2019 (11) TMI 146 - AT - Income Tax

Tribunal rules in favor of Revenue in appeal, remands issue for further investigation

ITO 20 (3) (1), Mumbai. Versus M/s Rikkie Ronie Residency

The Tribunal partly allowed the Revenue's appeal, deleting the addition related to M/s Radhey Krishna Gems Pvt. Ltd. and remanding the issue of the ... Addition u/s 68 - unsecured cash credit - shift of the onus on to the Department to prove addition - HELD THAT:- We should not forget the fact that out of the said four parties, one party namely M/s Radhey Krishna Gems Pvt. Ltd. filed copy of confirmation along with copy of ITR and relevant pages of the bank statement, in response to the notice u/s 133(6) issued by the AO. As is crystal clear from the above, there was no sufficient time before the AO to establish the ingredients contained in section 68 of the Act in respect of the remaining three parties. It is well settled that in order to discharge the onus, the assessee must prove the following (i) the identity of the creditor, (ii) the capacity of the creditor to advance money ; and (iii) the genuineness of the transaction. After the assessee has adduced evidence to establish prima facie the aforesaid, the onus shifts to the Department as held in Shankar Ind v. CIT [1985 (1) TMI 104 - ITAT CALCUTTA-D] The mere furnishing of particulars as held in CIT v. Precision [1993 (6) TMI 17 - CALCUTTA HIGH COURT] or the mere fact of payment by an account payee cheque as held in CIT v. United [1989 (5) TMI 18 - CALCUTTA HIGH COURT] or the mere submission of a confirmatory letter by the creditor as held in CIT v. Mahim [1994 (11) TMI 88 - KERALA HIGH COURT] is, by itself, not enough to shift the onus on to the Department, although these facts may, along with other facts, be relevant in establishing the genuineness of the transaction. As mentioned hereinabove, the new address along with full compliance was made by the assessee before the AO vide letter dated 22.03.2016. The AO completed the assessment u/s 143(3) on 30.03.2016 as it was getting time-barred. The Ld. CIT(A) should have appreciated the paucity of time before the AO to conduct further inquiries. Out of the said four parties, one party namely M/s Radhey Krishna Gems Pvt. Ltd. filed copy of confirmation along with copy of ITR and relevant pages of the bank statement, in response to the notice u/s 133(6) issued by the AO. The onus shifted to the AO. The AO failed to conduct any enquiry to verify the genuineness of the transactions with the above party. The addition made by the AO in respect of M/s Radhey Krishna Gems Pvt. Ltd is hereby deleted. However, following the ratio laid down in NRA Iron & Steel (P.) Ltd. [2019 (3) TMI 323 - SUPREME COURT] & Jansampark Advertising & Marketing (P.) Ltd. [2015 (3) TMI 410 - DELHI HIGH COURT] we set aside the order of the Ld. CIT(A) in part and restore the matter to the file of the AO to make an order afresh in respect of the remaining three parties, after allowing reasonable opportunity of being heard to the assesse. We direct the assessee to file the relevant documents/evidence before the AO - Revenue appeal is partly allowed for statistical purposes. Issues Involved:1. Deletion of addition made under Section 68 of the Income Tax Act, 1961.2. Deletion of addition made under Section 69C of the Income Tax Act, 1961.3. Failure of the assessee to prove the genuineness and creditworthiness of the transactions and the identity of the lender.4. Failure of the assessee to produce the parties before the Assessing Officer (AO).5. Request to reverse the order of the Commissioner of Income Tax (Appeals) [CIT(A)] and restore the order of the AO.Detailed Analysis:1. Deletion of Addition Made Under Section 68:The Revenue appealed against the CIT(A)'s decision to delete an addition of Rs. 3,80,00,000 made under Section 68. The AO had observed that the assessee borrowed loans from four lenders but failed to prove the identity and creditworthiness of these lenders. Despite notices and summons, the lenders did not respond adequately. The AO concluded that the loans were not genuine and made the addition as unexplained cash credit. However, the CIT(A) found that the lenders were private limited companies with details available in the public domain. The CIT(A) noted that the AO failed to make further inquiries despite having the new addresses of the lenders. The CIT(A) deleted the addition, stating that the assessee had provided sufficient evidence of the loans' genuineness, including repayment through banking channels.2. Deletion of Addition Made Under Section 69C:The Revenue also contested the deletion of Rs. 30,04,000 added under Section 69C for interest paid on the alleged unexplained loans. The AO had disallowed this interest payment, considering the loans as non-genuine. The CIT(A) deleted this addition, reasoning that since the loans were genuine, the interest paid on them was also legitimate.3. Genuineness and Creditworthiness of Transactions:The AO argued that the assessee failed to prove the genuineness and creditworthiness of the transactions. The AO noted that the lenders had negligible paid-up capital and significant trade payables and receivables. The CIT(A) countered this by stating that the assessee provided sufficient documentation, including bank statements, ITRs, and confirmations, proving the transactions' genuineness. The CIT(A) emphasized that the AO did not establish any cash trail or provide corroborative evidence to dispute the loans' authenticity.4. Failure to Produce Parties Before AO:The AO highlighted that the assessee did not produce the lenders for examination. The CIT(A) observed that the AO had the new addresses and could have made further inquiries but failed to do so. The CIT(A) noted that the lenders complied with the notices by providing the required documents through speed post.5. Request to Reverse CIT(A)'s Order:The Revenue requested to reverse the CIT(A)'s order and restore the AO's decision. The Tribunal considered the arguments and noted that one lender, M/s Radhey Krishna Gems Pvt. Ltd., had provided all necessary documents, shifting the onus to the AO, who failed to conduct further inquiries. The Tribunal deleted the addition related to this lender. For the remaining three lenders, the Tribunal set aside the CIT(A)'s order and remanded the matter to the AO for fresh examination, directing the assessee to provide relevant documents.Conclusion:The Tribunal partly allowed the Revenue's appeal for statistical purposes, deleting the addition related to M/s Radhey Krishna Gems Pvt. Ltd. and remanding the issue of the remaining three lenders to the AO for further investigation. The Tribunal emphasized the need for the AO to conduct proper inquiries and provide the assessee with an opportunity to present evidence.