2023 (2) TMI 460 - AT - Income Tax

Addition u/s 68 - assessee has failed to bring on record any evidence to prove the credit worthiness and genuineness of the transaction of the creditors - CIT-A deleted the addition - HELD THAT - CIT(A) has given a clear-cut findings that the AO did not examine the transaction, in question, independently rather solely relied upon the report of the Investigation Wing in making the impugned addition, whereas, the assessee has duly discharged its primary onus by furnishing the relevant details and evidences to prove the identity and creditworthiness of the creditor and genuineness of the transaction. A perusal of the impugned order of the CIT(A) reveals that the ld. CIT(A) has thoroughly discussed the facts of the case and relied upon various decisions of higher courts.Ground No.2 raised by the Revenue is hereby dismissed. Addition u/s 69C - payments made by the assessee company to two people for land development business in respect of property - only contention raised by the Assessing Officer was that the aforesaid amounts were not accounted in the books of account of the appellant although these were debited from the bank account of the appellant - CIT-A deleted addition - HELD THAT - CIT(A), has rightly held that since the Assessing Officer himself has noted that the amount was debited from the bank account of the assessee itself, therefore, there was no doubt regarding the source of the said expenditure. Therefore, even if the assessee has not claimed the said expenditure in its books of account that itself cannot be the reason for further disallowance of the said expenditure. The addition u/s 69C of the Act could have been made only if the assessee could not have established the source of the expenditure. However, in this case, it was agreed by the Assessing Officer that the said amount was debited from the bank account of the assessee. We, therefore, do not find any reason to interfere in the impugned order of the CIT(A) and the same is upheld. Decided against revenue.

Summary

Issues:
- Appeal against CIT(A)'s orders dated 22.10.2019
- Assessment year 2013-14: Loan received from M/s Renovate Marketing Private Ltd
- Assessment year 2013-14: Unexplained expenditure of Rs. 1,60,000
- Validity of reopening assessment u/s 147 read with section 148
- Failure to conduct independent inquiry by AO
- CIT(A)'s findings on the identity and creditworthiness of the creditor
- Addition of Rs. 1,60,000 for land development business
- Assessment year 2014-15: Identical issues as in 2013-14

Analysis:
1. The Revenue appealed against CIT(A)'s orders dated 22.10.2019 for assessment years 2013-14 and 2014-15. The issues primarily revolved around the deletion of additions made by the Assessing Officer, including a loan of Rs. 3,06,50,000 from M/s Renovate Marketing Private Ltd and unexplained expenditure of Rs. 1,60,000. The Revenue contested these deletions on grounds of creditworthiness and genuineness of transactions.

2. The first issue addressed was the validity of reopening the assessment u/s 147 read with section 148. The CIT(A) found the reopening to be bad in law as the AO had based the decision on borrowed satisfaction from the Investigation Wing, without independent assessment. The Revenue did not challenge this legal point, leading to potential dismissal of the appeal solely on this ground.

3. The next issue highlighted the failure of the AO to conduct an independent inquiry into the transactions, relying solely on the Investigation Wing's report. The CIT(A) emphasized that the assessee had fulfilled its obligations under Section 68 of the Act by providing necessary evidence. The Revenue failed to counter these findings, resulting in the dismissal of their appeal against the deletion of the loan addition.

4. Regarding the addition of Rs. 1,60,000 for land development business, the CIT(A) noted that the Assessing Officer acknowledged the debited amount from the assessee's bank account, indicating a clear source of expenditure. As the Revenue could not challenge this finding, the appeal against this addition was also dismissed.

5. The judgment for the assessment year 2014-15 mirrored that of 2013-14, with identical issues and findings leading to the dismissal of the Revenue's appeal. Both appeals were ultimately dismissed by the ITAT Kolkata on 9th February 2023, upholding CIT(A)'s orders and findings in favor of the assessee.