2022 (8) TMI 728 - AT - Income Tax

Tribunal allows appeal, directs deletion of loan addition, sets aside CIT(A) order for fresh decision.

The Tribunal partially allowed the Appeal by directing the Assessing Officer to delete the addition of Rs. 1,80,000/- in loan repayments to related ... Addition on account of unexplained loan repayments - books of account as evidence of explanation for transactions - addition on account of unexplained sundry creditors - field inquiries under notice and adequacy of opportunity for verification - remand for fresh verificationAddition on account of unexplained loan repayments - books of account as evidence of explanation for transactions - Deletion of addition of Rs. 1,80,000 made in respect of repayments to two related persons. - HELD THAT: - The repayments of Rs. 90,000 each were recorded in the assessee's regular books and reflected in the respective ledger accounts of the two persons; the assessee was engaged in regular business with regular receipts. The AO and the Ld. CIT(A) produced no material showing that these repayments were made from unexplained sources outside the books. On these facts the repayments were held to be fully explained by the books of account and the addition was without basis. The Tribunal therefore directed deletion of the addition.Addition of Rs. 1,80,000 deleted; Ground No. 1 allowed.Addition on account of unexplained sundry creditors - field inquiries under notice and adequacy of opportunity for verification - remand for fresh verification - Disposition of additions totaling Rs. 37,62,393 made in respect of sundry creditors by remanding the matter for fresh consideration. - HELD THAT: - The AO made additions after field inquiries under notice produced unsatisfactory verification and confronted the assessee within a short span; the Tribunal noted that notices were dated 28/11/2016 and the adverse note recorded on 05/12/2016, a period of six days which was inadequate in the circumstances to permit replies or reconciliation by the parties or delivery by post. The appellate confirmation failed to take into account the insufficiency of opportunity. In view of inadequate opportunity for verification, the Tribunal set aside the CIT(A)'s confirmation and restored the matter to the file of the AO for fresh adjudication after providing reasonable opportunity and verification, with direction that the assessee cooperate.Additions of Rs. 37,62,393 set aside for fresh verification by the AO after giving reasonable opportunity; Grounds Nos. 2 and 3 disposed of as partly allowed (remanded).Final Conclusion: The appeal is partly allowed: the addition of Rs. 1,80,000 is deleted, while the additions relating to sundry creditors totalling Rs. 37,62,393 are remitted to the Assessing Officer for fresh verification after providing reasonable opportunity. Issues:1. Addition of Rs. 1,80,000/- in respect of loan repayments to related persons.2. Addition of Rs. 31,62,393/- in respect of Sundry Creditors.Analysis:(A) Addition of Rs. 1,80,000/- in respect of loan repayments to related persons:The appellant contested the addition of Rs. 1,80,000/- made by the Assessing Officer and confirmed by the CIT(A) regarding loan repayments to two related persons. The appellant argued that the repayments were made from regular business receipts and were duly recorded in the books of accounts. After reviewing the facts, the Tribunal found that the repayments were properly recorded and explained in the books of accounts. It was noted that the Assessing Officer failed to provide any evidence of unexplained sources for the repayments. Consequently, the Tribunal directed the Assessing Officer to delete the addition of Rs. 1,80,000/-, allowing Ground No. 1 of the Appeal.(B) Addition of Rs. 31,62,393/- in respect of Sundry Creditors:The Assessing Officer added Rs. 31,62,393/- in respect of Sundry Creditors due to unsatisfactory verification from field inquiries. The CIT(A) upheld this addition stating that the inquiries did not yield a satisfactory result. During the hearing, the appellant requested the issue to be sent back to the AO for a fresh order, promising full cooperation. The Tribunal observed that the period between issuing notices and passing the assessment order was insufficient for proper responses. It was deemed that the assessment was done hastily without providing adequate opportunity for explanations. Therefore, the Tribunal set aside the CIT(A) order and returned the matter to the AO for a fresh decision, emphasizing the need for reasonable opportunity and cooperation. Ground Numbers 2 and 3 of the Appeal were partly allowed in this regard.In conclusion, the Appeal was partly allowed by the Tribunal based on the detailed analysis and findings for the two main issues raised by the appellant.