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2021 (1) TMI 29 - AT - Income TaxAddition u/s.68 - loans received from certain parties - CIT-A deleted the addition admitting additional evidence - HELD THAT - Assessee produced copies of affidavit of Mr. Vijay Narendra Kothari who had retracted his statement made u/s.132(4) of the Act and also denied having given any accommodation entry. The said party had categorically stated that the statement u/s.132(4) of the Act was given out of mental pressure and was given in abnormal circumstances. It was also submitted by Mr. Vijay Narendra Kothari in the said affidavit that he is a proprietor of Kothari Impex and Director of Khushi Gems Pvt. Ltd. CIT(A) duly appreciated the aforesaid transactions and factual submissions made by the assessee together with all the supporting evidences and deleted the addition made u/s.68 of the Act. The ld. CIT(A) also with regard to admission of additional evidences had dedicated an exclusive paragraph in para 11.1 in his appellate order stating that the assessee had infact submitted basic details of confirmations before the ld. AO which was not found satisfactory by the ld. AO as the assessee had not submitted the copy of PAN and balance sheets of the concerned loan creditors before the ld. AO. The said deficiencies were set right by the assessee by filing additional evidences before the ld. CIT(A). Hence, the said additional evidences need to be admitted and had to be examined as to its evidentiary value. None of the aforesaid factual observations recorded by the ld. CIT(A) had been controverted by the ld. DR before us with cogent evidences. We find that the ld. DR reiterated the contentions made by the ld. AO in his assessment order. We find after that, much water has flown in the instant case by way of additional evidences and by way of two remand reports from the ld. AO etc. - Decided against revenue.
Issues Involved:
1. Justification of deletion of addition made under Section 68 of the Income Tax Act, 1961. 2. Admission of additional evidences by the Commissioner of Income Tax (Appeals). Issue-wise Detailed Analysis: 1. Justification of Deletion of Addition Made Under Section 68: The primary issue in this appeal was whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in deleting the addition made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961, concerning loans received by the assessee from certain parties. The AO had treated these loans as unexplained cash credits due to the inability of the assessee to produce the loan creditors for verification and the lack of satisfactory evidence regarding their identity and creditworthiness. During the assessment, the AO issued notices under Section 133(6) to three parties from whom the assessee had borrowed unsecured loans. Notices to two parties were returned with the remark "left," and the third party did not respond. The AO then issued a show-cause notice to the assessee, asking her to establish the identity and creditworthiness of the loan creditors. The assessee's representative submitted written submissions but could not produce the loan creditors. Consequently, the AO treated the loans as unexplained cash credits and made additions under Section 68. The assessee appealed to the CIT(A), submitting confirmations from the loan creditors, their bank statements, balance sheets, and returns of income. The CIT(A) sought a remand report from the AO, who reiterated his stance that the loan creditors were not creditworthy and had admitted during a search operation that they were involved in providing accommodation entries. However, the assessee submitted that the loans were genuine, had been repaid through banking channels, and interest on these loans had been allowed as a deduction by the AO. The CIT(A) examined the evidences and concluded that the assessee had proved the identity, creditworthiness, and genuineness of the loan transactions. The CIT(A) noted that the AO had not provided any corroborative evidence to support the claim that the loans were accommodation entries. The CIT(A) also observed that the loans had been repaid through banking channels, which further supported the genuineness of the transactions. Therefore, the CIT(A) deleted the addition made under Section 68. 2. Admission of Additional Evidences by the Commissioner of Income Tax (Appeals): The revenue raised an additional ground, contending that the CIT(A) erred in admitting additional evidences that were not produced before the AO during the assessment proceedings. The CIT(A) had admitted these additional evidences, including PAN cards, balance sheets, and bank statements of the loan creditors, under Rule 46A of the Income Tax Rules. The CIT(A) justified the admission of additional evidences by stating that the assessee had submitted basic details during the assessment, which were not found satisfactory by the AO. The deficiencies were rectified by filing additional evidences before the CIT(A). The CIT(A) also noted that the AO had submitted two remand reports, and no adverse inference was drawn on the evidences submitted by the assessee. The Tribunal upheld the CIT(A)'s decision to admit the additional evidences, noting that the CIT(A) had provided a detailed explanation for admitting these evidences. The Tribunal found no merit in the revenue's additional ground and dismissed it. Conclusion: The Tribunal concluded that the assessee had provided sufficient documentary evidence to prove the identity, creditworthiness, and genuineness of the loan transactions. The Tribunal also upheld the CIT(A)'s decision to admit additional evidences, finding no basis for the revenue's contention. Consequently, the appeal filed by the revenue was dismissed.
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