2019 (6) TMI 544 - AT - Income Tax

Tribunal directs reassessment under Income Tax Act, deleting unexplained cash credit

The Tribunal allowed the appeal, directing the Assessing Officer to reevaluate the disallowance under section 14A of the Income Tax Act, 1961, and ... Disallowance u/s 14A - HELD THAT:- The limited contention raised by the learned counsel for the assessee is that the actual dividend income earned by the assessee during the year under consideration was only ₹ 9,687/- and, therefore, the disallowance u/s 14A should be restricted ₹ 9,687/-. However, as pointed out by the learned DR from the order of the Assessing Officer, the amount of exempt income was mentioned by the AO as ₹ 1,49,519/-. Direct the AO to verify the actual amount of exempt income earned by the assessee during the year under consideration and restrict the disallowance u/s 14A to that extent. Ground No. 1 of the assessee’s appeal is accordingly treated as allowed for statistical purpose. Unexplained cash credit - loan received by the assessee as unexplained - HELD THAT:- In the case of Orissa Corporation Pvt. Ltd. [1986 (3) TMI 3 - SUPREME COURT] as held that merely because summons issued to some of the creditors could not be served or they fail to appear before the AO cannot be the basis to treat the loans taken by the assessee from those creditors as non-genuine. It was also held that if the AO was not satisfied about the cash amount deposited by those creditors in their bank account, the proper course should have been to make assessments in the case of those creditors by treating the cash deposits in their bank account as unexplained investment of those creditors u/s 69. Decision in the case of Orissa Corporation Pvt. Ltd. [1986 (3) TMI 3 - SUPREME COURT] is squarely applicable in the facts of the present case and respectfully following the same, delete the addition treating the loan in question received by the assessee as unexplained cash credit u/s 68 - Decided in favour of assessee. Issues:1. Disallowance of &8377; 1,49,519 under section 14A of the Income Tax Act, 1961.2. Addition of &8377; 9,00,000 as unexplained cash credit under section 68.Issue 1 - Disallowance under Section 14A:The appeal challenged the disallowance of &8377; 1,49,519 made by the Assessing Officer (AO) and upheld by the Ld. CIT(A) under section 14A of the Income Tax Act, 1961. The AO calculated the disallowance based on Rule 8D, which exceeded the actual exempt dividend income of &8377; 1,49,519 received by the assessee. The Tribunal directed the AO to verify the actual exempt income earned by the assessee and restrict the disallowance accordingly, allowing the appeal for statistical purposes.Issue 2 - Addition as Unexplained Cash Credit under Section 68:The second issue involved the addition of &8377; 9,00,000 as unexplained cash credit under section 68. The AO treated the loan received by the assessee as unexplained due to unsatisfactory establishment of the loan creditor's creditworthiness and transaction genuineness. Despite the confirmation letter and relevant documentation provided by the assessee, the AO and Ld. CIT(A) upheld the addition. However, the Tribunal found that the assessee had discharged the primary onus by proving the loan's genuineness and repayment during the relevant year. Citing legal precedents, the Tribunal held that the addition under section 68 was unjustified, deleting the &8377; 9,00,000 addition.In conclusion, the Tribunal allowed the assessee's appeal, directing the AO to reevaluate the disallowance under section 14A and deleting the addition of &8377; 9,00,000 as unexplained cash credit under section 68.