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2025 (5) TMI 1561 - AT - Income TaxAddition u/s 68 - unexplained cash credit - genuineness and creditworthiness of the creditor not proved - HELD THAT - We noticed that the alleged unsecured loan amount varies from Rs. 81, 000/- to 1, 20, 000/- and Rs. 1, 73, 000/-. The lenders are all relatives and due details have been given before the authorities but no inquiry was conducted by Revenue authorities. Hence the appeal of the assessee is allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal in this appeal are:
2. ISSUE-WISE DETAILED ANALYSIS Issue: Justification of addition under section 68 for unexplained cash credit of Rs. 9,62,000/- Relevant legal framework and precedents: Section 68 of the Income Tax Act mandates that where any sum is found credited in the books of an assessee and the assessee fails to satisfactorily explain the nature and source of such sum, it is treated as income. The well-established tests under this section require the assessee to prove three elements: identity of the creditor, genuineness of the transaction, and creditworthiness of the creditor. The burden of proof lies on the assessee to establish these elements by cogent and credible evidence. Court's interpretation and reasoning: The Commissioner of Income Tax (Appeals) upheld the addition on the ground that the assessee failed to establish the creditworthiness of the creditors. Although the assessee produced identity proofs such as PAN cards, Aadhar cards, affidavits, ledger confirmations, and land holding documents, the CIT(A) found these insufficient to prove the source of funds or the ability of the creditors to advance the loans. The CIT(A) emphasized the absence of documentary evidence such as income-expenditure accounts, bank statements, sale records of agricultural produce, or balance sheets that could demonstrate the generation of agricultural income sufficient to justify the loans. The Tribunal noted that the loans were received from eight parties, all relatives engaged in agricultural activities. The amounts varied from Rs. 81,000/- to Rs. 1,73,000/-, and detailed information about the parties was furnished. However, the Revenue authorities did not conduct any inquiry or verification regarding the genuineness of the creditors or the transactions. Key evidence and findings: The assessee submitted identity documents (PAN, Aadhar), ledger account confirmations, affidavits, 7/12 land statements, and video conference confirmations from the creditors. The creditors were agriculturists and relatives of the assessee, and the loans were unsecured. The Revenue's show-cause notice challenged the genuineness and creditworthiness, but no further inquiry was made. Application of law to facts: The Tribunal applied the settled legal principle that the onus lies on the assessee to establish identity, genuineness, and creditworthiness. However, it also considered the peculiar facts of the case, including the familial relationship between the parties, the agricultural occupation of the creditors, and the nature of the unsecured loans. The Tribunal observed that the Revenue failed to conduct any inquiry or cross-verification to disprove the assessee's evidence. Given the absence of any adverse material or investigation, the Tribunal found that the addition under section 68 was not justified. Treatment of competing arguments: The Revenue argued that the assessee did not furnish sufficient documentary proof of the creditors' ability to advance the loans and that the source of funds remained unexplained. The CIT(A) agreed with this view, emphasizing the lack of income-related documents. The assessee countered by submitting multiple forms of evidence and stressing the agricultural background and familial ties of the creditors. The Tribunal gave weight to the assessee's evidence and the absence of any inquiry by the Revenue, thereby rejecting the Revenue's contention. Conclusions: The Tribunal concluded that the addition under section 68 was not sustainable in the facts and circumstances of the case. The evidence furnished by the assessee was sufficient to establish the identity and genuineness of the creditors and the loans. The failure of the Revenue to conduct any inquiry or disprove the evidence weighed heavily in favor of the assessee. Accordingly, the appeal was allowed, and the addition was deleted. 3. SIGNIFICANT HOLDINGS The Tribunal held:
Core principles established include:
Final determination: The addition of Rs. 9,62,000/- under section 68 was set aside, and the appeal of the assessee was allowed on the grounds that the evidence furnished was sufficient and the Revenue failed to disprove the genuineness and creditworthiness of the unsecured loans received from relatives engaged in agriculture.
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