TaxTMI 
TaxTMI 
TaxTMI 
2022 (9) TMI 375
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....e facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.3,02,25,000 / - on account of unsecured loan taken from M/s Time Star Pvt. Ltd. and the Ld. CIT(A) failed to appreciate the fact that in response to reply to notice u/s 133(6), M/s Time Star Pvt. Ltd. stated that it was not a loan transaction but repayment of outstanding balance for M/s Sadguru Homes and given to the assessee as a partner of M/s. Sadguru Homes, as full and final settlement(proportionate). 04. "The appellant prays that the Order of the Ld. CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored." 05. "The appellant craves leave to amend or to alter any ground or add a new ground, which may be necessary 2. The brief facts of the case are that the assessee is an individual and is a partner in partnership firms engaged in real estate and development of properties. The assessee has filed the return of income for the A.Y 2012-13 on 09.05.2013 disclosing a total income of Rs. Nil. Subsequently the case was selected for scrutiny and notice us 143(2) and 142(1) of the Act along with questionnaire was issued. In compliance to th....
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....ed at Para 4 and 5 of the order. The CIT(A) considered the facts, circumstances and the remand report has observed that the remand report does not specify any contrary facts of the assessee and the assessee has filed the detailed evidences and documents in the course of appellate proceedings and has deleted the additions made by the A.O and allowed the appeal. Aggrieved by the order the CIT(A), the revenue has filed an appeal before the Hon'ble Tribunal. 5. At the time of hearing the Ld. DR submitted that the CIT(A) has erred in granting the relief in unsecured loans and interest on loan irrespective of the facts that the additional evidence does not provide complete details. The contention of the Ld. DR that the CIT(A) should have call for the additional information for supporting the claims and also the payment made by the erstwhile partnership firm to the assessee being partner in the earlier years .Further the CIT(A) has erred in observing that the A.O does not found discrepancy in evidences furnished by the assessee and there could not be any adverse comments. The Ld.DR supported the order of trhe A.O. and prayed for allowing the appeal. 6. Contra, the Ld. AR submitted that ....
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....urt, categorically pointed out that with the object of ensuring that evidence is primarily led before the Assessing Officer, Rule 46A (1) puts fetters on the right of the appellant to produce before the Commissioner of Income-tax (Appeals) any additional evidence, not previously raised before the Assessing Officer. However, the Court has clarified that putting fetters on the right of appellant in the matter of producing additional evidence before the Commissioner of Income-tax (Appeals), clarified the Court; does not mean affecting in anyway the powers of the first appellate authority conferred by sub-rule (4) and section 250 of the Act. The relevant part of the said order is as under:- "3 . On a plain reading of rule 46A, it is clear that this rule is intended to put fetters on the right of the appellant to produce before the AAC any evidence, whether oral or documentary, other than the evidence produced by him during the course of the proceedings before the ITO except in the circumstances set out therein. It d oes not deal with the powers of the AAC to make further enquiry or to direct the ITO to make further enquiry and to report the result of the same to him. This position ha....
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....or file additional papers or additional evidence in the matter he thinks fit.. "(p. 376) It was further held that- .. In fact, receiving new material by the Appellate Assistant Commissioner cannot be equated with receipt of additional evidence as contemplated in Order 41, rule 27 of the Code of Civil Procedure or even at the stage of second appeal by the Tribunal. " (p. 376)" Thus, a conjoint reading of section 250(4) and, (5) of the Act and rule 46A(1) and (4) of the Rules clarifies that only restriction is imposed on the appellant's right to produce additional evidence before the Commissioner of Income-tax (Appeals). 7.1 In the decision rendered in the case of K. Ravindranathan Nair reported at 184 CTR (Ker) 46, the Kerala High Court.took cognizance of the decision in the case of Prabhavati S. Shah and further specified that "if the provisions of r. 46A sub-rule (1) thereof is held to be mandatory that will go against the provisions of section 250 of the Act conferring power on the first appellate authority to enquire into the matter and pass appropriate orders. In other words, rule 46A without sub-rule (4) will be open to challenge as ultra vires section 250 of the Act....
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....ons. The A.O. has submitted the remand report and discussed the issues briefly. However, the appellant has submitted counter comments on the observation of remand report. It is reported by the A.O. that the appellant has submitted the loan confirmation of the party and the loans are genuine. The opening and closing balance are the same. The loan amount should be accepted. 8.1 During the remand, the appellant has submitted Confirmations, Copy of Acknowledgement and Copies of the Bank statements. The identity of the creditors has been established as they are having PAN and they are regularly filing return of income. The genuineness of the transaction is established from the fact that both the acceptance and repayment of loan has been through banking channels. The creditworthiness of the lenders can be established from the statements. The source of receipt through banking channels to substantiate the genuineness of the credits reflected in its books of Account. After considering the totality of facts and remand report, the appellant has submitted sufficient documents during the remand proceedings and established the genuineness of transactions. The A.O. did not found any discrepancy....
