ITAT Sustains Additions u/s 68, Denies Deduction for LIC Premium and Tuition Fees; Dismisses Assessee’s Appeal [Read Order]

The Income Tax Appellate Tribunal (ITAT) Hyderabad Bench upheld the additions made under Section 68 of the Income Tax Act, 1961, treating unexplained cash credits as taxable income. The tribunal also denied deductions under Section 80C for LIC premium and tuition fees due to a lack of documentary evidence. As a result, both appeals filed by the assessee were dismissed.

Srinivasa Rao Bathini, a resident of Warangal engaged in commodity trading, was the assessee in this case. The Income Tax Department reopened assessments for AY 2011-12 and AY 2012-13 after noticing cash deposits exceeding ₹10 lakh in his bank account. A notice under Section 148 was issued on March 29, 2018, but the assessee failed to file his return of income. In response to a subsequent notice under Section 142(1) dated November 30, 2018, he filed his return of income on December 16, 2018, declaring ₹3,55,210 as total income. He claimed that the cash deposits were sourced from loans taken from relatives, friends, and farmers. He provided a list of names but failed to submit confirmation letters or supporting documents to establish the genuineness of the loans and the financial capacity of the lenders. The Assessing Officer rejected the explanation, treating the loans amounting to ₹27.51 lakh for AY 2011-12 and ₹95 lakh for AY 2012-13 as unexplained cash credits under Section 68, making taxable additions accordingly. Additionally, an ₹1 lakh deduction under Section 80C for LIC premium and tuition fees was disallowed due to a lack of supporting receipts.

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The assessee appealed before the Commissioner of Income Tax (Appeals) [CIT(A)] and submitted additional affidavits and Pattadar Pass Books to support his claims. The CIT(A) forwarded the documents to the Assessing Officer for review, but after evaluation, the Assessing Officer maintained that the evidence was insufficient to establish the credibility of the transactions. The CIT(A) upheld the Assessing Officer’s decision, stating that the affidavits lacked independent verification and the lenders’ financial capacity was not proven.

During the ITAT hearing on January 15, 2025, A.V. Raghu Ram represented the assessee, while Dr. Sachin Kumar appeared for the Revenue. The ITAT examined the affidavits and supporting documents but found them unconvincing. The tribunal noted that the lenders claimed to be agriculturists, but their small land holdings made it unlikely that they could extend large loans. Furthermore, no PAN details or bank account statements were provided for verification.

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The ruling was delivered by Manjunatha G. (Accountant Member) and K. Narasimha Chary (Judicial Member). The tribunal held that the assessee failed to provide credible evidence for the loans and could not establish the creditworthiness of the lenders. It also upheld the disallowance of ₹1 lakh under Section 80C, stating that no receipts or proof of LIC premium or tuition fee payments were furnished. Consequently, both appeals were dismissed.

The ITAT Hyderabad Bench upheld the additions of ₹1.22 crore under Section 68 and the disallowance of deductions under Section 80C. The tribunal ruled that the burden of proof lies with the assessee to establish the genuineness of transactions, and mere affidavits without supporting documents are insufficient. This judgment reinforces the importance of maintaining proper financial records and furnishing verifiable evidence in taxation matters.

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