of the transactions which he had with his creditors, and the creditworthiness of his creditors vis-a-vis the transactions which he had with the creditors, his burden stands discharged and the burden then shifts to the revenue to show that the amount in ques-tion, actually belonged to, or was owned by the assessee himself. A delicate balance must be maintained while walking the tightrope of section 68.The burden of proof cannot be discharged to the hilt by the assessee. If the Assessing Officer harbors any doubt about the legitimacy of the loan, he is empowered to carry out investigations thoroughly. But if he is unable to unearth any discrepancy, he cannot obdurately adhere to his suspicion and treat the loan as unexplained. Thus, we hold that the AO was not justified in invoking provisions of section 68 - Decided in favour of assessee.

Summary

Issues:
1. Whether the appellant proved the identity, creditworthiness of the creditor, and genuineness of the transaction under Section 68 of the Income-tax Act.
2. Whether the unsecured loan of Rs. 5 Cr. should be treated as an unexplained cash credit under Section 68 of the Act.
3. Whether the addition of Rs. 5 Cr. made by the Assessing Officer under Section 68 of the Act should be deleted.

Detailed Analysis:

Issue 1:
The appellant appealed against the order passed by the Commissioner of Income-tax (Appeals) regarding the assessment order under Section 143(3) of the Income-tax Act for the Assessment Year 2015-16. The Assessing Officer treated a loan taken from a company as a paper transaction and bogus. The appellant contended that the loan was taken for business purposes through banking channels. The Commissioner of Income-tax (Appeals) concluded that the lender was not a paper company and that the appellant had established the identity, creditworthiness, and genuineness of the transaction. Therefore, the addition was deleted.

Issue 2:
The Revenue argued that the appellant failed to prove the impugned cash credit, which was treated as unexplained under Section 68 of the Act. However, the appellant's representative argued that all necessary details proving identity, creditworthiness, and genuineness were provided to the Assessing Officer. The lender had received funds from another company and lent money to the appellant, which was reflected in the appellant's bank account. The lender had submitted relevant documents to prove the legitimacy of the transaction.

Issue 3:
The Tribunal found merit in the appellant's contentions. The primary onus was discharged by providing relevant confirmations, bank statements, and other documents. The Assessing Officer had ignored crucial evidence and summarily treated the lender as a paper company without further investigation. The burden of proof shifted to the Revenue to demonstrate that the amount in question belonged to the appellant. The Tribunal held that the Assessing Officer was unjustified in invoking Section 68 and directed the deletion of the addition. The order passed by the Commissioner of Income-tax (Appeals) was upheld, and the appeal of the Revenue was dismissed.