2023 (8) TMI 1461 - AT - Income Tax

Tax Tribunal Upholds Deletion of Rs. 4.56 Crore Addition; Revenue's Appeal Dismissed Due to Insufficient Evidence.

The ITAT dismissed the Revenue's appeal against the CIT(A)'s decision to delete the addition of Rs. 4,56,50,000 under Section 143(3) of the Income Tax ... Addition u/s 68 - unsecured loan taken by the assessee - scope of amendments brought in Section 68 - Assessee submitted when the transaction were through banking channel and there was no cash entries in the accounts of the investors there was no reason to disbelieve the unsecured creditors - HELD THAT:- As in the case in hand the material evidence produced by the assessee has been duly examined by CIT(A) and there is no dispute with regard to identity of the parties, the amounts were paid by them through banking channels. They themselves did not receive any amount cash in the immediate vicinity of the transactions. The 2022 amendment in Section 68 of the Act takes effect from 1st April, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years. The amendment is the illustration of application of ‘Mischief Rule’ in interpretation of statutes. Memorandum explaining the amendment makes it crystal clear that amendment is proposed to remove doubts created by certain judicial rulings about the onus of proof of source of source. The principle may have been there in certain judgments in favor of Revenue, but now once this amendment has specifically made applicable the principles with effect from AY 2023-24, the Bench cannot apply retrospectively. If this evidence was insufficient to the satisfaction of AO then the burden was on AO to have at least brought on record some evidence during the remand proceedings to show that the parties transacting with assessee were not genuine. The burden when discharged by the assessee by substantial evidence the onus shifted on AO to discredit the same with some evidence, direct or circumstantial, and not just bald assertions on his own belief and dissatisfaction. The grounds raised have no substance. Appeal of Revenue is dismissed. Issues Involved:- Addition of unsecured loans u/s 143(3) of the Income Tax Act, 1961- Burden of proof on the assessee to establish the source of source- Interpretation of Section 68 of the Act and the amendment effective from 1st April, 2023Summary:The appeal was filed by the Revenue against the order of CIT(A)-1, Gurgaon, regarding the addition of unsecured loans amounting to Rs. 4,56,50,000 made by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961. The Revenue contended that the CIT(A) erred in deleting the addition without appreciating the remand report (para 2).The Revenue argued that the burden is on the assessee to establish the source of source, citing the judgment of the Supreme Court in the case of CIT vs. Biju Patnaik. The appellant sought to rely on the amendment brought by the Finance Act, 2022, emphasizing the need for sufficient evidence to prove the genuineness of the transactions (para 4).On the other hand, the assessee's representative supported the order of CIT(A), stating that all relevant evidence was presented, including transactions through banking channels with no cash entries. The representative highlighted that the amendment to Section 68, effective from 01.04.2023, aimed to establish the source of source (para 4.1).The CIT(A) considered additional evidence regarding the identity and genuineness of the transactions, pointing out discrepancies in the AO's assessment and the evidence provided by the assessee. The CIT(A) analyzed each lender individually, demonstrating the failure of the AO to appreciate the evidence correctly (para 5).The CIT(A) examined the facts related to four suspected parties, detailing the evidence provided for each lender and confirming the legitimacy of the transactions. The bench concluded that the reliance on the Supreme Court judgment cited by the Revenue was not sustainable in this case (para 6).Regarding the interpretation of Section 68 and the 2022 amendment, the bench emphasized that the burden of proof lies with the AO to discredit the evidence provided by the assessee. The bench dismissed the appeal of the Revenue, stating that the grounds raised had no substance (para 8).In conclusion, the appeal was dismissed, and the order was pronounced on 07th August, 2023.