2022 (11) TMI 971 - AT - Income Tax

Unexplained cash credits u/s. 68 - Assessee failure to discharge the onus put upon - assessee has failed to supply any documents/evidences to prove the genuineness of the transaction, established the identity of the depositor and prove the capacity of the depositor - assessee submitted that so far as the creditor in respect of whom the additions were made by AO said company is very much traceable and has in fact gone into liquidation - HELD THAT - As assessee submitted that the said creditor in respect of whom additions have been made by the AO and also confirmed by CIT(A) in the appellate order is both identifiable as well as traceable. Assessee submitted that the assessee has a good case on merits and in the instant set of facts the additions should not be confirmed on merits and if given an opportunity of being heard, the assessee is desirous to place on record additional evidences before ld. CIT(A) to prove the genuineness of the transaction and creditworthiness of the creditor in respect of the aforesaid unsecured loan. In view of the above in the interest of justice, we are setting aside the file to the ld. CIT(A) for hearing the case on merits after giving due opportunity of hearing to the assessee to place on record all additional documents/evidences. Appeal of the assessee is allowed statistical purposes.

Issues:
1. Opportunity of hearing not afforded to the appellant leading to an ex parte order.
2. Addition of Rs. 90,62,934 as unexplained cash credits under section 68 of the Act.
3. Disallowance under section 40A(2) of the Act of interest amounting to Rs. 9,01,274.
4. Confirmation of addition under section 40A(2) without determining the fair market rate of interest.
5. Lower authorities passing orders without properly appreciating facts and submissions.
6. Confirmation of interest levied under section 234A/B/C of the Act.
7. Confirmation of penalty initiated under section 271(1)(c) of the Act.

Analysis:
1. The appellant contended that the ld. Commissioner of Income Tax (Appeals) erred in not providing an opportunity of hearing, resulting in an ex parte order, violating the Principles of Natural Justice. The appellant raised concerns about the lack of consideration of submissions and information before passing the order. The Tribunal acknowledged the oversight and set aside the file for a fresh hearing to ensure due opportunity for the appellant, emphasizing the importance of adhering to principles of natural justice.

2. The primary issue revolved around the addition of Rs. 90,62,934 as unexplained cash credits under section 68 of the Act. The Assessing Officer found the unsecured loan received by the assessee to lack sufficient evidence regarding the transaction's genuineness, creditor's identity, and capacity. The ld. CIT(A) confirmed the addition, citing the appellant's failure to provide necessary details to establish the credibility of the transaction. However, the appellant presented evidence of the creditor's liquidation, demonstrating traceability and requested a fresh hearing to submit additional evidence. The Tribunal allowed the appeal, setting aside the matter for a reevaluation on merits.

3. The disallowance under section 40A(2) of interest amounting to Rs. 9,01,274 was contested by the appellant, highlighting the excessive and unreasonable nature of the disallowance. The Tribunal's decision to set aside the file for a fresh hearing encompassed this issue as well, ensuring a comprehensive review of all aspects related to the disallowance.

4. The confirmation of the addition under section 40A(2) without determining the fair market rate of interest was intertwined with the broader issue of procedural fairness and the need for a thorough examination of the facts. The Tribunal's decision to remand the case for a fresh hearing encompassed this aspect, emphasizing the importance of a detailed assessment before confirming any additions.

5. The appellant raised concerns about the lower authorities' failure to appreciate facts and submissions adequately, leading to a breach of law and Principles of Natural Justice. The Tribunal's intervention to set aside the matter for a reevaluation aimed to address these concerns and ensure a fair and comprehensive review of the case.

6. The confirmation of interest levied under section 234A/B/C of the Act and the penalty initiated under section 271(1)(c) were additional issues raised by the appellant. While these aspects were not individually addressed in the Tribunal's decision, the overarching theme of procedural fairness and the need for a fresh hearing encompassed all grounds of appeal, indicating a holistic approach to resolving the issues raised by the appellant.

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