2016 (1) TMI 1496 - AT - Income Tax

Unexplained cash credit u/s 68 - inability of the creditors to explain the source of source - Assessee argued unsecured loans had been received by account payee cheques from identifiable parties who had duly confirmed in their statement that loans had been advanced to the appellant - HELD THAT - It is well settled position of law and as stated above that appellant is not obliged to prove source of source of the credits. The burden of the assessee is to restrict himself to prove and explain the source of the credit; and once creditor has appeared and accepted that he has provided loan and there is nothing to prove that money received by the appellant is his own money. Assessee has discharged the primary onus on him to prove the identity creditworthiness and genuineness of the transaction. Thereafter it was the duty of the AO to investigate and found fault with the aforesaid documents that was produced before him. Without doing so simply by taking one statement of an old man of 79 years that he has sold the agricultural produce to one firm M/s. Girdhari Lal Ramesh Chander cannot be a sole ground that entire statement of Faquir Chand and documents which have corroborated the statement of Faquir Chand cannot be countenanced. AO has failed to bring on record any deficiency or could challenge the veracity of the documents filed before him. We find that Faquir Chand had enough creditworthiness and the transactions being through account payee need to be taken as genuine in the absence of any other evidences which is not on record. Therefore we delete the disallowance. For Joginder Mongia the assessee had brought the creditor before the AO and has also produced the aforesaid documents to discharge its primary onus. We find that the authorities below have not been able to point out any discrepancy or defect in any of these documents produced by the assessee. In the absence of same simply disallowing and making an assertion by just saying that it is bogus transaction is legally untenable therefore we are inclined to delete the addition. In respect of Satayawanti we find that she is the mother of the assessee and she deposed before the AO that she is receiving money from M/s. Shree Gian Chand a commission agent -However during assessment proceedings we find that the partner / proprietor of M/s. Shree Gian Chand denied to have any transaction with the said Satayawanti. Satayawanti s contention is that the amount of Rs. 1, 50, 000/- has accumulated from her past savings and also she earns Rs. 25, 000/- per annum from stitching works. The AO has also taken note of the fact that cash was deposited on the same date before issuance of cheque by Satayawanti to assessee - No infirmity in the order passed by the authorities below with regard to this creditor. Decided partly in favour of assessee.

Summary

Issues Involved:
1. Addition of Rs. 12,50,000 as unexplained cash credit under Section 68 of the Income Tax Act.
2. Lump sum addition of Rs. 25,000 out of the expenses incurred and claimed by the assessee.

Issue-Wise Detailed Analysis:

1. Addition of Rs. 12,50,000 as Unexplained Cash Credit under Section 68

Facts and Background:
The assessee, a part-time accountant and trader in shares, filed a return showing a loss of Rs. 1,20,122 for the assessment year 2008-09. The case was selected for scrutiny, and the AO made an addition of Rs. 12,50,000 as unexplained cash credit under Section 68 of the Income Tax Act, 1961, pertaining to three unsecured creditors: Shri Faquir Chand Godara, Shri Joginder Mongia, and Smt. Satyawanti.

1.1 Loan from Shri Faquir Chand Godara:
- AO's Observation: Rs. 5,00,000 was added as unexplained cash credit because identical cash amounts were deposited before issuing cheques to the assessee. The AO questioned the creditworthiness and genuineness of the loan.
- CIT(A)'s Decision: Confirmed the addition, citing contradictions in the statements and evidence provided by Shri Faquir Chand Godara.
- Tribunal's Analysis: The assessee provided substantial evidence, including bank statements and confirmations from M/s. Shyam Traders. The Tribunal found that the AO's reliance on a mistaken statement by an old man (aged 79) was not justified. The Tribunal concluded that the assessee had sufficiently proved the identity, creditworthiness, and genuineness of the transaction. Decision: The addition of Rs. 5,00,000 was deleted.

1.2 Loan from Shri Joginder Mongia:
- AO's Observation: Rs. 6,00,000 was added as unexplained cash credit due to identical cash deposits before issuing cheques and the fact that Joginder Mongia had taken a loan from a bank but did not charge interest on the loan given to the assessee.
- CIT(A)'s Decision: Confirmed the addition, questioning the genuineness and creditworthiness of the loan.
- Tribunal's Analysis: The assessee provided evidence of the creditor's landholding, annual income, and bank statements. The Tribunal found that the authorities did not point out any discrepancies in the documents provided. Decision: The addition of Rs. 6,00,000 was deleted.

1.3 Loan from Smt. Satyawanti:
- AO's Observation: Rs. 1,50,000 was added as unexplained cash credit because Smt. Satyawanti, earning Rs. 25,000 per annum from stitching, could not substantiate the source of the loan.
- CIT(A)'s Decision: Confirmed the addition, citing the lack of creditworthiness and contradictions in the statements.
- Tribunal's Analysis: The Tribunal found that Smt. Satyawanti's explanation about her past savings and annual income was not convincing, especially given the cash deposits before issuing the cheque. Decision: The addition of Rs. 1,50,000 was upheld.

Legal Precedents Cited:
- Nemi Chand Kothari vs. CIT: The assessee is not required to prove the source of the source.
- DCIT vs. Rohini Builders: The assessee needs to prove the identity, creditworthiness, and genuineness of the transaction, not the source of the source.
- CIT vs. Jai Kumar Bakliwal: Mere suspicion cannot be the basis for addition under Section 68.

2. Lump Sum Addition of Rs. 25,000 out of the Expenses Incurred and Claimed by the Assessee
- Assessee's Position: This ground was not pressed by the assessee.
- Tribunal's Decision: Dismissed as not pressed.

Conclusion:
The appeal was partly allowed. The Tribunal deleted the additions of Rs. 5,00,000 and Rs. 6,00,000 related to loans from Shri Faquir Chand Godara and Shri Joginder Mongia, respectively, but upheld the addition of Rs. 1,50,000 related to the loan from Smt. Satyawanti. The lump sum addition of Rs. 25,000 was dismissed as not pressed.