2017 (4) TMI 236

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.... the loans were claimed to be interest free. In order to verify the genuineness of the loans, the assessing officer issued notices u/s 133(6) of the Act. Since the AO did not receive any response from the creditors, he deputed his inspector to make enquiries. The Inspector reported that the creditors have denied having given loan to the assessee. It was further noticed that all the creditors have filed their respective return of income through the auditor of the assessee firm named Shri Kamal Sangtani. Subsequently the AO carried our survey operation u/s 133A of the Act at the business premises of the assessee. A statement was taken from the auditor of the assessee firm, i.e., Shri Kamal Sangtani. In the statement so taken, Shri Kamal Sangtani agreed to offer the entire loan amount of Rs. 2,09,23,000/- and also further capital contribution of Rs. 28,95,755/- was also offered. Thus a sum of Rs. 2,38,17,755/- in aggregate was offered as income of the assessee. During the course of assessment proceedings, the AO issued a show cause notice dated 7.12.2011 asking the assessee to explain as to why the addition of Rs. 2,38,71,755/- should not be made to the returned income as admitted in ....

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....tive of the assessee has agreed to offer the sundry creditors balances as income. He has further offered one of the partners' capital also as income of the assessee. The assessee has also accepted the same by not filing appeal. He submitted that the provisions of sec. 68 create a legal fiction to treat capital receipts as income of the assessee. He submitted that the impugned loans and partner's capital has been brought into the books immediately after the inception of the partnership firm. He submitted that the assessee's source of income is only rental income and it is not the case of the AO that the assessee has suppressed any rental income. Accordingly he submitted that the assessee-firm could not have earned the income equivalent to impugned cash credits addition during the year under consideration. He further submitted that the assessee has furnished all the relevant details before the AO, but the authorized representative agreed to offer the same as the assessee could not produce the loan creditors at that point of time. Accordingly he submitted that the addition made u/s 68 of the Act cannot lead to the inference that the assessee has concealed income. 5. The Ld A.R furt....

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....hat the assessee has understated its rental income. The impugned addition has been made u/s 68 of the Act in respect of unsecured loans obtained from various parties and also capital introduced in one of the partners' hand. There should not any dispute that the provisions of Section 68 introduce a legal fiction to assess capital credits as revenue income of the assessee, if the assessee fails to discharge the initial burden of proof placed upon its shoulders. In the instant case, the assessee has furnished confirmation letters obtained from 20 creditors and the same has been placed in the paper book filed by the assessee. A perusal of the same would show that the assessee has obtained copies of financial statements, bank accounts and return of income filed by them. We notice that the above said sundry creditors did not respond to the notices issued by the AO u/s 133(6) of the Act. Further, according to the report submitted by the Inspector of income tax, most of the creditors have denied the loan transaction. However, the facts remain that the copies of financial statements, return of income and bank statements very much show that the creditors have given the loan to the assessee. ....

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....me. It is well settled proposition that both the limbs prescribed in sec. 271(1)(c) viz., concealment of particulars of income and furnishing of inaccurate particulars of income connote different meanings. In the instant case, the observation made by the assessing officer would lead to two types of interpretations, i.e., either the AO has charged the assessee with both kinds of fault, without specifying how both charges fit into in the present case or he has charged the assessee for furnishing inaccurate particulars of income, which has lead to concealment of income. However, the fact remains that the addition has been made u/s 68 of the Act due to legal fiction and there is no allegation that the assessee has suppressed its rental income, being the only source of income of the assessee. Hence we are of the view that the assessee, in the facts and circumstances of the case, cannot be charged with the guilt of furnishing inaccurate particulars of income 10. The Ld D.R objected to the contention of the assessee with regard to the contention of first year of operation on the plea that the same has been raised for the first time before the Tribunal. However we notice that the Ld A.R....