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2013 (9) TMI 338 - AT - Income TaxAddition u/s 68 credit of earlier year, additions made during the current year under dispute - Held that - After verification of the sub dealer deposit account, has noted that the addition was erroneously made - such deposits were received in A.Y. 2003-04 and 2004-05 for which the balance sheets for those years were filed. Further, the learned CIT(A) himself admits that technically the addition cannot be made u/s.68 during the year, still he had confirmed the addition, which in our opinion was not proper. Under these circumstances, the CIT(A), in our opinion, was not justified in confirming the addition made by the AO. Whatever remedy available with the department could have been utilised in the preceding years. However, the same cannot be a ground to make the addition during this year. In this view of the matter, we set-aside the order the CIT(A) and direct the AO to delete the addition. - Decided in favor of assessee. Unexplained Loan Credits for Nonbusiness Purposes - Held that - Since the assessee had produced the loan creditors before the AO who have confirmed to have given the loan - therefore, the same in our opinion should be allowed - The AO disallowed an amount on account of loan from 7 loan creditors on the ground that the assessee could not substantiate the identity, credit worthiness and the genuineness of the transactions - We find the assessee filed certain details before the CIT(A) who called for a remand report from the AO - the assessee has produced the loan creditors before the AO who recorded their statements and since the loan creditors filed their bank accounts and the AO was satisfied regarding the genuineness of the transaction and their credit worthiness, therefore, we find no reason as to why the same should not be accepted - We therefore set-aside the order of the CIT(A) on these 2 loans and direct the AO to allow these 2 loans as genuine. - Decided in favor of assessee.
Issues Involved:
1. Addition of Rs. 4,29,000/- under Section 68 of the I.T. Act. 2. Addition of Rs. 11,99,200/- on account of unexplained loan credits. Issue-wise Detailed Analysis: 1. Addition of Rs. 4,29,000/- under Section 68 of the I.T. Act: The assessee challenged the addition of Rs. 4,29,000/- made by the AO under Section 68 of the I.T. Act, which was confirmed by the CIT(A). The AO noted that the assessee showed a liability of Rs. 4,29,000/- under "Sub dealers deposit" from 39 sub-dealers. Upon investigation, the AO found no such sub-dealers existed, leading to the addition. The assessee argued that the deposits were received in previous financial years (2002-03 and 2003-04) and thus should not be added in the assessment year 2006-07. The CIT(A) dismissed the assessee's appeal, considering the transactions fictitious despite the AO's remand report suggesting the addition was erroneously made. The Tribunal found that the CIT(A) was not justified in confirming the addition, as the deposits were indeed received in earlier years, and directed the AO to delete the addition. 2. Addition of Rs. 11,99,200/- on account of unexplained loan credits: The AO added Rs. 11,99,200/- to the assessee's income, suspecting the unsecured loans from various individuals as bogus due to the failure of the assessee to produce the loan creditors and prove their creditworthiness. The CIT(A) upheld the AO's addition, citing insufficient evidence of the creditors' financial capacity and the genuineness of the transactions. Detailed Analysis of Loan Credits: - Mr. Ashokkumar Nandiram Chandwani (Rs. 2,00,000/-) and Smt. Komal Sevalram Sewlani (Rs. 3,00,000/-): The AO accepted these loans as genuine in the remand report based on the creditors' statements and bank passbooks. The Tribunal found no reason to disallow these loans and directed the AO to accept them as genuine. - Mr. Ravisobasingh Sahajsinghani (Rs. 99,600/-) and Mr. Shobasingh R. Sahajsinghani (Rs. 99,600/-): The creditors confirmed the loans, but the AO disbelieved their creditworthiness. The Tribunal, following the precedent that the assessee is not required to prove the source of the creditor's funds to the hilt, directed the AO to accept these loans as genuine. - Smt. Seema Rajkumar Deoyani (Rs. 2,00,000/-): Despite summons, the creditor did not appear before the AO, and the assessee could not establish her identity or creditworthiness. The Tribunal upheld the addition of this loan. - Mr. Gopichand Premchandani (Rs. 1,00,000/-): The loan was obtained in F.Y. 1995-96, not in the relevant assessment year. The Tribunal directed the AO to delete this addition. - Smt. Vimla Girdharilal Manmani (Rs. 2,00,000/-): The AO did not comment on this loan in the remand report, and the creditor was not produced. The Tribunal restored the issue to the AO for fresh adjudication. Conclusion: The Tribunal partly allowed the assessee's appeal, directing the deletion of certain additions and remanding others for further verification. The judgment emphasized the importance of proving the identity, creditworthiness, and genuineness of transactions under Section 68 while also recognizing the limits of the assessee's burden in proving the source of the creditors' funds. The appeal was partly allowed for statistical purposes.
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