If assessee proves genuineness of Unsecured Loan, no addition u/s 68

The brief facts of the case are that assessee is an individual and filed his return of income on 19.03.2014, declaring total income at Rs.2,29,850./-. Thereafter, assessee`s case was selected for scrutiny and assessing officer framed assessment order under section 143(3) of the Income Tax Act, 1961 (The Act) dated 07.03.2016. During the assessment proceedings, the assessing officer observed that assessee has purchased immovable properties for which he had taken unsecured loan from Shri Shailesh B. Satyasia of Rs. 20,00,000/- but had only filed confirmation of depositor but did not file any document to prove the identity and creditworthiness of the lender.

Therefore, assessing officer issued a show cause notice to the assessee on 16.02.2016 asking the assessee to explain the transaction. In response, the assessee submitted written submissions before the assessing officer on 22.02.2016 and explained the transaction. The assessee also submitted Loan confirmation, copy of bank statement, and acknowledgment of return of income. However, assessing officer has rejected the contention of the assessee and held that assessee has failed to prove identity, creditworthiness and genuineness of the transaction and therefore made addition of Rs. 20,00,000/- as unexplained cash credit u/s. 68 of
the Act.

On appeal, ld CIT(A) confirmed the action of the assessing officer. Aggrieved, the assessee filed an appeal before the tribunal.

Before tribunal, the ld. Counsel for the assessee, pleads that assessee had filed confirmation of account of the lender, bank statement, a return of income and also filed the affidavit confirming the transaction. It was also contended that the assessing officer had issued notice u/s 133(6) of the Act and the lender had responded and filed response before the assessing officer to confirm the transaction. The assessing officer has not considered the PAN, return of income, bank statements. The assessee has discharged his owns to prove the genuineness, identity and creditworthiness of the transactions, therefore addition made by the assessing officer may be delete. ITAT observed that when assessee has filed confirmation of account of the Lender, PAN number, bank statement, return of income and also filed the affidavit confirming the transaction, then Assessing Officer should enquire from the Assessing Officer of the creditor (Lender) as to the genuineness of the transaction and whether such transaction has been accepted by the Assessing Officer of the creditor but instead of adopting such course, the Assessing Officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. In order to establish receipt of credit in cash, as per requirement of section 68, the assessee has to explain or satisfy three conditions, namely : (i) identity of the creditor; (ii) genuineness of the transaction; and (iii) credit-worthiness of the creditor. It noted that in the instant case, there is no dispute as to the identity of the creditor. There is also no dispute about the genuineness of the transaction. That apart, the creditor (Lender) has explained as to how the credit was given to the assessee. Thus, assessee had discharged the onus which was on him as per the requirement of section 68 of the Act. Therefore, ITAT deleted the addition of Rs.20,00,000/-.

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