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2020 (3) TMI 1190 - AT - Income TaxUnexplained cash credit u/s 68 - Unexplained loan - HELD THAT - Assessee claimed to have accepted loan of ₹ 85 lakhs from the parties through the involvement of the undisclosed bank account namely Bank of India. However, the assessee has shown receipt of cheques amounting to ₹ 66.5 lakhs from the parties as detailed in table shown somewhere in the preceding paragraph of this order. The difference amount of ₹ 18.5 lakhs transferred out of cash deposit were held as unexplained cash credit under section 68 of the Act by us while deciding the loan amount of ₹ 50 lakh from Shri Nilesh N Panchal in vide paragraph no 8.5 of this order. Therefore in our considered view treating entire cash deposit and making the addition of same to the income of the assessee will lead to double addition to tune of ₹ 18.5 lakh in the hand of the assessee. As the same was already confirmed by us while deciding the genuineness of the loan received. Remaining amount of cash deposit - AR before us agreed to addition with regard to cash deposit. Accordingly we sustain the addition on account cash deposit in Bank of India. Undisclosed bank account maintained with ICICI bank we note that the assessee has not filed any satisfactory explanation or documentary evidence either before authorities below neither before us. Accordingly in absence of any submission from the assessee we sustained the addition of ₹ 49,500/- made by the AO on account of deposit made there under. In the result the ground of the assessee partly allowed. Addition of cessation of liability - HELD THAT - Assessee at the time of hearing before us admitted to the impugned addition. Thus the ground of appeal of the assessee is dismissed. Disallowances of bad-debt - assessee during the year under consideration has written off its debtor balance but failed to produce the information about the year in which such bad debts were shown as income - AO in absence of any evidence with repect to the fact that impugned bad debt were offered to tax previously, disallowed the claim of the assessee and added the same to the total income of the assessee - HELD THAT - Provisions of section 36 (2) of the Act allow the assesse to claim the dedution of bad debt written off during the year under consideration subject to the condition specified therein. On perusal of the provision of the section 36(2)(i) we note that the legislature has used the word shall i.e. it is mandatory. Hence to avail the benefit of the bad debt written off the impugned amount should have been recognised as income/offered to tax previoulsy. However in the present case the assessee admittedly failed to produce any evidences to the effect that the impugned amount have already been recoginsed as income of the assessee. As the assessee expressed its inability to produce such document on the ground that its books of account are in the custody of previous management. Therefore in the absence of requisite information we find that the conditions prescribed under section 36 2 is not been complied with. Accordingly we hold that the assessee is not eligible for deduction for such bad debts. Hence, the ground of appeal of the assessee is dismissed. Addition of receipt from Madhya Gujarat Vij Co. Ltd. - HELD THAT - Admittedly, the assessee is following mercantile system of accounting. Therefore, the assessee, in our considered view, was under the obligation to offer the impugned income tax in the year under consideration. Accordingly, we confirm the order of the authorities below subject to the direction that the AO shall verify the fact whether the assessee has offered interest income in any of the succeeding year then the AO shall extend the relief the assessee in that assessment year. It is the settled law that income cannot be taxed twice. Accordingly, we dispose of the ground of appeal of the assessee in terms of the above. Appeal of the assessee is partly allowed.
Issues Involved:
1. Addition of loan amounts as unexplained loans. 2. Addition of entire deposits in two bank accounts. 3. Addition due to cessation of liabilities under section 41(1) of the Act. 4. Disallowance of bad debts. 5. Addition of receipt from Madhya Gujarat Vij Co. Ltd. 6. Non-credit of brought forward prior period losses. 7. Non-allowance of current year loss to be carried forward. Detailed Analysis: 1. Addition of Loan Amounts as Unexplained Loans: The assessee contested the addition of loans from four individuals as unexplained cash credits under section 68 of the Act. The Tribunal analyzed each loan separately: - Loan from Shri Nilesh N Panchal (?50,00,000): The assessee provided bank statements showing the transfer of ?31.50 lakhs from Shri Nilesh N Panchal. The Tribunal found that the assessee substantiated the receipt of ?31.50 lakhs but failed to justify the balance ?18.50 lakhs, which was upheld as unexplained. - Loan from Shri Aayush J Patel (?16,07,178): The Tribunal noted that the loan represented liabilities paid by Shri Aayush J Patel on behalf of the assessee, duly accounted for in the books. The addition was deleted as the transaction was genuine. - Loan from Shri Vasantbhai S Patel (?12,00,000): The Tribunal found that Shri Vasantbhai S Patel had sufficient creditworthiness to advance the loan, supported by his income tax returns. The addition was deleted. - Loan from Shri Jignesh Vasantbhai Patel (?57,50,000): The Tribunal found that the actual loan was ?29.50 lakhs, not ?57.50 lakhs. The creditworthiness and genuineness of the transaction were established based on the income tax returns and bank statements. The addition was deleted. 2. Addition of Entire Deposits in Two Bank Accounts: The assessee had undisclosed bank accounts with Bank of India and ICICI Bank. The Tribunal analyzed the deposits: - Bank of India (?1,26,90,800): The Tribunal confirmed the addition of ?41,90,800 as unexplained cash deposits. The remaining ?66.50 lakhs, deposited through cheques, were found to be genuine loans. The Tribunal noted that adding the entire deposit would result in double addition. - ICICI Bank (?49,500): The Tribunal upheld the addition as the assessee failed to provide satisfactory explanations. 3. Addition Due to Cessation of Liabilities (?1,12,49,155): The assessee admitted to the addition during the hearing. The Tribunal dismissed the ground of appeal. 4. Disallowance of Bad Debts (?19,16,749): The Tribunal upheld the disallowance as the assessee failed to provide evidence that the bad debts were previously recognized as income, a requirement under section 36(2) of the Act. 5. Addition of Receipt from Madhya Gujarat Vij Co. Ltd (?9,929): The Tribunal upheld the addition but directed the AO to verify if the income was offered in subsequent years to avoid double taxation. 6. Non-Credit of Brought Forward Prior Period Losses: This issue was not specifically addressed in the Tribunal's detailed analysis. 7. Non-Allowance of Current Year Loss to be Carried Forward: This issue was not specifically addressed in the Tribunal's detailed analysis. Conclusion: The Tribunal partly allowed the appeal, confirming some additions while deleting others based on the evidence and explanations provided by the assessee. The Tribunal emphasized the importance of substantiating claims with documentary evidence to meet the requirements of section 68 of the Act.
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