2021 (3) TMI 426 - AT - Income Tax

Addition u/s 68 - unexplained cash credit - HELD THAT - We hold that the authorities below have rightly invoked provisions of Section 68 of the 1961 Act and held that cash deposits in the assessee s ICICI Bank accounts to the tune of ₹ 3,22,68,500/- was the money of the assessee which was deposited by assessee in his bank accounts, during the year under consideration, and these two creditors namely Mr. Anuj Sonkar and Mr. Siddharth Agarwal in whose name the assessee has allegedly shown to have credited these amounts are bogus creditors. We uphold the orders of authorities below and hold that Section 68 was rightly invoked in the instant case. Allowability of set off of loss of current year against income assessed to tax by AO by invoking provisions of Section 68 - AO had denied the set off of current year loss owing to provision of Section 115BBE - HELD THAT - CIT(A) has not adjudicated on the applicability of Section 115BBE as was in statute at that time, while adjudicating appeal of the assessee. The decision of ld. CIT(A) is reproduced in preceding para s of this order . The assessee being aggrieved has raised ground number 4 in memo of appeal filed with tribunal agitating that the authorities are silent as to set off of current year loss against income charged to tax u/s 68 of the 1961 Act. Thus, in the fitness of things, interest of justice and fair play to both the parties, we are restoring this issue of invocation of Section 115BBE of the 1961 Act by AO for denying set off of current year loss against income assessed u/s 68 of the 1961 Act to the file of learned CIT(A) for fresh adjudication and to pass speaking and reasoned order as to applicability of Section 115BBE read with Section 68 on the facts and circumstances of the assessee s case before denying set off of current year loss against income charged to tax u/s 68 of the 1961 Act, in set aside remand proceedings.

Issues Involved:

1. Validity of the assessment order under Section 143(3).
2. Opportunity to the assessee before passing the order.
3. Consideration of the loss claimed by the assessee from trading activities.
4. Set-off of declared loss against the addition under Section 68.
5. Addition under Section 68 and its correctness.
6. Charge of penal interest under Sections 234A, 234B, and 234C.

Detailed Analysis:

1. Validity of the assessment order under Section 143(3):
The assessee challenged the assessment order dated 23.12.2017, stating it was "bad both on the facts and in law." The tribunal noted that the assessee failed to provide complete details during the assessment proceedings. The AO observed discrepancies in the balance sheet and ledger accounts, particularly regarding sundry creditors. The tribunal upheld the AO's assessment, noting that the assessee did not discharge the primary onus under Section 68 of the Income-tax Act, 1961.

2. Opportunity to the assessee before passing the order:
The assessee claimed that both lower authorities failed to provide an opportunity before passing their orders. The tribunal noted that the assessee did not appear before the CIT(A) despite several notices. The CIT(A) issued six notices, but the assessee remained absent. The tribunal concluded that the assessee had ample opportunity but did not utilize it, thus dismissing this ground.

3. Consideration of the loss claimed by the assessee from trading activities:
The assessee claimed a loss of ?2,58,66,234 from trading activities. The AO observed that the assessee did not provide complete details and confirmations for all creditors. The tribunal noted that the AO accepted the creditors where payments were received via banking channels but found discrepancies with creditors who allegedly deposited cash. The tribunal upheld the AO's decision, as the assessee failed to substantiate the claimed losses.

4. Set-off of declared loss against the addition under Section 68:
The assessee argued that the declared loss should be set off against the addition under Section 68. The tribunal noted that the AO invoked Section 115BBE, which disallows any deduction in respect of any expenditure or allowance against income referred to in Section 68. The tribunal remanded this issue to the CIT(A) for fresh adjudication, directing a reasoned order on the applicability of Section 115BBE.

5. Addition under Section 68 and its correctness:
The AO made additions of ?3,22,68,500 under Section 68, citing bogus creditors. The tribunal noted that the assessee did not provide sufficient evidence to prove the identity, creditworthiness, and genuineness of the transactions with the creditors. The tribunal upheld the AO's addition, referencing the Supreme Court's decision in Sumati Dayal v. CIT and CIT v. Durga Prasad More, which emphasize the need for satisfactory explanation of cash credits.

6. Charge of penal interest under Sections 234A, 234B, and 234C:
The assessee contended that the charge of penal interest was unjustified. However, the tribunal did not specifically address this issue in detail, as the primary focus was on the validity of the additions under Section 68 and the applicability of Section 115BBE.

Conclusion:
The tribunal upheld the AO's invocation of Section 68, confirming the addition of ?3,22,68,500 as unexplained cash credit. The issue of set-off of current year loss against income assessed under Section 68 was remanded to the CIT(A) for fresh adjudication. The appeal was partly allowed for statistical purposes.

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