2019 (2) TMI 632 - AT - Income Tax

Addition of unsecured loan - AO did not provide due opportunity to the assessee to submit relevant documentary evidence during assessment proceedings and made addition - Held that - AO alleged that during the course of assessment proceedings, the assessee was asked to furnish the names and address of the person from whom the firm has received unsecured loan and also asked to furnish the date and mode of receipt of loan but there is no mention regarding issuance of any notice or notesheet entry requiring the assessee to furnish abovenoted documentary evidence or details. Therefore, clearly observe that the AO did not provide due opportunity to the assessee to submit relevant documentary evidence during assessment proceedings and made addition. CIT(A) simply reproduced the observations of the AO and confirmed the addition by observing that even during the course of appellate proceedings the assessee has not given address of loan creditors, date on which alleged loan was obtained and whether the same was received through cheque or cash. CIT(A) also observed that in absence of date of obtaining loan, it cannot be said that they are old loans. No mention regarding issuance of any notice to the assessee or any notesheet entry seeking the required details by the first appellate authority. If the AO or appellate authority is not specifically asking the assessee to submit specified documentary evidence or details and adjudicating the issue against the assessee in absence of such relevant documentary evidence and details, then can safely presume that the assessee was not allowed due opportunity of hearing by the authorities below to submit its case along with supporting documentary evidence and relevant details. Therefore, second limb of rule 29 of the ITAT Rules, 1963 is to be pressed in service for admission and consideration of additional evidence submitted by the assessee before the Tribunal. In view of foregoing discussions, the additional evidence filed by the assessee including other relevant details of the creditors are relevant and necessary evidence, which should be taken on record to meet the ends of justice and to sub-serve the purpose and cause of justice. Therefore, application of the assessee for taking additional evidence is allowed under rule 29 of the ITAT Rules, 1963 and additional evidence is taken on record for consideration. Since the AO was not allowed to verify and examine the documentary evidence, which has been admitted as additional evidence in earlier part of this order, therefore, the issue of unsecured loan/creditors is restored to the file of AO for fresh examination - Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
Appeal against CIT(A) order confirming addition of unsecured loan of ?4,00,000 as not genuine, without verifying if it was brought forward from the previous financial year. Application for admission of additional evidence regarding loan creditors, date of loan, mode of receipts, balance sheet, and profit & loss account for the relevant financial year.

Analysis:

Issue 1: Addition of unsecured loan
The appellant contested the addition of ?4,00,000 as unsecured loan, arguing that the AO did not verify the loan's genuineness and did not provide sufficient opportunity to submit necessary details. The appellant submitted a list of 26 persons from whom the loan was taken but was not allowed to provide addresses and dates of the loans. The CIT(A) confirmed the addition without considering the appellant's submissions. The Tribunal noted that the AO did not provide adequate opportunity to the appellant to present relevant documentary evidence, violating Rule 29 of the ITAT Rules, 1963. The Tribunal allowed the appellant's application for admission of additional evidence and directed the AO to reexamine the issue with due opportunity for the appellant to be heard.

Issue 2: Application for admission of additional evidence
The appellant sought to submit additional evidence related to loan creditors, date of loan, mode of receipts, and financial statements for the previous financial year. The appellant argued that the loan in question was from the preceding assessment year and should not be treated as income. The Tribunal, after considering the arguments, allowed the admission of additional evidence under Rule 29 of the ITAT Rules, 1963. The Tribunal emphasized the importance of allowing the evidence to meet the ends of justice and directed the AO to consider the additional evidence for a fresh examination of the unsecured loan issue.

Conclusion
The Tribunal allowed the appeal for statistical purposes, emphasizing the importance of providing the appellant with a fair opportunity to present relevant evidence. The decision highlighted the necessity of following procedural fairness and ensuring that all parties have a chance to substantiate their claims with appropriate documentation. The case was remanded to the AO for a fresh examination of the unsecured loan issue based on the additional evidence submitted by the appellant.