2023 (7) TMI 994 - AT - Income Tax

Addition u/s 68 - assessee could not prove the identity and creditworthiness of creditors as well as the genuineness of transactions in respect of deposits in its various bank accounts - CIT(A) deleted the addition - HELD THAT - CIT(A) ought to have verified the persons/firm/Companies from whom the alleged amount has been credited along with the details of the PAN numbers and also should have verified the details of the persons to whom the said amount has been paid later on. CIT(A) should have also verified the fact as to whether the amount has been paid to the very same person from whom the said amount got credited to the Assessee or to some other persons for any consideration to arriving a conclusion that, the assessee is an entry provider and the said amount is the part of accommodation entry . In the absence of the details of the persons regarding credits and the payments made by the assessee, we are not in a position to uphold the order of the CIT (A). Order of the CIT(A) is reversed and the issue in dispute is restored to the file of the A.O. with a direction to the assessee to furnish the details of the deposits and withdrawals to the A.O. and details of the persons/firm/company so as to decide the issue afresh. Appeal of the Revenue are partly allowed for statistical purpose.

Summary

Issues involved:
The issues involved in this judgment are related to the addition of a substantial amount by the Assessing Officer under section 68 of the Income Tax Act, 1961, and the subsequent deletion of part of the addition by the Commissioner of Income Tax (Appeals).

Issue 1: Addition under section 68 of the Income Tax Act
The original assessment was completed under sections 144/147 of the Income Tax Act, 1961, where the Assessing Officer (AO) added amounts credited to the assessee's bank accounts as income from undisclosed sources. The AO initiated proceedings based on information received regarding these credits. The AO found that the assessee failed to prove the genuineness of the transactions with the parties involved. Subsequently, an order was passed under section 263 of the Act, adding a significant amount to the assessee's income. The Commissioner of Income Tax (Appeals) partly allowed the appeal, reducing the addition and directing the AO to take a lower rate of commission. The Revenue appealed against the deletion of the addition by the CIT(A).

Issue 2: Deletion of addition by CIT(A)
The Revenue contended that the CIT(A) erred in deleting the addition made by the AO under section 68 of the Act, as the assessee could not prove the identity and creditworthiness of the creditors or the genuineness of the transactions. The CIT(A) had directed the AO to restrict the addition to a lower amount based on the rate of commission for accommodation entries. The Tribunal found that the CIT(A) did not adequately verify the details of the persons involved in the transactions and payments, leading to a lack of basis for the conclusions made. Consequently, the Tribunal reversed the CIT(A)'s order and restored the issue to the AO for fresh consideration.

Separate Judgment:
The Tribunal, comprising Shri Shamim Yahya, Accountant Member, and Shri Yogesh Kumar U.S., Judicial Member, pronounced the order on 21st July 2023. The Tribunal partly allowed the Revenue's appeal for statistical purposes, overturning the CIT(A)'s decision and directing the issue to be reconsidered by the AO with additional information from the assessee.