2020 (6) TMI 45 - AT - Income Tax

Addition u/s 68 - source of the cash deposited were amount received out of the unsecured loan taken in the preceding year - HELD THAT - Issue being of double additions and in some case proper opportunity of being heard have not been provided during the course of assessment and appellate proceedings, we in the interest of justice and fair to both the parties are of the considered view that all the issues raised in these appeals for AY 2007-08 and 2008-09 by the assessee needs to be restored to the file of A.O for denovo adjudication. A.O is directed to accept all the details and material evidence brought on record by the assessee in support of his contention that double additions should not have been made, telescoping benefit of cash deposits out of the funds received from cash creditors should be provided and proper opportunity of being heard should also to be given to the assessee to produce the cash creditors if needed by the A.O so as to prove the genuineness and creditworthiness of the cash creditors. Ld. A.O is also directed to examine the genuineness of loan given to M/s Roshanlal Deshraj Party and if satisfied with the transactions then necessary relief, if any, available to assessee may be given as per the provisions of Income Tax Act.

Issues Involved:
1. Addition of unsecured loans under Section 68 of the Income Tax Act.
2. Addition of unexplained cash deposits.
3. Double addition claims.
4. Denial of telescoping benefit.
5. Insufficient opportunity for the assessee to be heard.

Issue-wise Detailed Analysis:

1. Addition of Unsecured Loans under Section 68:
The assessee, engaged in the business of trading poppy straw, did not file returns for the assessment years 2007-08 and 2008-09. Upon discovering significant cash deposits in the assessee's bank account, the cases were reopened. During the assessment for 2007-08, the Assessing Officer (A.O.) found that the assessee had taken unsecured loans amounting to ?6,19,49,750/- from 192 persons but failed to prove the identity, genuineness, and creditworthiness of these cash creditors. Consequently, the A.O. added the amount under Section 68 of the Act. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this addition, noting the assessee's failure to produce the creditors for examination.

2. Addition of Unexplained Cash Deposits:
For the assessment year 2007-08, the A.O. observed cash deposits of ?3,21,81,267/- in the assessee's bank account, which the assessee claimed were from various parties against advances given. The A.O. was not satisfied with the explanations and added the amount as unexplained cash deposits. Similarly, for 2008-09, the A.O. added ?4,74,95,921/- as unexplained cash deposits, rejecting the assessee's claim that these were sourced from unsecured loans taken in the preceding year.

3. Double Addition Claims:
The assessee contended that the additions for unexplained cash deposits were a double addition since the source of cash deposits was from the unsecured loans already added under Section 68. The Tribunal noted that the assessee had filed confirmations and some creditors were produced for statements, yet these were overlooked by the lower authorities.

4. Denial of Telescoping Benefit:
The assessee argued that the A.O. did not allow the telescoping benefit for the cash availability, which would have prevented double taxation. The Tribunal observed that the A.O. did not consider the availability of cash withdrawals from the bank and did not allow the benefit of telescoping.

5. Insufficient Opportunity for the Assessee to be Heard:
The assessee claimed insufficient opportunity to present evidence and produce creditors for examination. The Tribunal found that the assessee was not provided reasonable opportunity of being heard, and the lower authorities did not make further inquiries or consider the confirmations and evidence provided.

Tribunal's Decision:
The Tribunal, considering the submissions and the issues of double additions and lack of proper opportunity, decided to restore all issues to the A.O. for a fresh adjudication. The A.O. was directed to accept all details and material evidence from the assessee, provide the telescoping benefit for cash deposits, and ensure a proper opportunity of being heard. The A.O. was also instructed to examine the genuineness of loans given to M/s Roshanlal Deshraj & Party and provide necessary relief if satisfied with the transactions.

Conclusion:
The appeals for the assessment years 2007-08 and 2008-09 were allowed for statistical purposes, with the Tribunal directing the A.O. to re-examine the issues and provide a fair opportunity to the assessee. The order was pronounced on 22.05.2020.

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