2023 (7) TMI 1494 - AT - Income Tax

Addition u/s 68 - unexplained cash credit - HELD THAT - It is not in controversy that the Assessee had taken the said loans in the financial year 2010-11 (AY 2011-12) which continued in the assessment year under consideration as well. During the course of assessment proceedings, Assessee also submitted the following documents in order to substantiate its claim, i.e., confirmation of loans, Acknowledgment of returns of income of loan parties, Copies of relevant pages of bank statements of loan parties and Copies of bank statements of the Assessee, in which interest payments have been debited. AO doubted and rejected the same while relying upon the statement of Mr. Vipul Vidur Bhatt, without providing copy of the his statement to the Assessee and even without affording any opportunity of cross examination of Mr. Bhat. Assessee in this case, has not only discharged its primary onus by establishing the identity of the parties etc. , providing confirmation of loans, acknowledgment of return of income filed by the parties who have duly shown the amount of loan in their returns of income and banks statement of loan parties and the Assessee showing the transactions held, but also shown to have deducted TDS on the interest payment made to the parties, which also strengthen the genuineness of the claim of the Assessee. Thus, on the basis of the general statement made by any 3rd party, without demolishing the case/claim of the Assessee, making of an addition is not logical. Also the loan was taken by the Assessee from the said entities in 2010-11 (AY 2011-12) and during the year consideration, no such amount was found credited in the books of an Assessee maintained, if any and even otherwise the Assessee has claimed the he is not maintaining any books of account. As a settled law that mere suspicion cannot takes place for the purpose of passing an order, in fact there must be something more than suspicion in support of an assessment. As neither the Assessee has received any cash nor paid any cash and there was no real cash credit during the year under consideration, therefore the amount in question as unexplained expenditure could not arise - Assessee appeal allowed.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Validity of reopening of assessment under Section 147/148 of the Income Tax Act.
3. Addition of interest payments as unexplained expenditure under Section 68 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The Assessee filed the appeal with a delay of 23 days, attributing the delay to the death of the father-in-law of the individual responsible for filing. The Tribunal found the reason for the delay to be genuine and bona fide, and thus condoned the delay, allowing the appeal to proceed.

2. Validity of Reopening of Assessment Under Section 147/148:
The reopening of the assessment for the assessment years 2012-13 and 2013-14 was based on information received from the DDIT (Investigation) indicating that the Assessee had received bogus accommodation entries from entities controlled by Mr. Vipul Vidur Bhatt. The Commissioner upheld the reopening, stating that the information from the Investigation Wing constituted tangible material sufficient for assuming jurisdiction under Section 147. The Tribunal, however, noted that the reopening was based on a general statement from a third party without providing the Assessee an opportunity for cross-examination or access to the statement, which is a procedural lapse. The Tribunal emphasized that suspicion alone cannot justify an assessment, and there must be substantive evidence.

3. Addition of Interest Payments as Unexplained Expenditure Under Section 68:
The Assessee had taken loans from M/s. Santoshima Tradelinks Ltd and Vasudev Rawal HUF in the financial year 2010-11 and paid interest on these loans in the subsequent years. The Assessing Officer added the interest payments as unexplained expenditure under Section 68, citing the entities as bogus based on Mr. Vipul Vidur Bhatt's statement. The Commissioner affirmed this addition. However, the Tribunal found that the Assessee had provided sufficient evidence to substantiate the genuineness of the transactions, including loan confirmations, tax returns, and bank statements. Furthermore, the Assessee had deducted TDS on the interest payments, reinforcing the legitimacy of the transactions. The Tribunal concluded that there was no real cash credit during the assessment year in question, and therefore, the provisions of Section 68 were not applicable. Consequently, the Tribunal deleted the addition of Rs. 3,00,000/- for AY 2012-13 and Rs. 2,40,000/- for AY 2013-14, allowing the appeal in favor of the Assessee.

In summary, the Tribunal allowed the appeal by condoning the delay, questioning the procedural validity of the reopening of the assessment, and deleting the additions made under Section 68, citing insufficient evidence and procedural lapses in the assessment process.