2020 (8) TMI 198 - AT - Income Tax

Appeals Allowed, Additions Deleted under Section 68: Importance of Documentary Evidence

The Tribunal allowed the appeals of Shri Neetu Nayyar and Smt. Honey Nayyar, deleting the additions made under section 68 of the I.T. Act. The Tribunal ... Reopening of assessment u/s 147 - addition u/s 68 - HELD THAT:- As decided in own SMT. MEENA NAYYAR VERSUS ITO, WARD 41 (5) , NEW DELHI [2020 (3) TMI 957 - ITAT DELHI] onus shifts on to the department to conduct further enquiries with respect to the unsecure loan and establish that why assessee's case cannot be accepted - where the assessee had led evidences in support of the identity of the third party and his capability the initial burden which lies upon him stand discharged. It will not before the assessee thereafter to explain further how or in what circumstances the third party obtained the money and how or why he came to make a deposit of the same with the assessee. In such a situation the burden will shift on to the department to show why the assessee's case cannot be accepted and why it must be held that the entry, for purporting to be in the name of a third party still represents the income of the assessee. Thus where in a given case the assessee for his part produced the confirmations and identity proofs of Sh. Babu Jethani, which would be sufficient for the assessee to discharge his initial burden. Then it would be for the AO to bring material if he wants to negate the same. - Decided in favour of assessee. Issues Involved:1. Reopening of the assessment under section 147 of the I.T. Act, 1961.2. Addition of Rs. 4,00,000/- under section 68 of the I.T. Act, 1961 in the case of Shri Neetu Nayyar.3. Addition of Rs. 7,50,000/- under section 68 of the I.T. Act, 1961 in the case of Smt. Honey Nayyar.Issue-wise Detailed Analysis:1. Reopening of the Assessment under Section 147 of the I.T. Act, 1961:The reopening of the assessment was challenged by the assessees, but the primary focus of the judgment was on the additions made under section 68. The reopening was initiated to verify the source of investments made by the assessees, specifically the loans given to M/s. R.G. Consultants Pvt. Ltd. The Tribunal ultimately left the issue of reopening as an academic discussion, implying that the primary concern was the validity of the additions made under section 68.2. Addition of Rs. 4,00,000/- under Section 68 of the I.T. Act, 1961 in the Case of Shri Neetu Nayyar:The assessee, Shri Neetu Nayyar, filed a return declaring an income of Rs. 2,00,110/-. The case was reopened to verify the source of a Rs. 4,25,000/- investment. The assessee had given a loan of Rs. 7,50,000/- to M/s. R.G. Consultants Pvt. Ltd. The A.O. noted unexplained credits of Rs. 4,00,000/- in the assessee's bank account and made an addition under section 68. The assessee provided documentary evidence, including a cash flow statement and details of the lender, Shri Babu Jethani, who was residing in Dubai and had sufficient income from his business there. However, the A.O. and Ld. CIT(A) did not accept these explanations and confirmed the addition.The Tribunal, upon reviewing the case, noted that a similar issue involving the assessee's wife, Smt. Meena Nayyar, had been decided in favor of the assessee by the ITAT, SMC-1 Bench, Delhi. In that case, the Tribunal had accepted the documentary evidence provided and deleted the addition. Following this precedent, the Tribunal set aside the orders of the authorities below and deleted the addition of Rs. 4,00,000/- in Shri Neetu Nayyar's case.3. Addition of Rs. 7,50,000/- under Section 68 of the I.T. Act, 1961 in the Case of Smt. Honey Nayyar:Similar to the case of Shri Neetu Nayyar, Smt. Honey Nayyar's assessment was reopened, and an addition of Rs. 7,50,000/- was made under section 68. The assessee had given a loan of Rs. 7,50,000/- to M/s. R.G. Consultants Pvt. Ltd., sourced from loans taken from Shri Babu Jethani and his son, Master Karthik Nayyar. The A.O. and Ld. CIT(A) did not accept the explanations and confirmed the addition.The Tribunal, referencing the decision in the case of Smt. Meena Nayyar and the similar facts in Shri Neetu Nayyar's case, set aside the orders of the authorities below and deleted the addition of Rs. 7,50,000/- in Smt. Honey Nayyar's case.Conclusion:The Tribunal allowed both appeals, deleting the additions made under section 68 for both Shri Neetu Nayyar and Smt. Honey Nayyar, and left the issue of reopening the assessments as an academic discussion. The judgment emphasized the importance of documentary evidence in proving the identity, genuineness, and creditworthiness of the lenders, following the precedent set in the case of Smt. Meena Nayyar.