NIKHIL RADHESHYAM AGRAWAL ,MUMBAI vs. INCOME TAX OFFICER WARD 2(2), MUMBAI

The solitary ground raised by the assessee relates to the challenging the order passed by the learned CIT(A), whereby the learned CIT(A) upheld the order passed by the Assessing Officer under Section 69 of the Income-tax Act, 1961, on account of alleged unexplained investment.

In this regard, we have heard the learned counsel for both the parties, perused the material placed on record, considered the judgments relied upon before us, and examined the orders passed by the Revenue authorities.

From the records, we noticed that the additions were made by the Assessing Officer under Section 69 of the Income-tax Act on account of alleged unexplained investment in the form of unsecured loans received by the assessee. The assessee categorically contended that the Assessing Officer had erred in making an addition of Rs. 78,85,000 under Section 69 by treating the same as unexplained investment.

As per the assessee's case, during the year under consideration, the assessee had received funds from certain parties in the form of unsecured loans. In order to substantiate the genuineness of the transactions, the assessee had furnished the requisite details of the said parties, including their bank statements and income- tax returns. However, the Assessing Officer was of the view that the relevant documents had not been furnished by the assessee. Accordingly, the addition was made, which was subsequently upheld by the learned CIT(A).

Having carefully gone through the facts and circumstances of the case, we find that during the year under consideration, the assessee had availed unsecured loans from the parties whose details were recorded in the assessment order. In order to substantiate the genuineness of the transactions, the assessee had placed on record the bank statements and income-tax returns of the respective parties during the course of the assessment proceedings.

However, the Assessing Officer made the addition on the ground that the bank statements of certain parties had not been furnished by the assessee. In this regard, it was submitted on behalf of the assessee that, vide letters dated 27.11.2017 and 21.12.2017, the assessee had furnished the bank statements and income-tax returns of the concerned parties, but the same were not considered by the Revenue authorities.

At the outset, in our considered view, an addition under Section 69 of the Income-tax Act can be made only where, during the financial year immediately preceding the assessment year, the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee either offers no explanation regarding the nature and source of such investments or the explanation offered is not, in the opinion of the Assessing Officer, satisfactory. In such circumstances, the value of the investments may be deemed to be the income of the assessee for such financial year.

In the facts of the present case, however, the assessee had not made any investment. Rather, as per the case of the Assessing Officer itself, the assessee had received unsecured loans. Therefore, the very applicability of Section 69 requires consideration.

Further, in order to establish the identity and creditworthiness of the creditors and the genuineness of the transactions, the assessee had furnished the bank statements of the creditors, their PAN details, and their income-tax returns. Despite the same, the Assessing Officer made the addition by observing that the bank statements had not been furnished by the assessee.

At this stage, we note that the Assessing Officer is not merely an adjudicator but also has the role of an investigator. It is an undisputed fact that the PAN details, confirmations, and income-tax returns of the concerned parties were furnished by the assessee during the course of the assessment proceedings.

In our view, when all these documents were available before the Assessing Officer, he could have made further verification, including verification of the bank statements, in exercise of his investigative powers, particularly when the PAN details and other relevant particulars of the creditors were already available on record. However, the Assessing Officer did not make any further enquiry or verification.

Therefore, the inaction or lack of further enquiry on the part of the Assessing Officer cannot, by itself, be a ground for making an addition in the hands of the assessee, particularly when the assessee had already discharged the initial onus placed upon him. In this regard, reliance is also placed upon the decision relied upon by the assessee.

In our view, since the Assessing Officer had not pointed out any specific defect or infirmity in the documents relied upon by the assessee, and since the assessee had already discharged the initial onus cast upon him to establish the identity of the lenders, their creditworthiness, and the genuineness of the transactions, the onus thereafter shifted to the Assessing Officer to disprove or rebut the evidence furnished by the assessee.

However, no specific defect has been brought on record by the Assessing Officer in the documents relied upon by the assessee. Therefore, merely because the bank statements were allegedly not furnished, no addition could have been made, particularly when other relevant documentary evidence had been furnished and was available before the Assessing Officer.

Accordingly, considering the totality of the facts and circumstances of the case, as discussed above, and also taking into consideration the judicial precedents relied upon before us, we are of the considered view that no addition under Section 69 of the Income-tax Act was warranted in the present case.

More particularly, the assessee had admittedly not made any investment; rather, the assessee had received unsecured loans. Therefore, on the facts of the present case, the provisions of Section 69 of the Income-tax Act were not attracted.

Accordingly, considering the overall facts and circumstances of the case, we direct the Assessing Officer to delete the addition of Rs. 78,85,000 made under Section 69 of the Income-tax Act, as the same is not warranted. Accordingly, the ground raised by the assessee stands allowed.

In the result, the appeal filed by the assessee stands allowed.