Tribunal directs AO to re-examine bank transactions & verify creditors genuineness

The Tribunal allowed the appeal of the assessee for statistical purposes, directing the AO to re-examine the ownership and transactions of the bank account related to the unsecured loan and to verify the genuineness of the sundry creditors. The AO was also instructed to address the issue of interest under Sections 234A and 234B as per the assessee's argument.

---

---

Issues Involved:
1. Addition of Rs. 1,00,36,986/- under Section 68 for unsecured loan and interest.
2. Addition of Rs. 88,745/- for sundry creditors.
3. Charging of interest under Sections 234A and 234B.

Issue-wise Detailed Analysis:

1. Addition of Rs. 1,00,36,986/- under Section 68 for unsecured loan and interest:

The assessee contested the confirmation of the addition of Rs. 1,00,36,986/- by the CIT(A), which included the principal amount received as an unsecured loan and the interest due from M/s Matribhumi Fincap India Limited. The authorities below sustained the addition on the grounds that the lender company was declared a shell company and had a criminal prosecution case under Sections 220(1) & 220(2) of the Companies Act. The assessee argued that complete details justifying the three limbs mentioned under Section 68 were furnished, and the loan was duly returned with interest in the subsequent year. The assessee provided ITR, audited accounts, bank statements, and loan confirmations. Despite this, the CIT(A) confirmed the addition, citing the shell company status and criminal case against the lender. The Tribunal noted the need for the AO to examine the actual ownership and transactions of the bank account in question, as it was still under the name of M/s Pasa Sales and Marketing Ltd. The issue was sent back to the AO for further examination and verification of the bank account ownership and transactions.

2. Addition of Rs. 88,745/- for sundry creditors:

The assessee challenged the addition of Rs. 88,745/- for sundry creditors, which included Rs. 74,713/- for M/s Eastern Trading Agency and Rs. 14,032/- for M/s Annapurna Trading. The assessee provided ledgers and demonstrated that these were regular business concerns, with transactions recorded and repaid in subsequent years. The CIT(A) failed to adjudicate this ground of appeal. The Tribunal directed the AO to verify the genuineness of the creditors and provide the assessee with a reasonable opportunity of hearing. This issue was also sent back to the AO for verification.

3. Charging of interest under Sections 234A and 234B:

The assessee argued that interest under Sections 234A and 234B could only be charged on the returned income and not on the assessed income, following the decision of the Hon'ble Jharkhand High Court. The Tribunal directed the AO to address this issue accordingly, as it was consequential in nature.

Conclusion:

The Tribunal allowed the appeal of the assessee for statistical purposes, directing the AO to re-examine the ownership and transactions of the bank account related to the unsecured loan and to verify the genuineness of the sundry creditors. The AO was also instructed to address the issue of interest under Sections 234A and 234B as per the assessee's argument. The order was pronounced on 18/11/2019 at Ranchi.

---