INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Assessee duly discharged onus of proving identity and creditworthiness of loan creditors and genuineness of transactions - Treatment as unexplained cash credit

Assessee-company raised unsecured loans from 22 creditors during the year under consideration. AO observed that out of the said loans, the loans from 7 creditors were found to have been satisfactorily explained by the assessee. Accordingly, the AO treated the balance loans from 15 creditors as income from undisclosed sources and made addition of the same as unexplained cash credit. Held: It was found that assessee duly discharged its onus of proving identity and creditworthiness of loan creditors and genuineness of transactions by furnishing their confirmation letters, assessment particulars including PAN and copy of Income Tax Return, balance sheet, profit and loss account etc. It also furnished bank statements to show that the payments were made through banking channels in respect of the loan creditors. Further, it was also found that the AO did not provide any opportunity to the assessee for cross examination of the creditors in respect of whom he was not satisfied with the explanation rendered. It is settled proposition of law that the information gathered behind the back of the assessee cannot be used against him unless until an opportunity of rebutting the same is given to the assessee. Accordingly, the addition made under section 68 on account of unexplained cash credit was deleted.

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

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