#Unexplained Credit

The ITAT Delhi has ruled that the opening balance of unsecured loans cannot be treated as unexplained credit under Section 68, even if the closing balance is challenged. Once the assessee establishes the identity, genuineness, and creditworthiness of lenders, the burden shifts entirely to the Revenue to disprove the transaction - a critical safeguard for charitable trusts and small entities relying on third-party funding.

The ITAT Delhi has ruled that funds received as a refund of a prior advance payment cannot be taxed as unexplained credit under Section 68 merely because the payer is a bogus entity. This clarifies that the nature of the transaction-refund of consideration-trumps the source’s legitimacy, offering critical relief to businesses engaged in legitimate commercial advances.

ITAT Delhi dismisses Revenue’s appeal, ruling that for Section 68 IT Act, the assessee need not prove the 'source of source' if the lender’s creditworthiness is established through banking channels and financial records. The decision clarifies the scope of unexplained credit provisions, impacting tax assessments for loans and financial transactions.

ITAT Mumbai rules that share premium received before Section 56(2)(viib) came into force (01/04/2013) cannot be taxed, even if shares are allotted later. The tribunal invalidates additions under Section 68 for lack of notice and procedural compliance, reinforcing that tax provisions cannot apply retrospectively to past transactions.

The ITAT Ahmedabad quashed a Rs. 59.97 lakh addition under Section 68 because the Assessing Officer failed to produce any statement under Section 132(4) or verifiable transaction records to prove the alleged accommodation entry. This reinforces that mere suspicion or third-party allegations, without procedural compliance, cannot sustain a tax addition - a critical safeguard for taxpayers facing speculative assessments.

The ITAT Delhi has ruled that an investigation wing’s report identifying a company as bogus is insufficient to sustain additions under Sections 68 and 69C unless corroborated by independent, verifiable evidence such as bank trails, stock records, or third-party confirmations. This reinforces the burden of proof on the Revenue and protects taxpayers from speculative assessments based solely on departmental assertions.

ITAT holds that books of accounts cannot be rejected under Section 145(3) merely due to delayed document submission; must show specific defects or lack of bona fides.