2019 (3) TMI 1035 - AT - Income Tax

Appeal allowed on cash credit addition for lack of substantiation

The appeal was filed against the addition of Rs. 5,00,000 on account of cash credit for Assessment Year 2011-12. The CIT(A) upheld the addition due to ... Unexplained cash credit u/s 68/69 - assesse is salaried employee - not maintaining books of accounts - identity, genuineness and creditworthiness of the creditors - CIT's non speaking order - ex-parte order - HELD THAT:- In our view, these sections are applicable when the books of account are maintained by the assessee and entry appears in the books. When such requirement is not there, AO’s decision in invoking the said provisions becomes unsustainable. However, on perusal of the order of the CIT(A), this angle of an argument was not taken by the assessee. As such, the assessee failed to file relevant decisions to support his argument relating to sustainable of the addition u/s 68/69 of the Act. Therefore,the matter should travel to the file of the CIT(A) for want of a speaking order after considering the above stated arguments raised by the assessee before us - Appeal of the assessee is allowed for statistical purposes. Issues:Appeal against order of CIT(A) for Assessment Year 2011-12 - Addition of Rs. 5,00,000 on account of cash credit - Failure to furnish PAN numbers and bank statements of creditors - Invocation of sections 68/69 of the Act.Analysis:The appeal was filed against the order of CIT(A) confirming the addition of Rs. 5,00,000 to the total income of the assessee for the Assessment Year 2011-12. The original assessment by the Assessing Officer resulted in an addition of Rs. 40,550. Subsequently, a fresh assessment was made after invoking the provisions of section 263 of the Act, leading to the addition of Rs. 5,00,000 on account of cash credit and Rs. 40,550 as interest income. The CIT(A) upheld these additions and dismissed the appeal.The assessee, being aggrieved by the order of the CIT(A), appealed against the addition of Rs. 5,00,000 on account of cash credit. During the proceedings, despite notice being served, no one represented the assessee. The Revenue's representative highlighted that the assessee, a salaried employee, did not maintain books of account. The Assessing Officer observed that the assessee had taken loans totaling Rs. 5,00,000 from 10 individuals, deposited in a bank as fixed deposits, but failed to provide PAN numbers and bank statements of the creditors. Consequently, the Assessing Officer added the amount as unexplained cash credit and initiated penalty proceedings.The CIT(A) upheld the addition, noting the lack of substantiation by the appellant regarding the cash unsecured loans. The appellant's failure to establish the identity, creditworthiness, and genuineness of the transactions led to the confirmation of the addition. The appellant did not provide additional evidence during the appellate proceedings, resulting in the dismissal of Ground No.1.Upon reviewing the submissions and evidence, the ITAT found that while the assessee provided confirmation letters, the absence of PAN numbers of the creditors posed an issue. The ITAT opined that sections 68/69 of the Act, invoked by the Assessing Officer, require entries in maintained books of account, which were not present in this case. The ITAT directed the matter to be reconsidered by the CIT(A) for a speaking order, emphasizing the need to consider the arguments raised by the assessee. The CIT(A) was instructed to entertain any additional evidence regarding the identity, genuineness, and creditworthiness of the creditors.Ultimately, the appeal of the assessee was allowed for statistical purposes, with the ITAT providing specific directions for further consideration by the CIT(A).