2015 (10) TMI 919 - AT - Income Tax

ITAT emphasizes fairness in tax assessments, remands for re-examination of evidence

The ITAT allowed the appeal of the assessee for statistical purposes, emphasizing the need for a thorough examination of evidence and procedural fairness ... Addition of cash credits - assessee failed to produce any confirmation letters from the farmers regarding creditworthiness and genuineness - Held that:- We find that in spite of readiness of the assessee to produce persons who wanted to purchase the agricultural lands, the AO had not examined the persons. The CIT(A) passed the appellate order ex-parte and did not go through the accounts where some of the repayments were through cheques and details of the bank statements filed before him. In these circumstances, we deem it fit to restore the matter to the file of the Assessing Officer who shall examine the evidences filed with respect to the repayments to the buyers as the sale transactions did not fructify and after going through the bank statements and examining the persons, if necessary, decide the issue in accordance with law. - Decided in favour of assessee for statistical purposes. Issues:1. Addition of cash credits amounting to Rs. 70,50,000 in the assessment year 2009-10.2. Ex-parte order passed by the CIT(A) without giving sufficient opportunity to the assessee.Analysis:Issue 1: The Assessing Officer (AO) made an addition of Rs. 70,50,000 as cash credits in the assessment order due to cash deposits made by the assessee, which were claimed to be advances received for the sale of lands. The AO found the documents provided by the assessee to be unregistered and not verifiable, casting doubt on their genuineness. The AO also noted discrepancies in the documents, such as missing details of the farmers and unregistered sale deeds. Despite opportunities, the assessee failed to produce confirmations from the farmers, leading to the disallowance of the cash credits under section 68 of the Income Tax Act. The CIT(A) upheld the AO's decision, emphasizing the lack of confirmation letters to establish the creditworthiness and genuineness of the transactions. The assessee contended that the transactions did not materialize, and the amounts were repaid through the bank account, offering to produce confirmation letters and persons for examination. However, the CIT(A) affirmed the addition, prompting the assessee to appeal to the ITAT.Issue 2: The counsel for the assessee argued before the ITAT that the CIT(A) erred in passing an ex-parte order without adequate opportunity for the assessee to present their case. The counsel highlighted the readiness of the assessee to produce evidence and persons involved in the transactions, which the AO did not explore. The ITAT observed that the CIT(A) dismissed the appeal ex-parte despite accepting an adjournment petition, indicating a procedural lapse. The ITAT considered the documents submitted by the assessee, such as sale agreements and bank statements, which were not reviewed by the CIT(A due to the ex-parte order. In light of these circumstances, the ITAT decided to remand the matter back to the AO for re-examination of the evidences related to repayments for the unfructified sale transactions and to consider the bank statements and examine involved persons to decide the issue lawfully.In conclusion, the ITAT allowed the appeal of the assessee for statistical purposes, emphasizing the need for a thorough examination of evidence and procedural fairness in tax assessments.