2012 (9) TMI 1195 - AT - Income Tax

Summary

Issues involved:
The issue involves the confirmation of a sum as a bogus liability under Section 68 by the Assessing Officer, which was upheld by the learned CIT(A) and challenged by the assessee before the Tribunal.

Details of the Judgment:

Issue 1: Assessment of Bogus Liability u/s 68
The assessee, engaged in manufacturing polymer products, filed a return showing a loss. During scrutiny, the Assessing Officer noted a significant addition of liability under "unsecured loans." The assessee failed to produce confirmation letters from creditors to prove the genuineness of the liability, resulting in the Assessing Officer treating a portion of the liability as bogus under Section 68.

Issue 2: Appeal before CIT(A) and Tribunal
The assessee appealed before the CIT(A), who confirmed the addition of the disputed amount as made by the Assessing Officer under Section 68. The Tribunal considered the submissions of the assessee, which included details of loan transactions through account payee cheques and bank accounts. The Tribunal decided to restore the issue to the Assessing Officer for verification of the loan creditors in accordance with the provisions of the Income Tax Act.

Key Arguments by the Assessee:
The assessee contended that despite providing details and addresses of creditors, confirmation letters were not produced for all creditors due to genuine difficulties. The assessee argued that the Assessing Officer should have conducted further inquiry before treating the liabilities as bogus under Section 68. The assessee emphasized that the assessing officer did not properly examine the books of accounts and failed to consider the audited financial statements and bank statements.

Decision of the Tribunal:
After considering the submissions and material on record, the Tribunal found merit in the assessee's contentions and decided to allow the appeal for statistical purposes. The issue of the disputed liability was restored to the Assessing Officer for verification, providing the assessee with a reasonable opportunity to be heard.

This judgment highlights the importance of proper verification and examination of evidence before treating liabilities as bogus under Section 68 of the Income Tax Act, ensuring fair assessment procedures and adherence to legal principles.