INCOME TAX OFFICER, MUMBAI vs. AKSHAY AUTOMOBILES PVT LTD, MUMBAI

Whether on the facts and circumstances of the case, Ld. CIT(A) is justified in deleting the addition of Rs. 2,85,56,973/- made by the assessing officer by disallowing the unsecured loan and addition Rs. 34,56,000/- on account of cash deposits without considering the proviso to section 251(1)(a) of the IT. Act vide which the assessment could have been set aside to the file of the AO for deciding it afresh after giving opportunity to the assessee.

Whether on the facts and circumstances of the case, Ld. CIT(A) is justified in deleting the addition of Rs. 2,85,56,973/- disallowing the unsecured loan and Rs. 34,56,000/- disallowing the cash deposits without appreciating the fact that the assessee company has filed additional evidence during the appellant proceedings and Ld. CIT(A) should remand back to assessing officer for examine the same as per rule 46A of the income tax Act.

"The appellant craves leave to add, alter, amend or delete all or any of the aforesaid grounds of appeal.”

None appeared on behalf of the assessee nor was any adjournment application filed. Considering that the matter has been adjourned from time to time and notice has been duly served on the assessee and inspite of that, there is no representation on behalf of the assessee, it was decided that no useful purpose would be served in adjourning the matter any further and to decide the matter based on material available on record.

Briefly the facts of the case are that the assessee-company filed its return of income, declaring total income of Rs. 71,39,424/- which was selected for scrutiny and subsequently, notices u/s. 143(2) and 142(1) of the Income Tax Act, 1961 („the Act‟) were issued which remain non- complied with. Thereafter, the AO proceeded and passed the order u/s. 144 of the Act, dt. 30-03-2015, wherein addition of Rs. 2,85,56,973/- was made in respect of unsecured loans u/s. 68 of the Act and addition of Rs. 34,56,000/- were made on account of cash deposits as un-explained deposits u/s. 68 of the Act. Thereafter, the assessee carried the matter in 3 appeal before the Ld.CIT(A), and also moved an application for submitting additional evidences under Rule 46A.

The Ld. CIT(A) called for a remand report from the AO vide letter dt. 03-01-2025 and thereafter, a reminder letter was issued on 17-01-2025. However, there was no compliance on the part of the AO to submit the remand report and thereafter, the Ld. CIT(A) proceeded and passed the impugned order.

Regarding the addition of Rs. 2,85,56,973/-, the relevant findings of the Ld.CIT(A) are contained at paras 5.1 to 5.9 of the impugned order, which read as under:

2 During the appellate proceedings, the appellant has submitted the following details to explain the issue related to the unsecured loans:

3 It is pertinent to note that the addition u/s. 68 of the Act can be resorted to if either no explanation with regard to the 'nature and source of the credits appearing in the Books has been offered or the AO is not satisfied with the explanation of the assessee with regard to the 'nature and source' of such credits. As far as the nature

4 In the case of the appellant, it is noted that the AO has added a sum of Rs. 2,85,56,973/- as unexplained cash credit on account of the difference of unsecured loan amount standing in the Balance Sheet of the appellant as of 31.03.2011 and 31.03.2012. Therefore, firstly, it is imperative to have a closer examination of the Balance Sheet of the appellant for AY 2011-12 and 2012-13, specifically the detailed break-up of party-wise unsecured loans availed, to identify the lenders. Thereafter, we must test the lender on the touchstone of identity, creditworthiness, and genuineness. For the sake of clarity, the schedule of the Balance Sheet of the appellant is pasted hereunder for quick reference:

5 From the data pasted in the tables above, it could be noted that the major variation of 2.85 crore in unsecured loans is on account of loans taken from M/s, Manba Finance Ltd., an NBFC company, during the year under consideration i,e., FY 2011-12. Some upward mobility of around 18.30 Lakh is in respect of M/s. Prabhanjan Automobiles Pvt. Ltd. is noticed. It is also noted that some outstanding unsecured loans as of 31.03.2011 have also been repaid during the year ending 31.03.2012. The appellant has submitted the details in respect of M/s. Manba

6. The appellant has also submitted the details such as the loan confirmation ledger account in respect of all the other lenders, along with copies of their respective ITRs and audited financials. This evidence duly explains the nature and source of the unsecured loan availed by the appellant during the year under consideration and also the previous year, i.e., FY 2010-11. This transaction is a genuine unsecured loan, hence, the same cannot be brought to tax.

