2022 (2) TMI 269 - AT - Income Tax

Addition on basis of this statement recorded u/s 132(4) - additional income surrendered by the assessee u/s 132(4) - HELD THAT - As common statement of Shri Rajkumar Khilwani was recorded during the course of the search in which he offered the various undisclosed incomes in various concerns of Signature Group. On the basis of this statement recorded u/s 132(4), the ld. A.O. made the additions in the cases of Ultimate Builders, Signature Builders and Signature Infrastructure and these additions have been deleted by the Tribunal in the respective cases holding that without finding any incriminating material, no additions can be made merely on the declaration u/s 132(4). We find that on the basis of the same statement and with the same reasoning, the additions have been made by the Ld. A.O. in the present case and the same have been deleted by the ld. CIT(A) - in view of above discussion, we hold that the ld. CIT(A) rightly deleted the addition made by the Assessing Officer on account of additional income surrendered by the assessee u/s 132(4) of the I.T. Act. Thus, ground no.1 raised by the Revenue for the assessment year 2014-15 is dismissed. Unexplained unsecured loans - A.O. made the additions on the ground that in absence of the bank statement and the income tax returns, the genuineness and the credit worthiness of the parties are not established - HELD THAT - The assessee has furnished all details such as documents relating to identity, and creditworthiness of the lenders and genuineness of the transactions except in AY 2012-13. Thus, prima facie liability of the assessee to prove the genuineness of the transaction and to establish the identity and credit worthiness of the lender stands discharged. We also note that the Assessing Officer in the remand report has raised a doubt about the genuineness of the transaction which is mainly based on non availability of any written agreement and non repayment of the loan. However, we find that the assessee in reply had submitted that the contract can be either verbal or written and simply non availability of a written contract would not make the loan non-genuine and in private arrangement of loan between known persons, no practice of entering into a loan agreement is followed. We find that that the lenders are regular tax assessees and have given the loan through account payee cheques and have confirmed the transaction then the liability of the assessee of explaining the genuineness of the transaction stands discharged and the addition cannot be made on mere suspicion. Further, the Assessing Officer also failed to appreciate the fact that the assessee had paid interest on unsecured loans and had repaid the loan which is unjustified in view of the decision of Ayachi Chandrashekhar Narsangji 2013 (12) TMI 372 - GUJARAT HIGH COURT . Thus, we find that loan party furnished the loan confirmation, copy of bank account and proof of filing of the return. By filing the above documents the assessee established the Identity of the creditor, genuineness of the transaction and creditworthiness of the creditor. Thus, the assessee had satisfied all the three conditions required for genuineness of the transaction. - Decided in favour of assessee.

Issues Involved:

1. Confirmation of additions when no proceedings were pending for assessment as on the date of search.
2. Addition on account of unexplained unsecured loans.
3. Deletion of additions made by the Assessing Officer on account of additional income surrendered during the search.

Issue-Wise Detailed Analysis:

1. Confirmation of Additions When No Proceedings Were Pending for Assessment as on the Date of Search:

The assessee argued that the additions confirmed by the CIT(A) were erroneous as no assessment proceedings were pending on the date of the search. The Tribunal noted that the search conducted on 29.01.2014 led to the declaration of additional income by the assessee, which was later retracted. The Tribunal emphasized that no incriminating evidence was found during the search or post-search inquiries to suggest unrecorded expenses. The books of accounts were regularly maintained and audited, and no deficiencies were found. The Tribunal concluded that additions based solely on the statement recorded during the search, without any incriminating material, were not warranted.

2. Addition on Account of Unexplained Unsecured Loans:

The Tribunal examined the unsecured loans received by the assessee and noted that the necessary documents to establish the genuineness of the transactions, such as confirmations, bank statements, and income tax returns of the lenders, were provided. The CIT(A) had deleted the additions for the assessment years 2013-14 and 2014-15, relying on these documents. However, for the assessment year 2012-13, the CIT(A) confirmed the addition of ?3,50,000 due to insufficient evidence regarding the creditworthiness and genuineness of the transaction. The Tribunal upheld the CIT(A)’s decision, noting that the assessee failed to provide adequate evidence for the assessment year 2012-13.

3. Deletion of Additions Made by the Assessing Officer on Account of Additional Income Surrendered During the Search:

The Tribunal addressed the issue of additions made based on the surrender of additional income during the search. It was observed that the additions were made without any specific reference to incriminating material found during the search. The Tribunal reiterated that additions cannot be made solely based on statements recorded under section 132(4) without corroborating evidence. The Tribunal referenced various judicial precedents, including decisions from the Indore Bench of the ITAT and High Courts, to support the view that statements made during the search must be backed by incriminating material to justify additions. Consequently, the Tribunal upheld the CIT(A)’s decision to delete the additions for the assessment years 2013-14 and 2014-15.

Separate Judgments by Judges:

The judgment was delivered by a bench comprising Shri Mahavir Prasad, Judicial Member, and Shri Manish Borad, Accountant Member. The analysis and conclusions were collectively agreed upon, and no separate judgments were delivered by the judges.

Conclusion:

The Tribunal dismissed the appeals filed by both the assessee and the Revenue. The additions based on the surrender of additional income during the search were deleted due to the lack of incriminating material. The unsecured loans were accepted as genuine for the assessment years 2013-14 and 2014-15, while the addition for the assessment year 2012-13 was upheld due to insufficient evidence. The judgment emphasized the importance of corroborating statements made during searches with incriminating evidence to justify additions.

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