2016 (7) TMI 1344 - AT - Income Tax

Addition u/s 68 - receipt of unsecured loans - discharge of onus by assessee - Held that - The contention of the learned Commissioner of Income-tax (Appeals) that there were huge deposits before withdrawal, is thus no longer a valid ground for making addition , because all the deposits are duly stands explained by the assessee. In our opinion, documents and evidences filed by the assessee, clearly establish the genuineness of the transaction as well as creditworthiness in respect of the loan from Smt. Sunita and the onus of the assessee is discharged. The findings of the learned Commissioner of Income Tax (Appeals) in respect of the creditor are without appreciation of all the evidences on record and thus we delete the addition made under section 68 of the Act in respect of the loan taken during the year from Smt. Sunita amounting to ₹ 98,80,000/-. For receipt from Sh. Virender Yadav Commissioner of Income-tax(Appeals) has recorded that Sh Virender Yadav was not assessed to tax however the assessee has submitted PAN Card as identity, thus the identity of the creditor gets established, but the other two limbs of section 68 of the Act were not examined by the Assessing Officer as the creditor was not produced before the Assessing Officer. In view of the facts above, and in the interest of justice, we restore the matter to the file of the Assessing Officer for fresh examination of the requirement of section 68 of the Act and pass speaking order on the issue after providing sufficient opportunity of hearing to the assessee For receipt from Sh. Shiv Tej Singh creditor was not produced before the Assessing Officer even in the remand proceedings for verification of the requirement of section 68 of the Act. We find it appropriate in the interest of justice to restore the matter back to the file of the Assessing Officer for fresh examination of the requirement of section 68 in the case of loan from Sh Shiv Tejsingh and pass a speaking order on the issue after providing sufficient opportunity of hearing to the assessee. The assessee is also directed to provide all necessary documentary evidence and produce the creditor for examination /cross-examination by the Assessing Officer. For receipt from Sh. Om Prakash - neither document in support of genuineness of the transaction has been produced by the assessee nor the creditor has been examined by the Assessing Officer. Therefore in the interest of justice, we feel it appropriate to restore the issue to the file of the Assessing Officer for fresh examination of requirement of section 68 of the Act in the case of the creditor and pass a speaking order on the issue in dispute after providing sufficient opportunity of hearing to the assessee. The assessee is also directed to provide all necessary documentary evidence and produce the creditor for examination/cross-examination by the Assessing Officer. For receipt from Sh. Ramchander the documents filed by the assessee before the lower authorities and copy of which are submitted in the paper book, clearly manifest that the identity and genuineness of the transaction is established. As far as creditworthiness is concerned the source of money advanced, in the hands of the creditor has been duly explained, and therefore the assessee has discharged the onus casted upon him under section 68 of the Act and thus the addition deserves to be deleted. Accordingly, we delete the addition made under section 68 For receipt from Sh. Chandan Singh the assessee has filed all the documents establishing identity, genuineness of the transaction and creditworthiness in respect of the Sh. Chandan Singh. The source of money advanced to the assessee is appearing as received through banking channel and no cash deposits as mentioned by the learned Commissioner of Income-tax (Appeals) are observed in the bank statement. Thus findings of the ld CIT(A) in respect of the creditor are without proper appreciation of the evidences. Assessee has discharged the onus casted upon him under section 68 of the Act in respect of credit from Sh. Chandan Singh and the addition made deserves to be deleted. Accordingly, we delete the addition under section 68 Receipt from Sh. Amar Singh in view of the above documents, which were furnished before the authorities below and copy of which is submitted in paper book before us, we are of the opinion that the identity, and genuineness of the transaction is duly explained in respect of credit from Sh. Amar Singh. The observation of the learned CIT(A) that there were huge deposits in the bank account of Sh. Amar Singh is not relevant as far as the impugned transaction is concerned. As regard to creditworthiness is concerned that is also duly explained from the award of Land Acquisition Officer received by Sh Amar Singh and the credit was extended to the assessee out of the said sum of award. Thus in our view, the assessee has discharged its onus casted upon as per the requirement of section 68 Receipt from Sh. Harpreet Singh identity of the Sh Harpreet Singh was though established, but identity of Sh Daksh singh and copy of bank statement of the creditor indicating the said loan or advance to the assessee has not been filed. Further, no documents in support of creditworthiness of Sh. Dakshsingh have been filed, therefore in the interest of justice, we restore the matter back to the file of the Assessing Officer to examine the identity, genuineness of the transaction and creditworthiness and decide the issue in accordance with law after affording sufficient opportunity of hearing to the assessee. The assessee is also directed to produce all the necessary documents in support as required to discharge onus casted upon under section 68 of the Act in respect of the said advance. Accordingly the addition in the respect of Sri Harpreet Singh is allowed for statistical purposes. Computation of tax liability in demand notice issued - Held that - As counsel submitted that the Assessing Officer erroneously included a sum of ₹ 3,62,00,441/-instead of ₹ 3,28,23,704/- while computing the income of the assessee in the computation form. Further the Ld. counsel also submitted that in the computation form the Assessing Officer also included a sum of ₹ 1,48,180/- being the short-term capital gain whereas the assessee had set off the brought forward short-term capital loss and after adjustment, a sum of ₹ 23,842/-was carried forward. The Ld. senior departmental representative on the other hand submitted that these issues are of verification by the Assessing Officer and could have been disposed by way of filing rectification before the Assessing Officer. In our view, the issues are in the nature of mistake apparent from the record and therefore, we direct the Assessing Officer to verify the claims of the assessee and disposed of them in accordance with law. The ground of the appeal is allowed for statistical purpose

