2015 (4) TMI 826 - HC - Income Tax

Addition under Section 68 - interest eligibly paid on the said loans - ITAT deleted the additions - Held that - From the assessment order, it appears that the Assessing Officer made the addition of ₹ 33,50,000/- under Section 68 by doubting the genuineness of the transactions and creditworthiness of the depositors. It appears that the Assessing Officer made the addition solely on the ground that though number of opportunities were given, the assessee did not produce those seven depositors before him. However, it is required to be noted that the assessee did produce the conformation letters of those seven depositors and also produced the particulars with respect to those depositors such as PAN numbers etc. and, therefore, the learned CIT(A) as well as the learned ITAT have rightly observed that the assessee discharged his initial burden / onus and, therefore, it was for the Assessing Officer to examine those persons and hold necessary inquiry with respect to those seven depositors whose identity was disclosed and even PAN numbers of those seven depositors were also before the Assessing Officer. Under the circumstances and in the facts and circumstances of the case, it cannot be said that the learned CIT(A) as well as the learned ITAT have committed any error in deleting the addition made under Section 68 of the Act and deleting the disallowance of interest paid to various depositors. - Decided in favour of assessee.

Summary

Issues:
1. Whether the Appellate Tribunal erred in deleting the addition made under Section 68 of the Income Tax Act and interest paid on loans?
2. Whether the Appellate Tribunal correctly appreciated the records in deleting the addition under Section 68?
3. Whether the Appellate Tribunal was right in ignoring cash deposits before issuing cheques for unsecured loans, questioning the genuineness of the transactions?

Analysis:

Issue 1: The Assessing Officer doubted the genuineness of unsecured loans and interest paid to depositors. The assessee claimed to manage accounts of several persons, including the depositors in question. The Assessing Officer made additions under Section 68 of the Act and disallowed interest. The CIT(A) allowed the appeal, stating the assessee proved identity, creditworthiness, and genuineness of the depositors. The ITAT upheld this decision, leading to the current appeal.

Issue 2: The Appellate Tribunal and CIT(A) deleted the additions made by the Assessing Officer under Section 68 and interest disallowance. The Assessing Officer's basis for the addition was the non-production of depositors. However, the assessee provided confirmation letters and PAN details of the depositors. The courts found the initial burden was discharged, and the Assessing Officer should have conducted further inquiries based on the information provided.

Issue 3: The revenue argued that the Assessing Officer rightfully made the additions under Section 68 due to doubts on transactions and depositors' creditworthiness. They contended that the CIT(A) and ITAT erred in deleting the additions. However, the courts held that the assessee fulfilled the initial burden by providing necessary details, and the Assessing Officer should have conducted a proper inquiry based on the information provided.

In conclusion, the courts dismissed the Tax Appeal, stating that no substantial question of law arose. They agreed with the decisions of the CIT(A) and ITAT, emphasizing that the assessee had discharged the initial burden, and the Assessing Officer should have conducted further inquiries before making the additions under Section 68 of the Act.