2020 (1) TMI 49 - AT - Income Tax

Unexplained cash credit u/s 68 - assessee failed to substantiate the credit worthiness of M/s Ram Alloy Casting Pvt. Ltd., who has advanced an amount of ₹ 27 lacs to the assessee - HELD THAT - It is the allegation of the AO that despite summons issued, the said party did not appear and the reply given by the said party in response to notice u/s 133(6) raises certain doubts. CIT(A) upheld the action of the AO. It is the submission of the ld. Counsel for the assessee that given an opportunity, the assessee is in a position to produce the said party along with necessary documents to substantiate their credit worthiness. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the AO with a direction to give one final opportunity to the assessee to substantiate its case by producing the said party before him. The AO shall decide the issue as per fact and law. AO, while deciding the issue, shall keep in mind the various decisions relied on by the DR. We hold and direct accordingly. The first ground raised by the assessee is accordingly allowed for statistical purposes.

Summary

Issues Involved:
1. Addition made under section 68 of the IT Act for unexplained cash credit.
2. Confirmation of addition made on account of purchases of paddy husk & wheat straw.

Analysis:

Issue 1: Addition made under section 68 of the IT Act for unexplained cash credit:
The appeal was filed against the order of the CIT(A) confirming the addition of ?27 lakhs to the total income of the assessee under section 68 of the IT Act. The AO noted that the lender's credit worthiness was not satisfactory, and the transaction was doubtful as the lender's income was reported as nil. Despite efforts to confirm the loan, the lender did not comply, raising suspicions about the genuineness of the transaction. The CIT(A) upheld the addition, leading to the appeal before the Tribunal. The Tribunal considered the arguments from both sides, reviewed the orders of the AO and CIT(A), and the submissions made. Given the circumstances and in the interest of justice, the Tribunal directed the AO to provide one final opportunity to the assessee to substantiate the credit worthiness of the lender by producing necessary documents and the lender before him. The Tribunal emphasized that the AO should consider relevant legal precedents while deciding the issue, and accordingly allowed the first ground raised by the assessee for statistical purposes.

Issue 2: Confirmation of addition made on account of purchases of paddy husk & wheat straw:
The second ground raised by the assessee regarding the addition made by the AO on account of purchases of paddy husk & wheat straw was not pressed due to the smallness of the amount involved. Consequently, this ground was dismissed as not pressed. The appeal was partly allowed for statistical purposes, with the decision pronounced in the open court on 31.12.2019.

This detailed analysis highlights the key arguments, findings, and directions provided by the Tribunal regarding the issues raised in the appeal, focusing on the addition under section 68 of the IT Act for unexplained cash credit and the related confirmation process involving the lender's credit worthiness.