2021 (2) TMI 444 - AT - Income Tax

Unexplained cash credit u/s 68 - assessee has failed to prove the creditworthiness of the transaction - assessee challenged the findings of the AO on the ground that the AO has made the additions without conducting any enquiry to ascertain the genuineness of the transaction - HELD THAT - CIT(A) has not addressed this grievance of the assessee in its order. We further notice that the Ld. CIT (A) has endorsed the findings of the AO holding that the newly introduced proviso to section 68 by Finance Act lays down a more stringent test for the companies where public are not substantially interested. CIT (A) has nowhere discussed the plea of the assessee and the reasons for rejecting the same. CIT (A) has confirmed the addition as deemed income merely stating that the assessee could not explain the source of the cash credit in question even during the appellate proceedings. CIT(A) has not discussed the reasons for not accepting the explanation regarding source of cash credit in question. CIT (A) has not even discussed the plea of the assessee and the reasons for rejecting the same. During assessment proceedings not even a single notice was issued to the party, from whom the assessee had taken loan - CIT (A) has also ignored this aspect while passing the impugned order. Thus issues involved in the present appeal require fresh adjudication by the Ld. CIT (A) on merits - Appeal of assessee allowed for statistical purposes.

Summary

Issues:
1. Unexplained cash credit u/s 68
2. Unexplained cash credit u/s 69A
3. Penalty u/s 271(1)(C)
4. Interest U/s 234A, 234B, 234C & 234D

Unexplained cash credit u/s 68:
The assessee challenged the addition of ?2,00,00,000 under section 68 of the Income Tax Act, 1961, related to advance received from Yash Birla Construction Group. The contention was that the AO made the addition without proper inquiry into the genuineness of the transaction. The CIT(A) upheld the addition without addressing the assessee's plea, citing a stringent test under the newly introduced proviso to section 68. The Tribunal found that the CIT(A) failed to discuss the reasons for rejecting the assessee's explanation and passed the order in a mechanical manner. Consequently, the Tribunal set aside the order, remitting the case back to the CIT(A) for fresh adjudication on merits.

Unexplained cash credit u/s 69A:
The second issue revolved around the addition of ?3,00,000 as deemed income under section 69A, representing the peak of cash credit. The CIT(A) confirmed the addition stating that the assessee failed to explain the source of the cash credit. However, the Tribunal observed that the CIT(A) did not provide reasons for rejecting the assessee's explanation. Notably, no notice was issued to the party from whom the assessee borrowed ?2,00,00,000. The Tribunal concluded that the CIT(A) passed the order mechanically, necessitating a fresh adjudication on merits. Consequently, the Tribunal remitted the case back to the CIT(A) for a reasoned decision after providing a fair hearing to the assessee.

Penalty u/s 271(1)(C):
The issue of penalty under section 271(1)(C) was raised concerning inaccurate particulars of income and concealment of income. The AO initiated penalty proceedings, which the CIT(A) dismissed, stating that the initiation itself did not cause harm to the assessee. The Tribunal did not delve into this issue as the primary additions were set aside for fresh adjudication. Therefore, the penalty issue was not directly addressed in the judgment.

Interest U/s 234A, 234B, 234C & 234D:
Regarding the charging of interest under sections 234A, 234B, 234C, and 234D, the assessee contended that the CIT(A) erred in upholding the interest charges, deeming them mandatory and consequential. The Tribunal did not provide detailed analysis on this issue as the primary additions were set aside for fresh adjudication. Consequently, the interest issue was not the focus of the judgment.

In conclusion, the Appellate Tribunal set aside the order of the CIT(A) and remitted the case back for fresh adjudication on the issues of unexplained cash credit under sections 68 and 69A. The Tribunal emphasized the need for a reasoned decision after affording a fair opportunity to the assessee. The penalty and interest issues were not directly addressed in the judgment due to the primary additions being set aside for reconsideration.