Receipt of Money through Banking Channel would not Make Transaction 'Genuine' If Transaction is Not Explained with Documents: ITAT [Read Order]

While directing a re-adjudication of a matter under section 68 of the Income Tax Act, 1961, the Income Tax Appellate Tribunal ( ITAT ), Ahmedabad bench has held that mere fact that the amount received through banking channel does not make the transaction as genuine for the purpose of section 68 of the Income Tax Act, 1961 if the assessee needs to explain the transaction properly based on the documents within the parameters of the said section 68 of the Act.

The assessee, Smt Mayuri P Patel is an individual and engaged in the business of trading and manufacturing of machinery in the name and style of AR Chem Industries. During the course of assessment proceeding, the AO found that the assessee has shown unsecured loan from a few parties and the addition was confirmed for want of documents.

The assessee contended that the identity of the creditor, the genuineness of loan and the credit worthiness of the creditor was proved by the fact that the creditor, themselves appeared before the AO and confirmed the transaction which was duly carried out through the banking channel.

Ms Suchitra Kamble, Judicial Member and Shri Waseem Ahmed, Accountant Member observed that there are certain ambiguity on perusal of the documents.

Diving deeply into the facts of the case, the ITAT held that “the link in all these adjustment entry was not properly explained. Further the provision of section 68 requires the assessee to establish the identity of creditor, genuineness of transaction and credit worthiness of the parties. Merely the fact that the amount received through banking channel does not make the transaction as genuine. The assesseeneeds to explain the transaction properly based on the documents within the parameters of section 68 of the Act.”

Remanding the matter back to the AO, the ITAT held that “Coming to the loan amount credited from other two parties namely Akshar Trading Co and M.S. Carting Contractor for Rs. 2,33,85,000/- and Rs. 1,16,50,000/- respectively. We note that the learned AR for the assessee before us filed a fresh evidences regarding repayment of loan to the above mentioned two parties. In our considered opinion the evidences of the repayment of the loans by the assessee is very crucial for deciding the genuineness of the loan entries. However, these fresh evidences were not available before the lower authorities and therefore, the same needs to be verified at the level of the AO.”

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