2021 (12) TMI 255 - AT - Income Tax

Tribunal overturns tax assessment citing lack of evidence, directs re-examination.

The Tribunal found in favor of the appellant in challenging the addition of unexplained credits under Section 68 of the Income Tax Act for the assessment ... Unexplained credits u/s 68 - case of the Revenue that the assessee has failed to discharge its onus to prove the genuineness and creditworthiness of the persons giving unsecured loans - HELD THAT:- To prove the genuineness of the transaction, it is case of the assessee that it has supplied evidence in the form of bank statement hence, the transaction was genuine and with regard to the creditworthiness, income tax return and the PAN No. of the creditor were given to the Assessing Officer. AO did not accept these documents and proceeded to make addition without making any independent inquiry by himself. We find merit into this contention of the assessee as from the records, it is evident that the Assessing Officer had not issued any notice to the creditors. AO ought to have made necessary inquiry from the lenders regarding their source of income etc. - considering the totality of fact hereby, set aside the finding of lower authorities qua amount received from Ms. Neha Madan and Shri R.N.Arora and restore the issue to the file of Assessing Officer for decision afresh. Needless to say that Assessing Officer would provide reasonable opportunity to the assessee. This ground of assessee’s appeal is allowed for statistical purposes. Issues:1. Disregard of facts and documents by Assessing Officer and CIT(A)2. Ignoring court rulings in making additions3. Disregarding assessee's replies4. Lack of reasons for disbelieving information5. Ignoring provisions of the Income Tax Act6. Violation of principles of natural justiceAnalysis:1. The appeal challenges the order regarding unsecured loans treated as unexplained credits under Section 68 of the Income Tax Act for the assessment year 2005-06. The appellant contests the Assessing Officer and CIT(A)'s disregard for facts, documents, and explanations provided during assessment and appeal proceedings. The primary issue is the addition of Rs. 45,00,000 as unexplained credit.2. The appellant argues that the authorities ignored court rulings and made baseless additions without considering verifiable information. The contention is that the additions were made without proper grounds and failed to consider information traceable within the department.3. The appellant asserts that the authorities disregarded the assessee's replies, containing crucial information, to artificially augment revenue. This issue highlights the failure to consider the assessee's submissions during the assessment process.4. The Assessing Officer and CIT(A) are criticized for not providing reasons for disbelieving submitted information and documents. Despite circumstantial evidence presented, the authorities failed to justify their decisions, leading to concerns about the lack of transparency in the assessment process.5. The appellant alleges that the additions were made without adhering to the provisions of the Income Tax Act. This issue questions the legality and procedural compliance of the additions made by the tax authorities.6. Lastly, the appellant argues that the authorities violated principles of natural justice in handling the case. The contention is that the assessment process was unfair given the facts and circumstances of the case, raising concerns about procedural fairness and due process.In the detailed analysis, the Tribunal found that while one transaction was deemed genuine, the loans from other parties were treated as unexplained. The Tribunal noted that the assessee had provided evidence to support the transactions but failed to fully establish the genuineness and creditworthiness of the creditors. The Assessing Officer's failure to conduct independent inquiries and issue notices to the creditors was highlighted as a procedural flaw.The Tribunal set aside the findings of the lower authorities regarding certain loans and directed the Assessing Officer to re-examine the issue, emphasizing the need for a thorough inquiry into the genuineness and creditworthiness of the lenders. The decision allowed the appeal for statistical purposes, indicating a procedural victory for the appellant.