2017 (8) TMI 321 - AT - Income Tax

Unexplained unsecured loans - identity, creditworthiness and genuineness of the loan - transactions through the mediator - amount was re-paid - Held that - When once the primary documents were already supplied to the revenue by the assessee then the revenue could have served the said mediator Mr. Jalaj Batra and by not doing so, the assessee cannot be punished for not producing the said mediator and even otherwise without Mr. Jalaj Batra being in picture, the assessee has already discharged the primary onus cast on him by furnishing various details like PAN, TAN, addresses, master data from the website of Ministry of Corporate Affairs, details of directors, bank statement of the assessee indicating transaction through banking channel. Thus we hold that the additions made by AO and sustained by CIT(A) on the ground that summons were returned back and the parties were not produced are bad in law, hence the same are ordered to be deleted. - Decided in favour of assessee. Additions on account of unexplained bank deposits - Held that - As submitted that the bank account belonged to M/s. Gift & Novelties Impex, Proprietorship concern of the assessee and in this respect, the statement was also produced before the A.O. After hearing the parties and on perusal of the documents, the statement in respect of withdrawal of 5 lacs from Indian Overseas Bank is reflected and as per the submissions of the assessee. The remaining amount of Rs,1,00,000/- was alleged to be deposited out of cash-in-hand lying with the assessee. However, no documentary evidence in support of availability of 1 lakh was brought on record before the lower authorities nor before us. Therefore, we hold that the AO should have restricted the additions only to the amount which the assessee could not explain the source. Therefore in our view, the additions made by AO and confirmed by CIT(A) is restricted to ₹ 1 lakh only in place of ₹ 6 lakhs.

Issues Involved:
1. Determination of total income.
2. Addition of unexplained unsecured loans.
3. Addition of unexplained bank deposits.
4. Initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Determination of Total Income:
The learned Assessing Officer (AO) determined the total income of the appellant at ?1,33,526,010/- against the returned income of ?(-) 53,897,425/-. The Commissioner of Income Tax (Appeals) [CIT(A)] confirmed this determination. This ground was considered general and dismissed without further analysis.

2. Addition of Unexplained Unsecured Loans:
The AO added ?1,87,000,000/- to the appellant's income under Section 68 of the Income Tax Act, citing unexplained unsecured loans. The CIT(A) upheld this addition. The appellant, engaged in various businesses, provided details of loan creditors, including addresses and PAN numbers. Despite this, the AO added the amounts, stating that the identity, creditworthiness, and genuineness of the loans could not be verified due to non-attendance of the parties.

The appellant argued that they had submitted all necessary details, including confirmations, bank statements, and other relevant documents to prove the genuineness of the transactions. The AO did not bring any material to disprove these details. The Tribunal noted that the appellant had discharged the primary onus under Section 68 by providing sufficient evidence. The addition was deemed unsustainable merely because the parties did not appear before the AO. Reliance was placed on the Bombay High Court ruling in Commissioner of Income-Tax, Bombay City - 11 Vs. U.M. Shah, Proprietor, Shrenik Trading Co., which held that the assessee should not be blamed if the parties do not appear in response to the summons.

3. Addition of Unexplained Bank Deposits:
The AO added ?600,000/- to the appellant's income, citing unexplained bank deposits. The CIT(A) confirmed this addition. The appellant explained that ?500,000/- of the deposit was from a withdrawal made on the same day from another bank account, and the remaining ?100,000/- was from cash-in-hand. The Tribunal accepted the explanation for ?500,000/- but upheld the addition of ?100,000/- due to a lack of documentary evidence for the cash-in-hand.

4. Initiation of Penalty Proceedings under Section 271(1)(c):
The AO initiated penalty proceedings under Section 271(1)(c) for furnishing inaccurate particulars of income and concealment of income. The appellant did not press this ground as the penalty had not yet been imposed. Consequently, this ground was dismissed as not pressed.

Conclusion:
The appeal was allowed in part. The addition of ?1,87,000,000/- on account of unexplained unsecured loans was deleted, and the addition of ?600,000/- on account of unexplained bank deposits was restricted to ?100,000/-. The initiation of penalty proceedings was dismissed as not pressed. The judgment emphasized the importance of the AO bringing material evidence to disprove the details submitted by the assessee and upheld the principle that the assessee should not be penalized for non-appearance of parties in response to summons.

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