2024 (3) TMI 248 - AT - Income Tax

Assessee wins appeal as loan addition under Section 68 deleted when creditor identity and transaction genuineness established

Hement Trading Company Versus Income Tax Officer, Ward-Suratgarh, Sriganganagar

Hement Trading Company Versus Income Tax Officer, Ward-Suratgarh, Sriganganagar - TMI Issues Involved:1. Legality of the order passed by the Income Tax Officer and sustained by the Commissioner of Income Tax (Appeals).2. Sustenance of the addition of the amount received and repaid by account payee cheque.3. Relevance of the case relied upon by the lower authority.4. Addition without rejection of books of account.5. Discharge of burden by the assessee.6. Legality of the addition in light of judgment of Lalchand Bohra vs Income Tax Officer.7. Charging of interest.Summary:Issue 1: Legality of the OrderThe assessee contended that the order passed by the Income Tax Officer and sustained by the Commissioner of Income Tax (Appeals) was illegal, against the law, and without any application of mind. The Tribunal noted that the assessee had not pursued the appeal effectively, leading to the dismissal of the appeal by the Commissioner of Income Tax (Appeals) for non-prosecution. The Tribunal emphasized the inherent power of appellate authorities to dismiss appeals for non-prosecution, as supported by various judicial precedents.Issue 2: Sustenance of AdditionThe assessee argued that the Commissioner of Income Tax should not have sustained the addition of Rs. 5,00,000/- received and repaid by account payee cheque, supported by an affidavit and the creditor's statement. The Tribunal observed that the assessee had provided sufficient evidence, including the creditor's affidavit and statement, to prove the genuineness of the transaction. The Tribunal noted that the lower authorities failed to appreciate the explanation provided by the assessee and relied on judicial precedents that supported the assessee's claim.Issue 3: Relevance of Case Relied UponThe assessee contended that the lower authority relied on a case with different facts not identical to the assessee's case. The Tribunal agreed, noting that the case relied upon by the lower authority was not applicable to the facts of the assessee's case. The Tribunal emphasized that the assessee had successfully discharged the burden of proof by providing the creditor's affidavit and statement, which were not refuted by the lower authorities.Issue 4: Addition Without Rejection of Books of AccountThe assessee argued that no addition could be made without rejecting the books of account, citing various judicial precedents. The Tribunal agreed, noting that the lower authorities had not rejected the assessee's books of account. The Tribunal emphasized that without rejecting the books of account, any addition made was illegal and against the law.Issue 5: Discharge of Burden by AssesseeThe assessee contended that the A.O. should not have made the addition and the Commissioner of Income Tax (Appeals) should not have sustained the addition because the assessee had discharged the burden cast upon him by the statute. The Tribunal agreed, noting that the assessee had provided sufficient evidence to prove the genuineness of the transaction and the creditor's capacity to advance the loan.Issue 6: Legality of Addition in Light of Judgment of Lalchand Bohra vs Income Tax OfficerThe assessee argued that the addition was illegal in light of the judgment of Lalchand Bohra vs Income Tax Officer, which stated that the capacity of the lender to advance money to the assessee was not a matter that the assessee could be required to establish. The Tribunal agreed, noting that the assessee had provided sufficient evidence to prove the genuineness of the transaction and the creditor's capacity to advance the loan.Issue 7: Charging of InterestThe assessee contended that the charging of interest was illegal and against the law. The Tribunal did not specifically address this issue in the judgment.Final Decision:The Tribunal directed the A.O. to delete the addition of Rs. 5,00,000/- made in the hands of the assessee, allowing the appeal. The Tribunal emphasized that the assessee had provided sufficient evidence to prove the genuineness of the transaction and the creditor's capacity to advance the loan, and that the lower authorities had failed to appreciate the explanation provided by the assessee.