2018 (8) TMI 752 - AT - Income Tax

Additions u/s 68 - introduction of amount to capital - unexplained cash credit - Held that - the assessee had duly submitted all the relevant documents with supporting evidences before the ld AO in the remand proceedings - ld AO was incorrect in stating that the assessee had not cooperated in the remand proceedings by furnishing the requisite details and evidences - Additions to be deleted - Decided in favor of assessee. Addition towards secured loans and unsecured loans received by the assessee as unexplained cash credit - Held that - the assessee had duly submitted all the relevant documents with supporting evidences before the ld AO in the remand proceedings - d AO was incorrect in stating that the assessee had not cooperated in the remand proceedings by furnishing the requisite details and evidences. Hence there is no case made out by the revenue for disbelieving the loan taken from bank and PNB Housing Finance Ltd. Regarding unsecured loans - Held that - Merely because the loan creditors had shown lesser income in their income tax returns , that does not automatically mean that the concerned loan creditors did not have sufficient sources to advance loan to the assessee. The loan advanced to the assessee is duly reflected in their balance sheets. We find that the assessee had duly submitted all the relevant documents with supporting evidences before the ld AO in the remand proceedings - Additions directed to be deleted. Decided in favor of assessee.

Summary

Issues Involved:
1. Addition towards introduction to capital as unexplained cash credit.
2. Addition towards secured loans as unexplained cash credit.
3. Addition towards unsecured loans as unexplained cash credit.
4. Violation of principles of natural justice by the CIT(A).

Issue-wise Detailed Analysis:

1. Addition towards introduction to capital as unexplained cash credit:
The first issue was whether the CIT(A) was justified in upholding the addition of ?38,77,390 towards the introduction to capital as unexplained cash credit. The assessee, an individual engaged in the business of running a restaurant and sale of liquor, filed a return declaring total income initially at ?3,02,043 and later revised to ?3,14,518. The assessee's capital account in M/s Sona Restaurant & Hotel showed ?23,14,362 and bank loans payable at ?3,63,028 as of 31.03.2010. The assessee started another proprietary business, M/s Sona Kuthi, and showed an opening capital of ?38,77,390 as of 23.04.2010, which included ?26,77,390 from the previous business and gifts of ?6,00,000 each from his father and brother. The AO treated the sum as unexplained cash credit under Section 68 of the Income Tax Act, 1961, as no satisfactory explanation was provided. The assessee submitted documents proving the availability of funds and the genuineness of the gifts, which were not considered by the AO. The Tribunal found that ?23,14,362 was indeed available from the previous business, and the gifts were genuine, directing the AO to delete the addition.

2. Addition towards secured loans as unexplained cash credit:
The second issue was whether the CIT(A) was justified in upholding the addition of ?25,10,682 towards secured loans as unexplained cash credit. The assessee had reflected secured loans from State Bank of India and PNB Housing Finance Ltd in the balance sheet of M/s Sona Kuthi. The AO added the same as unexplained cash credit due to the absence of supporting documents. The assessee provided loan sanction letters, account statements, and a certificate from a Chartered Accountant correcting a typographical error in the balance sheet. The Tribunal found that the loans were genuine and supported by evidence, directing the AO to delete the addition.

3. Addition towards unsecured loans as unexplained cash credit:
The third issue was whether the CIT(A) was justified in upholding the addition of ?15,40,000 towards unsecured loans as unexplained cash credit. The assessee provided names, addresses, PAN, balance sheets, loan confirmations, and income tax return details of the loan creditors, who were family members. The AO doubted their creditworthiness despite the loans being reflected in their balance sheets. The Tribunal found that the loans were genuine and supported by evidence, directing the AO to delete the addition.

4. Violation of principles of natural justice by the CIT(A):
The fourth issue was the alleged violation of principles of natural justice by the CIT(A) for not considering the various submissions of the assessee. This issue was addressed while adjudicating the respective grounds, making the adjudication of this ground infructuous.

Conclusion:
The appeal of the assessee was allowed, with the Tribunal directing the deletion of additions made towards the introduction to capital, secured loans, and unsecured loans as unexplained cash credits. The principles of natural justice were found to be upheld in the process.