DY. COMMISSIONER OF INCOME TAX, BHILAI vs. GOEL TRADERS, DURG

The grounds of appeal taken by the Revenue are as under:

The relevant facts giving rise to this appeal are that the assessee filed its Income Tax Return (‘ITR’) of the relevant year declaring income of Rs.2,10,70,200/-. The case was picked up for scurrility. During the course of assessment proceedings, the Ld. Assessing Officer (‘AO’) examined the cash credits/loans of Rs.1,38,00,000/- in accordance with the provision of section 68 of the Act. However, the assessee did not submit any detail/document establishing the identity of lenders, creditworthiness of lenders and genuineness of transactions; therefore, the Ld. AO treated the said loan of Rs.1,38,00,000/- as unexplained and taxed the same under section 68 of the Act. Further, the Ld. AO disallowed the claim of interest of Rs.10,25,738/- paid on the loan of Rs.1,38,00,000/-. The relevant part of the assessment order reads as under: “2.5 The assessee has not provided any information with regard to the aforementioned queries asked, so this office has no option but to decide the case on the base of material available on record. On perusal of the balance sheet as on 31/03/2018, It is seen that the assessee has taken unsecured loan to the tune of Rs.4,04,25,489/-, The assessee was asked to furnish documentary evidence to substantiate the identity of the lenders, ITRs of last 3 years of the lenders to substantiate the creditworthiness of the lenders and relevant bank statements and other financials to prove the genuineness of the relevant transactions. With respect to interest paid on such unsecured loan, the assessee was asked to furnish name and address of the party against whom interest on loan is claimed along with amount and rate of interest in a particular format mentioned in the aforementioned notice.

6 But, The assessee has failed to submit confirmations, bank statement, copy of ITR for A.Y. 2017-18 for some of the lenders. The assessee was asked to submit complete reply through reminders, and fresh letters along with notice u/s 142(1) but the assessee did not submit complete information and submitted fragmented information every time. The burden of proof lies on the assessee to prove the genuineness of loan-taken. However, the assessee failed to discharge the onus cast on it.

7 The onus to prove the identity, genuineness, creditworthiness of the lenders is on the assessee, which have not been adhered to by the assessee and in spite of repeated notice issued to assessee for the details of unsecured loan, the assessee did not submit the required details of the following parties: ……………………………. …………………………….

8 In response to above query related to the unsecured loan, the assessee has not submitted any reply. In absence of the requisite details called for relating to the above parties, the genuineness of loan taken during the year could not be proved. In view of the above and in absence of the details sought, the claim of unsecured loan added during the year to the tune of Rs.1,38,00,000/- is disallowed and same is hereby added back to the total income of the assessee as unexplained cash credit u/s 68 of the I. T. Act.”

Aggrieved with the assessment order, the assessee filed appeal before the Ld. CIT(A), who allowed the appeal by accepting the additional evidence filed before him without calling any remand report thereon with the Ld. AO. The relevant finding of the order of Ld. CIT(A) is as under: “5.6 During the course of appellate proceedings, the assessee has submitted that the assessee has made adequate compliance before the assessing officer to prove identity, creditworthiness and genuineness of the transactions. However, it is admitted that in certain parties, the bank account statements of those parties could not be submitted as these parties were reluctant to share their bank account statements since the unsecured loans were squared off. However, it is submitted that it does not make the genuineness of the loan questionable since the interest or rooted to the banking channels reflected in the bank accounts of the assessee and finally reflected in the books of accounts of the assessee. Therefore, the assessing officer has wrongly invoked the provisions of section 68 of the IT Act.

7 After perusal of the assessment order and submission of the assessee, it is found that the assessee has obtained loans from the 21 parties as under: ……………………………… ……………………………… The assessing officer concluded that the assessee could not produce the requisite documentary evidences thereby failed to prove identity, creditworthiness and genuineness of the transaction. Therefore, the assessing officer has made addition of the principal amount and interest payable on such principal amount to the total income of the assessee.

8 During the course of appellate proceedings, the assessee has submitted the requisite documentary evidences to prove identity, creditworthiness and genuineness of the transactions as under- …………………………… ……………………………

9 Therefore, considering the facts and circumstances of the case, submission of the assessee and filing of requisite documentary evidences to prove identity. creditworthiness and genuineness of the transactions, the amount of unsecured loans of Rs.1,38,00000/- is found to be genuine. Therefore, the addition of the even amount is deleted.

Before us, none attended on behalf of the assessee. Therefore, we heard Dr. Priyanka Patel, Ld. Senior Departmental Representative (“Sr. DR”) at length. At the outset, the Ld. Sr. DR drew our attention to paragraphs 2.5 to 2.8 of the assessment order and paragraphs 5.6 to 5.9 of the impugned order of the Ld. CIT(A). She contended that the Ld. CIT(A) has not followed the Rule 46A(3) of the Income-tax Rules, 1962, while admitting the evidences which were not filed before the Ld. AO. As per Rule 46A(3) the Income-tax Rules, 1962, the Ld. CIT(A) is required to call a remand report from the Ld. AO before admitting the additional evidences filed/submitted by the assessee. She therefore, argued that the Ld. CIT(A), thus, had erred in admitting the additional evidences without calling any remand report from the Ld. AO. She, therefore, prayed for remanding the matter back to the file of Ld. CIT(A) for fresh adjudication.

We have heard the Ld. Sr. DR and have perused the material available on the record. We find the Ld. CIT(A), on the basis of certain documents filed by the assessee deleted the addition without calling for any remand report from the Ld.

In the result, the appeal of Revenue is allowed for statistical purposes as above.

""थ"/ The Respondent

The Pr. CIT, Raipur (C.G.)

िवभागीय "ितिनिध, आयकर अपीलीय अिधकरण, रायपुर/ DR, ITAT, Raipur 5. गाड" फाईल / Guard file.