2015 (11) TMI 1864 - AT - Income Tax

Addition u/s 68 on account of unsecured loans - non discharge the burden to prove the credit u/s 68 - AO objected to the admission of additional evidences - DR argued that there is violation of Rule 46A inasmuch as the learned CIT(Appeals) has admitted additional evidences and the AO has not been granted an opportunity to comment upon the merits of the case of additional evidences - HELD THAT - As it is not the case that these particulars were false, there is no reason why the AO could not make necessary enquiry to satisfy himself. By providing all the necessary details regarding loan creditors the assessee has duly discharged the initial onus. The onus of further enquiry and proving that the loans were bogus lied on the AO who has chosen not make any enquiry whatsoever. In these circumstances, in our considered opinion, there is no infirmity in the order of CIT(Appeals). CIT(Appeals) has noted that if the AO had any doubt about the transactions he could have issued summons u/s 133(6) or even deputed the Inspector which had not been done. The creditors were assessed to income-tax at the same place and hence the AO could have very easily invoked any enquiry. In these circumstances, in our considered opinion, there is no infirmity in the order of learned CIT(Appeals). In this regard we may refer to Hon ble Apex Court decision in the case of CIT vs. Orissa Corporation P. Ltd. 1986 (3) TMI 3 - SUPREME COURT . In this case it was expounded that when the names and addresses of the creditors are given and they are income-tax assesses, then the onus to disprove the same lied on the Revenue. In this case admittedly the Revenue has not discharged the onus. We are not inclined to accept the submissions of the learned D.R. to remit the matter to the files of the AO. AO had all the informations before him at the time of assessment. Similarly he was again given an opportunity when the submissions of the assessee were remanded to him. Now the AO cannot give a third innings which will be clearly an injustice to the assessee and harassment by multiple assessment proceedings on same issue for no fault of the assessee. Accordingly we uphold the order of learned CIT(Appeals) on this issue and dismiss the ground taken by the Revenue. Addition of miscellaneous expenses - HELD THAT - We find that CIT(Appeals) has clearly found that the amount of miscellaneous expenses of Rs.10,758/- was added twice as it was once again included by the AO in the disallowance for unsecured loans and interest. This is clear from the reading of the AO s order on the issue of addition for unsecured loan wherein the AO had started with the figure of Rs.51,38,998/- but in conclusion had added Rs.51,49,756/-. Clearly the different amount of Rs.10,758/- was a double addition. Hence the learned CIT(Appeals) has only deleted the double addition in the grounds dealt with by him. Hence we uphold the order of learned CIT(Appeals) on this account. Addition on account of salary and other expenses - AO made the disallowance by observing that the assessee is having receipt by way of rent from BPCL land and has claimed various expenses - HELD THAT - We find that it is true that the AO has made the disallowance in an adhoc manner without specifying which expenses are not supported by vouchers. It is settled law that the additions cannot be made on the basis of surmises and conjectures - Decided against revenue.

Issues Involved:
1. Deletion of addition made by AO under Section 68 of the IT Act on account of unsecured loans.
2. Deletion of interest on these loans.
3. Deletion of addition made by AO on account of miscellaneous expenses.
4. Deletion of addition on account of salary and other expenses.

Issue-Wise Detailed Analysis:

1. Deletion of Addition Made by AO under Section 68 of the IT Act on Account of Unsecured Loans:
The AO noted that the assessee had taken fresh loans amounting to Rs. 51,38,998/- during the year and invested in new properties. Despite filing confirmations, the assessee did not establish the creditworthiness of the lenders. The AO observed that the lenders showed meager incomes and did not file balance sheets or capital accounts, leading to the conclusion that the loans were not satisfactorily explained as genuine, invoking Section 68.

Before the CIT(Appeals), the assessee argued that the loans were from outside parties who were non-cooperative in providing satisfactory evidence. The assessee requested the AO to conduct direct inquiries under Section 133(6), which was not done. Additional evidence was submitted to the CIT(Appeals) under Rule 46A, showing that the creditors were assessed to tax, and the loans were received through account payee cheques. The CIT(Appeals) admitted the additional evidence, noting that the AO did not conduct any inquiries to disprove the creditworthiness of the creditors. The CIT(Appeals) deleted the addition, stating that the AO made the addition for non-compliance in a technical manner without conducting proper inquiries.

2. Deletion of Interest on These Loans:
The interest amounts for various assessment years were also deleted by the CIT(Appeals) as they were related to the unsecured loans. The AO had added these amounts without conducting proper inquiries. The CIT(Appeals) directed the AO to allow the interest disallowed for the respective years.

3. Deletion of Addition Made by AO on Account of Miscellaneous Expenses:
The CIT(Appeals) found that the AO had added the amount of Rs. 10,758/- twice-once under a separate heading and again by including it in the total addition for unsecured loans and interest. The CIT(Appeals) deleted this double addition.

4. Deletion of Addition on Account of Salary and Other Expenses:
The AO made adhoc disallowances for salary and other expenses, observing that the expenses claimed were excessive, unjustified, and not supported by proper evidence. The CIT(Appeals) deleted these additions, stating that the AO made the disallowances in a casual and routine manner without pinpointing specific improper vouchers. The CIT(Appeals) emphasized that ad hoc disallowances are not permissible and must be reasonably justified through a speaking order.

Conclusion:
The Tribunal upheld the order of the CIT(Appeals) on all issues, dismissing the Revenue's appeals. The Tribunal noted that the AO had all necessary information but failed to conduct proper inquiries. The Tribunal emphasized that the onus to disprove the creditworthiness of the creditors lied on the AO, who did not fulfill this responsibility. The Tribunal also rejected the Revenue's request to remit the matter to the AO, stating that it would result in multiple assessment proceedings and harassment of the assessee. The Tribunal upheld the deletion of adhoc disallowances for salary and other expenses, citing settled law that additions cannot be made based on surmises and conjectures.

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