2021 (5) TMI 654 - AT - Income Tax

Addition made u/s 68 - creditworthiness of loan creditors - HELD THAT - Assessee failed to convince both the lower authorities with regard to the genuineness and creditworthiness of the creditors. Before us also it was submitted that the above stated amount of ₹ 2,85,000/- was received from Shri Arun Kumar Tiwari. Loan confirmation letter and bank statement have been filed. In the bank statement of Shri Arun Kumar Tiwari equal amount of cash was deposited a day before the issue of cheque to the assessee. No evidence to show the source of cash available with Shri Arun Kumar Tiwari and his financial strength has been filed. Submissions made by the Counsel for the assessee before us are not sufficient to explain the genuineness and creditworthiness of the transaction. We thus are of the considered view that assessee has miserably failed to succeed in the test laid down in the provisions of Section 68 of the Act and thus could not explain the source of credit of cheque of ₹ 1,65,000/- and creditworthiness and genuineness of amount received from Shri Arun Kumar Tiwari. We thus find no reason to interfere in the finding of Ld. CIT(A) and thus confirm the addition. Addition u/s 69A - unaccounted business receipt - no evidence of nexus between the cash withdrawals and redeposit in the bank account - HELD THAT - We find that except certain withdrawals and deposits in round figures no other entries of day to day cash income/expenditure are appearing. It is not clear that the cash flow statement is only for the individual cash transactions or all the transactions carried out by the assessee during the year. Assessee has also failed to explain various entries appearing in the bank statement specially with regard to the amount withdrawn by Shri Surendra Saha and Shri Mukesh Sahu during the financial year 2009-10 which has been claimed as source of cash as opening balance We find that since the beginning of the assessment proceedings till now the explanation and submission made by the assessee lacks clarity and it is hard to reach a conclusion about the source of cash deposited. However we find that various submissions were filed by the assessee to explain the source but revenue authorities could not go deeper to bring the truth on record. Further Ld. A.O as well as Ld. CIT(A) have observed that it cannot not be denied that the alleged amount is an unaccounted business receipts. In our considered view and in the given facts and circumstances of the case and being fair to both the parties, we treat the alleged cash deposit as unaccounted business receipt and apply net profit rate of 8% on this amount and the same is added to the income of the assessee in place of ₹ 35,00,000/- for unexplained cash deposit. We thus delete the addition of ₹ 32,20,000/- and confirm the addition of ₹ 2,80,000/- and partly allow ground No. 3, 4 6 raised on merits.

Summary

Issues Involved:
1. Validity of assessment proceedings under Section 143(3) read with Section 147 of the Income Tax Act.
2. Non-provision of the reasons recorded for initiating assessment under Section 147.
3. Addition of ?4,50,000 for Assessment Year 2010-11 and ?35,00,000 for Assessment Year 2011-12 as unexplained income.
4. Non-admission of additional evidence under Rule 46A.
5. Application of Sections 68 and 69A of the Income Tax Act.

Detailed Analysis:

1. Validity of Assessment Proceedings:
The assessee challenged the validity of assessment proceedings under Section 143(3) read with Section 147 of the Income Tax Act for both assessment years. However, these legal grounds were not pressed by the assessee's counsel during the tribunal proceedings. Consequently, these grounds were dismissed as not pressed.

2. Non-Provision of Reasons for Assessment:
The assessee contended that the reasons recorded for initiating assessment under Section 147 were not provided. This ground was also not pursued further by the assessee's counsel and was dismissed.

3. Addition of ?4,50,000 for AY 2010-11:
The addition was made based on three amounts credited in the bank account:
- ?1,35,000 on 24.04.2009
- ?1,50,000 on 05.05.2009
- ?1,65,000 on 27.04.2009

The assessee claimed these amounts were loans from Shri Arun Kumar Tiwari, supported by a loan confirmation letter and bank statement. However, the tribunal found that equal amounts of cash were deposited in Shri Arun Kumar Tiwari's account a day before issuing the cheques, and no evidence was provided to explain the source of this cash. The tribunal concluded that the assessee failed to prove the genuineness and creditworthiness of the transactions, thus confirming the addition of ?4,50,000.

4. Addition of ?35,00,000 for AY 2011-12:
The assessee argued that the cash balance of ?20,52,304 as on 31.03.2010 was available for the subsequent year. The Assessing Officer (A.O) accepted the source for ?30,00,000 but doubted the remaining ?5,00,000. The tribunal noted that the assessee failed to provide a clear explanation for the cash deposits and withdrawals. However, considering the facts, the tribunal treated the cash deposit of ?35,00,000 as unaccounted business receipts and applied a net profit rate of 8%, resulting in an addition of ?2,80,000. The tribunal thus deleted the addition of ?32,20,000 and confirmed ?2,80,000.

5. Non-Admission of Additional Evidence:
The assessee claimed that additional evidence under Rule 46A was not admitted by the Commissioner of Income Tax (Appeals). This ground was also not pursued further by the assessee's counsel and was dismissed.

6. Application of Sections 68 and 69A:
For AY 2010-11, the tribunal upheld the addition under Section 68, as the assessee failed to explain the source of credits adequately. For AY 2011-12, the tribunal partially allowed the appeal by treating the cash deposits as unaccounted business receipts under Section 69A and applying an 8% net profit rate.

Conclusion:
- The appeal for Assessment Year 2010-11 was dismissed.
- The appeal for Assessment Year 2011-12 was partly allowed, with an addition of ?2,80,000 confirmed and ?32,20,000 deleted.

The order was pronounced on 30.04.2021.