2020 (1) TMI 462 - AT - Income Tax

Tribunal upholds CIT(A)'s decision on Income Tax Act Sections 68 and 41(1)

The Tribunal upheld the CIT(A)'s decision to confirm the additions under Sections 68 and 41(1) of the Income Tax Act, 1961, due to the Assessee's failure ... Additions u/s 68 and u/s 41(1) - unexplained credit - receipt of refundable security deposit from business agents - none was present from the assessee’s side - Ex-parte order - Held that:- After perusal of the materials on record, including the order of the AO and the aforesaid impugned order dated 08.08.2016 of the Ld. CIT(A), we find that the Ld. CIT(A) has passed speaking order on merits. During appellate proceedings in Income Tax Appellate Tribunal (“ITAT”, for short) no material has been brought for our consideration to persuade us to take a view different from the view taken by the Ld. CIT(A) in the impugned order on merit. After hearing the Ld. Sr. DR and after perusal of materials on record, and further, in view of the foregoing discussion, we decline to interfere with the aforesaid impugned appellate order of Ld. CIT(A), and accordingly, this appeal is dismissed. Assessee will be at liberty to approach ITAT for restoration of the appeal in accordance with Proviso to Rule 24 of Income Tax (Appellate Tribunal), Rules, 1963. If the assessee does approach ITAT for restoration of the appeals in ITAT, the matter will be considered in accordance with law having regard to the facts and circumstances. Issues Involved:1. Addition under Section 68 of the Income Tax Act, 1961.2. Addition under Section 41(1) of the Income Tax Act, 1961.3. Admission of additional evidence under Rule 46A of the Income Tax Rules, 1962.4. Genuineness and creditworthiness of depositors.Detailed Analysis:1. Addition under Section 68 of the Income Tax Act, 1961:The Assessee challenged the addition of Rs. 2,59,90,054 under Section 68 for unexplained credits. The Assessing Officer (AO) observed that the Assessee received security deposits amounting to Rs. 3,00,91,531, out of which Rs. 2,44,40,054 was from 178 parties with deposits exceeding Rs. 1 lakh. The AO required the Assessee to furnish details and confirmations of these deposits. The Assessee provided confirmations from 71 parties, but the AO found these insufficient due to the lack of PAN details and other supporting documents. Consequently, the AO added Rs. 2,44,40,054 as unexplained credits.During the appellate proceedings, the Assessee submitted additional confirmations and PAN details for 22 more parties. The CIT(A) admitted these additional evidences under Rule 46A, considering that the Assessee was not given sufficient time by the AO to furnish the required details. However, the CIT(A) upheld the AO’s decision, stating that the Assessee failed to prove the creditworthiness of the depositors and the genuineness of the transactions. The Tribunal found no material to take a different view from the CIT(A) and dismissed the appeal.2. Addition under Section 41(1) of the Income Tax Act, 1961:The AO added Rs. 15,50,000 under Section 41(1) for unclaimed receipts shown as security deposits. The Assessee contended that these receipts were reconciled in the subsequent year and shifted from unclaimed receipts to outstanding liabilities. However, the Assessee did not provide details of the depositors to whom these receipts were attributable. The CIT(A) upheld the addition, but under Section 68, as the Assessee failed to establish the identities, creditworthiness, and genuineness of the transactions. The Tribunal found no reason to interfere with this decision.3. Admission of additional evidence under Rule 46A of the Income Tax Rules, 1962:The Assessee sought to admit additional evidence, including confirmations and PAN details of depositors, under Rule 46A. The CIT(A) admitted these evidences, noting that the AO did not provide sufficient time for the Assessee to furnish the required details. The AO opposed the admission, arguing that the Assessee was given ample opportunity during the assessment proceedings. The Tribunal upheld the CIT(A)’s decision to admit the additional evidence, considering it crucial for adjudicating the issues on merit.4. Genuineness and creditworthiness of depositors:The Assessee argued that it had discharged its burden by providing confirmations and PAN details of the depositors. However, the CIT(A) and the Tribunal noted that mere furnishing of PAN details does not prove creditworthiness. The Assessee failed to provide supporting documents like I.T. returns, balance sheets, and bank statements to establish the financial capacity of the depositors. The Tribunal agreed with the CIT(A) that the Assessee did not discharge its initial onus under Section 68, and the addition was justified.Conclusion:The Tribunal upheld the CIT(A)’s decision to confirm the additions under Sections 68 and 41(1) of the Income Tax Act, 1961, due to the Assessee’s failure to establish the identities, creditworthiness, and genuineness of the transactions. The appeal filed by the Assessee was dismissed.