2014 (10) TMI 692 - AT - Income Tax

Unexplained credits u/s 68 Onus to prove - Held that - Whatever compliance was asked by AO, assessee has duly filed the same - onus cast u/s 68 is primary in nature there is no infirmity in the order of CIT(A) that as a per the first requirement of sec 68 assessee discharged its primary onus relying upon COMMISSIONER OF INCOME TAX DELHI - II Versus KINETIC CAPITAL FINANCE LTD. 2011 (9) TMI 289 - DELHI HIGH COURT - each instance of cash credit is to be identified and a bunch of transaction without specifying the details cannot be added u/s 68 - assessee has explained each credit entry in both the bank a/cs along with the source thereof i.e. cash available in books - Bank a/cs are disclosed and part of the regular recording of assesses real estate business - They have not been rejected, therefore, the books of accounts and generation of cash is thus impliedly accepted by AO - There is total lack of appreciation of facts and material available on record and the assessing officer s observations suffer from self-contradictions - CIT(A) after verification has given clear findings of facts that AO failed to properly considered the material produced by the assessee in discharge to it s primary onus - due to non-appreciation of assesses explanation and evidence in a proper manner, AO has made contradictory observations the order of the CIT(A) is upheld as the assessee duly discharged its primary onus in terms of sec 68 to explain the entries in SBI and ABN Amro bank A/cs Decided against revenue. Unconfirmed creditors Held that - Assessee has filed sufficient evidence which are detailed above and claims to have discharged its primary onus in terms of sec 68 - CIT(A) has rightly held that in income tax proceedings attested photocopies duly signed are admissible as evidence in income tax proceedings - the assessee has been able to demonstrate that due to name change of Taral Vincom to Link point Infrastructure Pvt. Ltd w.e.f. 6.5.2009, the notice u/s 133(6) remained unserved - AO has to ascertain the facts and discharge of primary onus on the basis of material available on record after giving adequate opportunity of hearing - He cannot brush aside the entire evidence on the pretext that party is not physically produced more so when it is apparent that it was physically impossible for assessee to ensure production of Kolkata party in one day s short time. Regarding other sundry creditors, assessee discharges its primary onus in terms of sec. 68 which is attempted to be rebutted by AO on assumptions and sweeping observations - They are all parts of books of accounts which are accepted by AO without raising iota of doubt - The due confirmation, explanation of entries and source thereof emanating from books of accounts is duly explained by the assessee relying upon COMMISSIONER OF INCOME TAX-IV Versus M/s. DWARKADHISH INVESTMENT (P) LTD. and M/s. DWARKADHISH CAPITAL (P) LTD. 2010 (8) TMI 23 - DELHI HIGH COURT - assessee has discharged it s onus in terms of sec 68 thus, the order of the CIT(A) is upheld Decided against revenue.

Summary

Issues Involved:
1. Deletion of addition of Rs. 20,37,05,000/- made by the AO under Section 68 of the Income Tax Act.
2. Deletion of addition of Rs. 4,32,07,394/- made by the AO on account of unconfirmed creditors.

Issue-wise Detailed Analysis:

1. Deletion of Addition of Rs. 20,37,05,000/- under Section 68:

The assessee, engaged in real estate, filed its return declaring an income of Rs. 64,90,644/-. During assessment, the AO issued a show-cause notice regarding unexplained credit entries in the assessee's bank accounts. The AO made an addition of Rs. 20,37,05,000/- under Section 68, treating all bank deposits as unexplained. The AO's justification was that the assessee failed to provide necessary details and supporting documents for the credit entries.

The assessee contended that all entries were explained with complete details, including sale of land, advances received, and refunds of advances. The assessee provided confirmations, PAN details, and other supporting documents. The CIT(A) found contradictions in the AO's statements and noted that the assessee had indeed provided necessary documents. The CIT(A) observed that the AO did not make proper inquiries and had added the total deposits without verifying individual transactions.

The CIT(A) concluded that the assessee had discharged its onus by providing identity, creditworthiness, and genuineness of transactions. The AO failed to rebut the evidence provided by the assessee. The CIT(A) deleted the addition, citing that the AO's approach was not justified and lacked proper inquiry.

2. Deletion of Addition of Rs. 4,32,07,394/- on Account of Unconfirmed Creditors:

The AO made an addition of Rs. 4,32,07,394/- due to a significant increase in sundry creditors, primarily from Taral Vincom Pvt. Ltd. The AO issued a notice under Section 133(6) to Taral Vincom, which was returned unserved. The AO concluded that the assessee failed to prove the identity, creditworthiness, and genuineness of the transaction, and added the amount as unexplained.

The assessee argued that the amount represented a genuine liability to Taral Vincom for work done. The assessee provided a complete set of documents, including confirmations, PAN details, and financial statements of Taral Vincom. The name change of Taral Vincom to Linkpoint Infrastructure Pvt. Ltd. explained the non-service of the notice. The CIT(A) found that the assessee had provided sufficient evidence and the AO did not make proper inquiries.

The CIT(A) applied the rationale of the judgment in the case of Lovely Exports, stating that the addition under Section 68 was not justified. The CIT(A) directed the AO to forward details of all investors to their respective AOs for further examination.

Conclusion:

The ITAT upheld the CIT(A)'s order, stating that the assessee had discharged its primary onus under Section 68 by providing necessary details and supporting documents. The AO failed to properly rebut the evidence and made sweeping additions without proper inquiry. The ITAT dismissed the revenue's appeal, confirming the deletion of both additions.