AO adds unsecured loans as unexplained credit citing lenders' lack of creditworthiness: ITAT confirms genuineness by copies of ITR, bank statements [Read Order]

The Ahmedabad of the Income Tax Appellate Tribunal ( ITAT ) confirmed the genuineness of the lenders by examining the copies of ITR, bank statements and deleted the addition made by the Assessing Officer (AO).

Abhaykumar Sevantilal (assessee) filed his Income Tax Return ( ITR ) for the Assessment Years (AYs) 2016-2017 and 2017-2018. The Assessing Officer (AO) selected the cases for scrutiny and the assessment order was passed with some additions which included unsecured loans as unexplained credit.

The AO added the unsecured loans as unexplained cash credit under section 68 of the Income Tax Act stating that the lenders lacked creditworthiness. The assessee preferred an appeal before the Commissioner of Income Tax (appeals)[CIT(A)].

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The CIT(A) relied on the findings of the AO and submissions of the assessee including loan confirmations and financial details were not accepted to prove the genuineness of the loans. Therefore, the CIT(A) upheld the addition made by the Assessing officer under section 68 of the Income Tax Act.

Aggrieved by the order of the CIT(A), the assessee filed an appeal before the ITAT. The counsel for the assessee submitted that the assessee had already given several pieces of evidence to prove the genuineness of the lenders.

The counsel also listed the documents submitted by the assessee which included copies of ITR, cash book, bank statements. The counsel argued that this evidence proves the identity, genuineness and creditworthiness of the lenders.

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On the other hand, the counsel for the revenue argued that only cash books were not sufficient to prove the genuineness of the source. Therefore, the counsel relied on the order of the lower authorities and sought to dismiss the appeal.

The tribunal comprising T.R. Senthil Kumar (Judicial Member) and Makarand V. Mahadeokar (Accountant Member) observed that the loans were given to the assessee by banking channels. The tribunal observed that the assessee proved the genuineness of the source with the evidence of copies of ITR and bank statements.

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The tribunal also observed the judgement of the Gujarat High court in the case of CIT V. Ranchod Jivabhai Nakava, that once the assessee provides evidence to prove genuineness then the onus shifts to the revenue to prove the contrary.

The tribunal confirmed the genuineness of the lenders considering the ITR copies and bank statements. The tribunal also deleted the additions made by the AO under section 68 of the Income Tax act.

To Read the full text of the Order CLICK HERE

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