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....f transaction. In response, M/s. Time Star submitted that he has not given loan to the appellant and the same amount is the re-payment outstanding balance of Sadguru Homes in the capacity of partner of full and final settlement. In view of the findings, the A.O. has issued show cause notice to the appellant for detailed explanation. The appellant failed to submit explanation during the assessment proceedings. Therefore, A.O. has disallowed Rs. 3,02,25,000/- U/5.68 of I.T.Act and added to the appellant's income. The appellant has submitted detailed explanation along with the documentary evidence during the appellate proceedings. The same was forwarded to the A.O. for verification of transactions. 10.1 During the appe|late proceedings, appellant has stated that appellant was in partner of Sadguru Homes and the said firm had developed jointly real estate project with Time Star Ltd, M/s.Sadguru Homes had advanced certain money to Time Star, out of funds received from its partner., M/s. Time Star could not continue with the development project and refunded the money directly to the partner of Sadguru Homes at the time of filing of Incometax return, M/s.Sadguru Homes was under liti....
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....ficer to make enquiry. If he is satisfied that these entries are not genuine he has every right to add these as income from other sources. But before rejecting the assessee's explanation, A.O. must make proper enquiries and in the absence of proper enquiries, addition cannot be sustained. The Hon'ble Supreme Curt in Anees Ahmad & Sons v. CIT(A)(297 IT 441)(SC), the Hon'ble Court has held that merely for non-compliance with section 131(1) by other parties, no 'negative inference could be drawn and the assessee could not be penalized. Following the decision in Anees Ahmad (supra), the Hon'ble Rajkot Tribunal in ITO v. Oris Ceramics (ITA No. 1122/Rjt/2012, order dated December 15, 2011)also held that for noncompliance to 133(6) notice by third parties, assessee should not be penalised and addition could not be sustained. The observation of the Hon"ble jurisdictional High Court in CIT v. Nikunj Exim Enterprises Pvt. Ltd. (ITA 5604 of 2010, order dated December 17, 2012) is also worth to rely upon. 10.4 Further, the A.O. has not given opportunity to clarify his suspicion or doubts. The Hon'ble Apex Court in the case of Andaman Timber Industries in CIVIL APPEAL ....
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....e, in fact, sold to the sold dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No.2216 of 2000, order dated 17-032005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement o the aforesaid two witnesses was the only basis of issuing the Show Cause Notice. 10.5 The Hon'ble High Court of Mumbai in the case of H.R.Mehta vs. ACIT ITA No.58 of 2001 in the judgement delivered on 30-06-2016 held as under: - "In Ms. Andaman Timber Industries, the Supreme Court found that the adjudication authorities has not grante....
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.... assessee by account payee cheques drawn from the bank accounts of the creditors. It held that the assessee is not expected to prove the genuineness of the cash deposited in the bank accounts of those creditors because under law the assessee can be asked to prove the source of the credits in its books of accounts but not the source of the source. 10.7 As far as the creditworthiness or financial strength of the lender is concerned, that can be proved by producing, the bank statement, IT and confirmations of the lender showing that it had sufficient balance in its accounts to. enable it to lend to us. Once these documents are produced, the assessee would have satisfactorily discharged the onus cast upon him. Thereafter, it is for the Assessing Officer to scrutinize the same and in case he nurtures any doubt about the veracity of these documents, to probe the matter further. However, to discredit the documents produced by the assessee on the aforesaid aspects, there has to be some cogent reasons and materials for the Assessing Officer and he cannot go into the realm of suspicion. Thus element of credit worthiness and satisfaction of AO thereafter is subjective and requires more effo....
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....e as non-genuine. The A.O. has not discharged the onus "casted on him. The section 68 can be invoked when there is credit of amounts in the books maintained by the assessee" (b) such credit has to be a sum of money during the previous year (c) either the assessee offers no explanation about the nature and source of such credits found in the books or the explanation offered by the assessee, in the opinion of the AO, is not satisfactory. It is only then that the sum so credited may be charged to income-tax as the income of the assessee of that previous year. The expression the assessee offers no explanation means the assessee offers no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. The opinion of the AO for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on the record. The opinion of the AO is required to be formed objectively with reference to the material on record file. While considering the explanation of the assessee, the AO has to. act reasonably-application of mind is the sine....
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....outstanding balance of Sadguru Homes in the capacity of partner as full and final settlement. In the assessment order and remand proceeding, the A.0. did not at all discuss the merit of submission made by the appellant and casually brushed aside the details filed by the appellant. Further, the appellant has stated that he had furnished all the relevant details during. the course of the remand proceedings and accordingly had duly discharged its onus by furnishing the identity and address of the parties. Further, the source of receipt through banking channels to substantiate the genuineness of the credits reflected in its books of Account .After considering the totality of facts, rival submissions, the applicable law and on the basis of discussion mentioned above, I have come to the conclusion that nature of transactions of Rs.3,02,25,000/- stands explained. Consequently, addition made by A.O. cannot be sustained. Therefore, A.O. is directed to delete the addition of Rs.3,02,25,000/-. This ground is allowed. 8. We find that the CIT(A) has considered the provisions of Sec 68 of the Act in respect of addition of unsecured loans and judicial decisions and relied on the supporting addit....