7 The appellant, during the current proceeding, has also submitted the reconciliation statement of the unsecured loan and an explanatory note thereto. The submission of the appellant is self-explanatory and hence plausible. For the sake of clarity, the reconciliation table is pasted hereunder:

9 Given the facts and the evidence on record, I am of the view that the addition u/s. 68 of the Act in the case of the appellant is not justified. The AO is directed to delete the addition of Rs. 2,85,56,973/-,

Regarding addition of Rs. 34,56,000/-, the relevant findings of the Ld.CIT(A) are contained at paras 6.3 to 6.6 of the impugned order, which read as under:

5 Here too, if the addition made by the AO is examined from the angle of the provisions of section 68 of the Act, the nature and source of such cash deposits need to be verified. The appellant has elucidated the nature of the transaction to be on account of sales made in cash to various customers, which are duly supported by the copies of invoice no., date, customers name, invoice amount, insurance & RTO charges, total amount along with copy of invoices, cash receipts & customers' ledger etc. The sources of such small sums of cash of about Rs. 50,000/- on average with individual customers intending to buy a two-wheeler seem reasonable. In my considered view, this is a plausible explanation. These cash sales are duly recorded in the appellant's revenue from sales, and they have been duly offered to tax under the head "profits & gains from business or profession". Therefore, adding the same sum again as unexplained cash credit would tantamount to double taxation.

6 Since the cash sales are found to have been duly recorded in the Books of the appellant, the addition of cash deposits in the bank as unexplained by the AO is not justified. It would be tantamount to double taxation. The AO is therefore directed to delete the addition of Rs. 34,56,000/-.”

Against the said findings, the Revenue is in appeal before us.

During the course of hearing, the Ld.DR submitted that the Ld.CIT(A) has erred in deleting the addition, without appreciating the fact that the assessee-company did not provide relevant supporting documentation during the course of assessment proceedings and the AO did not get a chance to examine the additional evidences filed by the assessee before the 8 Ld.CIT(A). It was further submitted that the Ld.CIT(A) instead of deciding the matter should have remanded the matter back to the AO by drawing our reference to proviso to section 251(1)(a) of the Act.

We have heard the Ld.DR and perused the material available on record. Firstly, it is noted that it is a case where the assessment proceedings were completed u/s 144 and during the course of appellate proceedings, the assessee moved an application seeking submission of additional evidence before the Ld.CIT(A). The Ld.CIT(A) thereafter has sought remand report from the AO and for reasons best known to the AO, no remand report was submitted by the AO inspite of reminder letter being issued by the Ld.CIT(A). Even during the course of hearing, nothing has been brought on record which prevented the AO in submitting the remand report. In such a situation, where the Ld.CIT(A) has proceeded with examining the additional evidences, no fault can be found with the approach and action of the Ld.CIT(A). Merely the fact that power to remand has been granted to the Ld.CIT(A) doesn‟t mean that in all cases where the assessment has been completed u/s 144 and additional evidences are submitted, the matter has to be necessarily remanded to the AO. It is for the Ld.CIT(A) to exercise his discretion and apply his mind and based on facts and circumstances of each case, he is duly empowered either to call for the remand report or remit the matter to the file of the AO. In either case, there is no fetter on the power of the Ld.CIT(A) to examine the additional evidence submitted before him. In the instant case, Ld. CIT(A) looking into facts of the case has sought remand report from the AO and as we have noted earlier, there is complete silence on the part of the AO and there has been no compliance on his part to submit the remand report. In such a situation, we find that the Ld.CIT(A) has proceeded and examined the evidences thoroughly and rightly so and has passed detailed

Further, in respect of cash deposits as well, the Ld.CIT(A) has duly examined the evidences and has come to a finding that these deposits are in respect of cash sales which are duly recorded in the books of accounts and there is no basis to make double addition in hands of the assessee and the addition so made by the AO has been rightly set-aside.

We concur with the approach and findings of the Ld.CIT(A) and don‟t see any justifiable basis to intervene with the order of the Ld.CIT(A) and the same is hereby confirmed.

In the result, the appeal of the Revenue is dismissed.