2024 (1) TMI 1035 - AT - Income Tax

Addition u/s. 68 - onus to prove the capacity, credit worthiness of the loan givers and genuineness of the said loans - CIT - A deleted addition as categorically held that assessee has discharged his onus cast upon him u/s 68 by proving the identity and creditworthiness of the lender along with genuineness of the transaction by producing the confirmation, Ledger, bank statement of the lender and the income tax returns - HELD THAT - In the present case before us the assessee officer has not made any enquiry unlimited submitted by the assessee but has simply relied upon the statement recorded by the investigation wing which were subsequently retracted. And even those statements along with the opportunity of cross-examination of the persons making statement was not allowed to assessee. In view of this, we are not in a position order of the AO. The assessee has also produced the evidence of repayment of loan. Thus, initial onus is discharged by the assessee. AO has not thrown back the onus of the above three ingredients back on the assessee by making adequate enquiry or throwing back the evidences available and also granting assessee and a point unity of cross-examination. Therefore the CIT - A has held that assessee has discharged initial onus cast upon section 68 of the act which has not been discredited by the assessing officer by making adequate enquiry and further the assessing officer has violated the provisions of the principles of natural justice by not granting the evidences available with the AO for making evidence and not granting an opportunity of cross examination of the statement of the persons used by the AO. Nothing was shown to us that the order of CIT-A is not sustainable. Accordingly we confirm the order of the learned CIT A in deleting the addition u/s 68 of the income tax act by the assessing officer. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the appeal filed by the revenue.
2. Deletion of addition made under Section 68 of the Income Tax Act, 1961.

Summary:

1. Validity of the Appeal Filed by the Revenue:

The appeal was initially filed against a deceased assessee. The CIT(A) passed the order in the name of the deceased assessee despite being informed of his death. The revenue revised Form No. 36 to include the legal heir of the deceased, making the appeal valid. The Tribunal accepted the revised form and dismissed the assessee's arguments regarding the invalidity of the appeal. Accordingly, the additional ground filed by the revenue was allowed.

2. Deletion of Addition Made Under Section 68 of the Income Tax Act, 1961:

The Assessing Officer (AO) added Rs. 2.5 crores to the assessee's income under Section 68, treating loans from Arihant Exports and Karnavati Impex Pvt. Ltd. as unexplained cash credits. The AO relied on statements from Mr. Rajendra Jain and the proprietor of the lender entities, which were later retracted. The assessee provided evidence such as bank statements, income tax returns, ledger confirmations, and financial statements to prove the genuineness of the loans. The CIT(A) held that the assessee had discharged the primary onus by providing sufficient evidence and noted that the AO did not make any independent inquiry or point out specific discrepancies. The CIT(A) deleted the addition, stating that the proviso to Section 68 requiring the source of the source does not apply to the assessment year under consideration.

The Tribunal upheld the CIT(A)'s order, emphasizing that the AO did not provide the assessee with the statements relied upon or the opportunity for cross-examination, violating the principles of natural justice. The Tribunal cited the Supreme Court's rulings in Andaman Timber Industries and NRA Iron and Steel Pvt. Ltd., highlighting the necessity of providing an opportunity for cross-examination and conducting inquiries before making additions under Section 68. The Tribunal concluded that the assessee had discharged the onus of proving the identity, creditworthiness, and genuineness of the transactions, and the AO failed to discredit this evidence with adequate inquiry. Thus, the appeal on the merits of the addition was dismissed.

Conclusion:

The Tribunal admitted the appeal by the revenue after including the legal heir of the deceased assessee but dismissed the appeal on the merits, confirming the deletion of the addition made under Section 68 by the CIT(A).

Order pronounced in the open court on 22.01.2024.