INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Unexplained cash credits - Assessee discharged its primary onus

Assessee-company took loans from various parties. AO found that the assessee failed to establish creditworthiness of the said parties on the basis of documentary evidence. Accordingly, he treated the amount of loans shown by the assessee as unexplained cash credit under section 68. Further, the AO also worked out the amount of interest on such loans and also disallowed the same. Held: Assessee discharged its primary onus by furnishing necessary details such as copies of PANs, confirmation of parties, bank extracts, etc. to support the transactions. Similarly, there was also no dispute to the fact that all the transactions were carried out through banking channel. Thus, the assessee discharged its onus imposed under section 68. Further, the details filed by assessee were not cross verified by revenue from the respective parties despite having the necessary details in its possession. Therefore, the addition made under section 68 was not sustainable. Further, the creditworthiness of the lenders was justified by assessee. Once the cash credit gets explained within the parameters of the provisions of section 68, then question of disallowing the interest expenses does not arise. Hence, the addition made under section 68 and also disallowance of corresponding interest on loans was deleted.

Relied:CIT v. Chanakya Developers (2014) 43 Taxmann.com 91 (Guj-HC) : 2014 TaxPub(DT) 2934 (Guj-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-2014

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