2018 (4) TMI 431 - AT - Income Tax

Tribunal upholds deletion of additions based on lack of corroborative evidence

The Tribunal upheld the CIT(A)'s decision to delete additions of Rs. 52,50,000/- and Rs. 3,19,00,726/- in the case. The additions were based solely on ... Addition on account of statement given by the Director in the course of survey - Held that:- No reference to any incriminating material to justify the aforesaid difference as unaccounted income. The long line of judicial precedents quoted in the order of the CIT(A) uniformly holds that mere statement given by an assessee making disclosure, which is not supported by any corroborative material, cannot be assigned evidentiary value for the purposes of additions of alleged undisclosed income in the hands of the assessee - the reasonings adopted by the CIT(A) while granting relief to the assessee are based on sound legal proposition and thus cannot be faulted. In the absence of any reference of incriminating materials to justify the addition, we find no infirmity in the order of the CIT(A) towards cancelling the addition made by the Assessing Officer on this score. Therefore, we decline to interfere with the order of the CIT(A) in this regard. Addition u/s 68 - Held that:- Where the trail for obtaining the loan and repayment thereof is proved and the lender has duly filed its return of income the encompassing transaction with the assessee; we see little merit in the grievance of the Revenue on the aforesaid issue. The conclusion drawn by the CIT(A) is based on proper appreciation of evidences and founded on peculiar facts of the case. Therefore, we decline to interfere with the conclusion drawn by the CIT(A) deleting the addition towards unexplained credit. - Decided against revenue. Issues Involved:1. Deletion of addition of Rs. 52,50,000/- being income disclosed during the course of survey but not reflected in the return of income.2. Deletion of addition made under Section 68 of the Income-tax Act amounting to Rs. 3,19,00,726/- from Prerna Mercantile Pvt Ltd.Issue-Wise Detailed Analysis:1. Deletion of Addition of Rs. 52,50,000/-:The first issue concerns the addition of Rs. 52,50,000/- which was part of income allegedly disclosed during a survey but not reflected in the return of income. A survey conducted under Section 133A of the Income-tax Act on 22.10.2010 led to the recording of a statement by one of the Directors, who disclosed an amount of Rs. 4,50,00,000/-. However, the assessee included only Rs. 3,97,50,000/- in the return of income, leading the Assessing Officer to add the difference of Rs. 52,50,000/- to the total income.The CIT(A) noted that the disclosure of Rs. 4,50,00,000/- included both the current year income and undisclosed income. The CIT(A) observed that no incriminating documents were found during the survey to corroborate the disclosure, and the total income shown in the return was Rs. 4,85,28,254/-, which included the undisclosed income of Rs. 3,97,50,000/- and current year profits of Rs. 87,78,254/-. The CIT(A) concluded that the addition was based solely on the statement made during the survey without considering the current year income. Judicial precedents cited by the CIT(A) supported the view that mere statements without corroborative material cannot justify additions. Consequently, the CIT(A) deleted the addition of Rs. 52,50,000/-.The Tribunal upheld the CIT(A)'s decision, agreeing that the addition was based solely on the statement without any incriminating material. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the Revenue's appeal on this ground.2. Deletion of Addition under Section 68 of Rs. 3,19,00,726/-:The second issue pertains to the addition of Rs. 3,19,00,726/- under Section 68 of the Income-tax Act. The Assessing Officer found that the assessee had obtained an unsecured loan from M/s. Prema Mercantile Pvt Ltd, Kolkata. Despite collecting various evidences, the Assessing Officer held that the assessee failed to produce the Principal Officer of the lender, thus not establishing the genuineness and creditworthiness of the loan.The CIT(A) noted that the assessee had provided sufficient evidence, including loan confirmation, Income-tax Returns, balance-sheet, profit and loss account, and bank statement of the lender. The CIT(A) observed that the Assessing Officer had also issued a notice under Section 133(6), which was duly responded to by the lender. The CIT(A) concluded that the assessee had discharged its onus of proving the identity, genuineness, and creditworthiness of the lender. The CIT(A) also pointed out that the loan was taken in the earlier year and was not disputed then. Judicial precedents from the Gujarat High Court supported the view that if sufficient information is provided, no addition should be made. Consequently, the CIT(A) deleted the addition under Section 68.The Tribunal upheld the CIT(A)'s decision, noting that the lender was not a stranger to the assessee and that the loan was obtained through banking channels and reported in the lender's return of income. The Tribunal also considered the fact that the loan was repaid in a subsequent year. The Tribunal found no merit in the Revenue's grievance and dismissed the appeal on this ground.Conclusion:In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s deletion of the additions of Rs. 52,50,000/- and Rs. 3,19,00,726/-. The Tribunal found that the CIT(A)'s decisions were based on sound legal propositions and proper appreciation of evidence.