2012 (6) TMI 799 - AT - Income Tax

Summary

Issues Involved:
1. Validity of Reassessment Proceedings u/s 147.
2. Addition of Unexplained Cash Credits u/s 68.
3. Disallowance of Interest on Unexplained Cash Credits.
4. Jurisdiction of Assessing Officer in the Absence of Order u/s 127.

Summary:

1. Validity of Reassessment Proceedings u/s 147:
The Tribunal, in the first round of appeals, dismissed the ground disputing the validity of reassessment proceedings as the assessee's counsel opted not to press it. The Tribunal held that the issue could not be re-agitated in the second round of appeal as it had already been decided against the assessee and was binding.

2. Addition of Unexplained Cash Credits u/s 68:
The assessee failed to provide sufficient documentary evidence to prove the identity, creditworthiness, and genuineness of the unsecured loans. Despite filing 98 confirmation letters out of 145 parties, the assessee could not produce any bank statements or other supporting documents. The Assessing Officer (AO) issued notices u/s 133(6), and only 8 parties responded with satisfactory evidence. Hence, the AO treated the balance loans as unexplained cash credits u/s 68 and made corresponding additions. The CIT(A) and the Tribunal upheld these additions, citing the assessee's failure to discharge the onus of proving the genuineness of the transactions.

3. Disallowance of Interest on Unexplained Cash Credits:
The AO disallowed the interest claimed on the unexplained loans. The CIT(A) allowed interest only on the amount of loans that were considered genuine. For A.Y. 1994-95, the disallowance of interest was partially allowed, considering the interest paid to the bank. For A.Y. 1995-96 and 1996-97, the entire interest claimed was disallowed as it was related to the unsecured loans, which were treated as income from undisclosed sources.

4. Jurisdiction of Assessing Officer in the Absence of Order u/s 127:
The assessee contended that the AO did not have jurisdiction in the absence of an order u/s 127. However, the Tribunal noted that the case was assigned to the AO as per a notification, and there was no evidence to show that reasons were not recorded for the transfer of jurisdiction. The Tribunal found no merit in this ground and rejected it.

Conclusion:
The Tribunal dismissed the appeals for A.Y. 1995-96 and 1996-97, upholding the additions and disallowances made by the AO and CIT(A). For A.Y. 1994-95, the Tribunal allowed the appeal in part, granting partial relief on the disallowance of interest.