2020 (12) TMI 664 - AT - Income Tax

Unexplained cash credit u/s. 68 - loan received by assessee from a group company ABPL - search and seizure action was conducted in the case of the assessee under s.132 - AO completed the assessment under s.153A - HELD THAT - The aspersions have been cast on the source of source of lender which would mean source of source of source of lending in the hands of assessee is the basis for invoking Section 68 - The genuineness of loan received has been doubted by Revenue on such ground. The action of Revenue seeking to cast aspersions on genuineness on such remote and unsupported basis is in the realm of conjectures and surmises as canvassed on behalf of assessee. There is nothing on record to show any outcome of enquiry, if any, from the lender of lender for source of his money. Genuineness of the transaction has to be read in the context of all attendant facts cumulatively and cannot be seen in isolation. The burden on the assessee under s.68 of the Act is limited to proving the nature and source of the credit entry. The burden does not extent to establish the quality of source of money in the hands of source of source per se. In the instant case, the lender as well as the lender of the lender are both limited company and are tax assessee in the record of department. In absence of any evidence against the assessee qua the lender of the lender, the onus on the assessee to establish genuineness and creditworthiness of lender, in our view, stands discharged. We see no error in the process of reasoning adopted by the CIT(A) while concluding the issue in favour of the assessee Unexplained investment as capital of the assessee - HELD THAT - Additions towards presumptive cash contribution amounting to ₹ 32,88,000/- in proportion to the partnership share appears prima facie inexplicable. The onus is on the Revenue to bring some cogent evidences on record to establish that alleged unaccounted cash contribution has been actually made by the assessee partner indeed. Unaccounted expenses for construction project carried out by the partnership firm has been attributed to the partner in proportion to the partner share as a figment of imagination without any legally sustainable basis. The impugned action of AO is apparently driven by misplaced suspicion and a mere ipse-dixit which is not objectively justifiable. It is well settled that suspicion, howsoever strong, cannot take the place of proof. In our view, the CIT(A) has analyzed the facts in its natural perspective and has rightly reversed the action of AO. We do not see any perceptible merit in the appeal of the Revenue and thus decline to interfere.

Summary

Issues Involved:
1. Deletion of additions of ?2,60,00,000 on account of unexplained credit under Section 68 of the Income Tax Act.
2. Additions of ?36,36,760 on account of unexplained investment and unaccounted expenses.
3. Miscellaneous Application for recalling and merging appeals due to combined tax effect exceeding the prescribed limit.

Detailed Analysis:

1. Deletion of Additions of ?2,60,00,000 on Account of Unexplained Credit under Section 68 of the Income Tax Act:
The Revenue challenged the CIT(A)'s decision to delete the additions of ?2,60,00,000 made by the AO under Section 68 of the Act for unexplained cash credit. The AO had treated an unsecured loan from Anusthan Buildcon Pvt. Ltd. as non-genuine due to lack of signed confirmation and questioned the creditworthiness of the lender. The CIT(A) found that the assessee had provided sufficient evidence, including the lender's PAN, confirmation, ITR, and bank statements, proving the identity, genuineness, and creditworthiness of the transaction. The CIT(A) relied on several judicial pronouncements, including the Hon'ble Gujarat High Court's decision in Pr.CIT vs. Saumya Construction Pvt. Ltd., which held that in the absence of incriminating evidence found during a search, reassessment under Section 153A is not justified. The Tribunal upheld the CIT(A)'s decision, noting that the Revenue's suspicion was based on conjectures and surmises, and the assessee had discharged its burden under Section 68.

2. Additions of ?36,36,760 on Account of Unexplained Investment and Unaccounted Expenses:
The AO made additions of ?32,88,000 (2% of ?16,44,00,000) towards the purchase of land by Shah Hiralal LLP, attributing it to the assessee's share in the firm, and ?2,48,760 (2% of ?1,24,38,000) for unaccounted expenses. The CIT(A) rectified an earlier order under Section 154, deleting these additions, as the substantive additions were already made in the hands of Shah Hiralal Buildcon LLP and deleted in the appellate order. The Tribunal agreed with the CIT(A) that the Revenue's action was based on misplaced suspicion without legally sustainable evidence. The Tribunal emphasized that suspicion cannot replace proof and upheld the CIT(A)'s decision.

3. Miscellaneous Application for Recalling and Merging Appeals:
The Revenue filed a Miscellaneous Petition to recall and merge ITA No. 2376/Ahd/2018 with IT(SS)A No. 266/Ahd/2018 due to a combined tax effect exceeding the prescribed limit under Circular No. 3 of 2018. The Tribunal found merit in the Revenue's request, noting that the combined tax effect from the same assessment order exceeded the limit, and allowed the Miscellaneous Petition. Consequently, ITA No. 2376/Ahd/2018 was recalled and re-fixed for hearing together with IT(SS)A No. 266/Ahd/2018.

Conclusion:
The Tribunal allowed the Miscellaneous Application filed by the Revenue, recalling and merging the appeals. It dismissed the Revenue's appeals challenging the deletion of additions under Section 68 and the unexplained investment and expenses, upholding the CIT(A)'s decisions. The assessee's Cross Objection was dismissed as withdrawn.