2017 (4) TMI 817 - AT - Income Tax

Admission of additional evidence by the CIT(A) - Held that - The assessee has reasonable cause also for admission of additional evidence as evident from the fact that the issue of cash credits was first time raised on 06.12.2010 just before the completion of the assessment (23 days; time period between the order sheet entry dated 06.12.2010 through which the above mentioned details were called and the conclusion of the assessment proceedings vide impugned order.) and that too when the requisite details were required to be called from third persons. Thus, it appears that the assessee has reasonable cause in ensuring compliance. Therefore, in our considered opinion, the Ld. CIT(A) has rightly held that it is a fit case for admission of additional evidence. Addition u/s 68 - Held that - The assessee has discharged her onus of proving identity, the source of loan and the genuineness of transactions in accordance with the provisions of section 68. It is a settled law that the assessee is not answerable to explain source of source of the fund. In light of the fact that there is no cash deposit in the bank accounts of the three persons for advancing loan and their categorical admission confirming loan during the remand proceedings, we are of the considered view that the loans aggregating to ₹ 38,50,000/- cannot be charged to tax in the Assessee s hands u/s 68 particularly in absence of any contrary evidence brought on the record by the AO. Hence, we find that Ld. CIT(A) has rightly observed that the assessee is not required to explain source of source of the fund gets buttressed by the amendment made in section 68 with effect from 01.04.2013, which empowers the AO to examine source of source in case of share application money from 01.04.2013 and no other cases prior to that. This amendment further does not give power to the AO to examine source of source of non-share capital cases and that too prior to 01.04.2013. Undisputedly; the assessee has given complete addresses and credit worthiness of the persons from whom she has taken loans. CIT(A) observed that there is no material which may even raise doubt about the genuineness of the loans. Therefore, it was rightly held that the AO has erred in taxing above mentioned loans aggregating to ₹ 38,5O,OOO/- u/s 68 in the hands of the appellant. Therefore, the addition was rightly deleted - Decided in favour of assessee

Summary

Issues Involved:
1. Admission of additional evidence under Rule 46A.
2. Deletion of the addition of ?38,50,000/- under Section 68 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Admission of Additional Evidence under Rule 46A:
The Revenue contended that the Commissioner of Income Tax (Appeals) [CIT(A)] erred in allowing the assessee to file fresh evidence under Rule 46A without appreciating that the assessee was given two opportunities during the assessment proceedings. The CIT(A) admitted the additional evidence stating that it was necessary for deciding the issue involved. The CIT(A) referenced the Supreme Court's interpretation in Venkataramiah vs. A Seetharama Reddy, which allows additional evidence if it helps in pronouncing judgment more satisfactorily. The CIT(A) also noted that the issue of cash credits was raised late in the assessment proceedings, giving the assessee reasonable cause for non-compliance initially. The Tribunal upheld the CIT(A)'s decision, noting that the additional evidence was necessary and justified, and the CIT(A) had rightly admitted it in the interest of justice.

2. Deletion of the Addition of ?38,50,000/- under Section 68:
The Assessing Officer (AO) had added ?38,50,000/- to the assessee's income under Section 68, doubting the creditworthiness and genuineness of the loans taken from three persons. The CIT(A) deleted this addition after examining the identity, creditworthiness, and genuineness of the transactions. The CIT(A) found that the loans were given through bank transactions without any cash deposits, and the lenders had confirmed the loans during remand proceedings. The CIT(A) emphasized that the assessee is not required to explain the source of the source of funds, a view supported by the amendment in Section 68 effective from 01.04.2013. The Tribunal agreed with the CIT(A), noting that the AO had not provided contrary evidence and the assessee had fulfilled her onus under Section 68. The Tribunal dismissed the Revenue's appeal, upholding the deletion of the addition.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on both the admission of additional evidence under Rule 46A and the deletion of the addition of ?38,50,000/- under Section 68. The Tribunal found the CIT(A)'s actions justified and supported by relevant case laws and amendments to the Income Tax Act.