Onus to prove Creditworthiness of Unexplained Credit is on the Assessee: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Allahabad Bench comprising Shri Vijay pal Rao, J M and Shri Ramit Kochar, A M held that the onus to prove the creditworthiness of the unexplained credit is on the Assessee and upheld the order passed by the CIT(A) on 02.12.2019.

The appellant is engaged in the business of Micro Finance in which the assessee e-filed its return of income declaring taxable income of Rs. 74,380/-. The AO made additions of Rs. 75,00,000/-   to the returned income under Section 68 of the 1961 Act, towards the share capital introduced during the year under consideration, for which the appellant failed to prove the creditworthiness.

The CIT(A) uphold the additions to the tune of Rs. 20,00,000/- being share capital received from Shri Sanjeev Kumar of Rs. 10,00,000/- and also with respect to share capital received from Shri Vinod Kumar Sharma of Rs. 10,00,000/- and granted relief to the assessee to the tune of Rs. 55,00,000/- with respect to share capital received from M/s. Stance Synergies Private Limited to the tune of Rs. 25,00,000/-, and share capital received from Shri Ashok Kumar Singh to the tune of Rs. 30,00,000/-.

It was contended by the respondent that both the shareholders have failed to explain the sources of cash invested in the share capital of the assessee company. It was observed that Section 68 of the Act creates a legal fiction which cast an obligation on the assessee to explain to the satisfaction of the AO about the nature and source of credit in case any amount is found credited in the books of the assessee maintained for any previous year.

The Tribunal observed that the onus to prove the creditworthiness of the unexplained credit is with the appellant assessee, which was failed to prove by the appellant thus impeached Section 68 of the 1961 Act, which requires the assessee to cumulatively prove to the satisfaction of the AO as to identity, the creditworthiness of the creditors and genuineness of the transaction. Thus, we dismiss this appeal filed by the assessee, as it lacks merit. We order accordingly.

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