2013 (6) TMI 626 - AT - Income Tax

Unexplained cash credit - CIT(A) deleted the addition - Held that - As assessee has furnished the bank statements of the lenders. From these statements it was established that the lenders had adequate bank balance to grant the loan to the assessee. The lenders were also income tax assessee. Thus agreeing with CIT(A) that assessee has been able to establish that the transaction with the creditors are genuine and the identities and credit worthiness have been established. In favour of assessee. CIT(A) annulled the assessment on relying on assessee s version that notice u/s 143(2) was not served - Held that - As already dealt with the merits in the case by CIT (A) on the issue that the sum of Rs. 28,00,000/- was not liable to be added to the income of the assessee as unexplained credit u/s 68. Hence, this issue of lack of notice u/s 143(2) is now of only academic interest.

Summary

Issues:
1. Annulling assessment order based on non-receipt of notice u/s 143(2).
2. Addition of Rs. 28,00,000/- on account of unexplained cash credits.

Issue 1: Annulling assessment order based on non-receipt of notice u/s 143(2):
The appeal by the revenue contested the CIT(A)'s decision to annul the assessment order for the year 2008-09 due to the non-receipt of the notice u/s 143(2) by the assessee. The revenue argued that the notice was sent by speed post to the given address of the assessee and not returned un-served. The revenue relied on a decision of the Delhi High Court stating that if a notice sent by Registered Post is not returned un-served within 30 days, it is presumed to be duly served. However, the CIT(A) annulled the assessment order based on the assessee's claim of non-receipt of the notice, disregarding the legal presumption of service in such cases.

Issue 2: Addition of Rs. 28,00,000/- on account of unexplained cash credits:
The Assessing Officer added Rs. 28,00,000/- as unexplained cash credits after the assessee accepted unsecured loans but failed to provide adequate documentary evidence to support the transactions. While the loan from one lender was accepted, loans from two other parties were added to the income of the assessee under section 68 of the IT Act due to insufficient documentation. However, the CIT(A) overturned this decision after the assessee submitted bank statements of the lenders, proving the genuine nature of the transactions. The CIT(A) highlighted the importance of proving the creditworthiness of the lenders, citing a Supreme Court ruling that emphasized the need to establish the source of funds. The CIT(A) found that the lenders had sufficient bank balances to grant the loans and were income tax assesses, indicating the legitimacy of the transactions. The ITAT upheld the CIT(A)'s decision, stating that the assessee had successfully demonstrated the genuineness of the transactions and the creditworthiness of the lenders, thereby dismissing the revenue's appeal.

In conclusion, the ITAT upheld the CIT(A)'s decision to annul the assessment order based on non-receipt of the notice u/s 143(2) and dismissed the revenue's appeal regarding the addition of Rs. 28,00,000/- on account of unexplained cash credits. The judgment emphasized the importance of providing sufficient evidence to support transactions and establishing the creditworthiness of lenders in such cases.