2022 (2) TMI 183 - AT - Income Tax

Addition u/s 68 - Unsecured loan and on account of interest against the said unsecured loans - CIT-A deleted addition admission of additional evidence under Rule 46A - HELD THAT - No violation of Rule 46A of the IT Rules by the ld.CIT(A) while passing impugned order because an application was moved by the assessee vide letter dated 3.11.2017, requesting for admission of additional evidence under Rule 46A and the same was forwarded to the AO, and the AO was given sufficient time to rebut the same. As a matter of fact, the AO in his detailed remand report had confirmed of having verified the additional evidence submitted by the assessee to establish the identity and creditworthiness of the concerned creditors, and genuineness of the transactions entered into by the assessee with the 15 creditors, based on which the CIT(A) has passed the impugned order giving relief to the assessee. We therefore, do not find any infirmity in the impugned order of the CIT(A) calling for any interference and upholding the same, we dismiss the appeal of the Revenue.

Summary

Issues:
Admission of additional evidences under Rule 46A by CIT(A) | Justification of relief granted by CIT(A) on unsecured loan and interest disallowance | Alleged violation of Rule 46A by CIT(A)

Admission of Additional Evidences under Rule 46A:
The appeal by Revenue challenges the admission of additional evidence under Rule 46A by CIT(A). The AO had made additions under section 68 on unsecured loans and interest disallowance. During appellate proceedings, the assessee submitted additional evidence for unsecured loans. The AO, in the remand report, confirmed the verification of the evidence provided by the assessee, establishing the identity, credit-worthiness of creditors, and genuineness of transactions. Based on this report, CIT(A) partly allowed the appeal, deleting a significant portion of the additions. The Tribunal found that the assessee moved an application for additional evidence under Rule 46A, giving the AO sufficient time to rebut. As the AO verified the evidence and confirmed its authenticity, the Tribunal upheld CIT(A)'s decision, dismissing the Revenue's appeal.

Justification of Relief Granted by CIT(A) on Unsecured Loan and Interest Disallowance:
The AO had disallowed unsecured loans and corresponding interest debited by the assessee, leading to additions in the total income. The assessee appealed to CIT(A) and submitted additional evidence under Rule 46A, which was verified by the AO in the remand report. CIT(A, based on the report, deleted a significant portion of the additions, retaining only a minor amount. The Tribunal noted that the AO had issued a show cause notice with a short deadline for furnishing details, which hindered the assessee from producing evidence. However, during appellate proceedings, the assessee applied for additional evidence, which was duly considered. The Tribunal found that the relief granted by CIT(A) was justified based on the verified evidence, leading to the dismissal of the Revenue's appeal.

Alleged Violation of Rule 46A by CIT(A):
The Revenue contended that CIT(A) did not provide proper opportunity to the AO regarding the additional evidence submitted by the assessee, violating Rule 46A. However, the Tribunal observed that the assessee applied for additional evidence during appellate proceedings, and the AO, in the remand report, confirmed the authenticity of the evidence provided. As the AO had sufficient time to verify and rebut the evidence, the Tribunal concluded that there was no violation of Rule 46A by CIT(A). Consequently, the Tribunal dismissed the Revenue's appeal, upholding the decision of CIT(A) based on the verified evidence presented during the proceedings.