2024 (4) TMI 312 - AT - Income Tax

Unexplained cash credit - Addition u/s 68 - assessee received unsecured loans from various parties - CIT(A) deleted addition - HELD THAT - Assessee established complete chain of flow of funds by way of elaborate written submissions during the course of appellate proceedings. The relevant ledgers were also furnished. Assessee has received unsecured loans from 3 entities. The source of the same was commission received from Kawarlal sons and M/s D.K. Enterprises which are group concerns of the assessee. These two concerns have surrendered income before Hon ble ITSC and therefore the impugned additions have been taxed at source itself. The assessee has established clear chain of funds to substantiate this fact. The assessee has also filed necessary details including income offered before settlement commission in the name of group companies and further clarified that group Companies had paid commission to above entities of Umed Mehta. Considering all these facts CIT(A) held that impugned credits stood subjected to tax and covered by Settlement application. Except for mere allegations the remand report is unable to controvert all these findings. In such a situation we see no reason to interfere in the impugned order. Decided against revenue.

Issues Involved:
1. Deletion of addition towards unexplained credits.
2. Validity of the transactions with Umed Mehta and his floated concerns.
3. Taxation of transactions not covered by the Income-Tax Settlement Commission (ITSC).

Summary:

Issue 1: Deletion of addition towards unexplained credits
The revenue challenged the deletion of Rs. 2.47 Crores made towards unexplained credits by the CIT(A). The AO had added this amount as unsecured loans received from three entities: C. Umedmal HUF, M/s Chakra Exports, and M/s Pranav Enterprises, which were deemed as devices to introduce the assessee's own unexplained money into the account. The CIT(A) deleted the additions, stating that the impugned credits had already been subjected to tax in the settlement application of the assessee's group concerns, M/s Kawarlal & Sons and M/s D.K. Enterprises, before the ITSC.

Issue 2: Validity of the transactions with Umed Mehta and his floated concerns
The AO argued that the transactions were sham, involving circular movement of funds among the assessee's group concerns, and were merely devices to evade taxes. During the survey, Shri Umed Mehta admitted to floating various concerns to accommodate receipts from M/s Kawarlal & Sons. However, the CIT(A) found that the unsecured loans were sourced from commission payments, which had already been taxed at the source in the hands of the group concerns. The assessee provided a detailed chain of funds and ledger accounts to substantiate this.

Issue 3: Taxation of transactions not covered by the ITSC
The AO contended that the transactions with M/s Pranav Enterprises were never offered for taxation in any assessment years and were not covered in the settlement application before the ITSC. However, the CIT(A) observed that the entire sum of money, including the transactions with M/s Pranav Enterprises, was part of the additional income disclosed before the ITSC. The CIT(A) directed the deletion of the additions, as the impugned credits had already been taxed.

Findings and Adjudication:
The Tribunal upheld the CIT(A)'s order, confirming that the impugned credits had already been subjected to tax and could not be taxed again. The Tribunal noted that the remand report contradicted the AO's findings in the assessment order and failed to provide substantial evidence against the assessee's claims. The appeal was dismissed, reinforcing the principle that an amount once taxed cannot be taxed again.

Conclusion:
The Tribunal dismissed the revenue's appeal, confirming the deletion of Rs. 2.47 Crores towards unexplained credits, as the impugned amounts had already been taxed in the hands of the assessee's group concerns and were covered by the settlement application before the ITSC.

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