2023 (1) TMI 616 - AT - Income Tax

Addition of loan creditors u/s. 68 - undisclosed income of the assessee - assessee has shown unsecured loans HELD THAT - In the present case, the assessee himself on an affidavit stated that he is a person of no means and did not carry on of such huge business. He on an affidavit has stated that his purchases from M/s. Riddhi Siddhi Bullion Ltd. are bogus and his cheque book is also in the custody of Mr. Dinesh Jani of M/s. Riddhi Siddhi Bullion Ltd. Therefore, the finding of the learned CIT (A) falls flat. The sale consideration received by the assessee is also in cash. There is no address of the parties who purchase the gold and silver from the assessee. Therefore, the whole transaction of purchase and sales shown by the assessee is merely a fa ade. The learned CIT (A) deleting the addition on account of sales and simultaneously accepting sales made by the assessee as also genuine is absolutely incorrect. When the assessee himself says that he is a person of no means, the loss incurred by the assessee on MCX platform of ₹1,32,28,014/- is also not allowable. The margin paid by the assessee of ₹1.15 crores could not have been deposited by the assessee. Similar is the case with respect to unsecured creditors appearing in the books of assessee cannot be accepted as genuine as sales and purchases both are not genuine. It is a clear-cut case that somebody else is operating on behalf of the assessee by using his bank account and of course, assessee cannot also be stated to be ignorant of the situation. Therefore, the assessee as well as the person who are trading with the assessee such as M/s. Riddhi Siddhi Bullion Ltd. is entering into purchase and sales of gold and silver with some ulterior motive. We set aside the whole appeal filed by the learned Assessing Officer as well as the assessee back to the file of AO to re-investigate the whole aspect of the huge transactions of purchases and sales of Gold and silver and to find out who are the real beneficiaries of these transactions. Prime facie it seems that Riddhi Sidhi Bullion and Hundia Exports have booked huge bogus sales in the name of this assessee. The proper examination of operation of bank account of the assessee by finding out who opened bank account, who operated it , who is beneficiary of the entries in bank account of assessee, who deposited the cash in bank accounts, in whose accounts the money is credited from the same account. This apparently seems to be a case of accommodation entry provider. But deeper and complete investigation leading to beneficiary of the transaction is required. It is also to be inquired whether the bankers have made any report of suspicious transaction or not. Appeals are allowed for statistical purposes.

Issues Involved:

1. Addition of unsecured loans under Section 68 of the Income-tax Act, 1961.
2. Validity of sales transactions and their treatment as unexplained cash credits.
3. Allowance of MCX trading loss.
4. Jurisdictional validity of the assessment order.
5. Timeliness of notice issuance under Section 143(2) and completion of assessment.

Detailed Analysis:

1. Addition of Unsecured Loans under Section 68:

The assessee contested the addition of Rs. 43,49,79,005/- as unsecured loans, arguing that the Assessing Officer (AO) failed to prove the income belonged to the assessee for the Assessment Year (A.Y.) 2007-08. The assessee provided details of his modest financial background and past income, emphasizing that he could not have earned such a large sum outside his books. The CIT(A) confirmed the addition, stating the assessee failed to establish the identity, creditworthiness, and genuineness of the creditors, except for an amount of Rs. 6,87,89,490/- pertaining to Union Bank of India, which was deleted.

2. Validity of Sales Transactions:

The AO treated the total sales amount of Rs. 658,80,98,525/- as undisclosed income under Section 68, citing a lack of documentary evidence and verification details for the transactions. The CIT(A) deleted this addition, noting that the purchases from M/s Riddhi Siddhi Bullion Ltd. and M/s Hundia Exports were accepted in their assessments, and the assessee had shown a gross profit of Rs. 42 lacs. However, the Tribunal found the CIT(A)'s findings unsustainable, given the assessee's affidavit stating the transactions were bogus and orchestrated by others, thus reversing the deletion.

3. Allowance of MCX Trading Loss:

The AO disallowed a trading loss of Rs. 1,34,28,014/- due to lack of details. The CIT(A) allowed the claim based on verification of contract notes and ledger accounts. However, the Tribunal disallowed the loss, aligning with the assessee's affidavit that he could not have incurred such a loss, given his financial status and the fraudulent nature of the transactions.

4. Jurisdictional Validity of the Assessment Order:

The assessee raised additional grounds challenging the jurisdictional validity of the assessment order, arguing it was passed by an officer without proper authority and beyond the prescribed time limit. The Tribunal did not explicitly address these jurisdictional issues in the final decision.

5. Timeliness of Notice Issuance and Completion of Assessment:

The assessee contended that the notice under Section 143(2) was not issued within the prescribed time, and the assessment order was received beyond the statutory deadline. The Tribunal did not provide a detailed analysis of these procedural issues but focused on the substantive matters of the transactions and additions.

Conclusion:

The Tribunal set aside the entire appeal, directing the AO to re-investigate the transactions to identify the real beneficiaries and the nature of the business operations, suggesting a deeper probe into the involvement of M/s Riddhi Siddhi Bullion Ltd. and others. Both the assessee's and the AO's appeals were allowed for statistical purposes, reversing the CIT(A)'s order in totality.

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