Addition of unexplained cash credit unsustainable as genuineness and creditworthiness proved

Birla Transasia Carpets Ltd Vs DCIT (ITAT Delhi)

ITAT Delhi held that addition under section 68 of the Income Tax Act towards unexplained cash credit unsustainable as genuineness of transaction and creditworthiness of lender duly proved.

Facts- The only effective issue to be decided in this appeal is as to whether the addition u/s 68 of the Act in respect of unsecured loans received by the assessee could be made in the facts and circumstances of the instant case.

Notably, AO proceeded to treat the unsecured loan received from parties totaling to Rs.3,50,15,937/- as unexplained cash credit u/s 68 of the Act on the premise that genuineness of the transactions and creditworthiness of the lenders were not proved by the assessee.

Conclusion- Held that the assessee has furnished confirmation from the parties, apart from ITR and annual report of lender company. From the perusal of the annual report, the lender company has free reserves which itself goes to prove the sufficient creditworthiness of the lender company. The loan transactions are routed through regular banking channels and reflected duly in the annual accounts of the lender company. Hence the genuineness of the transactions is also proved beyond doubt. All the three necessary ingredients of section 68 of the Act has been proved in respect of this loan transaction.

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