2021 (1) TMI 29 - AT - Income Tax

Tax appeal success: Section 68 addition deleted, additional evidence admitted, revenue appeal dismissed

ITO 20 (2) (2), Mumbai Versus Smt. Manjudevi Joitkumar Bhansali

ITO 20 (2) (2), Mumbai Versus Smt. Manjudevi Joitkumar Bhansali - TMI Issues Involved:1. Justification of deletion of addition made under Section 68 of the Income Tax Act, 1961.2. Admission of additional evidences by the Commissioner of Income Tax (Appeals).Issue-wise Detailed Analysis:1. Justification of Deletion of Addition Made Under Section 68:The primary issue in this appeal was whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in deleting the addition made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961, concerning loans received by the assessee from certain parties. The AO had treated these loans as unexplained cash credits due to the inability of the assessee to produce the loan creditors for verification and the lack of satisfactory evidence regarding their identity and creditworthiness.During the assessment, the AO issued notices under Section 133(6) to three parties from whom the assessee had borrowed unsecured loans. Notices to two parties were returned with the remark 'left,' and the third party did not respond. The AO then issued a show-cause notice to the assessee, asking her to establish the identity and creditworthiness of the loan creditors. The assessee's representative submitted written submissions but could not produce the loan creditors. Consequently, the AO treated the loans as unexplained cash credits and made additions under Section 68.The assessee appealed to the CIT(A), submitting confirmations from the loan creditors, their bank statements, balance sheets, and returns of income. The CIT(A) sought a remand report from the AO, who reiterated his stance that the loan creditors were not creditworthy and had admitted during a search operation that they were involved in providing accommodation entries. However, the assessee submitted that the loans were genuine, had been repaid through banking channels, and interest on these loans had been allowed as a deduction by the AO.The CIT(A) examined the evidences and concluded that the assessee had proved the identity, creditworthiness, and genuineness of the loan transactions. The CIT(A) noted that the AO had not provided any corroborative evidence to support the claim that the loans were accommodation entries. The CIT(A) also observed that the loans had been repaid through banking channels, which further supported the genuineness of the transactions. Therefore, the CIT(A) deleted the addition made under Section 68.2. Admission of Additional Evidences by the Commissioner of Income Tax (Appeals):The revenue raised an additional ground, contending that the CIT(A) erred in admitting additional evidences that were not produced before the AO during the assessment proceedings. The CIT(A) had admitted these additional evidences, including PAN cards, balance sheets, and bank statements of the loan creditors, under Rule 46A of the Income Tax Rules.The CIT(A) justified the admission of additional evidences by stating that the assessee had submitted basic details during the assessment, which were not found satisfactory by the AO. The deficiencies were rectified by filing additional evidences before the CIT(A). The CIT(A) also noted that the AO had submitted two remand reports, and no adverse inference was drawn on the evidences submitted by the assessee.The Tribunal upheld the CIT(A)'s decision to admit the additional evidences, noting that the CIT(A) had provided a detailed explanation for admitting these evidences. The Tribunal found no merit in the revenue's additional ground and dismissed it.Conclusion:The Tribunal concluded that the assessee had provided sufficient documentary evidence to prove the identity, creditworthiness, and genuineness of the loan transactions. The Tribunal also upheld the CIT(A)'s decision to admit additional evidences, finding no basis for the revenue's contention. Consequently, the appeal filed by the revenue was dismissed.