2022 (5) TMI 227 - AT - Income Tax

Addition u/s 68 - unexplained cash credits - HELD THAT - Both the tax authorities have perfunctory arbitrarily brushed aside the submissions of the appellant, and without articulating the insufficiency of explanation tendered, merely carried way for personal appearance of the creditors and concluded the proceedings capriciously under surmise, conjecture and guesswork, which is bad in law, thus the addition made u/s 68 finds no merits, and consequently deserves to be deleted. - Decided in favour of assessee.

Summary

Issues Involved:
1. Sustaining addition under Section 68 of the Income Tax Act.
2. Non-consideration of assessee’s submissions and documents.
3. Delay in adjudication by the Commissioner of Income Tax (Appeals) (CIT(A)).

Detailed Analysis:

1. Sustaining Addition Under Section 68 of the Income Tax Act:
The primary issue in the appeal was whether the CIT(A) was correct in sustaining the addition of ?2,27,186 under Section 68 of the Income Tax Act. The assessee, a private trust, had filed its return of income for AY 1984-1985 declaring NIL taxable income after apportioning the total income among four beneficiaries. During scrutiny, the Assessing Officer (AO) noticed cash credits from twenty-five creditors and demanded the assessee to prove their genuineness by producing the creditors in person. The assessee provided balance confirmation certificates for six creditors, which the AO rejected, leading to the addition under Section 68 for unexplained cash credits.

The Tribunal noted that the AO's order did not clarify whether the cash credits were new or carried forward from previous years, which is crucial as Section 68 applies only to credits during the relevant previous year. The Tribunal cited precedents, including "CIT Vs Usha Stud Agricultural Farms Ltd" and "DCIT Vs Amod Petrochem (P) Ltd," supporting that Section 68 does not apply to opening balances. The Tribunal found that the AO and CIT(A) failed to substantiate why the confirmation certificates were not acceptable and did not utilize their powers under Sections 131 and 133 to summon the creditors. The Tribunal concluded that the addition under Section 68 was arbitrary and based on surmise, conjecture, and guesswork, thus deserving deletion.

2. Non-Consideration of Assessee’s Submissions and Documents:
The assessee contended that the CIT(A) erred in not considering the submissions and documents provided. The Tribunal observed that the CIT(A) and AO dismissed the balance confirmation certificates without any deprecative material or specific reasons. The Tribunal emphasized that once the assessee discharges the primary onus by providing explanations and documents, the burden shifts to the AO to rebut the evidence. The Tribunal cited "Orient Trading Co. Ltd Vs CIT" and "Northern Bengal Jute Trading Co. Ltd. Vs CIT" to support that decisions should not be based on suspicions or probabilities. The Tribunal found that the tax authorities failed to articulate why the explanations were unsatisfactory, leading to an arbitrary conclusion.

3. Delay in Adjudication by the Commissioner of Income Tax (Appeals) (CIT(A)):
The Tribunal addressed the undue delay in adjudication, noting that the original assessment order was passed in 1987, and the CIT(A) dismissed the appeal in 1993. The Tribunal had set aside the order for fresh adjudication, which was finally decided by the CIT(A) in 2016, almost twenty years later. The Tribunal highlighted Section 250(6A) of the Act, which mandates the disposal of appeals within one year from the end of the financial year in which the appeal is filed. The Tribunal criticized the CIT(A) for failing to provide timely justice, equating it to "Justice delayed is Justice denied."

Conclusion:
The Tribunal allowed the appeal, deleting the addition under Section 68 and criticizing the undue delay in adjudication. The Tribunal emphasized the need for tax authorities to provide clear, substantiated reasons for their decisions and to adhere to statutory timelines to ensure timely justice. The order was pronounced in open court on April 29, 2022.