2015 (10) TMI 1271 - AT - Income Tax

Addition u/s. 68 - CIT(A) deleted the addition - Held that - From the details filed it is clear that in most of the cases loans/liabilities are of not current year and the balances were appearing in the balance sheets of earlier AY.s.It was admitted by the AO that in the cases of Dilip Chopra, Pranav Enterprises and Gautam Petrochem Industries Pvt. Ltd.the outstanding liabilities pertained to earlier years.Therefore,in our opinion the FAA was justified in deleting the additions made by the AO.Similarly,in the cases of Rajendra Chopra,Rakesh Chopra,K-Sarc Polymers, Pyramid Energy Creations Co.,BPC Polymers and Chakreshwari Plastics (India) Ltd. Suvidhi Impex,it was found by the FAA that most of the balances were old,that the transactions were carried out through banking channesl,that identity or creditworthiness of the lenders was not in doubt.Lastly in the case of J K Jain and M/s. K.C. Jain it is found that their returns and balance sheets were filed before the AO but he did not comment about the authenticity of the documents. It is a fact that the PAN of all the creditores were made available to the AO.Copies of the returns of the lenders were also filed in most of the cases.The AO could have very well cross verified the genuineness of the transactions.But,he did not make any investigation in that regard. So,we agree with the observation of the FAA that the assessee had sufficiently discharged the burden which lay upon her to explain the nature and source of the credit entry appearing in her books of accounts and the burden had clearly shifted to the AO to prove to the contrary to hold that in spite of her explanation the entries could still be held to represent her income. In our opinion,the AO failed to discharge the onus shifted to him. Therefore, we hold that the FAA had rightly concluded that it was sufficient to delete the addition. - Decided in favour of assessee.

Summary

Issues:
1. Deletion of additions made by the AO under section 68 of the Income Tax Act.

Analysis:
The Appellate Tribunal ITAT Mumbai considered the appeal challenging the order of the CIT(A)-32, Mumbai, where the Assessing Officer (AO) had raised grounds of appeal regarding the deletion of additions made under section 68 of the Act. The AO had added amounts totaling to Rs. 50.37 lakhs, Rs. 15.24 lakhs, and Rs. 4.90 lakhs under different heads like 'other liabilities,' 'unsecured loans in personal balance sheet,' and 'unsecured loans in business balance sheet,' respectively. The AO treated these amounts as unexplained cash credits due to lack of details provided by the assessee, including names, addresses, and PANs of the concerned parties. The AO found that the unsecured loans were not adequately proven by the assessee, leading to the additions.

The assessee, during the assessment proceedings, submitted additional evidences before the First Appellate Authority (FAA) to support the transactions. The FAA considered the submissions and remand report, where it was revealed that most outstanding liabilities were from relatives and business concerns of the assessee, who confirmed the balances. The FAA noted that transactions were through banking channels and the parties had PANs, concluding that the transactions were genuine. Accordingly, the FAA deleted the additions made by the AO under various heads, as the assessee had discharged the initial burden of proving the credit.

Regarding specific parties like Rajendra Chopra, K-Sarc Polymers, Pyramid Energy Creations Co., BPC Polymers, and Chakreshwari Plastics (India) Ltd., the FAA found that the balances were old and transactions were genuine. The FAA also addressed cases like Suvidhi Impex and J.K. Jain, where the creditors had provided necessary documents and the AO did not question the authenticity of the transactions. The FAA deleted the additions made by the AO under section 68 of the Act, totaling Rs. 70.51 lakhs.

The Appellate Tribunal upheld the FAA's decision, stating that the assessee had sufficiently explained the nature and source of the credit entries, shifting the burden to the AO to prove otherwise. The Tribunal found that the AO failed to investigate the genuineness of the transactions adequately, leading to the dismissal of the AO's appeal. The Tribunal concluded that the FAA's decision to delete the additions was justified, and the appeal filed by the AO was dismissed.