2021 (8) TMI 1093 - AT - Income Tax

Unexplained cash credit under section 68 - no evidence filled in support of the claim of receipt of money from Mr. Suresh Shervegar - HELD THAT - The documents now sought to be filed by the assessee as additional evidence prima facie shows the source of funds is from Banks and requires examination by the AO and the AO has to be satisfied with the identity, capacity of the creditors and the genuineness of the transaction. For carrying out this exercise, it is necessary that the impugned order of the CIT(A) should be set aside and the issue with regard to addition u/s 68 has to be remanded to the AO for fresh examination. - Appeal of the assessee is treated as allowed for statistical purposes

Summary

Issues:
- Addition of ?33,00,000 as unexplained cash credit under section 68 of the Income Tax Act, 1961.

Analysis:
1. Background: The appeal concerns the addition of ?33,00,000 as unexplained cash credit by the Assessing Officer (AO) under section 68 of the Income Tax Act, 1961, for Assessment Year 2016-17.

2. AO's Findings: The AO noted that the assessee, an individual running a Bar and Restaurant business, had deposited ?33,00,000 in his bank account with State Bank of India. The AO sought an explanation regarding the source of these funds, which the assessee claimed were received from Mr. Suresh Shervegar for a bar license transfer.

3. Proceedings: Despite the assessee's submissions and documents, including a confirmation from Mr. Suresh Shervegar, the AO treated the amount as unexplained cash credit due to Mr. Suresh Shervegar's non-response to summons and lack of supporting evidence.

4. CIT(A) Decision: The CIT(A) upheld the AO's decision as the assessee failed to provide evidence supporting the claim that only a portion of the amount was from Mr. Suresh Shervegar and the rest was transferred from the assessee's bank accounts.

5. Tribunal Proceedings: The assessee appealed to the Tribunal and submitted additional evidence, including bank statements, affidavits, and income tax returns of involved parties, seeking admission under Rule 29 of the ITAT Rules, 1963.

6. Tribunal Decision: The Tribunal admitted the additional evidence, emphasizing the need for a thorough examination of the source of funds. It found that the documents presented showed a potential legitimate source of the funds, requiring further scrutiny by the AO.

7. Conclusion: The Tribunal set aside the CIT(A)'s order, remanding the issue to the AO for fresh examination based on the additional evidence provided by the assessee. The AO was directed to ensure the genuineness of the transactions and afford the assessee a fair opportunity to be heard.

8. Legal Principles: The Tribunal's decision was guided by the principles of natural justice, ensuring the assessee's right to a fair hearing and the need for a comprehensive examination of the evidence to determine the legitimacy of the cash credits.

9. Precedent: The assessee invoked the decision of the Hon'ble Supreme Court in K Venkatarmaiah versus A Reddy to support the admission of additional evidence in the interest of justice, emphasizing the importance of filling any gaps for a satisfactory judgment.

10. Outcome: The Tribunal allowed the assessee's appeal for statistical purposes, highlighting the importance of due process and thorough examination of evidence in tax assessments.