TaxTMI 
TaxTMI 
2026 (5) TMI 556
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.... 30.10.2023 declaring a business loss of Rs. 1,57,67,659/-. The return was processed under section 143(1) of the Act and thereafter the case was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS) on account of specific risk parameters including large squared up loans, large investment in property as compared to income, and claim of large refund. Notices under section 143(2) and 142(1) were issued and duly complied with by the assessee. 2.1 During the course of assessment proceedings, the Assessing Officer examined the books of account and noticed that the assessee had reported repayment of unsecured loan amounting to Rs. 25,31,97,810/- to M/s. Khush Housing Finance Pvt. Ltd. in its audit report filed under section 44AB. However, in response to notice issued under section 133(6), the said lender confirmed receipt of only Rs. 22,58,54,727/-. The Assessing Officer, therefore, called upon the assessee to explain the difference of Rs. 2,73,43,083/-. In response, the assessee submitted that the difference represented a cheque issued for Rs. 2,73,43,083/- towards interest liability which was not presented for payment during the year due to shortage of funds. It was....
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.... the accounting treatment in the books of account. 3. The CIT(A), after considering the submissions of the assessee and the assessment order, held that the addition made by the Assessing Officer under section 68 was wrong and not sustainable. It was observed that section 68 applies only where a sum is found credited in the books of the assessee, whereas in the present case the impugned amount was in the nature of expenditure debited to the Profit and Loss account and not a credit entry. The CIT(A) further observed that the Assessing Officer had not examined whether the amount was debited to the Profit and Loss account or shown as liability in the balance sheet. 3.1 It was held that the discrepancy in repayment and the explanation regarding unpresented cheque required verification from an appropriate perspective and not by invoking section 68. Relying on judicial precedents, the CIT(A) concluded that the primary condition for invoking section 68 was absent and accordingly deleted the addition of Rs. 2,73,43,083/-. The appeal of the assessee was thus allowed. 3.2 Aggrieved by the order of CIT(A), the Revenue is in appeal before us raising following grounds of appeal: ....
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.... decision, it was submitted that the Co-ordinate Bench has categorically held that an addition cannot be deleted merely on the ground that the wrong section has been invoked by the Assessing Officer and that the matter has to be examined on merits. 4.2 It was thus contended that the impugned order of the learned CIT(A) deserves to be set aside and the matter restored for adjudication on merits, or in the alternative, the addition be sustained by applying the correct provision of law. 5. The learned Authorised Representative (AR), on the other hand, strongly relied upon the order of the learned CIT(A). It was contended that no loan was received by the assessee during the year under consideration and, therefore, the question of examining the identity, creditworthiness and genuineness of any creditor does not arise at all. Inviting our attention to the ledger account of M/s. Khush Housing Finance Pvt. Ltd. as reproduced by the Assessing Officer in the assessment order, the learned Authorised Representative submitted that the entire issue pertains only to reconciliation of repayment figures and not to any fresh credit in the books. It was submitted that the Assessing Officer has ....
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....the assessee was made aware of the case it had to meet and no prejudice is caused. Section 292B of the Act clearly provides that no assessment shall be invalid merely by reason of any mistake, defect or omission, if the same is in substance and effect in conformity with the intent and purpose of the Act. The co-ordinate bench decision relied upon by the learned DR has also held that an addition cannot be deleted solely on the ground that the wrong section has been invoked, and that the matter requires examination on merits. Therefore, to this extent, we are unable to concur with the approach adopted by the learned CIT(A) in deleting the addition only on the technical ground of wrong invocation of section 68. The legal ground raised by the Revenue is accordingly upheld. 7. Having held so, we now proceed to examine the issue on merits. 7.1 On perusal of the assessment order, it is evident that the addition has been made on account of difference in repayment of loan as per the books of the assessee and the confirmation received from M/s. Khush Housing Finance Pvt. Ltd. The Assessing Officer treated the difference of Rs. 2,73,43,083/- as unexplained cash credit primarily on the g....