Case Law Details

Case Name : Shri Suresh Chandra (Indl.) Vs DCIT (ITAT Lucknow)
Appeal Number : ITA No. 184/LKW/2010, ITA No. 185/LKW/2010, ITA No. 239/LKW/2010
Date of Judgement/Order : 12/06/2015
Related Assessment Year :
Courts : All ITAT (4337) ITAT Lucknow (70)

Brief Facts: The dispute is regarding addition made by the Assessing Officer of Rs.59,65,729/- u/s 68 in respect of various cash credits received by the assessee and in the Revenue’s appeal for the same assessee, the dispute is regarding deletion of addition made by Assessing Officer of Rs.27.91 lac u/s 68 of the Act.

Question of Law

Whether the Assessee was able to prove the creditworthiness of the depositors by declaring proper source and giving satisfactory explanation according to section 68?

Contention of the Assessee

According to the learned AR of the Assessee, they have established the identity and creditworthiness of the creditors by submitting confirmations and copy of bank statement of all the creditors along with the copy of income tax return filed by each of the creditors. Merely on this basis that cash was deposited in the bank account of the loan creditor prior to the issue of cheque, it cannot be said that the cash deposited by the loan creditor in his bank account was belonging to the assessee. Reliance was placed by him on a judgment of Hon’ble Gujarat High Court rendered in the case of CIT vs. Rohini Builders [2002] 256 ITR 360 (Guj) where it was held that when the assessee has established the identity of creditors and the amount was received by account payee cheques, initial burden lying on the assessee of proving credits is discharged and the source of credit need not be proved.

Contentions of the Revenue

According to Revenue, the assessee could not prove the creditworthiness of the depositors which has been dealt in detail by the CIT(A) in the order. Reliance was made on Banarsi Prasad Vs. CIT 304 ITR 239 (All.) where it was observed that the assessee has to prove three conditions (a) the identity of the creditor, (b) the “capacity” of such creditor to advance the amount, and (c) the genuineness of the transaction.

The Revenue also relied upon Ram Lal Agarwal Vs. CIT 280 ITR 547 (All) where it was observed that under section 68 the burden lies upon the assessee to prove its nature and source. The Revenue further relied upon CIT Vs. P. Mohankala 291 ITR 278(SC), where it was mentioned that When and in what circumstances Section 68 of the Act would come into play? Further it was observed that the expression “the assessee offer no explanation” means where the assessee offer no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. The revenue also relied upon CIT Vs. Orissa Corporate (P) Ltd., 159 ITR 78 (SC), where the “doubtful nature” of the transactions were discussed by the Apex Court. Then in the last, Revenue relied upon Vijay Kunar Talwar V CIT 330 ITR 1 (SC) where it was held that the amount will be charged to income tax if proper explanation is not found to be satisfactory.

Held by the Tribunal

The Hon’ble Tribunal while discussing the case of Banarsi Prasad Vs. CIT (supra) in which it was observed that the assessee has to prove three conditions i.e. the identity of creditor, the capacity of the creditors and genuineness of the transactions. The Hon’ble Tribunal was not agreed by it as the facts in the present case are totally different as The assessee has not only stated that money was received from whom, the assessee has furnished the complete address, confirmation, PAN, bank statement etc. of each of the creditors.

Then by disagreeing by the decision of Ram Lal Agarwal Vs. CIT (supra), the Hon’ble Tribunal held that the assessee has furnished various evidences regarding source of loan creditors and bank statements are brought on record.

Mere cash deposit in the bank account of the creditor cannot be said that the creditor has no creditworthiness. Then by disagreeing by the other decisions the Hon’ble Tribunal held that in the present case, not even a notice was issued by the Assessing Officer to the creditors to examine and verify the case of the assessee regarding creditworthiness and identity of the creditors. Then by discussing the Judgments relied upon by the Assessee, The Hon’ble Tribunal held that failure of creditor to show creditworthiness of his sub-creditor does not amount to failure of the assessee to establish the creditor. Also, in the present case, confirmation of all creditors with full address and PAN, bank statement and assessment particulars are brought on record. Only adverse feature that there is cash deposit in the bank account of the creditor could not be the only basis to say that creditors are not having credit worthiness, when they are assessed to tax and their PAN, address and assessment particulars are furnished and the A.O. has not made any effort to call any detail from the creditors or to verify the details from the A.O. of the creditors. Therefore, respectfully following judgments relied upon by the Assessee, the Hon’ble Tribunal held that in the facts of the present case, no addition is justified u/s 68 of the Act in respect of any of the cash credits. In, the result the appeal of Revenue was dismissed and both the Appeals of the assessee were allowed.

Analysed by Advocate Bharat Agarwal

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Category : Income Tax (25333)
Type : Judiciary (10108)

0 responses to “Furnishing of Name, Address, PAN and Bank Statements are Sufficient compliance u/s 68”

  1. Nem Singh says:

    Good finding: The Hon’ble Tribunal held that failure of creditor to show creditworthiness of his sub-creditor does not amount to failure of the assessee to establish the creditor. Further the cash deposit in the bank account of the creditor could not be the only basis to say that creditors are not having credit worthiness without making any further inquiry.

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