Section 80G deduction is allowed by ITAT if assessee provides sufficient evidence

Facts and Issue of the Case

The Revenue has disputed the Ld.CIT(Adecision )’s to treat the Assessing Officer’s addition of Rs. 2,88,85,846 made according to Section 68 of the Income Tax Act, 1961 on account of unsecured loans as an unexplained cash credit in ground No. 1.

In this case, the assessee is a partnership-firm that specialises in road construction. It filed a return of income on August 5, 2010, declaring a total income of Rs. 51,58,810 for the year under consideration. The above said return was selected for scrutiny by CASS, and on August 30, 2011, the Assessing Officer sent the assessee a notice under Section 143(2) of the Act.

According to the Assessing Officer, the assessee received loans or deposits aggregating Rs. 2,88,85,846 from 28 persons during the year under review, which were also refunded back, during the course of assessment proceedings. In this regard, he requested that the assessee present confirmations from the relevant creditors’ or depositors’ signatures together with documentation demonstrating the existence of funds to make the loans or deposits to the assessee. The Assessing Officer noted that the Assessee had not complied with the said requirement, so he treated the loans and deposits totaling Rs. 2,88,85,846 as unexplained cash credits and added that amount to the Assessee’s total income pursuant to Section 68 of the Act in the assessment carried out pursuant to Section 143(3) of the Act via an order dated March 28, 2013.

In an appeal submitted to the Ld.CIT, the assessee challenged the addition made by the Assessing Officer according to Section 68 of the Act (A). Additional evidence in the form of copies of relevant ledger accounts, bank statements, and TDS details was filed during the course of the appellate proceedings before the Ld.CIT(A), along with a request that the additional evidence be admitted due to the Assessing Officer not having provided a proper and sufficient opportunity to do so during the course of the assessment proceedings. Considering the circumstances of the case, the Ld.CIT(A) admitted the new evidence and referred it to the Assessing Officer for review and comment.

The Assessee was given access to the Assessing Officer’s remand report by the Ld.CIT(A), and after taking into account the Assessee’s response and all the material on file, the Ld.CIT(A) removed the addition of Rs. 2,88,85,846 made by the Assessing Officer according to Section 68 of the Act.

Observation by the Court

The court had heard the arguments of both the sides and also perused the relevant material available on record. It is observed that the loans/deposits aggregating to Rs.2,88,85,846/- received and refunded back by the assessee during the year under consideration were treated by the Assessing Officer as unexplained cash credits and added to the total income of the assessee u/s.68 of the Act on account of failure of the assessee to furnish confirmations of the concerned creditors/depositors. During the course of appellate proceedings before the Ld.CIT(A), the assessee, however, filed the relevant evidences as additional evidences to establish the identity and capacity of the concerned creditors/depositors as well as the genuineness of the relevant loans/deposits/transactions. Keeping in view that there being no proper and sufficient opportunity afforded by the Assessing Officer during the course of assessment proceedings to file the relevant details and documents, the additional evidence filed by the assessee was admitted by the Ld.CIT(A) and the same was forwarded to the Assessing Officer for the latter’s verification and comments. As mentioned by the Assessing Officer in the remand report dated 12/10/2015 submitted to the Ld.CIT(A), the details and documents furnished by the assessee in support of its case on this issue were verified by him and even further details and documents as required by him were also furnished by the assessee. As clearly mentioned by the Assessing Officer in the remand report, the same were also verified by him and kept on record without giving any adverse comments/findings. The Assessing Officer also required the assessee to produce some of the creditors/depositors for examination before him which was duly complied with by the assessee. The concerned creditors/depositors who appeared before the Assessing Officer with the required documentary evidences confirmed having been given the loans/deposits to the assessee. Keeping in view all the facts of this case which were verified by the Assessing Officer and found to be correct as clearly mentioned by the Assessing Officer in the remand report, the Ld.CIT(A) held by relying on the judgement of Hon’ble Gujarat High Court in the case of CIT vs. Sanjay K. Thakkar that the assessee having shown that the loans were advanced by the concerned creditors through bank and placed evidences in this regard on record including the income-tax details of the concerned creditors, addition cannot be made in the hands of the assessee u/s.68 of the Act and, if at all the Assessing Officer is not satisfied about the creditworthiness of the parties in question, it is open to him to make the addition in the hands of concerned creditors after making appropriate enquiry. Reliance was also placed by the Ld.CIT(A) in his impugned order on the judgement of Hon’ble Gujarat High Court in the case of DCIT vs. Rohini Builders and in the case of CIT vs. Ranchhod Jivabhai Nakhava to hold that the assessee having filed the relevant documentary evidences including the confirmations of the creditors giving the required details and proved that amounts were received by A/c. Payee Cheque drawn from bank accounts from creditors, the primary onus that lies on the assessee was duly discharged to explain the cash credits in terms of section 68 of the Act and the addition u/s.68 of the Act was not sustainable.

