2018 (12) TMI 1135 - AT - Income Tax

Addition u/s 68 - genuineness of loan - Held that - When the assessee has produced the director before the learned assessing officer but after the assessment order has been passed one day prior to the appearance by the director of the lender company, in the interest of justice, the matter is restored back to the file of the learned assessing officer with a direction to the assessee to produce the director of the lender company before the assessing officer along with any other detail which assessee would like to substantiate the transaction. AO is further directed to examine the details furnished by the assessee as well as the director of the lender company and decide the issue afresh. We further direct the learned assessing officer to not to get influenced by the observation of the learned CIT-A about the nil income of the lender because there may be any other source available with the company to advance loan to the assessee. He may examine the issue for ascertaining the creditworthiness of the lender and genuineness of the transaction. In the result ground number 1 of the appeal of the assessee is allowed with above direction.

Summary

Issues:
Appeal against CIT(A) order for Assessment Year 2014-15 - Opportunity of being heard - Addition of ?26,00,000 under section 68 of the Income Tax Act - Rejection of additional evidences under rule 46A - Genuineness of transaction and creditworthiness of the lender - Restoration of the matter to the Assessing Officer for further examination.

Analysis:
The appeal was filed by the assessee against the order of the ld CIT(A) for the Assessment Year 2014-15. The assessee raised various grounds of appeal, including the contention that sufficient opportunities were not granted for being heard and the addition of ?26,00,000 was unjustified. The case involved scrutiny due to a large property investment compared to the total income. The assessing officer made the addition under section 68 of the Income Tax Act based on the loan obtained from a private limited company without adequate documentation.

The assessee appealed to the CIT(A) and submitted additional evidence under rule 46A, which was rejected on grounds of insufficient cause shown by the assessee and lack of substantiation of the transaction's genuineness and lender's creditworthiness. The CIT(A) confirmed the assessment order, leading to the appeal before the ITAT.

During the ITAT hearing, the authorized representative presented additional evidence, including the lender's PAN and income tax returns for assessment years 2014-15 and 2015-16. The departmental representative argued against the acceptance of additional evidence, emphasizing the lender's lack of a visible income source.

Upon careful consideration, the ITAT found that although the assessee had provided substantial evidence, the assessing officer's summons remained unanswered due to insufficient opportunity. The ITAT directed the matter to be restored to the assessing officer for a fresh examination, instructing the assessee to produce the lender company's director for further substantiation. The assessing officer was directed to evaluate the creditworthiness of the lender and the transaction's genuineness without being influenced by the lender's reported nil income.

The ITAT allowed ground number 1 of the appeal, leading to the decision not to adjudicate on ground number 3. The appeal was allowed for statistical purposes, emphasizing the need for a fair assessment based on complete information and proper opportunity for the assessee to be heard.