2022 (4) TMI 1319 - AT - Income Tax

Validity of reason of scrutiny selection - limited scrutiny v/s complete scrutiny - assessee s case was selected for complete scrutiny under CASS and notice u/s 143(2) of the Act was issued, served on the assessee and assessment order u/s 143(3) r.w.s. 144B of the Act was passed - As submitted that the assessee s field of working is erroneously stated as real estate, whereas, the assessee is in the business of rural water scheme, which lacks the jurisdiction for scrutiny - HELD THAT - We find that the assessee s case was selected for complete scrutiny. Therefore, we do not find any infirmity in the order passed by the Ld.CIT(A) on this ground and accordingly, the ground raised by the assessee is dismissed.. Addition u/s 68 - unexplained cash credits - HELD THAT - Admittedly, the assessee has filed PAN, Aadhar numbers and bank details of the creditors except two creditors i.e. Sri A.Nageswar Rao for an amount of ₹ 2,00,000/- and Sri Bommala Srinivasa Rao for an amount of ₹ 2,00,000/-. Therefore, all the transactions are explained except the above said two transactions for an amount of ₹ 4,00,000/-. But the Ld.CIT(A) as well as the AO simply ignored the bank statement and passed erroneous order. Therefore, we are of the view that except these two transactions, the remaining transactions are proved by the assessee. Therefore, we confirm the transactions of Sri A.Nageswar Rao and Sri Bommala Srinivasa Rao for an amount of ₹ 4,00,000/- (two lakhs each). For remaining amount, the assessee has explained the genuineness of the transactions and credit worthiness of the creditors. Therefore, we direct the AO to delete the addition made by the AO for other loan transactions for an amount of ₹ 29,32,906/-. - Decided partly in favour of assessee.

Summary

Issues:
1. Validity of reason for scrutiny selection
2. Addition of unexplained cash credits under section 68 of the Income Tax Act

Issue 1: Validity of reason for scrutiny selection

The appeal was filed against the order of the Commissioner of Income Tax (Appeals) for the Assessment Year 2018-19. The case involved scrutiny under CASS due to unexplained loans. The assessee argued that the scrutiny selection was erroneous as it was based on the assumption of real estate business, while the business was actually related to rural water schemes. The CIT(A) dismissed the appeal, citing the correct selection for complete scrutiny. The Tribunal upheld the CIT(A)'s decision, emphasizing that the case was indeed selected for complete scrutiny, and there was no error in the process.

Issue 2: Addition of unexplained cash credits under section 68 of the Income Tax Act

The AO added unexplained cash credits under section 68 of the Act due to discrepancies in loan documentation. The CIT(A) upheld the addition, stating the onus was on the assessee to prove the legitimacy of the loans. The assessee contended that the loans were genuine, providing PAN, Aadhar cards, and bank details of most creditors. The Tribunal found that except for two transactions, the remaining loans were adequately explained. It directed the AO to delete the addition for transactions totaling &8377; 29,32,906, while confirming the addition for the two unexplained transactions totaling &8377; 4,00,000. Consequently, the appeal was partly allowed, and the addition was adjusted accordingly.

In conclusion, the Tribunal addressed the issues of scrutiny selection validity and unexplained cash credits meticulously, ensuring a fair and just outcome based on the evidence presented by the parties involved.