2022 (4) TMI 953 - AT - Income Tax

Addition on account of unsecured loan - No documentary evidences to prove the genuineness of these loan - HELD THAT - The assessee has furnished the required detail as placed in the paper book before the ld. CIT(A) as additional evidences to prove genuineness of loan obtained from the aforesaid parties and the ld. CIT(A) vide letter dated 18.07.2016 had directed the assessing officer to furnish the remand report. The appeal of the assessee was dismissed without considering the said additional evidences on the default of the assessing officer for not submitting the remand report. In the light of above facts we are of the considered view that decision of ld. CIT(A) is not justified. Therefore, normally, any irregularity crept in the proceeding then after removing irregularity proceedings is to be initiated from that stage but by remitting the issue to the learned first appellate authority we would be multiplying the litigation, because the ld. CIT(A) would call for a remand report from the assessing officer and proceedings to be commenced on two stages, in order to avoid that situation we would deem it proper to set aside this issue to the file of the A.O for deciding afresh after taking into consideration the additional evidences filed during the course of appellate proceedings before the ld. CIT(A). It is needless to say that observation made by us will not ensure or impair the case of A.O and will not cause any prejudice to the defense explanation of the assessee. Accordingly, this ground of appeal of the assessee is allowed for statistical purposes. Addition u/s 68 - cash deposit in the bank account of the assessee maintained with the Federal Bank Ltd.- HELD THAT - We observe that ld. CIT(A) has not disproved the supporting evidences furnished by the assessee in support of his claim that aforesaid amount was withdrawn from overdraft bank account maintained with Modal Cooperative Bank ltd. before depositing the same in the bank account maintained with the Federal Bank ltd. Therefore, this ground of appeal of the assessee is allowed. Disallowance of interest - HELD THAT - AO noticed that comparatively the assessee has paid interest to the one party M/s Kiran A Lund at abnormally higher rate of 24% whereas to the order parties the rate of interest was almost of the said rate of interest. CIT(A) has dismissed the appeal of the assessee stating that no documentary evidences has been furnished by the assessee to justify the payment of interest at higher rate of 24%. Even, during the course of appellate proceedings before us the assessee has simply filed copy of acknowledgment of return of income filed by M/s Kiran A Lund without filing any documentary evidence to substantiate the genuineness of paying interest @ 24%, therefore, we don t find any infirmity in the decision of the ld. CIT(A). Accordingly, this ground of appeal of the assessee stand dismissed. Disallowance of interest of personal loan - Before the ld. CIT(A) the assessee has failed to produce any documentary evidence to prove that personal loan obtained was used for business purposes - HELD THAT - As during the course of appellate proceedings before us the assesee failed to demonstrate that the personal loan was used for the business purpose of the assessee, therefore, we don t find any need to interfere in the decision of ld. CIT(A). Accordingly, this ground of appeal of the assessee is dismissed.

Issues Involved:

1. Admission and consideration of additional evidence under Rule 46A.
2. Addition of ?91,27,000/- as unsecured loans under Section 68 of the Income Tax Act.
3. Addition of ?4,50,000/- as cash deposit under Section 68 of the Income Tax Act.
4. Disallowance of interest of ?2,69,750/- on loan paid to Mr. Kiran A Lund.
5. Disallowance of interest of ?2,00,221/- on personal loan.
6. Imposition of interest under Sections 234B and 234C of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Admission and Consideration of Additional Evidence under Rule 46A:

The appellant argued that the CIT(A)-3, Thane, erred in passing the order without considering additional evidence submitted during appellate proceedings. The evidence was remanded to the AO for verification, but the CIT(A) ignored it, contravening principles of natural justice. The Tribunal found that the CIT(A) dismissed the appeal without considering the additional evidence due to the AO's failure to submit a remand report. Consequently, the Tribunal set aside the issue to the AO for fresh consideration of the additional evidence, allowing this ground for statistical purposes.

2. Addition of ?91,27,000/- as Unsecured Loans under Section 68:

The AO added ?91,27,000/- to the total income, treating it as unsecured cash credit under Section 68 due to incomplete details from six parties. The CIT(A) upheld this addition, stating the assessee failed to establish the genuineness of the loans. The Tribunal, however, noted that the assessee provided additional evidence to the CIT(A) to prove the creditworthiness and genuineness of the loans, which the CIT(A) ignored due to the absence of a remand report. The Tribunal remitted the matter to the AO for fresh adjudication, considering the additional evidence, thus allowing this ground for statistical purposes.

3. Addition of ?4,50,000/- as Cash Deposit under Section 68:

The AO added ?4,50,000/- as cash deposit in the assessee's bank account, suspecting it as an unsecured loan. The CIT(A) dismissed the appeal, but the Tribunal found that the assessee had withdrawn ?5,50,000/- from an overdraft account before depositing it in another bank account. The Tribunal concluded that the CIT(A) did not disprove the supporting evidence provided by the assessee, thus allowing this ground of appeal.

4. Disallowance of Interest of ?2,69,750/- on Loan Paid to Mr. Kiran A Lund:

The AO disallowed ?2,69,750/- of interest paid to Mr. Kiran A Lund, finding the interest rate of 24% excessively high compared to other creditors. The CIT(A) upheld the disallowance due to the lack of documentary evidence justifying the higher rate. The Tribunal agreed with the CIT(A), noting that the assessee failed to substantiate the genuineness of the higher interest rate with evidence, thereby dismissing this ground of appeal.

5. Disallowance of Interest of ?2,00,221/- on Personal Loan:

The AO disallowed ?2,00,221/- of interest on a personal loan, stating the assessee could not prove its use for business purposes. The CIT(A) upheld the disallowance, and the Tribunal found no evidence demonstrating that the personal loan was used for business purposes. Thus, this ground of appeal was dismissed.

6. Imposition of Interest under Sections 234B and 234C:

The Tribunal did not specifically address the imposition of interest under Sections 234B and 234C in its analysis, implying that the issue was not contested separately or was subsumed under the broader grounds of appeal.

Conclusion:

The appeal was partly allowed, with specific grounds remitted to the AO for fresh consideration, while others were dismissed due to the lack of substantiating evidence. The order was pronounced in the open court on 28.03.2022.

← Previous Next →