2024 (4) TMI 1150 - AT - Income Tax

Cash credit addition u/s 68 - onus to prove - reasonable cause for non-appearance before the AO - unsecured loan of two parties by taking view that the assessee was given sufficient opportunity but the assessee failed to file any submission to substantiate the transaction of unsecured loan - HELD THAT - We find that before the ld. CIT(A), the assessee in its submission, explained that they were prevented by sufficient cause as notice of AO was not received. The factory premises of assessee as well as Metal Links Alloys Ltd. were possessed by the order of NCLT. We find that alongwith submission, the assessee also filed requisite details of lenders in furnishing their details including, name, address, ledger account, bank account, confirmation of parties. AO has not issued any notice to carry out any further investigation or to bring any adverse material rather objected about the admissibility of additional evidence at the first appellate stage. Though, AO accepted that the assessee has furnished confirmation of bank account, bank statement, ledger account in the books of assesse of lenders, ledger account of assessee in the books of lenders. The assessee also furnished evidence of repayment of loan. All such facts are accepted by the assessing Officer. Still the Assessing Officer instead of giving any comment on the merit of various evidences, objected only on the ground that such evidences were not furnished before him during the assessment. We find that the assessee has shown sufficient cause for non-appearance before Assessing Officer for non-compliance. Once the assessee has filed evidence which was directly related with issue under consideration, before the Assessing Officer as well as before the first appellate authority, then it was incumbent upon the Assessing Officer to consider and gave his opinion or report on the merit of issue. We find that the filing of various evidences during the remand proceeding is not in dispute. Further the Assessing Officer has not disputed the repayment of loan in subsequent assessment year and only took the plea that the principle of res judicata is not applicable on income tax proceedings. We find that in CIT Vs Ayachi Chandrashekhar Narsangji 2013 (12) TMI 372 - GUJARAT HIGH COURT held that where the department has accepted repayment of loan in subsequent year, no addition was to be made in current year on account of cash credit. The Hon'ble Gujarat High Court in the case of DCIT Vs Rohini Builders 2001 (3) TMI 9 - GUJARAT HIGH COURT also held that when the assessee has discharged initial onus by providing identity of all creditors by giving their complete addresses, GIR numbers, PAN and copy of assessment orders wherever readily available and proved the capacity of creditors that amounts were paid through cheques. Repayment of loan and interest thereon was also made by cheques, the Assessing Officer was not justified. Once the assessee has shown a reasonable cause for non-appearance before the Assessing Officer and later on furnished complete details of lenders including repayment of unsecured loan, the lower authorities were not justified in making addition of such unsecured loan . Assessee appeal allowed.

Summary

Issues Involved:
1. Addition of Rs. 3,40,86,750/- as unexplained credit under Section 68 of the Income Tax Act.
2. Ignoring documents produced by the appellant proving the identity, genuineness, and creditworthiness of transactions.
3. Non-appreciation of the fact that unsecured loans were repaid in subsequent years.
4. Non-consideration of loss of Rs. 7,98,928/- under Section 66 of the Act.
5. Initiation of penalty proceedings under Section 271(1)(c) of the Act.
6. Charging of interest under Sections 234A, 234B, and 234C.

Detailed Analysis:

1. Addition of Rs. 3,40,86,750/- as Unexplained Credit:
The assessee challenged the addition of Rs. 3,40,86,750/- made by the Assessing Officer (AO) by treating loans from two entities as unexplained credit under Section 68 of the Income Tax Act. The AO had issued multiple notices to the assessee seeking details of the lenders, which were not responded to, leading to the addition. The appellate tribunal found that the assessee had provided sufficient cause for non-compliance, including the fact that the factory premises were taken over by the National Company Law Tribunal (NCLT). The tribunal noted that the assessee later furnished complete details of the lenders, including confirmations, bank statements, and proof of repayment, which were not appropriately considered by the AO.

2. Ignoring Documents Proving Identity, Genuineness, and Creditworthiness:
The assessee argued that the AO and the Commissioner of Income Tax (Appeals) [CIT(A)] ignored the documents produced, such as loan confirmations, bank statements, and income tax returns of the lenders, proving the identity, genuineness, and creditworthiness of the transactions. The tribunal noted that these documents were submitted during the remand proceedings and should have been considered. The AO's objection was primarily on the grounds that these documents were not furnished during the original assessment, which the tribunal found unreasonable given the circumstances.

3. Non-Appreciation of Repayment of Loans in Subsequent Years:
The assessee contended that the unsecured loans were repaid in subsequent years, which was proved with relevant documents. The tribunal observed that the AO did not dispute the repayment but argued that the principle of res judicata does not apply to income tax proceedings. The tribunal cited several case laws, including CIT vs. Ayachi Chandrashekar Narsangji, which held that repayment of loans in subsequent years should be considered, and no addition should be made on account of cash credit in the current year.

4. Non-Consideration of Loss of Rs. 7,98,928/-:
The assessee did not press this ground during the hearing, and it was dismissed as not pressed.

5. Initiation of Penalty Proceedings under Section 271(1)(c):
The tribunal found this ground premature and did not adjudicate on it.

6. Charging of Interest under Sections 234A, 234B, and 234C:
This ground was found to be consequential to the main issues and was not separately adjudicated.

Conclusion:
The tribunal allowed the appeal in part, specifically on grounds related to the addition of unexplained credit and the consideration of documents proving the identity, genuineness, and creditworthiness of the transactions. The tribunal dismissed the grounds related to non-consideration of loss, initiation of penalty proceedings, and charging of interest as either not pressed, premature, or consequential. The decision emphasized the importance of considering all relevant documents and circumstances, especially when the assessee is prevented by sufficient cause from complying with procedural requirements. The appeal was partly allowed, with the main addition of Rs. 3,40,86,750/- being deleted.