2016 (10) TMI 851 - AT - Income Tax

Addition u/s 68 - Addition on loan and advances - Held that - As during the course of assessment proceedings, the assessee filed Confirmation, ITR, Computation of income, Bank statement, and Balance Sheet as on 31.03.2008 of the lender and the payment were made through the loan was also repaid back before the initiation of banking channels. The loan was also repaid back before the initiation of assessment proceedings. It was noted that the AO did not make any specific enquiries in the assessment proceedings as well as in the remand proceedings to discredit the documents produced by the aforesaid aspects and no efforts were made to pursue the lender to determine their credit worthiness. Moreover, there was no adverse material in the hands of AO which casts aspersions on the genuineness of transaction. Mere non compliance of summon cannot be the basis to make addition. - No additions - Decided against revenue Addition on loan and advances - Held that - since the amount advanced was in the nature of loan which was repayable in future and hence the provision of section 56(2)(vi) of the Income Tax Act cannot be invoked against the assessee and therefore the assessing officer was rightly directed to delete the impugned addition. In the background, CIT(A) has passed a well reasoned order which does not need any interference hence uphold the same

Summary

Issues:
1. Failure to exercise power under section 250(4) of the I.T. Act
2. Deletion of addition of ?22,54,338
3. Observations on non-compliance of summons
4. Deletion of addition of ?14,00,000
5. Grounds for appeal alteration

Analysis:
1. The first issue pertains to the failure of the Ld. CIT(A) to exercise power under section 250(4) of the I.T. Act, as contended by the Revenue. The Revenue argued that it is essential for the CIT(A) to invoke this section, citing relevant court cases. However, the judgment did not find merit in this argument and dismissed this ground of appeal.

2. The second issue revolves around the deletion of an addition of ?22,54,338 by the Ld. CIT(A). The AO had made this addition on account of unexplained cash credit under section 68. The Ld. CIT(A) found that the appellant had provided sufficient documentation, including confirmation, bank statements, and balance sheets, to support the transaction's genuineness. The judgment upheld the Ld. CIT(A)'s decision, stating that no adverse material was present to question the transaction's authenticity, and the AO had not pursued specific inquiries to discredit the documents.

3. The third issue concerns observations on non-compliance of summons and its impact on additions. The Ld. CIT(A) noted that mere non-compliance of summons cannot be the sole basis for making additions. The judgment agreed with this observation, emphasizing the importance of pursuing thorough investigations and establishing creditworthiness before making such additions.

4. The fourth issue addresses the deletion of an addition of ?14,00,000 by the Ld. CIT(A). This addition was made under section 56(2) for unexplained cash credit. The judgment highlighted that the appellant had shown the amount as a loan in the balance sheet, supported by loan confirmation certificates. The Ld. CIT(A) found the transaction to be in the nature of a loan repayable in the future, thus directing the AO to delete the addition. The judgment upheld this decision, emphasizing the validity of the documents presented.

5. Lastly, the judgment mentioned the appellant's plea to add, alter, or amend any grounds of appeal during the appellate proceedings. The judgment concluded by dismissing the Revenue's appeal and upholding the Ld. CIT(A)'s well-reasoned orders in both instances of deletion of additions.