2013 (7) TMI 475 - AT - Income Tax

Unexplained cash credit being loan taken by assessee - CIT(A) deleted the additions - CIT(A) deleted the interest amount paid on loans - Held that - Amount of Rs 90 lakhs appears in the books of accounts of the the assessee as well as the Sreeji Corporation. It is also an undisputed fact that the impugned cash credit has been repaid by the assessee later in time. Further, it is a settled issue that the assessee is prevented from examining the issue of source of the source of Rs 90 lakhs in the assessee s case. Considering the above stated facts as well as the speaking order of the CIT (A), the decision of the CIT (A)upheld. Regarding the cash credit of Rs 80 lakhs PAN of the loan creditor is AAAHY3767N and the same is evident from the face of acknowledgement of the return of his income. AO merely suspect the loan transaction and otherwise, AO has no evidence against the assessee to conclude that the loan is not genuine as the said amount of Rs 80 Lakhs appears in the books of accounts of the assessee as well as the Sumati Corporation. It is also an undisputed fact that the impugned cash credit has been repaid by the assessee later in time. Further, it is a settled issue that the assessee is prevented from examining the issue of source of the source of Rs 80 lakhs in the assessee s case. The decision of the CIT (A) on this issue does not call for any interference. Claims of payment of interest on the said cash credits is merely consequential in nature as since the addition of cash credits are deleted assessee is entitled to the claim of interest paid to the loan creditors. In favour of assessee.

Summary

Issues:
1. Deletion of additions of unexplained cash credits and interest amounts by CIT(A).
2. Failure to issue show cause notice by AO.
3. Discrepancy in PAN details and jurisdiction of creditors.
4. Assessment of loans as genuine by CIT(A).

Analysis:

Issue 1: Deletion of additions of unexplained cash credits and interest amounts by CIT(A)
The appeal by the Revenue challenged the CIT(A)'s deletion of additions totaling Rs. 1.7 Crs as unexplained cash credits and interest amounts related to loans from two entities. The AO doubted the sources of these cash credits and disallowed the interest claim. The assessee, a proprietorship concern, explained discrepancies in PAN details and jurisdiction, arguing the loans were genuine. The CIT(A) granted relief, restoring the disallowed interest. The Tribunal upheld the CIT(A)'s decision, noting the loans were repaid, and the assessee's inability to examine the source of the funds, dismissing the Revenue's appeal.

Issue 2: Failure to issue show cause notice by AO
The AO's failure to issue a show cause notice to the assessee regarding doubts on the loans was raised as an issue. The CIT(A) found that the AO did not provide a proper opportunity for the assessee to address the concerns raised, leading to the deletion of the additions. The Tribunal considered this procedural lapse and confirmed the CIT(A)'s decision, emphasizing the importance of due process in tax assessments.

Issue 3: Discrepancy in PAN details and jurisdiction of creditors
The discrepancies in PAN details and jurisdiction of the creditors were highlighted in the case. The CIT(A) examined these issues for both entities, M/s. Shreeji Corporation and M/s. Sumati Enterprises, finding no substantial evidence to question the genuineness of the loans. The Tribunal concurred with the CIT(A)'s analysis, emphasizing the repayment of the loans and the absence of concrete evidence against the assessee, leading to the dismissal of the Revenue's appeal on these grounds.

Issue 4: Assessment of loans as genuine by CIT(A)
The CIT(A) assessed the loans from both entities as genuine after considering the explanations provided by the assessee regarding PAN details and jurisdictional discrepancies. The Tribunal reviewed the CIT(A)'s reasoning, noting the repayment of the loans and lack of evidence against the assessee, leading to the affirmation of the loans' genuineness and the dismissal of the Revenue's appeal.

In conclusion, the Tribunal upheld the CIT(A)'s decision to delete the additions of unexplained cash credits and interest amounts, emphasizing the assessee's explanations, the repayment of the loans, and the lack of substantial evidence against the genuineness of the transactions. The procedural lapses by the AO and the importance of providing opportunities for the assessee to address concerns were also highlighted in the judgment.