2025 (1) TMI 1484 - AT - Income Tax

Addition u/s 68 - unsecured loan obtained by the assessee / appellant from his wife Freyan Jamshed Desai by alleging that source of credit - HELD THAT - We find materials substance in the submissions of assessee / appellant by which is crystal clear that the identity of the lender genuineness of the Transaction and creditworthiness of wife of assessee / appellant is beyond question and by furnishing documentary evidences the assessee appellant succeeded to discharge primary onus to prove or establish the same and there is nothing on record to controvert which has to bring the necessarily on record by the Revenue as per law and even the Ld. AO /CIT(A) nowhere doubted about genuineness of the document placed on record by assessee. In above fact situation addition made by the Ld. AO on account of unsecured loan obtained by the assessee / appellant from his wife which was affirmed by the CIT(A) is quite unsustainable in the eye of law and hence ground no. 2 2.1 and 2.2 is hereby allowed. Denial of exemption u/s 10(13A) of the HRA alleging absence of proof regarding payment of actual rent - As relevant that alleging absence of proof regarding payment of actual rent is unwarranted more so when the eligibility to claim HRA exemption is not disputed by the Revenue. It is also submitted that strangely the Ld. CIT(A) while deciding the appeal ignored the back account statement submitted before him and dismissed the plea by stating that in the absence of actual rent paid by the assessee the submissions of him not accepted and above all it is highly relevant that the case of the assessee / appellant for the subsequent assessment years i.e. 2018-19 was also selected for scrutiny assessment wherein identical issue relating to exemption of HRA was examined in detail and thereafter the assessing officer fully allowed the claim to appellant without any deviation / disallowance. We find substance in submissions which is supported with relevant material on record and hence this ground of appeal is allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment revolve around the following questions:

1. Whether the CIT(A) erred in dismissing the appeal without considering the appellant's submissions and without granting an opportunity for a hearing, thus violating statutory provisions and principles of natural justice.

2. Whether the CIT(A) was correct in upholding the addition of Rs. 1,00,00,000 under Section 68 of the Income Tax Act, concerning an unsecured loan from the appellant's wife, despite evidence presented regarding the identity, creditworthiness, and genuineness of the transaction.

3. Whether the CIT(A) erred in not deleting the addition of Rs. 1,68,000 as deemed income from vacant house property.

4. Whether the CIT(A) was justified in denying an exemption of Rs. 24,09,000 under Section 10(13A) of the Act for house rent allowance (HRA), citing a lack of proof of actual rent payment.

5. Whether the assessing officer's imposition of interest under Sections 234B and 234C of the Act was justified.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Dismissal of Appeal without Hearing

The appellant contended that the CIT(A) dismissed the appeal without considering the extensive submissions and documents provided, and without offering a hearing, thus violating principles of natural justice. The Tribunal noted that the CIT(A) merely reiterated the assessing officer's findings without independent analysis. This procedural lapse was deemed a significant oversight, undermining the fairness of the appellate process.

Issue 2: Addition under Section 68

The Tribunal examined the legal framework under Section 68, which requires the assessee to prove the identity, creditworthiness, and genuineness of the transaction. The appellant provided various documents, including bank statements, income tax returns, and ledger accounts, to substantiate the loan from his wife. The Tribunal found that these documents sufficiently demonstrated the lender's identity and creditworthiness, as well as the genuineness of the transaction, particularly since the transactions were conducted through banking channels. The Tribunal criticized the CIT(A) for failing to engage with this evidence and for disregarding the appellant's explanations, which shifted the burden of proof back to the Revenue.

Issue 3: Deemed Income from Vacant Property

This issue was not pressed by the appellant and therefore was not adjudicated by the Tribunal.

Issue 4: Denial of HRA Exemption

The appellant argued that the denial of HRA exemption was unjustified, as he had submitted bank statements, a rent agreement, and Form 16 to demonstrate actual rent payments. The Tribunal found that these documents were sufficient to prove the payment of rent and the eligibility for HRA exemption. The Tribunal noted the CIT(A)'s failure to consider these documents and highlighted the inconsistency with the subsequent assessment year where the HRA claim was accepted. Thus, the Tribunal allowed this ground of appeal.

Issue 5: Imposition of Interest

This issue was deemed general in nature and was not specifically adjudicated by the Tribunal.

SIGNIFICANT HOLDINGS

The Tribunal's significant holdings include the following:

- The Tribunal emphasized the importance of procedural fairness and the need for appellate authorities to independently assess the evidence presented, rather than merely reiterating the findings of lower authorities.

- The Tribunal reaffirmed the principle that once an assessee provides a reasonable explanation and supporting evidence for a transaction under Section 68, the burden shifts to the Revenue to disprove the evidence.

- The Tribunal underscored the necessity of considering all relevant documents and evidence when adjudicating claims for exemptions, such as HRA, and criticized the CIT(A) for failing to do so in this case.

In conclusion, the Tribunal allowed the appeal, finding that the additions made by the assessing officer and upheld by the CIT(A) were unsustainable in law. The Tribunal's decision underscores the importance of procedural fairness and the proper application of evidentiary standards in tax adjudications.