2017 (10) TMI 1402 - HC - Income Tax

Addition u/s 68 - Held that - Assessee has made no case to prove the genuineness of the transactions, which are un-evidenced and de hors the probabilities of human conduct. Further, the question of Revenue doubting the source of the source does not arise, with the creditors, even though called for, having not been produced. The cited decision, if at all, validates the Revenue s case; the hon ble court upholding the addition u/s. 68 despite the production of affidavit from the creditor, under circumstances of non-production of the creditor coupled with non-furnishing of his correct address. An opportunity to the Revenue to examine the assessee or the creditor vis-a-vis the explanation and the materials furnished is again a sine qua non for any reliance to be placed thereon. - decided against assessee.

Summary

Issues Involved:
1. Admission of new plea by the Tribunal contrary to facts on record and Rule 29 of the Appellate Tribunal Rules, 1963.
2. Sustaining the addition of ?12.50 lacs by the Tribunal under Section 69A of the IT Act, despite the appellant not maintaining books of accounts and having only pension and interest as sources of income.

Detailed Analysis:

Issue 1: Admission of New Plea Contrary to Facts on Record and Rule 29 of the Appellate Tribunal Rules, 1963
The appellant challenged the Tribunal's decision to admit a new plea contrary to the facts on record and Rule 29 of the Appellate Tribunal Rules, 1963. The Tribunal condoned a 28-day delay in the Revenue's appeal based on a clarification from the Commissioner of Income-tax (CIT), Ajmer, regarding the actual communication date of the appellate order. The Tribunal found the reason stated by the CIT understandable and proceeded with the hearing.

The Tribunal addressed the principal issue of restricting the addition of ?15.51 lacs on account of unexplained cash deposits to ?81,000/-. The appellant had explained that ?11.50 lacs were sourced from 63 creditors in Ahmedabad, supported by confirmations with addresses and PANs. However, the Assessing Officer (AO) found the explanation unsatisfactory, noting that the creditors were not produced, and the documents provided were not relevant for the assessment year in question. The AO also doubted the capacity of the creditors and the genuineness of the transactions.

In appeal, the CIT(A) accepted the appellant's explanation for the ?3.20 lacs withdrawn and redeposited but sustained an addition of ?81,000/- due to the lack of evidence for the remaining amount. The Tribunal upheld this view, finding the appellant's explanation inconsistent and unsubstantiated.

Issue 2: Sustaining the Addition of ?12.50 lacs under Section 69A of the IT Act
The Tribunal considered whether the addition made by the AO under Section 68, and deleted by the CIT(A), could be sustained under Section 69A. The appellant claimed that the funds were borrowed from various individuals in Ahmedabad to meet a temporary need for purchasing a property. However, the Tribunal found the explanation "fantastic by all counts, bordering on the bizarre."

The Tribunal noted several inconsistencies and anomalies in the appellant's explanation:
- The need to raise funds was not justified, given the appellant had secured advances from the sale of his property.
- The appellant had near-liquid assets in the form of bank FDRs, which could have been monetized.
- The method of raising funds from 63 outstation parties was impractical and improbable.
- The acceptance and repayment of loans in cash were risky and lacked any contemporaneous material evidence.
- The non-production of creditors before the AO for examination was critical, as it hindered the verification of the appellant's explanation.

The Tribunal found the appellant's explanation untrue, concocted, and inconsistent with normal human conduct. It concluded that the AO's non-satisfaction with the appellant's explanation was justified. The Tribunal referenced several Supreme Court decisions to support the principle that the onus is on the assessee to satisfactorily explain the nature and source of the credits or debits.

The Tribunal rejected the appellant's reliance on case laws, noting that mere production of confirmatory letters or routing transactions through banking channels does not prove the genuineness of the loans. The Tribunal upheld the AO's action, finding the credits in the appellant's bank account did not represent genuine borrowings.

Conclusion:
The Tribunal's view was deemed just and proper, leading to the dismissal of the appeal. The issue was resolved in favor of the department and against the assessee. The addition of ?12.50 lacs under Section 69A was sustained, and the appeal was dismissed.