2015 (7) TMI 981 - AT - Income Tax

Addition made u/s. 68 - Held that - The unsecured loans received during the year of ₹ 3,00,000/- have been held to be unexplained cash-credits within the meaning of section 68 of the Act. We find that in the impugned assessment, which has been affirmed by the CIT(A) also, there is no material referred by the Assessing Officer which came to his notice subsequent to the assessment order dated 28.03.2003(supra). Pertinently, in the assessment order dated 28.03.2003 (supra), the statement of Shri Nitin J. Rughani sought to be relied upon by the Assessing Officer in the impugned assessment, was very much available and it is not a new material. In fact, in the course of the assessment dated 28.03.2003 (supra), the Assessing Officer carried out detailed enquiries including examination of the concerned parties u/s 133(1) of the Act. An affidavit was also filed by Shri Nitin J. Rughani pointing out that so far as the transactions relating to the assessee were concerned, the same are genuine. All these assertions have been made before the CIT(A). So however, we find that the CIT(A) has glossed over the same and he has merely referred to the material with the Assessing Officer prior to the finalization of assessment order dated 28.03.2009(supra). Ostensibly, such material was put to verification by Assessing Officer and only thereafter, he has accepted the transactions as genuine in the assessment dated 28.03.2003 (supra). Considering the entirety of facts and circumstances of the present case, we are unable to uphold the assertions of the Assessing Officer that the unsecured loans of ₹ 3,00,000/- received by the assessee during the year under consideration were unexplained within the meaning of section 68 of the Act. As a consequence, we set aside the order of CIT(A) and direct the Assessing Officer to delete the addition of ₹ 3,00,000/-. - Decided in favour of assessee.

Issues:
- Appeal against addition made under section 68 of the Income Tax Act, 1961.
- Reopening of assessment and subsequent revision under section 263 of the Act.
- Dispute regarding unsecured loans treated as unexplained cash credit.
- Interpretation of material found during survey action and statements recorded.
- Examination of genuineness of loans and creditworthiness of creditors.
- Jurisdiction of the Commissioner under section 263 of the Act.
- Applicability of section 68 of the Act to unsecured loans received.
- Assessment based on previous findings and lack of new material.

Issue 1: Appeal against addition under section 68 of the Income Tax Act:
The case involved an appeal against an addition made under section 68 of the Income Tax Act, 1961, concerning unexplained cash credit. The appellant contested the addition of Rs. 3,00,000 as unsecured loans from various parties, arguing that the loans were genuine and had been previously examined during a reassessment. The dispute centered on the genuineness of the loans and the application of section 68 by the Assessing Officer.

Issue 2: Reopening of assessment and revision under section 263 of the Act:
The assessment was reopened under section 147/148 of the Act, leading to a revision under section 263 by the Commissioner. The Commissioner set aside the initial assessment as prejudicial to the interests of Revenue, prompting a new assessment where the disputed addition was made. The appellant contended that no new material was presented during the subsequent assessment to justify treating the loans as unexplained cash credit.

Issue 3: Interpretation of material from survey action and statements recorded:
The dispute stemmed from a survey action on a related party, Shri Nitin J. Rughani, who admitted involvement in providing Hawala entries through arranging loans. The loans received by the appellant were linked to parties associated with Shri Nitin J. Rughani, raising concerns about the genuineness of the transactions. The Assessing Officer relied on statements and material found during the survey to treat the loans as accommodation entries.

Issue 4: Examination of genuineness of loans and creditworthiness of creditors:
During the initial assessment and subsequent reassessment, detailed enquiries were conducted to verify the genuineness and creditworthiness of the creditors providing the unsecured loans. The appellant argued that no new evidence was presented to question the authenticity of the loans, emphasizing that previous assessments had confirmed their legitimacy.

Issue 5: Jurisdiction of the Commissioner under section 263 of the Act:
The Commissioner's exercise of revisionary powers under section 263 led to the addition of the disputed amount as unexplained cash credit. The appellant challenged this decision, highlighting the absence of fresh material or substantial grounds to deviate from the findings of the earlier assessments.

Issue 6: Applicability of section 68 of the Act to unsecured loans received:
The core contention revolved around the application of section 68 of the Act to the unsecured loans received by the appellant. The Assessing Officer treated the loans as unexplained cash credit based on the survey findings and statements, while the appellant maintained that the loans were genuine and had been properly examined in previous assessments.

Issue 7: Assessment based on previous findings and lack of new material:
The Tribunal concluded that the Assessing Officer failed to provide new material or substantial grounds to support the addition of Rs. 3,00,000 as unexplained cash credit. The Tribunal found that the earlier assessments had thoroughly examined the loans' genuineness, and there was no valid reason to overturn those findings. Consequently, the Tribunal directed the Assessing Officer to delete the disputed addition, ruling in favor of the appellant in both appeals.

This detailed analysis covers the key issues raised in the judgment, focusing on the legal arguments, interpretations of the Income Tax Act provisions, and the Tribunal's decision based on the facts presented during the proceedings.

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