2024 (7) TMI 1014 - AT - Income Tax

Validity of reassessment proceedings - Unexplained cash credit u/s 68 - unsecured loan received from the loan creditor - Loans treated as bogus on the basis of the statement given by one Mukesh Banka - HELD THAT - As prima facie the appellant has submitted copies of all those documents including the bank statement of the alleged loan provided/accommodation entry provider in support of transaction related to alleged loan claimed by the appellant. But he discarded the same by mere assumption and surmises thereby saying that these documents are mere masks to hide the real nature of the transaction. It is surprising to note that what was the basis of ld. CIT(A) to discard those documents without verification and genuineness of the documents and he doubted the same. We further notice that the ld. CIT(A) has rejected the above documents by saying that finding of the AO was based on strong surrounding circumstances and preponderance of the probability and human conduct. It is important to mention here that above findings cannot be basis of rejection of a document which was filed by the assessee. The documents clearly go to show that the transaction made being a genuine one and we do not find any transaction made by and with any Mukesh Banka. It is also a fact that all transactions made through banking channels. Loan taken was duly repaid by account payee cheque. No transaction was entered with Sh. Mukesh Banka and Banka Group. Genuine loan was taken from M/s. Fast Speed Realcon Pvt. Ltd. and loan confirmation of M/s. Fast Speed Realcon Pvt. Ltd. has also been enclosed in the balance sheet, profit and loss account filed by the assessee. Keeping in view the above facts, the answers come in favour of the assessee that the assessee could be able to disclose the amount and the finding of the AO and the ld. CIT(A) that the assessee could not be able to disclose the source of income of Rs. 15 Lakh is hereby set aside. Validity of reopening of assessment - We find that before issuance of notice u/s 148 of the Act there must be a belief in the mind of the AO that the assessee has escaped assessment of income and there must be some basis for forming such a belief. Mere suspicion cannot be a ground for issuance of notice. In the present case as we have discussed above that there is nothing in the record brought by the AO to establish any connection of the assessee with Mukesh Banka, there is no transaction made by and with Mukesh Banka as the statement of bank account details reveals. Keeping in view the above facts also the case of the assessee is succeeded that issuance of notice is also bad in law. Accordingly, the grounds raised by the assessee are allowed. Assessee appeal allowed.

Summary

Issues:
Reopening of assessment based on third party statement, Addition of unexplained cash credit under section 68 of the Income Tax Act, Disclosure of source of fund amounting to Rs. 15 Lakh, Jurisdiction of Assessing Officer in issuing notice under section 148.

Reopening of Assessment:
The appeal challenged the reopening of assessment for the Assessment Year 2016-17 based on a notice issued under section 147 of the Income Tax Act. The case was reopened on the grounds that an unsecured loan received by the assessee was alleged progressively theized alleged
esB the equ , Procedure ,):av ecom2B the,) theed the, Judgment asward the,) the,) The Tribunal The Tribunal , Judgment u no the,):av es the es the und usingecsa onount the,)’ the,) the,):urs analysis rg ,):av 01sssssst Un eding review via ce checks el RE ed E Ar of of the,):av Expl E Dr el RE For the issues For the,) Travel V. Dr. M. B., A. M. and P. K. C. v. S. G., A. C., A. C., and A. C. Page 2 of 3 the case of the appellant as it also reveals from the order of the ld. CIT(A) is that for the AY 2016-17 the appellant filed income tax return showing the total income of Rs. 2,36,640/-. The assessment was reopened for the reasons that information received from the Investigation Wing, Kolkata that the appellant has received Rs. 15,00,063/- as the beneficiary during FY 2015-16 from the companies managed and controlled by Sh. Mukesh Banka. It is a definite case of the assessee and he has repeatedly submitted before the AO and the ld. CIT(A) that he does not know any Mukesh Banka. The assessee in support of his case filed the following papers before the AO which are as follows: Company Master Data- M/s Fastspeed Realcon Pvt Ltd (source) from ROC website. Confirmation of accounts by M/s Fastspeed Realcon Pvt Ltd showing source of the source. Ledger of Keshav Shroff in books of loan creditor showing the amount of Interest of Rs. 39575 paid to M/s Fastspeed Realcon Pvt Ltd. PAN card of M/s Fastspeed Realcon Pvt Ltd. Statement of Bank account of M/s Fastspeed Realcon Pvt Ltd maintained with UCO bank for the period F.Y. 2016-17. Copy of ITR for AY 2016-17 of assessee and M/s Fastspeed Realcon Pvt Ltd. Audit report of M/s Fastspeed Realcon Pvt Ltd. Balance Sheet, PL account of M/s Fastspeed Realcon Pvt Ltd for A.Y. 2016-17. Computation, Balance Sheet, I&E account of assessee for A.Y. 2016-17. Statement of bank account of assessee maintained with Oriental bank of Commerce (F.Y. 2015-16, 2017-18) reflecting loan taken, Interest paid and showing loan repayment. Documentary evidence of utilization of loan.

Addition of Unexplained Cash Credit:
The Assessing Officer added the entire loan as unexplained cash credit under section 68 of the Income Tax Act, despite the appellant submitting various documents to substantiate the loan's legitimacy. The appellant argued that the loan amount of Rs. 15 Lakh was received from M/s. Fast Speed Realcon Pvt. Ltd. and subsequently repaid through proper banking channels. The appellant contended that the AO and CIT(A) failed to consider this repayment evidence and wrongly added the loan amount as unexplained. The Tribunal found that the appellant had provided substantial evidence, including bank statements and confirmations, to establish the genuineness of the transaction. The Tribunal set aside the findings of the AO and CIT(A) and held in favor of the appellant, concluding that the loan was genuine and properly disclosed.

Disclosure of Source of Fund:
The main issue in the appeal was whether the appellant could disclose the source of funds amounting to Rs. 15 Lakh, which the AO and CIT(A) deemed unexplained. The Tribunal noted that the appellant had submitted all necessary documents, including bank statements, PAN card, ITR, and confirmation of the creditor, to establish the transaction's genuineness. The Tribunal found that the loan was repaid through an account payee cheque and that no transactions were conducted with Mukesh Banka. Based on the evidence presented, the Tribunal concluded that the appellant had successfully disclosed the source of the funds, overturning the findings of the lower authorities.

Jurisdiction of Assessing Officer:
The Tribunal also addressed the jurisdiction of the Assessing Officer in issuing a notice under section 148 of the Income Tax Act. It emphasized that there must be a belief that the assessee has escaped income assessment, supported by a valid basis, and mere suspicion is insufficient for issuing a notice. Citing relevant case law, the Tribunal found that there was no evidence connecting the appellant with Mukesh Banka, and therefore, the notice issued was deemed invalid. The Tribunal allowed the grounds raised by the appellant, concluding that the notice was legally flawed.

In conclusion, the Appellate Tribunal ruled in favor of the appellant, setting aside the orders of the lower authorities and allowing the appeal. The Tribunal found that the appellant had adequately disclosed the source of funds, established the genuineness of the loan transaction, and challenged the validity of the notice issued by the Assessing Officer. The judgment highlighted the importance of providing substantial evidence to support claims and ensuring that assessing authorities follow due process in tax assessments, as evidenced by the specific documents submitted by the appellant to substantiate the loan transaction.