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Facts
The Revenue appealed against the CIT(A)'s order deleting an addition of Rs. 5,48,00,000/- made towards an unexplained cash credit. The assessee received a loan from M/s. Opus Holdings Pvt. Ltd., which was allegedly not properly reflected in the original return and financial statements.
Held
The tribunal held that the CIT(A) did not err in deleting the addition. The assessee had discharged its onus by providing evidence establishing the loan creditor's identity, the genuineness of the transaction, and the creditor's creditworthiness, including details from M/s. Opus Holdings Pvt. Ltd.'s books and an affidavit from its director.
Key Issues
Whether the CIT(A) erred in deleting the addition of cash credit when the assessee allegedly failed to discharge its onus, and whether the CIT(A) violated Rule 46A by accepting additional evidence.
Sections Cited
147, 148, 132, 142(1), 69, 251, 139(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad “B” Bench, Hyderabad
PER MANJUNATHA G., A.M : This appeal filed by the Revenue is directed against the order of the learned Commissioner of Income Tax (Appeals) – 11, Hyderabad (for short “Ld. CIT(A)") dated 20.12.2024, pertaining to the assessment year 2016-17. 2. The grounds raised by the Revenue read as under :
“1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.5,48,00,000/- representing unexplained cash credit even when the assessee not discharged its onus cast upon it in respect of genuineness of loan transaction and the creditworthiness of the loan creditor M/s Opus Holdings Pvt. Ltd.?
Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the fact the documents filed before AO were incomplete, faulty and prima facie the sets filed before CIT(A) which were unreliable due to prolonged delay in such submission and Id. CIT(A) erred in placing reliance on self serving affidavit of the director of M/s Opus Holdings Pvt Ltd which was filed after a lapse of more than five years.
Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the fact of non-production of relevant details before the assessing officer and the alleged reasons for non-production of those details before the assessing officer even after affording sufficient number of opportunities?
Whether on the facts and in the circumstances of the case and in law, the powers of Id. CIT(A) are the ones which are not unfettered and circumscribed by the provisions of section 251 of the Act read with Rule 46A of I.T.Rules, 1962 and while factually differing, the Id. CIT(A) is duty bound to establish the factual matrix as per law ?
Whether the Id. CIT(A) erred in overlooking the improper depiction of accounts in balance sheet of the lending entity M/s Opus Holdings Pvt. Ltd. ?
Any other ground that may be urged at the time of hearing.”
The brief facts of the case are that, the assessee company is engaged in the business of Management Consultancy Services and filed its original return of income for AY 2016-17 on 29.11.2016 declaring an income of Rs.37,250/-. A search and seizure operation under Section 132 of the Income Tax Act, 1961 was conducted in the case of M/s. Sumeru Infrastructure Park and its associated persons/concerns on 08.02.2019, during which Sri Bangar Raju Penmetsa, Managing Director of M/s. KVR Consultancy Private Limited, was also covered under Section 132 of the Income Tax Act, 1961. From the information gathered during the post-search proceedings from the bank account statements of the assessee, it is observed that, there were huge credits to the tune of Rs. 5,63,00,000/- appearing on various dates during the financial year 2015-16 in the assessee's bank account from M/s. Opus Holdings Pvt. Ltd. Further, during the course of post-search proceedings, the Director of the company, M/s. KVR Consultancy Pvt. Ltd., was asked to explain the nature of the above transaction, for which Sri Bangar Raju could not explain the nature of the amounts credited in the assessee's bank account. Further, during the investigation proceedings, summons were issued and a statement was recorded on 04.06.2019 from Sri Rajesh Gandhi, Managing Director of M/s. Opus Holdings Pvt. Ltd., and he was asked to explain the transactions between M/s. KVR Consultancy Pvt. Ltd. and M/s. Opus Holdings Pvt. Ltd. In response, Sri Rajesh Gandhi has not furnished any documents or books of account and also failed to explain the transactions.
