The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has held that the addition of unexplained cash will sustain when the genuineness of the transaction was not proven.
The assessee, Softtouch Cosmetic (Mktg) P. Ltd filed a return of income on 31-10-2005 declaring the total income at “Nil”. The AO noted that during the year under consideration, the assessee had received a loan of 1,78,66,925/- from M/s S. M. Traders, the proprietary firm of Shri Hareshbhai R. Parmar.
The assessee furnished a permanent account number (PAN), confirmation of the said party and bank statement of the assessee to prove the identity, genuineness and creditworthiness of the transaction. The Assessing Officer treated the amount as the assessee’s account fund as the genuineness of the transaction and creditworthiness of the party was not established and added the same to the total income of the assessee under section 68 of the Act. On appeal, CIT(A) confirmed the additions.
The assessee contended that the company has gone into liquidation and he was appearing on behalf of the official liquidator. He submitted that in the instant facts the matter may kindly be decided on the merits of the case.
The Tribunal observed that the assessee though has been able to establish the identity of the creditor/lender, but failed to establish either the genuineness of the transaction or his creditworthiness.
Shri P.M. Jagtap, Vice President and Shri Siddhartha Nautiyal, Judicial Member upheld the order of CIT(A) in confirming the action of AO of making an addition of 1,78,66,925/- as unexplained cash credit u/s.68 of the Act in respect of loan taken from the lender since the assessee was not been able to discharge the onus cast upon him u/s 68 of the Act. The appeal of the assessee was dismissed.
The Assessee was represented by Shri Kiran C. Shah and the Revenue was represented by Shri Purushottam Kumar.
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