Issues Involved:
1. Addition of ?3,25,50,000/- under Section 68 of the Income Tax Act, 1961.
2. Failure to appreciate the satisfaction of conditions under Section 68.
3. Discharge of initial onus by the assessee.
4. Receipt of loans through account payee cheques.
5. Provision of loans from own funds by creditors.
6. Arbitrary and speculative nature of the addition.
7. Violation of principles of natural justice.
8. Computation of tax liability in the demand notice.

Detailed Analysis:

1. Addition of ?3,25,50,000/- under Section 68 of the Income Tax Act, 1961:
The primary issue was the addition of ?3,25,50,000/- as unexplained cash credits under Section 68. The Assessing Officer (AO) held that the assessee failed to furnish evidence supporting the identity, creditworthiness, and genuineness of the transactions from the creditors.

2. Failure to Appreciate Satisfaction of Conditions under Section 68:
The assessee argued that all conditions under Section 68 were satisfied, as the loans were received from family members and close relatives who appeared and deposed before the AO. However, the Commissioner of Income Tax (Appeals) [CIT(A)] and the AO were not convinced about the creditworthiness and genuineness of the transactions.

3. Discharge of Initial Onus by the Assessee:
The assessee contended that the initial onus was discharged by providing documentary evidence and that the addition was made without any adverse material. The Tribunal found that the assessee provided sufficient evidence for some creditors but not for others.

4. Receipt of Loans through Account Payee Cheques:
The assessee argued that all loans were received through account payee cheques, which should establish the genuineness of the transactions. The Tribunal noted that mere receipt through banking channels does not automatically establish genuineness or creditworthiness.

5. Provision of Loans from Own Funds by Creditors:
The assessee claimed that the creditors provided loans from their own funds, and there was no evidence of unaccounted income being routed through their bank accounts. The Tribunal examined the creditworthiness of each creditor individually.

6. Arbitrary and Speculative Nature of the Addition:
The assessee argued that the addition was based on speculation and without any adverse material. The Tribunal found that the AO and CIT(A) had valid reasons to doubt the creditworthiness and genuineness of some creditors.

7. Violation of Principles of Natural Justice:
The assessee claimed that a fair opportunity of being heard was not provided during the assessment and appellate proceedings. The Tribunal admitted additional evidence in the interest of justice and remanded some issues back to the AO for fresh examination.

8. Computation of Tax Liability in the Demand Notice:
The assessee challenged the computation of tax liability, claiming errors in the inclusion of certain amounts. The Tribunal directed the AO to verify and rectify any mistakes in the computation.

Issue-Wise Judgment:

1. Smt. Sunita (?98,00,000/-):
The Tribunal found that the identity, genuineness, and creditworthiness of Smt. Sunita were established through documentary evidence, including compensation received from the Land Acquisition Department. The addition was deleted.

2. Sh. Virender Yadav (?20,00,000/-):
The Tribunal restored the matter to the AO for fresh examination as the creditor was not produced before the AO, and sufficient evidence was not provided.

3. Sh. Shiv Tej Singh (?25,00,000/-):
The Tribunal restored the matter to the AO for fresh examination due to insufficient evidence and non-appearance of the creditor before the AO.

4. Sh. Om Prakash (?9,00,000/-):
The Tribunal restored the matter to the AO for fresh examination as the creditor was not produced before the AO, and sufficient evidence was not provided.

5. Sh. Ramchander (?10,00,000/-):
The Tribunal found that the identity and genuineness of the transaction were established, and the creditworthiness was explained. The addition was deleted.

6. Sh. Chandan Singh (?1,10,00,000/-):
The Tribunal found that the identity, genuineness, and creditworthiness were established through documentary evidence. The addition was deleted.

7. Sh. Amar Singh (?50,00,000/-):
The Tribunal found that the identity, genuineness, and creditworthiness were established through documentary evidence, including compensation received from the Land Acquisition Department. The addition was deleted.

8. Sh. Harpreet Singh (?3,50,000/-):
The Tribunal restored the matter to the AO for fresh examination as the identity of Sh. Daksh Singh and the creditworthiness were not sufficiently established.

Ground No. 3:
The ground was dismissed as infructuous since it was not pressed by the assessee.

Ground No. 4:
The Tribunal directed the AO to verify and rectify any mistakes in the computation of tax liability.

Conclusion:
The appeal was partly allowed for statistical purposes, with some additions deleted and others remanded for fresh examination. The decision was pronounced on 19th July 2016.

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