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Facts
The assessee's return of income was selected for scrutiny, and an addition of Rs. 10,00,000/- was made under section 68. The CIT(A) sustained this addition. The assessee appealed to the ITAT, providing additional documentation not presented earlier.
Held
The Tribunal held that the additional documents, including creditor confirmations and bank statements, were satisfactory. The Tribunal noted that the authorities below did not adequately address the repayment of the loan and applied the deeming fiction of Section 68 strictly.
Key Issues
Whether the addition made under Section 68 of the Income Tax Act, 1961, for unexplained cash credit is justified, especially when the assessee provided additional evidence before the Tribunal.
Sections Cited
68, 2(22)(e), 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCH “A”, JAIPUR
Before: SHRI GAGAN GOYAL & SHRI NARINDER KUMAR
This appeal by the assessee is directed against the order of NFAC, Delhi dated 09.07.2024 passed u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act’).The assessee has raised the following grounds of appeal:
1. On the facts and circumstances of the case Ld. Lower Authorities grossly erred in making and confirming addition of Rs 10,00,000/- under section 68 of the Act.
2. On the facts and circumstances of the case Ld Lower Authorities grossly erred in making and confirming addition of Rs 10,00,000/- under section 68 of the Act with considering the fact that assessee retuned back the amount to the lender on 04-04-2016.
3. On the facts and circumstances of the case Ld CIT(A) grossly erred in confirming addition of Rs 10,00,000/- under section 68 of the Act with considering the fact that assessee is not liable for proving source of the source.
That the appellant craves his indulgence to add, amend, alters or deletes the grounds of appeal.
2. The brief facts of the case are that the assessee individual filed his return of income at Rs. 13, 84,720 vide dated: 24.12.2014. The case of the assessee was selected for scrutiny. During the year under consideration the assessee derived income under the head Salary, House Property, Capital Gains and Income from Other Sources. The case of the assessee was assessed after making addition u/s. 2(22) (e) of the Act amounting to Rs. 50 Lacs and Rs. 10 Lacs u/s. 68 of the Act. The assessee being aggrieved with this order of the AO preferred an appeal before the Ld. CIT (A), who in turn disposed of the appeal by deleting the addition made u/s. 2(22) (e) of the Act amounting to Rs. 50 Lacs but sustained the addition of Rs. 10 Lacs made u/s. 68 of the Act. The assessee being further aggrieved with this order of the Ld. CIT (A) preferred the present appeal before us.
3. We have gone through the order of the AO, order of the Ld. CIT (A) and submissions of the assessee alongwith grounds taken before us. Before us the assessee presented copy of confirmation duly signed by the creditors Sh. Sushil Kumar Jain, Copy of Bank Statement alongwith his ITR, Copy of the assessee’s bank account (On demand of the Bench) and Copies of the assessee’s submission against Remand Report. These documents were not produced before the AO during the assessment proceedings (except copy of confirmation duly signed by the creditors Sh. Sushil Kumar Jain), same were first time produced before the Ld. CIT (A), and hence Rule 46A of the I.T. Rules, 1962 is applicable here. In compliance with Rule 46A of the I.T. Rules, 1962 the Ld. CIT (A) called for the remand report from the JAO. We have examined the remand report of the AO alongwith the bank statements and ITR of the creditor and apparently found to be correct that neither the creditor nor the assessee maintained good/enough balance in their respective bank accounts. The creditor of the assessee deposited Rs. 8, 15,267/- and Rs. 2, 00,000/- on 26.03.2014 and 28.03.2014 respectively and the same were transferred to the assessee on 28.03.2014. The assessee also received the same on 28.03.2014 and consumed the balance on 28.03.2014 and 29.03.2014. The assessee also produced bank statement for the period 01.04.2016 to 21.07.2016, in which it was shown to us that the amount of loan returned back on 04.04.2016 to the creditor in his same bank account.
4. In the given situation and based on the facts, explanations and submission of the assessee looks to be convincing to us, as on the issue of repayment of loan there are no remarks either by the AO or the Ld. CIT(A). Looking at the amount involved and level of participation by the assessee at each level, we found the submissions of the assessee as satisfactory one. Here we need to understand that section 68 is a deeming fiction and to apply the same, a strict rule of evidence and interpretation is required to be followed. None of the explanation or document of the assessee can’t be brushed aside alongwith the fact that each and every condition of the section has to be verified by the Revenue (May be against/favourable to the assessee). As w.e.f. A.Y. 2013-14, the assessee has to prove the source of the source also, but we found there is no query on this issue by the AO and Ld. CIT (A) also has not dealt with the same. For sake of better clarity and ready reference we are reproducing herein below the provisions of section 68 of the Act as under: Section - 68, Income-tax Act, 1961 - FA, 2024 Cash credits.
68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year: Provided that where the sum so credited consists of loan or borrowing or any such amount, by whatever name called, any explanation offered by such assessee shall be deemed to be not satisfactory, unless, — (a) the person in whose name such credit is recorded in the books of such assessee also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that] where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided also] that nothing contained in the first proviso or second proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.
5. On the one hand it’s a compulsory provision to be followed, on the other hand this exercise can crystallize the facts strongly and firmly in favour of either side and there is no scope of any confusion. But, as the same is not part of any proceeding carried out by the authorities below, benefit of doubt goes in favour of the assessee. Resultantly, Grounds raised by the assessee are allowed and the AO is directed to delete the addition made u/s. 68 of the Act.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 21st Day of February 2025.