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2013 (5) TMI 278 - AT - Income TaxUnexplained cash credit/ceased liability u/s 28(iv) - CIT(A) directed the AO to re-open the A.Y. 2002-03 as the addition was not sustainable - Held that - As can be seen from the chart of credit received only an amount of Rs.3,84,000/- has been received in the financial year relevant for A.Y. 2002-03. Balance of the amount has been received in later years. So, issuing direction for the A.Y. 2002-03 for the entire amount is not factually correct. Secondly, the assessee furnished confirmation from the party. This additional evidence has been rejected but the confirmation of credit could have been examined in the year itself when the party confirms the credit how a finding can be given for reopening in earlier year is not explained. Thirdly, the AO can not reopen the A.Y. 2002-03 by the time be finalized the proceeding. He is aware of the credit in that year. Since the law prohibits the reopening u/s 147 beyond six years, the direction of CIT(A) to reopen A.Y.2002- 03 in financial year 2012 in the order is against the provisions of law and principles on the issue. There is no finding that the amount was undisclosed. Even the AO order indicates that it is received through banking channel. That itself may not affirm the genuineness of the credit but confirmation filed by assessee prima facie indicate that the amount can not be treated as unexplained cash credit.Reopening order is to be quashed - In favour of assessee.
Issues Involved:
1. Addition of Rs.15,34,000/- as unexplained cash credit/ceased liability under section 28(iv) of the Income Tax Act. 2. Direction by the CIT(A) to re-open the assessment year (A.Y.) 2002-03. Issue-wise Detailed Analysis: 1. Addition of Rs.15,34,000/- as Unexplained Cash Credit/Ceased Liability under Section 28(iv) of the Income Tax Act: The assessee, a builder and developer, had shown an unsecured loan of Rs.15,34,000/- from an individual in the balance sheet, which had been outstanding for several years. The Assessing Officer (AO) treated this amount as unexplained cash credits and added it to the total income for the following reasons: - The loan was not confirmed by the creditor. - The identity of the creditor was not established. - The loan was considered a ceased liability due to the lack of acknowledgment from the creditor. - The loan appeared in the books of the assessee and was deemed ceased due to non-submission of confirmation. - The loan was borrowed for business purposes, thus falling within the purview of section 28(iv) of the Income Tax Act, 1961. On appeal, the CIT(A) directed the AO to re-open the A.Y. 2002-03, stating that the addition was not sustainable in the relevant year (A.Y. 2008-09) under consideration. The CIT(A) noted that the loan pertained to A.Y. 2002-03 and could not be admitted as additional evidence for A.Y. 2008-09. The confirmation letter from the creditor, submitted during the appellate proceedings, was not considered as it was not produced before the AO initially. 2. Direction by the CIT(A) to Re-open the Assessment Year (A.Y.) 2002-03: The assessee contended that the CIT(A) could not direct the AO to re-open the assessment for A.Y. 2002-03, citing several legal precedents: - The reopening of an assessment must be based on the AO's belief and not on the direction of a higher authority. - The CIT(A)'s findings should be confined to the subject matter of the appeal and necessary for the disposal of the ground of appeal. - The CIT(A) cannot issue directions for reopening assessments of years not under appeal. - The CIT(A) should not enlarge the limitation period or secure the interest of the Revenue by directing the reopening of concluded assessments. The Tribunal agreed with the assessee's contention, noting that: - Only Rs.3,84,000/- was received in the financial year relevant to A.Y. 2002-03, with the balance received in later years. Thus, directing the reopening of A.Y. 2002-03 for the entire amount was factually incorrect. - The confirmation from the creditor should have been examined in the year itself. - The AO could not reopen A.Y. 2002-03 as the limitation period had expired. - The direction to reopen A.Y. 2002-03 was against the provisions of law and principles on the issue. The Tribunal concluded that the CIT(A)'s direction to reopen A.Y. 2002-03 was not justified and was an ultra vires exercise of jurisdiction. The Tribunal modified the CIT(A)'s order and allowed the assessee's appeal, stating that the impugned addition could not be made in the relevant year (A.Y. 2008-09). Conclusion: The Tribunal held that the addition of Rs.15,34,000/- as unexplained cash credit/ceased liability under section 28(iv) of the Income Tax Act was not sustainable for A.Y. 2008-09. The direction by the CIT(A) to re-open A.Y. 2002-03 was deemed unjustified and beyond jurisdiction. Consequently, the Tribunal allowed the appeal filed by the assessee.
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