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2022 (7) TMI 259 - AT - Income TaxAddition u/s 68 - amounts were stated to have been received by way of foreign inward remittance from the lender who claims to be British Nationals and persons of Indian origin - As per assessee amount was received in pursuance of collaboration agreement to pursue certain business interest in the form of 35% share in 'Harsha K3C Mall Cinema Karnal' - HELD THAT - As the bona fides of the loan/deposits transaction in question with Shri Ashok Kumar Verma, in our view, is beyond any iota of doubt. The CIT(A) has grossly ignored these self explanatory documents to come to a conclusion adverse to the assessee. The action of the CIT(A) cannot be justified in view of formidable documentary evidences noted above. The confirmation of money lent is self evident from compromise carried out. The action of the CIT(A) is thus set aside and the Assessing Officer is directed to cancel the additions so made under Section 68 of the Act. Addition towards unexplained advance from customer - HELD THAT - The assessee has submitted party-wise explanation towards advances received from different customers - the action of the CIT(A) for sustaining the addition to the extent of Rs. 4,89,744/- in respect of above noted customers is wholly unjustified and liable to be reversed. Addition on account of flat customers - HELD THAT - The consideration for receipt of business advance stands proved. The action of the CIT(A) thus cannot be faulted. Addition on account of 'other liabilities' payable to banks as shown in the financial statement of the assessee on the ground that such liability was not confirmed from the respective banks - Assessee contends that the liability shown against the banks are not actual or real liabilities but on account of journal entry passed by increasing the book overdraft and reducing the corresponding creditors liability and has made additions in respect of above liability on the ground that respective banks have not confirmed the above stated liabilities owing to wrong appreciation of these facts - CIT-A deleted the addition - HELD THAT - CIT(A) has failed to determine the bona fides of the liabilities and has hurriedly relied upon the narrative canvassed on behalf of the assessee and that too, without waiting for any verification report of the Assessing Officer. The bank reconciliation statement claimed to have been referred by the CIT(A) does not prove stand of the assessee towards discharge of liabilities or bona fide of outstanding liability in any manner. No justification in the reasoning of the CIT(A) which is contrary to the factual position on record. It is the admitted position that no documents were filed before the Assessing Officer. The documents filed before the CIT(A) neither supports the claim of assessee nor unverified by the Assessing Officer - CIT(A) himself has opted to make no independent inquiry and has mechanically accepted the explanation offered by the assessee which does not appear to be backed by any sound basis. Therefore, the action of the CIT(A) for reversal of addition in relation to Bank of Baroda and Punjab National Bank is bereft of any sound factual basis. The Assessee has failed to discharge the onus which lay upon it to offer satisfactory explanation on inflated Bank liability. Hence, the action of the Assessing Officer is restored. Addition on account of cessation of liability - HELD THAT - As outstanding liability, however, is claimed to be disputed by the assessee and pending before the Court. As emerges from record, the assessee entered into agreement with Techsoft Global Pvt. Ltd. and received some amount against it. A civil suit was filed by M/s. Techsoft Global Pvt. Ltd. for recovery of advance paid as token money. Revenue could not provide any justification on nature of dispute to the extent of Rs. 2,46,880/- and how this figure has been determined by the Revenue. In the absence of any explanation from the Revenue and on examination of the findings recorded by the CIT(A), we do not see any reason to interfere with the order of the CIT(A). Ground No. 2 of the appeal of the Revenue is dismissed.
Issues Involved:
1. Addition of Rs. 1.40 crore under Section 68 of the Income Tax Act. 2. Addition of Rs. 4,89,744/- towards unexplained advance from customers. 3. Deletion of addition of Rs. 4,44,12,989/- on account of other liabilities. 4. Deletion of addition of Rs. 2,46,880/- on account of cessation of liability. 5. Deletion of addition of Rs. 12,92,241/- towards advance received from certain customers. Detailed Analysis: 1. Addition of Rs. 1.40 crore under Section 68 of the Income Tax Act: The assessee received Rs. 1.40 crore from Shri Ashok Verma, which the Assessing Officer (AO) treated as unexplained income under Section 68 due to the absence of confirmation from the lender. The assessee contended that the amount was received under a collaboration agreement for constructing a multiplex cinema and was later returned as per a compromise agreement submitted to the Delhi High Court. The Tribunal found that the documentary evidence, including the compromise agreement and bank confirmations, demonstrated the genuineness of the transaction. Thus, the Tribunal directed the AO to cancel the addition. 2. Addition of Rs. 4,89,744/- towards unexplained advance from customers: The AO added Rs. 32,80,669/- as unexplained advances from customers, which the CIT(A) reduced to Rs. 4,89,744/-. The Tribunal examined the assessee's evidence, including flat booking agreements and customer confirmations, and found that the advances were genuine. The Tribunal reversed the CIT(A)'s decision and allowed the assessee's appeal, concluding that the addition was unjustified. 3. Deletion of addition of Rs. 4,44,12,989/- on account of other liabilities: The AO added Rs. 4,44,12,989/- as bogus liabilities towards various banks. The CIT(A) deleted the addition, accepting the assessee's explanation that these were book overdrafts and not actual liabilities. The Tribunal found that the reconciliation statements provided by the assessee did not sufficiently prove the discharge of liabilities for Bank of Baroda and Punjab National Bank. However, the Tribunal endorsed the deletion of Rs. 4,90,071/- linked to Indian Overseas Bank, as the liability was satisfactorily discharged. The Tribunal restored the AO's addition for Bank of Baroda and Punjab National Bank liabilities, amounting to Rs. 4,39,22,918/-. 4. Deletion of addition of Rs. 2,46,880/- on account of cessation of liability: The AO added Rs. 2,46,880/- as cessation of liability, which the CIT(A) deleted, noting that the liability was under dispute in a civil court. The Tribunal upheld the CIT(A)'s decision, finding no justification for the addition and concluding that the liability was genuine and pending resolution in court. 5. Deletion of addition of Rs. 12,92,241/- towards advance received from certain customers: The AO added Rs. 12,92,241/- as unexplained advances from customers Jagdish Kumar and Avinash Kumar. The CIT(A) deleted the addition, accepting the assessee's evidence of agreements and payment receipts. The Tribunal found that the agreements and payment records sufficiently proved the genuineness of the advances and upheld the CIT(A)'s deletion of the addition. Conclusion: The Tribunal allowed the assessee's appeal, reversing the additions under Section 68 and unexplained advances, while partly allowing the Revenue's appeal by restoring the addition for Bank of Baroda and Punjab National Bank liabilities. The Tribunal upheld the CIT(A)'s decisions regarding the deletion of additions for Indian Overseas Bank liabilities and cessation of liability.
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