2012 (11) TMI 859 - HC - Income Tax

Unexplained Loans u/s 68 and Disallowance of Interest thereon - held that - It cannot be said that the assessee had not discharge his obligation in appearing in person to show/prove that amount credited to his account as loan or otherwise is justified when notices were issued to two companies from whom loan had been received by the assessee, AO did not pursue the same and proceeded with the assessment, on the basis of records produced before him and also on the basis of submissions made by the authorised agent of the assessee. The assessment order has been confirmed in appeal - question of law raised in this appeal is not a question of law but is on merits of the case - no justification to admit this appeal and is accordingly dismissed.

Summary

Issues:
1. Upholding deletion of addition of unexplained loans and interest thereon
2. Compliance with section 68 of the Act regarding appearance of authorized agent

Analysis:
1. The first issue revolves around the Department's appeal against the order of the Income Tax Appellate Tribunal regarding the deletion of the addition of Rs.1,09,75,100/- on account of unexplained loans under section 68 and Rs.1,58,531/- on account of disallowance of interest. The Department contended that the Assessee failed to prove that the credited amounts did not represent income. Citing a Supreme Court decision, the Department argued that the burden of proof lies on the Assessee. However, the Tribunal noted that notices were issued to the companies providing the loans, but they did not appear. The Assessing Officer proceeded with the assessment based on available records and submissions by the Assessee's authorized agent. The Tribunal found that the Assessee had not failed to discharge the obligation of proving the nature of the credited amounts. The Tribunal concluded that the issue was more about the merits of the case rather than a legal question, leading to the dismissal of the appeal.

2. The second issue pertains to the compliance with section 68 of the Act regarding the appearance of the authorized agent. The Department argued that mere appearance of the agent is not sufficient compliance with the section. However, the Tribunal observed that in this case, the Assessing Officer had proceeded with the assessment after issuing notices to the loan-providing companies, even though they did not appear. The Tribunal found that the Assessee had fulfilled the obligation by presenting submissions through the authorized agent. Ultimately, the Tribunal held that the question raised was not a legal one but related to the case's merits. Consequently, the appeal was dismissed by the Tribunal.

In summary, the judgment by the Allahabad High Court dismissed the Department's appeal against the Tribunal's order. The Court found that the Assessee had adequately discharged the obligation of proving the nature of the credited amounts, even though the companies providing the loans did not appear in response to notices. The Court emphasized that the issues raised were more about the case's merits rather than legal questions, leading to the dismissal of the appeal.