Failure to Prove Authenticity of Loan Transactions: ITAT holds Unsecured Loans as Unexplained Cash Credits u/s 68 of Income Tax Act

The Raipur bench of Income Tax Appellate Tribunal (ITAT) has recently upheld the decision of the lower authority held that unsecured loans are unexplained cash credits under Section 68 of Income Tax Act 1961,if failed to prove authenticity of loan transactions.

Assesee Santosh Chopra, is engaged in the business of earning commission and brokerage on sale of agricultural produce.

Return of income filed by the assessee was processed under Section 143(1) of the Income Tax Act. Subsequently, the case of the assessee was selected for scrutiny assessment  under Section 143(2) of the Income Tax Act.

During the course of the assessment proceedings, it was observed by the A.O that as per the records the assessee had outstanding unsecured loans .

After receiving explanation regarding the transaction AO found that the assessee had failed to produce the copies of the bank accounts of the lenders and held the unsecured loans that were raised by the assessee during the year from three parties aggregating to Rs. 26,72,250/- as unexplained cash credits.

Aggrieved the order  assesee filed appeal before the CIT(A) but assessee failed before CIT(A).

Praveen Jain counsel for the assessee submitted that there was no proper inquiry to ascertain whether the explanation was genuine. The Tribunal also had totally overlooked the matter and therefore the addition made by the ITO for the assessee Firm doubting the genuineness of the transaction had to be deleted.

Priya Godheja, counsel for the revenue submitted that assessee had failed to substantiate the identity and creditworthiness of the lenders and also, genuineness of the transactions under consideration.

Therefore, the assessee had failed to discharge the onus that was cast upon him as regards proving the authenticity of the loan transactions in question.

While considering the contentions, the tribunal observed that the assessee had failed to discharge the primary onus that was cast upon him as regards proving the identity and creditworthiness of the aforementioned lenders, as well as genuineness of the transactions under consideration.

Hence the  single bench of Ravish Sood, (Judicial Member) upheld the decision of the lower authority and dismissed the appeal filed by the assessee.

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