2022 (4) TMI 170 - AT - Income Tax

Enhancement of income made by the CIT(A) - addition of loan and advances - unsecured loan received - HELD THAT - CIT(A) enhanced income on the ground that the assessee failed to discharge its onus for proving identity and creditworthiness of this party as well as the genuineness of the transaction. The assessee has filed certain documents that goes to demonstrate that there were ongoing litigation between the parties. Therefore, looking to the facts and circumstances of the present case, we are of the considered view that this transaction needs further verification at the end of the AO. We therefore, set aside the order of Ld.CIT(A) and restore this issue to the assessing authority for decision afresh. The AO is hereby directed to carry out requisite inquiry to ascertain the true facts about the transaction and decide the issue afresh giving adequate opportunity to the assessee of representing case effectively. Thus, ground related to this transaction is allowed for statistical purposes.

Issues Involved:
1. Enhancement of income by CIT(A).
2. Legality and jurisdiction of notice under Section 251(2) and enhancement.
3. Addition under Section 68 regarding unsecured loans.
4. Consideration of submissions and principles of natural justice.
5. Direction under Section 150(1) by CIT(A).
6. Proper inquiry and verification by CIT(A).
7. Interpretation of evidence and material on record.
8. Charging of interest under Sections 234A and 234B.

Issue-wise Detailed Analysis:

1. Enhancement of Income by CIT(A):
The CIT(A) enhanced the income of the appellant by ?10,12,50,000 against the returned loss of ?2,73,530. The enhancement was made regarding unsecured loans from M/s. Hirise Hospitality Pvt. Ltd. and M/s. Mithilanchal Investment & Finance Pvt. Ltd. The CIT(A) also sustained the addition of ?87,50,000 made by the AO. The assessee contended that the loans were taken in earlier years, and the enhancement was arbitrary and unjust.

2. Legality and Jurisdiction of Notice under Section 251(2) and Enhancement:
The assessee argued that the notice under Section 251(2) of the Income Tax Act, 1961, and the enhancement made by the CIT(A) were illegal and without jurisdiction. The CIT(A) allegedly exceeded his jurisdiction by exercising revisionary powers not conferred upon him.

3. Addition under Section 68 Regarding Unsecured Loans:
The AO made an addition of ?87,00,000 out of the total loan and advances of ?9,72,50,000. The CIT(A) confirmed the addition under Section 68, stating that the appellant failed to discharge the onus of proving the identity and creditworthiness of the lenders and the genuineness of the transactions. The CIT(A) directed the AO to verify the loans received in earlier years and take necessary steps for taxation.

4. Consideration of Submissions and Principles of Natural Justice:
The assessee argued that the CIT(A) did not consider its submissions and acted against the principles of natural justice. The CIT(A) allegedly failed to conduct an inquiry despite the appellant's request, leading to an arbitrary and unjust enhancement.

5. Direction under Section 150(1) by CIT(A):
The CIT(A) issued directions under Section 150(1) to the AO to examine the case under Section 147/148 for the relevant assessment years. The CIT(A) instructed the AO to initiate proceedings if conditions under relevant sections were satisfied and to delete the addition in the current assessment year if the amount was assessed and attained finality in earlier years.

6. Proper Inquiry and Verification by CIT(A):
The CIT(A) enhanced the income related to transactions with M/s. Hirise Hospitality Pvt. Ltd. and M/s. Mithilanchal Investment & Finance Pvt. Ltd. The assessee contended that there were ongoing litigations with Hirise Hospitality Pvt. Ltd., and the CIT(A) did not conduct proper inquiries. The Tribunal directed the AO to carry out requisite inquiries to ascertain the true facts about the transaction and decide the issue afresh.

7. Interpretation of Evidence and Material on Record:
The CIT(A) noted that the appellant failed to produce sufficient evidence to prove the identity and creditworthiness of the lenders and the genuineness of the transactions. The Tribunal found no infirmity in the CIT(A)'s findings regarding the addition of ?87,50,000 but directed further verification of the transaction with Hirise Hospitality Pvt. Ltd. due to ongoing litigation.

8. Charging of Interest under Sections 234A and 234B:
The assessee argued that interest under Sections 234A and 234B was wrongly and illegally charged. The Tribunal did not specifically address this issue in the judgment.

Conclusion:
The Tribunal partly allowed the appeal for statistical purposes, directing the AO to verify the transaction with Hirise Hospitality Pvt. Ltd. and decide the issue afresh. The Tribunal affirmed the CIT(A)'s findings regarding the addition of ?87,50,000 but found the enhancement related to Hirise Hospitality Pvt. Ltd. required further verification. The Tribunal emphasized the need for adequate opportunity for the assessee to represent its case effectively.

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