2017 (2) TMI 1129 - AT - Income Tax

Tribunal upholds CIT(A)'s decision on Income Tax Act additions

The Tribunal upheld the CIT(A)'s decision to delete additions and disallowances made by the Assessing Officer under various sections of the Income Tax ... Unexplained cash credit u/s.68 - Held that:- Assessee has in its permissible limit has proved beyond doubt the identity, genuineness and creditworthiness of the loan creditors and it could not be disputed by the Revenue at any stage nor any enquiry was made in case of any other loan creditor, which could disprove the evidence placed by assessee. We therefore, find no reason to interfere with the order of ld. Commissioner of Income Tax(A) deleting the impugned addition on account of unexplained cash credit - Decided in favour of assessee Disallowance on account of interest expenses on cash credit - Held that:- As we have already decided adjudicating ground no.1 of Revenue wherein we have confirmed the order of ld. Commissioner of Income Tax(A) deleting the impugned addition u/s 68 and as have accordingly held that assessee has proved the identity, genuineness and creditworthiness of the cash creditors. Therefore, the interest paid on such genuine loan creditors cannot be treated as non-genuine. - Decided in favour of assessee TDS u/s 194A - disallowance u/s.40(a)(ia) - non deduction of tds on interest expenses - submission of Form No. 15 G - Held that:- We are of the view that as the assessee has filed form no.15G in the cases of 9 parties to whom interest of ₹ 3,00,348/- was paid there was no liability of deducting tax at source at assesse’s behest and, therefore, ld. Commissioner of Income Tax(A) has rightly deleted the disallowance. We find no substance in this ground raised by Revenue against ld. Commissioner of Income Tax(A)’s order for admitting additional evidence in violation of Rule 46A as from the perusal of the assessment order it is well evident that the details, names and addresses, PAN, bank statement, income-tax returns were all placed before the assessing authority and as regards form no.15G in relation to non-payment of ₹ 3,00,348/- record was very much available with the assessing authority as these forms were filed on 4.4.2009 with ITO, TDS-3, Ahmedabad. Therefore, we find that ld. Commissioner of Income Tax(A) has not admitted any additional evidence in violation of Rule 46A. We, therefore, dismiss this ground of Revenue.- Decided in favour of assessee Issues Involved:1. Deletion of addition on account of unexplained cash credit under Section 68 of the Income Tax Act.2. Deletion of disallowance of interest expenses.3. Deletion of disallowance under Section 40(a)(ia) for interest expenses paid without compliance with Section 194A.4. Admission of additional evidence in violation of Rule 46A.5. General issue regarding upholding the Assessing Officer's order.Detailed Analysis:1. Deletion of Addition on Account of Unexplained Cash Credit under Section 68:The Assessing Officer (AO) observed that the assessee had taken unsecured loans of Rs. 1,35,53,985/- and failed to prove the creditworthiness of loan creditors for Rs. 1,20,21,020/- due to their meager income. The AO made an addition under Section 68 for unexplained cash credit. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted this addition, referencing the judgment of the Hon. Gujarat High Court in DCIT vs. Rohini Builders, which states that once the assessee provides PAN, bank statements, and income-tax returns of creditors, the initial burden under Section 68 is discharged. The Tribunal upheld the CIT(A)'s decision, noting that the assessee had provided sufficient evidence to prove the identity, genuineness, and creditworthiness of the loan creditors, and the AO had not conducted any further inquiry to disprove these evidences.2. Deletion of Disallowance of Interest Expenses:The AO disallowed interest expenses of Rs. 7,06,261/- paid to the loan creditors, treating them as non-genuine. The CIT(A) deleted this disallowance, reasoning that since the loans were genuine, the interest paid on such loans could not be treated as non-genuine. The Tribunal concurred with the CIT(A), affirming that the interest expenses were legitimate and paid to genuine parties who had shown the interest income in their respective income-tax returns.3. Deletion of Disallowance under Section 40(a)(ia) for Interest Expenses:The AO made an alternate disallowance under Section 40(a)(ia) for non-deduction of TDS on interest expenses of Rs. 3,00,348/-. The CIT(A) deleted this disallowance, noting that the assessee had submitted Form 15G for the creditors, and these forms were filed with the ITO, TDS within the statutory limit. The Tribunal upheld the CIT(A)'s decision, stating that there was no liability for the assessee to deduct TDS as Form 15G was duly filed, and thus, the disallowance was unwarranted.4. Admission of Additional Evidence in Violation of Rule 46A:The Revenue contended that the CIT(A) admitted additional evidence in violation of Rule 46A. However, the Tribunal found that all necessary details, including names, addresses, PAN, bank statements, and income-tax returns, were already placed before the AO. The Form 15G was also on record with the ITO, TDS. Therefore, the Tribunal dismissed this ground, concluding that there was no violation of Rule 46A.5. General Issue Regarding Upholding the Assessing Officer's Order:The Tribunal found no substance in the general ground raised by the Revenue to uphold the AO's order, as the specific grounds had already been addressed and dismissed.Conclusion:The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order in full, thereby deleting the additions and disallowances made by the AO. The order was pronounced in the open Court on 20th February 2017.