2018 (6) TMI 1282 - AT - Income Tax

Tribunal dismisses Revenue's appeal, upholds deletion of addition under Income Tax Act

The Tribunal upheld the decision to delete the addition made under Section 68 of the Income Tax Act, 1961, as the assessee satisfactorily explained the ... Addition made u/s 68 - onus to discharge the burden so cast upon assessee - Held that:- The proviso to section 68 of the Act was introduced by the Finance Act, 2012 w.e.f. 01/04/2013, thus, it would be effective only from Assessment Year 2013-14 onwards and not to the earlier years. The legislature did not introduce the proviso to section 68 of the Act with retrospective effect nor does the proviso so introduce states that it was introduce ‘for removal of doubts’ or that it is ‘declaratory’, therefore, it is not open to give it to retrospective effect by proceeding on the bases that the addition of proviso to section 68 is immaterial. Thus, we find merit in the argument of the ld. counsel for the assessee. All documents submitted neither disproved by AO nor any evidence was brought on record to falsify the claim of the assessee or the authenticity of these documents. Thus, it can be said that the assessee discharged its onus as provided under section 68 of the Act. The interest was paid through banking channel by the assessee on such loans. It is also noted that so far as the disallowance of interest portion is concerned, the same was deleted by the ld. FAA and has not been challenged before this Tribunal by the Revenue further fortifies the case of the assessee. The loans were repaid along with interest before the date of survey i.e. 17/10/2014 and no cash was found during survey further fortifies the claim of the assessee. All the concerned parties appeared before AO during remand proceedings, AO recorded their statement and nothing adverse was pointed out even Shri Pravin Jain himself appeared before the Ld. Assessing Officer and even during remand proceedings enquiries were carried out and no adverse remark was made by the ld. Assessing Officer. The assessee as well as the other parties furnished all possible documents evidencing that the loans are not bogus. No cash was found deposited in the accounts of alleged six parties, thus in the presence of plausible explanation by the assessee, relevant material, and requirement of fulfillment of ingredients, enshrined in section 68 of the Act, we find that onus cast upon the assessee has been duly discharged - decided in favour of assessee Issues Involved:1. Addition made under Section 68 of the Income Tax Act, 1961.2. Validity of retracted statements.3. Onus of proving the genuineness of transactions.4. Non-provision of opportunity for cross-examination.5. Treatment of interest paid on loans.Detailed Analysis:1. Addition made under Section 68 of the Income Tax Act, 1961:The Revenue was aggrieved by the deletion of the addition made under Section 68 of the Income Tax Act, 1961, by the First Appellate Authority. The addition was based on the statement of Shri Ajay Maheshwari, who later retracted his statement. The Tribunal analyzed the provisions of Section 68, which states that if any sum is found credited in the books of an assessee and the assessee offers no satisfactory explanation, the sum may be charged to income tax as the income of the assessee.2. Validity of retracted statements:Shri Ajay Maheshwari retracted his statement 23 days after it was recorded, claiming that it was made under mental pressure and health issues. The Tribunal noted that retraction alone does not invalidate the statement unless corroborated by other evidence. The Tribunal emphasized that the burden of proof lies on the assessee to provide a satisfactory explanation for the credit entries.3. Onus of proving the genuineness of transactions:The Tribunal observed that the assessee had submitted loan confirmations, bank statements, and income tax returns of the lenders, thereby discharging the initial burden of proof. The Tribunal cited various legal precedents, including the Hon’ble Supreme Court's decision in P. Mohankala (2007) and CIT vs. Durga Prasad More (82 ITR 540), which support the principle that the onus of proving the source of a sum lies on the assessee.4. Non-provision of opportunity for cross-examination:The Tribunal highlighted that the statements of Shri Pravin Jain and other lenders were not provided to the assessee for cross-examination, violating the principles of natural justice. The Tribunal referred to the decision in Kishanchand Chellaram v. CIT [125 ITR 713], which mandates that any material used against the assessee must be disclosed to them, and an opportunity for cross-examination must be provided.5. Treatment of interest paid on loans:The Tribunal noted that the interest paid on the loans was disallowed by the Assessing Officer but was not challenged further by the Revenue. The Tribunal found that the loans were repaid along with interest before the date of the survey, and no cash was found during the survey, further supporting the assessee's claim.Conclusion:The Tribunal concluded that the assessee had satisfactorily explained the nature and source of the credit entries and discharged the onus cast upon them under Section 68 of the Act. The addition made by the Assessing Officer was based on presumptions and retracted statements without corroborative evidence. Therefore, the Tribunal upheld the decision of the First Appellate Authority to delete the addition and dismissed the Revenue's appeal.