2024 (6) TMI 860 - AT - Income Tax

Reopening of assessment - unexplained cash credit u/s. 68 - HELD THAT - From the perusal of the reasons for reopening, it was in respect of the search conducted on three entities and the verification is a must for these transactions and the statements made by the concerned directors and the accountants of the said groups. There was no other discrepancies pointed out by the assessee and therefore reopening is valid. Thus, ground no. 1 is dismissed. Addition u/s 68 - Assessee has given confirmation of bank statement of M/s. Hartron Network Ltd. as well as the intention for obtaining said loan thereby saying that the assessee invested the said amount for acquiring the shares of Kanungo Financers Ltd. the AO doubted the expenses of Kanungo Financers Ltd. but documents and details reveal it otherwise as it is an operational company. As regards, the loss return filed by the M/s. Hartrol Network Ltd., from the perusal of the bank statement and the relevant documents the said company was having sufficient balance to give the loan to the assessee at the particular period. Merely filing the loss return cannot shake the intention of loss return company as they might have reserve funds which in the present is clearly shown in the bank statement as well as its returns (Profit and Loss account). The confirmation itself was not doubted by the AO and therefore this transaction is properly explained by the assessee and section 68 will not come into picture. This ground no. 2 is allowed. Appeal of the assessee is partly allowed.

Summary

Issues involved: Appeal against order dated 05-07-2023 passed by National Faceless Appeal Centre (NFAC), Delhi for assessment year 2016-17.

Issue 1: Reopening of the case u/s. 147
- The Assessing Officer initiated proceedings without specifying the name of the person who paid Rs. 30,00,000 to the appellant.
- The CIT(A) upheld the addition of unsecured loan u/s. 68 despite furnished confirmation, ITR, and bank statement of the lender.
- The appellant argued that the reopening based on vague information from searches on different groups was not valid.
- The A.R. relied on legal precedents to challenge the reopening and the addition of unsecured loan.

Issue 2: Addition of unsecured loan u/s. 68
- The Assessing Officer added Rs. 30,00,000 as unexplained cash credit u/s. 68 despite the appellant providing documentation to establish the genuineness of the loan.
- The CIT(A) partly allowed the appeal of the assessee regarding this addition.
- The appellant contended that the lender's financial position was sound and the investment made from the loan was legitimate.
- Legal arguments were presented citing relevant court decisions to support the appellant's case.

Judgment Summary:
- The assessee's return for the assessment year 2016-17 was scrutinized following searches on various groups.
- The Assessing Officer made an addition of Rs. 30,00,000 as unexplained cash credit u/s. 68, which the CIT(A) partly upheld.
- The appellant challenged the reopening of the case u/s. 147 and the addition of the unsecured loan, providing substantial evidence to support the legitimacy of the transactions.
- After hearing both parties, the Tribunal dismissed the appeal regarding the reopening of the case but allowed the appeal against the addition of the unsecured loan u/s. 68.
- The Tribunal found that the appellant had adequately demonstrated the source and utilization of the loan, rendering the Assessing Officer's doubts unfounded.
- The confirmation of the bank statement and the investment details supported the appellant's explanation, leading to the allowance of the appeal on the second ground.
- The Tribunal pronounced the order on 12-01-2024, partly allowing the appeal of the assessee.