2021 (4) TMI 1122 - AT - Income Tax

Sundry creditors addition - HELD THAT - We notice herein as well that the CIT(A) has followed the very detailed discussion as already held in the preceding AYs since based on the seized material only. We thus follow judicial consistency to affirm CIT(A)'s findings in the instant second AY 2006-07 as well. Unexplained liability - HELD THAT - It emerges during the course of hearing that the impugned sum represents three alleged promissory notes; all dated 18.03.2009 in the names of Shri J.N. Chandra Reddy, J. Madhumalathi and J.N. Shanthi involving sum of ₹ 5 lakhs in former two cases and ₹ 2 lakhs in the last instance; respectively. We notice that the search in question had found and seized those original promissory notes than photocopies thereof which sufficiently indicates that the corresponding loan transactions had not been completed as the original documents in such a case is supposed to be with the creditor only. Coupled with this, Ms. Biswas fails to rebut that the learned lower authorities have added the loan amounts only whose source; going by the contents of the seized documents, ought not to be treated ass assessee's unexplained income since the same belongs to the named third parties only. We also wish to clarify here that the Revenue has failed to pinpoint any payment from assessee's side for the promissory note(s) in issue. We thus direct the Assessing Officer to delete the impugned addition. Adding an amount representing borrowals from Shri G. Shoban Babu and interest thereof - HELD THAT - As lower authorities have themselves identified source of impugned loan in other words that the sum indicates that repayment of the very sum to Shri Shoban Babu only. This repayment of principle sum does not represent diversion of assessee's alleged unexplained income in other words. We also accept Revenue's stand supporting impugned addition at the same time and direct the Assessing Officer to restrict the impugned addition only to the extent of interest payment component from the assessee's side made to Shri Shoban Babu. He shall further ensure that the assessee is granted telescoping benefit of the corresponding unaccounted receipts amount of ₹ 30 lakhs in AY 2005-06 sundry creditors addition against the unaccounted interest payment addition in the impugned assessment year 2010-11 as per law. Necessary computation shall follow. This last appeal is partly accepted in foregoing terms. Unexplained cash credits - HELD THAT - The assessee's only stand in tune with her pleadings throughout is that the impugned sum represents past savings only. Mr. Ramakrishnan fails to rebut the clinching fact that this assessee has not even filed her cash flow statement so as to explain source of the amount in issue. We thus confirm the impugned addition

Summary

Issues Involved:
- Appeals related to two taxpayers challenging additions made by lower authorities under the Income Tax Act, 1961 for various assessment years.

Analysis:

Former Assessee's Appeals - ITA 1068 to 1071/H/18:
- AY 2005-06 & 2006-07: The former assessee challenged the addition of unaccounted receipts and sundry creditors. The CIT(A) confirmed the addition of unaccounted receipts of ?30 lakhs based on seized material and the assessee's modus operandi. The appellate tribunal accepted the CIT-DR's arguments, upholding the addition. The appeal for AY 2005-06 failed.
- AY 2009-10: The former assessee contested the addition of an unexplained liability of ?12 lakhs, representing alleged promissory notes. The tribunal noted that the original promissory notes were seized, indicating incomplete loan transactions with third parties. As the Revenue failed to prove the payments from the assessee's side, the addition was directed to be deleted. The appeal for AY 2009-10 succeeded.
- AY 2010-11: The former assessee disputed the addition of borrowings and interest payments. The tribunal acknowledged the source of the loan and directed the Assessing Officer to restrict the addition to the interest payment component only. The assessee was granted telescoping benefit against previous unaccounted receipts and creditors. The appeal for AY 2010-11 was partly accepted.

Latter Assessee's Appeal - ITA 1072/H/18:
- AY 2010-11: The latter assessee challenged the addition of unexplained cash credits. The CIT(A) considered the bank deposits as unexplained credits due to lack of proof of past savings. The tribunal upheld the addition as the appellant failed to substantiate the claim. The appeal for AY 2010-11 failed.

In conclusion, former assessees' appeals for AY 2005-06 and 2006-07 were dismissed, AY 2009-10 was allowed, AY 2010-11 was partly allowed, and the latter assessee's sole appeal for AY 2010-11 was dismissed. The tribunal pronounced the order on 07/04/2021.