2018 (5) TMI 1904 - AT - Income Tax

Addition u/ 68 - unexplained cash credit - CIT-A deleted the addition - HELD THAT - When all the relevant details and evidences were filed by the assessee and the assessing officer has made no effort whatsoever to examine the lender, in my considered opinion, there is no infirmity in the order of the ld. Commissioner of Income Tax (Appeals). Accordingly, we confirm the same.

Summary

Issues Involved:
1. Addition of unexplained cash credit under section 68 of the Income Tax Act.
2. Verification of identity and creditworthiness of the lender.
3. Assessment based on information from Investigation Wing.
4. Application of section 68 in the case.
5. Legal validity of the assessment.

Issue 1: Addition of Unexplained Cash Credit under Section 68:
The Revenue appealed against the deletion of an addition of a significant amount made under section 68 of the Income Tax Act by the ld. Commissioner of Income Tax (Appeals). The appellant contended that the assessee failed to prove the identity and creditworthiness of the lender, leading to the addition. However, the ld. Commissioner of Income Tax (Appeals) found that the identity of the creditor was established through PAN details and income tax returns, and the transaction's genuineness was supported by banking channels. Additionally, the interest payment on the loan further validated the transaction's authenticity. The appellant's husband confirmed the loan in a statement, and the lender's acceptance of providing the loan was evident. The focus shifted to the modus operandi of a different group, which was deemed irrelevant. The ld. Commissioner of Income Tax (Appeals) concluded that the identity, creditworthiness, and genuineness of the transaction were established, leading to the deletion of the addition under section 68.

Issue 2: Verification of Identity and Creditworthiness of the Lender:
The Assessing Officer relied on information from the Investigation Wing regarding the lender's association with a group known for providing accommodation entries. Despite overwhelming evidence linking the lender to a questionable group, the Assessing Officer did not engage the lender in the assessment process. In contrast, the ld. Commissioner of Income Tax (Appeals) considered all evidence submitted by the assessee, including confirmation from the lender, to establish the legitimacy of the transaction. The Hon'ble Bombay High Court's decision in a similar case was also referenced, emphasizing the importance of examining the details provided by the assessee. The failure of the Assessing Officer to verify the lender's identity and creditworthiness was a crucial factor in upholding the ld. Commissioner of Income Tax (Appeals)'s decision to delete the addition under section 68.

Issue 3: Assessment Based on Information from Investigation Wing:
The assessment was influenced by information from the Investigation Wing regarding the lender's alleged involvement in providing accommodation entries. However, the ld. Commissioner of Income Tax (Appeals) highlighted that the focus should have been on the specific case at hand rather than general information about a different group. The reliance on external information without verifying the transaction's specifics led to an incorrect assessment by the Assessing Officer. The ld. Commissioner of Income Tax (Appeals) emphasized the need to establish the nature and source of credit within the appellant's books, which was satisfactorily done, resulting in the deletion of the addition under section 68.

Issue 4: Application of Section 68 in the Case:
The application of section 68 of the Income Tax Act was central to the dispute, with the Assessing Officer adding the loan amount to the total income due to alleged discrepancies in the transaction. However, the ld. Commissioner of Income Tax (Appeals) scrutinized the details provided by the assessee and concluded that the identity, creditworthiness, and genuineness of the lender and the transaction were adequately established. The Assessing Officer's focus on a different group's practices rather than the specific case led to an erroneous assessment, highlighting the importance of applying section 68 accurately based on the facts of the individual case.

Issue 5: Legal Validity of the Assessment:
The legal validity of the assessment was questioned due to the Assessing Officer's failure to engage with the lender despite substantial evidence linking them to a problematic group. The ld. Commissioner of Income Tax (Appeals) based the decision on the evidence provided by the assessee, including confirmation from the lender, and referenced a relevant court decision to support the deletion of the addition under section 68. The lack of effort by the Assessing Officer to verify crucial details and the focus on irrelevant information led to the dismissal of the Revenue's appeal, upholding the ld. Commissioner of Income Tax (Appeals)'s decision.

This detailed analysis of the judgment highlights the key issues involved in the case and the reasoning behind the decisions made by the ld. Commissioner of Income Tax (Appeals) and the ITAT.