2015 (7) TMI 862 - AT - Income Tax

Addition under section 68 - CIT(A) deleted the addition - Held that - The assessee has produced copies of income-tax returns as well as PAN of the investors. Therefore, as far as the creditworthiness is concerned there is no dispute. Similarly the amounts have been received through account payee cheques. It is to be assumed that transactions are genuine unless proved otherwise by the AO. The solitary grievance of the AO is that he has tried to serve the notice upon the investors but failed to serve. In this connection it is pertinent to note that in AY 2007-08 effort was made by the AO after 18.12.2009 and before 22.12.2009, because he passed the assessment order on 31.12.2009. The list of the customers is available on pages 318 to 322 of the Paper Book. All the customers are from Surat but appears to be from different areas. The addresses given in the list is also the address reflected on the income-tax returns. Then why the ld. AO could not service notices upon these persons is specifically not discernible. According to the AO the process server has reported that addresses are in complete. In these situation we have two sets of evidences one the alleged assertions of the AO on the basis of alleged report of the process server which has not been placed on record by the Revenue nor reproduced by the AO in the assessment order. He has not even made reference to any particular witness in whose presence process server had tried to locate the alleged investors. On the other hand, copies of the income-tax returns, bank statement, PAN coupled with the fact that the amounts have been returned through account payee cheques and ld. first appellate authority had accepted this explanation. If we weigh both these sets of evidences then the scale would tilt in favour of the ld. CIT(A) because the assertions of the AO is not supported with any concrete material on the record. The time gap of 2-3 days referred by the A.O. for service, gives a doubt to our mind also whether, practically the process server had actually made an attempt to effect the services on all the investors in different corners of the city in that short time. Therefore, on an overall analysis of the record we are satisfied that ld. first appellate authority has appreciated the facts and circumstances in right perspective and no interference is called for - Decided against revenue.

Summary

Issues:
Appeals against orders of ld. CIT(A) for AYs 2006-07 & 2007-08 - Addition of amounts under section 68 - Nature of advances received by assessee - Verification of genuineness of transactions - Compliance with section 131 of the Income-tax Act - Burden of proof on assessee - Discharge of onus under section 68.

Analysis:
The appeals were directed against separate orders of ld. CIT(A) for AYs 2006-07 & 2007-08, challenging the addition of amounts under section 68 of the Income-tax Act. The core issue revolved around whether the advances received by the assessee were in the nature of trade advances or unexplained credits. The AO had added Rs. 81 lacs and Rs. 1,62,50,000/- for AYs 2007-08 & 2006-07 respectively. The assessee contended that the advances were received as booking amounts against future plot sales, not loans, and had provided details of customers, including PAN, bank statements, and income tax returns.

The ld. CIT(A) held that the additions were unjustified as the assessee had discharged its primary onus under section 68. The CIT(A) emphasized that the AO should have verified transactions with related banks and made further inquiries, which were not done. The CIT(A) also noted that the customers were regular income tax filers, and the amounts were received through bank transactions. The CIT(A) cited case law to support the assessee's position and criticized the AO's reasoning for non-appearance of customers. The CIT(A) concluded that the additions made by the AO were deleted, and the appeals were allowed.

During the hearing, the ld. DR argued that genuineness of transactions could not be proved as summons issued to investors were not served. In contrast, the ld. counsel for the assessee relied on judicial precedents and presented evidence supporting the genuineness of transactions, including repayment of advances. The Tribunal analyzed the evidence and contentions of both parties. It emphasized that the onus under section 68 required the assessee to prove the identity, creditworthiness, and genuineness of transactions, which the assessee had done. The Tribunal found the AO's assertions lacking concrete material and supported the CIT(A)'s decision. The Tribunal dismissed both appeals, upholding the CIT(A)'s order.

In conclusion, the Tribunal upheld the CIT(A)'s decision to delete the additions made by the AO under section 68, emphasizing the assessee's compliance with the burden of proof and the genuineness of transactions. The Tribunal found no merit in the appeals and dismissed them, affirming the CIT(A)'s orders for AYs 2006-07 & 2007-08.