2020 (1) TMI 447 - AT - Income Tax

Unexplained income u/s.68 - Admission of additional evidence - HELD THAT - The additional evidences were examined and found that they are basically copies of the affidavits, confirmations given by certain creditors and the bank statements of those creditors. In principle, they relate to the issue under consideration and they go to the root of the matter and shall definitely be of some use for adjudication of the issue judiciously. In our opinion, it is in the interest of administrational justice to admit the same. Accordingly, we direct the AO to consider the contents available on these papers and use them for adjudication of the issue, after granting a reasonable opportunity of being heard to the assessee. The AO is free to conduct requisite enquiries into the correctness of these papers, as per law. Repayment of the loans to the creditors - Repayment means, assessee paid the dues to the person, who is existing. That person received the funds and to that extent, the genuineness of the transaction assumes credibility. So long as there is no evidence with the AO to demonstrate such repayments were routed back to the payer, the transaction becomes genuine and therefore, there is no need for suspecting the same. The transaction becomes so genuine more so when the payments and repayments are done through the banking channels. AO is directed to examine whether the repayments are properly appropriated by the creditors, if not routed back into the accounts of assessee. Reasonable opportunity of being heard to the creditors is to be given in case such enquiries are undertaken. Thus, keeping all the issues open relating to the addition - Grounds remanded back to the file of AO. Appeal of assessee is treated as allowed for statistical purposes.

Summary

Issues Involved:
1. Addition towards unexplained income under Section 68 of the Income Tax Act.
2. Admission of additional evidence.
3. Consideration of repayment details for loan transactions.

Detailed Analysis:

1. Addition towards unexplained income under Section 68 of the Income Tax Act:

The primary issue in this case is the addition of ?78,20,000 towards unexplained income under Section 68 of the Income Tax Act. The assessee, a proprietor of M/s. Global Steel Company, filed a return of income for AY 2012-13 admitting a total income of ?77,35,570. However, the Assessing Officer (AO) assessed the income at ?1,62,55,570, making an addition of ?85,20,000 under Section 68. This addition was based on loans received from 15 creditors, which the AO deemed unexplained due to insufficient evidence regarding the source of credits and the nature of evidences furnished. During the First Appellate Proceedings, the CIT(A) sustained the addition to the extent of ?75,20,000, relying on certain case laws and confirming the identity, creditworthiness, and genuineness of the transactions for some creditors.

2. Admission of additional evidence:

During the appeal before the Tribunal, the assessee's counsel submitted that the loans had been repaid in subsequent periods, and these repayment details were not presented before the lower authorities. The additional evidence included affidavits, confirmation letters, and bank statements of the creditors, which were crucial for adjudicating the issue judiciously. The Tribunal admitted these additional evidences, emphasizing their relevance and importance in determining the genuineness of the transactions. The AO was directed to consider these documents and conduct requisite enquiries, providing a reasonable opportunity for the assessee to be heard.

3. Consideration of repayment details for loan transactions:

The Tribunal considered the repayment transactions of the loans, which occurred between 2014 and 2019. These repayments were deemed relevant as they supported the identity, genuineness, and creditworthiness of the creditors. The Tribunal instructed the AO to examine these repayments, ensuring they were appropriately appropriated by the creditors and not routed back to the assessee. The AO was also directed to provide a reasonable opportunity for the creditors to be heard if further enquiries were necessary. The Tribunal emphasized that the genuineness of the transactions is credible as long as there is no evidence suggesting that the repayments were routed back to the payer, especially since the transactions were conducted through banking channels.

Conclusion:

The Tribunal remanded the issue of the addition of ?78,20,000 under Section 68, along with other argumentative grounds, back to the AO for fresh adjudication. The AO was instructed to consider the additional evidence and repayment details, conduct necessary enquiries, and provide a reasonable opportunity for the assessee to be heard. The appeal of the assessee was treated as allowed for statistical purposes. The order was pronounced in the open court on 4th December 2019.