PCIT Vs Veedhata Tower Pvt.Ltd. (Bombay High Court)
The Revenue filed an appeal under Section 260-A of the Income-tax Act, 1961 challenging the Income Tax Appellate Tribunal’s order dated 21 January 2015 for Assessment Year 2010-11. The sole question raised was whether the Tribunal was correct in holding that the Assessing Officer was not entitled to enquire into the “source of the source” under Section 68 while examining the genuineness of a cash credit. The Tribunal had deleted an addition of Rs.1.65 crore made under Section 68 in respect of a loan obtained by the respondent-assessee from M/s. Lorraine Finance Pvt. Ltd. The Assessing Officer had treated the loan as unexplained cash credit on the ground that the assessee failed to establish the genuineness of the transaction, the lender’s creditworthiness, and the real source of funds. The Commissioner of Income Tax (Appeals) upheld the addition.
On further appeal, the Tribunal found that the loan from the lender was undisputed, the lender had confirmed the loan through confirmations, personal appearance and had attempted to explain the source of its funds. It also recorded that Rs.64.25 lakh had already been repaid through account payee cheques and the balance outstanding was Rs.1.75 crore. The Tribunal further noted that the source of the lender’s funds stood explained by the creditor’s director accepting that he had advanced the loan. It held that, for Assessment Year 2010-11, there was no statutory requirement to explain the “source of the source” since the amendment to Section 68 became effective from Assessment Year 2013-14. The Tribunal also held that the assessee had discharged its onus under the pre-amended Section 68 by furnishing confirmation letters, affidavits, full addresses and PAN details of the creditors, relying upon Commissioner of Income Tax V/s. Lovely Exports (P.) Ltd.
