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2011 (6) TMI 393 - AT - Income TaxDeduction u/s 80P(2)(a)(vi) - assessee engaged in manufacturing and construction activity, besides trading - addition of amount received by the assessee by way of fixed deposits/loans in cash from its members, treating the same as unexplained credit u/s 68 - Held that - In the facts of the case, on the basis of the material furnished by the assessee, it is stated that by furnishing the names and full addresses of the creditors, assessee has, at best, prima facie established the identity of the creditors, of course, assuming that the AO had, as it appears, having regard to the volume, not called for the confirmation from all the creditors. Their capacity or the genuineness of the transactions; the two other parameters on which the satisfaction of the AO u/s 68 is to rest and, thus, met by the assessee, have in any case not been. Therefore, we restore the issue back to the file of the AO to allow another opportunity to the assessee to present its case before him. W.r.t. to deduction u/s 80P - Held that - AO has rendered factual findings, which have not been met by CIT, who has reversed the same by relying on the Tribunal s decision for another year; a matter which is primarily factual, and subject to variation from year to year. We, therefore, restore this matter back to the file of CIT(A)
Issues Involved:
1. Deduction under section 80P(2)(a)(vi) of the Income-tax Act, 1961. 2. Addition of Rs. 927.05 lakhs as unexplained credit under section 68 of the Income-tax Act, 1961. Issue-wise Detailed Analysis: 1. Deduction under Section 80P(2)(a)(vi): The first issue pertains to the deduction claimed by the assessee under section 80P(2)(a)(vi) of the Income-tax Act, 1961, which was allowed by the Commissioner of Income-tax (Appeals) [CIT(A)], reversing the disallowance by the Assessing Officer (AO). The Tribunal's order for assessment years 2003-04 and 2004-05, which was upheld by the Hon'ble Jurisdictional High Court, was cited by the assessee's counsel to support the claim. The Revenue's grievance on this issue was deemed unsustainable in law before the Tribunal. The Tribunal noted that the Hon'ble Court had confirmed that the assessee is a workers' society undertaking civil construction work by executing the work by the members, qualifying for the deduction under section 80P(2)(vi). However, the Tribunal emphasized that this matter is purely factual and subject to variation from year to year. The Tribunal observed that the assessee had received a significant infusion of capital, which contradicted its claim of being solely a labour contractor. The Tribunal directed the CIT(A) to re-examine the matter and issue definite findings of fact in accordance with the law. 2. Addition of Rs. 927.05 Lakhs as Unexplained Credit under Section 68: The second issue involves the addition of Rs. 927.05 lakhs received by the assessee-society as fixed deposits/loans in cash from its members, which the AO treated as unexplained credit under section 68. The assessee filed confirmatory letters from some depositors, but these were not accompanied by proof of identity or source of the deposits. The AO deputed the Inspector of Income-tax (ITI) to make inquiries, who confirmed the deposits but not the source or income. The AO, unsatisfied with the explanation, confirmed the entire amount as unexplained credit. The CIT(A), after examining the case and obtaining a report from the incumbent AO, concluded that the assessee had proved the identity of the creditors by submitting names and addresses. However, the CIT(A) opined that proving the creditworthiness of the depositors was not the society's responsibility, and the Revenue Department could proceed against individual members if necessary. The CIT(A) directed the deletion of the addition made by the AO. Before the Tribunal, the Revenue's representative cited the Apex Court's decision in CIT v. P. Mohanakala, emphasizing that the assessee must prove the identity, creditworthiness, and genuineness of the transactions. The Tribunal noted that the assessee had not provided exact details of the cash creditors and the mode of receipt. The Tribunal observed that the credit claimed per person was substantial and received entirely in cash, which was unusual for a labour contractor. The Tribunal found that none of the depositors could explain the source of the money lent to the assessee, indicating that the assessee had not discharged the onus under section 68. The Tribunal criticized the CIT(A) for not addressing the factual findings and relying on presumptions. The Tribunal deemed the sample size selected for verification by the AO inadequate but emphasized that the assessee must first discharge the onus cast by section 68. The Tribunal concluded that the assessee had only prima facie established the identity of the creditors but not their capacity or the genuineness of the transactions. The Tribunal restored the issue to the AO for re-adjudication, allowing the assessee another opportunity to present its case. Conclusion: The Tribunal restored both issues to the respective authorities for re-examination and fresh adjudication, emphasizing the need for definite findings of fact and adherence to legal principles. The appeal by the Revenue was allowed for statistical purposes.
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