2021 (2) TMI 652 - AT - Income Tax

Revenue's Appeal Dismissed: Loans not Income, Unjustified Additions Deleted

Deputy Commissioner of Income Tax, Central Circle-3 (1) Versus I. Mallapa Raju

The Revenue's appeal challenging the treatment of loans as income in regular assessment was dismissed. The CIT(A) found the Assessing Officer's rejection ... Addition of the credits received - AO treating the assessee's loans as his income in the course of the regular assessment framed - As per DR during the course of hearing that the AO had rightly added the impugned sum since the assessee had neither put in appearance in Section 142(2A) special audit proceedings nor he had sufficiently discharged onus of having received the sum in issue from one Shri B. Suryanarayana Raju - HELD THAT:- The case file indicates that the assessee just to file his additional evidence under rule 46A of the Income Tax Rules in the lower appellate proceedings. The CIT(A) sought for remand report(s) - no justification in Revenue's endeavour that the impugned addition of the credits received in F.Y. 2006-07 i.e., A.Y. 2007-08 are liable to be added in this A.Y. 2008-09. The necessary corollary that flows therefore is that the assessee's credits in A.Y. 2007-08 only formed source of the land transactions/investments executed in F.Y. 2007-08 i.e., A.Y. 2008-09 in issue before us. We thus find no reason to accept the Revenue's sole grievance raised in the instant case. Issues Involved:1. Treatment of loans as income in regular assessment.2. Dispute regarding unexplained investment.3. Addition of credits received in a specific financial year.4. Justification for adding credits in a different assessment year.5. Decision on Revenue's appeal.Issue 1: Treatment of loans as income in regular assessmentThe Revenue's appeal sought to reverse the Assessing Officer's action of treating the assessee's loans as income in the regular assessment. The CIT(A) detailed the issue, stating that the amounts were advanced by a specific individual, which was not disputed by the Assessing Officer. The appellant provided bank statements and explanations to support the source of the funds. The Assessing Officer's rejection of the evidence was deemed vague and unacceptable. The CIT(A) concluded that the addition made by the Assessing Officer lacked merit and ordered its deletion.Issue 2: Dispute regarding unexplained investmentThe core issue in the appeal was the addition of a specific sum as an unexplained investment by the Assessing Officer. The CIT(A) analyzed the submissions, bank statements, and explanations provided by the appellant. It was highlighted that the Assessing Officer did not question the source of the funds but added the amount as income in the hands of the assessee. The CIT(A) found the addition unjustified and ordered its deletion, emphasizing that the investment was not made during the assessment year under appeal.Issue 3: Addition of credits received in a specific financial yearThe CIT(A) noted the impugned credits received by the assessee in specific dates in 2006, forming the subject matter of the addition. The Assessing Officer's remand reports failed to rebut this crucial aspect. It was concluded that the credits in the preceding assessment year formed the source of the investments in the year under appeal. Therefore, the Revenue's argument to add the credits in the current assessment year was deemed unjustified.Issue 4: Justification for adding credits in a different assessment yearThe judgment clarified that the credits received in the earlier assessment year were the source of investments in the current assessment year. The Revenue's attempt to add these credits in the different assessment year was found to lack justification, leading to the dismissal of the appeal.Issue 5: Decision on Revenue's appealUltimately, the Revenue's appeal was dismissed based on the detailed analysis of the issues involved. The judgment emphasized the lack of merit in the Assessing Officer's actions and the insufficiency of justifying the addition of the credits in the different assessment year. The order was pronounced in open court on 12th January 2021.This summary provides a comprehensive analysis of the judgment, covering each issue involved and detailing the reasoning behind the decision.