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2025 (3) TMI 521 - AT - Income TaxUnexplained cash credit u/s. 68 - assessee has failed to discharge his onus with respect to the credit worthiness and genuineness of the transaction - CIT(A) deleted addition as the amount is found to have been received through banking channel HELD THAT - Based only on suspicion conjectures and surmises the AO couldn t have spurned it away. Even though original MoU was placed before the AO he failed to call for the stamp vendor Mr.N.Jyothi Selvam who sold the stamp paper on 05.12.2018 as well as any of the witnesses whose names have been cited as witnesses to the aforesaid MoU. AO couldn t point out any material infirmity in the MoU i.e. as to the assertions made by the assessee that he was the owner of the scheduled property and that the buyer has part performed his part of the obligation by advancing Rs. 2 Crs. through banking channel on 21.12.2018 which was an event which happened before the search took place on 29.01.2019 . AO erred in law by observing that unregistered document MoU is not enforceable contract. And as noted the AO has not been able to rebut the onus which shifted on him after the MoU was presented before him and the payer/purchaser has confirmed the transfer of Rs 2 Crs online to assessee s account. Having said so we also agree with the Ld.CIT(A) that the addition u/s.68 of the Act was not warranted because the identity of the credit is not disputed i.e. Shri Ramajayam Rangasamy ; and the nature of the transaction has been shown as advance for the purchase of scheduled property owned by the assessee. Section 68 addition could have been made only if assessee failed to prove the identity creditworthiness and genuineness of the transaction. In this case even if the statement of assessee recorded during the search is accepted then it is loan from Shri Ramajayam Rangasamy; and if the statement of transferee of the credit is taken then it is advance of the sale consideration given to assessee; in both scenario there is no element of income embedded in either transaction. Decided in favour of assessee.
ISSUES PRESENTED and CONSIDERED
The core legal issue in this case is whether the addition of Rs. 2,00,00,000/- as unexplained cash credit under Section 68 of the Income Tax Act, 1961, by the Assessing Officer (AO) was justified. The Tribunal needed to consider whether the Learned Commissioner of Income Tax (Appeals) [Ld.CIT(A)] was correct in deleting this addition. The specific questions involved included:
ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents Section 68 of the Income Tax Act, 1961, allows the AO to add any unexplained cash credits in the books of an assessee as income if the assessee fails to satisfactorily explain the nature and source of the credit. The burden of proof initially lies on the assessee to demonstrate the identity, creditworthiness, and genuineness of the transaction. Court's Interpretation and Reasoning The Tribunal examined the evidence presented, including the Memorandum of Understanding (MoU) dated 21.12.2018, which indicated that the Rs. 2 Crores was an advance for the purchase of property. The Tribunal noted that the MoU was executed on a stamp paper purchased on 05.12.2018 and was signed by both parties, witnessed by two individuals. The Tribunal found that the MoU had not been effectively rebutted by the AO. Key Evidence and Findings
Application of Law to Facts The Tribunal applied Section 68 and concluded that the identity of the credit was not in dispute, and the nature of the transaction was sufficiently explained as an advance for property purchase. The Tribunal emphasized that the AO failed to rebut the onus that shifted to him after the MoU was presented. Treatment of Competing Arguments The Tribunal considered the AO's argument that the MoU was an afterthought and the transaction was not genuine. However, it found that the AO's conclusions were based on suspicion rather than concrete evidence. The Tribunal agreed with the Ld.CIT(A) that the transaction did not contain an element of income, whether considered as a loan or an advance. Conclusions The Tribunal upheld the Ld.CIT(A)'s decision to delete the addition under Section 68, concluding that the transaction was adequately explained and did not constitute unexplained cash credit. SIGNIFICANT HOLDINGS The Tribunal's significant holdings included:
Verbatim Quotes of Crucial Legal Reasoning "Further, to treat a particular credit / receipt as income appearing in the books,-the corollary debit / payment has to be considered... As long as such liability was not discharged by the recipient, the same partake the character of loan / advance." "Therefore, in the light of the above discussion, the AO is directed to delete the addition of Rs. 2 crores made u/s 68." Core Principles Established The Tribunal reaffirmed that the burden of proof under Section 68 initially lies with the assessee but shifts to the AO once the assessee provides credible evidence explaining the nature and source of the credit. Final Determinations on Each Issue The Tribunal dismissed the Revenue's appeal, confirming the Ld.CIT(A)'s decision to delete the addition of Rs. 2 Crores under Section 68 of the Income Tax Act, 1961.
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