2020 (7) TMI 368 - AT - Income Tax

Appeal partly allowed: deletions upheld, additions deleted based on evidence. Grounds analyzed in detail.

The appeal was partly allowed, with specific additions deleted and others upheld based on the evidence and explanations provided by the assessee. The ... Unexplained income - addition on account of introduction of the amount in the capital account of the assessee - HELD THAT:- Only contention of the AO in the remand report is that M/s Euro Steels had shown very low income in the assessment year 2013-14 itself is not a ground to reject the creditworthiness of M/s Euro Steels. An assessee, may or may not, earn considerable income during an assessment year but that fact itself is not determinative of the creditworthiness / financial capability of such an assessee. When the assessee and even the AO himself has called for necessary records from his counterpart / AO of the said concern, but could not find any discrepancy or fault in the same, hence, in our view, the action of the AO in rejecting the creditworthiness of M/s Euro Steels solely on the ground that its income for the year under consideration was low, cannot be held to be justified. So far as the identity of the creditor was concerned, there was no doubt raised by the AO in this respect. M/s Euro Steels was as separate concern in which the assessee was partner and the same was duly assessed to the income tax. So far as the genuineness of the transactions was concerned, even in that respect no doubt has been raised by the AO. Admittedly, all the amounts by M/s Euro Steels has been transferred to the assessee through banking channels. CIT(A) has rejected the contentions of the assessee and upheld the additions made by the AO citing different reasons saying that the assessee could not prove the source of numerous deposits in the bank accounts of M/s Euro Steels. CIT(A) simply noted that there was a deposit into the said account, therefore, he doubted the genuineness of the transactions, whereas, the claim of the assessee has that all the details whatever were called for, were duly furnished and that the alleged deposits in the individual bank account of Shri Rohit Kumar Jindal were through banking channels. When the assessee has proved the source of deposit and genuineness of the transactions, therefore, the assessee without being called for to prove the source of source by the AO was not supposed to furnish the further details. No doubt has been raised either by the AO or by the CIT(A) regarding the transaction so far as the receipt by the assessee from saving account of the individual is concerned. So far as the addition was concerned, the assessee admittedly could not prove with reliable evidence the source of the said amount and the creditworthiness of the creditor and genuineness of the transaction. Addition to the extent of ₹ 4,75,000/- is upheld whereas, the remaining part of the additions out of the total additions ₹ 1,03,10,000/- is ordered to be deleted. This ground of the appeal is accordingly partly allowed. Unexplained unsecured loans - HELD THAT:- Since the source of deposit in the bank account of M/s Kiran Industries remained unexplained, he, therefore, held that the genuineness of the transaction is not proved. However, in our view, the fact that there was sufficient income declared by Smt. Santosh Rani to prove her creditworthiness of the amount advanced to M/s Dev Krishan Jindal & Sons HUF, is enough evidence so far as the onus on the assessee to prove the creditworthiness of the creditor is concerned. The assessee, in fact, has proved the source of source. The observation of the CIT(A) that there were other entries of the equal amount in the bank account of M/s Kiran Industries, in our view, is not relevant so far as the genuineness of the transaction and creditworthiness of the creditor in respect of the funds received by the assessee is concerned. - Decided in favour of the assessee. Issues Involved:1. Addition of Rs. 2,66,60,000/- against the declared income.2. Addition of Rs. 1,03,10,000/- in the capital account as unexplained.3. Addition of Rs. 1,62,50,000/- as unexplained unsecured loans.4. Ad-hoc addition of Rs. 1,00,000/- for personal use expenses.Issue-wise Detailed Analysis:1. Addition of Rs. 2,66,60,000/- Against Declared Income:The assessee contested the total addition amounting to Rs. 2,66,60,000/-. However, this issue was addressed through the adjudication of subsequent specific grounds.2. Addition of Rs. 1,03,10,000/- in the Capital Account as Unexplained:The assessee claimed the addition was sourced from:- Rs. 90,75,000/- transferred from M/s Euro Steels.- Rs. 2,60,000/- transferred from Shri Rohit Jindal’s personal savings account.- Rs. 5,00,000/- transferred from the assessee's savings account.- Rs. 4,75,000/- received through banking channels but source unidentified.The AO, in the remand report, observed discrepancies in the sources:- M/s Euro Steels had low declared income, questioning its creditworthiness.- No sufficient documentary evidence for Rs. 4,75,000/- and Rs. 2,60,000/-.The CIT(A) upheld the addition, stating:- The assessee failed to explain the sources of Rs. 4,75,000/- and Rs. 2,60,000/-.- Numerous unexplained deposits in M/s Euro Steels’ bank account.The Tribunal found:- The AO's rejection based on M/s Euro Steels’ low income was unjustified.- The assessee provided sufficient evidence for the transactions from M/s Euro Steels.- No queries were raised by the AO regarding the source of deposits in Shri Rohit Jindal’s account.- The addition of Rs. 4,75,000/- was upheld due to lack of evidence.3. Addition of Rs. 1,62,50,000/- as Unexplained Unsecured Loans:The assessee explained the loans were received from family members and friends:- Rs. 19,95,000/- from M/s Kiran Industries through M/s Dev Krishan Jindal & Sons (HUF).- Rs. 20,00,000/- from M/s Euro Steels through Mrs. Smriti Jindal.- Rs. 54,31,000/- from Shri Ramesh Jain.- Rs. 85,00,000/- from M/s Euro Steels through Shri Rohit Jain.- Rs. 26,55,000/- from M/s Euro Steels through Mrs. Superna Jindal.- Rs. 13,90,000/- from Shri Rohit Kumar Jindal.The AO observed:- Discrepancies in the capital account of Shri Rohit Jain.- Lack of ITR for Shri Ramesh Jain.- Incorrect details about M/s Kiran Industries’ proprietorship.The CIT(A) upheld the addition, stating:- Unexplained deposits in M/s Euro Steels’ bank account.- Failure to prove the source of deposits in M/s Kiran Industries.The Tribunal found:- The AO's observations about M/s Euro Steels were unjustified.- The assessee provided sufficient evidence for the transactions.- The creditworthiness of M/s Kiran Industries was proven through Smt. Santosh Rani’s income.- The addition of Rs. 1,42,55,000/- from M/s Euro Steels was deleted.- The addition of Rs. 19,95,000/- from M/s Dev Krishan Jindal & Sons (HUF) was deleted.4. Ad-hoc Addition of Rs. 1,00,000/- for Personal Use Expenses:This ground was not pressed by the assessee and thus dismissed.Conclusion:The appeal was partly allowed, with specific additions deleted and others upheld based on the evidence and explanations provided by the assessee. The detailed analysis addressed each ground of appeal, considering the remand report, counter objections, and the final findings of the CIT(A) and Tribunal.