2023 (11) TMI 641 - AT - Income Tax

Addition of loan given by assessee - assessee submitted that she made a cash-deposit in her Bank and thereafter out of the balance held in Bank A/c the said loan was given - whether assessee explained claim of redeposit out of previous withdrawal - HELD THAT - There is no dispute on the fact that the AO has made addition qua the loan given by assessee and not loan taken by assessee. We agree that under the scheme of Income-tax act and it is logical also, there can be an addition for bogus loan/accommodation taken by a person but certainly there cannot be any addition for bogus loan/accommodation given . If the loan given by X to Y is found bogus/accommodation, the department can make addition in the hands of Y but certainly not in the hands of X . In fact, Ld. DR also understood this basic point and that is why he simply supported the AO s order and left it for the Bench to take a call. As far as the source of cash-deposit in bank a/c, prior to giving loan, is concerned, Ld. AR has successfully demonstrated that the assessee made a withdrawal of enough amount from same bank a/c which was available for re-deposit. Thus, we need not go further to examine the genuineness or otherwise of the loan given by assessee, suffice it to say that the AO has wrongly made addition given by assessee in assessee s hands. We, therefore, direct the AO to delete the addition. Decided in favour of assessee.

Summary

Issues involved:
The issues involved in the judgment are the re-opening of assessment by the AO based on information received, addition made by the AO regarding a loan given by the assessee, the non-compliance of hearing notices during the first appeal, and the legality of the reopening of proceedings.

Re-opening of Assessment:
The AO re-opened the assessment based on information received regarding a loan given by the assessee to M/s U.B. Investment, which was suspected to be part of a bogus loan mechanism. The assessee re-filed the return but the AO made an addition to the total income, leading to an appeal by the assessee challenging the re-opening of assessment.

Addition of Loan Given by Assessee:
The AO made an addition of Rs. 6,75,000 in the assessee's hands, pertaining to the loan given to M/s U.B. Investment. The assessee explained the source of the loan, including cash deposits in the bank account, but the AO did not accept the explanation. The AR argued that even if the loan was considered bogus, it should not be treated as income in the hands of the giver. The AR provided evidence to support the genuineness of the loan given by the assessee.

Non-compliance of Hearing Notices:
During the first appeal, the CIT(A) observed non-compliance with the notices of hearing by the assessee, leading to the dismissal of the appeal by the CIT(A). The AR argued that the appeal was conducted through a faceless regime, and the assessee was not aware of the hearing notices. The AR requested a decision on the appeal without remanding it back to the CIT(A) to avoid prolonging the proceedings.

Legality of Reopening of Proceedings:
The AR objected to the legality of the re-opening of proceedings by the AO, while the DR for the revenue supported the AO's actions. However, since the addition made by the AO was deleted by the Tribunal, there was no need to delve into the legality of the re-opening of proceedings, and the issue was kept open without further adjudication.

This judgment by the Appellate Tribunal ITAT Indore addressed the re-opening of assessment, the addition of a loan given by the assessee, non-compliance of hearing notices during the first appeal, and the legality of the re-opening of proceedings. The Tribunal ruled in favor of the assessee, directing the AO to delete the addition made regarding the loan given by the assessee. The Tribunal also kept the issue of the legality of the re-opening of proceedings open without further adjudication.