2017 (9) TMI 739 - HC - Income Tax

Unsecured loans and transport charges backed by records and confirmations held genuine; s.68 addition and disallowance deleted

Addition under s.68 for unexplained unsecured loans was held unsustainable because the assessee discharged the initial onus by producing creditor identity ... Unexplained unsecured loans - addition u/s 68 - ITAT deleted addition - Held that:- Tribunal, in concurring with the First Appellate Authority, found that the Assessing Officer had made addition under Section 68 without any reasonable basis. FAA has analyzed the transaction with each and every creditor and assigned reasons as to why the loans have to be treated as genuine. The assessee has produced details like copy of PAN card, copy of return of income, balance sheet with all the annexures and copy of bank accounts before the Assessing Officer. If there was any doubt, the Assessing Officer should have made further investigation. Once the initial burden was discharged, the Assessing officer had then to find out that despite production of record in relation to these parties, the version of the assessee cannot be accepted. It is in these circumstances that the First Appellate Authority rightly stepped in. Tribunal's order, it quoted that two of the creditors not only appeared before the Assessing Officer, but had also admitted of giving loan. There was nothing suspicious or doubtful in the version of these persons. That is why the order of the First Appellate Authority was upheld. It did not suffer from any legal infirmity. Tribunal did not agree with the Assessing Officer but with the First Appellate Authority because there was overwhelming documentary evidence on record to support the conclusion of the First Appellate Authority. - Decided against revenue Addition towards transportation charges - CIT-A deleted addition confirmed by ITAT - Held that:- Tribunal did not rest its conclusions only on the finding that the Assessing Officer has not carried out a complete exercise. The Tribunal perused the material produced on record. It agreed that there is a proof of actual performance of transportation work, lifting of waste, payment of Tax deducted at Source, full addresses and confirmation of accounts with Permanent Account Number. Even the mode of payment is by account payee cheques. If there was further doubt about the transactions, the Assessing Officer was free to make inquiries with the Regional Transport Office. Tribunal agreed with the First Appellate Authority in holding that mere nonattendance or mere non service without anything more could not be reason enough to sustain the addition. It is in these circumstances, that the First Appellate Authority has rightly stepped in according to the Tribunal. No substantial question of law. - Decided against revenue Issues:1. Challenge to order passed by Income Tax Appellate Tribunal regarding assessment year 2007-2008.2. Disallowance of transportation charges and addition under Section 68 of the Income Tax Act.Issue 1: Challenge to Tribunal's OrderThe Revenue challenged the order of the Income Tax Appellate Tribunal (ITAT) regarding the assessment year 2007-2008. The Revenue contended that the Tribunal did not properly consider factual materials and relevant laws in dismissing the Appeal. The primary issue raised was the addition of transportation charges made by the Assessing Officer, which the Commissioner deleted. The Assessing Officer found discrepancies in transportation charges paid by the assessee and issued notices under Section 133(6) of the Income Tax Act to verify the payments. However, the notices were returned unserved, leading the Assessing Officer to conclude the charges were not genuine. The assessee argued before the First Appellate Authority that the transportation expenditure was genuine, supported by evidence like TDS payments, receipts, and details of subcontractors. The Tribunal, however, found a lack of nexus between the vehicles and parties engaged, upholding the Assessing Officer's decision. The Revenue also challenged the addition under Section 68 of the Income Tax Act related to unsecured loans taken by the assessee. The Assessing Officer doubted the genuineness of the loan transactions, leading to discrepancies in the papers produced. The Commissioner and Tribunal found sufficient evidence to support the genuineness of the loans, disagreeing with the Assessing Officer's doubts. The Tribunal upheld the First Appellate Authority's decision, concluding that the Assessing Officer's additions lacked a reasonable basis and were not supported by substantial evidence.Issue 2: Disallowance of Transportation ChargesThe Assessing Officer disallowed transportation charges paid by the assessee, leading to a challenge by the Revenue. The Commissioner and Tribunal found that despite unserved notices, there were decisive factors supporting the genuineness of the expenditure, such as actual performance of work, TDS payments, and receipts from the Municipal Corporation. The First Appellate Authority emphasized the responsibility of the Assessing Officer to verify transactions through bank accounts and other means, rather than solely relying on non-service of notices. The Tribunal agreed with the First Appellate Authority's approach, noting proof of transportation work, TDS payments, and proper documentation. The Tribunal found no perversity in the conclusions of the lower authorities and dismissed the Revenue's appeal, stating no substantial question of law arose from the deletion of the Assessing Officer's addition. The Tribunal's decision was based on thorough analysis and substantial documentary evidence supporting the genuineness of the transportation charges, leading to the dismissal of the Revenue's appeal.In conclusion, the High Court of Bombay dismissed the Revenue's appeal challenging the Tribunal's order regarding transportation charges and unsecured loans. The Court upheld the decisions of the Commissioner and Tribunal, emphasizing the importance of substantial evidence and proper verification in tax assessments.