2015 (12) TMI 129 - AT - Income Tax

Unexplained cash credit under section 68 - CIT(A) confirmed addition for two parties - Held that - The inquiry with regard to the creditors have taken place during the course of appellate proceedings before the ld. CIT(A) in the year 2011. Admittedly, these loans were taken in the year 2000, hence, we find merits in the submissions of the ld. AR that the creditors did not co-operate with the assessee and hence they did not appear before the AO, since the assessee had repaid the loans. We further notice that the assessee has filed copies of cheque/pay-in-slips and confirmation letters obtained from these creditors. The confirmation letters contained the address of the creditors and also their respective PAN. Thus, we notice that the creditors having received back the loans from the assessee did not mind to co-operate with the assessee by way of appearing before the AO, since the transactions were 10 years old. We also notice that the AO also did not enforce the attendance of these creditors by issuing summons to them and he did not verify their income tax returns also, even though the assessee has filed necessary details. Under these set of facts, we are of the view that tax authorities could not draw adverse inference in respect of inability of the assessee to produce the creditors.In the peculiar facts and circumstances of the case, we are of the view that the assessee should not be punished for his inability to enforce the attendance of the creditors. We have already noticed that there is failure on the part of the AO also in not enforcing the attendance of the creditors by issuing summons to them - Decided in favour of assessee. For addition of ₹ 21.36 lakhs CIT(A) has simply restored the matter to the file of the AO to examine the claim of the assesee. Hence, we are of the view that the Revenue could not be considered as having aggrieved by the said direction given by the ld.CIT(A). Accordingly, we do not find any merit in the appeal filed by the Revenue. - Decided against revenue

Summary

Issues Involved:
1. Unexplained cash credit under section 68 of the Income Tax Act, 1961 - Assessment year 2000-01.
2. Unexplained bank deposits - Assessment year 2005-06.

Analysis:

Issue 1: Unexplained cash credit under section 68 of the Income Tax Act, 1961 - Assessment year 2000-01:
The appeal was filed by the assessee against the addition of unsecured loans as unexplained cash credit under section 68 of the Act. The AO assessed the entire amount of unsecured loans as unexplained cash credit due to lack of details provided by the assessee. In the appellate proceedings, the ld.CIT(A) confirmed the addition to the extent of &8377; 16 lakhs related to two creditors who did not appear before the AO. The assessee argued that the loans were repaid, provided necessary evidence, and requested the creditors to appear before the AO, but they did not cooperate. The Tribunal found that the creditors did not cooperate, the AO did not enforce their attendance, and the provision of sec. 68 allows discretion to the AO. Relying on legal precedents, the Tribunal held that the addition of &8377; 16 lakhs was not justified, directing the AO to delete the addition.

Issue 2: Unexplained bank deposits - Assessment year 2005-06:
The Revenue appealed against the deletion of an addition of &8377; 21.36 lakhs by the ld.CIT(A). The AO made the addition under section 68 of the Act for unexplained bank deposits. In the appellate proceedings, the ld.CIT(A) found that deposits amounting to &8377; 15 lakhs were explained by the assessee as commission income. The ld.CIT(A) directed the AO to examine the claim of the assessee regarding the balance amount of deposits. The Tribunal noted that the ld.CIT(A) had merely asked the AO to examine the claim, and the Revenue's grievance was not substantial. Therefore, the Tribunal dismissed the appeal filed by the Revenue for the assessment year 2005-06.

In conclusion, the Tribunal allowed the appeal filed by the assessee for the assessment year 2000-01 and dismissed the appeal of the Revenue for the assessment year 2005-06. The Tribunal emphasized the importance of cooperation, discretion of the AO, and proper examination of claims in tax matters, as evidenced by the detailed analysis and legal reasoning provided in the judgment.