2020 (1) TMI 657 - HC - Income Tax

Assessment u/s 153A - unexplained Cash Credit u/s.68 - HELD THAT - Proceedings were initiated under Section 153A of the Act. In the course of the search undertaken by the Department, nothing incriminating was found or recovered from the assessee, and in the course of the assessment proceedings, AO took notice of the fact that the assessee had obtained a loan of ₹ 7.30 Crore from one Manaksia Trexim Pvt. Ltd based at Calcutta. AO got the matter inquired through the Investigating Wing of the Calcutta, and the inquiry revealed that loan was in fact advanced. The source of the loan was also explained. Thus, it was confirmed that the assessee had received funds from Manaksia Trexim Pvt. Ltd, one of its own groups. The Tribunal also notes that no incriminating document was found and seized from the premise of the assessee during the assessment proceedings. There are questions of fact which have been resolved by the CIT (A) as affirmed by the Tribunal.

Summary

Issues:
1. Appeal under Section 260A of the Income Tax Act, 1961 against ITAT order.
2. Deletion of addition of unexplained Cash Credit u/s. 68 of the Act.
3. Scope of provisions of Section 153A of the Act.
4. Adjudication of the matter on merits without first adjudicating legal grounds.

Analysis:
1. The appeal was filed by the Revenue against the ITAT order regarding the addition of unexplained Cash Credit u/s. 68 of the Act. The Tribunal noted that during a search conducted, no incriminating documents were found, and the loan received by the assessee was thoroughly investigated. The source of the loan was explained, and it was confirmed that the funds were received from a related entity. The Tribunal upheld the decision of the CIT (A) based on these findings.

2. The first issue raised by the Revenue was whether the Tribunal erred in upholding the decision of CIT (A) to delete the addition of a substantial amount on account of unexplained Cash Credit u/s. 68 of the Act. The Tribunal found that the assessee had satisfactorily explained the transaction's genuineness and the source of the funds. Since no incriminating documents were found during the search, the Tribunal affirmed the decision of the CIT (A) in deleting the addition.

3. The second issue pertained to the scope of provisions of Section 153A of the Act. The Revenue contended that the Tribunal failed to consider the legal grounds raised regarding this section. However, the Tribunal found that the factual findings regarding the loan transaction were clear and did not necessitate further adjudication on legal grounds. Therefore, the Tribunal did not find merit in this argument.

4. The final issue raised was whether the Tribunal erred in not adjudicating the matter on merits without first addressing the legal grounds. The Tribunal held that since the factual findings were clear and the explanation regarding the loan was satisfactory, there was no need to delve into legal grounds separately. As a result, the appeal by the Revenue was dismissed as none of the proposed questions qualified as substantial questions of law. The judgment upheld the decisions of the lower authorities based on factual findings and explanations provided by the assessee.