Loan preceded by cash deposit of exact amount held to be cash credit u/s 68

Loan obtained preceded by cash deposit of exact amount in lenders account held to be cash credit u/s 68 as the explanation offered was not found to be satisfactory

ABCAUS Case Law Citation:
ABCAUS 3671 (2023) (02) ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming addition made by the Assessing Officer (AO) towards unexplained cash credits u/s 68 of the Income Tax Act, 1961 (the Act).

The return of the appellant assessee was selected for complete scrutiny under CASS.  

The AO observed that the assessee had taken a loan of large amount from one individual (the lender) and paid interest after due deduction of TDS. 

The assessee could not establish the creditworthiness of the lender   and the genuineness of the loan. Being unsatisfied with the explanation offered by the assessee regarding credit of loan in the books of account of the assessee, the AO invoked the provisions of Section 68 and made an addition on this account.

The Tribunal observed that the lender in this case had received cash from a company in which the appellant assessee was a shareholder. In the bank account of the said company cash was deposited before the date of giving the loan to the assessee.

The ITAT observed the trail of the cash being deposited in the account of the company and from there to the account of  the lender and from there to the account of the assessee.

The Tribunal affirm the finding of the AO that the loan was preceded by the deposit of exact amount which was preceded by the cash deposits. The explanation offered by the assessee to explain the entries was not found to be satisfactory.

As a result, the Tribunal decline to interfere with the order of the CIT(A) and dismissed the appeal of the assessee.

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