2017 (5) TMI 470 - AT - Income Tax

Addition u/s 68 - unexplained cash credit - credit-worthiness of the DE , genuineness of the transaction - Held that - CIT(A) has discussed this issue in little detail, but devoted much energy in reproduction of CIT(A) s order passed in the case of Shri Dipin G. Patel. The ld.CIT(A) also reproduced the finding of the AO, submissions made by the assessee. While making an analysis of the statement given by Shri Dipin G. Patel, the ld.CIT(A) just reiterated replies given by him. But he has not analysed inference required to be drawn from those replies. Basically, the ld.CIT(A) was of the opinion that it is the onus upon the assessee to prove source of loan and its nature. Once the assessee failed to file confirmation from creditor, then it will be construed that she failed to discharge onus. As observed earlier, in the normal circumstances, the ld.CIT(A) s action could be appreciated. But, it is to be seen in the context that when a creditor turn hostile, then whether an assessee should be given an opportunity to prove his case with the help of circumstantial evidence or not. The role of the AO is not only of prosecutor, rather he is an adjudicator also. It is for the Revenue to provide a platform to the assessee where with the help of statutory powers of the AO, she could explain her position for not visiting her with tax liability. Looking into these facts and circumstances, we are of the view that impugned orders deserves to be set aside because the assessee was not granted sufficient opportunity at the level of the AO. These appeals are remitted to the file of the AO for re-adjudication. The ld.AO shall examine the ledger account of the assessee exhibiting details of loans received by the assessee through account payee cheque, and thereafter he would direct the bank for providing bank statement of the creditor during those periods. He would supply all incriminating materials to the assessee for giving an explanation. The assessee will be at liberty to submit any explanation or details in support of her defence. The observations made by us will not impair or injure the case of the AO and will not cause any prejudice to the defence/explanation of the assessee. All appeals of the assessee are allowed for statistical purpose.

Issues Involved:
1. Reopening of assessment under Section 148 of the Income Tax Act, 1961 for the assessment year 2007-08.
2. Additions made under Section 68 of the Income Tax Act, 1961 in various assessment years: 2007-08, 2008-09, 2009-10, 2005-06, and 2010-11.

Issue-wise Detailed Analysis:

1. Reopening of Assessment under Section 148 for AY 2007-08:

The assessee challenged the reopening of the assessment for AY 2007-08 under Section 148. The brief facts are that the assessee, running a proprietorship concern, filed her return on 29.10.2007 declaring a total income of ?7,11,187/-. The assessment was initially completed under Section 143(3) determining the income at ?7,61,190/-. The assessment was reopened based on new information obtained during the assessment proceedings for AY 2008-09, where it was found that the loan transactions with M/s Deepak Enterprises (DE) were not genuine. The AO recorded reasons for reopening, citing that the creditor, Dipin Patel, in his statement under Section 131(1), denied giving any loan to the assessee and admitted to providing accommodation entries. The Tribunal found that the AO had new information justifying the belief that income had escaped assessment and upheld the reopening of the assessment within four years from the end of the relevant assessment year.

2. Additions under Section 68 in Various Assessment Years:

AY 2008-09:
The assessee declared an income of ?40,68,811/- and showed a loan of ?73,87,331/- from Dipin Patel, proprietor of DE. The AO, after verifying with DE, found that no such loan was shown in DE’s books and added the amount under Section 68 as unexplained cash credit. The AO relied on the statement of Dipin Patel, who admitted to providing accommodation entries.

AY 2009-10 and 2010-11:
Similar additions were made based on the statement of Dipin Patel and the non-appearance of the loan in DE’s books. The AO reproduced ledger accounts and bank statements, concluding that the loans were not genuine.

AY 2005-06 and 2007-08:
Additions were made based on the pattern observed in AY 2008-09, where the AO concluded that the loans were accommodation entries.

Assessee’s Argument:
The assessee contended that the loans were received through account payee cheques and duly recorded in the books. The assessee argued that the AO did not provide an opportunity for cross-examination of Dipin Patel and did not supply copies of the statement or bank records. The assessee maintained that the burden of proving the genuineness of the transaction was discharged by providing the identity of the creditor and the transaction details.

Tribunal’s Observations:
The Tribunal noted that the AO did not provide sufficient opportunity to the assessee to cross-examine Dipin Patel and did not supply all relevant documents. The Tribunal emphasized the importance of circumstantial evidence when direct evidence is not available. The Tribunal found that the AO’s investigation was inadequate and that the assessee should be allowed to prove her case with the help of circumstantial evidence.

Conclusion:
The Tribunal set aside the impugned orders and remitted the cases back to the AO for re-adjudication. The AO was directed to examine the ledger accounts of the assessee, obtain bank statements of the creditor, and supply all incriminating materials to the assessee for explanation. The assessee was given the liberty to submit any additional evidence or explanation in support of her defense.

Final Order:
All appeals of the assessee were allowed for statistical purposes, and the cases were remitted back to the AO for fresh adjudication with specific directions to ensure a fair opportunity for the assessee to present her case.

← Previous Next →