2024 (7) TMI 1270 - AT - Income Tax

Addition of unsecured loans u/s 68 - assessee failed to prove the creditworthiness of the creditor - CIT(A) deleted addition - HELD THAT - This is for the precise reason that it had filed it s rejoinder containing additional details/evidence before the CIT(A)- NFAC which had nowhere been put to factual verification at the AO s end during remand proceedings. Assessee is found to have very well missed the bus by not filing all the relevant details before the AO in remand proceedings. Mr. Joshi at this stage drew strong parallels between the impugned loan entry vis- -vis other amounts received. His case is that the AO had adopted pick and choose method in adding only the loan in question of Rs.99 lakhs. We see no merit in assessee s arguments for the reason already quoted hereinabove that the department has not been able to get all the corresponding bank accounts et., verified at the AO s end. We accordingly deem it appropriate in these facts and circumstances to restore the Revenue s instant former substantive grounds back to the AO for his afresh appropriate adjudication as per law, subject to the rider that it shall be the taxpayer s risk and responsibility only to plead and prove all the relevant facts in consequential proceedings, within three effective opportunities of hearing. The Revenue instant first and foremost grievance is accepted for statistical purposes. Addition of penalty paid to the owners by the assessee - HELD THAT - AO s remand report indeed expressed agreement with the assessee s explanation that the foregoing amount was incurred wholly and exclusively for the purpose of redevelopment of project since the payments were made to the already existing tenants for their temporary transit alternative accommodation. We thus quote Smt. B. Jayalaxmi 2018 (8) TMI 208 - MADRAS HIGH COURT and DN Purnesh 2020 (9) TMI 731 - KARNATAKA HIGH COURT that the Revenue could hardly be held as an aggrieved party once the assessing authority submits a favourable remand report before the CIT(A)-NFAC and accordingly reject the Revenue s instant second latter substantive ground in very terms.

Summary

Issues:
1. Addition of unsecured loans under sec.68 of the Income Tax Act.
2. Disallowance of penalty paid for non-compliance with agreed conditions.

Analysis:

Issue 1: Addition of unsecured loans under sec.68 of the Income Tax Act
The Revenue appealed against the deletion of the addition of Rs.99,00,000 made in respect of unsecured loans due to the failure of the assessee to prove the creditworthiness of the creditor. The Revenue contended that the loan was unexplained cash credit under sec.68 of the Act. The CIT(A)-NFAC had deleted the addition, stating that all supportive details were filed before the lower authorities. The Assessing Officer's remand report highlighted the lack of proof of the genuineness of the loans or the creditor's creditworthiness. The assessee's additional evidence filed before the CIT(A)-NFAC was not verified during the remand proceedings, leading to the restoration of the Revenue's substantive grounds back to the Assessing Officer for further adjudication. The assessee's arguments were deemed unconvincing as relevant details were not provided to the Assessing Officer during the remand proceedings. The Revenue's grievance was accepted for statistical purposes, and the matter was remanded back to the Assessing Officer for appropriate adjudication.

Issue 2: Disallowance of penalty paid for non-compliance with agreed conditions
The second issue pertained to the disallowance of Rs.32,13,464 paid as a penalty to the owners for non-compliance with agreed conditions. The Assessing Officer, in the remand report, agreed with the assessee's explanation that the amount was incurred for the redevelopment project's purpose. Citing relevant case laws, it was concluded that the Revenue could not be considered an aggrieved party when the assessing authority submits a favorable remand report. As a result, the Revenue's second substantive ground was rejected, and the appeal was partly allowed for statistical purposes.

This judgment by the Appellate Tribunal ITAT Mumbai addressed the issues of unsecured loans addition under sec.68 of the Income Tax Act and the disallowance of penalty paid for non-compliance. The decision emphasized the importance of providing all relevant details to the Assessing Officer during proceedings and the significance of favorable remand reports in determining the outcome of appeals.