2018 (5) TMI 955 - AT - Income Tax

Addition on account of unexplained cash credit - Held that - Findings of the A.O. may not be appropriate to reject the explanation of assessee particularly when the lender has confirmed the transaction with the assessee directly to the A.O. in response to the notice under section 133(6) of the I.T. Act. These facts, therefore, shows that one more opportunity could be given to the assessee to produce the creditor before A.O. for examination. We, accordingly, set aside the orders of the authorities below and restore the matter in issue to the file of A.O. with a direction to redecide the issue on merits in accordance with law. - Decided partly in favour of assessee for statistical purposes.

Summary

Issues involved:
Challenge against addition of unexplained cash credit under section 68 of the I.T. Act for A.Y. 2009-2010.

Detailed Analysis:

1. Issue of Delay in Filing Appeal:
The appeal by the assessee was reported as time-barred by three days. The assessee filed for condonation of delay, explaining the circumstances. The delay was condoned considering the explanation provided.

2. Unexplained Cash Credit Addition:
The case involved a search and seizure operation under section 132 of the I.T. Act, leading to the addition of a loan amount as unexplained cash credit under section 68. The lender company's creditworthiness was questioned by the Assessing Officer (A.O.) due to inadequate means to advance such a substantial loan. Despite the lender confirming the transaction, the A.O. doubted the genuineness of the credit.

3. Challenge before CIT(A) and Failure to Produce Creditor:
The assessee challenged the addition before the Ld. CIT(A), arguing no incriminating material was found during the search. The CIT(A) directed the A.O. to allow the assessee to produce all creditors to prove genuineness, but the assessee failed to do so. The CIT(A) confirmed the addition due to the non-production of the creditor for examination.

4. Legal Grounds and Precedents:
The assessee cited legal grounds and precedents where appeals were allowed due to the absence of incriminating material during searches. However, the A.O. contended that the assessment for A.Y. 2009-2010 was not completed during the search, justifying the assessment under section 153A of the I.T. Act.

5. Judicial Intervention and Directions:
The Tribunal considered the evidence presented by the assessee, including the lender's confirmation and financial documents. Relying on judicial decisions emphasizing the burden on the department to prove undisclosed income, the Tribunal set aside the lower authorities' orders. The matter was remanded to the A.O. to re-decide the issue, directing the assessee to produce the creditor for examination and provide necessary bank statements.

6. Final Decision:
The Tribunal allowed the appeal partly for statistical purposes, emphasizing the need for a fair opportunity for the assessee to present evidence and substantiate the genuineness of the cash credit. The A.O. was instructed to provide sufficient hearing opportunities to the assessee during the re-examination.

In conclusion, the judgment addressed the issues of delay in filing the appeal, the addition of unexplained cash credit, the failure to produce the creditor, legal grounds, and judicial interventions, providing detailed analysis and directions for further proceedings.