ITAT Justifies Addition for Unexplained Cash Credit regarding Unexplained Creditors shown as Bogus

ITAT Justifies Addition for Unexplained Cash Credit regarding Unexplained Creditors shown as Bogus

The Income Tax Appellate Tribunal (ITAT), Allahabad Bench ruled on 10 March 2021, in the matter of Mr. Malay Prasad (Appellant/ Assessee) v. The Assistant Commissioner of Income Tax (Respondent/ Revenue) that the addition for unexplained cash credit is justified in respect of unexplained creditors showed as bogus.

The ITAT coram comprising of Vijay Pal Rao and Ramit Kochar stated that the lower authorities have rightly invoked provisions of Section 68 of the Income Tax Act, 1961 (IT Act).

It held that cash deposits in the assessee's ICICI Bank account of Rs. 3,22,68,500 was the money of the assessee. It added that the two creditors namely Mr. Anuj Sonkar and Mr. Siddharth Agarwal are bogus creditors in whose name the assessee has allegedly credited the amount.

The factual background of the case is that the Assessing Officer (AO) asked the assessee to prove the identity and creditworthiness of the creditors and the genuineness of transactions.

The assessee submitted confirmations of Shri Chhatoo Prasad and Shri Krishna Mohan but did not submit confirmation of Shri Anuj Sonkar and Shri Siddharth Agrawal.

He failed to submit copies of the Income Tax Return (ITR) of any of the aforesaid creditors. He also did not submit bank statements or any other original records regarding financial transactions with the above-mentioned creditors.

The assessee further failed to produce any of the creditors for examination by the AO. He also failed to explain the details of the purposes of transactions. The assessee instead of discharging its primary onus as is cast under Section 68 of the Act requested the AO to summon the above parties for necessary verification.

The AO summoned Shri Anuj Sonkar by issuing a summons under section 131(1) of the 1961 Act. Mr. Anuj Sonkar appeared before the AO and denied having any financial transactions with the assessee.

In the statement of the creditor recorded by the AO, he denied having any financial transactions with the assessee. The statement of Shri Anuj Sonkar is reproduced by the AO in his assessment order.

The assessee submitted in rebuttal that said Sonkar has purposefully denied the financial transactions with the assessee, but no record/evidence as per AO was produced by the assessee to substantiate his stand.

It was held by the AO that the two creditors namely Anuj Sonkar and Siddharth Agarwal are bogus. The AO observed that Mr. Sonkar has himself denied having any financial transactions with the assessee.

It was added that as far as Mr. Agarwal is concerned, the assessee has not filed any confirmation, and the ITR of Shri Siddharth Agarwal and the AO held that this creditor is bogus and the money is assessee's own money which is wrongly represented as trade payable.

Hence, the AO made additions of Rs. 3,22,68,500 under Section 68 read with Section 115BBE of the IT Act, vide assessment order passed under Section 143(3) of the IT Act.

An appeal was filed before the Commissioner of Income Tax (Appeals) [CIT(A)] challenging the order of the AO for setting off the loss of the current year against income assessed to tax by AO. The CIT(A) rejected the contentions of the Assessee.

The assessee moved to the ITAT and it upheld the invocation of provisions of Section 68 of the IT Act by authorities below in making additions to the income of Rs. 3,22,68,500/- as unexplained cash credit.