Consequent to search, the case has been reopened under Section 147 of the Act, and accordingly, notice under Section 148 of the Act dated 10.03.2021 was issued and served on the assessee. In response to the notice, the assessee filed its return of income on 02.11.2021 admitting the income at Rs.37,250/-. During the course of assessment proceedings, the assessee was called upon to explain the transactions between the assessee company and M/s. Opus Holdings Pvt. Ltd. In response to the notice issued under Section 142(1) of the Act, the assessee company furnished a copy of the financials and the return of income filed in response to notice under Section 148 of the Act and stated that, the company has received an amount of Rs.5,48,00,000/- from M/s. Opus Holdings Pvt. Ltd. in the form of loan. The assessee had also furnished relevant details including the confirmation letter from the loan creditors. The A.O., after considering the relevant submissions of the assessee, observed that, if the transaction happens to be a loan transaction, which according to the assessee is forming part of the financials, it should have been reflected in the balance sheet of the assessee in the original return of income. In the original return of income filed by the assessee and the financial statements filed along with the return, the said transaction does not appear. The A.O. had also verified the transactions with reference to the books of account of M/s. Opus Holdings Pvt. Ltd. and observed that, the purported loan given to the assessee company does not appear on the assets side of M/s. Opus Holdings Pvt. Ltd. Therefore, the A.O. rejected the explanation of the assessee and made addition of Rs.5,63,00,000/- towards credit into the bank account of the assessee from M/s. Opus Holdings Pvt. Ltd. as unexplained investment under Section 69 of the Income Tax Act, 1961. 5. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee has furnished a detailed written submission on the issue, which has been extracted in para 5 on pages 9 to 15 of the Ld. CIT(A) order. The sum and substance of the argument of the assessee before the Ld. CIT(A) is that, the credits in the bank account of the assessee from M/s. Opus Holdings Pvt. Ltd. is a genuine transaction and the same has been reflected and reported in the books of account of both the parties. The additional evidence filed by the assessee has been forwarded to the A.O. for his comments and remand report and the A.O., vide remand report dated 23.09.2024, submitted his observations with regard to the transaction between the assessee company and the loan creditor and claimed that, the transaction does not appear in the balance sheet of the original return of income filed by the assessee on 29.11.2016. Further, the balance sheet of M/s. Opus Holdings Pvt. Ltd. does not show any corresponding entry on the assets side. The remand report of the A.O. has been forwarded to the assessee for its rejoinder and in response, the assessee has furnished the explanation and claimed that, the transaction between the assessee company and M/s. Opus Holdings Pvt. Ltd. is recorded in the regular books of account and in the balance sheet net of loans and advances and loans received from M/s. Opus Holdings Pvt. Ltd. has been reported, which is the reason for the A.O. to doubt the transaction. The assessee had also furnished an affidavit from the Director of M/s. Opus Holdings Pvt. Ltd. to the effect that the company has paid loan of Rs. 5,48,00,000/- to the assessee company.
The Ld. CIT(A), after considering the relevant submissions of the assessee and also taking note of various facts, observed that, the assessee company furnished copy of confirmation letter from M/s. Opus Holdings Private Limited, which mentioned that, a loan of Rs. 5,48,00,000/- was given to the assessee company during the financial year 2015-16. Along with the confirmation letter, ledger extract of the assessee company in the books of M/s. Opus Holdings Private Limited was also enclosed. The assessee company has also furnished ledger account of loan account in the books of account of M/s. Opus Holdings Private Limited. From the details furnished by the assessee, it is observed that, the loan given by M/s. Opus Holdings Private Limited to the assessee company has been recorded in the books of account under the head loans and advances' and net balance of the ledger account has been reported in the balance sheet. To this effect, the assessee has also furnished an affidavit from Sri Rajesh Gandhi, Director of M/s. Opus Holdings Private Limited, wherein he has confirmed the loan transactions and entries in the books of account. Although the A.O. has observed that, the assessee has furnished an affidavit, but claimed that, Sri Rajesh Gandhi is not a Director and his affidavit cannot be accepted, however, fact remains that as per the MCA portal, Sri Rajesh Gandhi was appointed as Director on 25.04.2024 and he has filed an affidavit on 23.09.2024. The assessee has also reported the loan transaction by filing Form No. AOC-4 with the