2022 (1) TMI 1348 - HC - Income Tax

Unexplained credits - reliance on statement recorded from the CFO - HELD THAT - From the statement recorded from the CFO the tribunal found on facts that the reconciliation and the explanation was duly supported by evidence which were on record. That apart, the assessee was called upon to explain various details which formed part of the addition made u/s 68 by AO and the Tribunal has recorded that the assessee has explained before it in entirety the reconciliation and also explained all the discrepancies. Tribunal said that the AO ought to have asked to produce the bills and evidence of delivery of materials such as road challan and accepted challan copy etc. and no enquiry was made by the assessing officer in this regard and he has been swayed entirely by the statement of the CFO who was not allowed to be cross-examined. Tribunal on facts, concluded that the reconciliation is supported by evidence which is on record and there is no difference in the balance sheet and in the books of accounts of the assessee and accordingly dismissed the appeal filed by the revenue. The above factual discussion has been set out by us in the preceding paragraphs to demonstrate that the case on hand involves adjudication and re-adjudication into facts. This exercise has been done by the CIT(A) as well as the tribunal and we are precluded from doing such an exercise in an appeal filed u/s 260A of the Act where we are required to decide the question of law which in our considered opinion does arise in the instant case. Appeal filed by the revenue is dismissed.

Summary

Issues:
Challenge to order granting relief on unexplained credits under Section 68 of the Income Tax Act, 1961.

Detailed Analysis:
The appeal filed by the revenue under Section 260A of the Income Tax Act, 1961, challenged the order of the Income Tax Appellate Tribunal (ITAT) regarding unexplained credits for the assessment year 2006-07. The main issue was whether the Tribunal's decision affirming the Commissioner of Income Tax (Appeals) order was perverse given the evidence available, specifically the Chief Finance Officer's statements regarding transactions with the assessee.

The assessee, engaged in steel manufacturing and trading, reported a loss of ?2,58,03,527 for the relevant assessment year. The assessing officer treated certain credits as unexplained under Section 68 of the Act, which the CIT(A) later overturned. The Tribunal upheld the CIT(A)'s decision, leading to the revenue's appeal.

The CIT(A) extensively analyzed the Chief Finance Officer's statements, noting discrepancies in the assessing officer's findings and the evidence provided by the assessee. The CIT(A) found the reconciliation supported by records, including bank statements, while highlighting the lack of evidence from the other party involved in the transactions.

The Tribunal re-examined the facts and evidence, concluding that the reconciliation was adequately supported by evidence on record. It criticized the assessing officer for not seeking crucial evidence like bills and delivery documents, solely relying on the CFO's statement without allowing cross-examination.

The High Court emphasized that the case required fact-based adjudication, which had been thoroughly done by the CIT(A) and the Tribunal. The Court clarified its role under Section 260A to address questions of law, not re-evaluate facts. Consequently, the Court dismissed the revenue's appeal, affirming the Tribunal's decision.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing the importance of evidence and proper evaluation in tax matters, while highlighting the respective roles of different authorities in the assessment process.