2024 (7) TMI 655 - AT - Income Tax

Disallowance of provisions for routine expenses - audit fees, accounting charges and legal professional fees - failure of the assessee to furnish full particulars of provision for expenditure as well as substantiate the same - HELD THAT - We find that the CIT(A)/NFAC merely extracted the submissions made by the assessee by giving bald finding, simply confirmed the addition only to the extent of Rs. 83,000/- without giving any cogent reason. Therefore, matter is required to be sent back to the file of CIT(A)/NFAC with a direction to pass a reasoned order after adverting to the written submissions of the assessee as well as the evidence filed during the course of assessment proceedings. Thus, Ground of appeal No.1 stands partly allowed. Addition on account of unsecured loans - failure of the assessee to furnish any explanation with regard to unsecured loans establishing identity of the loan creditors, their creditworthiness and the genuineness of the transactions - CIT(A)/NFAC deleted the part addition and confirmed balance of addition in respect of unsecured loan obtained from Mr. Janardhan Anant Patil by holding that the appellant only filed PAN and bank statement of the said lender but not submitted any evidence as to the creditworthiness of the lender - HELD THAT - On perusal of the relevant material on record, bank statement of Mr. Janardhan Anant Patil, we are of the considered opinion that it can be found out whether there are any deposits in his account before giving loan to the assessee. It can also be found out whether said person has given the unsecured loans out of the money standing to his credit. From the reading of CIT(A)/NFAC s order, it would show that the ld.CIT(A)/NFAC swayed away by the remand report of the AO - It is also clear that the CIT(A)/NFAC has passed the order without any independent application of mind. Therefore, in the interest of justice, we are of the opinion that the matter requires remission to the file of CIT(A)/NFAC. Unexplained cash credit u/s. 69A - Requirement of passing a reasoned order by an authority whether administrative, quasi judicial or judicial - CIT(A)/NFAC deleted addition - DR submits that the ld.CIT(A)/NFAC without discussing any factual evidences merely deleted the addition - HELD THAT - During the proceedings before the NFAC, it appears that the appellant had filed certain information/documents in support of the sources of the cash deposits. The ld.CIT(A)/NFAC had rightly called for the remand report from the Assessing Officer, however, deleted the addition without any discussion on facts of the case and the law governing the facts. However, the ld.CIT(A)/NFAC had failed to discuss the evidences as well as the remand report submitted by the Assessing Officer while reaching the satisfaction as to the sources of cash deposits. Needless to mention that in respect of the additions made on account of cash deposits, the sources of cash deposits, the evidences filed in support of the each cash deposits should be examined and then only the ld.CIT(A)/NFAC could have reached the satisfaction about the sources of the cash deposits. In the present case, the ld.CIT(A)/NFAC deleted the addition by recording a bald findings which does not meet the requirements of principles of natural justice and a reasoned order. The Hon ble Supreme Court in the case of Pankaj Garg vs. Meenu Garg 2013 (2) TMI 924 - SUPREME COURT reiterated the settled position of law an order which does not contain any reason is no order in the eyes of law. Therefore, the order passed by the NFAC does not meet the requirements of being a reasoned order. Appeal filed by the assessee as well as Revenue is partly allowed.

Summary

Issues Involved:
1. Disallowance of provisions for routine expenses.
2. Addition of unsecured loan under Section 68.
3. Addition of unexplained cash credit under Section 69A.

Detailed Analysis:

1. Disallowance of Provisions for Routine Expenses:
The assessee challenged the addition of Rs. 83,000/- on account of provision for expenditure as confirmed by CIT(A)/NFAC. The Assessing Officer initially disallowed Rs. 15,92,941/- due to the assessee's failure to furnish full particulars. CIT(A)/NFAC reduced this disallowance to Rs. 83,000/- without providing a detailed rationale. The Tribunal found that the CIT(A)/NFAC merely extracted the assessee's submissions and confirmed the addition without any cogent reason. Therefore, the matter was remitted back to the CIT(A)/NFAC to pass a reasoned order after considering the assessee's submissions and evidence. Ground of appeal No.1 was partly allowed.

2. Addition of Unsecured Loan Under Section 68:
The assessee contested the addition of Rs. 50,00,000/- on account of unsecured loans. The Assessing Officer had added Rs. 54,00,000/- due to the assessee's failure to establish the identity, creditworthiness, and genuineness of the loan creditors. CIT(A)/NFAC deleted Rs. 4,00,000/- but confirmed the addition of Rs. 50,00,000/- from Mr. Janardhan Anant Patil, citing insufficient evidence of the lender's creditworthiness. The Tribunal noted that the CIT(A)/NFAC relied heavily on the remand report and lacked independent application of mind. The matter was remitted back to the CIT(A)/NFAC for a detailed examination of the lender's bank statements and other relevant documents. Grounds of appeal No.2 and 3 were partly allowed.

3. Addition of Unexplained Cash Credit Under Section 69A:
The Revenue challenged the deletion of Rs. 3,68,76,096/- on account of cash deposits with HDFC Bank Ltd. The Assessing Officer had made the addition due to the assessee's failure to explain the source of cash deposits. CIT(A)/NFAC deleted the addition based on a remand report without discussing the factual evidence. The Tribunal found that CIT(A)/NFAC failed to provide a reasoned order and did not adequately discuss the evidence or the remand report. Citing the Supreme Court's guidelines on the necessity of reasoned orders, the Tribunal remitted the matter back to CIT(A)/NFAC for a detailed examination of each cash deposit. Grounds of appeal of the Revenue were partly allowed.

Conclusion:
Both the assessee's and the Revenue's appeals were partly allowed. The Tribunal remitted the matters back to the CIT(A)/NFAC for passing reasoned orders after a detailed examination of the evidence and submissions. The judgment emphasized the necessity of reasoned orders to meet the principles of natural justice and judicial accountability.