2014 (3) TMI 1131 - AT - Income Tax

Addition u/s 68 by treating the loan received - Held that - The submissions of the assessee along with various evidences furnished to the Ld. CIT(A) was not appreciated in right perspective. The Ld. CIT(A) even did not consider this vital fact that an addition to the extent of ₹ 14.25 Lac was already made in the block assessment and that there was a dispute between the assessee and Johari Group to which creditors of about ₹ 1 Crore belonged and they had filed a FIR, but the Ld. CIT(A) neither considered the amount mentioned in the FIR nor amount assessed in the block assessment. CIT-A simply confirmed the addition made by the Assessing Officer on this basis that the letters issued to certain persons returned back and few of the creditors did not comply the summons. However, he ignored this contention of the assessee that new addresses of few creditors were given to whom no letter was written by the Assessing Officer. We, therefore, considering the totality of the facts, deem it appropriate to set aside this issue back to the file of Ld. CIT(A) to be adjudicated afresh - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Confirmation of addition under section 68 of the Income Tax Act, 1961 for unexplained unsecured loans.
2. Sustaining the disallowance of interest expenses.

Issue-wise Detailed Analysis:

1. Confirmation of Addition under Section 68 of the Income Tax Act, 1961 for Unexplained Unsecured Loans:

The core issue in both appeals relates to the confirmation of additions made by the Assessing Officer (AO) under section 68 of the Income Tax Act, 1961, concerning unexplained unsecured loans. The AO initially made an addition of Rs. 1,41,65,000 for the assessment year (A.Y.) 1994-95. The Commissioner of Income Tax (Appeals) [CIT(A)] provided relief of Rs. 1,19,15,000 but sustained an addition of Rs. 22,50,000. Both the assessee and the department appealed to the ITAT, which remanded the matter back to the AO to verify the genuineness of the transactions.

The AO, following the ITAT's directions, summoned the creditors to verify their identity, creditworthiness, and the genuineness of the transactions. However, summons to 14 parties were returned with remarks such as "No such person resides," "House closed," and "Left without address." Nine other creditors refused to comply. Only Smt. Kantarani Dawra confirmed her credit of Rs. 9,00,000, which was accepted. The remaining credit of Rs. 1,30,35,000 was considered unproved, leading to the addition under section 68.

The CIT(A) upheld the AO's decision, stating that mere confirmations and payments through account payee cheques were insufficient to establish the genuineness of the transactions. The CIT(A) emphasized that the assessee failed to produce the creditors despite being given the opportunity. The CIT(A) also noted that the AO had made reasonable efforts to verify the creditors, but the assessee did not provide new addresses for the creditors whose summons were returned.

The ITAT, upon reviewing the case, noted that the CIT(A) did not consider the fact that an addition of Rs. 14.25 lakh was already made in the block assessment and that there was a dispute between the assessee and the Johari Group, which included creditors of about Rs. 1 crore. The ITAT found that the CIT(A) did not adequately consider the evidence and submissions provided by the assessee. Consequently, the ITAT set aside the issue back to the CIT(A) for fresh adjudication, instructing the CIT(A) to consider the various details and evidence provided by the assessee.

2. Sustaining the Disallowance of Interest Expenses:

For the A.Y. 1995-96, the CIT(A) confirmed an addition of Rs. 38,27,913 under section 68 and sustained a disallowance of Rs. 15,53,037 out of interest expenses. The ITAT, in its previous order dated 31/05/2007, had remanded the matter back to the AO, who repeated the addition. The CIT(A) confirmed the addition in the same manner as done in the earlier year. The ITAT, following its decision for the preceding year, set aside the issues for the A.Y. 1995-96 back to the CIT(A) for fresh adjudication, ensuring due and reasonable opportunity of being heard to the assessee.

Conclusion:

The ITAT allowed both appeals for statistical purposes, remanding the issues back to the CIT(A) for fresh adjudication in accordance with the law, ensuring that the assessee is given a fair opportunity to present their case. The ITAT emphasized the need for the CIT(A) to consider all relevant evidence and submissions provided by the assessee during the reassessment proceedings.