ITAT upheld addition as reditworthiness of creditors had not been established

1. Assessee individual was engaged in the business of trading of fertilizers and pesticides. The return of income for the year under consideration was filed by him on 26.09.2008 declaring total income of Rs.1,41,318/-. During the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee had received loans of Rs.2,09,000/- each from Shri M. Sahabuddin and Shri Molla Amir Ali and the said loans received in cash have been repaid again in cash during the year under consideration. He, therefore, proceeded to examine the said loans received by the assessee representing cash credits under section 68 (of Income Tax Act, 1961) and recorded his findings/ observations. AO considered the loans received from two creditors only to the extent of Rs.20,000/- each as explained and the balance amount aggregating to Rs.3,78,000/- was added by him to the total income of the assessee treating the same as unexplained cash credit u/s 68 (of Income Tax Act, 1961).

2. CIT(A) confirmed the addition.

3. On appeal,the ITAT held as under:

"In these facts and circumstances, I am of the view that mere ownership of agricultural land by the concerned two creditors is not sufficient to establish their creditworthiness or financial capacity to advance the loan amounts in question to the assessee especially when there is not even an iota of evidence to show the extent of agricultural income claimed to be generated by them. Even the other source of funds explained by them in the affidavits was found to be not satisfactory by the ld. CIT(Appeals) for the elaborate reasons given by him in his impugned order and keeping in view the same as well as the specific adverse findings/observations recorded by the Assessing Officer, I am of the view that the creditworthiness or the financial capacity of the concerned two creditors to advance the loan amounts in question has not been satisfactorily established. In that view of the matter, I uphold the impugned order of the ld. CIT(Appeals) confirming the addition of Rs.3,78,000/- made by the Assessing Officer by treating the loan amounts in question as unexplained cash credits under section 68 (of Income Tax Act, 1961) and dismiss this appeal of the assessee.

4. In the result, the appeal of the assessee is dismissed."

Case Reference- Binay Chandra Sadhukhan -Vs.- Income Tax Officer

IN THE INCOME TAX APPELLATE TRIBUNAL,

KOLKATA 'SMC' BENCH, KOLKATA

Before Shri P.M. Jagtap, Accountant Member

I.T .A. No. 1508/KOL/ 2014

Assessment Year: 2008-2009