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2023 (6) TMI 1126 - AT - Income TaxAddition u/s 68 - receipt of loan unexplained - lender had confirmed the fact of advancing the loan to the assessee - HELD THAT - As the assessee had discharged its primary onus of fulfilling the three ingredients of Sec.68. The lender, in sworn statement, admitted the fact of granting of loan and thus, the assessee stood discharged. The onus was now on revenue to make further enquiries from the lenders to ascertain their financial capacity to lend the loans. Turnover alone could not be considered as source of loan as advanced to the assessee. In the absence of such a fact based-finding to prove that assessee s own money was routed through banking channels in the garb of loan, the impugned addition could not be sustained in law. The assessee was not expected to prove the source of source as held by Hon ble Supreme Court in the case of M/s Lovely Exports (P.) Ltd. 2008 (1) TMI 575 - SC ORDER - Therefore, we direct Ld. AO to delete the impugned addition. The assessee s appeal stand allowed accordingly. Validity of reassessment proceedings - absence of any tangible material - HELD THAT - We find that the original return of income was scrutinized u/s 143(3). The case was reopened within 4 years. The perusal of assessment order would show that Ld. AO has not referred to any tangible material coming into his possession which would lead to formation of a belief that certain income escaped assessment in the hands of the assessee. Apparently, reassessment has been initiated on the same set of material as available before Ld. AO during original assessment proceedings. This being so, the reassessment proceedings would be nothing would review of the order which is impermissible. In absence of any new tangible material, the case could not be reopened on mere change of opinion - See M/S. KELVINATOR OF INDIA LIMITED 2010 (1) TMI 11 - SUPREME COURT - Reassessment proceedings are bad in law and hence, liable to be quashed - Decided in favour of assessee.
Issues involved: Addition of Rs. 16.47 Lacs u/s 68 of the Act for Assessment Year (AY) 1997-98 and addition of Rs. 18.17 Lacs for AY 2001-02.
For AY 1997-98, the Appellate Tribunal considered the issue of addition of Rs. 16.47 Lacs u/s 68 of the Act. The assessee, a partnership firm, had admitted a loan from Mr. Ramachandran, received through Indian Bank DD. Despite providing confirmation and address of the lender, the lender failed to provide necessary documents. The AO concluded that the loan was not genuine and added it to the income of the assessee. The CIT(A) upheld the addition, stating that the assessee did not prove the capacity of the creditor and genuineness of the transaction. However, the Tribunal found that the assessee had fulfilled the requirements of Sec.68 by proving the identity of the lender and the genuineness of the transaction. The lender confirmed the loan in a sworn statement, shifting the onus to the revenue to verify the lender's financial capacity. As there was no evidence that the assessee's own money was disguised as a loan, the addition was directed to be deleted, in line with the principles laid down by the Supreme Court. In AY 2001-02, the Tribunal addressed the addition of Rs. 18.17 Lacs and the validity of reassessment proceedings. The case was reopened based on undisclosed income from House Property. The assessee argued that the profits represented accumulated amounts from previous years, which were not credited to capital accounts. The AO made the addition based on discrepancies in the Balance Sheet. The CIT(A) upheld the addition, stating that the assessee did not conduct any business and the profits should have been credited to partners' capital accounts. The Tribunal found the reassessment proceedings to be invalid as there was no new tangible material justifying the reopening. Citing legal precedents, the Tribunal concluded that the reassessment was a review exercise and ordered it to be quashed. The case law referred by the revenue was deemed inapplicable as it did not align with the facts of the present case. Consequently, both appeals were allowed based on the Tribunal's findings. The judgment was pronounced on 23rd June, 2023 by Hon'ble Shri V. Durga Rao and Hon'ble Shri Manoj Kumar Aggarwal, AM.
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