2014 (5) TMI 355 - AT - Income Tax

Addition made u/s 68 of the Act Unexplained cash credits Loans received from various persons Admission of additional evidences - Held that - The assessee has received loans from 47 persons in cash during the financial year the cash loans aggregated to Rs. 92,59,530 - there were other loans also, which has been accepted by the AO - the documents are quite relevant for the adjudication of the cash credit, therefore they are admitted - the additional evidences have already been filed before the Department in the proceedings u/s 153C - the additional evidences go to the very root of the addition made, which needs to be considered for adjudication of the issue the documents should be considered for deciding the issue afresh on merits the documents have not been examined by any of the departmental authorities, thus, the matter is required to be remitted back to the AO for fresh adjudication of the entire addition made u/s 68 of the Act Decided in favour of Assessee. Proceedings u/s 153C of the Act Held that - A search and seizure action u/s 132(1) has taken in the case of the assessee s husband Mr. Jawahar B. Purohit proceeding u/s 153C has been initiated in the case of the assessee - it cannot be held that the assessment proceedings for the assessment year 2005-06 were pending on the date of the search - the original assessment order in the case does not get abated - Once the original order does not abate, then whatever is the fate of the addition made u/s 68, in the regular proceedings u/s 143(3), it would be applicable in the proceedings only and that would be final qua the assessment year 2005-06 - No further addition on this count as to u/s 68, pertaining to same creditors can be made again u/s 153C / 153A proceedings Relying upon CIT v/s Shaila Agarwal 2011 (11) TMI 213 - ALLAHABAD HIGH COURT - only the assessment proceedings and the re-assessment pending on the date of initiation of search, shall abate under the second provisio to section 153A and if an appeal is pending against a completed assessment before the Tribunal on the date of search, then such completed proceeding do not abate -if any addition on account of provisions of section 68 is called for in the case, it should be examined in the regular assessment proceedings u/s 143(3) and not u/s 153C r/w section 153A - no addition is warranted in the proceeding u/s 153C r/w section 154A Decided in favour of Assessee.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Addition of Rs. 92,59,530 as unexplained cash credit under section 68 of the Income Tax Act, 1961.
3. Validity of the offer letter submitted by the assessee's authorized representative.
4. Admission of additional evidence during the appellate proceedings.
5. Reassessment proceedings under section 153C r/w section 153A.

Detailed Analysis:

1. Condonation of Delay:
The appeal was barred by a delay of 157 days. The assessee filed an application for condonation of delay, supported by affidavits from the authorized representative, Mr. Surendra R. Desai, explaining that the delay occurred due to the misplacement of the appellate order by his office clerk. The Tribunal accepted the explanation and condoned the delay, stating that the assessee was prevented by sufficient and reasonable cause from filing the appeal on time.

2. Addition of Rs. 92,59,530 as Unexplained Cash Credit:
The assessee, engaged in the business of civil contracting, had received unsecured loans totaling Rs. 1,32,93,000. The Assessing Officer (AO) added Rs. 92,59,530 as unexplained cash credit under section 68, due to the assessee's failure to provide confirmations and addresses for 47 creditors who had given loans in cash. The AO held that the assessee could not establish the identity and creditworthiness of these creditors.

3. Validity of the Offer Letter:
Before the Commissioner (Appeals), the assessee's authorized representative submitted an offer letter dated 7th July 2008, agreeing to the addition of the loan amount to buy peace, provided no penalty proceedings were initiated. The Commissioner (Appeals) accepted the offer but did not agree to the condition regarding penalty proceedings. The Tribunal noted that the offer letter should not be considered conclusive against the assessee, especially as it was submitted without the assessee's knowledge or consent. The Tribunal decided to ignore the offer letter and examine the merits of the addition.

4. Admission of Additional Evidence:
During the appellate proceedings, the assessee submitted additional evidence, including identity proofs, land revenue records, family trees, and confirmation letters for the creditors. The Tribunal admitted these additional evidences, noting their relevance and the fact that they were already part of the department's records during the section 153C proceedings. The Tribunal restored the matter to the AO for fresh adjudication, directing the AO to verify the additional evidence and conduct any necessary inquiries.

5. Reassessment Proceedings under Section 153C r/w Section 153A:
In the reassessment proceedings under section 153C r/w section 153A, the AO made a similar addition of Rs. 92,82,500 as unexplained cash credit. The Tribunal held that since the original assessment proceedings for the assessment year 2005-06 were not pending on the date of the search, the original order did not abate. Consequently, the addition under section 68 should be examined in the regular assessment proceedings under section 143(3), not under section 153C r/w section 153A. The Tribunal allowed the assessee's appeal, stating that no addition was warranted in the reassessment proceedings.

Conclusion:
The Tribunal condoned the delay in filing the appeal, admitted the additional evidence, and restored the matter to the AO for fresh adjudication regarding the addition of Rs. 92,59,530 as unexplained cash credit. The Tribunal also held that no addition was warranted in the reassessment proceedings under section 153C r/w section 153A, as the original assessment order did not abate. The appeals were allowed for statistical purposes and on merits.