2017 (5) TMI 205 - AT - Income Tax

Addition u/s 68 - loans creditors admitted to the fact of having advanced the loan to the assessee - Held that - It is not the case of the assessee that the loan creditors had advanced the money out of the income of the year alone and no positive material has been brought on record to show that loan creditors could not have any other source like his capital i.e. saving of earlier years or receipt from any other person from which the loan creditors could not have advanced the loan. The Assessing Officer observed that the loan creditors have deposited the amount in cash before issuing cheque to the assessee. In our view where a borrowing or a credit is shown to have come from the person other than the assessee, there is no further responsibility for the assessee to show that it has come from the accounted source of the lender. As decided in case of CIT vs. Shiv Dhooti Pearls & Investment 2015 (12) TMI 1291 - DELHI HIGH COURT held that where the assessee has discharged its onus to prove the creditworthiness and genuineness of the lender, there was no requirement in law for the assessee to prove the genuineness and creditworthiness of the sub-creditor. Thus we delete the addition made by the Assessing Officer u/s.68 of the Act as unexplained cash credit. - Decided in favour of assessee Denying deduction u/s.54F claimed out of long term capital gain on sale of land - Held that - We are of the considered view that if during the course of assessment proceedings, the assessee filed details of claim of exemption of the same u/s.54F of the Act, the Assessing Officer is duty bound to entertain those details and verify the same and if the assessee is found eligible otherwise as per the conditions u/s.54F of the Act, he is bound to allow deduction to the assessee. Our view finds support from the circular of CBDT No.014(XL)-35) dated 11.4.1955. Further, we find that the assessee has filed all details for claim of deduction u/s.54F before the CIT(A), who held against the assessee on the ground that the assessee had not claimed deduction in the return of income. We find that Hon ble Supreme Court in the case of Goetz (India) Ltd (2006 (3) TMI 75 - SUPREME Court ) has categorically held that the decision does not impinge upon the power of the appellate authority. Thus we feel it would be just and fair to remand back the issue of allowability of deduction u/s.54F to the file of the Assessing Officer for adjudication afresh as per law after considering all the details and evidence filed by the assessee in support of the claim. - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Addition of ?12,00,000/- under Section 68 of the Income Tax Act.
2. Denial of deduction under Section 54F for long-term capital gains.

Issue 1: Addition of ?12,00,000/- under Section 68 of the Income Tax Act

The first issue pertains to the confirmation of an addition of ?12,00,000/- made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, which concerns the genuineness of unsecured loans taken by the assessee from three lenders. The AO observed that the lenders had deposited cash in their bank accounts before issuing cheques to the assessee, leading to a suspicion about the genuineness and creditworthiness of these loans. The CIT(A) upheld this addition, noting that the income tax returns and financial statements of the lenders were submitted late and lacked comprehensive details.

The assessee argued that the AO had recorded statements from the lenders, who confirmed the loans and their terms. The assessee relied on judicial precedents, including decisions from the Gujarat High Court (DCIT vs. Rohini Builders), Gauhati High Court (Nemchand Kothari vs. CIT), and M.P. High Court (CIT vs. Metachem Industries), which held that an assessee is not required to prove the source of the source of the funds. The assessee contended that since the loans were received through cheques and the lenders were identified and had filed their tax returns, the initial burden of proof was met.

Upon review, the Tribunal found that the assessee had indeed discharged the initial burden of proving the identity, genuineness, and creditworthiness of the loan creditors. The Tribunal noted that the department failed to provide any positive evidence to counter the assessee's claims and based their adverse inference on mere suspicion. Citing supportive judicial precedents, the Tribunal concluded that the assessee was not responsible for proving the source of the creditors' funds. Consequently, the Tribunal set aside the orders of the lower authorities and deleted the addition of ?12,00,000/- made under Section 68.

Issue 2: Denial of Deduction under Section 54F for Long-Term Capital Gains

The second issue involved the denial of a deduction under Section 54F claimed by the assessee for long-term capital gains arising from the sale of land. The assessee sold a piece of land and claimed to have invested the proceeds in constructing a new residential house. However, the assessee did not declare this capital gain or the corresponding deduction in the return of income. The AO, upon investigation, found discrepancies regarding the ownership and purchase of the land, ultimately treating the sale proceeds as income from other sources due to lack of evidence supporting the assessee's claims.

The CIT(A) upheld the AO's decision, emphasizing that the assessee failed to disclose the capital gain and the deduction in the return of income, which is a mandatory requirement. The CIT(A) relied on a decision from the Rajasthan High Court (Usha Gupta vs. CIT) to support the stance that deductions not claimed in the return cannot be allowed later.

The assessee argued that the deduction should be allowed even if not claimed in the return, provided it was claimed during assessment proceedings and supported by evidence. The assessee cited the Supreme Court's decision in Goetze (India) Ltd vs. CIT, which permits appellate authorities to consider such claims. The assessee also referenced a CBDT circular emphasizing that tax officers should assist taxpayers in claiming due reliefs.

The Tribunal agreed with the assessee, stating that the AO is duty-bound to consider and verify claims made during assessment proceedings. The Tribunal noted that the CIT(A) should have examined the evidence provided for the Section 54F claim. Referring to the Supreme Court's decision in Goetze (India) Ltd, the Tribunal remanded the issue back to the AO for fresh adjudication, instructing the AO to verify the claim and allow the deduction if the assessee meets the requirements under Section 54F.

Conclusion:

The Tribunal allowed the appeal partly for statistical purposes, deleting the addition of ?12,00,000/- under Section 68 and remanding the issue of the Section 54F deduction back to the AO for fresh consideration. The order emphasized the need for thorough verification and fair adjudication based on the evidence provided.