2018 (9) TMI 529 - AT - Income Tax

Assessee's Appeals Dismissed for Lack of Evidence, Revenue's Appeal Not Maintainable

The ITAT dismissed both appeals filed by the assessee and the revenue. The assessee failed to substantiate the sources of capital introduced, sundry ... Addition on account of unexplained cash credits - proof of identity, capacity and genuineness of creditors - initial onus and duty of enquiry by Assessing Officer - admission of additional evidence in appellate proceedings - maintainability of departmental appeal in view of CBDT CircularAddition on account of unexplained cash credits - Addition of Rs. 8,82,378/- as capital introduction was sustained in absence of evidence of source. - HELD THAT: - The Assessing Officer treated the cash introduced as capital as unexplained because the assessee failed to produce supporting evidence of accumulated salary savings or other documentary proof. The CIT(A) examined the bank account and observed no balance except a small amount; before the Tribunal the assessee did not furnish additional evidence to substantiate the source of the capital. In these circumstances the Tribunal found no infirmity in the appellate order confirming the addition, as the assessee did not discharge the requisite evidentiary burden to establish the source of the capital introduced. [Paras 4, 5]Addition of Rs. 8,82,378/- as unexplained capital introduction confirmed; ground dismissed.Proof of identity, capacity and genuineness of creditors - addition on account of unexplained cash credits - Addition of Rs. 6,73,100/- shown as sundry creditors was upheld for want of confirmations or evidence. - HELD THAT: - The Assessing Officer added the amount as the assessee failed to produce confirmation letters or other evidence to establish the creditors. The CIT(A) affirmed the addition for lack of evidence, and no new material was placed before the Tribunal. Absent any proof establishing identity, capacity or genuineness of the sundry creditors, interference with the appellate order was not warranted. [Paras 6, 7, 8]Addition of Rs. 6,73,100/- on account of sundry creditors confirmed; ground dismissed.Initial onus and duty of enquiry by Assessing Officer - proof of identity, capacity and genuineness of creditors - Out of total alleged loan creditors of Rs. 63.00 lakhs, Rs. 39.00 lakhs were accepted and Rs. 24.00 lakhs were held as unexplained and added to income. - HELD THAT: - The CIT(A) examined the evidence produced: for nine creditors (aggregate Rs. 39 lakhs) the existence of creditors and advances was established by attendance, identity documents and land records; the Tribunal accepted the CIT(A)'s finding that the initial onus was discharged in respect of those creditors and that the Assessing Officer ought to have made specific further enquiries before making additions. However, for the balance amount of Rs. 24 lakhs the assessee failed to produce confirmations, original promissory notes or place the creditors for examination; the CIT(A) found the three essential elements (identity, capacity and genuineness) not proved for that sum and therefore sustained the addition. The Tribunal also rejected belatedly tendered confirmation produced before it on grounds of non-admission and insufficiency to establish creditworthiness. [Paras 10, 11, 13, 14]Relief of Rs. 39.00 lakhs granted in respect of nine proved creditors; addition of Rs. 24.00 lakhs confirmed as unexplained and added to income.Admission of additional evidence in appellate proceedings - Belatedly filed confirmation letter in respect of one creditor was not admitted and in any event was insufficient to discharge the evidentiary burden. - HELD THAT: - The Tribunal refused to admit the confirmation letter tendered before it because it was not filed before the Assessing Officer or the CIT(A); the assessee's explanation that promissory notes were sufficient was not accepted, particularly as confirmations had already been filed earlier in respect of other creditors. Further, the confirmation produced related to a creditor whose landholding and explanation did not satisfactorily establish source or genuineness of the advance. Hence the belated evidence was neither admitted nor found decisive. [Paras 13]Application to admit additional evidence rejected; confirmation not considered to discharge burden.Maintainability of departmental appeal in view of CBDT Circular - Revenue's cross-appeal was dismissed as not maintainable in view of CBDT Circular No.03/2018 dated 11.07.2015. - HELD THAT: - On hearing, the assessee's counsel pointed out that the tax effect involved was below the threshold and relied on the stated CBDT circular, which the Tribunal applied retrospectively. The Departmental Representative did not object to this submission. In consequence, the Tribunal held the revenue appeal not maintainable and dismissed it. [Paras 15]Revenue appeal dismissed as not maintainable under the cited CBDT circular.Administrative dismissal of general grounds - General grounds (Ground Nos. 1 and 5) not requiring adjudication were dismissed. - HELD THAT: - The Tribunal observed that the stated grounds were general in nature and did not call for separate adjudication; accordingly they were dismissed without further consideration. [Paras 2]General grounds dismissed.Final Conclusion: Tribunal dismissed the assessee's appeals challenging additions for capital introduction and sundry creditors and sustained the addition of Rs. 24.00 lakhs relating to unproved loan creditors while granting relief of Rs. 39.00 lakhs for proved creditors; a belated confirmation was not admitted; the Revenue's cross-appeal was dismissed as not maintainable in view of the CBDT circular. Appeals stand disposed of accordingly for AY 2011-12. Issues involved:1. Addition of capital introduction2. Addition of sundry creditors3. Addition of loan creditorsIssue 1: Addition of capital introductionThe Assessing Officer noted that the assessee introduced capital of Rs. 8,82,378 without providing supporting evidence. The assessee claimed the capital came from savings accumulated while working as a Sales Manager, but failed to produce any evidence. The Assessing Officer made the addition based on lack of evidence. The CIT(A) confirmed the addition after finding no balance in the bank account except for Rs. 70,240. The ITAT upheld the decision, as the assessee failed to substantiate the source of the capital, leading to the dismissal of the appeal.Issue 2: Addition of sundry creditorsThe Assessing Officer observed an amount of Rs. 6,73,100 shown as sundry creditors without confirmation letters. The assessee did not provide any evidence, resulting in the addition of the entire amount to the assessee's income. The CIT(A) upheld the addition, as no evidence was presented. The ITAT found no reason to interfere with the CIT(A)'s order, leading to the dismissal of the appeal related to sundry creditors.Issue 3: Addition of loan creditorsThe Assessing Officer questioned cash deposits and asked for sources of Rs. 63.00 lakhs deposited in the bank account. The assessee listed loan creditors, mainly small farmers, for the amount. The Assessing Officer found discrepancies in the statements of the creditors and concluded the loans were unexplained money. The CIT(A) confirmed the addition of Rs. 24.00 lakhs, as no details or confirmation letters were provided for this portion of the loans. The ITAT upheld the decision, stating that the assessee failed to prove the creditworthiness and genuineness of the loan creditors for this amount. An additional ground raised by the assessee was rejected, and the appeal related to loan creditors was dismissed.In a separate appeal, the tax effect involved was below Rs. 20.00 lakhs, rendering the revenue's appeal not maintainable as per a CBDT Circular. Consequently, the appeal filed by the revenue was dismissed. Overall, both appeals filed by the assessee and the revenue were dismissed by the ITAT.