2020 (12) TMI 182 - AT - Income Tax

Undisclosed/unexplained credits in the bank account - HELD THAT - Assessee has taken loans from several persons, which was partly repaid during the year under consideration and again the loans were taken from the same persons. AO has simply seen credits in the bank account without realising that the same amount is recycled. We find that detailed explanation alongwith re-conciliation has been furnished by the assessee before the CIT(A) but the same was dismissed out-rightly. Similar is the fate of expenditure treated by the AO as paid in cash in excess of cash withdrawals. We find that out of the alleged difference, most of the payments have been made by account payee cheques on account of salaries and wages, tyre purchases and diesel expenses, which totalled to ₹ 24.65 lakhs. These details were also furnished before the CIT(A) but such details received the same fate. We are of the considered view that when the assessee has explained everything with evidences, the CIT-A should not have rubbished those evidences without recording any specific findings. Cash purchase of the impugned property - HELD THAT - AO has grossly erred in simply believing the contention of the counsel of Shri Ram Babu. It appears that ₹ 97 lakhs was deposited in cash in the bank account of Shri Ram Babu and to explain the source, the ld. counsel simply stated that Shri Ram Babu has received the same from the assessee. Interestingly, Shri Ram Babu died in on 14.11.2013 as per the death certificate exhibited at page 18 of the paper book. Assessment proceedings of Shri Ram Babu took place subsequent to his death. A pertinent question arises as to how the counsel of Shri Ram Babu knew that ₹ 97 lakhs were received by Shri Ram Babu from the assessee when he has left for heavenly abode on 14.11.2013. Order sheet entries are placed at pages 1 to 3 of the paper book. Assessment proceedings are dated February 2014, which means that the assessment proceedings in the case of the assessee were much after the date of death of Shri Ram Babu. Entire addition has been made on assumptions and surmises and on the statement of counsel of Shri Ram Babu which do not have any evidentiary value keeping in mind that Shri Ram Babu died in 2013. Considering these facts in totality, addition of ₹ 97 lakhs is directed to be deleted We remit both these issues to the file of the Assessing Officer. The assessee is directed to furnish all necessary evidences which were furnished before the CIT(A) and the Assessing Officer is directed to examine each and every evidence/explanation and decide these two issues afresh after affording reasonable opportunity of being heard to the assessee. Addition on account of difference of interest as per bank statement and as per books of account - HELD THAT - The assessee is directed to reconcile the same and explain the difference, if any, and the Assessing Officer is directed to examine the issue afresh and decide the same after giving opportunity of being heard to the assessee. This ground is, accordingly, treated as allowed for statistical purposes.

Summary

Issues:
1. Admissibility of additional evidence under Rule 46A
2. Addition on account of unexplained credit entries in the bank account
3. Addition of expenses remaining unexplained under section 68
4. Addition of unexplained investment under section 69
5. Difference in interest earned in the bank account

Admissibility of Additional Evidence under Rule 46A:
The assessee challenged the CIT(A)'s refusal to admit additional evidence under Rule 46A. The CIT(A) dismissed the appeal without considering the merits of the additions. The ITAT found that the CIT(A) rejected all evidence without proper justification. The ITAT remitted the issue back to the Assessing Officer for a fresh examination based on the evidence submitted by the assessee.

Addition on Account of Unexplained Credit Entries in the Bank Account:
The Assessing Officer made an addition of ?1.49 crores as unexplained credit entries in the bank account. The ITAT noted that the credits were loans from various persons, partially repaid and recycled during the year. The ITAT found that the explanation provided by the assessee was detailed and supported by reconciliation, but the CIT(A) dismissed it outright. The ITAT remitted this issue back to the Assessing Officer for a fresh examination.

Addition of Expenses Remaining Unexplained under Section 68:
The Assessing Officer added ?23,93,637 as income from other sources due to unexplained expenses. The ITAT observed that most payments were made through cheques for legitimate expenses. The CIT(A) rejected the details provided by the assessee without proper justification. The ITAT directed the Assessing Officer to re-examine this issue based on the evidence submitted.

Addition of Unexplained Investment under Section 69:
An addition of ?97 lakhs was made as unexplained investment based on a statement from Shri Ram Babu's counsel. The ITAT questioned the validity of this addition as Shri Ram Babu had passed away before the assessment proceedings. The ITAT found the addition based on assumptions and directed it to be deleted.

Difference in Interest Earned in the Bank Account:
The Assessing Officer added ?22,828 as income from other sources due to a difference in interest earned in the bank account. The ITAT directed the assessee to reconcile the difference and the Assessing Officer to re-examine the issue. The ITAT allowed the appeal in part for statistical purposes.

In conclusion, the ITAT remitted various issues back to the Assessing Officer for a fresh examination based on the evidence submitted by the assessee. The ITAT also directed the Assessing Officer to provide a reasonable opportunity for the assessee to be heard. The appeal was allowed in part for statistical purposes.