2012 (4) TMI 272 - AT - Income Tax

Unexplained cash credits CIT(A) deleted major additions made by A.O. - addition related to amount advanced by non-resident retained in absence of evidences - Held that - Order of CIT(A) is upheld since assessee discharged his onus by establishing the identity, credit worthiness of parties and genuineness of the transactions and onus shifts to revenue, which is not discharged by it. AO cannot brush aside the evidences submitted during assessment proceedings and make additions. Further, CIT(A) have rightly excluded opening balance pertaining to the earlier years from the total addition - Decided against the Revenue With respect to amount advanced by non-resident Assessee submitted that since creditor is not assessed to tax in India, details of the tax returned could not be filed held that - Since there is no finding in the assessment order about the claim made by the assessee, so it will be proper to remit the matter back to the AO for making verification in this regard and pass a speaking order Decided in favor of assessee for statistical purposes.

Summary

Issues Involved:
1. Deletion of addition amounting to Rs. 80 lacs made by the AO under Section 68 of the Income-tax Act, 1961.
2. Deletion of addition on account of interest payments except for one creditor.
3. Addition upheld by CIT(A) for one creditor, Shri Gangu Hingorani, and interest paid to him.

Issue-wise Detailed Analysis:

1. Deletion of Addition Amounting to Rs. 80 Lacs:
The Assessing Officer (AO) added Rs. 86,47,500/- as unexplained cash credits, citing that the assessee used accounts of relatives and friends merely for entry purposes. The AO observed that transactions were suspicious as money was deposited and transferred on the same day, and many loan givers had the same address or bank as the assessee. The CIT(A) deleted the addition except for one creditor, stating that almost all cash creditors were assessed to tax and their PANs were provided. The CIT(A) also noted that the AO added opening balances from earlier years, which was not sustainable. The CIT(A) concluded that the assessee established the identity, creditworthiness, and genuineness of the transactions, shifting the onus to the department. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO did not make further inquiries to rebut the evidence provided by the assessee.

2. Deletion of Addition on Account of Interest Payments:
The CIT(A) deleted the addition on account of interest payments made to creditors except for interest paid to Shri G. Hingorani. The Tribunal upheld this decision, reiterating that the assessee had provided sufficient evidence to establish the genuineness of the transactions and the identity and creditworthiness of the creditors. The AO's failure to conduct further inquiries or provide material evidence to the contrary meant that the CIT(A)'s deletion of the addition was justified.

3. Addition Upheld by CIT(A) for One Creditor, Shri Gangu Hingorani:
The CIT(A) upheld the addition made by the AO for Shri Gangu Hingorani, a non-resident who was not assessed to tax in India, as no evidence supporting the genuineness of the transaction was provided. The Tribunal remitted the matter back to the AO for verification, noting that the assessee claimed the loan was advanced from matured FDRs and foreign remittances. The AO was directed to make a verification and pass a speaking order.

Conclusion:
The Tribunal upheld the CIT(A)'s deletion of the addition made under Section 68 of the Act, except for the case of Shri Gangu Hingorani, which was remitted back to the AO for further verification. The appeal filed by the AO was dismissed, and the appeal filed by the assessee was allowed for statistical purposes.