2014 (3) TMI 433 - HC - Income Tax

Deletion of amount made Addition u/s 68 - unsecured loans from NRI - Held that - Substantial amounts which were routed through the NRI s accounts emanated from the assessee s accounts or the overdraft account maintained by him - the essential character of the loan as disclosed by him was something verifiable even at the CIT (Appeals) s stage in view of the bank statements furnished keeping in view the Tribunal s findings on the issue of the quantum of addition that was deleted, as such there is no substantial question of law arises for consideration Decided against Revenue.

Summary

Issues:
1. Tribunal's deletion of Rs. 41,55,000/- from the amount added by the Assessing Officer.
2. Failure to produce relevant materials by the assessee.
3. Acceptance of explanation based on affidavit attested by a foreign notary.
4. Nature of transactions involving Non-Resident Indians (NRIs) and lack of rationale.

Issue 1: Tribunal's Deletion of Rs. 41,55,000/-
The High Court addressed the Revenue's grievance against the Tribunal's order deleting Rs. 41,55,000/- added by the Assessing Officer. The Revenue argued that the Tribunal overlooked crucial circumstances, emphasizing that the assessment order considered furnished materials and the absence of the assessee and relevant persons during the assessment. The Revenue contended that the Tribunal should have been cautious in accepting the explanation based on an affidavit attested by a foreign notary. Additionally, the Revenue highlighted remand reports rejecting the assessee's explanations for non-production of materials.

Issue 2: Failure to Produce Relevant Materials
The Revenue pointed out that despite opportunities, the assessee and others did not appear during the assessment, raising doubts about the explanations provided later. The Tribunal, however, observed that the trail of entries was well explained with documents placed on record, showing the flow of funds from various accounts. The Tribunal concluded that the amounts received by the assessee were fully explained through bank statements and documentary evidence, leading to the deletion of the added amount.

Issue 3: Acceptance of Explanation Based on Affidavit
The Revenue questioned the acceptance of the explanation based on an affidavit attested by a foreign notary, arguing that caution should have been exercised. The Tribunal, however, found the explanations satisfactory, especially regarding the flow of funds from different accounts and the documentary evidence supporting the transactions. The Tribunal held that the explanations provided were credible and supported by the evidence presented.

Issue 4: Nature of Transactions Involving NRIs
The Revenue raised concerns about the nature of transactions involving NRIs, highlighting the lack of rationale behind the significant amounts transferred without apparent reasons such as interest or personal relationships. The Tribunal, after considering the submissions and evidence, found that the transactions were adequately explained through the flow of funds from various accounts, including those of NRIs, and the documentary evidence provided.

In conclusion, the High Court dismissed the appeal, stating that no substantial question of law arose from the Tribunal's findings. The Court found the Tribunal's approach reasonable and not indicative of perversity, ultimately upholding the deletion of Rs. 41,55,000/- from the added amount, as the explanations provided by the assessee were deemed sufficient and supported by documentary evidence.