Girish Madhukar Rathi v. The Dy. Commissioner of Income Tax - (Income Tax Appellate Tribunal) (05 Mar 2020)

On mere suspicion, addition for unexplained Cash Credit cannot be made

MANU/IP/0110/2020

Direct Taxation

In facts of present case, the assessee is son of Shri Madhukar Rathi. The assessee filed his return of income declaring total income of Rs.56,10,180. At the end of the scrutiny proceedings, the assessment was completed determining the assessed income at Rs.1,75,53,770. Apart from others, the Assessing Officer made an addition of Rs.79 lakhs under Section 68 of the Income-tax Act, 1961.

The Assessing Officer is of the view that despite the filers income tax return by concerned loan creditors, banking transactions, the loan transactions are not genuine. According to Assessing Officer, Shri Madhukar Rathi lacks creditworthiness. Despite the documentation furnished by the assessee with regard to creditworthiness of Shri Madhukar Rathi, loan transactions through banking channels, repayment of loans with interest, compliance of TDS provisions, wherever applicable, the AO invoked the provisions of section 68 of the Act and made addition on account of unsecured loan of Rs.79 lakhs. During the first appellate proceedings, the assessee could not win the appeal before the CIT(A). The CIT(A) dismissed the appeal of assessee and confirmed the additions.

It is an undisputed fact that the assessee has Running Account in matters of taking loans from Shri Madhukar Rathi (father) and Shri Madhukar Rathi in turn taking loans from Rahul Anil Birla and Nand Sales Corporation. The said transactions are undisputedly through banking channels. It is further an undisputed fact that during the year under consideration, the assessee repaid to the tune of Rs.1,25,50,000 to Shri Madhukar Rathi. So, it is case of taking loans and repayment of loans through a Running Account. Regarding balance of loan in the Running Account, it is also an undisputed fact that, in past too, no addition of these loans amounts were added by AO despite the similar loan transactions with Shri Madhukar Rathi and, in turn, Shri Madhukar Rathi with Rahul Anil Birla, Rakesh N. Birla and Nand Sales Corporation.

Therefore, it is case of mere suspicion of the AO that led to invoking of the provisions of Section 68 of the Act. Otherwise, there is no evidence with Revenue to demonstrate that it is case of money laundering, non discharge of onus by the assessee. With the loans taken from Birlas & others, Shri Madhukar Rathi is capable of providing loan of Rs.79 lakhs to the assessee. AO has not disturbed the loans in the cases of Birlas & others. There is no case of addition under Section 68 of the Act. The additions made by the AO are not sustainable. Therefore, grounds raised by the assessee are required to be allowed.

Tags : TRANSACTION GENUINENESS ADDITIONS LEGALITY