2024 (6) TMI 274 - AT - Income Tax

Addition u/s 68 - Non establishment the identity of the creditors and their creditworthiness as well as genuineness of the transaction - Admission of additional evidences - HELD THAT - The Hon ble High Court of Karnataka in M/s. Google India Private Ltd. 2021 (4) TMI 1044 - KARNATAKA HIGH COURT has been pleased to hold that if additional evidence is to be considered and allowed by the Tribunal the parties to the proceedings or the affected party should be well aware of the said material/additional evidence before the same is considered by the Hon ble Tribunal In case the judgment of the Ld. Coordinate Bench is to be considered wherein the identity of the parties there creditworthiness and genuineness of the transactions were considered because the documents have already been filed before the Ld. AO hence the genuineness of the transaction needs to be established independently by the assessee for the relevant A.Y. 2015-16. For that reasons the end of justice requires that assessee/appellant be given opportunity to file additional evidence in support of his claim of identity of the parties who advanced loans and their creditworthiness alongwith genuineness of the transactions. In view of the provisions of the Rule 30 of the Appellate Tribunal Rules 1963 and in the given facts and circumstances the case is restored to the file of the Ld. AO who shall consider the additional evidence to be filed by the assessee/appellant before the Ld. AO within the period of 60 days from this order. The grounds of the appeal are allowed for statistical purposes.

Summary

Issues Involved:
1. Disallowance of interest expenditure and unsecured loans.
2. Addition u/s 68 as unexplained cash credit.
3. Application for additional evidence.

Summary:

1. Disallowance of Interest Expenditure and Unsecured Loans:
The assessee, a partnership firm engaged in property development, filed a return for A.Y. 2015-16 declaring nil income. The case was selected for scrutiny, and statutory notices u/s 143(2) and 142(1) were issued. The assessee had borrowed new loans and paid interest to various unsecured loan parties. During the assessment proceedings, the assessee provided confirmations, ITR copies, and bank statements of the loan parties. However, the DIT (Investigation) reported that the lenders were not available at the given addresses, and no business activity was found, leading to doubts about the genuineness of the interest expenditure and identity of the loan parties. Consequently, the AO disallowed the interest expenditure of Rs. 1,51,31,232/- and reduced the closing work in progress (WIP).

2. Addition u/s 68 as Unexplained Cash Credit:
The AO observed that the lenders were acting as accommodation entry providers and not engaged in real business activities. The assessee failed to prove the genuineness of the transactions and the creditworthiness of the unsecured loan parties. Therefore, an amount of Rs. 2,25,00,000/- was disallowed and added to the total income of the assessee u/s 68 as unexplained cash credit. The CIT(A) upheld the AO's decision, leading to the present appeal.

3. Application for Additional Evidence:
The assessee argued that sufficient evidence was available to prove the genuineness and creditworthiness of the loan parties. The assessee sought permission to file additional evidence under Rule 29 of the Appellate Tribunal Rules, 1963, to establish the identity and creditworthiness of the creditors. The Tribunal considered the rival submissions and allowed the additional evidence, noting that the assessee had a justified reason for not producing the evidence earlier. The case was restored to the file of the AO to consider the additional evidence within 60 days.

Conclusion:
The appeal was allowed for statistical purposes, permitting the assessee to file additional evidence to establish the genuineness of the transactions. The AO was directed to consider the additional evidence and reassess the case accordingly.