2024 (7) TMI 705 - AT - Income Tax

Assessee proves genuineness of unsecured loans under section 68 with proper documentation and lender verification

BMM Ispat Limited Versus ACIT Circle-1 (1) (2), Bangalore

BMM Ispat Limited Versus ACIT Circle-1 (1) (2), Bangalore - TMI Issues Involved:1. Violation of natural justice and procedural fairness.2. Addition of Rs. 150,13,10,676/- as unaccounted cash credit under Section 68 read with Section 115BBE of the Income Tax Act.3. Treatment of specific loans from Dinesh Kumar Singhi, Snehalatha Singhi, and Laxmipat Dudheria as unaccounted cash credits.4. Levy of interest under Sections 234B and 234C of the Act.Detailed Analysis:1. Violation of Natural Justice and Procedural Fairness:The assessee argued that the Assessing Officer (AO) did not provide sufficient and adequate opportunity as required under law, thus violating principles of natural justice. The AO issued notices and collected partial information from Karur Vysya Bank without seeking further details or expressing any adverse view on the details filed by the assessee. The assessee was shocked to learn about the substantial addition made by the AO against the declared loss. The Tribunal noted that the AO did not conduct a thorough verification and failed to follow basic principles of natural justice.2. Addition of Rs. 150,13,10,676/- as Unaccounted Cash Credit:The AO made an addition of Rs. 150,13,10,676/- under Section 68 read with Section 115BBE of the Act, treating it as unaccounted cash credit. The assessee contended that all transactions were through banking channels and provided necessary documents like ledger accounts, confirmation statements, bank statements, income tax returns, and financial statements. The AO, however, did not make any further inquiries and summarily made the addition. The Tribunal observed that the AO failed to conduct an independent inquiry to verify the capacity of lenders and the genuineness of the transactions.3. Specific Loans from Dinesh Kumar Singhi, Snehalatha Singhi, and Laxmipat Dudheria:- Dinesh Kumar Singhi (Rs. 78,39,89,104/-):The assessee provided details of loans, including bank statements and confirmation of accounts. The AO made an addition without further inquiries, relying on irrelevant material. The Tribunal noted that the AO failed to verify the transactions adequately and made a double addition by considering both Dinesh Kumar Singhi and Laxmipat Dudheria.- Snehalatha Singhi (Rs. 1,03,21,572/-):The assessee submitted necessary documents to prove the genuineness of the transaction. The AO, without giving any reason, made the disallowance. The Tribunal found that the AO did not make any effort to verify the transaction and summarily made the addition.- Laxmipat Dudheria (Rs. 70,70,00,000/-):The assessee provided standard details to establish the genuineness of the transaction. The AO did not ask for any further details and made an addition based on wild imagination. The Tribunal observed that the AO failed to follow the correct procedure and did not verify the transaction adequately.4. Levy of Interest under Sections 234B and 234C:The assessee disputed the levy of interest under Sections 234B and 234C, arguing that no opportunity was given before the levy. The Tribunal noted that these grounds are consequential and mandatory in nature and should be computed accordingly.Conclusion:The Tribunal found that the AO failed to conduct a thorough verification and follow principles of natural justice. The case was remitted to NFAC/CIT(A) for further inquiry and fresh consideration. The appeal was partly allowed for statistical purposes. The Tribunal emphasized the need for the AO to conduct an independent inquiry and verify the capacity of lenders and the genuineness of transactions before making any additions under Section 68 of the Act.