AI Drafter 
TaxTMI 
TaxTMI 
2022 (9) TMI 375
X X X X Extracts X X X X
X X X X Extracts X X X X
....tions are not proven by the assessee." 3. "On the 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)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....O. and the assessee was provided the remand report copy for filling rebuttal referred 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....red in the case of Smt. Prabhavati S. Shah vs. CIT reported at 231 IT 1, the Hon'ble Bombay High Court, 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 enqu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nvested with the power of making further inquiry. He does not exceed his jurisdiction if he asks or allows the assessee to produce 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 in....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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. 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 fact....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 10. During the assessment proceedings, the A.O. has observed that the appellant has shown loan of Rs. 3,02,25,000/- from Time Star Ltd. The A.O. has issued notice U/5.133(6) to the Time Star Ltd. asking for verification of 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 r....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... part of the AO to give a finding in the order that lender is not credit worthy. The AO must make proper enquiry before making any addition. In Khandelwal Constructions v. CIT 227 ITR 900 (Gau.), it has been held that empowers the Assessing officer 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 5....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oned in the price list itself could be the subject matter of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lay on it in terms of Section 68 by roving the identity of the creditors by giving their complete addresses, GIR nos./PAN nos. and copies of assessment orders wherever readily available and that it has also proved the capacity of the creditors by showing that the amounts were received by the 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 di....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... documentary evidences submitted during assessment proceedings. Without pointing out any lacuna in the evidences submitted by the appellant, the sources and the genuineness of transaction cannot be doubted. Once evidences related to a transaction is submitted before the A.O., the onus shifts on him to prove these 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... appellant has submitted sufficient evidence and establish that the fact that both the acceptance and repayment of transaction has been through banking channels. Further, M/s. Time Star has already clarified during the assessment proceedings that the amount of Rs.3,02,25,000/- was given to the appellant on account of the payment of 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 explaine....