2018 (4) TMI 510 - AT - Income Tax

Unproved cash credits u/s 68 - no details of the loan creditors and bank statements, particularly before the date of extending loan to the assessee - Held that - In this case, the assessee has not proved the identity, creditworthiness of the creditors and even genuineness of the transactions. In our opinion, the assessee failed to discharge burden cast upon him by filing necessary evidence before the assessing officer. Therefore, under these facts and circumstances of the case, in view of our discussion above, the A.O. rightly disallowed amounts borrowed from the loan creditors u/s 68 of the Act and the same is added in the hands of the assessee as an income from other sources. In view of the above, we reverse the order passed by the Ld. CIT(A) and this ground of appeal raised by the revenue is allowed.

Summary

Issues:
1. Addition of unproved cash credits under section 68 of the Income Tax Act.
2. Consideration of fresh evidence without a remand report under Rule 46A of the IT Rules.

Issue 1: Addition of unproved cash credits under section 68 of the Income Tax Act:
The case involved the appellant challenging the order of the CIT(A) regarding the addition of ?1,16,50,000 as unproved cash credits under section 68 of the Income Tax Act for the assessment year 2012-13. The appellant contended that the assessee failed to prove the cash credits as genuine and cooperated inadequately during the assessment proceedings. The A.O. found that the alleged unsecured loans were sourced from unaccounted funds of the assessee company and disallowed them under section 68, bringing them to tax as income from other sources. On appeal, the CIT(A) deleted the addition based on returns filed by the creditors subsequent to the assessment. The Tribunal reversed the CIT(A)'s decision, stating that the assessee failed to prove the identity, creditworthiness, and genuineness of the transactions of the creditors. The Tribunal held that the CIT(A) erred in accepting the explanation without a remand report and upheld the addition under section 68, considering the burden of proof not discharged by the assessee.

Issue 2: Consideration of fresh evidence without a remand report under Rule 46A of the IT Rules:
The Tribunal highlighted the violation of Rule 46A of the IT Rules by the CIT(A) in allowing fresh evidence without a remand report. The A.O. had pointed out discrepancies regarding cash deposits in the accounts of the loan creditors before advancing amounts to the assessee, which the CIT(A) did not address. The Tribunal emphasized that the CIT(A) should have called for a remand report before considering the new evidence. The Tribunal concluded that the CIT(A) improperly accepted the explanation provided by the assessee and deleted the addition without proper verification. This violation of Rule 46A led the Tribunal to reverse the CIT(A)'s decision and uphold the addition of the unproved cash credits under section 68 of the Income Tax Act.

In summary, the Tribunal allowed the revenue's appeal, reinstating the addition of unproved cash credits under section 68 of the Income Tax Act, as the assessee failed to prove the genuineness of the transactions and the CIT(A) erred in considering fresh evidence without a remand report, violating Rule 46A of the IT Rules.