2025 (3) TMI 1165 - AT - Income Tax

Unexplained cash credit addition under Section 68 deleted after department accepted business transactions and books

ITAT Raipur allowed the assessee's appeal, directing deletion of addition made u/s 68 for unexplained cash credit. The tribunal found that since the ... Legality of order passed u/s. 144 - addition towards unexplained cash credit u/s. 68 - HELD THAT:- There is no dispute by the department regarding the purchase and sales as appearing in the books of account which had also been accepted by the department, therefore, there is no possibility for the CIT(A) to hold that these deposits were outside the normal course of business of the assessee. The addition has been made by the AO because he was not convinced with the source of the cash deposits in the bank which was confirmed by the CIT(A). On a perusal of the order of the Ld. CIT(Appeals), it is noticed that the CIT(Appeals) has not passed a speaking order in terms of Sections 250(4) and (6) of the Act. In that regard, the order of the Ld. CIT(Appeals) becomes a cryptic, arbitrary and bad in law. The basic fact is that when the genuineness of the assessee’s business is not disputed or any undisclosed sources has not been unearthed by the department and nothing is there on record which shows that the assessee had earned income from other sources other than from its business. Separate addition on a perusal of the assessment order, it is noticed that the AO had rejected the return of income filed by the assessee as the same was filed belatedly - AO while making computation has determined income which suggests that the assessment order is self-contradictory. On a perusal of the order of the CIT(Appeals), it is noticed that the CIT(Appeals) has not passed speaking order in terms of Sections 250(4) and 250(6) of the Act and summarily sustained the addition made by the Assessing Officer. In that regard, the order of the Ld. CIT(Appeals) becomes a cryptic, arbitrary and bad in law When the business of the assessee had not been disputed by the department and books of account has been accepted, then there is no justification for the lower authorities in making/sustaining the addition - direct the AO to delete the addition from the hands of the assessee. Assessee appeal allowed. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered by the Tribunal were:Whether the order passed under Section 144 of the Income Tax Act, 1961, was justified given the circumstances of the case.Whether the addition of Rs. 30,48,500 as unexplained money under Section 68 was valid.Whether the addition of Rs. 8,86,366 as business income was justified.Whether the rejection of the return of income (ROI) filed by the assessee was appropriate.Whether the imposition of interest under Sections 234A, 234B, and 234C was warranted.ISSUE-WISE DETAILED ANALYSIS1. Validity of the Order under Section 144The relevant legal framework includes Section 144, which pertains to best judgment assessment in cases where the assessee fails to comply with notices or furnish required information. The Tribunal noted that the assessee had complied with the notices and provided submissions during the assessment proceedings. The Tribunal found that the Assessing Officer (AO) acted on assumptions and did not consider the submissions adequately, rendering the order under Section 144 unjustified.2. Addition of Rs. 30,48,500 under Section 68Section 68 deals with unexplained cash credits. The AO added Rs. 30,48,500 as unexplained money, invoking Section 115BBE for taxation. The Tribunal observed that the business activities and transactions were not disputed by the department, and the books of accounts were accepted. The Tribunal found that the CIT(Appeals) did not provide a detailed reasoning for sustaining the addition, rendering the order cryptic and arbitrary. Consequently, the Tribunal directed the deletion of this addition, emphasizing the lack of evidence for income from undisclosed sources.3. Addition of Rs. 8,86,366 as Business IncomeThe AO computed business income at Rs. 8,86,366, rejecting the ROI as belated. However, the Tribunal noted that the ROI was filed in compliance with the notice under Section 142(1) and before the assessment's completion. The computation discrepancies in the assessment order were highlighted, indicating contradictions. The Tribunal found the CIT(Appeals) order lacking detailed reasoning and directed the deletion of this addition, considering the acceptance of the assessee's business and books of accounts.4. Rejection of Return of IncomeThe AO's rejection of the ROI was based on its belated filing. However, the Tribunal noted that the ROI was filed in response to a notice and before the assessment's completion. The Tribunal found the rejection unwarranted, given the circumstances and compliance by the assessee.5. Imposition of Interest under Sections 234A, 234B, and 234CThe Tribunal did not specifically address the issue of interest imposition, as the primary focus was on the validity of the additions and the assessment order. However, the deletion of the additions effectively impacted the interest calculations.SIGNIFICANT HOLDINGSThe Tribunal's significant holdings include:The order under Section 144 was unjustified due to the lack of consideration of the assessee's submissions and compliance with notices.The addition of Rs. 30,48,500 under Section 68 was invalid, as the business activities were not disputed, and the CIT(Appeals) failed to provide a detailed reasoning.The addition of Rs. 8,86,366 as business income was unjustified, given the acceptance of the assessee's business and books of accounts, and the contradictions in the assessment order.The rejection of the ROI was unwarranted, as it was filed in compliance with the notice and before the assessment's completion.Verbatim Quotes of Crucial Legal Reasoning:'The basic fact is that when the genuineness of the assessee's business is not disputed or any undisclosed sources has not been unearthed by the department and nothing is there on record which shows that the assessee had earned income from other sources other than from its business.''Considering these facts, I direct the Assessing Officer to delete the addition of Rs. 30,48,500/- from the hands of the assessee.''I am of the view that when the business of the assessee had not been disputed by the department and books of account has been accepted, then there is no justification for the lower authorities in making/sustaining the addition of Rs. 8,86,366/-.'The Tribunal concluded by allowing the appeal and directing the deletion of the contested additions, thereby providing relief to the assessee. The decision underscored the importance of detailed reasoning and adherence to procedural fairness in tax assessments.