2018 (1) TMI 77 - AT - Income Tax

Re-opening of assessment u/s 147 - addition u/s 68 - Held that - Re-opening of assessment under section 147 of the Income Tax Act, 1961, and (b) the ld.CIT(A) has erred in confirming addition of ₹ 7,21,000/- which was added by the AO with the aid of section 68 - Held that - We are satisfied that the AO was possessing sufficient information for harping a belief that taxable income has escaped assessment, and therefore, he has rightly reopened the assessment. It has been observed that the lenders are silent to status of loan as well as rate of interest. Lenders have bank account and they have given loan in cash. It is pertinent to observe that these are not transactions in day-to-day business of assessee. This is to be appreciated with back ground of the assessee, who is a blind person; who has some relationship with lenders. This way loans were taken by him in personal relation capacity. Whenever any small amounts are being taken from near-and-dear one, then interest and other terms and conditions are not negotiated. It is only on the basis of mutual faith and requirement of particular person. They have confirmed advancement of loans. They appeared before the AO in support of such advancement; they have submitted details of land holding and others source of earnings. To my mind, the ld.CIT(A) has erred in rejecting the explanation of the assessee. We are satisfied with the kind of evidence produced by the assessee that has discharged his onus as contemplated under section 68 of the Act. Similarly, the assessee is in service getting salary income. He used to manufacture cane furniture i.e. weaving/interlacing of cane in chairs etc. Savings at his end to the extent of ₹ 2.60,000/- cannot be doubted. - Decided partly in favour of assessee.

Summary

Issues:
1. Reopening of assessment under section 147 of the Income Tax Act, 1961
2. Addition of ?7,21,000 under section 68 of the Act

Reopening of Assessment:
The appellant contested the re-opening of assessment under section 147 of the Income Tax Act, 1961. The AO initiated the re-assessment based on a complaint by a third party alleging that the appellant had given a loan which was not disclosed in the tax return for the relevant assessment year. The AO believed that taxable income had escaped assessment. The Tribunal upheld the AO's decision, stating that sufficient information existed to support the belief that income had escaped assessment. The Tribunal found no merit in the appellant's argument against the re-opening of assessment.

Addition under Section 68:
The second issue revolved around the addition of ?7,21,000 under section 68 of the Income Tax Act. The appellant claimed that a part of the amount was sourced from loans obtained from six individuals and the rest from past savings. The AO had added the amount under section 69 due to lack of satisfactory explanation. The ld.CIT(A) upheld the addition after considering various factors, including the nature of evidence presented. However, the Tribunal disagreed with the ld.CIT(A)'s decision. The Tribunal noted that the lenders had confirmed the loans, appeared before the AO, and provided details of their financial status. The Tribunal found that the appellant had discharged the onus under section 68 by presenting sufficient evidence. Additionally, considering the appellant's employment and savings, the Tribunal allowed the appellant's appeal partially, deleting the addition of ?7,21,000 made by the AO and confirmed by the ld.CIT(A).

In conclusion, the Tribunal partially allowed the appellant's appeal, ruling in favor of the appellant regarding the addition under section 68 of the Income Tax Act. The Tribunal found that the appellant had provided satisfactory evidence to support the source of the disputed amount, thereby discharging the burden of proof required under the law.