At the time of hearing before us, the Ld.DR has not been able to dispute the fact that on verification of relevant details and documents furnished by the assessee, no adverse finding was recorded by the Assessing Officer in the remand report submitted to the Ld.CIT(A). He has only pointed out that there were credits found in the bank accounts of the concerned creditors/depositors just before giving loans/advances to the assessee in many cases. However, as noted by the Ld.CIT(A) in this regard, there was no allegation made by the Assessing Officer regarding any cash deposits made by the concerned creditors/depositors in their accounts before giving the loans/advances to the assessee in question. As observed by the Ld.CIT(A) in this regard, merely because there were funds transfer by depositors/creditors from another source of investment before giving loans/advances to the assessee, the transactions could not be doubted since depositors might have their funds lying elsewhere which were brou brought in for giving loans/advances to the assessee. Having regard to all the facts of the case, we therefore find no infirmity in the impugned order of the Ld.CIT(A) deleting the addition made by the Assessing Officer u/s.68 of the Act and upholding the same, the court dismiss ground No.1 of Revenue’s appeal.

In ground No.2, the Revenue has challenged the action of the Ld.CIT(A) in deleting the addition of Rs.10,15,000/- made by the AO u/s.68 of the Act on account of unsecured loan by treating the same as unexplained cash credit.

During the year under consideration, unsecured loan of Rs.10 lakhs was taken by the assessee from Miss Pooja Manoj Haria and after crediting the interest of Rs.15,000/- a sum of Rs.10,15,000/- was shown as payable. As required by the Assessing Officer, the assessee filed confirmation of Miss Pooja Manoj Haria along with the copy of cheque received from Miss Pooja Manoj Haria as well as copy of form 15G. On perusal of these documents, the Assessing Officer noticed that the signature of Miss Pooja Manoj Haria, as appearing in confirmation letter, differs from the signature made by her on cheque. He therefore held that the confirmation of Miss Pooja Manoj Haria submitted by the assessee was not genuine. He also found from the copy of 15G furnished by the assessee that Miss Pooja Manoj Haria was a student residing in Mumbai. Keeping in view the same, the Assessing Officer held that the creditworthiness of Miss Pooja Manoj Haria and the genuineness of loan transaction was not established. Accordingly, a sum of Rs.10 lakhs was added to the total income of the assessee u/s.68 of the Act and interest of Rs.15,000/- claimed by the assessee on the unsecured loan was also disallowed by him.

The addition of Rs.10,00,000/- made by the Assessing Officer on account of unsecured loan received from Miss Pooja Manoj Haria and disallowance of interest of Rs.15,000/- paid thereon were challenged by the assessee in the appeal filed before the Ld.CIT(A) and after considering the submissions made by the assessee and the material available on record including the remand report submitted by the Assessing Officer.

The court had heard arguments of both the sides and also perused the relevant material available on record. It is observed that Affidavit of Miss Pooja Manjo Haria was filed by the assessee during the course of appellate proceedings before the Ld.CIT(A) and although the same was stated to be not made available by the Assessing Officer in his remand report, the Ld.CIT(A) himself verified the same. On such verification, he found that the unsecured loan of Rs.10 lakhs given to the assessee was confirmed by her and even the difference in signature as noticed by the Assessing Officer from the perusal of the relevant documents was satisfactorily clarified by her. The relevant details giving inter-alia her PAN were also furnished by Miss Pooja Manoj Haria which also proved that the loan in question was given by her to the assessee by A/c payee Cheque. Keeping in view all these facts of the case, the Ld.CIT(A) held that the primary onus to establish the identity and creditworthiness of the concerned creditors as well as genuineness of the relevant transaction was duly discharged by the assessee and having regard to the relevant findings of fact recorded by the Ld.CIT(A) in his impugned order, which have unrebutted by the Ld.DR, the court are of the view that the addition made by the Assessing Officer u/s.68 of the Act along with disallowance of corresponding interest of Rs.15,000/- was rightly deleted by the Ld.CIT(A). The court therefore find no merit in ground No.2 of Revenue’s appeal and hence the same is dismissed.

As regards the issue raised in Ground No.3 relating to the deletion by the Ld.CIT(A) of the addition of Rs.25,000/- made by the Assessing Officer on account of disallowance of assessee’s claim for deduction u/s.80G of the Act, it is observed that the deduction claimed by the assessee u/s.80G of the Act amounting to Rs.25,000/- in respect of donation of Rs.50,000/- made to Chief Minister Kanya Kelvani Nidhi was disallowed by the Assessing Officer for want of original receipt since the assessee failed to submit the donation receipt.

The court had heard the arguments of both the sides and also perused the relevant material available on record. It is observed that eventhough the original receipt for payment of donation of Rs.50,000/- made to Chief Minister Kanya Kelvani Nidhi was not produced by the assessee as the same was lost or misplaced, sufficient evidence was produced by the assessee to support and substantiate its claim of having paid the said donation. As noted by the Ld.CIT(A) in his impugned order, the said evidence was sufficient to verify the claim of the assessee regarding payment of donation of Rs.50,000/- to Chief Minister Kanya Kelvani Nidhi. Even the donation receipt issued by the Executive Engineer Panchayat Department Dahod evidencing payment of donation was produced by the assessee. Keeping in view these details and documents furnished by the assessee to support and substantiate its claim of donation of Rs.50,000/- paid to Chief Minister Kanya Kelvani Nidhi, the Ld.CIT(A), in our opinion, has rightly deleted the disallowance of assessee’s claim for deduction u/s.80G of the Act made by the Assessing Officer. The court , therefore, uphold the impugned order of the Ld.CIT(A) deleting the disallowance made by the Assessing Officer on account of assessee’s claim for deduction u/s.80G of the Act and dismiss the ground No.3 of Revenue’s appeal.