Mayuri P. Patel Vs ITO (ITAT Ahmedabad)
ITAT Ahmedabad held that mere receipt of amount via banking channel doesn’t make the transaction as genuine. Addition u/s 68 of the Income Tax Act sustainable because of non-establishment of identity of creditor, genuineness of transaction and credit worthiness of the parties.
Facts- During the course of assessment proceeding, the AO found that the assessee has shown unsecured loan from three parties.
The assessee in support of impugned loan transactions only furnished copy of confirmation letter from the loan parties. Thereafter, the AO issued notice under section 13 1(1) to the loan parties seeking necessary detail which were complied with by them.
After going through respective replies, AO was of the opinion that the credit worthiness and genuineness of loan parties namely M/s Akshar Trading and M.S. Carting Contractor were not established. AO held that the assessee failed to explain genuineness and creditworthiness of the lender creditor and made addition of Rs. 3,86,35,000/- to the total income of the assessee under section 68 of the Act.
The aggrieved assessee preferred an appeal to the learned CIT(A). CIT(A) rejected the contention of the assessee and confirmed the addition. Being aggrieved, the present appeal is filed.
Conclusion- Held that the link in all these adjustment entry was not properly explained. Further the provision of section 68 requires the assessee to establish the identity of creditor, genuineness of transaction and credit worthiness of the parties. Merely the fact that the amount received through banking channel does not make the transaction as genuine. The assessee needs to explain the transaction properly based on the documents within the parameters of section 68 of the Act.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-5, Vadodara, dated 25/11/2019 arising in the matter of assessment order passed under s. 143 of the Income Tax Act, 1961 (here-in-after referred to as “the Act”) relevant to the Assessment Year 2012-13.
2. The assessee has raised following grounds of appeal:
1. The ld.CIT(appeals) erred in law and on fact in confirming action of the Ld.AO in treating the unsecured loans received from the depositors (i) Akshar Trading Co. of Rs.2,33,85,000/- (ii) Rs.36,00,000/- from Ashok Khurana and (iii) Rs.1,16,50,000/- from M.S Carting Contractor aggregating Rs.3,86,35,000/- as unexplained Cash credit U/s.68 of the Income Tax Act.
2. Your appellant most humbly reserves the right to add, amend, alter or substitute the ground in this appeal on or before the time of hearing.
3. The only issue raised by the assessee is that the learned CIT-A erred in deleting the addition of Rs. 3,86,35,000/- made by the AO on account of unexplained cash credit under section 68 of the Act.
4. The assessee is an individual and engaged in the business of trading and manufacturing of machinery in the name and style of AR Chem Industries. During the course of assessment proceeding, the AO found that the assessee has shown unsecured loan from following parties:
