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2017 (5) TMI 1261 - AT - Income TaxReopening of assessment - Unexplained cash credit u/s 68 and unexplained expenditure u/s 69C - violation of natural justice - Held that - As find from the record that the assessee filed during the course of assessment proceedings all the details like loan confirmation letters from the creditors, PAN of the creditors, bank statements of the creditors and the assessee, form no.16 qua TDS on interest ,profit and loss account and balance sheet including the ledger account of the creditors, and ITR etc. Moreover, the loan creditors also appeared before the AO in compliance to the notice issued under section 133(6) of the Act and filed confirmations before the AO that loans were actually given to the assessee. Thus we find that the assessee has discharged its onus cast upon it by filing all the necessary details as called for by the AO to corroborate the transactions of borrowing the money and thereby satisfied all the three main ingredients i.e. creditworthiness of the creditors, genuineness of the transactions and identity of the creditors. So much so that the loan creditors in response to the notice issued under section 133(6) appeared before the AO and confirmed the that they have given interest bearing loans to the assessee on which TDS have been deducted and paid and form no.16A issued to the loan creditors also filed before the AO. The AO has merely proceeded and relied on the information received from the DGIT(Inv), Mumbai that the assessee is one of the beneficiary of the accommodation entries without bringing any material against the assessee on record by contrary to the defense put up by the assessee during the course of appellant proceedings. No cross examination was allowed to the assessee and information was used against the assessee causing violation of natural justice. - Decided in favour of assessee.
Issues Involved:
1. Reopening of assessment under Section 147 of the Income Tax Act, 1961. 2. Addition of unexplained cash credit under Section 68 of the Act. 3. Addition of unexplained expenditure under Section 69C of the Act. Issue-wise Detailed Analysis: 1. Reopening of Assessment under Section 147: - The assessee initially filed a return declaring a total income of ?56,732, which was processed under Section 143(1). The assessment was later completed under Section 143(3) with a total income of ?33,82,280. - The case was reopened under Section 147 based on information from DGIT(Inv), Mumbai, indicating that the assessee received accommodation entries from entities managed by Shri Bhanwarlal Jain. - The AO formed an opinion that ?2,02,62,016 had escaped assessment and issued a notice under Section 148. - The assessee chose not to press the ground relating to the reopening of assessment, leading to its dismissal. 2. Addition of Unexplained Cash Credit under Section 68: - The AO added ?1,29,04,231 as unexplained cash credit, asserting that the assessee received accommodation entries from entities related to Shri Bhanwarlal Jain. - The assessee provided various documents, including loan confirmations, PAN details, bank statements, and Form 16 for TDS, to substantiate the loans. - Despite these submissions, the AO relied solely on the information from DGIT(Inv), Mumbai, and rejected the assessee's contentions. - The CIT(A) dismissed the appeal ex-parte due to the assessee's non-appearance, upholding the AO's addition. - The Tribunal found that the assessee had discharged its onus by providing all necessary details to prove the identity, genuineness, and creditworthiness of the creditors. The AO failed to disprove the assessee's stand and relied only on third-party information without further investigation. - The Tribunal cited several judgments, including those from the Supreme Court and various High Courts, emphasizing that the AO must conduct a proper inquiry and cannot make additions based solely on third-party information without allowing cross-examination. - Consequently, the Tribunal directed the AO to delete the addition of ?1,29,04,231. 3. Addition of Unexplained Expenditure under Section 69C: - The AO computed 3% of ?1,15,00,000 as undisclosed expenditure, resulting in an addition of ?3,45,000. - The CIT(A) upheld this addition due to the assessee's non-appearance during the appeal proceedings. - The Tribunal, considering its decision on the addition under Section 68, also directed the deletion of the addition under Section 69C, as the primary addition was found to be unjustified. Consolidated Order: - The appeals for the assessment years 2008-09 to 2010-11 were decided in favor of the assessee, with the Tribunal directing the deletion of additions under Sections 68 and 69C. - The revenue's appeal for the assessment year 2012-13, based on similar grounds, was dismissed following the Tribunal's decision in favor of the assessee for earlier years. Conclusion: - The Tribunal allowed the assessee's appeals and dismissed the revenue's appeal, emphasizing the importance of proper inquiry and adherence to principles of natural justice in making additions under the Income Tax Act.
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